Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-04-00035/USCOURTS-ca10-04-00035-0/pdf.json

Nature of Suit Code: 0
Nature of Suit: other
Cause of Action: 

---

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE FURR’S SUPERMARKETS,

INC., A Delaware Corporation,

Debtor.

BAP No. NM-04-035

YVETTE J. GONZALES, Trustee,

Plaintiff – Appellant,

Bankr. No. 7-01-10779-SA

Adv. No. 02-1091-S

 Chapter 7

v.

NABISCO DIVISION OF KRAFT

FOODS, INC.,

Defendant – Appellee.

JUDGMENT

Filed November 24, 2004

Before BOHANON, CORNISH, and MICHAEL, Bankruptcy Judges.

This case originated in the United States Bankruptcy Court for the District

of New Mexico.

The judgment of that court is AFFIRMED.

For the Panel:

Barbara A. Schermerhorn, Clerk of Court

By:

Deputy Clerk

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 1 of 15
FILED

U.S. Bankruptcy Appellate Panel

of the Tenth Circuit

November 24, 2004

Barbara A. Schermerhorn

Clerk PUBLISH

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE TENTH CIRCUIT

IN RE FURR’S SUPERMARKETS,

INC., A Delaware Corporation,

Debtor.

BAP No. NM-04-035

YVETTE J. GONZALES, Trustee,

Plaintiff – Appellant,

Bankr. No. 7-01-10779-SA

Adv. No. 02-1091-S

 Chapter 7

v. OPINION

NABISCO DIVISION OF KRAFT

FOODS, INC.,

Defendant – Appellee.

Appeal from the United States Bankruptcy Court

for the District of New Mexico

David T. Thuma (Stephanie L. Schaeffer with him on the briefs) of Jacobvitz,

Thuma & Walker, P.C., Albuquerque, New Mexico, for the Plaintiff – Appellant.

Valerie L. Bailey-Rihn of Quarles & Brady, LLP, Madison, Wisconsin, for the

Defendant – Appellee.

Before BOHANON, CORNISH, and MICHAEL, Bankruptcy Judges.

MICHAEL, Bankruptcy Judge.

In every bankruptcy dispute, there are winners and losers. We are all

familiar with the expression that, when someone complains about a result, it is

called a case of “sour grapes.” Today’s dispute does not involve sour grapes, but

rather, stale cookies. The issue is whether the invoice price of cookies, crackers,

and other food products, delivered to the debtor but later returned to the creditor,

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 2 of 15
1 Apparently some or all of the product supplied by Nabisco were subject to

a “freshness date”; items that were not sold by that date were considered unfit for

sale.

-2-

should be considered part of the new value given by the creditor to the debtor. 

The products had significant value when delivered, but no value at the time of

their return. The bankruptcy court ruled for the creditor, and reduced its

preference liability by some $90,000.00. The trustee for the bankruptcy estate

appeals. Finding no error, we affirm.

I. Background

Furr’s Supermarkets, Inc. (“Furr’s”) filed a petition for relief under Chapter

11 of the Bankruptcy Code on February 8, 2001. On December 19, 2001, the case

was converted to Chapter 7, and Yvette J. Gonzales (“Gonzales” or “Trustee”)

was appointed to serve as trustee. In the course of performance of her duties,

Gonzales investigated the transfers made by Furr’s in the ninety days prior to the

filing of its bankruptcy case (the “Preference Period”). Included in this

investigation were transfers between Furr’s and Nabisco, a Division of Kraft

Foods, Inc. (“Nabisco”).

At the time the bankruptcy case was filed, Furr’s owned and operated 71

supermarkets in New Mexico and Texas. Nabisco was one of its suppliers. 

Rather than deliver to a central warehouse, salesmen for Nabisco delivered

product to each of the stores. When product was delivered, Nabisco would issue

an invoice to that store at the time of delivery. In the ordinary course of business

between Nabisco and Furr’s, Nabisco would also remove from the stores items it

had previously delivered that were no longer saleable because they had become

damaged, out of date, or were overstocked items.1

 When Nabisco collected such

items, it issued a credit memo to the store in an amount equal to the original

invoice price of the items. Under the terms of the contractual arrangement

between Furr’s and Nabisco, Furr’s was entitled to a deduction of the face amount

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 3 of 15
2 During the course of litigation, Nabisco and the Trustee agreed that it

would be impossible to determine the exact amount of delivered product. 

