complaint - southern rice - arkansas times rock, ar 72201 501-374 ... southern rice’s claim...

B1040 (FORM 1040) (12/15)

ADVERSARY PROCEEDING COVER SHEET (Instructions on Reverse)

ADVERSARY PROCEEDING NUMBER (Court Use Only)

PLAINTIFFS DEFENDANTS

ATTORNEYS (Firm Name, Address, and Telephone No.) ATTORNEYS (If Known)

PARTY (Check One Box Only) □ Debtor □ U.S. Trustee/Bankruptcy Admin□ Creditor □ Other□ Trustee

PARTY (Check One Box Only) □ Debtor □ U.S. Trustee/Bankruptcy Admin□ Creditor □ Other□ Trustee

CAUSE OF ACTION (WRITE A BRIEF STATEMENT OF CAUSE OF ACTION, INCLUDING ALL U.S. STATUTES INVOLVED)

NATURE OF SUIT (Number up to five (5) boxes starting with lead cause of action as 1, first alternative cause as 2, second alternative cause as 3, etc.)

FRBP 7001(1) – Recovery of Money/Property □ 11-Recovery of money/property - §542 turnover of property □ 12-Recovery of money/property - §547 preference□ 13-Recovery of money/property - §548 fraudulent transfer□ 14-Recovery of money/property - other

FRBP 7001(2) – Validity, Priority or Extent of Lien □ 21-Validity, priority or extent of lien or other interest in property

FRBP 7001(3) – Approval of Sale of Property □ 31-Approval of sale of property of estate and of a co-owner - §363(h)

FRBP 7001(4) – Objection/Revocation of Discharge □ 41-Objection / revocation of discharge - §727(c),(d),(e)

FRBP 7001(5) – Revocation of Confirmation □ 51-Revocation of confirmation

FRBP 7001(6) – Dischargeability □ 66-Dischargeability - §523(a)(1),(14),(14A) priority tax claims □ 62-Dischargeability - §523(a)(2), false pretenses, false representation, actual fraud □ 67-Dischargeability - §523(a)(4), fraud as fiduciary, embezzlement, larceny

(continued next column)

FRBP 7001(6) – Dischargeability (continued) □ 61-Dischargeability - §523(a)(5), domestic support □ 68-Dischargeability - §523(a)(6), willful and malicious injury □ 63-Dischargeability - §523(a)(8), student loan □ 64-Dischargeability - §523(a)(15), divorce or separation obligation(other than domestic support) □ 65-Dischargeability - other

FRBP 7001(7) – Injunctive Relief □ 71-Injunctive relief – imposition of stay □ 72-Injunctive relief – other

FRBP 7001(8) Subordination of Claim or Interest □ 81-Subordination of claim or interest

FRBP 7001(9) Declaratory Judgment □ 91-Declaratory judgment

FRBP 7001(10) Determination of Removed Action □ 01-Determination of removed claim or cause

Other □ SS-SIPA Case – 15 U.S.C. §§78aaa et.seq. □ 02-Other (e.g. other actions that would have been brought in state courtif unrelated to bankruptcy case)

□ Check if this case involves a substantive issue of state law □ Check if this is asserted to be a class action under FRCP 23□ Check if a jury trial is demanded in complaint Demand $ Other Relief Sought

M. Randy Rice, Trustee

Rice & Associates, P.A.523 S. Louisiana, #300Little Rock, AR 72201 501-374-1019

x

Complaint to avoid and recover preferential and/or fraudulent transfer(s) of Debtor's interest in property. 11 USC 101 et seq.

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x

Southern Rice & Cotton LLC

Lindsey Dilks, AttorneyP. O. Box 34157Little Rock, AR 72203

1,000,000.00

2:16-ap-01095 Doc#: 1 Filed: 10/06/16 Entered: 10/06/16 16:06:40 of 17

B1040 (FORM 1040) (12/15)

BANKRUPTCY CASE IN WHICH THIS ADVERSARY PROCEEDING ARISES NAME OF DEBTOR BANKRUPTCY CASE NO.

