Opinion ID: 2995114
Heading Depth: 3
Heading Rank: 2

Heading: For or on Account of an Antecedent

Text: Debt Even though PTG was not entitled to summary judgment on the ground that the $500,000 payment it received was not an interest of Presidential in property, summary judgment still would have been proper if the payment was not for or on account of an antecedent debt. An antecedent debt exists when a creditor has a claim against the debtor, even if the claim is unliquidated, unfixed, or contingent. See Energy Coop., Inc. v. Socap Int’l, Ltd. (In re Energy Coop., Inc.), 832 F.2d 997, 1001 (7th Cir. 1987). There is no question in this case that the note PTG held against Presidential was an antecedent debt; instead, the only question is whether the payment PTG received was for or on account of that antecedent debt. 11 U.S.C. sec. 547(b)(2). PTG argues that it could not have been paid for or on account of the antecedent debt because the payment it received merely worked a substitution of creditors and did not reduce the outstanding amount of Presidential’s debt. See, e.g., 1 Robert E. Ginsberg & Robert D. Martin, Ginsberg & Martin on Bankruptcy sec. 8.02[D] (4th ed. 2000) (The key is how the creditor applies the payment. If it is applied to reduce an existing claim in whole or in part, then the part so applied is avoidable as a preference . . . .). PTG’s argument might have merit if LLC’s purchase of the note truly was independent of its purchase of Presidential’s assets and if possession of the note provided real value to the owner. As we have already indicated, however, the record does not permit us to draw either of these conclusions. The documentation in the record indicates that PTG threatened to hold up the sale of Presidential’s assets to LLC unless it was compensated on an equitable basis for the existing notes [it held] against Presidential. R.19, Ex.G. LLC subsequently paid PTG $500,000 in connection with the asset sale for a note that essentially was uncollectible in light of Presidential’s impending bankruptcy. Moreover, for the same reason that applying $750,000 of debt forbearance towards the purchase price for the assets added no real value to the consideration Presidential received, own ership of the note provided no real value to LLC. Contrary to PTG’s argument, then, it is possible that the note purchase was not just a substitution of creditors; instead, the note purchase may have allowed LLC to eliminate Presidential’s debt to PTG by paying PTG $500,000 it otherwise would not have received. In this procedural context and on this record, this possibility is sufficient to satisfy the trustee’s burden of demonstrating that the transfer was made for or on account of an antecedent debt. Therefore, PTG is not entitled to summary judgment on this ground.