3 Memorandum Opinion at 3, in Appellant’s App. at 445. 

4 Id. 

-3-

of the credit memo from the amounts that it owed Nabisco. In other words, Furr’s

was not required to pay for returned product.

During the Preference Period, Nabisco issued approximately 2,500 invoices

and credit memos to Furr’s. During that same time period, Nabisco delivered

between $1.26 and $1.36 million in product to Furr’s.2

 In addition, Nabisco

accepted returns of product from Furr’s. This product (the “Returned Product”)

was, at the time of its return, no longer saleable. It was damaged, out of date, or

otherwise unsaleable by Furr’s. Nabisco issued credit memos for the Returned

Product (the “Credit Memos”) in the amount of $90,180.74. Furr’s was able to

deduct the amount of the Credit Memos from the amounts it owed Nabisco. The

quantity of Returned Product and the dollar amount of the Credit Memos was

consistent with past amounts of purchases and returns between Furr’s and

Nabisco.

The factual findings outlined above were based upon stipulated facts. In

addition, the bankruptcy court assumed that:

1) upon return, the products had no value, given that they were

outdated, damaged in the store or were overstock; 

2) the credit memos issued to Furr’s were applied to subsequent

invoices; and

3) the deliveries and returns were spread evenly over the preference

period.3

The bankruptcy court also assumed “that, as part of the ordinary course of the

grocery business, grocery products become damaged in stores or go out of date;

these overhead type items are a cost of doing business.”4

 The parties do not take

issue with these assumptions. Moreover, at oral argument, counsel for the trustee

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 4 of 15
5 Id. at 5, in Appellant’s App. at 447.

6 Fed. R. Bankr. P. 8002(a) (West 2004). Unless otherwise noted, all

statutory references are to sections of the United States Bankruptcy Code, 11

U.S.C.A. § 101 et. seq. (West 2004). All other references to federal statutes and

rules are also to West 2004 publications.

7 28 U.S.C. § 158(c); Fed. R. Bankr. P. 8001(e).

8 Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712 (1996) (quoting Catlin

(continued...)

-4-

admitted that the items returned by Furr’s to Nabisco had no value to Nabisco at

the time of their return. 

The Trustee and Nabisco were unable to agree on the proper measure of

“new value” given to Furr’s by Nabisco. The Trustee argued that the dollar

amount on the face of the Credit Memos ($90,180.74) should be deducted from

the “new value.” The Trustee took the position that because the Returned Product

was ultimately of no value to Furr’s (i.e., it was not sold in the course of Furr’s

business and generated no revenue), its value at the time of delivery (as reflected

in the Credit Memos) should be deducted from the amount of new value provided

by Nabisco. Nabisco disagreed, arguing that, because the Returned Product had

value when delivered and no value upon its return, no deduction should be taken. 

The bankruptcy court found for Nabisco, noting that “the returned goods had no

value at the time they were returned, did not deplete the Furr’s estate, and did not

preferentially benefit Nabisco.”5

 This appeal followed.

II. Appellate Jurisdiction

The order of the bankruptcy court was timely appealed.6 The parties have

not elected to have the appeal heard by the United States District Court for the

District of New Mexico.7

 Accordingly, the Bankruptcy Appellate Panel has

jurisdiction over this appeal.

A decision is considered final “if it ‘ends the litigation on the merits and

leaves nothing for the court to do but execute the judgment.’”8

 In this case, the

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 5 of 15
8 (...continued)

v. United States, 324 U.S. 229, 233 (1945)). 

9 See In re Gledhill, 164 F.3d 1338, 1340 (10th Cir. 1999) (“The district

court’s interpretation of a statute is a question of law subject to de novo review

by this court.”); see also Duncan v. Zubrod (In re Duncan), 294 B.R. 339, 342

(10th Cir. BAP 2003) (citing Gledhill).

10 Wolfgang v. Mid-America Motorsports, Inc., 111 F.3d 1515, 1524 (10th

Cir. 1997).

-5-

order of the bankruptcy court determined the only outstanding issue in the

litigation between the Trustee and Nabisco. Nothing remains for the trial court’s

consideration. Thus, the decision of the bankruptcy court is final for purposes of

review. 

