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In re New York City Shoes Inc.

argued: May 23, 1989.

IN RE NEW YORK CITY SHOES, INC., DEBTOR. NEW YORK CITY SHOES, INC., APPELLANT,
v.
BENTLEY INTERNATIONAL, INC., APPELLEE



On Appeal From the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 88-6683.

Becker, Stapleton and Rosenn, Circuit Judges.

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge.

The bankruptcy code allows the debtor's trustee to avoid certain preferential transfers made by the debtor to a creditor within the 90-day period before the debtor filed its petition in bankruptcy. See 11 U.S.C. § 547(b) (1982 & Supp. V 1987). However, 11 U.S.C. § 547(c)(4) (1982) allows a creditor to retain an otherwise voidable preference if the creditor gave the debtor new value after the preferential transfer. This appeal presents the question of when a postdated check given by a debtor to a creditor should be deemed transferred for purposes of section 547(c)(4). We hold that there is a presumption that postdated checks are transferred for section 547(c)(4) purposes either on the date on the face of the check or on the date that the check clears the bank,*fn1 as opposed to the date on which the check was delivered. We further hold that this presumption can be rebutted if the creditor can demonstrate that the parties treated the transaction as though it were a cash transaction and that if the creditor rebuts the presumption, the date of transfer should be considered to be the date that the debtor delivered the check to the creditor.

The appeal also requires us to decide whether, on the facts of this case, the bankruptcy court erred in finding that the creditor has established that it treated the transaction as a cash transfer on the day it received the post-dated check. We believe that finding to be clearly erroneous, and thus, because we find that the new value in this case was given before the preferential transfer, we hold that the exception provided by section 547(c)(4) does not apply.

I

The facts are straightforward. In November 1986 the debtor, New York City Shoes ("NYC"), received a shipment of shoes worth $15,960 from its creditor, Bentley International, Inc. ("Bentley"). In February 1987, NYC ordered more shoes, but Bentley refused to ship because NYC had not yet paid the November bill. At the beginning of March, NYC sent two checks to Bentley to cover the amount due from the November shipment. One of the checks, worth $7,960, was postdated April 1, 1987.

On March 3 and March 10, 1987, Bentley shipped additional shoes, worth $40,000, to NYC. Bentley attempted to deposit the postdated check on April 1, but at first the bank refused to cash it because there were insufficient funds in NYC's account. The check finally cleared the bank on April 13, 1987. On July 7, 1987, NYC filed a petition in bankruptcy.

II

For clarity's sake we will first discuss the relevant provisions of the bankruptcy code and then turn to the procedural history of the instant case. The bankruptcy code provides that a trustee in bankruptcy:

may avoid any transfer of an interest of the debtor in property --

(1) to or for the benefit of the creditor;

(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;

(3) made while the debtor was insolvent;

(4) made --

(A) on or within 90 days before the date of the filing of ...


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