DISTRICT IN WHICH CASE IS PENDING DIVISION OFFICE NAME OF JUDGE

RELATED ADVERSARY PROCEEDING (IF ANY) PLAINTIFF DEFENDANT ADVERSARY

PROCEEDING NO.

DISTRICT IN WHICH ADVERSARY IS PENDING DIVISION OFFICE NAME OF JUDGE

SIGNATURE OF ATTORNEY (OR PLAINTIFF)

DATE PRINT NAME OF ATTORNEY (OR PLAINTIFF)

INSTRUCTIONS

The filing of a bankruptcy case creates an “estate” under the jurisdiction of the bankruptcy court which consists of all of the property of the debtor, wherever that property is located. Because the bankruptcy estate is so extensive and the jurisdiction of the court so broad, there may be lawsuits over the property or property rights of the estate. There also may be lawsuits concerning the debtor’s discharge. If such a lawsuit is filed in a bankruptcy court, it is called an adversary proceeding.

A party filing an adversary proceeding must also must complete and file Form 1040, the Adversary Proceeding Cover Sheet, unless the party files the adversary proceeding electronically through the court’s Case Management/Electronic Case Filing system (CM/ECF). (CM/ECF captures the information on Form 1040 as part of the filing process.) When completed, the cover sheet summarizes basic information on the adversary proceeding. The clerk of court needs the information to process the adversary proceeding and prepare required statistical reports on court activity.

The cover sheet and the information contained on it do not replace or supplement the filing and service of pleadings or other papers as required by law, the Bankruptcy Rules, or the local rules of court. The cover sheet, which is largely self-explanatory, must be completed by the plaintiff’s attorney (or by the plaintiff if the plaintiff is not represented by an attorney). A separate cover sheet must be submitted to the clerk for each complaint filed.

Plaintiffs and Defendants. Give the names of the plaintiffs and defendants exactly as they appear on the complaint.

Attorneys. Give the names and addresses of the attorneys, if known.

Party. Check the most appropriate box in the first column for the plaintiffs and the second column for the defendants.

Demand. Enter the dollar amount being demanded in the complaint.

Signature. This cover sheet must be signed by the attorney of record in the box on the second page of the form. If the plaintiff is represented by a law firm, a member of the firm must sign. If the plaintiff is pro se, that is, not represented by an attorney, the plaintiff must sign.

Turner Grain Merchandising, Inc. 2:14-bk-15687J

Eastern District of Arkansas Helena Jones

/s/ Hamilton Moses Mitchell

Hamilton Moses Mitchell10/06/2015


IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF ARKANSAS

HELENA DIVISION

IN RE: TURNER GRAIN MERCHANDISING, INC., Case No.2:14-bk-15687J Debtor Chapter 7

Converted from Chapter 11

M. RANDY RICE, TRUSTEE PLAINTIFF

VS. CASE NO. ______________

SOUTHERN RICE & COTTON LLC DEFENDANT

COMPLAINT

Comes now M. Randy Rice, Chapter 7 Trustee (the “Trustee”), by and through

counsel, and for his Complaint, states as follows:

PARTIES & JURISDICTION

1. The Plaintiff, M. Randy Rice (“the Trustee”), is the duly appointed and

acting Chapter 7 Trustee of the above referenced bankrupt estate, and it is in said capacity

that he brings the instant causes of action.

2. The Defendant, Southern Rice & Cotton LLC (“Southern Rice”), is a

domestic limited liability company organized and operating under the laws of the State of

Arkansas, and its principal place of business is located at 408 Cole Street, Harrisburg,

Arkansas.

3. The Trustee brings the instant causes of action to avoid preferential

transfers made to Southern Rice within ninety (90) days of filing of the petition. This

Court has jurisdiction over this Complaint and the parties pursuant to 28 USC §§ 1334

and 157, 11 USC §§ 101, 541, 542, 544, 547, 550, and 551. Venue is proper in this

district pursuant to 28 USC § 1409.


