8th Circuit Distinguishes "Intraday Overdrafts" from "True Overdrafts" In Determ
In Saracheck v. Luna Savings Bank, the chapter 7 trustee sought to recover deposits made by corporate debtor AgriProcessors, Inc. to its bank account to cover overdrafts in the 90 day preference period. The bank's policy was to provisionally settle all checks and debit the account. When the provisional settlement caused or contributed to a negative account balance, an "intraday overdraft" occurred. Under Iowa law, the provisional settlement did not become final until midnight the next business day. Once the settlements became final and the account was still negative, a "true overdraft" occurred. During the 90 day period, AgriProcessors deposited funds to cover both intraday and true overdrafts.
The Chapter 7 Trustee sought to recover all deposits that covered both types of overdrafts within the 90 day period, as well as money transferred from one bank account to another at the same bank for the purpose of covering the overdraft. The court distinguished the intraday overdrafts, stating that these types of overdrafts are not "antecedent debts". The overdrafts only become debts under Iowa law when the provisional settlements became final and not before. The Court also found that there was sufficient proof of an agreement between the debtor and bank to treat both bank accounts as one account, and therefore the accounts needed to be netted to determine the extent of any true overdrafts.
The court did not evaluate any set-off defense, because a finding in favor of the bank would not have changed the result.