IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
THE VILLAGE INN, INC., No.1-86-00268
J. TAYLOR HALEY, Trustee,
v. A.P. No. 1-87-0120
THOMAS E. FLOWERS and
Memorandum of Decision
Over a year before the debtor filed its bankruptcy petition, defendants Thomas Flowers and Koko
Fujita loaned it $45,000.00, to be secured by the debtor's real and personal property. However, the
financing statement perfecting the interest in the personal property (furnishings of the debtor's inn) was
not filed with the Secretary of State until sixty days before the bankruptcy. Since the date of a transfer
for preference purposes is the date of perfection of a security interest (section 547(e)(2)(B) of the
Bankruptcy Code), the transfer was clearly within thepreference period. The presumption of insolvency
pursuant to section 547(f) was not contested.
The debtor's inn had been operated as a proprietorship of its principal shareholders prior to
incorporation in 1982. Flowers and Fujita admit that at the time they made loan it was represented to
them, and they believed, that all of the personal property was owned by the corporation. The personal
property was described in the financing statement, depreciated in the corporation's tax returns, and listed
as corporate assets in the bankruptcy schedules. However, Flowers and Fujita now claim that the property
was owned by the shareholders individually.
The only evidence questioning the ownership of the property is a declaration of the corporation's
president, Charles Stinnett, dated August 27, 1987, in which he declares that the personal property was
never actually transferred to the corporation. This is at odds with his present testimony that the property
in question is corporate property and that most of it was purchased with corporate funds after
incorporation. He explains that the prior declaration was prepared by Flowers, who forced him to sign
it under threat of eviction and other actions Flowers could take against him.
The Court has no trouble finding that Stinnett's present testimony is the more truthful account. The
demeanor demonstrated by Flowers at the trial makes it clear to the Court that he was capable of the acts
alleged by Stinnett. This finding explains away the sole evidence inconsistent with the debtor's title to the
Moreover, the Court would still find the property was owned by the corporation even if Stinnett had
stuck by his prior declaration. There need not have been a formal assignment of the property in order for
the Court to find that assignment was intended. Bergin v. Van der Steen
(1951) 107 Cal.App.2d 8, 16.
It is clear from the representations made to Flowers and Fujita, as well as the listing of the property as
corporate assets in the tax returns and bankruptcy papers, that the property was intended to be corporate
property. Even where record title is in a corporate officer, the property may nonetheless be found to
belong to the corporation. In re John Algiere, Inc.
(Bkrtcy.D.R.I.1982) 20 B.R. 615.
The evidence as to the value of the property is weak. Stinnett testified without going into much detail
that it was worth $9,000.00, while Flowers and Fujita produced an expert with weak credentials who
valued the property, other than air conditioners and stoves, at $2,329.00. He valued the stoves separately
at $80 to $125 each. The Court finds the testimony offered by defendants slightly more believable than
Stinnett's as to value, and accordingly finds the value of the property, including the stoves, to be $3204.00.
There is no merit to the argument that the free-standing gas stoves are fixtures and not personal
property. The mere fact that a stove is hooked up to a gas line does not make it a fixture. Daniger v.
(1952) 114 Cal.App.2d 796, 798. However, the Court agrees that the air conditioners have
The transfer of the security interest in the personal property, including the stoves, is accordingly
avoided as a preference. Due to the length of time which has passed since the transfer and the Court's
adoption of defendants' valuation of the property, the Court will award its value, rather than the actual
property, pursuant to section 550(a) of the Bankruptcy Code. Judgment shall therefore be entered in
favor of the Trustee and against both Flowers and Fujita in the sum of $3,204.00, plus the Trustee's costs
Counsel for the Trustee shall prepare and submit a form of judgment consistent with this decision. This
memorandum constitutes findings and conclusions pursuant to FRCP 52(a) and Bankruptcy Rule 7052.
Dated: February 10, 1988 _____________________