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Union Bank v. Wolas

United States Supreme Court
502 U.S. 151 (1991)


Facts

In December 1986, ZZZZ Best Co., Inc. (Z Best) borrowed $7 million from Union Bank (the Bank) (defendant) pursuant to a revolving credit agreement and evidenced by a promissory note. The note required Z Best to pay interest on a monthly basis, accruing on the principal at a rate of .65 percent per year above the Bank’s reference rate. In July 1987, Z Best filed a Chapter 7 bankruptcy petition. Within 90 days prior to the filing, Z Best had transferred to the Bank two interest payments totaling approximately $100,000 as well as a $2,500 loan commitment fee. Wolas, the trustee appointed to Z Best’s bankruptcy (the trustee) (plaintiff), sought to recover the payments to the Bank under 11 U.S.C. § 547(b). The bankruptcy court concluded that the payments were not voidable under § 547(b) because they satisfied the ordinary course of business exception set forth at § 547(c)(2). The district court affirmed. The Court of Appeals for the Ninth Circuit reversed after ruling in a separate case that § 547(c)(2) was applicable only to short-term debt. The Bank petitioned the Supreme Court for certiorari.

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