           United States Bankruptcy Appellate Panel
                      FOR THE EIGHTH CIRCUIT
                              ________

                                 No. 12-6043
                                   ________
                                       *
In re:                                 *
                                       *
LGI Energy Solutions, Inc.; LGI Data   *
Solutions Company, LLC,                *
                                       *
       Debtors.                        *
_________________________________ *
                                       *       Appeal from the United States
John R. Stoebner, Trustee,             *       Bankruptcy Court for the
                                       *       District of Minnesota
       Plaintiff – Appellee            *
                                       *
              v.                       *
                                       *
San Diego Gas & Electric Company,      *
                                       *
       Defendant – Appellant           *
                                   ________

                                 No. 12-6044
                                   ________
                                       *
In re:                                 *
                                       *
LGI Energy Solutions, Inc.; LGI Data   *
Solutions Company, LLC,                *
                                       *
       Debtors.                        *
_________________________________ *
                                       *       Appeal from the United States
John R. Stoebner, Trustee,             *       Bankruptcy Court for the
                                       *       District of Minnesota
       Plaintiff – Appellant           *
                                     *
            v.                       *
                                     *
Southern California Edison Company, *
                                     *
      Defendant – Appellee           *
                                 ________

                           Submitted: October 23, 2012
                            Filed: November 14, 2012
                                    ________

FEDERMAN, VENTERS and SALADINO, Bankruptcy Judges
                                     ________
VENTERS, Bankruptcy Judge.

       In these consolidated appeals, Defendants San Diego Gas & Electric
Company (“SDG&E”) and Southern California Edison Company (“SCE”) appeal
the bankruptcy court’s judgments against them under 11 U.S.C. § 547(b) for
payments they received from the Debtors1 in the 90 days prior to the bankruptcy
petition date. After giving credit for certain “new value” transfers, the bankruptcy
court entered judgment against SCE for $131,267.63 and against SDG&E for
$31,242.63.

       The Defendants assign error to three aspects of the bankruptcy court’s
ruling. They argue: 1) that the transfers at issue weren’t preferential because the
Defendants weren’t creditors of the Debtors, as required by § 547(b)(1); 2) that the
transfers were not on account of antecedent debts, as required by § 547(b)(2); and
3) that the bankruptcy court erred in limiting the Defendants’ new value credits to


1
  Because the two Debtor’s estates have been consolidated, for convenience all
references herein will be to the “Debtors,” although a particular fact might pertain
to a single Debtor.
                                          2
the value of the utility services they provided to the Debtors’ customers in the
preference period.

      For the reasons stated below, we affirm the bankruptcy court’s decision with
regard to its determination that the payments the Defendants received from the
Debtors are avoidable under 11 U.S.C. § 547(b), but we reverse on the bankruptcy
court’s calculation of the Defendants’ new value credits.

                                JURISDICTION
       The bankruptcy court’s judgment is a final order over which we have
jurisdiction under 28 U.S.C. §158(b).

                                BACKGROUND
      The facts are undisputed. On February 6, 2009, separate involuntary Chapter
7 bankruptcy petitions were filed against the Debtors. An Order for Relief was
entered in each case on March 3, 2009, and the Debtors’ bankruptcy estates were
substantively consolidated on February 2, 2011.

       The Debtors’ business was to provide utility-management and bill-payment
services to restaurants and other businesses. As originally conceived, the Debtors’
business worked in the following manner: The Debtors would receive invoices
from a utility provider on behalf of a customer and then periodically report to the
customer regarding those invoices. The customer then would transfer funds to the
Debtors in an amount that corresponded to the amount of the invoice report and,
after receiving those funds from the customer, the Debtors would send the utility
provider a check drawn on the Debtors’ bank account.

     All of the transfers at issue in this appeal relate to two of the Debtors’ and
Defendants’ mutual customers: Buffets, Inc. (and related entities) and Wendy’s


                                         3
International, Inc.2 The Debtors provided bill-payment services to Buffets pursuant
to an “Energy Services Agreement” dated January 5, 2007. The Debtors and
Wendy’s were parties to an Energy Services Agreement dated May 1, 2007.

