In Re Fulghum Constr. Corp., 706 F.2d 171 (1st Cir. 1983). · Go Syfert
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In Re Fulghum Constr. Corp., 706 F.2d 171 (1st Cir. 1983). Cases Citing This Book View Copy Cite
“as is facially evident from this provision, all five no. 06-3796 in re southern air transport, inc. page 8 enumerated criteria must be satisfied before a trustee may avoid any transfer of property as a preference.”
137 citation events (37 in the last 25 years) across 54 distinct courts.
Strongest positive: Triad Intl v. So Air Transp (ca6, 2007-12-14)
Treatment trajectory · 1983 → 2026 · click a year to view as-of
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Top citers, strongest first. 50 distinct citers. How cited ↗
examined Cited as authority (verbatim quote) Triad Intl v. So Air Transp
6th Cir. · 2007 · quote attribution · 1 verbatim quote · confidence high
as is facially evident from this provision, all five no. 06-3796 in re southern air transport, inc. page 8 enumerated criteria must be satisfied before a trustee may avoid any transfer of property as a preference.
cited Cited as authority (rule) Reinhardt v. Prince
Bankr. E.D. Mich. · 2022 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied sub nom., Ranier & Assocs. v. Waldschmidt, 464 U.S. 935 (1983).
cited Cited as authority (rule) Jevon Richard Piccard
Bankr. E.D. Mich. · 2021 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied sub nom., Ranier & Assocs. v. Waldschmidt, 464 U.S. 935 (1983).
discussed Cited as authority (rule) Hooker
E.D. Mich. · 2020 · confidence medium
“As is facially evident from this provision, all five enumerated criteria must be satisfied before a trustee may avoid any transfer of property as a preference.” In re Fulghum Const. Corp., 706 F.2d 171, 172 (6th Cir. 1983). 1.
discussed Cited as authority (rule) Williams v. McNabb (In re McNabb)
Bankr. W.D. Tenn. · 2017 · confidence medium
Conclusion of § 547(b) Analysis Section 547(b) is written in the conjunctive and, as such, all five elements “must be satisfied before a trustee may avoid any transfer of property as a preference.” Waldschmidt v. Ranier (In re Fulghum Const. Corp.), 706 F.2d 171, 172 (6th Cir. 1983).
cited Cited as authority (rule) Tower Credit, Inc. v. Schott
M.D. La. · 2016 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983); Antonin Scalia & Bryan A. CrARNER, READING LAW: THE INTERPRETATION of Legal Texts 116-25 (2012).
discussed Cited as authority (rule) Dymarkowski v. Savage (In re Hadley)
Bankr. N.D. Ohio · 2015 · confidence medium
Section 547(b) provides as follows: Except as provided in subsection (c) and (I)of this section, the trustee may avoid any transfer of an interest of the debtor in property&emdash; (1) to or for the benefit of a 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&emdash; (A) on or within 90 days before the filing of the petition; or (B) between ninety days and one year before the date of the filing of the filing of the petition, if such creditor at the time of such transfer was an insider; and…
discussed Cited as authority (rule) Graham v. Huntington National Bank (In re Medcorp, Inc.)
Bankr. N.D. Ohio · 2014 · confidence medium
Section 547(b) provides as follows: Except as provided in subsection (c) and (i)of this section, the trustee may avoid any transfer of an interest of the debtor in property— (1) to or for the benefit of a 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— * * * * * * (B) between ninety days and one year before the date of the filing of the filing of the petition, if such creditor at the time of such transfer was an insider; and (5) that enables such creditor to receive more than such cre…
cited Cited as authority (rule) DeGiacomo v. Raymond C. Green, Inc. (In re Inofin Inc.)
Bankr. D. Mass. · 2014 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983), cert. denied, 464 U.S. 935 , 104 S.Ct. 343 , 78 L.Ed.2d 310 (1983)).
discussed Cited as authority (rule) Official Committee of Unsecured Creditors v. UMB Bank, N.A. (In re Residential Capital, LLC)
