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World Fuel Services, Inc. v. Martin

United States District Court, D. Oregon, Portland Division

February 13, 2018

WORLD FUEL SERVICES, INC., Plaintiff and Counter Defendant,
NDREW M. MARTIN, Defendant and Counter Claimant.


          MICHAEL W. MOSMAN, Chief United States District Judge

         This matter comes before me on the parties' Cross-Motions for Summary Judgment [52, 54] and World Fuel's Motion to Strike [59]. For the reasons below, I GRANT in part and DENY in part the Cross-Motions for Summary Judgment, and DENY as moot the Motion to Strike.


         This case involves complicated dealings between an aviation operations company, its subsidiaries, and several creditors. Evergreen Holdings (“Holdings”), as its name indicates, is a holdings company. Holdings provided aviation services through two subsidiary companies: Evergreen International Aviation (“Aviation”) and Evergreen Vintage Aircraft (“Vintage”). Aviation also has a number of subsidiary companies: Evergreen International Airlines (“Airlines”), Evergreen Aviation Ground Logistics Enterprises, Evergreen Trade, and Evergreen Agricultural Enterprises. Holdings's assets appear to be limited to its stock in Aviation and Vintage, and its ownership of a property located in Yamhill County at 3800 NE Three Mile Lane (the “Property”). Schweitzer Decl. [53], Ex. 21. To complicate matters, Aviation and Vintage are in bankruptcy proceedings, and the ownership of the Property is disputed: the bankruptcy trustee claims it is owned by Aviation and is seeking to impose a constructive trust on the Property for the benefit of Aviation.

         Plaintiff and Counter Defendant World Fuel Services and Defendant and Counter Claimant Andrew Martin each claim a financial interest in the Property. Both parties allege in this litigation that the other's claim is based on a fraudulent conveyance under O.R.S. §§ 95.230- 95.240 and should be avoided.

         I. World Fuel Services' dealings with Airlines

         Plaintiff World Fuel Services is an aviation fuel supplier who supplied fuel and services to Airlines. Second Amended Complaint (“SAC') [18] ¶¶ 1, 6-7; Sweitzer Decl. [53], Ex. 1 at 10, 16-18. After Airlines had trouble paying World Fuel for fuel, World Fuel and Airlines signed a series of payment plan agreements in 2010 and 2012. Sweitzer Decl. [53], Ex. 1 at 11-14. In May 2012, World Fuel and Airlines attempted to address Airlines's payment problems by signing a Continuing Guaranty and Joinder to Continuing Guaranty. Sweitzer Decl. [53], Exs. 6, 7. On July 20, 2012, Airlines and World Fuel signed two new agreements: one which gave World Fuel interest in three vintage planes, and a guaranty signed by Vintage and by Holdings (the “Blanket Guaranty”). Sweitzer Decl. [53], Exs. 8, 9.

         But Airlines continued to struggle with its debts to World Fuel. By April 2013, Airlines and its affiliates owed World Fuel $9 million. Sweitzer Decl. [53], Ex. 11. At the time, Aviation was in the middle of selling its stock in another related company, Evergreen Helicopters, for $250 million. Sweitzer Decl. [53], Ex. 10. In conjunction with the Helicopters sale, Airlines negotiated an agreement with World Fuel to pay down $6 million of its debt in exchange for the release of three interests World Fuel held. Sweitzer Decl. [53], Ex. 13. World Fuel received the first payment from this agreement for $5.2 million, but never received a second payment for $800, 000. Sweitzer Decl. [53], Ex. 1 at 24-25. In September 2013, World Fuel stopped supplying fuel to Airlines entirely after Airlines did not answer a written demand for immediate payment. Sweitzer Decl. [53], Ex. 16.

         In December 2013, World Fuel filed a lawsuit against Airlines, Aviation, Holdings and several other affiliate companies in Yamhill County, seeking payment of Airlines's debts. Sweitzer Decl. [53], Ex. 18. Judge Carroll J. Tichenor granted summary judgment in favor of World Fuel against Holdings and Evergreen Agricultural Enterprises in December 2014 and entered a money judgment in February 2015 in the amount of $9, 093, 297.57. Sweitzer Decl. [53], Ex. 19, 20. This judgment appears as an encumbrance against the Property. Sweitzer Decl. [53], Ex. 19, 20. There are at least two other judgments encumbering the Property: a 2013 money judgment for $227, 404.73 registered in Oregon by Aersale, Inc. in 2014, and a 2010 judgment registered in Oregon in 2013 by Chemoil Corp. Sweitzer Decl. [53], Exs. 24, 26, 27.

         II. Mr. Martin's loan

         Andrew Martin is a private lender who loaned $4.2 million to Aviation in July 2013 after some complications with the April 2013 Helicopters sale. Martin Decl. [56] ¶ 11; Ex. 3. According to Aviation's President, Blythe Berselli, the Helicopters sale could not go through unless the parties paid back Banner Bank, which held a trust deed against the property.[1] Stephens Decl. [55], Ex. 3, at 56-59. Ms. Berselli testified that Aviation's owner, Delford Smith, agreed to loan $3.5 million to Aviation via his limited liability company, Ventures Acquisitions Company (“VAC”), to allow the closing of the Helicopters sale. Stephens Decl. [55], Ex. 3, at 59-60. On the day the Helicopters sale closed, VAC wired $3.5 million to Aviation. Stephens Decl. [55], Ex. 5.

         Aviation then sought a lender to repay the loan to VAC. After two banks declined to finance a loan, Aviation contacted Mr. Martin via several intermediaries in June 2013. Martin Decl. [56] ¶ 3. According to Mr. Martin, he reviewed numerous documents, including an executive summary of the loan, the referring broker's opinion letter, and hundreds of other pages provided by Aviation, Holdings, and Delford Smith. Martin Decl. [56] ¶¶ 4-9. The executive summary provided to Mr. Martin stated that the loan funds would be used as “[r]eimbursement to owner for $3.5M balance payoff of Banner Bank debt (necessary to execute sale of Evergreen Helicopter).” Martin Decl. [56], Ex. 1. On July 17, 2013, Mr. Martin and Aviation signed a secured loan agreement, with Holdings, Delford Smith, and Delford M. Smith, LLC, serving as guarantors. Martin Decl. [56], Ex. 3. In return for the secured loan agreement, Holdings provided Mr. Martin with a Trust Deed to the Property, which was appraised at $7.2 million at the time. Martin Decl. [56], Ex. 4.

         According to the settlement statement issued upon closing of the loan, Delford Smith was to receive $3.5 million and $36, 459.36 in interest. Stephens Decl. [55], Ex. 4. But Aviation instructed the title company via email to wire the interest and $3.5 million repayment to VAC, not Delford Smith. Stephens Decl. [55], Ex. 6. Mr. Martin states he was not aware that the funds were disbursed to VAC. Martin Decl. [56] ¶ 12.

         III. ...

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