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4. This is a core proceeding within the meaning of 28 USC § 157(b)(2)(A),

(B), (F), and (O), and it constitutes an adversary proceeding pursuant to the applicable

provisions of the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure.

PROCEDURAL BACKGROUND

1. On September 11, 2014, Kevin P. Keech was appointed the receiver of the

receivership estate of Turner Grain Merchandising, Inc. dba Turner Grain dba Turner

Grain, Inc. (“the Debtor”), pursuant to an order entered by the United States District

Court for the Eastern District of Arkansas, Eastern Division, Case No. 2:14-CV- 111-JM.

2. The receiver filed a voluntary Chapter 11 bankruptcy petition on behalf of

the Debtor on October 23, 2014 (“the petition date”), and initially acted as the debtor-in-

possession.

3. The Debtor’s case was converted to a case under Chapter 7 on May 15,

2015, and Richard L. Cox was appointed the Chapter 7 Trustee of the Debtor’s estate on

the same date. Richard L. Cox filed a Resignation and Accounting of Trustee on May 12,

2016, and the Trustee was appointed the successor trustee of the Debtor’s estate on the

same date.

FACTUAL ALLEGATIONS

4. The Debtor was incorporated on or about August 7, 2002, and it was

engaged in the agricultural industry prior to the petition date. The Debtor purchased

and sold agricultural products in and around the State of Arkansas.

5. Southern Rice is engaged in the agricultural industry in and around the

State of Arkansas. Southern Rice is a wholesaler of grain and other agricultural products.


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6. The Debtor purchased grain from Southern Rice during the 2014 calendar

year. The grain was delivered and sold on an unsecured basis pursuant to written and/or

verbal agreements.

7. On or about July 22, 2014, the Debtor issued a check in the amount of

$1,122,863.46 payable to Southern Rice as payment for grain sold and delivered to the

Debtor. The check was dishonored by the Debtor’s bank due to insufficient funds on or

about July 24, 2014. A copy of the dishonored check is attached hereto as Exhibit A and

incorporated herein by reference. The Debtor thereafter made the following payments by

money order and check to Southern Rice:

Date Instrument No. (Bank Account) Amount

07/29/2014 Money Order No. 3260 (M&P 1001) $ 250,000.00

08/01/2014 Check No. 4542 (HNB 9157) 200,000.00

08/04/2014 Check No. 4561 (HNB 9157) 200,000.00

08/05/2014 Check No. 4573 (HNB 9157) 200,000.00

08/08/2014 Check No. 4584 (HNB 9157) 150,000.00

Total $1,000,000.00

A copy of the money order and canceled checks are attached hereto as Exhibit B and

incorporated herein by reference.

8. Southern Rice is a scheduled unsecured creditor of the Debtor. Southern

Rice is a claimant and creditor herein by virtue of filing Proof of Claim No. 111-1 in the

amount of $1,624,062.80 in the lead bankruptcy on September 24, 2015. Further,

Southern Rice filed a Complaint against the Debtor in the Circuit Court of Poinsett


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County, Arkansas, prior to the petition date. See Southern Rice & Cotton LLC vs. Turner

Grain Merchandising, Inc., et al, Case No. 56CV-14-103.

COUNT I – AVOIDANCE OF PREFERENTIAL TRANSFERS – 11 USC § 547

9. The Trustee incorporates all preceding paragraphs as if fully re-alleged

herein, and states that the payments to Southern Rice in the total amount of

$1,000.000.00 resulted in an avoidable preferential transfer within the meaning of Section

547 of the Bankruptcy Code.