Bankr. S.D.N.Y. · 2013 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983) (“As is facially evident from this provision, all five enumerated criteria must be satisfied before a trustee may avoid any transfer of property as a preference.”). a.
cited Cited as authority (rule) United Science Industries v. Southwest Bank (In Re EDG Holdings, Inc.)
Bankr. S.D. Ill. · 2010 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983).
cited Cited as authority (rule) Stevenson v. Genna (In Re Jackson)
Bankr. E.D. Mich. · 2010 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied sub nom., Ranier & Assoc. v. Waldschmidt, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) In Re Pankey
E.D. Mich. · 2008 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.1983)).
cited Cited as authority (rule) Kohut v. New Century Mortgage Corp. (Pankey)
E.D. Mich. · 2008 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.1983)).
discussed Cited as authority (rule) Triad International Maintenance Corp. v. Southern Air Transport, Inc. (In Re Southern Air Transport, Inc.)
6th Cir. · 2007 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983) (“As is facially evident from this provision, all five enumerated criteria must be satisfied before a trustee may avoid any transfer of property as a preference.”).
cited Cited as authority (rule) Phoenix Restaurant Group, Inc. v. Proficient Food Co. (In Re Phoenix Restaurant Group, Inc.)
M.D. Tenn. · 2007 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983).
cited Cited as authority (rule) Gold v. Interstate Financial Corp. (In Re Schmiel)
Bankr. E.D. Mich. · 2007 · confidence medium
E.D.Mich.2005) (citing Waldschraidt v. Earner (In re Fulghura Construction Corp.), 706 F.2d 171, 172 (6th Cir.1983)).
cited Cited as authority (rule) Mender v. Carrion (In Re Martinez)
Bankr. D.P.R. · 2006 · confidence medium
Corp), 706 F.2d 171, 172 (6th Cir. 1983); cert, denied 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Miranda v. Madelux International, Inc. (In re VJ International, Inc.)
Bankr. D.P.R. · 2006 · confidence medium
In order for a transfer to be deemed avoidable as a preference, the burden of proving all five of these elements is on the trustee. 5 Lawrence P. King, et al., Collier on Bankruptcy ¶ 547.03(15th ed rev’d 2006), citing Boberschmidt v. Society Nat’l Bank (In re Jones), 226 F.3d 917, 921 (7th Cir.2000); In re Bullion Reserve of North America, 836 F.2d 1214, 1217 (9th Cir.), cert. denied, 486 U.S. 1056 , 108 S.Ct. 2824 , 100 L.Ed.2d 925 (1988); Waldschmidt v. Ranier (In re Fulghum Construction Corp), 706 F.2d 171, 172 (6th Cir.1983), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 31…
cited Cited as authority (rule) K. Jin Lim v. Chase Home Finance, LLC (In Re Comps)
Bankr. E.D. Mich. · 2005 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied sub nom., Ranier & Assoc. v. Waldschmidt, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Russell v. Jones
6th Cir. · 2005 · confidence medium
Recognizing this fact, § 547(c)(4) requires transfers between the debtor and a creditor to be “netted out.” In re Fulghum Construction Corp., 706 F.2d 171, 173-74 (6th Cir.) (quoting H.R.Rep.
cited Cited as authority (rule) Shapiro v. Homecomings Financial Network, Inc. (In Re Davis)
Bankr. E.D. Mich. · 2004 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied sub nom., Ranier & Assocs. v. Waldschmidt, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Phoenix Restaurant Group, Inc. v. Ajilon Professional Staffing LLC (In Re Phoenix Restaurant Group, Inc.)
Bankr. M.D. Tenn. · 2004 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Phoenix Restaurant Group, Inc. v. Lawson Software, Inc. (In Re Phoenix Restaurant Group, Inc.)
Bankr. M.D. Tenn. · 2004 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Roberds, Inc. v. Broyhill Furniture (In Re Roberds, Inc.)
Bankr. S.D. Ohio · 2004 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.) cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Chrysler Credit Corp. v. Hall
E.D. Va. · 2004 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.1983).
cited Cited as authority (rule) Gonzales v. DPI Food Products Co. (In Re Furrs Supermarkets, Inc.)
Bankr. D.N.M. · 2003 · confidence medium
Corp.), 706 F.2d 171, 173 (6th Cir.1983).
