                        United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 96-3006
                                   ___________

Stephen Anthony Bruening, Doing   *
Business as Bruening Holding      *
Company, and Nancy E. Bruening,   *
                                  *
      Debtors.                    *
____________________________      *
                                  *
David C. Stover, Trustee,         * Appeal from the United States
                                  * District Court for the Western
      Appellee,                   * District of Missouri.
                                  *
      v.                          *
                                  *
Jewett M. Fulkerson,              *
                                  *
      Appellant.                  *
                             ___________

                             Submitted: February 14, 1997

                                  Filed: May 13, 1997
                                   ___________

Before HANSEN and MORRIS SHEPPARD ARNOLD, Circuit Judges, and
      MELLOY,1 District Judge.
                               ___________

MORRIS SHEPPARD ARNOLD, Circuit Judge.


      1
       The Honorable Michael J. Melloy, Chief Judge, United States District Court for
the Northern District of Iowa, sitting by designation.
       Jewett M. Fulkerson appeals a district court decision affirming the judgment of
a bankruptcy court in favor of a trustee who brought an action to recover $13,700 that
the trustee alleged was a preferential transfer under 11 U.S.C. § 547(b)(2). We find
that only $13,000 of the payment that Mr. Fulkerson received was a preferential
transfer and thus we affirm in part and reverse in part the judgment of the district court.

                                            I.
       Sometime prior to February, 1993, Mr. Fulkerson transferred, pursuant to an oral
agreement, several dozen cattle to Stephen Bruening, who, with his wife, is the debtor
in this case. Whether this transfer was pursuant to a sale of the cattle, or merely a
bailment accompanied by a series of option contracts, is, for reasons that we shall
explain, crucial to the case and is in dispute. There is no dispute, however, about the
fact that the agreement anticipated payments of $22,500 a year from Mr. Bruening to
Mr. Fulkerson, because Mr. Bruening signed to Mr. Fulkerson's order a series of notes.

        Each note indicated a sum due, a due date, an interest rate, and a description,
such as on the note due February 10, 1995, which read "3rd Payment on 100 Bred
Heifers." Mr. Fulkerson testified that these notes merely reflected the fact that
Mr. Bruening was entitled to purchase twenty-five cows a year from the hundred or so
cattle for which he was caring. He said that the notes were drawn up on inappropriate
forms that happened to be in his possession, and that the execution of the notes was an
afterthought to provide their respective wives with some evidence of their agreement
in the event something should happen to the two men. Mr. Fulkerson received a total
of five payments in 1993 and 1994 that were consistent with the schedule indicated by
the notes, the last of which, for $13,700, is the one at issue here.

      A second difficulty in this case arises from the fact that the $13,700 payment was
drawn not on Mr. Bruening's personal account but on the account of Bruening Holding
Company ("BHC"), a company wholly owned by Mr. Bruening and his wife and which


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did not file bankruptcy. That payment followed shortly on a transfer by Mr. Bruening
of $13,000 from his personal account into the BHC account. A related factual dispute
has to do with whether it was BHC or Mr. Bruening who owned (or had a bailee's
interest in) the cattle.

        There is no question that Mr. Bruening's interests were intermingled with the
corporate interests in a very confusing way. He signed the notes personally, but
testified that he thought that the company owned the cattle. He admitted, however, that
"in the long run" the obligation on the debt was his personally. Mr. Fulkerson, although
he argues on appeal that his dealings were with BHC alone, indicated in his testimony
that he, in effect, equated BHC with Mr. Bruening. The cattle were listed on
Mr. Bruening's bankruptcy filing. They also, apparently, were included in the security
interest granted to Kearney Trust Company ("Kearney") when that company lent BHC
money for cattle operations: It was Kearney that liquidated all of the livestock in
Mr. Bruening's possession, including the cattle that Mr. Fulkerson had transferred to
him, when BHC defaulted on that note.

                                          II.
                                          A.
       The bankruptcy code provides that a trustee may recover a transfer of property
made "on account of an antecedent debt owed by the debtor before such transfer was
made." 11 U.S.C. § 547(b)(2). No such recovery is allowed, on the other hand, when
the transfer was "intended by the debtor and the creditor to or for whose benefit such
transfer was made to be a contemporaneous exchange for new value given to the
debtor." 11 U.S.C. § 547(c)(1)(A). The bankruptcy court had to determine, therefore,
whether the $13,700 that Mr. Fulkerson received was a payment on a promissory note
for cattle bought in the past or a cash purchase of the cattle pursuant to an option
contract.




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        The bankruptcy court found that it was the former. Mr. Fulkerson, contending
that it was the latter, bases his appeal primarily on two related arguments: One, that
because Mr. Bruening was permitted, under their agreement, to return cattle that he did
not want, the arrangement must have been an option contract; and, two, that the sum
of the evidence shows that the original intent of the parties was to create a bailment and
option contract, not a sale.