      In the 90 days prior to the petition date of February 6, 2009, the Debtors
made the following 24 transfers to Defendant SCE totaling $183,512.74:

    Check No.       Check Amt.      Check Date      Rcvd. by SCE     Clear Date
     6077932           $4,178.52     10/21/08         11/12/08       11/14/2008
     6077954           $4,224.86     10/21/08         11/12/08       11/14/2008
     6076652           $5,943.93     10/17/08         11/14/08       11/18/2008
     6076653           $8,125.06     10/17/08         11/14/08       11/17/2008
     6076654           $9,620.77     10/17/08         11/14/08       11/17/2008
     6076656           $9,996.85     10/17/08         11/14/08       11/17/2008
     6078508           $7,948.76     10/23/08         11/12/08       11/14/2008
     6078516           $8,156.87     10/23/08         11/12/08       11/14/2008
     6078532           $8,188.20     10/23/08         11/19/08       11/21/2008
     6078537           $7,827.17     10/23/08         11/18/08       11/20/2008
     6078554           $7,435.41     10/23/08         11/18/08       11/20/2008
     6078566           $7,804.13     10/23/08         11/18/08       11/20/2008
     6078617           $7,678.34     10/23/08         11/13/08       11/17/2008
     6079360           $7,371.65     10/27/08         11/13/08       11/17/2008
     6079362          $10,844.50     10/27/08         11/13/08       11/17/2008
     6079363           $9,514.28     10/27/08         11/13/08       11/17/2008
     6079379           $7,860.50     10/27/08         11/17/08       11/19/2008
     6079380           $6,322.93     10/27/08         11/17/08       11/19/2008
     6079381           $6,628.53     10/27/08         11/17/08       11/19/2008
     6079382           $7,970.53     10/27/08         11/17/08       11/19/2008
     6079943           $8,460.80     10/28/08         11/12/08       11/14/2008
     6080543           $6,881.98     10/29/08         11/17/08       11/19/2008
     6080554           $7,461.95     10/29/08         11/25/08       11/28/2008
     6080946           $7,066.22     10/30/08         11/20/08       11/24/2008


2
    Only SCE provided utility service to Wendy’s.
                                          4
      All 24 of the transfers were made by checks drawn on a checking account at
U.S. Bank in the name of debtor LGI Energy Solutions, Inc., account no. xxxx-
3321. The first two checks, nos. 6077932 and 607954, totaling $8,403.38, related
to Wendy’s; the other 22 checks related to Buffets.

       In the 90 days prior to the petition date of February 6, 2009, the Debtors
made eight transfers to Defendant SDG&E totaling $75,053.85. All eight of the
transfers were made by checks drawn upon account no. 3321 and related to utility
services provided to Buffets.

   Check No.    Check Amt. Check Date Rcvd by SDG&E                Clear Date
    6075058        $5,773.59 10/13/08     11/12/08                  11/14/08
    6078518       $10,402.58 10/23/08     11/12/08                  11/17/08
    6078952        $9,093.92 10/24/08     11/18/08                  11/20/08
    6079349       $10,468.59 10/27/08     11/10/08                  11/12/08
    6079949        $8,514.01 10/28/08     11/20/08                  11/24/08
    6080548       $11,097.37 10/29/08     11/17/08                  11/19/08
    6081120       $10,062.69 10/31/08     11/25/08                  11/26/08
    6081126        $9,641.10 10/31/08     11/26/08                  11/28/08

      The 3321 account was a basic, unrestricted business checking account. Both
the monthly statements for the 3321 account and the checks drawn on the 3321
account indicate that LGI Energy Solutions, Inc. was the sole holder of the
account. Wendy’s and Buffets last made deposits into the 3321 account on
November 3, 2008, and November 4, 2008, respectively. Thereafter, Wendy’s and
Buffets made their payments to the debtors via other accounts owned by the
Debtors at M & I Marshall & Ilsley Bank. Between November 3, 2008, when
Wendy’s made its last deposit into the 3321 account, and November 28, 2008,
when the last of the 24 checks was debited against the 3321 account, the balance of
the 3321 account was overdrawn or drawn to a nominal amount every business
day.

                                         5
      On and after November 10, 2008, through the petition date, SCE sent 32
Wendy’s invoices to the Debtors, which they then reported to Wendy’s. Wendy’s
remitted payment for these invoices, but the Debtors never paid the related
invoices of SCE. The Debtors received a total of $41,426.39 pursuant to these
invoices.

      On and after November 10, 2008, through the petition date, Defendant SCE
sent 32 Buffets invoices to the Debtors, which they then reported to Buffets.
Buffets remitted payment to the Debtors for these invoices, but the Debtors never
forwarded those payments on to SCE. The Debtors received a total of $157,886.99
pursuant to these invoices.