cited Cited as authority (rule) Gonzales v. Nabisco Division of Kraft Foods, Inc. (In Re Furrs)
Bankr. D.N.M. · 2003 · confidence medium
In re Enserv Co., 64 B.R. al 520 (citing Waldschmidt v. Ranier (In re Fulghum Const. Corp.), 706 F.2d 171, 173 (6th Cir.1983).) 30 .Pearson Industries, 178 B.R. at 761 .
cited Cited as authority (rule) Information Packaging, Inc. v. Golden Eagle Products, Inc. (In Re Information Packaging Inc.)
Bankr. M.D. Tenn. · 2003 · confidence medium
Corp.), 706 F.2d 171, 173 (6th Cir.1983), ce rt. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) In Re White
Bankr. D.N.J. · 2001 · confidence medium
Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied sub nom., Ranier & Assoc. v. Waldschmidt, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Greenwald v. Square D Co. (In Re Trans-End Technology, Inc.)
Bankr. N.D. Ohio · 1998 · confidence medium
Under 11 U.S.C. § 547 (c)(4), “[preferential transfers as defined in § 547(b) may not be avoided by the trustee if after such transfer, such creditor gave new value.” See, Waldschmidt v. Ranier (In re Fulghum Const. Corp.), 706 F.2d 171, 172 (6th Cir.1988) (emphasis in original).
cited Cited as authority (rule) Fitzpatrick v. Central Communications & Electronics, Inc. (In Re Tennessee Valley Steel Corp.)
Bankr. E.D. Tenn. · 1996 · confidence medium
Corp.), 706 F.2d 171, 173 (6th Cir.1983), ce rt. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Fitzpatrick v. Rockwood Water, Wastewater & Natural Gas Systems (In Re Tennessee Valley Steel Corp.)
Bankr. E.D. Tenn. · 1996 · confidence medium
Waldschmidt v. Ranier (In re Fulghum Const. Corp.), 706 F.2d 171, 173 (6th Cir.1983), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Slone-Stiver v. Clemens Oil Co. (In re Tower Metal Alloy Co.)
Bankr. S.D. Ohio · 1996 · confidence medium
Prior to the enactment of the Bankruptcy Reform Act of 1978, courts frequently utilized the so-called “net result rule” which netted all transactions between the debtor and the defendant during the entire ninety-day preference period “irrespective of whether the value furnished by the creditor to the debtor [was] advanced either before or after the transfer from the debtor to the creditor.” Waldschmidt v. Ranier (In re Fulghum Construction Corp.), 706 F.2d 171, 173 (6th Cir.1983).
discussed Cited as authority (rule) Rice v. Garrison (2×)
Kan. · 1995 · confidence medium
An equitable doctrine must of necessity‘comport to and remain compatible with the prevailing legislative intent.’ In re Fulghum Construction Corp., 706 F.2d 171, 173 (6th Cir.) (quoting In re Bell, 700 F.2d 1053, 1057 (6th Cir. 1983)), cert. denied, _ U.S. _, 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983). ‘The plain mandate of the law cannot be set aside because of considerations which may appeal to referee or judge as falling within general principles of equity jurisprudence.’ United States v. Killoren, 119 F.2d 364, 366 (8th Cir. 1941) (quoting Southern Bell Telephone & Telegraph Co. v.…
discussed Cited as authority (rule) Colonial Auto Center, Inc. v. Tomlin
W.D. Va. · 1995 · confidence medium
Co., 665 F.2d 868 , 872 (9th Cir.1981) (in absence of drafting error, courts are powerless to avoid effects of plain language of a statute); In re Fulghum Const. Corp., 706 F.2d 171, 173 (6th Cir.) (the application of bankruptcy law must comport to and remain compatible with the prevailing legislative intent (citations omitted)), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) Mosier v. Ever-Fresh Food Co. (In re IRFM, Inc.)
9th Cir. · 1995 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.) cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
cited Cited as authority (rule) In Re Irfm, Inc.
9th Cir. · 1995 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.) cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Barber v. McCord Auto Supply, Inc. (In Re Pearson Industries, Inc.) (2×) also: Cited "see"
Bankr. C.D. Ill. · 1995 · confidence medium
In re Fulghum Const Corp., 706 F.2d 171, 173 (6th Cir.1983). [[Image here]] Section 547(b) plainly states that the only preferences which will be allowed are contained in Section 547(c).
