Bezanson v. Tekon Technical Consultants, Inc. (In re Agency Refrigeration & Air Conditioning, Inc.)
Docket: Bankruptcy No. 85-026; Adv. No. 85-88
Court: United States Bankruptcy Court, D. New Hampshire; March 20, 1986; Us Bankruptcy; United States Bankruptcy Court
On January 14, 1986, Bankruptcy Judge James E. Yacos presided over a trial concerning a trustee's complaint alleging a preferential transfer of $550 under 11 U.S.C. § 547(b). The key issue was whether the transfer was made in the ordinary course of business, potentially exempting it from recovery under 11 U.S.C. § 547(c)(2). The debtor filed for Chapter 11 on January 25, 1985, later converting to Chapter 7 on April 2, 1985.
The transfer in question was a payment to the defendant, a subcontractor named Tekon, made via check on November 9, 1984. Tekon had contracted with the debtor to test air conditioning systems for a job with New England Telephone. Charles A. Corlin, Jr., president of Tekon, testified that his company began working with the debtor in July 1984, with initial work invoiced on August 30, 1984, for the same amount as the disputed transfer. Although Tekon had no prior relationship with the debtor, Corlin had previously dealt with the project manager, Ken Duchesne, regarding other contracts.
Corlin explained Tekon’s payment collection policy, stating they typically pursue debts after 45 days and expect payments in line with when the general contractor is paid. He noted that payments from telephone company contractors usually came 40 to 90 days post-completion, contingent upon engineer approval. Tekon contacted the debtor on November 8, 1984, regarding the $550 payment, and was informed that payment would be made that Friday. Corlin also indicated the only other interactions with the debtor involved bids on two other jobs, for which Tekon was not compensated. Additionally, Frank Williams, president of the debtor, testified that Agency Refrigeration did not pay Tekon when it received payment from New England Telephone.
Under 11 U.S.C. § 547, a trustee can avoid transfers made by a debtor to a creditor under specific conditions, including that the transfer was made while the debtor was insolvent and enabled the creditor to receive more than in a Chapter 7 bankruptcy. However, transfers made in the ordinary course of business, as outlined in § 547(c)(2), are not avoidable. In this case, the court found that a payment made by the debtor to Tekon Technical Consultants, Inc. was indeed made in the ordinary course of business. The debtor's payment of an invoice dated August 30, 1984, was made on November 9, 1984, which was within a customary timeframe for such transactions, despite being outside of Tekon's typical 45-day collection period.
The trustee did not provide evidence to challenge the ordinary course of business argument, and the court determined that the payment timing was reasonable given the context of prior dealings. Tekon’s decision to continue bidding on additional jobs for the debtor while awaiting payment further indicated that the payment was not considered overdue. Additionally, the court highlighted that the legislative changes to § 547(c)(2) allowed for a broader interpretation of what constitutes the ordinary course of business, moving away from rigid timelines. Consequently, the court ruled in favor of Tekon, affirming the payment was not a preferential transfer.
