Bankruptcy Trustee Cannot Avoid Payment to Cattle Seller.

The defendant was an order buyer of cattle (broker) that the plaintiff bought cattle from.  The parties entered into multiple contracts for the defendant to deliver 644 head of cattle to the plaintiff.  While written contracts were not produced, the bankruptcy trustee identified two separate contracts accounting for 572 of the delivered cattle - one executed on Aug. 26, 2010 and one executed on Sept. 17, 2010.  The defendant was paid by check three days after delivery (in mid-October), which were then voided and replaced by a single wire transfer on October 20, 2010.  The plaintiff filed bankruptcy on Dec. 6, 2010, and the bankruptcy trustee sought to set aside the payment under 11 U.S.C. Sec. 547(b).  The defendant, however, claimed that the payment amounted to a contemporaneous  exchange for value and that the payment was made in the ordinary course of business - both exceptions to 11 U.S.C. Sec. 547(b) contained in 11 U.S.C. 547(c).  On the ordinary course of business exception, the court noted that the defendant had not established a pattern of behavior and that the court could not conclude that the wire transfer was made in the ordinary course of business.  On the issue of substantially contemporaneous exchange for value, the court noted that the plaintiff's checks had not been dishonored, had not been presented to a bank for payment, and that the plaintiff had changed the form of payment by replacing them with the wire transfer.  As such, the parties intended the exchange to be contemporaneous, and it was, in fact, contemporaneous.  The court granted the defendant's motion for summary judgment.  In re Eastern Livestock Co., LLC v. Krantz, No. 10-93904-BHL-11, 2015 Bankr. LEXIS 3656 (Bankr. S.D. Ind. Oct. 28, 2015). 

 

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