In re Transport Associates, Inc.
| Decision Date | 09 June 1994 |
| Docket Number | Bankruptcy No. 93-30016. Adv. No. 93-3118. |
| Citation | 171 BR 232 |
| Parties | In re TRANSPORT ASSOCIATES, INC., Debtor. J. Baxter SCHILLING, Trustee-in-Bankruptcy for Transport Associates, Inc., Plaintiff, v. JACKSON OIL COMPANY, Defendant. |
| Court | U.S. Bankruptcy Court — Western District of Kentucky |
Mark Sandlin, Louisville, KY, for defendant Jackson Oil Co.
Baxter Schilling, Louisville, KY, for plaintiff/Trustee.
This action is brought by the Chapter 7 Trustee of Transport Associates, Inc. ("Trustee") against Jackson Oil Company ("Jackson") to avoid as preferential transfers a total of $148,209.58 transferred by Transport Associates to Jackson in payment for petroleum products. This matter is presently before the Court on Jackson's Motion for Summary Judgment. Jackson advances two arguments in support of its Motion: (1) the payments were made in the ordinary course of business, and (2) Jackson gave new value following the transfers at issue. Having reviewed the Briefs filed by the parties, including Jackson's Reply and Trustee's Sur-Reply, this Court finds there are material facts in dispute and overrules Jackson's Motion.
On January 5, 1993, Transport Associates, Inc. ("Transport") filed a petition in bankruptcy under Chapter 7 of the Bankruptcy Code. Transport was in the business of selling petroleum products at the retail level through "truck stop" operations. Accordingly, as an ordinary part of Transport's business, it purchased petroleum products from various suppliers, including Jackson. At the outset of their business relationship in 1980, Jackson set up a credit account for Transport pursuant to the terms of which Transport was to pay Jackson's invoices within ten days of the date of each invoice. However, it is clear from the evidence in the record that early into their business relationship Jackson determined that Transport would be permitted to pay over a period extended significantly beyond the ten day period. From the evidence presented by the parties, it is not possible for the Court to determine the exact period to which the payment terms were extended, as there is no evidence as to when Transport's checks were received. It is imperative for this Court to be presented with evidence as to when the checks were received by Jackson in order to analyze the evidence for purposes of Jackson's ordinary course of business defense and new value defense, pursuant to 11 U.S.C. § 547(c)(2) and (4).
Nevertheless, Jackson did supply this Court with a schedule of payments between the parties from July 7, 1992 to October 6, 1992 (the period of 90 to 180 days prior to the filing of Transport's bankruptcy petition). This schedule shows that of 45 payments totalling $278,444.79, 41 totalling $270,037.83 were posted by Jackson within 30 days of the invoice date. It appears from this evidence that a course of dealing was established whereby Transport was routinely permitted to pay Jackson within 30 days of invoice, presuming of course that Jackson is able to present evidence that the date it posted the checks was the same date it received them.
During the 90 day period preceding the filing of Transport's bankruptcy petition, Transport transferred to Jackson payments totalling $148,209.58. Of that total, $91,230.34 in payments (or 62%) were posted within 30 days of the invoice date. Additionally, Jackson continued to supply Transport with petroleum products throughout this period.
In considering a motion for summary judgment, the question presented to this Court is whether there is "no genuine issue as to any material fact and whether the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). This Court cannot try issues of fact on a Rule 56 motion, but is authorized to determine whether there are issues to be tried. In re Atlas Concrete Pipe, Inc., 668 F.2d 905, 908 (6th Cir.1982). In Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), the Supreme Court held that "in filing a motion for summary judgment, the judge must view the evidence presented through the prism of the substantive evidentiary burden; i.e., whether a jury could reasonably find either the plaintiff proved his case by the quality or quantity of evidence required by the law or that he did not." Id., 477 U.S. at 254, 106 S.Ct. at 2513.
When ruling on a motion for summary judgment, the inference to be drawn from the underlying facts contained in the record must be viewed in a light most favorable to the party opposing the motion, in this case the Trustee. Anderson, 477 U.S. at 242, 106 S.Ct. at 2505. By granting summary judgment, the Court is concluding that based on the evidence upon which the nonmoving party intends to rely at trial, no reasonable fact finder could return a verdict for the nonmoving party. Munson v. Friske, 754 F.2d 683, 690 (7th Cir.1985).
