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Ninth Circuit BAP Determines Date of Transfer for Post Petition Transfers - Transfer Occurs When Check is Honored, Not When Check Delivered

April 13, 2018

The Bankruptcy Appellate Panel for the Ninth Circuit in Lewis v. Kaelin (In re Cresta Technology Corp.) has held that an unauthorized post-petition transfer occurs when an ordinary check is honored by the bank, not when the check is delivered. The issue before the trial court was whether an ordinary check delivered to the creditor pre-petition, but honored post-petition, was transferred on the date of delivery or honor for purposes of 11 U.S.C. §549. Relying on the Supreme Court’s decision in Barnhill v. Johnson, 503 U.S. 393 (1992), the bankruptcy court determined that the payment was transferred when the check was honored by the debtor’s bank. The defendant appealed the ruling of the bankruptcy court. In an issue of first impression before any appellate court in the Ninth Circuit, the BAP panel affirmed the decision of the bankruptcy court. In ruling that the date of honor governs, The BAP panel said that the Ninth Circuit BAP’s own authority had been “effectively overruled” by Barnhill. In 1987, the BAP had held that the date of delivery was the date of transfer under Section 549. See Tarver v. Etoiles, Inc. (In re Trois Etoiles, Inc.), 78 BR 237 (BAP 9th Cir 1987).

 

Opinion here.

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