III. Standard of Review

Resolution of this appeal hinges upon the interpretation of § 547(c)(4) of

the United States Bankruptcy Code. Statutory construction is a matter of law that

we review de novo.

9

 When reviewing questions of law de novo, the appellate

court is not constrained by the trial court’s conclusions, and may affirm the trial

court on any legal ground supported by the record.10

IV. Issues on Appeal

Gonzales has identified the following issues for consideration on appeal:

1. [Whether] [t]he Bankruptcy Court erred when it held that $90,180.74 of “credit memos” issued by Appellee to the

debtor, and/or the returned products for which the credit

memos were issued, should be disregarded and/or not taken

into account when determining how much subsequent new

value Appellee gave the debtor under 11 U.S.C. § 547(c)(4).

2. [Whether] [t]he Bankruptcy Court erred when it held that the

amount of subsequent new value Appellee gave the debtor for

product Appellee delivered to the debtor was determined by

the invoice price of such product, without regard to the fact

that historically the debtor returned a percentage of such

product as being out of date, damaged, or otherwise

unsaleable, and received a credit off the invoice price for such

returned product.

3. [Whether] [t]he Bankruptcy Court erred when it held that the

subsequent new value defense of 11 U.S.C. § 547(c)(4) does

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 6 of 15
11 Appellant’s Brief at 1-2.

12 The elements of a preference action are spelled out in § 547(b): 

(b) Except as provided in subsection (c) of this section, the trustee

may avoid any transfer of an interest of the debtor in property— 

(1) to or for the benefit of a creditor;

(2) for or on account of an antecedent debt owed by the debtor

before such transfer was made;

(3) made while the debtor was insolvent;

(4) made— 

(A) on or within 90 days before the date of the filing of

the petition; or

(B) between ninety days and one year before the date of

the filing of the petition, if such creditor at the time of

such transfer was an insider; and

(5) that enables such creditor to receive more than such

creditor would receive if— 

(A) the case were a case under chapter 7 of this title;

(B) the transfer had not been made; and

(C) such creditor received payment of such debt to the

extent provided by the provisions of this title.

§ 547(b). In order for a transfer to be deemed preferential, each of these elements

must be present. 

-6-

not require consideration or determination of the value of

goods delivered to the debtor by the preference defendant

beyond an inquiry into the invoice price of such product.11

We will limit our inquiry to the errors assigned by the Trustee.

V. Discussion

Section 547 of the Bankruptcy Code defines what constitutes a preference

in bankruptcy cases.12 It sets the parameters of recovery of such preferences by

the debtor in possession or bankruptcy trustee. It also sets forth various defenses

that may be made to a claim of preference. The issue in this appeal is the

applicability of § 547(c)(4), which provides that 

(c) The trustee may not avoid under this section a transfer— 

(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

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 7 of 15
13 § 547(c)(4).

14 § 547(a)(2).

15 In re Kroh Bros. Dev. Co., 930 F.2d 648, 652 (8th Cir. 1991) (citations

omitted) (emphasis added).

16 Rushton v. E & S Int’l Enters., Inc. (In re Eleva, Inc.), 235 B.R. 486, 489

(10th Cir. BAP 1999).

17 Id.

-7-

(B) on account of which new value the debtor did not

make an otherwise unavoidable transfer to or for the

benefit of such creditor[.]13

For purposes of this section, “new value” is defined as: 

money or money’s worth in goods, services, or new credit, or release

by a transferee of property previously transferred to such transferee

in a transaction that is neither void nor voidable by the debtor or the

trustee under any applicable law, including proceeds of such

property, but does not include an obligation substituted for an

existing obligation.14

The theory behind the “new value” exception has been ably explained by the

United States Court of Appeals for the Eighth Circuit:

The trustee is able to avoid preferences in bankruptcy for the

sake of equality of distribution of assets among creditors. Therefore,

a preference does not merely diminish the estate, it does so unfairly. 

