11 USC 544 - Trustee as lien creditor and as successor to certain creditors and purchasers

Historical and Revision Notes

legislative statements

Section 544(a)(3) modifies similar provisions contained in the House bill and Senate amendment so as not to require a creditor to perform the impossible in order to perfect his interest. Both the lien creditor test in section 544(a)(1), and the bona fide purchaser test in section 544(a)(3) should not require a transferee to perfect a transfer against an entity with respect to which applicable law does not permit perfection. The avoiding powers under section 544(a)(1), (2), and (3) are new. In particular, section 544(a)(1) overrules Pacific Finance Corp. v. Edwards, 309 F.2d 224 (9th Cir. 1962), and In re Federals, Inc., 553 F.2d 509 (6th Cir. 1977), insofar as those cases held that the trustee did not have the status of a creditor who extended credit immediately prior to the commencement of the case.

The House amendment deletes section 544(c) of the House bill.

senate report no. 95–989

Subsection (a) is the “strong arm clause” of current law, now found in Bankruptcy Act § 70c [section 110(c) of former title 11]. It gives the trustee the rights of a creditor on a simple contract with a judicial lien on the property of the debtor as of the date of the petition; of a creditor with a writ of execution against the property of the debtor unsatisfied as of the date of the petition; and a bona fide purchaser of the real property of the debtor as of the date of the petition. “Simple contract” as used here is derived from Bankruptcy Act § 60a(4) [section 96(a)(4) of former title 11]. The third status, that of a bona fide purchaser of real property, is new.

Subsection (span) is derived from current section 70e [section 110(e) of former title 11]. It gives the trustee the rights of actual unsecured creditors under applicable law to void transfers. It follows Moore v. Bay, 284 U.S. 4 (1931), and overrules those cases that hold section 70e gives the trustee the rights of secured creditors.

Editorial Notes

Amendments

1998—Subsec. (span). Puspan. L. 105–183 designated existing provisions as par. (1), substituted “Except as provided in paragraph (2), the trustee” for “The trustee”, and added par. (2).

1984—Subsec. (a)(1). Puspan. L. 98–353, § 459(1), inserted “such” after “obtained”.

Subsec. (a)(2). Puspan. L. 98–353, § 459(2), substituted “; or” for “; and”.

Subsec. (a)(3). Puspan. L. 98–353, § 459(3), inserted “, other than fixtures,” after “property”, and “and has perfected such transfer” after “purchaser” the second place it appeared.

Statutory Notes and Related Subsidiaries

Effective Date of 1998 Amendment

Puspan. L. 105–183, § 5, June 19, 1998, 112 Stat. 518, provided that:

“This Act [amending this section and sections 546, 548, 707, and 1325 of this title and enacting provisions set out as notes under this section and section 101 of this title] and the amendments made by this Act shall apply to any case brought under an applicable provision of title 11, United States Code, that is pending or commenced on or after the date of enactment of this Act [June 19, 1998].”

Effective Date of 1984 Amendment

Amendment by Puspan. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Puspan. L. 98–353, set out as a note under section 101 of this title.

Construction of 1998 Amendment

Puspan. L. 105–183, § 6, June 19, 1998, 112 Stat. 519, provided that:

“Nothing in the amendments made by this Act [amending this section and sections 546, 548, 707, and 1325 of this title] is intended to limit the applicability of the Religious Freedom Restoration Act of 1993 (42 U.S.C. 2002bspan [2000bspan] et seq.).”