Opinion ID: 2631019
Heading Depth: 3
Heading Rank: 2

Heading: The Transfer Enabled Anchor Wate to Receive a Greater Percentage of Its Debt Than Other Creditors of the Same Class

Text: ¶ 39 Having determined that the reinsurance proceeds were part of SAIC's estate, we now address whether SAIC's transfer of the $3.5 million to Anchor Wate enabled Anchor Wate to receive a greater percentage of its debt than creditors of the same class, thus allowing the Liquidator to establish a voidable preference under the Liquidation Act. ¶ 40 As a general matter, a transfer enables a creditor to receive more than another similarly situated creditor when the transfer diminish[es] the fund to which other creditors can legally resort for the payment of their debts, thus making it impossible for other creditors of the same class to obtain as great a percentage as the favored one. [46] Concerns about equity necessitate the well-recognized policy that a debtor should not be able to make transfers on the eve of liquidation that deplete the debtor's assets to the detriment of the other creditors. [47] In determining whether there was such a voidable transfer, [t]he focus of the court must be on the effect of the payment. [48] ¶ 41 In this case, the effect of SAIC's payment to Anchor Wate was to directly deplete SAIC's estate. The $3.5 million that would have been available for division among all of SAIC's creditors went solely to Anchor Wate. We therefore hold that the entire $3.5 million must be brought back into SAIC's estate to be distributed pro rata among all creditors of the same class.