A creditor who subsequently advances to the estate new value in an

amount equal to the preference, however, “in effect returns the

preference to the estate.” The debtor who makes a preferential

transfer to a creditor who subsequently advances new value, then, has

not “depleted the bankruptcy estate to the disadvantage of other

creditors.” But when a debtor pays for new value or the creditor

retains a security interest in the new value, “there is in effect no

return of the preference.” Thus, the relevant inquiry under section

547(c)(4) is whether the new value replenishes the estate. If the new

value advanced has been paid for by the debtor, the estate is not

replenished and the preference unfairly benefits a creditor.15

Other courts have noted that one purpose of the new value exception is to

“encourage creditors to deal with troubled businesses.”16 This Court has held that

new value is given at the time goods are shipped or delivered to a debtor.17 This

decision is in accordance with prior decisions of the United States Court of

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 8 of 15
18 Kenan v. Fort Worth Pipe Co. (In re George Rodman, Inc.), 792 F.2d 125,

128 (10th Cir. 1986); Spears v. Mich. Nat’l Bank (In re Allen), 888 F.2d 1299,

1302 (10th Cir. 1989).

19 The record is silent as to why Nabisco required the return of the valueless

product.

-8-

Appeals for the Tenth Circuit.18

The parties agree that Nabisco provided new value to Furr’s through the

delivery of product. The Trustee contends that the Returned Product cannot be

considered to have “replenished the estate,” and thus cannot be included in the

new value calculation. Nabisco contends that because the Returned Product had

value when it was delivered to Furr’s, and no value when Furr’s returned it to

Nabisco, the return did not deplete the estate, and the amount of the Credit

Memos should not be deducted from the “new value” supplied by Nabisco.

This issue is resolved by looking at the language of § 547(c)(4)(B), which

states that the new value defense is defeated, if, after receipt of the new value, the

debtor made a transfer to the creditor that would be avoidable. The question is

whether the return of goods by Furr’s to Nabisco would be an avoidable transfer. 

That question must be answered in the negative for one simple reason: at the time

of their return to Nabisco, the goods had no value. A transfer of valueless

property is not an avoidable transfer. We see no difference for purposes of

§ 547(c)(4)(B) between the return of valueless property to the creditor and its

destruction.19 Since the return of goods by Furr’s to Nabisco does not constitute

an avoidable transfer, it does not dilute the new value provided by Nabisco. The

decision of the bankruptcy court was correct, and should be affirmed.

In order to rule for the Trustee, we would have to conclude that (1) the

Returned Product had no value at the time it was delivered to Furr’s, and thus

should not be considered part of the new value that Nabisco provided to Furr’s; or

(2) that the Returned Product retained its full invoice value at the time of the

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 9 of 15
20 294 B.R. 297 (Bankr. N.D. Ill. 2003).

21 Id. at 301.

22 51 B.R. 258 (Bankr. S.D. Ind. 1984).

-9-

return, and thus constituted a preferential transfer by Furr’s to Nabisco. The

record supports neither of these conclusions. There is nothing to indicate that the

Returned Product had any value other than its invoice value at the time of

delivery to Furr’s. Similarly, there is no basis for us to conclude that the

Returned Product retained its value at the time of return. At that time, the

Returned Product was damaged, out of date, or otherwise no longer saleable.

We have considered the cases cited by the Trustee in support of the

argument that returned goods cannot be considered new value for purposes of

§ 547(c)(4). They are distinguishable from the case at bar. The court in Moglia

v. American Psychological Ass’n (In re Login Bros. Book Co.)20 did not reach the

issue of value. In Login Bros., the creditor had delivered books to the debtor on

credit pre-petition, and obtained return of those books after the bankruptcy case

was filed pursuant to court order. The debtor filed a preference action, and the

creditor defended on the basis that, even though the books had been returned, the

mere fact that they had been delivered supported the new value defense as a

matter of law. Other than noting that the books had value, the issue of their value

was never discussed. Instead, the bankruptcy court denied the creditor’s motion

for summary judgment, finding that a material issue of fact existed regarding the

return of the books.21 The issue of what happens when goods are returned that

have no value at the time of their return was neither argued nor considered in

Login Bros.

Similarly, in Precision Masters, Inc. v. Wilson-Garner Co. (In re Precision

Masters, Inc.),

22 another case relied upon by the Trustee, the issue of the return of

valueless goods was not considered by the court. Although the case involved the

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 10 of 15
23 Id. at 261.

24 Id.

25 24 B.R. 827 (Bankr. E.D. Wisc. 1982).