      On and after November 10, 2008, through the petition date, Defendant
SDG&E sent 21 Buffets invoices to the Debtors, which they then reported to
Buffets. Buffets remitted payment for these invoices, but the Debtors never
forwarded those payments on to SDG&E. The Debtors received a total of
$97,475.50 pursuant to these invoices.

      The bankruptcy court held a hearing on the Trustee’s preference claims
(Count I)3 against Defendants on June 11, 2012, although the court declined to hear
oral argument; it took the case on written submissions instead and entered
judgments later that day – against SCE for $131,267.63 and against SDG&E for
$31,242.63.

      The Defendants timely appealed.



3
  On May 3, 2012, the Defendants filed motions for summary judgment seeking the
dismissal of all counts (I, II, and III) of the Amended Complaint(s). The Trustee
voluntarily dismissed Counts II and III, and the bankruptcy court denied summary
judgment on Count I.
                                         6
                            STANDARD OF REVIEW
       We review the bankruptcy court's legal conclusions de novo and its findings
of fact under a clearly erroneous standard.4 A finding is clearly erroneous when
there is evidence to support it but the court reviewing the entire evidence is left
with the definite and firm conviction that a mistake has been committed. 5 Whether
the Defendants were creditors of the Debtor and whether the transfers were made
in payment of antecedent debts are factual questions which we review for clear
error. The bankruptcy court’s application of § 547(c)(4) is a mixed question of law
and fact.

                                   DISCUSSION
       As summarized above, the Defendants appeal three aspects of the
bankruptcy court’s ruling. They argue: 1) that the Defendants weren’t creditors of
the Debtors, 2) that the transfers were not on account of antecedent debts, and 3)
that the bankruptcy court miscalculated the value of the Defendants’ new value
credits. Each argument is addressed in turn.

A.    The Defendants were creditors of the Debtors

      The Bankruptcy Code defines “creditor” as an “entity that has a claim
against a debtor that arose at the time of or before the order for relief concerning
the debtor.”6 A “claim,” in turn, is defined as a:

      (A) right to payment, whether or not such right is reduced to
      judgment, liquidated, unliquidated, fixed, contingent, matured,
      unmatured, disputed, undisputed, legal, equitable, secured, or;


4
  See Drewes v. Vote (In re Vote), 276 F.3d 1024, 1026 (8th Cir. 2002).
5
  See Lovett v. St. Johnsbury Trucking, 931 F.2d 494, 500 (8th Cir. 1991).
6
  11 U.S.C. §101(10).
                                         7
      (B) right to an equitable remedy for breach of performance if such
      breach gives rise to a right to payment, whether or not such right to an
      equitable remedy is reduce to judgment, fixed, contingent, matured,
      unmatured, disputed, undisputed, secured, or unsecured.7

      The bankruptcy court held that the Defendants were creditors of the Debtors
on two grounds. It found that the Defendants were beneficiaries of a trust created
between the Debtors and their customers and that the Defendants became creditors
when the Debtors violated the trust by depleting the customer deposits without
paying the Defendants’ invoices. Alternatively, the bankruptcy court found that the
Defendants were contractual “third-party beneficiaries” with direct claims against
the Debtors. Neither of these findings is clearly erroneous.

      1.     Trust Beneficiary Claims
       Minnesota law requires three elements for the creation of a trust: (1) a
trustee; (2) a beneficiary; and (3) a definite trust res.8 “No particular form and no
specific words are necessary to create a trust. Even though the settlor’s language be
inept, clumsy, or even unsuitable, it is adequate if it reveals an intent to create the
incidence of a trust relationship.”9

      The Debtors’ agreements with Wendy’s and Buffets both evince an intent to
create a trust. Paragraph 3b of the agreement between the Debtors and Buffets
provides that Buffets will provide money to the Debtors to be used for the specific
purpose of paying the bills of utility companies and states that “[a]t no time shall
LGI have a legal or equitable interest in the Customers funds and Customer grants
no security interest to LGI.”10 The Debtors’ agreement with Wendy’s provides that

7
  11 U.S.C. § 101(5).
8
  See e.g., In re Bush’s Trust, 81 N.W.2d 615, 620 (Minn. 1957).
9
  Id. at 619-20.
10
   Technically, this language would not create a trust, inasmuch as the trustee of a
trust holds legal title to the res while the beneficiaries hold an equitable interest in
the res. See Farmers State Bank of Fosston v. SIG Ellingson & Co., 16 N.W. 2d
                                            8
the funds tendered to the Debtors are to be used for the specific purpose of paying
Wendy’s utility bills.

