Preferences. Fred Currey purchased cattle from Itano Farms, Inc ...

[JMatthes]

Preferences. Fred Currey purchased cattle from Itano Farms, Inc As payment for the cattle, Currey gave Itano Farms worthless checks in the amount of 50,250. Currey was later convicted of passing bad checks, and the state criminal court ordered him to pay Itano Farms restitution in the amount of 50,250. About four months after this court order, Currey and his wife filed for Chapter 7 bankruptcy protection. During the ninety days prior to the filing of the petition, Currey had made three restitution payments to Itano, totaling 14,821. The Curreys sought to recover these payments as preferences. What should the court decide? Explain.

Question 2

Emile owns Emile's Used Car Emporium. Several people work for him at the Emporium. When Emile is gone, he leaves one of his best salespersons, Meg, in charge. Over the years, Emile has given Meg the authority to contract with vendors, negotiate sales, and conclude car sales contracts in his name. One August, Emile takes a long vacation, leaving Meg in charge. While he is gone a hurricane hits Florida where the Emporium is located, causing severe damage. Because Emile is floating down the Amazon, Meg cannot reach him for instructions. She decides that rather than leave the place in shambles, she will hire people to repair the Emporium. Meg hires a carpenter to rebuild a wall that was blown down by the storm. Phil, the carpenter, is busy at work on his scaffold when Meg's Scottish terrier Adam, who she keeps with her at work, plows into the scaffolding while chasing a cat. Phil is knocked off the scaffold and falls ten feet to the ground, suffering a broken leg. As Meg's principal, Emile is required to:
 a. cooperate with her
  b. pay her for her services
  c. indemnify her for any legal liabilities she incurs during the course of her work d. reimburse her for reasonable expenses
  e. do all of the other choices

[carolinefletcherr]

Answer to Question 1

Preferences
The court concluded that Itano Farms was a creditor for purposes of the preference provisions of the Bankruptcy Code, and that therefore, the payments it received under the restitution order were avoidable as preferences. The court explained that the term creditor is defined by the Code to include any entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor. The filing of the bankruptcy petition constituted an order for relief. A claim as defined by the Code to mean a right to payment, which includes a right to payment under a restitution order. Therefore, the court reasoned, on the date of the filing of the petition, as well as the date of receipt of the payments, Defendant Itano Farms had a right to payment from Debtor under the restitution order, and was accordingly a creditor as to Fred Currey. The court pointed out that a restitution order is not dischargeable in a Chapter 7 casethus, Itano Farms must eventually be repaid. The court also noted that as a result of a discharge of the bulk of Currey's indebtedness in the bankruptcy proceedings, he might be in a better position to make future restitution payments to Itano Farms. This case was decided before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, but the result under that act would likely have been the same.

Answer to Question 2

e