## Facts

- David Scott Lee refinanced his home and executed a new mortgage in favor of Chase Manhattan Mortgage Corporation on October 6, 2003.
- Chase advanced funds that were used to satisfy the existing mortgage; the new mortgage secured the refinance debt.
- Chase did not record the mortgage until December 17, 2003, 72 days after execution.
- Lee filed a voluntary Chapter 7 petition on March 4, 2004, 77 days after the mortgage was recorded.
- The Chapter 7 trustee sued to avoid Chase’s mortgage as a preferential transfer under 11 U.S.C. § 547(b), asserting the relevant “transfer” occurred when the mortgage was recorded and thus fell within the 90-day preference period.

## Issues

1. Under 11 U.S.C. § 547(e) and Michigan recording law, whether the “transfer” of Chase’s mortgage interest is deemed to occur on the execution date or on the recordation (perfection) date when recordation is delayed beyond the statutory relation-back window.
2. If the transfer occurred on recordation, whether the trustee established the remaining elements of a preference under 11 U.S.C. § 547(b), including that the transfer enabled Chase to receive more than it would have received as an unsecured creditor in a Chapter 7 liquidation.

## Decision

- The Sixth Circuit reversed the district court and reinstated the bankruptcy court’s summary judgment for the trustee.
- Because Chase recorded the mortgage well after the statutory relation-back period, § 547(e)(2) treated the transfer as “made” at the time of perfection, i.e., the recordation date.
- The recordation occurred within 90 days before the bankruptcy filing, satisfying § 547(b)(4)(A).
- The court held the other preference elements were met, including that perfection secured an antecedent debt and improved Chase’s recovery relative to unsecured creditors.
- The trustee was permitted to avoid Chase’s mortgage as a preferential transfer.

## Legal Principles

- For preference purposes, 11 U.S.C. § 547(e)(2) deems a transfer “made” at the time it takes effect between the parties only if perfection occurs within the statutory relation-back period; otherwise, the transfer is “made” when it is perfected.
- State law governs when a mortgage is perfected; under Michigan law, perfection occurs upon recording, which provides constructive notice.
- A delayed perfection that falls within the 90-day period before bankruptcy can satisfy § 547(b)(4)(A) even if the mortgage was executed earlier.
- Perfecting a security interest after the underlying debt exists can constitute a transfer “for or on account of an antecedent debt” under § 547(b)(2).
- A perfected mortgage generally allows a creditor to receive more than it would as an unsecured creditor in a Chapter 7 liquidation, satisfying § 547(b)(5) when other elements are met.

## Conclusion

The Sixth Circuit held that because the mortgage was not recorded within the statutory relation-back period, the relevant transfer occurred upon recordation; since that perfection occurred within 90 days of the Chapter 7 filing and satisfied the other § 547(b) elements, the trustee could avoid the mortgage as a preference.


Chase Manhattan Mortg. Corp. v. Shapiro, 530 F.3d 458 (6th Cir. 2008)