Locke v. Walker

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
JAMES FRANK WALKER, No. 05-14391
Debtor(s).
______________________________________/
JEFFRY G. LOCKE, Trustee,
Plaintiff(s),
v. A.P. No. 06-1115
SHARON GAYLE WALKER,
Defendant(s).
_______________________________________/
Memorandum After Trial
_________________
Debtor James Walker and defendant Sharon Walker are former spouses, divorced in 2003. They
remained on amicable terms thereafter, and during 2004 and 2005 Sharon loaned James about $30,000.00
which James needed for expenses relating to his real property in Oregon. James promised Sharon that he
would repay her in full when he sold the property.
Sharon had loaned smaller sums of money to James in the past, which he had repaid. Because the
loans related to the Oregon property were much larger than prior loans, Sharon asked for and received two
promissory notes: one dated July7, 2004, for $10,500.00, and one dated April 30, 2005, for $19,500.00.
Both notes were due when James sold the Oregon property.
The escrow on the sale of the property closed about July 16, 2005. On July 18, 2005, James sent
Entered on Docket
March 12, 2007
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-01115 Doc# 20 Filed: 03/12/07 Entered: 03/12/07 16:28:49 Page 1 of 3

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1The date of the transfer is the date when the check was honored by the James’ bank. Barnhill v.
Johnson, 503 U.S. 393, 395, 112 S.Ct. 1386, 118 L.Ed.2d 39 (1992); In re Greene, 223 F.3d 1064,
1067n.3 (9th Cir. 2000).
2Insolvency is presumed pursuant to § 547(f) of the Code.
3The evidence established that unsecured creditors will not be paid in full, which is all that need be
shown to meet the requirement of § 547(b)(5). In re Powerline Oil Co., 59 F.3d 969, 972 (9th Cir. 1995).
4Because there was nothing ordinary about the loans or the repayment, the court need not deal with
the dubious proposition that personal loans such as those made by Sharon to James can be considered to be
incurred in the ordinary course of financial affairs.
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Sharon a check for $30,000.00. The check cleared on July 21, 2005. James filed a Chapter 7 petition on
October 15, 2005. The Chapter 7 trustee, plaintiff Jeffry Locke, seeks to avoid the payment as a preference
pursuant to § 547(b) of the Bankruptcy Code.
The court does not need to concern itself with whether Sharon should be considered an insider as the
transfer was within 90 days of the bankruptcy.1 She was a creditor, and the payment was on account of the
antecedent debts evinced by the notes. It was made while James was insolvent.2 It allowed Sharon to
receive more than she would have received if the transfer had not been made and she had received her
dividend pursuant to the Bankruptcy Code.3 Thus, all elements of an avoidable preference have been
proved.
Sharon argues that James’ debt to her was made in the ordinary course of financial affairs between
her and James and his payment was made in the ordinary course of their financial affairs, so that the transfer is
immune from recovery pursuant to § 547(c)(2) of the Code. However, the evidence established that nothing
about the debt or the payment was ordinary. The amount of the debt was far larger than prior loans, James
had not given her a note before, and no prior repayments had been conditioned on the sale of real property.4
For the foregoing reasons, judgment shall be entered in favor of Locke in the amount of $30,000.00,
plus interest at the legal rate from and after the date the complaint in this adversary proceeding was filed.
Case: 06-01115 Doc# 20 Filed: 03/12/07 Entered: 03/12/07 16:28:49 Page 2 of 3

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26 5Counsel for Locke shall notice a scheduling conference on the fraudulent conveyance claim forthwith.
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Locke shall also recover his costs of suit.
This memorandum constitutes the court’s findings and conclusions pursuant to FRCP 52(a) and
FRBP 7052. Counsel for Locke shall submit an appropriate form of judgment after the bifurcated fraudulent
conveyance claim has been adjudicated.5
Dated: March 12, 2007
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 06-01115 Doc# 20 Filed: 03/12/07 Entered: 03/12/07 16:28:49 Page 3 of 3