Sigmon v. Royal Cake Co. (In re Cybermech, Inc.)

Royal Cake Company, Inc. (Royal) (defendant) entered into a conditional sales contract to purchase machines from Cybermech, Inc. (Cybermech). The contract provided that Cybermech would install a protype machine at Royal’s facility for a trial period and that Royal did not have to purchase the machines if it was unsatisfied. On July 23, 1987, Cybermech wrote a letter to Royal setting forth the terms if Royal wanted to order the machines, including the price, delivery date, and payment terms that included a downpayment covering one-third of the purchase-price. On July 30, 1987, Royal placed an order for machines and sent Cybermech a check for $33,306.67, which Royal expressly intended to cover the requested downpayment. Cybermech deposited Royal’s check into its bank account. On August 24, 1987, Cybermech sent Royal a letter stating that it could not execute the deal along with a check for $33,306.67 representing the return of Royal’s downpayment. On September 16, 1987, Cybermech filed for Chapter 7 bankruptcy. The bankruptcy trustee, Wayne Sigmon (plaintiff), sued Royal to recover the money that Cybermech returned to Royal as an avoidable preference pursuant to 11 U.S.C. § 547(b). The bankruptcy court ruled for Sigmon and ordered Royal to pay Cybermech $33,306.67 plus prejudgment interest. The district court affirmed.