      The Debtors’ and Buffets’ intent to create the “incidence of a trust” is further
evidenced by the state-court complaint attached to Buffets’ proof of claim, which
repeatedly invokes trust language:

    “As a result, [the Debtor] held Plaintiff Buffets’ funds in trust….” (¶ 3)

    “Defendant M & I Marshall & Ilsley Bank knew [the Debtor] did not have
     any ownership interest in Plaintiff Buffets’ funds and that [the Debtor] held
     Plaintiff Buffets’ funds in trust subject to fiduciary duties.” (¶ 4)

    “The Contract provided that [the Debtor] would directly receive the utility
     invoices ….to wire transfer or ACH transfer this gross amount to a bank
     account [Debtor] designated where Plaintiff Buffets’ monies were held in
     trust for the payment of utility invoices…..” (¶ 30)

      Having determined that a trust was created, the bankruptcy court held that
the Debtors’ dissipation of the trust res, i.e., the customer deposits, constituted a
breach of the trust, giving the Defendants general, unsecured claims against the
Debtors for the amounts the Debtors failed to forward to them pursuant to the
Energy Services Agreements.

      The Sixth Circuit Court of Appeals, in First Federal of Michigan v.
Barrow,11 came to the same conclusion under analogous circumstances. In First
Federal, a mortgage broker and servicer of mortgages received payments from
borrowers and, despite being contractually bound to forward those payments

319, 322 (N.D. 1944). Nevertheless, this language could be interpreted as evidence
of the parties’ intent to preclude the Debtors from treating customer funds as their
own money, which in turn could be interpreted as an intent to create a trust, albeit
clumsily expressed.
11
   878 F.2d 912, 917-918 (6th Cir. 1989).
                                          9
(minus its fees) to the investors, taxing authorities, insurers, etc., it dissipated the
payments almost immediately upon receipt and made select payments to certain
creditors with later deposits. The Court of Appeals analyzed the situation as
follows:

         Initially, the monthly payments collected in trust from the mortgagors,
         including the pro rata amounts for the superior mortgages, taxes,
         hazard insurance and investors which had originally been held in trust
         for the mortgagors . . . and which were deposited into the Salem
         Central Account, subsequently lost their identity as a result of
         commingling with other unidentified debtor funds derived from
         numerous other miscellaneous sources and became the property of the
         debtors' estate.

         Additionally, for at least ninety days immediately preceding debtors'
         declaration of bankruptcy and probably for some time prior thereto
         when it became apparent that debtors' exploding expenses hopelessly
         exceeded income and the Salem Central Account consistently carried
         a five figure negative balance, and when monies from that account
         were disbursed to honor previously issued checks in satisfaction of
         pre-existing indebtedness, the mortgagors as well as the appellant
         taxing authorities and investors were stripped of their status as
         beneficiaries of any trust or constructive trust that may have existed
         while the mortgage payments were identifiable in segregated escrow
         accounts and they became general creditors of the debtors and the
         debtors' bankrupt estate because the debtors' conversion of the
         mortgage payments had occurred at the moment when the identifiable
         funds were deposited into Salem's negative balance Central Account
         from which transfers were made to satisfy debtors' pre-existing
         indebtedness to the mortgagors and appellants. Accordingly, the
         appellants' charge that the transfers here in controversy were not in
         payment of pre-existing indebtedness must fail and the repayments to
         the appellants must be declared to be voidable preferences.12



12
     Id. (emphasis added).
                                           10
      Like the appellants in First Federal, the Defendants here became general,
unsecured creditors of the Debtors at the moment the Debtors depleted the
customer deposits, which the evidence shows happened on a daily basis and, most
importantly, before the Debtors used those deposits for their intended purpose.

       In sum, consistent with the intent to create a trust, Wendy’s and Buffets
entrusted the Debtors with specific, identifiable property that they were to hold in
trust for payment to the Defendants and other utility companies. The Debtors’
failure to preserve trust property was a breach of trust which gave the Defendants
unsecured claims against the Debtors. Thus, the bankruptcy court’s holding that the
Defendants      were      creditors   of   the     Debtors     for   purposes     of
§ 547(b)(1) is not clearly erroneous.

