IN RE CANNON, (Bankr.W.D.Tenn. 1997)

GEORGE BOSWELL, Bankruptcy Judge

On April 22, 1997, this Court entered a Memorandum Opinion and Order Re Cross Motions for Summary Judgment. In such Memorandum, this Court granted the Trustee's Motion for Summary Judgment and held that $163,350.00 in pre-petition transfers made by the debtor, William Dunlap Cannon, to the defendant, First Tennessee Bank, were avoidable preferential transfers, recoverable by the trustee under 11 U.S.C. § 547(b). Approximately one week after issuance of this Memorandum, First Tennessee Bank filed a Motion to Amend the Judgment, wherein the defendant moved the Court to set aside the judgment for a sum figure, set the matter for trial and reconsider the granting of the Trustee's motion for summary judgment.

This Court conducted a trial on this matter on September 16, 1997. FED. R. BANKR. P. 7001. According to 28 U.S.C. § 157(b)(2), this is a core proceeding. The parties agreed at the trial that the only issues for the Court to decide were the dollar amount of the damages the Chapter 7 Trustee is entitled to recover from First Tennessee and the applicability and effect of the "Subsequent New Value" defense on First Tennessee's liability. After reviewing the testimony from the trial and the record as a whole, the Court makes the following findings of facts and conclusions of law. FED. R. BANKR. P. 7052.

I. FINDINGS OF FACT

There is not a person or party involved in this adversary proceeding who is not extremely familiar with the facts of this case. In fact, if anyone were to ask the attorneys, the parties, or the Court itself what the facts of this matter were, it is highly likely that a narrative answer could be recited from memory. Because the scope of this opinion is a narrow one, however, and because this court previously set forth the relevant facts in its April 22, 1997, Memorandum Opinion and Order re Cross Motions for Summary Judgment, the facts which need to be determined today are sparse.

On January 10, 1994, the debtor in this case, William Dunlap Cannon, III, ("Cannon"), deposited a check in the amount of $81,900.00 into his Real Estate Escrow Account at First Tennessee Bank. Also on this date, debtor deposited a check in the amount of $81,450.00 into his Escrow Recording Account at First Tennessee. Both of these checks were written on an account the debtor had opened only a few days earlier at Hibernia National Bank in New Orleans.

Immediately upon deposit, First Tennessee credited Cannon's two accounts with $81,900.00 and $81,450.00, respectively. Between the date of deposit and January 24, 1994, First Tennessee also honored and paid numerous checks presented against Cannon's Real Estate Escrow Account and Escrow Recording Account. With regard to Cannon's Real Estate Escrow Account, First Tennessee paid a total of $40,783.01 worth of checks Cannon wrote on such account. With regard to Cannon's Escrow Recording Account, First Tennessee paid a total of $78,925.17 worth of checks Cannon wrote on such account.

II. CONCLUSIONS OF LAW

In the previous Memorandum Opinion and Order re Cross Motions for Summary Judgment, this Court found, as a matter of law, that $163,350.00 of the money William Dunlap Cannon deposited in his First Tennessee Bank accounts on January 24, 1994, were avoidable preferential transfers within the meaning of 11 U.S.C. § 547(b). In so finding, this Court held that Cannon's "antecedent debt" to First Tennessee Bank arose on January 10, 1994, when First Tennessee granted Cannon provisional credit for the two deposits of $81,900 and $81,450. The opinion this Court enters today in no way changes, affects, or alters the Findings of Fact and Conclusions of Law set forth in the April 22, 1997, opinion granting the Trustee's motion for summary judgment.

Because this Court has previously found the transfers in issue to be avoidable preferences, the only issue for the Court to decide today is what affect, if any, does the "Subsequent New Value" defense have on First Tennessee's liability to return the preferential transfers of $163,350.00 to the Chapter 7 Trustee. Under 11 U.S.C. § 547(c)(4), a trustee may not avoid a transfer under § 547(b) which was made:

(4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor —

(A) not secured by an otherwise unavoidable security interest; and

(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor;

11 U.S.C. § 547(c)(4) (1994). The plain and unambiguous meaning of § 547(c)(4) is that if a creditor extends new value to the debtor AFTER a preferential transfer occurs, the trustee is barred from recovering that portion of the preferential transfer which represents the new value extended by the creditor. See 11 U.S.C. § 547(c)(4); See also Amex Trading Co., Inc. v. Brown Feed Chemical Company (In re Amex Trading Company, Inc.), 37 B.R. 793, (Bankr. W.D. Tenn. 1984). In the case at bar, First Tennessee asserts it is entitled to use the "Subsequent New Value" defense found in § 547(c)(4) because it honored numerous checks written by Cannon between January 10, 1994, and January 24, 1994, despite the lack of funds in his two First Tennessee accounts. The preferential transfer which was made in this case, however, did not occur until January 24, 1994. As a result, First Tennessee did not extend "new value" to Cannon after the preferential transfers were made. Because First Tennessee's actions do not fall within the purview of § 547(c)(4), they are not entitled to use the "Subsequent New Value" defense and they are, therefore, liable to the trustee in the entire amount of $163,350.00.

III. ORDER

It is therefore ORDERED that the Trustee's Complaint to Recover Preferential Transfers against First Tennessee Bank is granted in the amount of $163,350.00 as previously ORDERED by this Court.

IT IS SO ORDERED.