Appellant cites to several courts that have endorsed this view. For example, in In re Ameriservice Food Distrib., Inc., the court held that "Section 502 addresses the allowability of a creditor's proof of claim where the creditor has received a voidable transfer, not the debtor's ability to commence a preference action where the debtor fails to object to the creditor's claim." 315 B.R. 24, 34 (Bankr. D. Del. 2004); see also In re TWA, Inc. Post Confirmation Estate, 305 B.R. 221, 226 (Bankr. D. Del. 2004) (holding that ยง 502(d) "should not be used to prohibit a preference claim that is commenced after a claim is allowed by settlement or hearing"); In re Bridge Info. Sys., Inc., 293 B.R. 479, 488-89 (Bankr. E.D.Mo. 2003) (holding that ยง 502(d) is not even an issue unless raised by the debtor as a defense); In re Rhythms Net Connections, Inc., 300 B.R. 404, 408-09 (Bankr. S.D.N.Y. 2003) (same). In all of these cases, the initial allowance of a creditor's claim was not treated as a determination that the creditor could not later owe money to the debtor for past preference payments.
AFD Fund v. Transmed Foods, Inc. (In re AmeriServe Food Distrib., Inc.), 315 B.R. 24, 34 (Bankr.D.Del.2004); In re Polaroid Corp., No. 01โ10864(PJW), 2004 Bankr.LEXIS 841 (Bankr.D. Del. June 22, 2004); In re TWA Inc. Post Confirmation Estate, 305 B.R. 221, 226โ27 (Bankr.D.Del.2004); Rhythms NetConnections Inc. v. Cisco Sys. (In re Rhythms NetConnections Inc.), 300 B.R. 404, 408 (Bankr.S.D.N.Y.2003); Peltz v. Gulfcoast Workstation Group (In re Bridge Information Sys., Inc.), 293 B.R. 479, 487โ88 (Bankr.E.D.Mo.2003). While the Fifth Circuit has not analyzed this issue, this Court adopts this majority reasoning because, as discussed below, this rule seems both more reasonable and more cognizant of the realities of the plan confirmation process.
"If the creditor satisfies these elements, a setoff is permitted in the amount of the new value and the recoverable amount is reduced." TWA Inc. Post Confirmation Estate v. City and County of San Francisco Airports Comm'n (In re TWA Inc. Post Confirmation Estate), 305 B.R. 221, 228 (Bankr. D. Del. 2004) (citations omitted). The parties agree that Salton provided $284,497.82 in new value during the preference period that remained unpaid as of the Petition Date. (Doc. # 132 p. 39; Doc. # 135, pp. 37-8.)
During the pendency of this appeal, however, another bankruptcy judge in this district confronted the same issue and arrived at the opposite conclusion. TWA Inc. Post Confirmation Estate v. City County of San Francisco Airports Comm'n (In re TWA Inc. Post Confirmation Estate), 305 B.R. 221 (Bankr. D. Del. Jan. 20, 2004). See also Homeplace of Am., Inc. v. Salton, Inc. (In re Waccamaw's Homeplace), 325 B.R. 524, 535 (Bankr. D. Del. May 31, 2005).
The Trustee's main argument is that the last column comprised of 21 invoices, dated March 5, 2009, in the amount of $71,808.03 for household goods insurance charges does not qualify for new value pursuant to section 547(c)(4), because Prudential failed to prove the dates when the actual services were provided. See, e.g., First Jersey Sec., 180 F.3d at 511 (holding that a debt arises when legal services are provided, not when an invoice is issued). Therefore, the Trustee maintains that Prudential failed to satisfy its burden under section 547(c)(4). See, e.g., TWA Inc. Post Confirmation Estate v. City and Cnty. of SF. Airports Comm'n (In re TWA, Inc. Post Confirmation Estate), 305 B.R. 221, 228 (Bankr. D. Del. 2004) (holding that defendant must prove when the services were rendered to establish that the new value exception applies). Prudential responds, however, that Ms. Williams-Varner testified that an expense for household goods insurance was automatically triggered once a move was completed and resulted in an invoice the following week. (Tr. 3/12/13 at 104.)