The moving party carries the initial burden of proof by informing the Court of the basis of its motion, and by identifying portions of the record which highlight the absence of genuine factual issues. Once the moving party has produced such evidence, the non-moving party must then direct the Court's attention to evidence in the record sufficient to establish that there is a genuine issue of material fact for trial. In other words, the nonmoving party, in this case the Trustee, must come forward with evidence establishing that it has a viable cause of action. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); First National Bank v. Cities Service Co., 391 U.S. 253, 289-90, 88 S.Ct. 1575, 1592-93, 20 L.Ed.2d 569 (1968).
In the present case, it is clear that there are material facts in dispute. Moreover, the Court does not at the present time have before it certain evidence which is critical to this court's analysis of both Jackson's ordinary course of business defense and new value defense, pursuant to 11 U.S.C. § 547(c)(2) and (4), respectively.
Most importantly, there is no evidence in the record with regard to the date that Jackson received the Transport checks at issue. The United States Supreme Court has held that for purposes of § 547(c), the transfer of funds by check is effective on the date the creditor received the check, as long as Debtor's bank subsequently honors the check. Barnhill v. Johnson, ___ U.S. ___, ___, 112 S.Ct. 1386, 1391, 118 L.Ed.2d 39 (1992). The Barnhill Court specifically distinguished between transfers for purposes of § 547(c) and transfers for purposes of determining whether a payment falls within the 90 day preference period under § 547(b). A transfer for purposes of § 547(c) occurs upon the creditor's receipt of the check, while a transfer for purposes of § 547(b) occurs when the check is presented to the bank. Id.; accord Braniff Airways, Inc. v. Midwest Corp., 873 F.2d 805 (5th Cir.1989); In re Continental Commodities, Inc. v. Smith Metal and Iron Co., 841 F.2d 527, 529-30 (4th Cir.1988); In re Kroh Bros. Dev. Co., 930 F.2d 648, 650 (8th Cir.1991); O'Neill v. Nestle Libbys P.R., Inc., 729 F.2d 35, 37-38 (1st Cir.1984); In re White River Corp., 799 F.2d 631, 633-34 (10th Cir.1986).
This approach "encourages trade creditors to continue dealing with troubled businesses by insulating normal business transactions from the trustee's avoiding power." Continental Commodities, 841 F.2d at 530; accord Braniff Airways, 873 F.2d at 807. Moreover, it is more reflective of commercial realities as the commercial world customarily considers the receipt of a check the equivalent of a cash payment unless it is subsequently dishonored. Continental Commodities, 841 F.2d at 530; White River, 799 F.2d at 634; In re Wolf & Vine, 825 F.2d 197, 200 (9th Cir.1987).
Jackson has also failed to provide this Court with a calculation of its preference exposure that combines both the calculations of exposure under its new value defense, as well as its ordinary course of business defense. Jackson's Motion for Summary Judgment included a calculation of its preference exposure under its ordinary course of business defense. Jackson's Reply then provided a separate calculation of its preference exposure under its new value defense. Both calculations included all transfers that occurred within the 90 day preference period. There has been no attempt by Jackson to separate out the transfers that are entitled to the new value exception from the transfers that are entitled to the ordinary course of business exception. Without such a designation, the end result would be a form of double dipping. The proper method of performing the calculation of preference exposure was a subject of great dispute between the parties' briefs, and will be discussed in detail subsequently.
Jackson asserts that the payments it received from Transport during the 90 day preference period were made pursuant to the ordinary course of business defense contained in 11 U.S.C. § 547(c)(2). For Jackson to prevail under 11 U.S.C. § 547(c)(2), three elements must be met:
The Court does not at the present time have sufficient information before it to make a determination with regard to each of the prongs of this three-part test. Nevertheless, the Court will attempt to address the issues that it can given the evidence before it at this time.
There does not appear to be any dispute with regard to the fact that Transport's debts to Jackson within 90 days of...
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