         The first point, Mr. Fulkerson appears to contend, establishes as a matter of law
that the parties created an option contract and not a sale between them. We note, first
of all, that the evidence is not conclusive that Mr. Bruening's ability to return the cattle
was in fact part of the original understanding; indeed, Mr. Bruening's testimony
suggests that it became part of the understanding between the two parties only after
Mr. Fulkerson became aware of Mr. Bruening's financial difficulties. But assuming,
arguendo, that this return provision was part of the original contract between the
parties, Mr. Fulkerson is still unable to point to any case that holds that the existence
of such a contractual provision, by itself, requires a court to conclude that the relevant
arrangement was an option contract and not a sale. We do not think, moreover, that
there is any such rule of law.
         On the second point, we agree with Mr. Fulkerson that the parties' intent will
determine how this business arrangement ought to be characterized. See Mo. Ann.
Stat. § 400.2-401(1). But Mr. Fulkerson's testimony with regard to his intent in placing
his cows with Mr. Bruening, although it is certainly credible on its face, is nevertheless
not the only evidence for the trier of fact on this point. Evidence in conflict with
Mr. Fulkerson's testimony included the existence of the notes, as well as the testimony
of Mr. Bruening, who said that he had signed the notes in order "to purchase cattle,"
and that the payment of $13,700 to Mr. Fulkerson occurred because "we owed him for
the cattle and we were due [to make] a payment." Mr. Bruening also listed, when he
filed for bankruptcy, a debt to Mr. Fulkerson that was consistent with the schedule of
the executed notes. Mr. Fulkerson himself mentioned in a letter to the bankruptcy court


                                            -4-
that Mr. Bruening had purchased the cattle, and in his filings with the court he asserted
"cattle sold" as the basis for his claim. On the basis of this record, we are hardly in a
position to disturb the holding of the bankruptcy court on the factual question of
whether the transfer was a sale or a bailment.

       Mr. Fulkerson's reliance on our decision in Rohweder v. Aberdeen Prod. Credit
Ass'n, 765 F.2d 109 (8th Cir. 1985), misses the mark. It is true that the Rohweder
court had before it a case that, like ours, required a decision on the question of whether
a transfer of cattle was a bailment or a sale. On a record much stronger than that in our
case for the proposition that the transfer was a bailment, we held that a factual question
existed and that a summary judgment in the district court, holding that the transfer was
a sale, had to be reversed. Rohweder, then, for our purposes, merely stands for the
unexceptionable proposition that factual disputes are to be resolved by the trier of facts.

                                            B.
       Having concluded that the bankruptcy court did not err in holding that the
transfer of cattle to Mr. Bruening by Mr. Fulkerson was a sale and gave rise to a debt,
the second question is whether the fact that BHC made the relevant payment on that
debt, and not Mr. Bruening personally, stands in the way of the trustee's recovery.
       The answer to this question depends on whether the $13,700 payment can
correctly be said to be a transfer "of an interest of the debtor in property." 11 U.S.C.
§ 547(b). The bankruptcy code defines a transfer broadly to include "every mode,
direct or indirect ... of disposing of or parting with property or with an interest in
property." 11 U.S.C. § 101(54). It is undeniable that the $13,700 that Mr. Fulkerson
received belonged, if only for the short interlude between Mr. Bruening's transfer and
BHC's payment, to BHC. The trustee, of course, has no right to recover a payment by
a co-obligor of a debtor on a note, or a payment by any third party for that matter, that
pays down a debt of the debtor. That is because these payments, which would decrease
the sum of the creditors' claims on the debtor, would have no effect on the estate of the


                                           -5-
debtor. Brown v. First Nat'l Bank of Little Rock, Ark., 748 F.2d 490, 491 (8th Cir.
1984) (per curiam).

       To reach the $13,700 payment, then, requires that the corporate form be
overlooked, or that the interests of the corporation and the principal be somehow
equated. We are not persuaded that the law supports such an outcome. There seems
to be nothing in the bankruptcy code itself that touches on the question. Under
Missouri law, to ignore the corporate form under an "alter ego" theory requires not just
a showing of complete control but at least some element of mischief in the corporate
undertaking itself. In re B. J. McAdams, Inc., 66 F.3d 931, 937 (8th Cir. 1995), cert.
denied, 116 S. Ct. 2546 (1996) (corporate entity may be rejected when "used as a
subterfuge to defeat public convenience, to justify wrong, or to perpetuate a fraud").
The record shows that BHC kept separate accounts and records, and that it had
corporate funds apart from the $13,000 that Mr. Bruening put in the account. There is
no evidence that BHC was anything other than a legitimate enterprise set up to manage
Mr. Bruening's cattle interests. The payment from BHC is therefore not recoverable
by the trustee.

                                             C.
       We find, nevertheless, that the payment by Mr. Bruening into the corporate
account is itself a voidable preference under 11 U.S.C. § 547(b). Mr. Fulkerson argues
that the debt was BHC's and not Mr. Bruening's and therefore that the payment of
$13,000 was not on account of an antecedent debt. This argument, if successful, might
well lead, as the bankruptcy court indicated, to the conclusion that the payment was a
fraudulent transfer for less than equivalent value under 11 U.S.C. § 548(a)(2)(A). But
we think that the argument fails as a matter of law on the record before us. Because
Mr. Bruening signed the relevant notes without any indication that he was doing so on
behalf of BHC, there is no question that the obligation to Mr. Fulkerson was
Mr. Bruening's personally. Receivables Fin. Corp. v. Hamilton, 408 S.W.2d 44, 46
(Mo. 1966); see also United Sav. & Loan Ass'n v. Lake of the Ozarks Water Festival,

                                          -6-
Inc., 805 S.W.2d 350, 354-57 (Mo. Ct. App. 1991). We think that the record is clear,
moreover, that the funds were earmarked from the first for Mr. Fulkerson, and that
BHC was a mere conduit for them. The $13,000 payment to BHC is therefore voidable
as a preferential transfer under 11 U.S.C. § 547(b)(2).

                                           III.
       We therefore reverse the judgment of the district court as to the $700 of the
transfer that constituted corporate funds. We remand the case to the district court for
entry of a judgment consistent with this opinion.

      A true copy.

             Attest:

                CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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