discussed Cited as authority (rule) Paul Revere Life Insurance Company v. Lola V. Brock (2×)
6th Cir. · 1994 · confidence medium
Corp., 706 F.2d 171, 173 (6th Cir.1983)).
discussed Cited as authority (rule) Paul Revere Life Insurance v. Brock (2×)
6th Cir. · 1994 · confidence medium
Corp., 706 F.2d 171, 173 (6th Cir.1983)).
discussed Cited as authority (rule) Laker v. Vallette
5th Cir. · 1994 · confidence medium
Corp.), 706 F.2d 171, 174 (6th Cir.) (“Congressional metamorphosis has transformed the judicially created net result rule into what may be characterized as a subsequent advance rule....”), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Laker v. Vallette (In Re Toyota of Jefferson, Inc.)
5th Cir. · 1994 · confidence medium
Corp.), 706 F.2d 171, 174 (6th Cir.) (“Congressional metamorphosis has transformed the judicially created net result rule into what may be characterized as a subsequent advance rule.... ”), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Boyd v. Water Doctor (In Re Check Reporting Services, Inc.)
Bankr. W.D. Mich. · 1992 · confidence medium
The Sixth Circuit gave some indication that it found this section unambiguous when in In re Fulghum Const. Corp., 706 F.2d 171, 174 (6th Cir.1983) it stated that [section] 547(c) artfully articulates equitable “defenses” whereby the trustee may be foreclosed from avoiding the preference.
discussed Cited as authority (rule) McLemore v. Third National Bank in Nashville
M.D. Tenn. · 1992 · confidence medium
TNB does not cite any authority, but does cite In re H & S Transportation, supra, and In re Fulgham Construction Corp., 706 F.2d 171, 174 (6th Cir.1983), cert. den. sub. nom Rainer & Assoc. v. Waldschmidt, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 , for the proposition that a transfer, not simply an improvement in position, is required for a preference.
discussed Cited as authority (rule) In Re Montgomery
M.D. Tenn. · 1992 · confidence medium
TNB does not cite any authority, but does cite In re H & S Transportation, supra , and In re Fulgham Construction Corp., 706 F.2d 171, 174 (6th Cir.1983), cert. den. sub. nom Rainer & Assoc. v. Waldschmidt, 464 U.S. 935 , 104 S.Ct. 342 , 78 L.Ed.2d 310 , for the proposition that a transfer, not simply an improvement in position, is required for a preference.
cited Cited as authority (rule) Bluegrass Ford-Mercury, Inc. v. Farmers National Bank of Cynthiana
6th Cir. · 1991 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
discussed Cited as authority (rule) Bankr. L. Rep. P 74,202, 15 Ucc rep.serv.2d 369 in Re Bluegrass Ford-Mercury, Inc., Debtor, Bluegrass Ford-Mercury, Inc. v. Farmers National Bank of Cynthiana
6th Cir. · 1991 · confidence medium
Corp., 706 F.2d 171, 172 (6th Cir.), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983). 107 Farmers argues that the balance due on the notes entered into after October 8, 1981, and before January 5, 1982, should be applied against "the approximately $91,000.00 allegedly preferential payment[s] made by Bluegrass within the 90 days." In essence, Farmers is making the same argument it made for the application of section 547(c)(3).
discussed Cited as authority (rule) Young v. Continental Worsteds, Inc. (In Re Wingspread Corp.)
Bankr. S.D.N.Y. · 1990 · confidence medium
Inc.), 103 B.R. 436, 439 (Bankr.S.D.N.Y.1989), citing, inter alia, Waldschmidt v. Ranier (In re Fulghum Const. Corp.), 706 F.2d 171, 172 (6th Cir.), cert. denied, 464 U.S. 935 , 104 S.Ct. 343 , 78 L.Ed.2d 310 (1983); accord Young v. Peter J.
cited Cited as authority (rule) Sorenson v. Tire Holdings Ltd. Partnership (In Re Vinzant)
Bankr. D. Kan. · 1989 · confidence medium
Waldschmidt v. Ranier (In re Fulgham Construction Corp.), 706 F.2d 171, 172 (6th Cir.1983), cert. denied, 464 U.S. 935 , 104 S.Ct. 342 , 343, 78 L.Ed.2d 310 (1983).
Retrieving the full opinion text from the archive…
In Re Fulghum Construction Corporation, Debtor, Robert Waldschmidt, Trustee, Cross-Appellee
v.
Harry Ranier, Algin Nolan and Ranier & Associates, Cross- First Security National Bank of Lexington and Liberty National Leasing Company
81-5779.
Court of Appeals for the First Circuit.
May 9, 1983.
706 F.2d 171
Cited by 99 opinions  |  Published

