In Re: OAKWOOD MARKETS, INC. v. Oakwood Properties, Inc.

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0050P (6th Cir.)
File Name: 00a0050p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
In Re: OAKWOOD M ARKETS,
INC.,
Debtor.
_______________________
M AURICE K. GUINN , Trustee,
Appellant/Cross-Appellee,
v.
OAKWOOD P ROPERTIES, INC.,
Appellee/Cross-Appellant.
;>

1
Nos. 99-5378/5397
Appeal from the United States District Court
for the Eastern District of Tennessee at Greeneville.
No. 98-00375—Thomas G. Hull, District Judge.
Submitted: January 25, 2000
Decided and Filed: February 10, 2000
Before: GUY, RYAN, and BOGGS, Circuit Judges.

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2 In re Oakwood Markets, Inc. Nos. 99-5378/5397
_________________
COUNSEL
ON BRIEF: Maurice K. Guinn, GENTRY, TIPTON,
KIZER, McLEMORE & JENDREK, Knoxville, Tennessee,
for Appellant. Scott T. Powers, HUNTER, SMITH &
DAVIS, Kingsport, Tennessee, D. Michael Tranum,
HUNTER, SMITH & DAVIS, Johnson City, Tennessee, for
Appellee.
_________________
OPINION
_________________
RALPH B. GUY, JR., Circuit Judge. Maurice K. Guinn,
trustee in bankruptcy for Oakwood Markets, Inc. (debtor),
appeals from the judgment affirming the bankruptcy court’s
decision to grant summary judgment to Oakwood Properties,
Inc. Asserting error by the bankruptcy court, the trustee
claims that (1) the debtor’s post-petition transfers pursuant to
a pre-petition real estate lease were not excepted from
avoidance under 11 U.S.C. § 549(b); (2) the “value” given in
exchange for a transfer should be determined from the
perspective of the debtor for purposes of § 549(b); and (3) any
value that was given post-petition in exchange for the
transfers did not exceed the value of two days’ occupancy.
Oakwood Properties raises the additional issue on cross-
appeal of whether the district court correctly extended the
“date of honor” rule set forth in Barnhill v. Johnson, 503 U.S.
393 (1992), to transfers arising under 11 U.S.C. § 549. After
a review of the record and arguments presented on appeal, we
find no error and affirm.
I.
The facts are undisputed. On April 1, 1985, Oakwood
Properties entered into lease agreements with the debtor to
rent property and equipment in Weber City, Virginia, at a rate
Nos. 99-5378/5397 In re Oakwood Markets, Inc. 7
Further, the bankruptcy court correctly concluded that the
extent of value given must be determined from the “giver’s”
perspective, here Oakwood Properties. See 11 U.S.C.
§ 549(b) (“to the extent any value . . . is given after the
commencement of the case in exchange for such transfer”)
(emphasis added). Even if viewed from the debtor’s
perspective, the result is the same in this case. It is
undisputed that in exchange for payment of the March rent,
the debtor had the right to possess the Weber City premises
and equipment for that month. It is also undisputed that the
monthly rental value of the premises and equipment totaled
$12,825. Therefore, Oakwood Properties gave and the debtor
received $12,825 in value in exchange for the $12,825
transfer. As such, the transfer was properly excepted from
avoidance under 11 U.S.C. § 549(b).
The fact that the debtor subsequently lost its right to occupy
the premises and use the equipment after the foreclosure does
not alter the result. It is undisputed that Oakwood Properties
did not seek to reoccupy the premises or take back the leased
equipment after the sale on March 7. Instead, Oakwood
Properties honored the possessory right of the party that had
obtained the leasehold interests in the course of the sale.
Oakwood Properties should not be penalized based upon the
debtor’s delinquencies with other unrelated creditors. As a
result, the amount of value that the debtor received was not
limited to two days’ occupancy.
AFFIRMED.

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6 In re Oakwood Markets, Inc. Nos. 99-5378/5397
Canada Ltd. (In re Tennessee Chem. Co.), 112 F.3d 234 (6th
Cir. 1997), which adopted the date of receipt rule with
respect to 11 U.S.C. § 547(c)(4), are controlling. As a result,
the two disputed transfers that were honored by the debtor’s
bank on March 7, 1996, the day after the commencement of
the debtor’s bankruptcy case, were subject to avoidance under
§ 549(a).
Next, the trustee challenges the bankruptcy court’s finding
that the $12,825 transfer was excepted from avoidance under
11 U.S.C. § 549(b) based upon Oakwood Properties’
provision of rental space to the debtor in exchange for the
transfer. Subsection 549(b) provides:
In an involuntary case, the trustee may not avoid under
subsection (a) of this section a transfer made after the
commencement of such case but before the order for
relief to the extent any value, including services, but not
including satisfaction or securing of a debt that arose
before the commencement of the case, is given after the
commencement of the case in exchange for such transfer,
notwithstanding any notice or knowledge of the case that
the transferee has.
Id. There is no law in this circuit addressing this subsection
in this context.
On March 7, 1996, one day after commencement of the
debtor’s bankruptcy case, but before April 2, 1996, the day
the order for relief was entered, the debtor transferred
payment to Oakwood Properties in exchange for the provision
of rental space for the month of March 1996. While the
underlying lease was executed in 1985, we find that the right
to use the leased premises and equipment in March 1996
constituted value given after the commencement of the case
under § 549(b). Pursuant to the lease terms, the debtor was to
pay each month’s rent in advance on the first of that month.
Accordingly, the trustee’s argument that the debtor’s March
1996 rental payment was in satisfaction of a preexisting debt
is rejected.
Nos. 99-5378/5397 In re Oakwood Markets, Inc. 3
of $11,625 and $1,200 per month, respectively. The rent was
payable on the first of each month and subject to a late fee
penalty if not paid by the tenth of the month.
In December 1995, Fleming Companies, Inc., the debtor’s
principal creditor and primary supplier of inventory and
equipment, declared the debtor in default under the terms of
their loan agreements and filed suit in state court seeking the
appointment of a receiver. With the agreement of Fleming
and the debtor, a state court receiver was appointed and a bulk
sale of the debtor’s assets was noticed for March 7, 1996.
On March 6, 1996, three unsecured creditors filed an
involuntary Chapter 11 bankruptcy petition against the debtor.
The next day, Fleming sought immediate relief from the
automatic stay provision so it could proceed with the
foreclosure sale. The court ordered the sale to proceed with
the agreement of Fleming and the petitioning creditors. The
court also authorized the assignment of leases covering the
real property upon which the debtor's stores were located.
The debtor’s leasehold interest in the Weber City premises
was sold at the sale. Oakwood Properties permitted the
assignment and assumption of the lease by the purchaser of
the debtor’s assets. As a result, the debtor occupied the
Weber City premises on only two days during the period after
the petition was filed and before the order for relief was
entered.
On March 5, prior to the filing of the bankruptcy petition,
Oakwood Properties received two checks from the debtor
dated March 1: check No. 061184 for $12,825 and check No.
061199 for $802.63. Both checks were honored by the
debtor’s bank on March 7, the day after the bankruptcy
petition was filed.
On April 2, 1996, an order for relief under Chapter 11 was
entered. Upon motion of the petitioning creditors, the
debtor’s case was subsequently converted to a Chapter 7
proceeding. The trustee commenced an adversary proceeding
against Oakwood Properties in the bankruptcy court to avoid
the debtor’s two March payments as post-petition transfers