10. The payments resulted in transfers of property of the Debtor to or for the

benefit of a creditor on or within ninety (90) days of the order for relief. The payments

were comprised of funds owned by the Debtor, and the payments were drawn from a

deposit account with respect to which the Debtor was the sole owner. Southern Rice is a

creditor of the Debtor. Southern Rice’s claim against the Debtor is evidenced, inter alia,

by the proof of claim filed by Southern Rice in the lead bankruptcy case and by the

dishonored check attached hereto as Exhibit A. The transfers made by money order and

check occurred on and between July 29, 2014, and August 8, 2014, whereas the Debtor

filed for bankruptcy protection on October 23, 2014. Thus, each of the transfers occurred

within the ninety (90) day preference period.

11. The transfers were for or on account of an antecedent debt owed by the

Debtor before the transfers were made. On information and belief, the transfers were

made on account of the dishonored check attached hereto as Exhibit A. The debt

arose on or before July 24, 2014, whereas the payments were made on and

between July 29, 2014, and August 8, 2014.


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12. The transfers were made while the Debtor was insolvent. The Debtor

made the payments to Southern Rice within the ninety (90) day period immediately

preceding the petition date. The Debtor is presumed to have been insolvent on and

during the ninety (90) days immediately preceding the date of the filing of the petition.

11 USC § 547(f). During the ninety (90) days immediately preceding the petition date,

the Debtor was generally unable to pay its debts as they became due. The Debtor’s

insolvency is further evidenced by the Summary of Schedules, Schedules A-E, and the

Proofs of Claim filed in the bankruptcy case.

13. To the extent Southern Rice received the payments set forth above from

the Debtor, said transfers enabled Southern Rice to recover more than it would receive as

a creditor if:

a. This was a case under Chapter 7 of Title 11 of the Bankruptcy Code;

b. The transfers had not been made; and

c. Southern Rice received payment of its debt to the extent provided by the

provisions of the Bankruptcy Code.

The payments made by the Debtor to Southern Rice were on account of an unsecured

claim. It is well-settled law that a creditor who receives payment on account of an

unsecured claim has always been preferred. In Re Frankum, 453 B.R. 352 (Bankr. E.D. Ark.

2011) citing In re Auto-Train Corp., 49 B.R. 605, 610 (Bankr. D.D.C.1985) (“He has

obtained an unfair advantage at the expense of other creditors because he has receive[d] a

greater proportion of [his] unsecured claims than other unsecured claimants who received

payment after liquidation.”); see also, Hoffinger Indus., Inc. v. Bunch (In re Hoffinger

Indus., Inc.), 313 B.R. 812, 827 (Bankr. E.D.Ark.2004) ("[It is] generally well settled that

unless creditors would receive a 100% payout, any unsecured creditor who receives a


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payment during the preference period is in a position to receive more than it would have

received under a Chapter 7 liquidation.") (internal quotation marks and citations omitted).

On its bankruptcy schedules, the Debtor listed $13,773,515.56 in total assets and

$24,848,340.24 in total liabilities, and the Court’s claims register reflects claims in the total

amount of $39,748,670.71 filed to date. Therefore, it is without question that each of the

payments made by the Debtor to Southern Rice enabled Southern Rice to receive more on

its unsecured claim than it would under a hypothetical Chapter 7 liquidation.

14. Southern Rice has not returned the transferred property to the estate

despite demand by the Trustee.

15. During the course of this proceeding, the Trustee may learn (through

discovery or otherwise) of additional facts and information concerning the transfers

and/or of additional transfers made to Southern Rice by the Debtor during the preference

period. It is the Trustee’s intention to avoid and recover all transfers made by or for the

Debtor of an interest of the Debtor in property to or for the benefit of Southern Rice or

any other transferee. The Trustee reserves the right to amend this original Complaint so

as to include: (i) further information regarding the transfers, (ii) additional transfers, (iii)

modifications of and/or revision to Southern Rice’s name, (iv) additional defendants,

and/or (v) additional causes of action (including, but not limited to, 11 USC §§ 542, 544,

548, 549, and 550) (collectively the “Amendments”), that may become known to the

Trustee at any time during this adversary proceeding, through formal discovery or

otherwise, and for the Amendments to relate back to this original Complaint.


