Jubber v. SMC Electrical Products, Inc. (In re C.W. Mining Co.)

Jubber v. SMC Elec. Products, Inc. (In re C.W. Mining Co.), Case No. 13-4175 (10th Cir. August 10, 2015). Published.
The 10th Circuit permits first time transactions between a debtor and creditor to come with the ordinary course exception of section 547(c)(2) so long as the first time debt is ordinary in relation to the debtor’s and creditor’s past practices when dealing with other, similarly situated parties and cannot be a huge gamble by the debtor in attempt to avoid its slide into bankruptcy. For the first time transaction, the court may refer solely to the terms of the transaction to define the ordinary course between the parties and a payment made shortly before the due date will fall within the ordinary course exception.
Procedural context:
The Bankruptcy Court granted the creditor summary judgment dismissing the trustee’s complaint to avoid a preferential payment on the ground that the payment was made in the ordinary course of business. The 10th Circuit BAP affirmed as did the 10th Circuit. Reviewed de novo. In a footnote, the 10th Circuit rejected the trustee’s argument to adopt the meaning of the term “ordinary course of business” in section 364(a) because it failed to argue such in the Bankruptcy Court but said it would likely reject such an argument anyway.
C.W. Mining, a coal mining company, entered into an agreement for the first time with SMC Electrical, a mining equipment seller, for the purchase of approximately $800,000 of mining equipment. C.W. Mining was buying the equipment to mine coal using the longwall system rather than the continuous method that it had been using believing that this would increase its mining capacity by a factor of four to five. The 10th Circuit noted that evidence in the record that it took judicial notice of potentially contradicted this belief although the trustee did not bring this evidence to the Court’s attention. Pursuant to the terms of the agreement, within the 90 day preference period, C.W. Mining made a $200,000 payment 2 days before it was due, from its own account and there was no evidence of collection activities by SMC Electrical.
Kelly, Lucero, Hartz (Hartz)

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