Barney v. Robinson

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
fure 	)
)
HARRY VILLE TALERMO, 	)
)
Debtor. 	)
)
GARY A. BARNEY, Trustee ofthe 	)
Bankruptcy Estate of Harry Ville Talermo 	)
)
Plaintiff, 	)
)
v. 	)
)
STEVE ROBINSON, Individually, 	)
)
Defendant. 	)
Case No. 	11-20806
Chapter 7
Adv. No. 	12-2010
OPINION ON COMPLAINT FOR DELIVERY OR TURNOVER OF PROPERTY
On December 18, 2013, the Complaint for Delivery or Turnover of Property and to
Avoid Lien, filed by Gary A. Barney, trustee of the bankruptcy estate of Harry Ville
Talermo ("Trustee"), and the answer filed by defendant, Steve Robinson ("Robinson"),
came before the court for trial. At the conclusion of the trial, the court took the matter
under advisement. After reviewing the record, testimony and other evidence, arguments
of the parties, and applicable law, the court is prepared to rule.
Jurisdiction
The court has jurisdiction over this adversary proceeding under 28 U.S.C. §§ 157
and 1334. This is a core proceeding within the definition of28 U.S.C. § 157(a)(2)(F).
The complaint is brought under 11 U.S.C. § 54 7(b ). 1
1 Unless otherwise noted, all statutory references are to Title II of the United States Code.
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Facts
This case was remanded from the Tenth Circuit Bankruptcy Appellate Panel for
trial or other disposition based upon a finding that there were material facts in controversy
and the court applied § 545(2) in avoiding the liens in the Summary Judgment, which was
not applicable. Upon remand, the Trustee asserts a preferential transfer under§ 547(b)
and Robinson claims a defense to the Trustee's lien avoidance under§ 547(c)(1).
Harry Talermo ("Debtor") filed for chapter 7 bankruptcy protection on July 25,
2011. Prior to filing, in May 2011, Robinson loaned the Debtor the amount of$2,000.00.
The testimony indicates that the parties did not discuss terms for repayment.
Subsequently, in July 2011, the Debtor asked to borrow more money from Robinson. 2 At
that time, Robinson loaned the Debtor the amount of $18,000.00. According to
Robinson, he gave the money to the Debtor "a couple days prior to getting liens on the
property." Robinson "thought it was prudent to have some kind of collateral" for the
loans. After a discussion, Debtor offered a 1991 Jaguar valued at $7,500.00 ("Jaguar"),
1999 DHM Trailer valued at $500.00 ("Trailer"), and 2000 Calabria boat valued at
$12,000.00 ("Boat") as collateraP
After consultation with the Debtor's bankruptcy attorney, Robinson and the Debtor
took the titles of the Jaguar and Boat and a National UCC Financing Statement ("Form
2 Neither party presented testimony or evidence regarding the specific dates of these transactions.
3 The trustee did not controvert the values placed on the property. The total values equal the amount of both
loans.
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took the titles of the Jaguar and Boat and a National UCC Financing Statement ("Form
UCC1 ")to the Teton County Clerk's office to effectuate the liens on the titles. 4 The titles
to the Jaguar and Boat reflect that a lien was recorded on July 7, 2011, in the amount of
$20,000.00 in favor of Steve Robinson. Form UCC1 reflects that it was recorded on the
"71h JULY, 2011 at 2:59 o'clock" by "HKL deputy."
Discussion
The Trustee brought an adversary proceeding against Robinson seeking to avoid
the liens on Debtor's Jaguar and Boat as preferential transfers. Robinson asserts that the
liens should not be avoided based upon contemporaneous exchange exception under
§ 547(c)(l).
