ADVANCED ISSUES IN AVOIDANCE

personal property was perfected sixteen days after the transfer of the interest, the exchange is still "substantially contemporaneous" and therefore saved from avoidance by the defense of section 547(c)(1). Had the perfection occurred within ten days of the grant of the security interest it would have been saved by section 547(e). The Court found two conflicting lines of authority on this issue and determined that "Had Congress intended that 'substantially' be the equivalent of ten days, it would have provided that, as it did, for example, in the defenses established by paragraphs 547(c)(3) and (5)." Id. at 525 Moreover, the court determined that neither policy concerns, the legislative history nor the statutory context require such a result.

Judge Schermer dissented on the basis of his belief that the use of a case-by-case approach to define "substantially contemporaneous" under section 547(c)(1) ignores the importance of section 547(e) as well as the types of transaction involved in the preferential transfer. Moreover, Judge Schermer criticizes the majority for applying the thirty day standard developed for checks to other types of transfers such as security interests. The Court of Appeal affirmed on basically the same grounds as expressed in the B.A.P. decision. Accord Morris v. Chisolm Trail State Bank (In re Stephens), 242 B.R. 508 (D. Kan. 1999).

Roost v. Toyota Motor Credit Corp. (In re Moon), 262 B.R. 97 (Bank. D. Or. 2001), follows Dornholt and holds that perfection within fourteen days after the grant of the security interest was in fact a "substantially contemporaneous exchange" within the meaning of the "contemporaneous exchange" exception to trustee's preference-avoiding power.