      2.     Third-Party Beneficiary Claims

       “It is the prevailing rule in Minnesota and other jurisdictions in the United
States that a third party may sue on a contract made for his direct benefit.”13 “If, by
the terms of the contract, performance is directly rendered to a third party, he is
intended by the promisee to be benefited.” And where a promisor agrees to pay the
debts of another – as was the case here – the intended third-party beneficiary
possesses the primary claim against the promisor for the debt.14

        At oral argument, the Defendants conceded that SDG&E and SCE were
third-party beneficiaries with regard to the transfers received on account of the
utility services provided to Buffets. They continue to maintain, however, that the
language in the Energy Services Agreement with Wendy’s precludes a claim by




13
   Buchman Plumbing Co., Inc. v. Regents of the Univ. of Minnesota, 215 N.W.2d
479, 483 (Minn. 1974).
14
   In re Maurer, 256 B.R. 495, 502 (B.A.P. 8th Cir. 2000).
                                          11
the Defendants as third-party beneficiaries.15 Specifically, they point to the
provision in the Agreement stating that LGI “shall [not] be required to incur any
liability in connection therewith.” The bankruptcy court rejected this interpretation
of the Energy Services Agreement. That finding is not clearly erroneous.

        First, the context of the quoted passage suggests that it was intended only to
reinforce the parties’ agreement that LGI had no duty to extend credit, i.e., pay a
utility bill for which Wendy’s had not yet forwarded payment. To wit, page 7 of
the agreement provides in larger part:

      LGI shall then be obligated to pay each utility invoice within two
      business days of receipt of Wendy’s ACH transfer. LGI shall in no
      event be required to advance any of its funds or to utilize LGI’s credit
      in connection with or on behalf of Wendy’s, nor shall LGI be
      required to incur any liability in connection therewith. Wendy’s shall
      indemnify and hold harmless LGI from and against any and all claims,
      liabilities, costs and expenses relating to utility invoices that have
      been processed in accordance with this Agreement.16

      Second, the italicized portion can be interpreted as establishing LGI’s receipt
of funds from Wendy’s as a condition precedent to LGI’s obligation to pay utility
providers.

      Finally, the Energy Services Agreement’s statement that LGI was not
required to incur any liability does nothing to actually prevent LGI from incurring

15
  Minnesota follows the Restatement (Second) of Contracts, see Cretex
Companies, Inc. v. Constr. Leaders, Inc., 342 N.W.2d 135, 139 (Minn. 1984),
which permits a promisor and promise to contractually restrict (or eliminate) the
rights of a third-party beneficiary. “(1) Unless otherwise agreed between promisor
and promisee, a beneficiary of a promise is an intended beneficiary if recognition
of a right to performance in the beneficiary is appropriate to effectuate the
intention of the parties. . . .” Restatement (Second) of Contracts § 302.
16
   Emphasis added.
                                          12
a debt to a utility company as a result of its breach of the agreement by, for
example, using the funds it received from Wendy’s for another purpose. This
interpretation would be more consistent with the subsequent sentence which
specifically contemplates potential claims against LGI by the utilities.
       For these reasons, we hold that the bankruptcy court’s finding that the
Defendants were creditors of the Debtors as a consequence of their status as third-
party beneficiaries of the Energy Services Agreements is not clearly erroneous.

B.    The preferential transfers to the Defendants were made in payment of
      antecedent debts as required by 11 U.S.C. § 547(b)(2)

       The Defendants argue that the transfers at issue were not preferences
because they weren’t made in payment of antecedent debts. According to the
Defendants, the Debtors would not actually owe a debt to the Defendants until the
Debtors breached their agreements with Buffets and Wendy’s by failing to make
timely payments to the Defendants. Essentially, they argue that a debt created by
contract does not arise until the promisor repudiates or breaches the contract. They
point to the Eighth Circuit case, In re Bridge Information System, Inc.,17 to support
their argument.

       The Defendants’ argument on this point is without merit and their reliance
on In re Bridge Information Systems, Inc. is misplaced.

      The Bankruptcy Code does not define when the debtor incurs a debt, but it
does define a “debt” as a liability on a claim. 18 Thus, the concept of a debt and a
claim are coextensive under the Code,19 and a debtor incurs a debt to a creditor for
purposes of § 547(b)(2) as soon as the creditor would have had a claim against the
17
   327 B.R. 382 (B.A.P. 8th Cir. 2005), aff’d 474 F.3d 1063 (8th Cir. 2007)
18
   11 U.S.C. § 101(12).
19
   See In re Energy Co-op. Inc., 832 F.2d 997, 1001 (7th Cir. 1987) (“By defining a
debt as a ‘liability on a claim,’ Congress gave debt the same broad meaning it gave
claim.”).
                                         13
debtor's estate. The Defendants here had a claim against the Debtors when the
Debtors received funds from Buffets and Wendy’s.