706 F.2d 171

8 Collier Bankr.Cas.2d 644, 10 Bankr.Ct.Dec. 702,
Bankr. L. Rep. P 69,201

In re FULGHUM CONSTRUCTION CORPORATION, Debtor,
Robert WALDSCHMIDT, Trustee, Plaintiff-Appellant, Cross-Appellee,
v.
Harry RANIER, Algin Nolan and Ranier & Associates,
Defendants-Appellees, Cross- Appellants,
First Security National Bank of Lexington and Liberty
National Leasing Company, Defendants-Appellees.

Nos. 81-5779, 81-5801.

United States Court of Appeals,
Sixth Circuit.

Argued March 8, 1983.
Decided May 9, 1983.

C. Kinian Cosner (argued), Robert H. Waldschmidt, Cosner, Waldschmidt & Crocker, Nashville, Tenn., for plaintiff-appellant, cross-appellee.

John Bailey, III, Nashville, Tenn., L. Wearen Hughes (argued), William L. Montague, Lexington, Ky., for Harry Ranier, Algin Nolan and Ranier & Associates.

David T. Stosberg (argued), Louisville, Ky., for Liberty Nat. Leasing Co.

Before CONTIE and KRUPANSKY, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.

KRUPANSKY, Circuit Judge.

[*~171]1

This action joins inquiry into the long-standing judicially evolved application of the "net result rule" as the criteria for determining a preferential transfer as defined in 11 U.S.C. Sec. 547 of the Bankruptcy Reform Act of 1978. An involuntary petition in bankruptcy was filed against Fulghum Construction Corporation (Fulghum) whereupon the trustee initiated the instant proceeding to, inter alia, avoid as preferential transfers certain monetary transactions which transpired between Fulghum and its sole shareholder, Ranier & Associates (Ranier), during the one year period immediately preceding the filing of the bankruptcy petition. Both the bankruptcy court and reviewing district court adjudged that application of the net result rule, incorporated into 11 U.S.C. Sec. 547(b)(5) as a judicial gloss, foreclosed a finding that the transfers were preferential. See: In re Fulghum Construction Corp., 7 B.R. 629 (Bankr.M.D.Tenn.1980); In re Fulghum Construction Corp., 14 B.R. 293 (M.D.Tenn.1981). The operative facts, detailed in the lower courts' opinions, disclose that approximately 100 transactions occurred between Ranier and Fulghum during the year immediately preceding the filing of the bankruptcy petition. The aggregate amount of the payments by Ranier to Fulghum exceeded the aggregate amount of the payments tendered by Fulgham to Ranier during this period and the value of the estate was accordingly appreciated.

2

Preferential transfers which may be avoided by the trustee are defined in 11 U.S.C. Sec. 547(b):

3

(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of property of the debtor--

4

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

5

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

6

(3) made while the debtor was insolvent;

7

(4) made--

8

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

9

(B) between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer--

10

(i) was an insider; and

11

(ii) had reasonable cause to believe the debtor was insolvent at the time of such transfer; and

12

(5) that enables such creditor to receive more than such creditor would receive if--

13

(A) the case were a case under chapter 7 of this title;

14

(B) the transfer had not been made; and

15

(C) such creditor received payment of such debt to the extent provided by the provision of this title.