It provides a mechanism that enables a trustee to recover assets of the estate from a recipient of an avoidable transfer, unless the claimant has paid or turned over property that is the subject of the turnover or avoidance action. Cariolo v. Saginaw Bay Plastics, Inc. (Cambridge Indus. Holdings), No. 001919, 2006 WL 516764 (D. Del. Mar. 2, 2006); TWA Inc. Post Confirmation Estate v. City and County of San Francisco Airports Commission (In re TWA Inc. Post Confirmation Estate), 305 B.R. 221, 226 (Bankr. D. Del. 2004). Moreover, the failure to include a specific reservation of claims or causes of action in a plan need not be fatal so long as creditors received notice of such reservation before the plan is approved.
It provides a mechanism that enables a trustee to recover assets of the estate from a recipient of an avoidable transfer, unless the claimant has paid or turned over property that is the subject of the turnover or avoidance action. Cariolo v. Saginaw Bay Plastics, Inc. (Cambridge Indus. Holdings), No. 001919, 2006 WL 516764 (D. Del. Mar. 2, 2006); TWA Inc. Post Confirmation Estate v. City and County of San Francisco Airports Commission (In re TWA Inc. Post Confirmation Estate), 305 B.R. 221, 226 (Bankr. D. Del. 2004). Moreover, the failure to include a specific reservation of claims or causes of action in a plan need not be fatal so long as creditors received notice of such reservation before the plan is approved.
Phoenix Restaurant Group, Inc. v. Proficient Food Co. (In re Phoenix Restaurant Group, Inc.) Nos. 301-12036, 303-0568A, 2004 WL 3113719 (Bankr. M.D. Tenn. Dec. 16, 2004) (noting the split of authority). The better reasoned cases reject this preclusionary argument and hold that 11 U.S.C. ยง 502(d) does not require a trustee to raise his preference or fraudulent transfer claims in the claim allowance process or risk losing them. Rhythms NetConnections, Inc. v. Cisco Systems, Inc. (In re Rhythms NetConnections, Inc.), 300 B.R. 404 (Bankr. S.D.N.Y. 2003); TWA Post Confirmation Estate v. City and County of San Francisco Airports Comm. (In re TWA Inc. Post Confirmation Estate), 305 B.R. 221, 225 (Bankr. D. Del. 2004); Peltz v. Gulf Coast Workstation Group (In re Bridge Information Sys., Inc.) 293 B.R. 479, 487 (Bankr. E.D. Mo. 2003). The claims allowance process is aimed at determining whether or not the debtor is liable to a creditor on a particular claim.
In re Meredith Manor, Inc., 902 F.2d 257 (4th Cir. 1990); In reTransport Assocs., Inc., 171 B.R. 232 (Bankr. W.D. Ky. 1994). If the new value is less than the previous preferential transfers, then the transfers are avoidable only pro tanto. In re TWA, Inc. Post Confirmation Estate, 305 B.R. 221 (Bankr. D. Del. 2004); In re Comptronix Corp., 239 B.R. 357 (Bankr. M.D. Tenn. 1999); In re Workboats Northwest, Inc., 201 B.R. 563 (Bankr. W.D. Wash. 1996). If the unrepaid subsequent advances equal or exceed the prior preferential transfers, then the estate may not recover anything. In re Chez Foley, Inc., 211 B.R. 25 (Bankr. D. Minn. 1997); In re Winter Haven Truss Co., 154 B.R. 592 (Bankr. M.D. Fla. 1993).
Consequently, we conclude that the Defendant has failed to meet its burden of establishing a new value defense. See, e.g., TWA Inc. Post Confirmation Estate v. City County of San Francisco Airports Comm'n (In re TWA Inc. Post Confirmation Estate), 305 B.R. 221, 228 (Bankr. D. Del. 2004) (holding that defendant must prove when the services were rendered to establish that the new value exception applies). C. Mere Conduit Defense