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4 In re Oakwood Markets, Inc. Nos. 99-5378/5397
1The payment of $802.63 by check No. 061199 was for an arrearage
owed to Oakwood Properties and thus could not be excepted from
avoidance under 11 U.S.C. § 549(b). Oakwood Properties does not argue
otherwise.
under 11 U.S.C. § 549, and to recover those payments for the
benefit of the estate under 11 U.S.C. § 550.
Oakwood Properties moved for either dismissal of the
complaint or entry of summary judgment. The bankruptcy
court ruled that the transfers met the requirements for
avoidability under 11 U.S.C. § 549(a), but were excepted
from avoidance under § 549(b) to the extent of value given by
Oakwood Properties to the debtor in exchange for the
transfers. The court also made the following pertinent
findings: (1) the date of honor rule applied to transfers under
11 U.S.C. § 549; (2) the value provided by Oakwood
Properties in exchange for the March payments was the
provision of rental space for the operation of the debtor’s
business in March 1996, rather than the satisfaction of a pre-
petition debt; (3) the value of the transfers should be
measured from the perspective of Oakwood Properties; and
(4) the value given to the debtor was the right to occupy the
premises during the month of March. Finding that Oakwood
Properties did not meet its burden of proving the extent of the
value, the bankruptcy court initially denied Oakwood's motion
and scheduled trial on the sole issue of value. After the
parties stipulated that the March 1996 rental value of the
Weber City premises and equipment was $11,625 and $1,200,
respectively, Oakwood Properties again moved for summary
judgment. The bankruptcy court granted summary judgment
to Oakwood Properties for check No. 061184 ($12,825)
because value was given for that transfer, and to the trustee
for check No. 061199 because value was not provided for that
transfer.1 Both parties appealed the bankruptcy court’s
decision to the district court. The district court affirmed the
decision and this appeal followed.
Nos. 99-5378/5397 In re Oakwood Markets, Inc. 5
2There is no suggestion or evidence of any date manipulation
surrounding the disputed transfers in this case.
II.
We review de novo the district court’s decision affirming a
grant of summary judgment by a bankruptcy court. See
Kentucky Cent. Ins. Co. v. Brown (In re Larbar Corp.), 177
F.3d 439, 443 (6th Cir. 1999). We review the bankruptcy
court’s conclusions of law de novo and its factual findings for
clear error. See Corzin v. Fordu (In re Fordu), ___ F.3d ___,
No. 97-3936, 1999 WL 1222643, at *13 n.1 (6th Cir. Dec. 22,
1999).
First, Oakwood Properties argues that the bankruptcy court
erred in ruling that the date of honor rule applies to transfers
made under 11 U.S.C. § 549. “11 U.S.C. § 549(a) permits a
trustee to avoid a post-petition transfer of property of the
estate that occurs after commencement of the case and is not
authorized by the Bankruptcy Code or by the Court.” Still v.
Rossville Bank (In re Chattanooga Wholesale Antiques, Inc.),
930 F.2d 458, 461 n.2 (6th Cir. 1991) (emphasis added).
Oakwood Properties claims that the disputed transfers
occurred when it received the checks on March 5, 1996, the
day before commencement of the debtor’s bankruptcy case,
and thus are not avoidable under 11 U.S.C. § 549(a). The
bankruptcy and district courts disagreed, adopting the date of
honor rule outlined in Barnhill v. Johnson, 503 U.S. 393
(1992). Under that rule, ordinary checks are deemed
transferred on the date they are honored by a bank.
We conclude that adoption of the date of honor rule in the
context of 11 U.S.C. § 549(a) is appropriate because this rule
encourages the prompt submission of checks to the bank, and
provides a date certain upon which parties to the transfer can
rely and upon which courts can base a ruling in the event of
litigation. In contrast, the date of receipt rule leaves too much
room for manipulation by the parties to the transaction.2 In so
concluding we find that neither Barnhill, which involved
interpretation of 11 U.S.C. § 547(b), nor Brown v. Shell

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