E.D.N.C.: Kiddco v. Callaway- Avoidance of Preferential Payment to Subcontractor

Summary:

Jacobsen Construction entered into a contract with Kiddco to perform subcontract work on a project at Wake Technical Community College.  On May 7, 2004, Kiddco submitted an invoice to Jacobsen for $90,625.27 for grading work at the site and on June 2, 2004, submitted a second invoice for another $102,366.70.   On June 10, 2004, Jacobsen paid Kiddco $35,000 and then on June 29, 2004, Jacobsen paid another $55,625.27.   On September 24, 2004, Jacobsen filed Chapter 7, and the Trustee ultimately sought to avoid all of the payments to Kiddco as preferential payments under 11 U.S.C. § 547.  The bankruptcy court dismissed the preference action as to the June 10, 2004 payment, but held that the June 29, 2004, payment was avoidable as a preference.

Kiddco appealed, first arguing  that the transfer did not enable it to obtain more than it would have in a hypothetical Chapter 7 liquidation.  Kiddco asserted that it would have recovered these funds by enforcing its bond rights.  Relying on United Rentals v.  Angell, 592 F.3d 525 (4th Cir.  2010), the District Court held that this defense to a presence focuses on what the creditor would receive from the bankruptcy estate, not from other sources.

Kiddco also asserted that it had provided Jacobsen with new value, pursuant to 11 U.S.C. § 547(c)(1), by continuing work and not filing a bond claim.  Both the bankruptcy and district courts, however, held that Kiddco was required and failed to show evidence, beyond its own assertion, that it had intended to file a bond claim.

For a copy of the opinion, please see:

Kiddco v. Callaway- Avoidance of Preferential Payment to Subcontractor.PDF

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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