506 B.R. 83
Bankr. D. Ariz.2014Background
- Debtors Travis and Mary Carter filed Chapter 7 on July 19, 2012; they made four credit-card payments totaling $10,868.58 to Barclays within the 90-day preference period.
- Payments: $1,000.00 (Apr. 20), $4,868.58 (May 4), $2,500.00 (June 11), $2,500.00 (June 18).
- Trustee sued Barclays to recover the entire $10,868.58 as avoidable preferences under 11 U.S.C. § 547(b).
- Barclays asserted affirmative defenses: ordinary-course defense (§ 547(c)(2)), subsequent new value (§ 547(c)(4)), and objected to the Bankruptcy Court’s authority to enter final judgment (Stern objection), but also moved for summary judgment in its favor.
- Record showed the Debtors historically paid full or nearly-full balances, one late payment during the period was 3 days late, and Barclays’ chart demonstrated subsequent charges (new value) after each challenged payment except $3,093.50.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether payments in the 90-day period are "ordinary course" under §547(c)(2) | Payments deviated from prior pattern because some exceeded the statement amount and two payments split one statement. | Payments matched historical practice: usually full or near-full balance, only one 3‑day late payment, and often covered post‑statement charges. | Court: Payments were in the ordinary course (§547(c)(2)); defense fully defeats preference recovery. |
| Whether subsequent new value (§547(c)(4)) defeats avoidance (if ordinary‑course failed) | Trustee did not meaningfully contest new value chart. | Barclays showed subsequent new charges after each payment, reducing avoidable amount. | Court: New value would offset avoidable transfers except for $3,093.50; provides alternative defense. |
| Applicability of §547(c)(9) small‑amount exception to remaining $3,093.50 | Trustee argued exception should bar defense. | Barclays contended §547(c)(9) threshold requires aggregate avoidable transfers < statutory minimum. | Court: §547(c)(9) does not apply because the complaint alleged aggregate transfers > statutory threshold; exception inapplicable here. |
| Validity of Barclays’ Stern objection to Bankruptcy Court entry of final judgment | Trustee implicitly relied on bankruptcy court authority. | Barclays preserved Stern objection and cited Stem/Bellingham, but also asked for final judgment. | Court: By requesting final judgment, Barclays waived/forfeited its Stern objection under Bellingham; Bankruptcy Court may enter final judgment (or proposed findings if later held unauthorized). |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (Sup. Ct.) (limits bankruptcy court authority to enter final judgments on certain Stern claims)
- In re Bellingham Insurance Agency, Inc., 702 F.3d 553 (9th Cir.) (party conduct can waive Stern objection; sandbagging doctrine)
- Elec. City Merch. Co. v. Hailes (In re Hailes), 77 F.3d 873 (5th Cir.) (discusses preference and related defenses in bankruptcy context)
- Estate of Gianna Blue v. County of Los Angeles, 120 F.3d 982 (9th Cir.) (Rule 11 principles regarding pleading known defenses)