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COUNT II - CONSTRUCTIVELY FRAUDULENT TRANSFERS 11 USC § 548(a)(1)(B)


herein.

17. To the extent that one or more Transfers (or such other transfers that may

be identified or discovered during the discovery process) were not on account of an

antecedent debt or a prepayment for goods subsequently received, the Debtors did not

receive reasonably equivalent value in exchange for such Transfer(s) (the “Potentially

Fraudulent Transfers”); and

A. The Debtor was insolvent on the date that the Transfer(s) was made or became insolvent as a result of the Transfer(s); or

B. The Debtor was engaged in a business or a transaction, or was about to engage in business or a transaction for which any property remaining with the Debtor was an unreasonably small capital; or

C. The Debtor intended to incur, or believed it would incur, debts that would be

beyond its ability to pay as such debts matured. 18. The Potentially Fraudulent Transfers are avoidable pursuant to 11 USC §

548(a)(1)(B)

COUNT III - RECOVERY OF AVOIDED TRANSFERS 11 USC §§ 544 and 550


herein, and states that the avoided transfers may be recovered from Southern Rice.

20. The Trustee is entitled to avoid the transfers set forth above pursuant to 11

USC § 547(b) and/or 548(a)(1)(B).

21. Southern Rice was the initial transferee of the avoidable transfers or was

the immediate or mediate transferee of such initial transferee or the person for whose

benefit the transfers were made.


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22. Pursuant to 11 USC §§ 544 and 550(a), the Trustee is entitled to recover

from Southern Rice all avoided transfers, plus interest thereon to the date of payment and

the costs of this action.

COUNT IV – DISALLOWANCE OF CLAIMS – 11 USC § 502(d) and (j)


herein.

24. Southern Rice is an entity from which property is recoverable under 11

USC § 550.

22. Southern Rice is a transferee of transfers avoidable under 11 USC § 547.

23. Southern Rice has not returned the transferred property for which it is

liable under 11 USC § 550.

24. Pursuant to 11 USC § 502(d), any and all Claims of Southern Rice and/or

its assignee, against the Debtor’s estate must be disallowed until such time as Southern

Rice pays to Trustee an amount equal to the aggregate amount of all avoided transfers,

plus interest thereon and costs.

25. Pursuant to 11 USC § 502(j), any and all Claims of Southern Rice and/or

its assignee, against the Debtor’s estate must be disallowed until such time as Southern

Rice pays to Trustee an amount equal to the aggregate amount of all avoided transfers,

plus interest thereon and costs.

WHEREFORE, the Trustee respectfully requests this Court grant the following

relief against the Defendant:


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A. That all transfers made by the Debtor to Defendant avoidable under 11

USC § 547 and/or 548 be avoided and automatically preserved for the benefit of the estate

pursuant to 11 USC § 551;

B. That all transfers, to the extent avoided pursuant to 11 USC § 547

and/or 548, be recovered by Plaintiff pursuant to 11 USC § 550;

C. Awarding pre-judgment interest at the maximum legal rate running from

the date of each Transfer to the date of judgment herein;

D. Awarding post-judgment interest at the maximum legal rate running from

the date of judgment herein until the date the judgment is paid and satisfied in full, plus

costs;

E. Requiring Defendant to pay forthwith the judgment amount awarded in

favor of Plaintiff;

F. Disallowing all claims of Defendant, or its assignee, until such time as the

Defendant pays an amount equal to the aggregate amount of all avoided transfers, plus

interest thereon and costs;

G. Granting Plaintiff such other and further relief as the Court deems just and

proper.

DATE October 6, 2016

Respectfully submitted, M. RANDY RICE, TRUSTEE

By: /s/ Hamilton Moses Mitchell, Attorney Rice & Associates, P.A. 523 S. Louisiana, #300 Little Rock, AR 72201


complaint - southern rice - arkansas times rock, ar 72201 501-374 ... southern rice’s claim...

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