HomePlace of America, Inc. v. Toastmaster, Inc. (In re Waccamaw's HomePlace)

Citations: 325 B.R. 536; 2005 Bankr. LEXIS 963Docket: Bankruptcy No. 01-0181 (PJW); Adversary No. 02-07102 (PJW)

Court: United States Bankruptcy Court, D. Delaware; May 31, 2005; Us Bankruptcy; United States Bankruptcy Court

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The Court ruled on HomePlace of America, Inc.'s preference complaint against Toastmaster, Inc. for the recovery of $390,579.10 in transfers made during the preference period. The Court partially favored both parties. Toastmaster, a wholly-owned subsidiary of Salton, Inc., had transactions with HomePlace, which shifted from purchasing through a distributor to direct orders starting in May 2000. Prior to HomePlace's chapter 11 filing, it made significant payments to Toastmaster as outlined in a detailed payment schedule. 

Toastmaster claimed that the transfers were protected under the "ordinary course of business" defense of Code 547(c)(2), categorizing the invoices into those under the "Big Buy" program and those under standard "net 30" terms. Testimony indicated that the Big Buy program was influenced by Salton's acquisition, with industry norms suggesting that such arrangements are common for seasonal orders. The Court concluded that the Big Buy terms were indeed ordinary in the industry context, supporting Toastmaster’s defense.

Richter's testimony was utilized by Toastmaster to identify which invoices were classified as Big Buy Invoices, based on factors such as order dates, promised ship dates, and invoice sequences. Defendant’s Exhibit 9, which lists these invoices, was not meaningfully contested by HomePlace, leading the Court to accept it as representative of the Big Buy Invoices. Consequently, Toastmaster is entitled to protect $243,310 in Big Buy Invoices under Code 547(c)(2).

Regarding the Net 30 Invoices, the timing of payments was crucial. Kennedy indicated that non-Big Buy invoices were typically paid 10 to 25 days late, while Frost noted that HomePlace usually paid invoices 15 days late. Toastmaster presented Exhibit 5, which showed an average payment delay of 16.9 days past the net 30 terms, but this included Big Buy Invoices, leading to a misleading average. Excluding these invoices, it was determined that Net 30 Invoices were paid an average of 64 days after the invoice date, exceeding both industry norms and HomePlace's standard practice. Therefore, these invoices, totaling $147,269.10, are not protected under Code 547(c)(2).

Under Code 547(c)(4), both parties agree that Toastmaster provided $14,745.60 in new value during the preference period, which remains unpaid. Thus, Toastmaster is entitled to a setoff of this amount.

In conclusion, Toastmaster is entitled to protect a total of $258,055.60—$243,310 under Code 547(c)(2) and $14,745.60 under Code 547(c)(4). HomePlace is entitled to recover $132,523.50 from the originally sought $390,579.10, as granted by the Court's judgment order based on 11 U.S.C. 547 and 550. The term "Industry" refers specifically to the small appliance sector, as defined in prior opinions.