Matter of Sweetapple Plastics, Inc.
| Decision Date | 13 August 1987 |
| Docket Number | Bankruptcy No. 85-30037,Adv. P. No. 85-3016. |
| Citation | 77 BR 304 |
| Parties | In the Matter of SWEETAPPLE PLASTICS, INC., Debtor. SWEETAPPLE PLASTICS, INC., As Debtor in Possession, Plaintiff, v. PHILIP SHUMAN & SONS, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Middle District of Georgia |
William M. Flatau of Brown, Katz, Flatau & Hasty, Macon, Ga., for plaintiff.
Raymond L. Fink of Gross, Shuman, Brizdle, Laub & Gilfillan, P.C., Buffalo, N.Y., for defendant.
Ernest V. Harris, Athens, Ga., Trustee.
On February 5, 1985, Sweetapple Plastics, Inc., Plaintiff, filed a petition for relief under Chapter 11 of the Bankruptcy Code.1 On June 6, 1985, Plaintiff, as debtor in possession, filed a complaint against Philip Shuman & Sons, Inc., Defendant, asserting that Defendant had received a preferential transfer in the amount of $10,000 which should be avoided.2 By leave of the Court, Plaintiff amended its complaint. In its amendment, Plaintiff asserted that Defendant had received an additional preferential transfer in the amount of $20,000. On October 10, 1985, the Court granted Plaintiff's motion to dismiss that portion of its complaint regarding the $10,000 transfer.
The complaint came on for trial on January 14, 1986. The Court, having considered the evidence presented at trial and the briefs of counsel, now publishes its findings of fact and conclusions of law.
In June of 1984, Plaintiff began purchasing materials described as ABS Compound from Defendant. With the exception of one purchase order, Plaintiff verbally placed orders for the ABS Compound with Defendant. After Defendant received Plaintiff's order, Defendant would send an acknowledgement form to Plaintiff to insure that the order Defendant had taken from Plaintiff was correct. The acknowledgement form is a preprinted form with blanks on the front side for the order date, the shipment date, the terms of payment, materials ordered, the price of the material, and other such information. On the back of the acknowledgement, the following statement is printed:
The back of the acknowledgement also provides under the terms of payment that the net amount due must be paid within thirty days unless otherwise specified. Plaintiff and Defendant had altered this term. Brenda Walker, the former treasurer and comptroller of Plaintiff, and Hyman Shuman, the president of Defendant, testified that Plaintiff had sixty days in which to render payment on its orders with Defendant. The acknowledgement form states that all invoices not paid pursuant to the agreed upon terms are subject to a one and one-half percent monthly delinquency charge.
The following is a summary of Plaintiff's purchases of ABS Compound from Defendant:
INVOICE DATE DATE AMOUNT
NUMBER ORDERED SHIPPED
N11783 6/18/84 6/22/84 $24,060.00
N11878 7/12/84 7/13/84 $25,860.00
N11869 7/12/84 7/20/84 $26,340.00
N11870 7/10/84 8/07/84 $25,140.00
N11871 7/12/84 8/27/84 $24,301.80
N11949 7/26/84 9/07/84 $25,606.80
N11948 7/26/84 9/11/84 $24,450.00
N11950 7/26/84 9/19/84 $24,000.00
N12231 9/19/84 9/26/84 $25,110.00
Plaintiff received all of the ABS Compound shipped. Plaintiff made the following payments to Defendant for the materials purchased:
DATE DATE CHECK AMOUNT
WRITTEN RECEIVED NUMBER
08/24/84 08/27/84 #1187 $24,060
(payment on invoice number N11783)
09/27/84 10/02/84 #1278 $25,140
(payment on invoice number N11870)
11/02/84 11/6/84 #1356 $20,0003
(no invoice number specified)
11/29/84 12/03/84 #1430 $10,0004
(payment on invoice number N11878
and invoice number N11869)
Plaintiff made timely payments on the first and fourth invoices, but was delinquent on the second, third, and fifth invoices. Ms. Walker testified that as Plaintiff became delinquent in paying the invoices, Defendant's credit manager began telephoning Plaintiff to see when payments would be made. Ms. Walker testified that Plaintiff applied the $20,000 payment made on November 2, 1984 to invoice number N11878, the oldest outstanding invoice on its books. She testified that Plaintiff did not inform Defendant that it intended the $20,000 payment to be applied in this manner. Mr. Shuman testified that Defendant applied the $20,000 payment on account, thus reducing Plaintiff's overall balance to $155,668.60. Defendant deposited the check for $20,000 into its bank account on November 7, 1984. Plaintiff's bank honored this check on November 8, 1984.
