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In Re MID OHIO PETROLEUM COMPANY Chapter 11 Debtor. LEONARD Z. EPPEL OF FINANCIAL RESOURCE ASSOCIATES, INC., AS ESTATE REPRESENTATIVE OF MID OHIO PETROLEUM COMPANY Plaintiff v. ALLIANCE INVENTORY SERVICE OF KENTUCKY, INC. Defendant.

MEMORANDUM OF DECISION DENYING SUMMARY JUDGMENT MOTION

JEFFERY HOPKINS, Bankruptcy Judge

The Plaintiff ("Eppel") initiated this action with a complaint to avoid and recover: (1) two allegedly preferential transfers totaling $2,100.00; and (2) two alleged postpetition transfers totaling $2,100.00. Presently before the Court is a summary judgment motion ("Motion") (Doc. 21) filed by the Defendant ("Alliance"). By its Motion, Alliance raises eight defenses to the complaint.

1. Statute of Limitations

Alliance contends that the complaint was not timely filed.

Pursuant to 11 U.S.C. § 546(a), Eppel had until September 10, 2004, to file the complaint. Because he filed the complaint on September 9, 2004, the statute of limitations defense is without merit and will be denied.

The Debtor filed its chapter 11 petition on September 10, 2002. Because the case has not been dismissed or closed and because no trustee has been appointed, preference actions could be filed up to two years after the filing of the chapter 11 petition. See 11 U.S.C. § 546(a)(1)(A).

2. Standing

Alliance argues that Eppel does not possess standing to bring the action because the Bankruptcy Code only references the "trustee" as the moving party.

The confirmed plan provides that the Estate Representative may prosecute any "Recovery Actions." Doc. 275 at ¶ 8.5(b)(vi). Moreover, this Court's confirmation order provides that "[a]ll Recovery Actions are retained and may be prosecuted by the Estate Representative." See Doc. 290 at 12. The law is well settled that an estate representative appointed under a confirmed chapter 11 plan possesses standing to pursue avoidance actions. See Winston Strawn v. Kelly (In re Churchfield Management Investment Corp.), 122 B.R. 76, 81-83 (Bankr. N.D. Ill. 1990). Thus, Eppel possesses standing to prosecute this action. Alliance's challenge to Eppel's standing to bring these avoidance actions will be overruled.

3. Solvency — 11 U.S.C. § 547(b)(3)

Alliance next contends that Eppel cannot sustain his burden of proof under § 547(b) because the Debtor was solvent at the time of the transfers at issue.

Pursuant to 11 U.S.C. § 547(f), debtors are presumed to be insolvent during the non-insider preference period. Alliance has presented no evidence to rebut this presumption. See Fed.R.Evid. 301.

4. Affirmative Defenses — 11 U.S.C. § 547(c)

Alliance next moves to the affirmative defenses under § 547(c). Alliance bears the burden of proving all elements of any § 547(c) defense that it asserts. See § 547(g).

4a. Contemporaneous Exchange

The three elements of the contemporaneous exchange defense under § 547(c)(1) are: (1) both the debtor and creditor must intend the transfer to be a contemporaneous exchange; (2) the exchange must, in fact, be contemporaneous; and (3) the exchange must be for new value. Stevenson v. Leisure Guide of America (In re Shelton Harrison Chevrolet, Inc.), 202 F.3d 834, 837 (6th Cir. 2000). Because Alliance has presented no proof of the foregoing elements, its contemporaneous exchange defense fails.

4b. Ordinary Course of Business

"Subsections (B) and (C) of section 547(c)(2) `comprise a subjective and objective component respectively. The subjective prong (subsection (B)) requires proof that the debt and its payment are ordinary in relation to other business dealings between that creditor and that debtor. The objective prong (subsection (C)) requires proof that the payment is ordinary in relation to the standards prevailing in the relevant industry.'" Luper v. Columbia Gas of Ohio (In re Carled, Inc.), 91 F.3d 811, 813 (6th Cir. 1996) (quoting Logan v. Basic Distribution Corp. (In re Fred Hawes Org., Inc.), 957 F.2d 239, 244 (6th Cir. 1992)). Again, because Alliance has presented no proof of the foregoing elements, its ordinary course of business defense fails.

5. Defenses Not Contained in § 547(c)

Within § 547(c), Congress explicitly identified a set of defenses to a preference action. Notwithstanding, Alliance raises additional "defenses" that are not contained in § 547(c).

5a. Administrative Claimant Defense

Alliance contends that it is an administrative claimant and therefore it should not have to return any transfers that Eppel may be entitled to recover under the complaint.

Notwithstanding a September 2004 bar date for filing administrative claims, Alliance has yet to make any request for payment of a claim under 11 U.S.C. § 503(a). Even if Alliance is not barred from pursuing an administrative claim, it still must prove its claim under § 503(b). Even then, an allowed administrative claim would not serve as a defense to the complaint.

In a recent case, Roberds, Inc. v. Broyhill Furniture (In re Roberds), 315 B.R. 443, 476 (Bankr. S.D. Ohio 2004), Judge Waldron concluded that 11 U.S.C. § 502(d) does not bar an administrative claimant from receiving payment on its claim. At the same time, however, the existence of an administrative claim does not bar recovery under § 547(b). Id. Instead, the administrative claimant is indebted to the estate under § 547(b) and may nonetheless receive payment on its administrative claim so long as the same is approved by court order. Id. Thus, § 547(b) and § 503(b) represent two separate proceedings, with neither serving as a defense to the other.

5b. Failure to Schedule Interest in Property to be Recovered

Alliance next argues that Eppel is barred from prosecuting the complaint because the Debtor failed to schedule the property that Eppel seeks to recover from Alliance. The Court disagrees.

A chapter 11 debtor's failure to schedule its interest in a potential preferential transfer does not estop the debtor from pursuing recovery of the same. See Ice Cream Liquidation, Inc. v. Calip Dairies, Inc. (In re Ice Cream Liquidation, Inc.), 319 B.R. 324, 338-39 (Bankr. D. Conn. 2005); Direct Air, Inc. v. Fairchild Aircraft, Inc. (In re Direct Air, Inc.), 189 B.R. 444, 453-54 (Bankr. N.D. Ill. 1995).

5c. Unclean Hands — NSF Check

The final defense raised by Alliance is the doctrine of unclean hands. Alliance argues that the Debtor has unclean hands because it provided Alliance with NSF checks for prepetition services.

The doctrine of unclean hands is immaterial to a preference action. See Kmart Corp. v. Uniden America Corp. (In re Kmart Corp.), 318 B.R. 409, 418 (Bankr. N.D. Ill. 2004). If delivery of a prepetition, NSF check constituted a valid defense to a preference action, few debtors would ever prevail under § 547.

CONCLUSION

For the foregoing reasons, the Motion will be DENIED. An order to this effect will be entered.

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IN RE MID OHIO PETRO. v. LEONARD Z. EPPEL
(Jun 3, 2005)