ROBERT MARK, Chief Bankruptcy Judge
On June 4, 2007, City National filed a Motion for New Trial, Motion for Rehearing and Motion to Alter or Amend Memorandum Opinion (the "Motion") (CP# 118). Subsequently, the Trustee filed his Response and Memorandum of Law in Opposition (the "Response") (CP# 119), and City National filed its Reply to Trustee's Response (the Reply) (CP# 123). (The Motion and Reply will be collectively referred to as the "Motion for Rehearing.") The Motion for Rehearing seeks reconsideration of the Court's Memorandum Opinion (CP# 114) entered May 25, 2007 finding that certain transfers made by the Debtor to City National as deposits into the Debtor's bank account at City National were avoidable and recoverable as preference payments pursuant to Bankruptcy Code §§ 547 and 550.
Undefined terms are the same as those in this Court's Memorandum Opinion (CP# 114).
A motion for rehearing or reconsideration is not a vehicle for relitigating old matters, or for offering evidence or theories of law that were available to a party at the time of the initial ruling. See O'Neal v. Kennamer, 958 F.2d 1044, 1047 (11th Cir. 1992); In re Ingersoll, 124 B.R. 116, 123 (M.D.Fla. 1991); In re Investors Florida Aggressive Growth Fund, Ltd., 168 B.R. 760, 768 (Bankr. N.D.Fla. 1994). Most of City National's arguments in the Motion for Rehearing were raised at or prior to trial and implicitly, if not explicitly, addressed in the Memorandum Opinion. Nevertheless, to reiterate, or clarify, the Court's legal conclusions, City National's Motion for Rehearing arguments will be addressed in this Order.
A. The Gulf Bank Adversary is Inapplicable Because the Transfers There Were Between Accounts at the Defendant Bank
City National argues first that the transactions at issue here between itself and the Debtor are the mere "movement of funds," not "transfers" under 547. In support of this proposition, City National relies on Feltman v. Gulf Bank, Adv. No. 02-1514 (October 1, 2003) (the "Gulf Bank Adversary"), an earlier decided adversary proceeding in this bankruptcy case. This argument is unavailing because the two cases are distinguishable, as the Court previously explained. (Summ. J. Order 8-9, CP# 78, June 22, 2006.) In the Gulf Bank Adversary, the deposit of funds that cleared the overdraft in the Debtor's account came from another of the Debtor's accounts within the same bank. As such, the movement of funds was not a transfer, but rather Debtor money going from one Debtor account at Gulf Bank to the other. Here, at least $690,934.65 in deposits of funds on July 20th came from different banks. These deposits from Debtor accounts at other banks were transfers of the Debtor's property. See 11 U.S.C. § 101(54).
This second account at Gulf Bank belonged to Locin. It was treated as the Debtor's account under an alter-ego theory.
B. The Fact that Most of the Cashier's Checks were Payable to Locin or the Debtor is Irrelevant
City National argues in paragraphs 7 through 9 of its Motion for Rehearing that the issuance of the cashier's checks on July 19, 2000, were not transfers or the creation of a debt because the cashier's checks were issued to Locin or the Debtor. (Motion 4-5, ¶¶ 7-9.) This argument confuses transfers, which apply to payment of a debt, with transactions which result in creation of the debt. As the Trustee noted in his Response, "[t]he identity of the parties who received the cashier's checks is irrelevant." (Response 4, ¶ 14.) This Court agrees. For purposes of analyzing whether a debt arose, it does not matter to whom the checks were issued. The issuance of the checks was an extension of credit because the Debtor's account did not have sufficient cash or deposited items when the checks were issued to cover the checks. That is, to use the term emphasized in the Memorandum Opinion, issuance of the cashier's checks created a ledger balance overdraft and therefore a debt. (Mem. Op. 11-12.)
Although hardly worth mentioning, City National also argues that the Court overlooked the fact that the Debtor wrote checks to City National on its account to obtain the cashier's checks. This fact was not overlooked; it is just irrelevant. Whether the Debtor wrote checks to City National (to buy the cashier's checks) or wrote checks to third parties, the Debtor's account was debited creating the ledger balance overdraft.
