Opinion ID: 670790
Heading Depth: 1
Heading Rank: 4

Heading: the contemporaneous exchange exception

Text: 22 The district court held that the contemporaneous exchange exception, Sec. 547(c)(1), 4 applied to the payments received by Pacific for Vehicles 2 and 3. 5 23 The checks given to Pacific Suzuki were clearly not exchanged contemporaneously with the vehicles: the vehicles were delivered over one month before Pacific Suzuki received the debtor's checks. In exchange for the checks, Pacific Suzuki released its unperfected security interests in Vehicles 2 and 3 and the debtor received the title documents to those vehicles. The district court held that the contemporaneous exchange exception applied because the debtor received new value from Pacific Suzuki when it gave Pacific Suzuki two checks in exchange for the title documents ... [of] the two vehicles it had purchased and obtained from Pacific Suzuki approximately a month earlier. 24 In support of its holding, the district court cited In re George Rodman, Inc., 792 F.2d 125, 127 (10th Cir.1986), which held that the release of a lien in exchange for a debtor's payment represented a contemporaneous exchange for new value. The holding in Rodman has been narrowed by the Tenth Circuit in In re Robinson Bros. Drilling, 877 F.2d 32 (10th Cir.1989), and we have adopted our own approach to determining the value of a released lien under Sec. 547(c)(1). In In re Nucorp Energy, 902 F.2d 729, 733 (9th Cir.1990), we held that a court must measure the value given to the creditor and the new value given to the debtor in determining the extent to which the trustee may void a contemporaneous exchange. See also In re Spada, 903 F.2d 971, 977 (3d Cir.1990) (holding that party seeking shelter of Sec. 547(c)(1) must prove the specific measure of the new value given to the debtor in the exchange); In re Arrow Air, 940 F.2d 1463 (11th Cir.1991). Value should be measured at the time of the transfer. In re Nucorp Energy, 902 F.2d at 733; In re Robinson Bros. Drilling, 877 F.2d at 33. 25 The district court appears to have concluded that since Pacific's release of the security interests and title documents added some new value to the debtor's estate, the entire payment to Pacific from the debtor was within the scope of Sec. 547(c)(1). Under Nucorp, however, the district court should have determined how much, if any, new value the debtor obtained from the transfer. 26 Under Nucorp, the debtor's check payments for Vehicles 2 and 3 would qualify at least in part under Sec. 547(c)(1) if Pacific Suzuki's unperfected security interests had value within the meaning of that section. At the time of the transfer, the debtor's petition for bankruptcy had not been filed, and the trustee did not have the status of lien creditor under the Bankruptcy Code's strong-arm clause. See 11 U.S.C. Sec. 544(a) (conferring status of lien creditor on trustee as of date bankruptcy petition is filed). At the time of the transfer, the trustee did not have an interest in the vehicles with priority over Pacific Suzuki's unperfected security interests because the trustee had not yet attained the status of lien creditor under the Bankruptcy Code's strong-arm clause. See 11 U.S.C. Sec. 544(a) (conferring status of lien creditor on trustee as of date bankruptcy petition is filed). However, the record developed before the district court does not establish whether other creditors had superior interests. If no other creditor held a superior security interest, then the value of Pacific Suzuki's unperfected interests would equal the value of the collateral. If, however, other creditors held superior security interests, then Pacific Suzuki's release of its unperfected security interests might not have conferred any new value on the debtor's estate. 27 In addition to the release of the security interests, the debtor received title documents to the vehicles. Although receipt of the title documents was not necessary for title to pass, 6 the debtor needed them to resell the vehicles to consumers. Thus, there may have been new value attributable to having the documents of title that is apart from or different from that inhering in the security interests. We leave that to the district court to discern. 28 The district court was therefore correct that Pacific Suzuki conferred new value on the debtor's estate by releasing the title documents and security interests. The district court should now apply our holding in Nucorp and measure the extent to which new value was conferred on the debtor's estate at the time of the check transfers (i.e. May 31, 1988). The extent to which the transfers will be shielded by the contemporaneous exchange exception will depend on what combined value the district court attaches to the unperfected security interests and documents of title.