Delaware Bankruptcy Court Holds That New Value Need Not Remain Unpaid For Preference Defendant To Prove Subsequent New Value Defense
Hechinger Inv. Co. of Del. v. Universal Forest Products, Inc. (In re Hechinger Inv. Co. of Del., Inc.), Case No. 99-02261 (PJW), Adv. Pro. No, 01-3170 (PBL), 2004 WL 3113718 (Bankr. D. Del. December 14, 2004) (Judge Paul B. Lindsey)
The debtor, Hechinger Investment Company, operated a chain of home improvement stores. Defendant Universal Forest Products was a trade creditor of the debtor, supplying treated wood products for sale at the debtor’s stores. The debtor brought a preference action against UFP. UFP filed a motion for summary judgment, asserting various defenses under 11 U.S.C. § 547(c), including, most notably, a subsequent new value defense under section 547(c)(4). The Court distinguished the Third Circuit case of In re New York City Shoes, Inc., 880 F.2d 679 (3d Cir.1989), holding that in a typical running account scenario like this one, there is no requirement in section 547(c) that new value remain unpaid. However, the Court held that summary judgment was premature absent a waiver of the other asserted defenses under section 547(c), or a stipulation by the parties as to the amount in controversy, because a calculation under section 547(c)(4) must be prefaced by a determination of whether the transfers made on account of new value are "otherwise avoidable."
Continue Reading...
