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eBook details

• Title: In Re Pitman
• Author : United States Court Of Appeals For The Sixth Circuit
• Release Date : January 30, 1988
• Genre: Law,Books,Professional & Technical,
• Pages : * pages
• Size : 55 KB

Description

This case raises a significant question in bankruptcy concerning the relationship between the concept of a conditional "antecedent debt" and the concept of "contemporaneous exchange for new value" under the preference section of the Revised Bankruptcy Code of 1978, as amended in 1984, 11 U.S.C. § 547 (Supp. 1986). The essential question before us is whether the trustee in bankruptcy can avoid as a preference a bankrupt home buyers mortgage deed given a month before bankruptcy as security for payment of the purchase price of a home. The transfer was made and recorded on the same day that the warranty deed conveying the property to the buyer was transferred and recorded. Both transfers were made in order to perform the mutual conditional promises given in an executory contract of sale made a month before the transfers. The bankruptcy and district courts below held that the mortgage was conveyed solely for an "antecedent debt" created by the executory promises of the land contract, rather than for new value consisting of the warranty deed given contemporaneously in exchange for the mortgage. We hold that such a mutual contemporaneous exchange of "legal" interests in the property in place of the previously existing inchoate "equitable" interests constitutes a valid contemporaneous exchange for "new value" under § 547(c)(1). The mortgage here was exchanged for fair value and does not diminish or impair the bankrupt estate, or create a race to the courthouse by creditors to dismember the estate, or undermine the policy of equality of distribution among creditors--the primary problems concerning pre-petition transfers that the preference section was designed to solve. See H.R. Rep. No. 595, 95th Cong., 1st Sess. 177-79 (1977).

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