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Home Case Studies Alleged Transfers Were Pre-Payments, No Antecedent Debt Arose Between the Parties, Payments Not Preferential in Nature

Alleged Transfers Were Pre-Payments, No Antecedent Debt Arose Between the Parties, Payments Not Preferential in Nature

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The Debtors collectively operated a nursery and was one of the nation’s largest wholesale growers and distributors of container-grown shrubs, trees, perennials, roses, and groundcovers. Defendant, our client is a small family nursery engaged in the business of native and evergreen azaleas, rhododendrons.  

After the Debtors filed for bankruptcy, the plaintiff brought a complaint, alleging that the payments approximating $70k were received by the Defendants during the preference period and are avoidable as alleged preferential transfers according to 11 U.S.C. § 547 of the Bankruptcy Code.

Upon our analysis, we showed that the alleged transfers were pre-payments and were not made under an antecedent debt and thus, the transfers were not preferential. We argued that the alleged payment was made before the shipment of the liner plants to the Debtors. Therefore, at the time the alleged transfers were made, no antecedent debt arose between the parties. We also argued that Defendant and the Debtor intended the payments to be contemporaneous exchanges. We found that the entire project was structured in a way that it was divided into three phases with installments falling due simultaneously with the completion of each phase. We argued that this, by itself, indicated that Defendant had no intention of doing business with the Debtors on credit. Additionally, we contended that the alleged transfer was a payment made in the ordinary course of business of the parties.

Based on our argument in the position statement, Plaintiff dismissed the case for no payment.

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Jones & Associates

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