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The Bankruptcy Code provides,
"Except as provided in subsections (c) and (i) of this section, the
trustee may avoid any transfer of an interest of the debtor in property-
( 1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor
before such transfer was made;
(3) made while the debtor was insolvent;
(4) made-
(A) on or within 90 days before the date of the filing of the
petition; or
(B) between ninety days and one year before the date of the
filing of the petition, if such creditor at the time of such
transfer was an insider; and
(5) that enables such creditor to receive more than such creditor
would receive if-
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
4 Robinson conceded that a lien was not properly placed on the Trailer.
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(C) such creditor received payment of such debt to the extent
provided by the provisions of this title. " 5
The Trustee has the burden of proving the avoidability of a preferential transfer by
a preponderance of the evidence. 6 The creation of a security interest is a transfer for the
purpose of§ 547(b). 7 In this case, the Debtor transferred an interest in his property by
providing Robinson a security interest in the Jaguar and Boat. The transfer was for
Robinson's benefit as he became a secured creditor. The Bankruptcy Code further
provides, "the debtor is presumed to have been insolvent on and during the 90 days
immediately preceding the date of the filing of the petition." 8 Debtor did not present
testimony or evidence rebutting this presumption or disproving this element. The transfer
occurred on July 7, 2011, or 18 days prior to Debtor filing his bankruptcy petition, which
is within the 90 day period prior to his bankruptcy petition filing date. Robinson received
more than he would have as an unsecured creditor as he is now a secured creditor.
The Bankruptcy Code does not define "antecedent debt." Courts have held that "a
'debt is antecedent' when the debtor becomes legally bound to pay before the transfer is
made." 9 Each loan, i.e. the $2,000.00 loan in May 2011 and the $18,000.00 loan in July
5 § 547(b).
6 § 547(t) and In re Robinson Bros. Drilling, Inc. 9 F.3d 871 {10 1h Cir. 1993).
7 Royal v. Rocky Mountain Bank, F.S.B. (In re Potter), Adv. Case No. 93-2051, (Bankr. D. Wyo. July 27,
1994).
8 § 547(t).
9 The Fonda Group, Inc, v. Marcus Travel, 108 B.R. 956 (Bankr. D. N.J., 1989).
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2011, were made prior to the Debtor providing Robinson a security interest in Debtor's
property. Therefore, the debts are antecedent. The court finds that the trustee has met his
burden that the transfer was a preferential transfer under§ 547(b).
Contemporaneous Exchange
The Bankruptcy Code provides certain defenses to preference actions. Specific to
this case, Robinson claims the transfer was a contemporaneous exchange. The
Bankruptcy Code states,
"The trustee may not avoid ... a transfer-
( 1) to the extent that such transfer was -
(A) intended by the debtor and the creditor to or for whose
benefit such transfer was made to be a contemporaneous
exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange ... " 10
The creditor or party in interest against whom recovery or avoidance is sought has the
burden of proving the nonavoidablity of a transfer under subsection (c) ofthis section."11
( 1) 	Was new value received and what was the parties' "intent?"
The court's review of the facts reflects that the Debtor and Robinson entered into
two financial transactions. The first transaction was the $2,000.00 loan in May 2011.
The second is the $18,000.00 loan in July, 2011. Mr. Robinson "lumps" both transactions
together for the purpose of the contemporaneous exchange exception.
10 § 547 (c)(l).
II §547(g).
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(A) 	New Value
For the purpose of a preferential transfer, "new value" is defined as
"money or money's worth in goods, services or new credit, or release by a
transferee of property previously transferred to such transferee in a
transaction that is neither void nor voidable by the debtor or the trustee
under any applicable law, including the proceeds of such property, but does
not include an obligation substituted for an existing obligation."12
The party asserting the contemporaneous new value defense "must prove with specificity
the measure of new value given the debtor in the exchange transaction he seeks to protect
and the challenged payment is protected only to the extent of the specific measure of new
value shown." 13
The court finds that Robinson provided testimony as to the amounts of the loans he
provided to the debtor, i.e., $2,000.00 and $18,000.00 respectively.
(B) 	Parties' Intent
The first part of the substantially contemporaneous test is the parties' intent. The
Colorado Bankruptcy Court found this part of the test "is an unadorned factual
determination based on the evidence presented at trial." 14
(i) 	First Transaction
The $2000.00 loan transaction occurred approximately two months prior to the
12 § 547(a)(2).