-10-

return of goods, there was no discussion of whether the goods diminished in

value. Instead, the court held that “[a]dditional value must be received to

augment the estate in order to offset the preferential payment,”23 and that “the

debtor did not receive new value to enrich the estate–the goods were returned to

the defendant, and thus the estate derived no benefit from those goods.”24 Here,

the bankruptcy court concluded that Furr’s received additional value by the

delivery of product by Nabisco. Thus, the decision in Precision Masters is not

contrary to the ruling of the bankruptcy court. 

Finally, in Gander Mountain, Inc. v. Ventrice (In re Gander Mountain,

Inc.),

25 the debtor refused the goods at issue, and returned them immediately to

the seller. In addition to the value of the refused items, the creditor argued that

expenses it incurred as a result of the return of product constituted “new value”

supplied by the creditor. In our case, not only did Furr’s accept the Returned

Product, Furr’s retained it and attempted to sell it until the goods lost their value. 

Moreover, Nabisco is not asking the court to consider any of the expenses it may

have incurred in the return of the Returned Product as new value. Gander

Mountain is thus inapplicable to the case at bar.

Gonzales contends that, based upon the fact that Nabisco was willing to

issue the Credit Memos, the Returned Product must have been worth the dollar

amount listed upon the Credit Memos, at least to Nabisco. She argues that

Nabisco made a business decision to contractually agree that Furr’s would not be

required to pay for returned product, and that this decision was in Nabisco’s best

economic interest. Having made the decision to grant such credits to Furr’s, the

Trustee contends that the court must consider Nabisco’s contractual obligations as

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 11 of 15
26 See supra notes 16-18.

27 The weakness of the Trustee’s logic becomes clear when one considers the

following hypothetical. Assume that goods are delivered from a buyer to a seller

with no right of return with a value of $90,180.74 upon their delivery. After

receipt by the buyer, for whatever reason, the goods lose their value. As a result

of the loss of value, the buyer is unable to obtain any economic benefit from the

purchase of the goods. Let us further assume that the buyer files bankruptcy and

claims that the seller is the recipient of a preferential payment made before the

goods were delivered. Under the Trustee’s reasoning, the seller would not be

entitled to consider the supplying of these goods as the supplying of “new value,”

since the buyer/debtor was unable to ultimately generate any economic benefit

from the goods. “New value” would be found only when the debtor was able to

turn the delivered goods into revenue. Section 547(c)(4) contains no such

(continued...)

-11-

a part of the statutory preference analysis. The argument misses its mark. What

is at issue here is the value of the product delivered to Furr’s and the value of the

Returned Product, not the value of the pre-petition business relationship between

Furr’s and Nabisco. The fact that Nabisco may have agreed to give Furr’s full

credit for returned product does not change the fact that the Returned Product was

not saleable, and thus had no economic value at the time of its return to Nabisco.

Gonzales contends that, because it was ultimately returned to Nabisco, the

Returned Product never served to replenish the estate for purposes of § 547(c)(4). 

Put another way, the Trustee takes the position that, due to its ultimate return, the

Returned Product provided no value to the estate at the time it was delivered to

Furr’s. The argument ignores the rulings of the United States Court of Appeals

for the Tenth Circuit as well as the Tenth Circuit Bankruptcy Appellate Panel that

state that property that is transferred is valued at the time of the transfer.26 At the

time of its delivery to Furr’s, the Returned Product had a value of $90,180.74. 

Therefore, the pre-petition estate of Furr’s was increased (or, for our purposes,

“replenished”) by an amount equal to the value of the Returned Product at the

time of its delivery. The fact that the Returned Product was returned to Nabisco

after it lost its value does not change this fact, and is not relevant to the “new

value” analysis.27

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 12 of 15
27 (...continued)

requirement.

28 In the “Order and Stipulation Resulting from Status Conference,” which

was agreed to by counsel for Furr’s and Nabisco, the issue was framed in the

following manner:

The parties shall submit to the Court on briefs the following legal

issue for determination: Of the defendants’ [sic] claimed subsequent

new value amount of $1,271,482.86, is it appropriate to deduct

$90,180.74 for certain “credit memos” issued by the defendant to the

plaintiff during the preference period?