C. The Bank was Not Protected by Setoff Rights
City National argues next that § 547 preference liability is not applicable if the collecting bank has a right of setoff against subsequent deposits, arguing that setoffs are not transfers as defined in § 101(54) of the Bankruptcy Code. First, the Court questions whether this statutory argument was previously raised. If not, it cannot be considered a part of a Rule 59, Fed.R.Civ.P., Motion for Rehearing. Stone v. Wall, 135 F.3d 1438, 1442 (11th Cir. 1998).
Second, under the facts in this case, and under the case law cited by City National, the right of setoff did not apply to the July 20th transfers subject of the preference claim. City National relies primarily on In re Frigitemp, 34 B.R. 1000, 1018-20 (S.D.N.Y. 1983). In Frigitemp, the court found that the bank and debtor engaged in a routine practice in which the bank would honor the debtor's checks of up to $50,000 "without requiring advance clearance or confirmation with [the debtor] that specific deposits were forthcoming to cover the overdraft" and would "automatically" setoff the resulting overdraft with funds from subsequent deposits. Id. at 1018. An "overdraft debt" of $119,000 attributable to this routine practice was paid down over a period of approximately three weeks during the preference period. The court held that these deposits, which paid down the $119,000 overdraft debt, were not subject to preference liability and were setoffs, emphasizing that the "checks were not deposited to satisfy a specific indebtedness." Id. at 1019.
The Court's factual findings in this adversary are distinctly different. In particular, the Court found that neither the July 19th ledger balance overdraft nor the July 20th deposits were part of a routine practice between City National and the Debtor. For Frigitemp's routine-practice rule to apply, the ledger balance overdraft must be allowed without a decision by the bank. See Frigitemp, 34 B.R. 1000 at 1028 (such overdrafts were allowed "without requiring advanced clearance"). Mr. Alemany's testimony at trial established the opposite; advanced clearance was required. Moreover, the Frigitemp routine-practice rule also requires that the bank allow the overdraft ledger balance without requiring the debtor to identify specific subsequent deposits to clear that overdraft.See id. at 1018-19. Here, Mr. Alemany's testimony established that before City National allowed the July 19th ledger balance overdrafts it required the Debtor to identify specific future deposits.
City National attempts to attach significance to the fact that there were several instances during the preference period in which ledger balance overdrafts were eliminated by deposits made the following day. A bank's repeated tolerance of the debtor's overdrafts does not bless that tolerance with legal significance.See Matter of Prescott, 805 F.2d 719, 729 (7th Cir. 1986). Thus, even if there were other instances during the preference period in which ledger balance overdrafts were cleared by next day deposits, this is not a "routine practice" as defined inFrigitemp. As noted above, a deposit is not subject to setoff under the Frigitemp standard where, as here, the overdraft was allowed based upon the Debtor's representations that specifically described deposits would be made the following day. Moreover, if the Motion for Rehearing is rearguing common practice in the context of a § 547(c)(2) ordinary course of business defense, that defense was fully considered and rejected. (Mem. Op. 15-18.)
Other courts have rejected the setoff defense in similar circumstances in which a deposit is accepted with the specific intent to clear an overdraft. See Prescott, 805 F.2d at 729 ("[i]f the deposit is accepted by the bank with an intent to apply it on a pre-existing claim against the depositor rather than to hold [it] subject to the depositor's checks in ordinary course, . . . the deposit is viewed legally as a transfer in payment of debt") (citations and internal quotations omitted); Perierra v. Summit Bank 2001 WL 563730 (S.D.N.Y. 2001) (right of setoff does not apply when a deposit is accepted by a bank with an intent to apply it on a pre-existing claim against the debtor). Mr. Alemany's testimony was that City National issued the cashier's checks resulting in the July 19th ledger balance overdraft only because the Debtor promised sufficient deposits would be made on July 20th to clear the July 19th ledger balance overdrafts. This testimony is dispositive on the factual issue of intent. Thus, there is no setoff because the July 20th deposits were made with an intent to clear the July 19th ledger balance overdrafts.