13 Kipperman v. Onex Corp., 411 B.R. 805, 866 (N.D. Ga. 2009).
14 In re Kerst and Peters v. Wray State Bank, 347 B.R. 418 (Bankr. D.Colo. 2006).
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Debtor granting Robinson a security interest in Debtor's Jaguar and Boat. According to
Robinson's testimony, the parties did not discuss repayment terms of this loan. It was
only when the Debtor requested more funds, i.e., the second transaction, that Robinson
requested collateral for both loan amounts and Debtor granted Robinson a security
interest in the Jaguar and Boat. The court does not find the parties had any intention of
the $2,000.00 loan to be contemporaneous to Debtor's transfer to Robinson of a security
interest in Debtor's property. However, the testimony reflects that the parties intended
the second transaction to be a contemporaneous exchange as Robinson provided the
money to the Debtor at the same time that the parties discussed Debtor providing
collateral to Robinson for the loan. In conclusion, the court finds the first transaction
does not meet the first element of the contemporaneous exchange test. However, the
second transaction does meet the requirements that new value was given and the parties
intended the transaction to be a contemporaneous exchange.
(2) 	Was the second transfer "in fact" substantially contemporaneous?
The second element of the substantially contemporaneous test is whether the
transfer was "in fact" substantially contemporaneous. The Tenth Circuit has not adopted
a definitive test for determining whether a transaction qualifies as a substantially
contemporaneous exchange. Several courts within the Tenth Circuit discussed the
opposmg vtews.
In In re Pepper, the Tenth Circuit Bankruptcy Panel ("BAP") applied both tests to
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the facts finding that the transfer which occurred seven months and 18 days prior to the
Creditor protecting its interest was not, in fact, a contemporaneous exchange. 15 The
Bankruptcy Court for the District of New Mexico determined that ten days was
"sufficiently immediate" in view of the time required for administrative task of invoicing,
wiring funds, etc., to be defined as a contemporaneous exchange for the payments after
the delivery of fuel to the debtor. 16
In Kerst, the Bankruptcy Court for the District of Colorado ("Colorado Court")
discussed both the narrow view that limits a substantially contemporaneous exchange to
10 days and the more liberal view that the court should review the facts on a case-by-case
basis. The Colorado Court analyzed the liberal view proposed by the Seventh Circuit in
the Pine Top 17 case that provides for a flexible definition of contemporaneous,
considering the factors such as length of delay, reason for the delay, nature of the
transaction, intension of the parties, and possible risk of fraud. 18 The Kerst court held that
the nine days delay was considered substantially contemporaneous under even the most
rigid bright-line test.
In the case before this court, Robinson testified that he gave the Debtor $18,000.00
15 In re Pepper, 339 B.R. 756 (lOth Cir. BAP 2006).
16 Indian Capital Distributing, Inc., Adv. No. 11-1060; 2012 Bankr. LEXIS 3725 (Bankr. D.N.M. Aug. 10,
2012).
17 Pine Top Insurance Company v. Bank ofAmerica National Trust and Savings Association, 969 F.2d 321
(7th Cir. 1992).
18 Kerst at 425.
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just two days prior to the date that he and the Debtor went to the Teton County Court
house to place Robinson's lien on the titles. As in the Kerst case, the two day delay meets
the rigid bright-line ten-day test. Therefore the second transaction meets the elements of
an exception to the trustee's ability to avoid the preferential transfer.
Conclusion
In conclusion, the Trailer is valued at $500.00. The values of the Jaguar and Boat
total $19,500.00. Robinson concedes that the Trailer lien was not properly perfected.
The $2,000.00 transaction meets the standards of a preferential transfer, but fails to
meet the elements required as a contemporaneous exchange exception. Therefore, the
court finds for the plaintiff/Trustee with regard to the first transaction involving the
$2,000.00.
The Trustee met his burden proving that the second transaction in the amount of
$18,000.00 was a preferential transfer. However, Robinson carried his burden showing
that the avoidance sought by the Trustee is nonavoidable as a contemporaneous exchange.
The court finds for the defendant/Robinson with regard to the $18,000.00 transaction.
This opinion constitutes the Court's findings of fact and conclusions of law. A
separate order shall be entered pursuant to Fed. R. Bankr. P. 9021.
DATED this .:J1__ day of January, 2014.
Service to:
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Frank Watkins
Ken McCartney
By the Court
~~CNWFUnited States Bankruptcy Judge
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