      The rights and duties of a third-party beneficiary contract “depend upon, and
are measured by, the terms of the contract.” Under the Buffets Energy Services
Agreement, the Debtors were obligated to the “timely payment of invoices” upon
receipt of the customer funds. Under the Agreement with Wendy’s, the Debtors
were required to “pay each utility invoice within two business days of receipt of
Wendy’s ACH transfer.”

       The fact that the Debtors had a time within which to perform their
obligations before they would be in breach of the contract does not mean that the
obligation did not arise until those deadlines were upon them or past, just as the
prepayment of a loan before an installment due date or the maturity date constitutes
payment on an antecedent debt.20 The key to determining whether a transfer “for or
on account of” a debt owed by a debtor is whether a creditor would be able to
assert a claim against the estate absent payment. Here, the Defendants (or the
customers, as the primary promisees) had (and, indeed, did file) claims for all the
funds paid by a customer that were not paid to the Defendants for utility services
when the involuntary bankruptcy petitions were filed against the Debtors.

       Furthermore, Bridge Information Systems, Inc., does not stand for the
proposition the Defendants attribute to it, i.e., that a contractual duty to pay does
not arise until a party is in breach of that duty. Rather, the question in that case was
whether a payment pursuant to a settlement agreement was in payment of the
lessor’s alleged prior breach of a lease or a contemporaneous “buy out” of the
lessee’s renewal options.21 If the payment made by the debtor-lessor was in
satisfaction of damages caused by its purported prior breach – as the bankruptcy
20
  See, e.g., In re Bennett Funding Group, Inc., 220 B.R. 739 (B.A.P. 2nd Cir.
1998).
21
   In re Bridge Information Systems, Inc., 327 B.R. at 387-89.
                                           14
court held – then the payment would have been in satisfaction of an antecedent
debt and, therefore, avoidable as a preference. However, if the transfer was
payment for the defendant-lessee’s option rights – as the Bankruptcy Appellate
Panel held – then the transfer was not in payment of an antecedent debt and not a
preference. Quite simply, the holding of Bridge Information Systems, Inc., is
inapposite here.

       For these reasons, we conclude that the bankruptcy court did not err in its
determination that the transfers at issue here were made in payment of antecedent
debts for purposes of 11 U.S.C. § 547(b)(2).

C.    The Defendants’ new value credit was improperly determined

      Section 547(c)(4) of the Bankruptcy Code provides:

      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
                      (B) on account of which new value the debtor did not
      make an otherwise unavoidable transfer to or for the benefit of such
      creditor. . . .”

      “New value” is defined as “money or money's worth in goods, services, or
new credit . . . including proceeds of such property.” 11 U.S.C.§ 547(a)(2).

       The bankruptcy court held that the plain language of § 547(c)(4) –
specifically, its reference to “such creditor” – requires that new value be supplied
by the creditor that received the preferential transfer. Accordingly, it limited the


                                         15
Defendants’ new value credit to the value of the utility services they provided to
Buffets and Wendy’s during the preference period.

       The Defendants contend that under the Eighth Circuit Court of Appeals case,
Jones Truck Lines, Inc. v. Central States, Southeast and Southwest Areas Pension
Fund (In re Jones Truck Lines, Inc.),22 the Defendants’ new value credit should not
be limited to the value of the utility services provided to the Wendy’s and Buffets
customers during the preference period. Rather, they argue, they are entitled to a
credit for all of the payments Wendy’s and Buffets made to the Debtors subsequent
to each transfer, regardless of when the utility services were provided. We concur
with the Defendants’ interpretation of the holding in Jones Truck Lines.

        In Jones Truck Lines, a Chapter 11 debtor-employer sued to recover, as
preferential transfers, payments to a “Health and Welfare Fund” and to a “Pension
Fund” made on behalf of its employees.23 The bankruptcy court and district court
held that under § 547(c)(4), the defendant-Funds could not offset their preference
liability with the value provided by the debtor’s employees (in the form of
continued services rendered to the debtor); rather, the Funds themselves had to
provide new value to the debtor.24 In reversing the lower courts’ decisions, the
Court of Appeals examined the parties’ tripartite relationship and held that the
employee services provided to the debtor during the preference period qualified as
new value which could be applied as an offset against the Funds’ preference
liability.25 Notably, the Court of Appeals found that the Funds were creditors of the
debtor in their own right but did not limit the Funds’ new value credit to any value
they provided to the current employees. And, as a practical matter, it is unlikely
that the current employees received any contemporaneous benefit from the Pension