D. The Laws' Decision Does Not Support the Bank's Motion
City National also argues that the Court misapplied the holding in Laws v. United Missouri Bank of Kansas City, 98 F.3d 1047 (8th Cir. 1996). It did not. First, City National states that in Laws, "the negative ledger balance was paid from loan proceeds that were wired by another bank" (Motion 7-8, ¶ 11) (emphasis added). That characterization of the account balance is incorrect. As explained at length in the Memorandum Opinion, Laws (and this Court) focused on the distinction between a "negative collected funds" balance and a "negative ledger balance." (Mem. Op. 7-11.) The payment analyzed in Laws cured a negative collected funds overdraft, not as City National stated, a negative ledger balance.
Second, to the extent City National's argument notes that the transfer in Laws was not from collection of the deposits which gave rise to the provisional credits, the Court addressed this point head-on in the Memorandum Opinion at pages 10 and 11. As explained, the security interest defense still applied. The transfer which satisfied the overdraft did not improve the bank's position "since the bank was fully secured in the deposits which provided the provisional credits and created the [collected funds] overdrafts." (Mem. Op. 11 (citing Laws, 98 F.3d at 1052).)
E. The Bank was Not Protected by an Alleged Security Interest in Future Deposits
Finally, City National argues that it was protected by a security interest in the July 20th deposits, i.e., in future deposits, citing Frigitemp. Part of the court's analysis inFrigitemp relating to provisional credits was cited favorably by this court in the Summary Judgment Order, at 14-15, and in the Memorandum Opinion. The section of Frigitemp relied upon in this portion of the Motion for Rehearing addressed a different issue. In this later section of Frigitemp, discussing certain overdrafts which were allowed by the bank only after the debtor identified specific subsequent deposits, the court did shield those subsequent deposits from preference liability. 34 B.R. at 1021. The court relied on two alternative theories in so holding. First, since it found that the bank extended credit — that is allowed the overdrafts — because the debtor specifically identified future deposits, it ruled that such a transaction was "properly viewed as a `contemporaneous exchange for new value.'" Id. This Court expressly considered the contemporaneous-new-value defense and rejected it. (Mem. Op. 18-19) Second, the Frigitemp court found that under the applicable New York UCC section the bank held a security interest in the specifically-identified future deposits. Id. at 1022.
In its Memorandum Opinion, this Court expressly disagreed withFrigitemp to the extent it suggested a possible security interest in future deposits could provide a preference defense. (Mem. Op. 12 n. 3) Once again, it is important to focus on the distinction between collected funds overdrafts arising from provisional credits and ledger balance overdrafts. When a collected funds overdraft results from provisional credits granted on present deposits which have not yet cleared, a bank's security interest in those deposits is a shield from preference liability. When funds (or new deposits) come in to clear thecollected funds overdraft, the bank does not improve its position and the debtor does not suffer a diminution of its assets, since the transaction results in the release of the security interest. (Mem. Op. 9 — 11.)
Deposits into a debtor's account (like the July 20th deposits at issue here) are entirely different when the deposits are applied to cure an existing ledger balance overdraft. Under these circumstances, the bank's position is improved and the debtor's estate diminished. To state, as Frigitemp did, that the bank may be protected by a security interest in future deposits makes no sense. City National extended credit when it issued the cashier's checks on July 19th. It did so because the Debtor was a good customer and the bank accepted its assurance that deposits would be made the next day. City National, however, had no legal right to compel the Debtor to make the deposits the following day. Thus, if the Debtor had deposited the July 20th items into an account at another bank, and then filed bankruptcy, City National would have been an unsecured creditor for $690,000 and the Debtor's estate would have had an additional $690,000 in assets for distribution pro rata to all of its unsecured creditors. Simply stated, that is why it is a preference.
In sum, having reviewed the Motion, the Reply, and the Response, the Court finds that no issues justifying rehearing or reconsideration have been raised. The Court's ultimate conclusions are unchanged. Deposits that cleared negative collected funds balances arising from provisional credits on deposited items are not avoidable as preferences. However, deposits paying down a debt arising from a ledger balance overdraft, like the July 20th deposits here, are transfers avoidable under § 547 of the Bankruptcy Code. Therefore, it is —
ORDERED that the Motion is DENIED.
ORDERED