Case: 13-41050   Document: 00512750382    Page: 1   Date Filed: 08/28/2014




        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT


                                                               United States Court of Appeals

                                No. 13-41050
                                                                        Fifth Circuit

                                                                      FILED
                                                                August 28, 2014

IN THE MATTER OF: RICHARD POSTON,                                Lyle W. Cayce
                                                                      Clerk
                                          Debtor.


FLOORING SYSTEMS, INCORPORATED,

                                          Appellant,
v.

MICHELLE CHOW,

                                          Appellee.


                Appeal from the United States District Court
                     for the Eastern District of Texas


Before DAVIS, SMITH, and BENAVIDES, Circuit Judges.
PER CURIAM:
      This appeal began as an adversary proceeding in the bankruptcy of
debtor Richard Eric Poston, in which the bankruptcy trustee/plaintiff Michelle
Chow sought to avoid the pre-bankruptcy transfer of $18,529.64 to
creditor/defendant Flooring Systems, Inc., as a preferential transfer made
within 90 days prior to the debtor’s filing for bankruptcy. Both the bankruptcy
court and district court, analyzing the stipulated facts, concluded that the
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                                       No. 13-41050
transfer was indeed a preferential transfer avoidable by the trustee. Flooring
Systems appealed, and we now AFFIRM. 1
       In brief, Flooring Systems obtained a judgment against Mr. Poston on
June 20, 2007, in Texas state court, then filed an Application for a Turnover
Order and for Appointment of a Receiver on August 24, 2007, pursuant to the
Texas Turnover Statute, TEX. CIV. PRAC. & REM. CODE § 31.002, which “allows
the court to reach the assets owned and subject to the control of a judgment
debtor, even if those assets are in the hands of a third party.” 2 Section
31.002(b)(3) permits a court to “appoint a receiver with the authority to take
possession of the nonexempt property, sell it, and pay the proceeds to the
judgment creditor to the extent required to satisfy the judgment.” Following a
hearing, the Texas state court appointed receiver Michael Bernstein pursuant
to an order signed October 26, 2007.
       The funds at issue in this case were held in Mr. Poston’s bank account at
Plains Capital Bank. As a financial institution, the bank is subject to section
31.002(g), which provides: “With respect to turnover of property held by a
financial institution in the name of or on behalf of the judgment debtor as
customer of the financial institution, the rights of a receiver appointed under
Subsection (b)(3) do not attach until the financial institution receives service
of a certified copy of the order of receivership . . . .”        Flooring Systems did not
serve the bank with a certified copy of the receivership order until November
20, 2007. On December 18, 2007, the bank turned over a $22,923.05 check

1The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(F) and 11
U.S.C. § 502, 544, 547, 548, and 550, and the district court exercised its jurisdiction over the
bankruptcy appeal under 28 U.S.C. § 158(a). We have jurisdiction under 28 U.S.C. § 1291.
2 Resolution Trust Corp. v. Smith, 

, 78 (5th Cir. 1995) (citing Norsul Oil & Mining
v. Commercial Equip. Leasing Co., 

, 349 (Tex. App. 1985, no writ), and
Beaumont Bank, N.A. v. Buller, 

, 227 (Tex. 1991)).


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                                 No. 13-41050
payable to Mr. Bernstein, and on January 15, 2008, with the state court’s
approval, Mr. Bernstein paid Flooring Systems $18,529.64.
      Mr. Poston filed for bankruptcy relief under Chapter 11 on January 31,
2008, which was later converted to a Chapter 7 liquidation on November 17,
2008. Ms. Chow was appointed trustee in early 2010 and filed an adversary
proceeding against Flooring Systems, seeking to recover the $18,529.64
disbursed by Mr. Bernstein in the state turnover proceeding as a preferential
transfer avoidable under section 547(b) of the Bankruptcy Code, 11 U.S.C. §
547(b). The statute provides, in relevant part:
            (b) Except as provided in subsections (c) and (i) of this
            section, the trustee may avoid any transfer of an
            interest of the debtor in property--
                  (1) to or for the benefit of a creditor;
                  (2) for or on account of an antecedent debt owed
                  by the debtor before such transfer was made;
                  (3) made while the debtor was insolvent;
                  (4) made--
                         (A) on or within 90 days before the date of
                         the filing of the petition; . . .
                  (5) that enables such creditor to receive more
                  than such creditor would receive if--
                         (A) the case were a case under chapter 7 of
                         this title;
                         (B) the transfer had not been made; and
                         (C) such creditor received payment of such
                         debt to the extent provided by the
                         provisions of this title.

It is undisputed that the $18,529.64 transfer meets most of these statutory
requirements. The only question is when Mr. Poston transferred the interest
in his bank account at Plains Capital Bank.
      Because Mr. Poston filed for bankruptcy on January 31, 2008, the 90 day
preference period commenced on or about November 2, 2007. The


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                                     No. 13-41050
determinative issue is whether Mr. Poston’s interest in the bank account
transferred at the moment the Texas state court appointed a receiver under
the turnover order on October 26, 2007, which would fall outside the preference
period and thus allow Flooring Systems to keep the money; or whether it
transferred on November 20, 2007, when the bank received a certified copy of
the receivership order, which would fall within the preference window and
make the transfer avoidable.
      In well written opinions that addressed all of Flooring Systems’ properly
asserted arguments, 3 both the bankruptcy court and district court concluded
that the transfer in question did not occur until November 20, 2007, when the
bank received the requisite notice of receivership order under section 31.002(g)
(“[T]he rights of a receiver . . . do not attach until the financial institution
receives service of a certified copy of the order of receivership . . . .”). Therefore,
because the transfer of the bank account occurred less than 90 days before Mr.
Poston filed for bankruptcy and because the transfer met all the other
requirements for a preferential transfer, the lower courts concluded that the
transfer is avoidable by the trustee in this case. We agree, for essentially the
reasons assigned by the lower courts.
      For the reasons set out above, and those assigned by the lower courts,
we AFFIRM.




3The district court concluded that Flooring Systems failed to timely raise a Full Faith and
Credit argument and therefore had waived it. We agree.


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