16

As is facially evident from this provision, all five enumerated criteria must be satisfied before a trustee may avoid any transfer of property as a preference. See: In re Bishop, 17 B.R. 180, 181-82 (Bkrtcy.N.D.Ga.1982). Section 547(b) is proscribed by its own terms to the numerous "defenses" available to creditors which appear in Sec. 547(c) and which, if applicable, preclude the trustee from avoiding the Sec. 547(b) preferential transfer. Particularly, Sec. 547(c)(4) provides:

17

(c) The trustee may not avoid under this section a transfer--

18

* * *

19

* * *

20

(4) to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor--

21

(A) not secured by an otherwise unavoidable security interest; and

22

(B) on account of which new value the debtor did not make an otherwise unavoidable transfer to or for the benefit of such creditor

23

Section 547(c)(4) is perhaps most accurately characterized as a "subsequent advance rule". Preferential transfers as defined in Sec. 547(b) may not be avoided by the trustee if "after such transfer, such creditor gave new value". Id. See: In re Bishop, supra; In re Garland, 19 B.R. 920 (Bkrtcy.E.D.Mo.1982); In re Rustia, 20 B.R. 131, 135 (Bkrtcy.S.D.N.Y.1982); In re Fabric Buys of Jericho, 22 B.R. 1013, 1016-17 (Bkrtcy.S.D.N.Y.1982); In re Hersman, 20 B.R. 569 (Bkrtcy.N.D.Ohio 1982).

24

In the action sub judice, the district court adjudged, and the parties do not dispute on appeal, that the criteria of Sec. 547(b)(1) through (b)(4) have been satisfied. In addressing the application of Sec. 547(b)(5) to the facts of the case at bar, however, the district court relied upon its equitable powers to justify its application of the net result with the following rationale:

25

[T]his Court must agree with the Bankruptcy Court that two "net result rules" actually exist in bankruptcy law. One, that of section 547(c)(4) and insisted upon by the trustee, is statutory. The other, that applied by the Bankruptcy Court, is nonstatutory, a judicial gloss upon the requirements of section 547(b).

26

14 B.R. at 303. Applying the net result rule as a condition implicitly incorporated into Sec. 547(b)(5) and, correspondingly, a threshold requirement to support a preferential transfer, the district court observed that the net effect of all the transactions between the debtor, Fulghum, and the creditor, Ranier, appreciated the value of the estate and, accordingly, the transfers could not be avoided by the trustee as preferences. Upon concluding that no preferential transfers existed it was unnecessary for the district court to identify the defenses available to the creditor under Sec. 547(c).

27

The net result rule is a judicially created doctrine, predicated upon principles of equity, which evolved shortly after the enactment of the Bankruptcy Act of 1898 to presumably rectify what was judicially perceived to be inequities in bankruptcy law. See: In re Garland, supra, 19 B.R. at 922-25 (artfully documenting development of this doctrine); In re Bishop supra, 17 B.R. at 183-85 (same). As an equitable doctrine its application, of necessity, must "comport to and remain compatible with the prevailing legislative intent". In re Bell, 700 F.2d 1053, 1057 (6th Cir.1983); United States v. Killoren, 119 F.2d 364, 366 (8th Cir.1941). Logic dictates that judicial interposition of the net result rule into Sec. 547(b)(5) vitiates the congressional intent clearly reflected both on the face of Sec. 547 and in the legislative history of the enactment.

[*~172]28

Since the net result rule is "broader" in scope than the subsequent advance rule of Sec. 547(c)(4), engrafting the former doctrine upon Sec. 547(b)(5) as a threshold requirement for the qualifying preference would render the defense incorporated in Sec. 547(c)(4) impotent. The broader scope of the net result rule permits its utilization by the creditor irrespective of whether the value furnished by the creditor to the debtor is advanced either before or after the transfer from the debtor to the creditor. Contrawise, the subsequent advance rule of Sec. 547(c)(4) is more circumscribed in application and forecloses avoidance of the transfer by the trustee only if the creditor provides additional value after the transfer from the debtor to the creditor.[1] A "judicial gloss" which significantly restricts the statutory definition of "preference" and pragmatically emasculates the creditor defense thereto as intended by Congress in Sec. 547(c)(4) constitutes nothing less than legislation by judicial decree.