22
   130 F.3d 323 (8th Cir. 1997).
23
   Id. at 325-36.
24
   Id; In re Jones Truck Lines, Inc., 196 B.R. 483, 492 (Bankr. W.D. Ark. 1995.)
25
   In re Jones Truck Lines, Inc., 130 F.3d at 328-29.
                                         16
Fund. Hence, the bankruptcy court’s calculation of new value in this case is not
consistent with the Eighth Circuit’s binding holding in Jones Truck Lines.

       Arguably, because the Defendants were found to be creditors in their own
right, as opposed to just transferees of payments that benefitted a creditor
(Wendy’s or Buffets), the holding of Jones Truck Lines would appear to be
contrary to the plain terms of § 547(c)(4), which requires “such creditor,” i.e., the
creditor that received the transfer (or the benefit of the transfer) to provide the new
value. However, the holding in Jones Truck Lines can be harmonized with the
statute by interpreting it as a recognition that in tripartite relationships where the
transfer to a third party benefits the primary creditor, new value can come from
that creditor, even if the third party is a creditor in its own right. And that is exactly
the nature of the tripartite relationship here. In fact, as trust beneficiaries and third-
party beneficiaries, the Defendants are creditors of the Debtors precisely because
the payments made to them were intended to benefit the creditor(s) that provided
the new value (i.e., the Debtors’ customers, Wendy’s and Buffets).

      Giving the Defendants credit for all of the payments Wendy’s and Buffets
made to the Debtors on account of utility services provided by the Defendants,
SDG&E’s liability is reduced to zero and SCE’s liability is reduced to $25,625.75.
The charts below show the calculation of the Defendants’ new value credits based
on the figures contained in the record.26

                   SCE – WENDY’S NEW VALUE ANALYSIS
       Transfer     Preferential   Transfer to       Net
                                                                    Comment
         Date        Transfer        Debtor       Preference
      11/14/2008      $4,178.52                     $4,178.52
      11/14/2008      $4,224.86                     $8,403.38
      11/20/2008                        $40.00      $8,363.38

26
  All of these figures are contained in the Stipulations of Fact filed in the
underlying bankruptcy court cases, Stoebner v. SCE, 11-4066 (Doc. 39) and
Stoebner v. SDG&E, 11-4065 (Doc. 38).
                                            17
 Transfer    Preferential   Transfer to      Net
                                                             Comment
   Date       Transfer        Debtor      Preference
11/20/2008                    $2,447.73     $5,915.65
11/20/2008                       $40.00     $5,875.65
11/20/2008                    $2,647.66     $3,227.99
11/21/2008                       $40.00     $3,187.99
11/21/2008                    $2,604.31       $583.68
11/25/2008                       $40.00       $543.68
11/25/2008                    $2,848.46   ($2,304.78)   Preference Liability
                                                            Eliminated

