Law School Case Briefs | Legal Outlines | Study Materials: Bankruptcy Law, The Law of Debtors and Creditors Problem Set Answers, Warren Westbrook Sixth Edition

Problem Set 24, p.509

24.1

Contemporaneous exchange: three days interval between the delivery of goods and payments; ruin the exception of (c)(1); counterargument: Is it substantially contemporaneous exchange? Only three-day intervals.
It may be preference under (b).

24.2

July 1 signed the K and paid; July 12 identified the goods; July 28 delivered the equipment, and the debtor got the possession (c)(3); August 21 perfected the lien. Sep.30 filed for bankruptcy
Under UCC art 4, when some common goods is identified for the contract, the buyers get the equitable title, which means the buyer will shoulder the risk. It is also the time that the debtor first acquire the right of property under §547(e)(3).
As a rule of thumb, the transfer happens when it is perfected or possession; as an exception, under §547(e)(3), the transfer is made when the debtor has acquired the right in the property. In this case, it is within the rule of thumb.
Though the perfection is later on August 21, there is a 30-day grace period from the possession on July 28 for the perfection of PMSI debt under (c)(3) and (e)(2), so there is no preference for Big Rig.

If the bank has an after-acquired clause security interest, it may be different.
Outside the bankruptcy, PMSI has only 20-day grace period to perfect its lien under 9-317(e); in this case, from July 28 to August 21, has exceeded 20 days, so Big Rig will lose to the bank as an inventory creditor. Inside the bankruptcy, PMSI has 30-day grace period, so now Big Rig can beat TIB; TIB can also beat out the inventory creditor, because it is a preference to attach the after-acquired property. However, the question arises that under §551, TIB takes the position of the inventory creditor, so can TIB now beat PMSI, since the inventory creditor can beat PMSI outside the bankruptcy? This is a circular priority problem.
The answer lies where we look for the priority. Bankruptcy code does not give PMSI the first priority, so we have to look outside the code. So since the TIB steps into the shoes of the inventory creditor, TIB can beat PMSI creditor Big Rig. So finally the TIB gets the equipments.
Note: Strong arm cannot beat the inventory creditor; preference can do it.

24.3

§547(b) preference; (c)(2) ordinary course payment; (c)(8) consumer debts less than $600
UFTA 5(b) UFT to insiders within 90 days while insolvent; 8(f) exception to 5(b): the new value exception; ordinary course; good faith rehabilitation
Utilities bills: not ordinary course; see the three elements
Mortgage: preference? Ordinary course? Mortgage usually is paid on time; so it is a preference.
They just paid when the debt is due, so it is ordinary course???
Payment to the stockholder: UFTA 5(b)? To an insider, it may be preference; but it may arguably be the ordinary course