29

Moreover, judicial interposition of the net result rule into Sec. 547(b)(5) finds no sanction in the legislative history of the Bankruptcy Reform Act of 1978. The legislative proceedings attendant to the promulgation of Sec. 547(b)(5) are significantly devoid of any allusion to the net result rule. Contrawise, the House Report discussing the subsequent advance rule, Sec. 547(c)(4), incorporates concise language reflecting the intent of Congress:

30

The fourth exception [Sec. 547(c)(4) ] codifies the net result rule in section 60c of current law. If the creditor and the debtor have more than one exchange during the 90-day period, the exchanges are netted out according to the formula in paragraph (4). Any new value that the creditor advances must be unsecured in order for it to qualify under this exception. (Emphasis added).

31

H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 374, reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 6330. The Senate Report is identical. S.Rep. No. 95-989, 95th Cong., 2d Sess. 88, reprinted in 1978 U.S.Code Cong. & Ad.News 5874. Thus, it would appear that the "net result rule" is an anachronism of Sec. 547(c). As has been noted,

32

Whatever the net result rule may have been under the prior Bankruptcy Act, Congress has indicated that, under the Bankruptcy Code, the rule is to be applied accordingly to the formula set forth in section 547(c)(4).

33

In re Garland, supra, 19 B.R. at 926. Congressional metamorphosis has transformed the judicially created net result rule into what may be characterized as a subsequent advance rule and has codified this augmented version into Sec. 547(c)(4) rather than Sec. 547(b)(5). See also: In re Bishop, supra, referencing: 2 Norton Bankr.L. & Prac. Sec. 32.20 (net result rule "is of doubtful current validity"); 4 Collier on Bankruptcy Sec. 547.40 (seriously questioning continuing vitality of the net result rule in the wake of the Bankruptcy Reform Act of 1978); Report of the Commission on the Bankruptcy Laws of the United States, H.Doc. No. 93-137, 93rd Cong., 1st Sess., Pt. 1, 210-211 (1973) ("A true 'net result' rule would total all payments and all advances and offset the one against the other. This is not allowed under the Commission's recommendation, since the advance to be offset must be subsequent to the preference.")

34

Section 547(b) deliberately defines a preference as a "transfer", rather than as an aggregate of transfers or netting of transactions between the creditor and debtor, and Sec. 547(c) artfully articulates equitable "defenses" whereby the trustee may be foreclosed from avoiding the preference. In particular, Sec. 547(c)(4) permits a netting procedure to be applied when the debtor and creditor are both recipients and initiators of transactions. Construed in pari materia, Sec. 547(b) and (c) disclose a calculated legislative scheme and intent to implement equitable considerations which the judiciary at the turn of this century adjudged as lacking and responded by evolving the net result rule. This legislative response reflected in the promulgation of Sec. 547(b) and particularly Sec. 547(c)(4) mirror the congressional version of equitable principles, expressed as the subsequent advance rule, to be incorporated into the 1978 revision of the Bankruptcy Act.

[*~173]35

Accordingly, the judgment of the district court dismissing the trustee's complaint to avoid transfers from Fulghum to Ranier as preferential is hereby VACATED and this case is REMANDED for further proceedings consistent with this opinion. The judgment of the district court is AFFIRMED in all other respects, including the dismissal of (1) the trustee's amended complaint seeking to set aside the sale of construction equipment, and seeking to pierce Fulghum's corporate veil and (2) Ranier's claim for damages arising from the trustee's alleged improper retention of construction equipment, for the reasons articulated in the district court's memorandum opinion.

1

Bankruptcy Judge Robert Brauer appears to have recognized this dilemma:

I can think of no set of facts where, if the net result rule were to be applied under section 547(b)(5), 547(c)(4) would ever be utilized.

In re Garland, supra, 19 B.R. at 926.