Opinion ID: 670790
Heading Depth: 1
Heading Rank: 2

Heading: Matter of Vance

Text: 10 The trustee, relying on Matter of Vance, 721 F.2d 259 (9th Cir.1983), argues that the district court should not have applied the ordinary course and contemporaneous exchange exceptions. He contends that the purchase money security interest exception, Sec. 547(c)(3), 2 is the only preference defense that may be invoked whenever a purchase money security interest is involved in a transaction. 11 The trustee failed to raise this argument before the district court. An appellate court will not generally consider arguments not raised before the district court unless there are exceptional circumstances. In re Professional Investment Properties, 955 F.2d 623, 625 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 638, 121 L.Ed.2d 569 (1992). One exceptional circumstance we have identified is when the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed. Id. The applicability of Vance is purely a matter of law and does not depend on the factual record developed at the trial level. We therefore address the trustee's argument. 12 By its terms, Sec. 547(c)(3) applies to a transfer that creates a security interest in property acquired by the debtor.... 11 U.S.C. Sec. 547(c)(3) (emphasis added). In Vance, the trustee was seeking to avoid the creditor's perfection of a security interest as a preference. The perfection of a security interest constitutes a transfer of a security interest under the Bankruptcy Code. The creditor in Vance was unable to invoke a Sec. 547(c)(3) defense because it had failed to perfect its security interest within ten days. See 11 U.S.C. Sec. 547(c)(3)(B). Instead, the creditor argued that the contemporaneous exchange exception, Sec. 547(c)(1), applied because the perfection of its security interest was substantially contemporaneous with the underlying transaction (even though the perfection occurred more than ten days later). We rejected the argument and held that to allow a creditor to invoke the contemporaneous exchange exception for transfers of security interests would render the 10 day perfection period in Sec. 547(c)(3)(B) superfluous. Vance, 721 F.2d at 261. 13 Here, the trustee is attempting to avoid payments made on a secured, but unperfected, loan. A payment on a loan (whether secured or unsecured) is very different from a transfer of a security interest. Because the trustee is not seeking to avoid a transfer of a security interest, our holding in Vance does not apply. Pacific Suzuki is therefore not precluded from raising the contemporaneous exchange exception or the ordinary course exception.