             SCE – BUFFETS NEW VALUE ANALYSIS
 Transfer    Preferential   Transfer to      Net
                                                             Comment
   Date       Transfer        Debtor      Preference
11/14/2008      $4,178.52                   $4,178.52
11/14/2008      $4,224.86                   $8,403.38
11/14/2008      $7,948.76                  $16,352.14
11/14/2008      $8,156.87                  $24,509.01
11/14/2008      $8,460.80                  $32,969.81
11/14/2008                    $7,003.12    $25,966.69
11/14/2008                      $138.53    $25,828.16
11/17/2008     $8,125.06                   $33,953.22
11/17/2008     $9,620.77                   $43,573.99
11/17/2008     $9,996.85                   $53,570.84
11/17/2008     $7,678.34                   $61,249.18
11/17/2008     $7,371.65                   $68,620.83
11/17/2008    $10,844.50                   $79,465.33
11/17/2008     $9,514.28                   $88,979.61
11/18/2008     $5,943.93                   $94,923.54
11/19/2008                    $6,114.90    $88,808.64
11/19/2008                      $864.00    $87,944.64
11/19/2008                      $960.11    $86,984.53
11/19/2008                    $4,832.03    $82,152.50
11/19/2008                    $4,570.59    $77,581.91
11/19/2008                    $7,033.00    $70,548.91
11/19/2008                    $6,168.70    $64,380.21
11/19/2008                    $5,294.10    $59,086.11
11/19/2008                    $5,253.98    $53,832.13
11/19/2008     $7,860.50                   $61,692.63
11/19/2008     $6,322.93                   $68,015.56
11/19/2008     $6,628.53                   $74,644.09
11/19/2008     $7,970.53                   $82,614.62
11/19/2008     $6,881.98                   $89,496.60
                                     18
 Transfer    Preferential   Transfer to      Net
                                                             Comment
   Date       Transfer        Debtor      Preference
11/20/2008                       $21.30    $89,475.30
11/20/2008                    $5,283.78    $84,191.52
11/20/2008                    $5,410.79    $78,780.73
11/20/2008                    $5,728.54    $73,052.19
11/20/2008                    $5,280.57    $67,771.62
11/20/2008                    $6,118.07    $61,653.55
11/20/2008      $7,827.17                  $69,480.72
11/20/2008      $7,435.41                  $76,916.13
11/20/2008      $7,804.13                  $84,720.26
11/21/2008      $8,188.20                  $92,908.46
11/24/2008      $7,066.22                  $99,974.68
11/28/2008                    $5,470.19    $94,504.49
11/28/2008                    $5,058.94    $89,445.55
11/28/2008                    $7,803.90    $81,641.65
11/28/2008                    $6,438.30    $75,203.35
11/28/2008                    $4,826.31    $70,377.04
11/28/2008      $7,461.95                  $77,838.99
 12/1/2008                       $71.29    $77,767.70
 12/1/2008                    $5,256.98    $72,510.72
 12/1/2008                    $6,067.03    $66,443.69
 12/1/2008                    $4,771.92    $61,671.77
 12/1/2008                    $6,218.99    $55,452.78
 12/1/2008                    $5,148.72    $50,304.06
 12/9/2008                    $6,107.77    $44,196.29
 12/9/2008                    $5,577.87    $38,618.42
 12/9/2008                    $6,892.98    $31,725.44
 12/9/2008                    $6,099.69    $25,625.75   Preference Liability



           SDG&E – BUFFETS NEW VALUE ANALYSIS
Transfer     Preferential   Transfer to      Net
                                                             Comment
  Date        Transfer        Debtor      Preference
11/12/2008    $10,468.59                   $10,468.59
11/13/2008                    $3,126.29     $7,342.30
11/13/2008                    $1,747.28     $5,595.02
11/13/2008                    $5,255.58       $339.44
11/13/2008                    $7,208.34   ($6,868.90)    New Value credit
                                                          does not carry
11/13/2008                    $2,167.03         $0.00       forward.
11/14/2008     $5,773.59                    $5,773.59
                                     19
       Transfer    Preferential   Transfer to      Net
                                                                    Comment
         Date       Transfer        Debtor      Preference
      11/17/2008    $10,402.58                    $16,176.17
      11/19/2008    $11,097.37                    $27,273.54
      11/20/2008                    $7,487.70     $19,785.84
      11/20/2008                    $2,328.80     $17,457.04
      11/20/2008     $9,093.92                    $26,550.96
      11/24/2008     $8,514.01                    $35,064.97
      11/25/2008                    $8,195.65     $26,869.32
      11/25/2008                    $1,855.14     $25,014.18
      11/26/2008    $10,062.69                    $35,076.87
      11/28/2008                    $8,254.95     $26,821.92
      11/28/2008                    $1,955.21     $24,866.71
      11/28/2008     $9,641.10                    $34,507.81
       12/1/2008                    $1,667.01     $32,840.80
       12/1/2008                    $8,236.52     $24,604.28
       12/1/2008                    $7,942.75     $16,661.53
       12/1/2008                    $2,055.03     $14,606.50
       12/5/2008                    $7,509.62      $7,096.88
       12/5/2008                    $1,788.17      $5,308.71
       12/5/2008                    $1,609.64      $3,699.07
       12/5/2008                    $7,454.17    ($3,755.10)
                                                               Preference Liability
       12/5/2008                    $7,880.45   ($11,635.55)
                                                                  Extinguished
       12/5/2008                    $1,750.17   ($13,385.72)



                                  CONCLUSION
       For the foregoing reasons, the portion of the bankruptcy court’s judgment
determining that the Defendants received preferential transfers is affirmed. The
court’s calculation of the Defendants’ new value credit, however, is reversed. SCE
is entitled to a new value credit for all but $25,625.75 of the transfers it received
and SDG&E is entitled to a new value credit to the full extent of the transfers it
received.
                         _____________________________




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