Stoebner v. San Diego Gas & Electric Co., et al.

LGI's bankruptcy trustee filed suit to recover payments to SDGE and SCE that LGI made for its clients, Buffets and Wendy's restaurants, as avoidable preferences under section 547(b) of the Bankruptcy Code, 11 U.S.C. 547(b). SDGE and SCE asserted the subsequent new value exception to preference liability pursuant to section 547(c)(4). The court held that, in three-party relationships where the debtor's preferential transfer to a third party benefits the debtor's primary creditor, new value could come from the primary creditor, even if the third party was a creditor in its own right and was the only defendant against whom the debtor had asserted a claim of preference liability. As section 547(b) makes voidable a transfer "for the benefit of a creditor," it both served the purposes of section 547 and honored the statute's text to construe "such creditor" in the section 547(c)(4) exception as including a creditor who benefited from the preferential transfer and subsequently replenished the bankruptcy estate with new value. Therefore, the Bankruptcy Appellate Panel correctly concluded that SDGE and SCE could each offset subsequent new value that Buffets or Wendy's paid to LGI for that utility's services, regardless of when those services were provided. The court directed the BAP to enter a modified judgment reducing SCE's preference liability based on the double-counting of two payments. The court otherwise affirmed the judgment. View "Stoebner v. San Diego Gas & Electric Co., et al." on Justia Law