When Plaintiff made the $10,000 payment on November 29, 1984, Plaintiff specifically instructed Defendant to apply this payment to the balance on invoice N11878 for the amount of $5,860, and as partial payment on invoice N11869 for the amount of $4,140. Mr. Shuman testified that Plaintiff's instructions were not followed.
Plaintiff's bankruptcy schedules filed with the Court reflect that Plaintiff has unsecured debts totaling approximately $4,815,388. Plaintiff introduced a summary of its assets showing that its maximum recoverable assets total $1,801,060.23. This amount includes the money received from the liquidation of Plaintiff's assets as well as the money Plaintiff seeks to recover from certain parties in pending adversary proceedings.5
Plaintiff seeks to avoid the payment of $20,000 to Defendant on the ground that such payment is a preferential transfer under section 547(b) of the Bankruptcy Code.6 Section 547(b) provides:
11 U.S.C.A. § 547(b) (West 1979 & Supp. 1987). Plaintiff has the burden of proving these elements. 11 U.S.C.A. § 547(g) (West Supp.1987). See also Tidwell v. Fickling & Walker Insurance Agency, Inc. (In re Georgia Steel, Inc.), 58 B.R. 153, 156 n. 4 (Bankr.M.D.Ga.1984) (citing Meyers v. Vermont National Bank (In re The Music House, Inc.), 11 B.R. 139, 7 Bankr.Ct.Dec. 882, 5 Collier Bankr.Cas.2d 1240 (Bankr.D.Vt.1980)).
The Court finds that Plaintiff has met its burden of proof with regards to the first three elements. Plaintiff has established that the payment was a transfer of an interest of the debtor in property to or for the benefit of a creditor for an antecedent debt owed by the debtor before the transfer was made. Defendant admitted that at the time the transfer occurred, Plaintiff was insolvent.7
The fourth element of a preferential transfer requires Plaintiff to prove that the transfer was made on or within ninety days before the date of the filing of the petition. 11 U.S.C.A. § 547(b)(4) (West Supp.1987). Plaintiff filed its bankruptcy petition on February 5, 1985; therefore, the ninety-day preference period began on November 8, 1984. Plaintiff transferred the $20,000 to Defendant by check dated November 2, 1984. Defendant deposited the check into its bank account on November 7, 1984, and Plaintiff's bank honored the check on November 8, 1984. Thus, Defendant received the check outside of the preference period, but the check was honored by Plaintiff's bank during the preference period.
This Court has previously held that in determining whether a transfer was made during the preference period, the Court must look to the date when the drawee bank honored the check written by the debtor. See Tidwell v. Bethlehem Steel Corp. (In re Georgia Steel, Inc.), 56 B.R. 509, 518 (Bankr.M.D.Ga.1985), rev'd on other grounds, 66 B.R. 932 (M.D.Ga.1986); Tidwell v. Atlanta Gas Light Co. (In re Georgia Steel, Inc.), 38 B.R. 829, 832, 11 Bankr.Ct.Dec. 1163, 1165 (Bankr.M.D.Ga. 1984); Harris v. Harbin Lumber Co. of Royston (In re Ellison), 31 B.R. 545...
To continue reading
Request your trial