Brazoria County Stewart Food Markets, Inc. - Page 16




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          the total amount expected was received from Formosa whereas the             
          repayments of many of petitioner’s advances were postponed for 3            
          or more years, and some were never repaid.  Postponement of this            
          magnitude overtly suggests that petitioner’s advances were                  
          purposefully and systematically subordinated in favor of those of           
          other creditors, including Grocers, in an effort to keep                    
          petitioner’s and Stewart’s investment in UPE viable.                        
               Here, petitioner was wholly owned by Stewart, who eventually           
          used petitioner’s resources to acquire 100 percent of UPE.  A               
          portion of the advances UPE received from petitioner was used to            
          buy out the other owners of UPE common stock, making Stewart the            
          sole shareholder of both petitioner and UPE.  Upon gaining                  
          control of UPE, Stewart made himself president and demoted                  
          Goolsby to vice president.                                                  
               Another factor weighing heavily against petitioner is the              
          fact that UPE was thinly capitalized ($1,000) and reported losses           
          at the time of all advances.  To counter this factor, petitioner            
          argues that UPE’s inventory was worth more than $100 million at             
          the time of the advances.  Both Stewart and Goolsby testified               
          that UPE’s inventory was probably worth millions of dollars, but            
          that value depended upon the ability to tap the international               
          market.  They also pointed out that UPE did not reflect the                 
          equipment’s fair market value on its books because of a lack of             
          basis.  In light of the record, we find their testimony to be               






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Last modified: May 25, 2011