Order and Stipulation at 1-2, in Appellant’s App. at 355-56. The amount of the

invoices was not raised by the Trustee in the briefs that she submitted to the

bankruptcy court. See Appellant’s App. at 359-73 and 436-41.

29 See Lyons v. Jefferson Bank & Trust, 994 F.2d 716, 721 (10th Cir. 1993)

(and cases cited therein) (“We have therefore repeatedly stated that a party may

not lose in the district court on one theory of the case, and then prevail on appeal

on a different theory.”).

30 See Trustee’s Initial Brief to the Bankruptcy Court at 3 n.2 (“The parties therefore agree that the $90,180.74 of preference period returns likely is a very

close approximation of the value of product Nabisco delivered during the

preference period that later was returned.”) (emphasis added), in Appellant’s App.

at 362; Id. at 6 (“The price of goods should indicate their value, whether for ‘new

value’ purposes or otherwise.”), in Appellant’s App. at 365; Trustee’s Reply Brief

at 2 (“If goods are returned, then their value does not need to be determined, so

the cases Nabisco cites are irrelevant.”) (emphasis added), in Appellant’s App. at

(continued...)

-12-

The Trustee contends that we should not consider ourselves bound by the

dollar amount of the invoices for product supplied by Nabisco to Furr’s in

determining the value of the goods supplied. We note that this issue was neither

framed before nor argued to the bankruptcy court.28 We will not consider for the

first time on appeal an argument that was not presented to the court below.29

However, were we to consider the argument, we would reject it. Gonzales

provided the trial court with no evidence to support her contention that the

invoice price of the Returned Product did not reflect its value at the time of

delivery. The statement made by the Trustee that the goods should be valued at

something other than their invoice price is inconsistent with the arguments that

she made in the bankruptcy court.30 The only evidence presented to the

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 13 of 15
30 (...continued)

438.

31 There is no mention of this argument in the brief initially submitted to the

bankruptcy court on the new value issue. See Appellant’s App. at 359-73. The

Trustee’s reply brief to the bankruptcy court contains a single paragraph that

makes reference to the fact that returns are a part of the grocery business, and,

therefore, the price charged by suppliers such as Nabisco must take those returns

into account. See Reply Brief at 3, in Appellant’s App. at 439. By placing the

argument in the reply brief, Gonzales effectively eliminated the ability of Nabisco

to address the argument before the bankruptcy court. We will not require Nabisco

to deal with the argument here.

32 See supra note 30.

-13-

bankruptcy court regarding the value of the Returned Product was the parties’

stipulation that the invoice price for the Returned Product was $90,180.74. The

bankruptcy court can hardly be said to have committed error by relying on this

stipulation, especially in the absence of any other evidence.

The Trustee also suggests that the bankruptcy court erred by not taking into

account the historical rate of returned product in determining the value of the

goods delivered by Nabisco to Furr’s. She suggests that the actual value of the

goods delivered should be determined by deducting the historical return

percentage (approximately seven per cent) from the invoice price of the goods. 

Gonzales notes that the dollar amount set out in the Credit Memos is in line with

the historical averages for such returns. In other words, Gonzales contends that

the value of the goods delivered was not their invoice price, but was in fact a

lesser number. We reject this argument for several reasons. It was not properly

raised to the trial court.31 The argument is inconsistent with statements made to

the bankruptcy court by Gonzales regarding the value of the Returned Product.32

It asks the court to assume that Nabisco was in effect inflating its prices to cover

the costs of returns. Nabisco was a willing seller. Furr’s was a willing buyer. 

The invoice price reflects what a willing buyer paid a willing seller for the goods

sold. The price is therefore an accurate statement of the value of the product

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 14 of 15
-14-

sold.

The Trustee also asks us to make certain assumptions regarding the taxable

income generated by the transactions between Furr’s and Nabisco, and argues that

these tax considerations support her argument that the Credit Memos must be

deducted from the new value provided by Nabisco. This argument was never

advanced to the bankruptcy court, and will not be considered for the first time on

appeal. Moreover, Gonzales offers no legal authority in support of her theory,

and no factual basis for its application. We cannot consider an argument made in

such an intellectual vacuum.

VI. Conclusion

The decision of the bankruptcy court is affirmed.

BAP Appeal No. 04-35 Docket No. 31 Filed: 11/24/2004 Page: 15 of 15