Opinion
No. BK-78-292, No. BK-78-293
December 14, 1979
Preferred Creditors — Perfection of Transfer — Real Property — Time of Transfer
The determination of the date of a transfer of real property for purposes of voiding a transfer under Section 60 of the Bankruptcy Act is controlled by Section 60a(7). Therefore, a transfer perfected under state law within twenty-one days is treated as if it occurred when executed even though execution and perfection were not simultaneous. If execution occurred more than four months prior to the date the petition in bankruptcy was filed, the transfer is not a voidable preference under Section 60. See Sec. 60a(2) at ¶ 2553, and Sec. 60a(7) at ¶ 2558 and Sec. 547 at ¶ 9538.
[Digest of Opinion]
Following execution of property on a judgment against the bankrupt, and levy, the property was sold at a sheriff's sale on April 28, 1978 and the sheriff's deed recorded on May 16, 1978. On September 7, 1978, the bankrupts filed voluntary petitions. The trustee sought to avoid the transfer of property to the purchaser at the sheriff's sale under Section 60 of the Bankruptcy Act. The only element of a voidable preference which was disputed was whether or not the transfer of the real estate took place within four months of the date of the bankruptcy petition.Under Section 60, two methods are set forth for determining when a transfer of real property has taken place. Section 60a (2) provides that unless the transfer of the real estate had been so far perfected on the date of filing that no bona fide purchaser could have acquired superior rights in the property, the transfer can be attacked as preferential. Since under state law, a transfer of property is not generally perfected until the deed is recorded, the trustee argued that the delay by the purchaser in recording allowed him to assert the rights of a bona fide purchaser and avoid the transfer as preferential.
However, under Section 60a(7), an exception to the bona fide purchaser test is created for transfers of real property. This subsection permits a twenty-one day grace period during which the transferee may perfect his interest. If perfection under state law occurs within twenty-one days, the transfer is treated as if it were made when executed even though execution and perfection were not simultaneous. In the instant case, the purchaser recorded the deed sixteen days after the sale. Since the recording of the deed related back to the time of the sale, the transfer was made more than four months prior to the date of the bankruptcy petition and therefore was not a voidable preference.