January 8, 2018, Virginia – The Chapter 7 trustee of a Debtor Truland Walker Seal Transportation, Inc. brought an adversary proceeding against a Defendant Myers Controlled Power, LLC, a supplier of electrical equipment for the avoidance and recovery of an alleged preference and fraudulent transfers under Section 547 and Section 548(a)(1)(B) of the Bankruptcy Code.
Myers argued that it had an affirmative defense as the transfer was substantially contemporaneous exchange for new value under Section 547(c) (1). The Court found that the gaps of 44 days and 23 days between when the equipment was released and when the transfer later occurred were just too long to be considered truly “contemporaneous” under § 547(c)(1).
The Court held that the alleged payment from the Debtor to the Defendant, in the form of a joint check issued according to an agreement, constituted a preference for purposes of Sec. 547. Thus, the transfer could be avoided because the creditor did not meet its burden to show that there was a contemporaneous exchange for new value under Sec. 547(c)(1) when it released certain electrical equipment in exchange for the payment.
However, the Court granted the Defendant summary judgment on the Trustee’s count under §548 because there was no genuine dispute that the release of the equipment was reasonably equivalent value for the payment made under § 548(a)(1)(B).
Gold v. Myers Controlled Power, LLC (In re Truland Grp., Inc.), No. 14-12766-BFK, 2018 Bankr. LEXIS 42 (Bankr. E.D. Va. Jan. 8, 2018)