Opinion ID: 546944
Heading Depth: 3
Heading Rank: 1

Heading: preferential transfer, count i

Text: 38 In Count I of the adversary complaint, the Trustee charged that the surrender to the Bank within 90 days before bankruptcy of goods acquired by Vitreous after 1981 (and therefore not covered by the Bank's financing statement) constituted a preferential transfer under Sec. 547 of the Bankruptcy Code. The possible avoidability of a transfer to a creditor under Sec. 547 is not part of the inquiry a court is required to conduct on a motion to lift the stay as we have described above. It follows that any decision on whether the repossession was avoidable was not necessary to the judgment on the Sec. 362 motion, and we believe the bankruptcy court was in error barring litigation of this claim under the doctrine of collateral estoppel. The court should have considered the Trustee's arguments. 39 To avoid a transfer under Sec. 547, the Trustee must show that the transfer (1) was to or for the benefit of a creditor; (2) was on account of an antecedent debt; (3) was made while the debtor was insolvent; (4) was made within 90 days before the filing of the bankruptcy petition; and (5) allowed the creditor to receive more than it would receive in a distribution under Chapter 7 of the Bankruptcy Code. Sec. 547(b). There is no controversy concerning the first four elements. There certainly was a transfer to a creditor on account of an antecedent debt within 90 days before bankruptcy, and all parties agree that Vitreous would not have been able to pay all creditors the entire amount they were owed. The only possible issue, then, is whether the Bank's position was improved when it took possession of the equipment in which it did not have a perfected security interest. 40 The answer is that it did improve its position. The Bank claimed that the value of the property repossessed (including the real estate) exactly equalled the amount Vitreous owed. To the extent that the Bank perfected its security interest in some of the property it repossessed, it improved its position in bankruptcy. Had the security interest in the after-acquired equipment not been perfected before the filing of bankruptcy, the security interest would have been unenforceable against the Trustee. Because the bankruptcy court found that the liquidation value of all of its collateral exactly equalled the amount of the Bank's debt, there would necessarily be some shortfall if some of those assets had to be shared by all the creditors. The Bank would collect only its proportionate share along with the other creditors in a Chapter 7 liquidation, and because the items in question are the only assets remaining in the estate, it is not possible that unsecured creditors will receive 100% of the value of their claims. By taking the transfer of the goods not covered in the financing statement (i.e., by perfecting its security interest), the Bank improved its position by that increment. 41 There are no genuine issues of material fact in regard to this count, and this court thus may direct the entry of judgment for either party. 6 J. Moore, W. Taggart & J. Wicker, Moore's Federal Practice p 56.12 (2d ed. 1988). It is undisputed that the transfer of possession was for the benefit of a creditor, Sec. 547(b)(1), on account of an antecedent debt, Sec. 547(b)(2), made while the debtor was insolvent, Sec. 547(b)(3), Sec. 547(f), and made within ninety days before the filing of the bankruptcy petition. 4 The transfer enabled the transferee to receive more than it would have otherwise received in a Chapter 7 liquidation, Sec. 547(b)(5). There is no other factual issue that need be decided to determine whether a transfer may be avoided. The record holds no support for any contention that one of the exceptions to avoidance contained in Sec. 547(c) existed. We therefore direct that on remand judgment in an appropriate amount be determined and entered in favor of the Trustee on this count of the complaint.