Memorandum of Decision Re: Preferences

FOR THE NORTHERN DISTRICT OF CALIFORNIA In re UNICOM COMPUTER CORPORATION,                                       No. 1-88-01593      Debtor. ___________________________/ UNICOM COMPUTER CORPORATION,      Plaintiff,    v.                                                                                                       A.P. No. 1-90-0025 COMTEL FINANCIAL CORP., et al.,      Defendants. ______________________________/
     In 1983, defendant Comtel Financial Corporation and debtor Unicom Computer Corporation entered into a partnership agreement to engage in the business of computer leasing. In 1984, Comtel became convinced that Unicom was violating the agreement. It gave written notice of partnership dissolution and sued Unicom in state court.      In August of 1988, Unicom and Comtel agreed to settle the lawsuit for $75,000.00, payable in installments. The first payment of $15,000.00 was made a few days later. The next month, Unicom filed its bankruptcy petition. The issue before the court is whether the $15,000.00 payment is recoverable as a preference. Now before the court is Unicom's motion for summary judgment.      The court ruled from the bench that all of the elements of a preference pursuant to section 547(b) are present. The sole remaining issue is whether Comtel has a defense under section 547(c).      The court utterly rejects the notion that any payment made to settle a lawsuit is not a preference because release of the claim is new value under section 547(c). "New value" is defined in section 547(a)(2); the statutory definition clearly excludes anything which does not tangibly enrich the debtor.      The damages claimed in the lawsuit were for misappropriation of partnership opportunities, fraud and breach of fiduciary duties, and ruination of a partnership account. All of these alleged actions took place long before the settlement, and accordingly anything paid on account of these claims is recoverable as a preference. As to these matters, there was no contemporaneous exchange.      However, the complaint also seemed to allege that Unicom was wrongfully in possession of partnership assets. If this was true, and if, on the date the $15,000.00 was paid, Comtel's interest in such partnership assets exceeded $15,000.00, and if, by the settlement, Unicom acquired Comtel's interest, then there was new value given to Unicom. While a payment pursuant to a settlement of old claims against the debtor is recoverable as a preference, a settlement payment which purchases a present, existing, and valuable asset is not recoverable, because the transfer of such an asset to the debtor is new value.      For the foregoing reasons, all of the issues in this case shall be deemed without substantial controversy pursuant to Rule 56(d) of the Federal Rules of Civil Procedure, except the issue as to whether by the settlement Comtel transferred to Unicom assets then owned by Comtel and having a value in excess of $15,000.00. Comtel has the burden of proof regarding this issue.      SO ORDERED.
Dated: November 10, 1990                                                                          _______________________                                                                                                                         Alan Jaroslovsky                                                                                                                         U.S. Bankruptcy