161 B.R. 5 | D. N.Y. | 1993
This is a “core” proceeding (28 U.S.C. § 157) in which the Bankruptcy Trustee seeks to avoid, as 11 U.S.C. § 547(b) “preferences,” payments that were made to the defendant totalling $5,910.63 within 90 days before the Debtor filed its Chapter 11 Petition on June 8, 1990.
The defendant first argues that it is entitled to a credit for $5,425.96 for unpaid invoices for goods shipped to the Debtor on credit after the filing of the Chapter 11 petition and which currently remain unpaid. The defendant argues that this amount should be credited as “new value” under the 11 U.S.C. § 547(c)(4) defense,
To take an oversimplified example, assume that C was preferred by D to the extent of $10,000. Assume that after the filing of the petition, C delivers $4,000 of goods on credit, but X (a different creditor who may or may not have done business with the debtor prior to the filing of the petition, but who, in any event, received no preferential transfers) delivers $20,000 of goods on credit to the debt- or-in-possession. By the defendant’s theory, only $6,000 (recovery of the $10,000, less a $4,000 offset) should be available to pay X’s $20,000 claim. (If there are no administrative expenses, X would receive the $6,000.) By the Trustee’s theory, he should be able to recover the $10,000 from C and that $10,000 should be available to pay the aggregate $24,000 claims of both creditors. X then would receive more than $8,000, not a mere $6,000.
At the time that credit is extended to a DI-P, it cannot necessarily be known whether all administrative expenses will be paid. Thus defendant’s theory, which would reduce the preferred creditor’s exposure to the preference attack, at the expense of the non-preferred administrative claimant is not a sound policy result.
But more to the point, the defendant’s result is not sustained by the language of the statute. As explained by the Bellanca Court, the “new value” exception contained in 11 U.S.C. § 547(c)(4) grants a credit only when a preferred creditor thereafter gave new credit to or for the benefit of “the debtor” as opposed to “the estate.” The phrase “the debtor” is systematically used throughout the Bankruptcy Code to connote an entity different from “the estate,” “the Trustee,” or “the debtor-in-possession.” If Congress had intended to recognize a “new value” exception for credit extended to the “estate” or to the “trustee,” it would not have used the word “debtor.” Furthermore, as noted by the Court in Bellanca and in In re Jed Florida System, Inc., 59 B.R. 886 (Bankr.S.D.Fla.1986), the extension of credit in the ordinary course of business to the operating post-petition entity is governed by 11 U.S.C. § 364(a). That statute clearly states that such credit is allowable as an administrative expense under 11 U.S.C. § 503(b)(1). Such treatment would not accord C (in the above hypothetical) a status greater than X’s. Thus, neither section 547(c)(4) nor section 364(a) support the defendant’s theory. The administrative expense claim which the defendant possesses does not earn it a dollar-for-dollar section 547(c)(4) defense against any voidable preference it received.
Next the defendant argues for offset of $5,511 worth of goods delivered to the Debtor on credit after the preferential payments but before the filing of the petition.
The cases cited by the defendant (for the proposition that new credit extended after the receipt of a preferential payment need not remain unpaid in order to constitute “new value”) do not, in fact, stand for the asserted proposition.
These cases
In a “subsequent advance” analysis of a section 547(c)(4) defense one seeks to determine the extent to which the estate was “enriched,” replenished with “money or money’s worth in goods, services, or new credit”
A number of other cases stand for the proposition that “new credit” advances must “remain unpaid” in order to give rise to a (c)(4) defense,
The cases which say that the “new credit” need not remain unpaid in order to constitute “new value” under section 547(c)(4) (see footnote 2) do not hold that payments received by the creditor after the extension of new credit are not to be “charged against” the creditor in determining the amount of the (c)(4) defense. Indeed, those eases hold the opposite; all payments received by the creditor after the extension of new credit reduce the extent of the creditor’s allowable (c)(4) defense. Consequently, it seems that those cases merely stand for the proposition that it is not necessary to determine whether those payments were applied to the particular invoices that are claimed to reflect the “new value” asserted under section 547(c)(4).
In the case at Bar, we do not have a “stream” or “succession” of transactions between the Debtor and the creditor during the brief period after the payments were made (on 3/28/90, 4/11/90 and 5/23/90) that are alleged to be voidable preferences, and before the creditor began extending credit to “the estate” after the filing of the petition. There were only three transactions: extension of new credit (delivery of goods) of $4424 on 6/1/90, a further extension of $1087.00 on the 6/8/90 filing date, and the post-petition payment of those two bills in July, 1990. Even under the above-discussed cases cited by the defendant, these extensions of new credit would not yield a (c)(4) defense if the creditor had received a payment in similar amount a moment before the bankruptcy filing, rather than a month after it. Why should those cases yield a (e)(4) defense here? Which leads to the last argument for consideration: The defendant argues that the two-year statute of limitations contained in 11 U.S.C. § 549(d) precludes the post-petition payment from consideration in connection with its section 547(c)(4) defense.
This argument is rejected. Whether one construes 11 U.S.C. § 549(d) to be a true “limitation” (which only bars a remedy) or a condition or qualification upon the very “right” to invoke 11 U.S.C. § 549,
The Court is cited to no authority for the proposition that any limitation, qualification or condition of the sort contained in section 549(d) requires the Court to treat the fact of payment as if it never occurred simply because recognizing the fact as fact results in defeat of the defense. Stated otherwise, the fact that a particular occurrence would of itself be actionable were it not time-barred, does not preclude proof of the occurrence as a complete defense (or to disprove a defense) in a different action. Limitations or conditions on remedies, or even on rights of action, do not preclude evidence of facts.
Judgment will enter for the Trustee. As to its unpaid extensions of credit to the estate, the defendant will share with other administrative expense claimants. If it files a proof of claim under Bankruptcy Rule 3002(c)(3) after it disgorges the preference, it will also share as a general unsecured creditor, if assets reach that far.
SO ORDERED.
. It cites two cases ostensibly to that effect: In re Quality Plastics, Inc., 41 B.R. 241 (Bankr.W.D.Mich.1984) and In re Thomas Garland, Inc., 28 B.R. 87 (Bankr.E.D.Mo.1983). Those cases appear to cite others.
. Matter of Isis Foods, Inc., 39 B.R. 645 (W.D.Mo.1984) and In re Paula Saker & Co., Inc., 53 B.R. 630 (Bankr.S.D.N.Y.1985).
. 11 U.S.C. § 547(a)(2).
.The analysis differs from the pre-Code "net result rule” in that under that earlier rule, all transactions within the 90-day preference period were netted, rather than only those transactions which occurred subsequent to the challenged payment.
. If I negotiate for a payment with a promise to extend new credit, how much of what I extend is truly "new value”? Some courts might not treat all of the "new credit” as "new value," and might, thus, reject any “netting" approach.
. Consider, for example. In re Kroh Bros. Dev. Co., 930 F.2d 648 (8th Cir.1991); In re New York City Shoes, Inc., 880 F.2d 679 (3rd Cir.1989); and Jet Florida System, Inc., 841 F.2d 1082 (11th Cir.1988) as well as In re Keydata Corp., 37 B.R. 324 (Bankr.Mass.1983).
. If, and to the extent that, this characterization of those courts' holding is incorrect, and those courts treat payments to the creditor as if they were irrelevant, the present Court disagrees with those Courts, and relies on the reasoning of the cases set forth at the footnote immediately above.
. See 51 Am.Jur.2d, Limitation of Actions §§ 15, 22 for an explanation of the implications of this distinction.