Braniff Airways, Inc. v. Exxon Co., U.S.A.

814 F.2d 1030 (1987)

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Braniff Airways, Inc. v. Exxon Co., U.S.A.

United States Court of Appeals for the Fifth Circuit
814 F.2d 1030 (1987)

  • Written by Rose VanHofwegen, JD

Facts

Before filing bankruptcy, Braniff Airways, Inc. (Braniff) (plaintiff) contracted with Exxon Co. (defendant) for jet fuel and oil products. Under the fuel contract, Braniff prepaid Exxon each week for the amount of fuel Braniff estimated it needed. Under the oil contract, Braniff had an open account and paid after purchase. Braniff prepaid $530,000 for fuel for the following week two days before filing bankruptcy, then used only $96,252 in fuel, such that Exxon owed Braniff a refund of $434,972. Meanwhile, Braniff had paid Exxon $145,745 to cover purchases on the open account during the 90 days before bankruptcy. After filing for reorganization, Braniff sued to recover part of the open-account payments. Braniff stipulated that some of the payments were not recoverable because they paid ordinary business debts but sought recovery of $64,992. The district court found Exxon could not set off Braniff’s claim for $64,992 against the $434,972 that Exxon owed Braniff for fuel prepayments, reasoning that the debt Exxon owed Braniff was created by the bankruptcy-court judgment post-petition. Exxon appealed.

Rule of Law

Issue

Holding and Reasoning (Hill, J.)

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