Opinion ID: 515473
Heading Depth: 1
Heading Rank: 4

Heading: equivalent values

Text: 9 We agree with the district court that Sec. 549(b) of the Bankruptcy Code governs the principal issue in this dispute. It provides that a post-petition transfer is valid to the extent of any value given in exchange for it after the commencement of the case. 11 U.S.C. Sec. 549(b) (Supp. IV 1986). The parties in this proceeding disagree both about the value of Union Bank's replacement lien and the value of the consideration that Union Bank gave in exchange for it. We conclude, contrary to the Committee's position, that both values were speculative at the time of the settlement and that the bankruptcy court could have found them to be equal. 10 A. Time of Measuring Value of Replacement Lien 11 To determine the value of the replacement lien for the purposes of Sec. 549(b), we must fix the appropriate time for measuring it. Although neither party has offered authority for its position, each has suggested a time that would further its interests. Union Bank wishes to measure the lien's value at the time of the settlement. It argues that the value of the lien was entirely speculative at that time because Texas Research had not yet resold its technology. The Committee, by contrast, wishes to measure the value of the lien at the time of this proceeding. Using this point in time enables the Committee to argue that the value is $272,723.46, the amount of the debt owed to the Bank that the replacement lien eventually came to secure. 12 Although none of the few cases under Sec. 549(b) has addressed the issue, we hold that the value of post-petition transfers should be measured at the time they occur. Measuring a transfer's value at this time will encourage settlements and other transactions with debtors by reducing the risk that a court will strike them down when further information becomes available. Cf. Nadel v. Fruitville Pike Assocs. (In re Burke), 60 B.R. 665, 670 (Bankr.D.Conn.1986) (stating Sec. 549's policy of protecting transferees); Countryman, The Concept of a Voidable Preference in Bankruptcy, 38 Vand.L.Rev. 713, 740-41 (1985) (discussing the comparable problem of valuing collateral transferred to a secured party during the prepetition preference period). We thus agree with Union Bank that the replacement lien had a speculative value. 13 B. Value of Consideration Given by Union Bank 14 To determine the value of the consideration that Union Bank gave in exchange for the replacement lien, each of Union Bank's promises must be considered. The parties agree, as indeed they should, that Union Bank's promise to provide a $50,000 line of credit to Texas Research was worth $50,000. They also agree that Union Bank's promise to return Healthdyne's check was worthless because Union Bank could not negotiate the check without the Texas Research's signature. This leaves only the value of Union Bank's promise to drop its objection to Texas Research's motion to terminate its Healthdyne's license subject to dispute. 15 The Committee argues that Union Bank's promise not to object had no value because Texas Research unilaterally had the right under Tex.Bus. & Comm.Code Sec. 9.318(b) (Vernon Supp.1988) to rescind the contract. Union Bank, by contrast, contends that its promise had value because Texas Research had no clear right to rescind over its objection. 16 We agree with Union Bank. We do so for two reasons. First, no case under Sec. 9-318(b) or any other section of the Uniform Commercial Code decided at the time of the settlement in any jurisdiction directly supported the Committee's position. Indeed, FDIC v. Registry Hotel Corp., 658 F.Supp. 311 (N.D.Tex.1986), the only case that the Committee has cited, not only came after the settlement, but it also addressed a different issue. It held that an assignee/security-holder had no rights against the obligor when the obligee/assignor defaulted and the obligor rescinded the contract. See id. at 314-15. This case, by contrast, asks whether the assignee/security-holder has any rights when a nondefaulting obligee/assignor rescinds. 17 Second, commentators at the time had stressed that the issue had no clear answer. Although the Committee cites Gilmore, The Assignee of Contract Rights and His Precarious Security, 74 Yale L.J. 217 (1964), the article actually supports Union Bank's position. The article states that it is a reasonable assumption that the assignee should have a right to sue for repudiation or anticipatory breach by the contract obligor ... particularly in a case where he has made an advance to the assignor in reliance on the account debtor's going through with his part of the contract.... Id. at 259. Professor Clark, in addition, had written that it is an open question whether the right under Sec. 9-318(b) to 'modify' an assigned contract include[s] the right to terminate it, and he has not modified his opinion to date. B. Clark, The Law of Secured Transactions under the Uniform Commercial Code p 11.4, at 11-13 (1980 & Supp.1988) (citing Registry Hotel ). 18 As a result, we find that the value of Union Bank's promise not to object, like the value of the replacement lien, was speculative at the time of the settlement agreement. The bankruptcy court deemed the values commensurate, and this court cannot rule that its findings were clearly erroneous.