United States District Court, E.D. Arkansas, Helena Division
M. RANDY RICE, Trustee, PLAINTIFF
PRAIRIE GOLD FARMS; and FRANK PRISLOVSKY, DEFENDANTS
OPINION AND ORDER
LEON HOLMES, UNITED STATES DISTRICT JUDGE.
an adversary proceeding commenced by Chapter 7 bankruptcy
trustee Randy Rice in bankruptcy court to recover as an
avoidable preference a $71, 957.10 payment that Prairie Gold
Farms received from the debtor, Turner Grain, during the 90
days prior to Turner Grain filing a voluntary Chapter 11
petition (later converted to a Chapter 7 proceeding). The
defendants moved to withdraw the reference, Rice did not
respond, and the Court granted the motion to withdraw the
reference on August 1, 2017. Document #1. The parties have
filed cross-motions for summary judgment pursuant to Federal
Rule of Civil Procedure 56. Documents #8 and #11. For the
following reasons, the Trustee's motion is denied and the
defendants' motion is granted.
Grain was an Arkansas grain brokerage corporation. Frank
Prislovsky is a farmer and a partner in Prairie Gold Farms,
an Arkansas general partnership. Turner Grain regularly
purchased grain from the defendants. Karen Marshall of Hurley
& Associates Agri-Marketing Centers of Charleston, Inc.
helps Prairie Gold Farms market its grain and sell it for the
highest available price. Turner Grain and Prairie Gold Farms
entered into two contracts on May 7, 2014. Document #12-1.
Pursuant to one contract, Prairie Gold Farms agreed to sell
5, 000 bushels of wheat to Turner Grain, who agreed to pay
$6.78 per bushel. Id. at 1. Pursuant to the other
contract, Prairie Gold Farms agreed to sell 5, 000 bushels of
wheat to Turner Grain, who agreed to pay $7.09 per bushel.
Id. at 2. Both contracts include a notation:
“Booked via Karen Marhsall Hurley & Associates,
E-mailed to Karen.” Document #12-1. Both contracts
provide that shipment was expected to begin anytime from June
1, 2014 through July 31, 2014. Id.
record indicates that Prairie Gold Farms delivered the
following shipments of wheat to Turner Grain. On July 21,
2014, Prairie Gold Farms delivered 6, 533.67 bushels.
Document #12-2 at 3-4. On August 4, 2014, Prairie Gold Farms
delivered 4, 279.40 bushels. Id. at 1-2. The total
number of bushels Prairie Gold Farms delivered to Turner
Grain is 10, 813.07. Id. at 1-4. Then, on August 11,
2014, Turner Grain made a payment to Prairie Gold Farms in
the amount of $71, 957.10. Document #8-1. The check is dated
August 4, 2014. Id. at 2. Turner Grain filed a
voluntary Chapter 11 bankruptcy petition on October 23, 2014.
The case was converted to a Chapter 7 proceeding on May 15,
2015, and Rice was appointed trustee on May 12, 2016. The
Trustee initiated this adversary proceeding on October 10,
2016. The defendants moved to withdraw the reference on July
14, 2017, and the Court granted the motion on August 1, 2017.
should grant summary judgment if the evidence demonstrates
that there is no genuine dispute as to any material fact and
the moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(a). The moving party bears the initial burden
of demonstrating the absence of a genuine dispute for trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106
S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). If the moving party
meets that burden, the nonmoving party must come forward with
specific facts that establish a genuine dispute of material
fact. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89
L.Ed.2d 538 (1986); Torgerson v. City of Rochester,
643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). A genuine
dispute of material fact exists only if the evidence is
sufficient to allow a reasonable jury to return a verdict in
favor of the nonmoving party. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91
L.Ed.2d 202 (1986). The Court must view the evidence in the
light most favorable to the nonmoving party and must give
that party the benefit of all reasonable inferences that can
be drawn from the record. Pedersen v. Bio-Med.
Applications of Minn., 775 F.3d 1049, 1053 (8th Cir.
2015). If the nonmoving party fails to present evidence
sufficient to establish an essential element of a claim on
which that party bears the burden of proof, then the moving
party is entitled to judgment as a matter of law.
statute governing this case-11 U.S.C. § 547-is intended
to “promote equality of distribution to creditors in
bankruptcy” by discouraging creditors from
“racing to dismember a debtor sliding into
bankruptcy.” In re Jones Truck Lines, Inc.,
130 F.3d 323, 326 (8th Cir. 1997). Generally, the trustee may
avoid any transfer of an interest of the debtor in property
to or for the benefit of a creditor; for or on account of an
antecedent debt owed by the debtor before such transfer was
made; made while the debtor was insolvent on or within 90
days before the date of the filing of the petition. 11 U.S.C.
§ 547(b). However, the trustee may not avoid the
transfer to the extent the transfer was a contemporaneous
exchange for new value or made in the ordinary course of
business. Id. at § 547(c). If the trustee
can show that a transfer is avoidable under § 547(b),
the burden shifts to the creditor to prove by a preponderance
of the evidence that one of the § 547(c) exceptions
applies. See In re Genmar Holdings, 776 F.3d 961,
964 (8th Cir. 2015).
Trustee argues that the transfer is avoidable under §
547(b) and that the defendants have failed to create a
genuine dispute of fact as to whether an exception applies.
Document #10 at 3. The defendants argue that the Trustee has
failed to create a genuine dispute of fact as to whether the
transfer is avoidable under § 547(b) because the
transfer was not made on account of an antecedent debt. The
Bankruptcy Code defines “debt” as a
“liability on a claim.” Laws v. United Mo.
Bank of Kansas City, N.A., 98 F.3d 1047, 1049 (8th
Cir.1996) (citing 11 U.S.C. § 101(12)). “A debt is
‘antecedent' if it was incurred before the
allegedly preferential transfer.” In re Jones Truck
Lines, 130 F.3d at 329. “A debt is incurred
‘on the date upon which the debtor first becomes
legally bound to pay.' ” Id. (quoting
In re Iowa Premium Serv., Co., 695 F.2d 1109, 1111
(8th Cir.1982) (en banc)). Turner Grain became obligated to
pay on July 21 and August 4, the dates the wheat was
delivered. Turner Grain paid on August 4, after the
deliveries, so the payment was made on account of an
antecedent debt. The transfer is avoidable unless the
defendants prove an exception applies. See In re
Armstrong, 291 F.3d 517, 522 (8th Cir. 2002). The
defendants argue that, even if the transfer was made on
account of an antecedent debt, they have met their burden
under § 547(c) to prove that the transfer was a
contemporaneous exchange for new value and made in the
ordinary course of business. Document #12 at 2.
Contemporaneous New Value
547(c)(1) provides that a transfer is not avoidable to the
extent it was-
(A) intended by the debtor and the creditor to or for whose
benefit such transfer was made to be a contemporaneous
exchange for ...