Failure of Proof Regarding the Fifth Element Under §547(b) (5) Precluded Judgment For Trustee
Johns v. First Cmty. Bank (In re Trent), Nos. 2:14-bk-20526, 2:15-ap-02035, 2017 Bankr. LEXIS 407 (U.S. Bankr. S.D. W. Va. Feb. 13, 2017)
Debtor Herman Trent sought a loan from a Defendant First Community Bank in an amount of $7,044.80. The Defendant provided the loan, which enabled the Debtor to purchase a truck. Following the loan, the Bank disbursed $6,735.50 of the proceeds to Auto Discount Exchange, Inc., by check, and Herman Trent took possession of the truck on May 9, 2014. On August 19, 2014, the Bank perfected its security interest in the truck by registering its name and address on the face of the certificate of title as the first lien creditor. On July 21, 2016, the Debtor registered a certificate of title to the truck in his name. After that, the Debtor filed for bankruptcy. The Bank filed a proof of claim against the Debtor on February 5, 2016. The Trustee moved for summary judgment, asserting that the transfer of interest in the vehicle should be avoided because it was on account of an antecedent debt and that the Bank will receive preferential treatment because it was receiving more than it would have had the transfer not occurred. The Bank argued that the Trustee did not meet his burden, namely, a showing that the Bank will receive more than it would have had the transfer not been made.
The Court found that all elements of Sec. 547(b) were satisfied except the fifth element. The Court pointed out that the transfer was made on account of an antecedent debt under §547(b)(2) because the perfection occurred 102 days after the Debtor took possession of the vehicle and also 102 days after the Debtor acquired liability on the claim. The Debtor was insolvent on August 19, 2014, when the transfer was made, and the Bank did not refute the presumption of insolvency in §547(b) (3). Next, the §547(b) (4) was satisfied, as the transfer occurred within 90 days of filing the petition. However, the Court found that Trustee did not submit evidence that the bank was in a more favorable position resulting from the transfer as required by §547(b) (5). The Court stated that there was no evidence that the Bank will receive more than it would – had the case been filed under Chapter 7; had the transfer had not been made; had it received payment to the extent provided under Chapter 11. The Court determined that that the Trustee merely offered a statement reciting §547(b) (5) as a means to prove the element, which was not sufficient. Thus, the Court concluded that the Trustee was not entitled to summary judgment.
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