                              In the
 United States Court of Appeals
                 For the Seventh Circuit
                           ____________

No. 05-4749
IN RE
 GLOBE BUILDING MATERIALS, INC.,
                                                            Debtor.
GORDON E. GOUVEIA, Chapter 7 Trustee of
Globe Building Materials, Inc.,
                                   Plaintiff-Appellee,
                           v.

The RDI GROUP d/b/a Reichel & Drews, Inc.,
                                            Defendant-Appellant.
                           ____________
              Appeal from the United States District Court
        for the Northern District of Indiana, Hammond Division.
                 No. 05-cv-269—Rudy Lozano, Judge.
                           ____________
   ARGUED SEPTEMBER 19, 2006—DECIDED MAY 4, 2007
                  ____________


 Before RIPPLE, MANION, and WOOD, Circuit Judges.
  WOOD, Circuit Judge. In late 1999, Globe Building
Materials, Inc. (“Globe”), a roofing products manufacturer,
asked The RDI Group, Inc. (“RDI”) to submit a proposal
for a custom-built equipment line for use in manufactur-
ing laminated roofing products. RDI responded positively,
and in early 2000, Globe and RDI entered into a contract
for the line. RDI set to work, but when it was almost
2                                             No. 05-4749

finished, Globe filed for bankruptcy. This case arose as
an adversary proceeding brought by Globe’s bankruptcy
trustee against RDI, in which the trustee sought to re-
cover Globe’s last payment to RDI on the ground that
it was made during the preferential period before Globe’s
bankruptcy filing. RDI resisted, claiming that it was
entitled to the “new value” affirmative defense under 11
U.S.C. § 547(c)(4).
  The bankruptcy court held that RDI’s delivery of certain
components of the equipment line during the preference
period was not enough to entitle it to the benefit of the
new value exception. The court accordingly ruled that the
trustee was entitled to recover the payment that RDI had
received from Globe during the preference period. The
district court affirmed, and RDI has now appealed to
this court. We too conclude that no new value passed to
Globe when RDI delivered the materials in question, and
we therefore affirm.


                            I
  Thanks to a stipulation from the parties, the facts of
this case are largely undisputed. RDI is in the business of
manufacturing custom-built equipment for producing
asphalt-based products, such as shingles. In early 2000,
Globe and RDI entered into a contract for an equipment
line to produce laminated shingles. The line used a number
of component machines which, when linked together
properly, resulted in an overall machine suitable for
making the product. As amended, the contract stated a
single price for the entire (assembled) machine of
$4,210,745. That money was to be paid in stages, according
to a schedule set forth in the contract. Approximately 10%
of the contract price was due over a three-month period:
the agreement called for a payment of $100,000 on Janu-
No. 05-4749                                               3

ary 28, 2000; a payment of $50,000 on February 14, 2000;
and a payment of $258,000 on February 29, 2000.
  The next 80% of the price was due in monthly install-
ments beginning on March 31, 2000; the final 10% was due
“upon start-up or 90 days of shipment.” The payment
obligation was not tied to RDI’s delivery of any specific
system components. Instead, the initial contract obligated
RDI to deliver parts as they became available, beginning
in September 2000. In August 2000, the parties agreed to
a delivery schedule in which they scheduled delivery of
various components for the following dates in the final four
months of 2000: September 8, September 15, October 20,
October 27, November 3, November 17, November 22,
December 1, December 8, December 15, December 22 and
December 29. Thus, except for the final payment of the
last 10% and final delivery, the payment schedule and
delivery schedule were not coordinated, and no payments
were tied to specific deliveries. In fact, as this account
demonstrates, substantial payments were to be made
before any deliveries took place; many of the high-value
components were supposed to be delivered near the end
of the payment schedule.
  Globe began its payments in late December 1999, but
it never quite achieved the regular schedule that the
contract had contemplated. It came close, however, as the
following table shows:
4                                              No. 05-4749

    Actual Date of             Actual Amount of
    Payment                    Payment

    December 21, 1999          $50,000

    February 14, 2000          $50,000

    February 15, 2000          $50,000

    February 29, 2000          $258,095

    May 5, 2000                $250,000

    June 9, 2000               $1,026,397.72 (wire)

    July 18, 2000              $420,804

    August 7, 2000             $420,804

    September 19, 2000         $420,673

    September 19, 2000         $419,891

    November 2, 2000           $419,891

    Total                      $3,786,555.72

By the end of October 2000, Globe had fallen a month
behind on its installments, but as of November 2, 2000, it
had paid RDI nearly 90% of the total contract price. RDI’s
deliveries proceeded more or less on schedule, with
components being delivered beginning on October 2, 2000,
and continuing through January 18, 2001. As RDI’s
production of the equipment line neared an end, Globe
found itself increasingly stressed financially. Globe did
not inform RDI of its financial difficulties.
  The payment at issue in this litigation was the one for
$419,891.08 that Globe made to RDI on November 2. As
contemplated, this represented approximately 10% of the
No. 05-4749                                               5

contract price of the equipment line; it was supposed to be
the second-to-last scheduled payment under the contract.
In fact, it wound up being the last one, because Globe
never paid the last 10% of the contract price. As of the
same date, RDI had shipped, or had offered to ship, 55% of
the component machinery to Globe. Not long after it
received the November 2 payment, RDI completed its
production of the equipment line at a direct cost of
$276,270. It shipped some of that equipment to Globe and
offered to ship the rest. For reasons that are not apparent
in this record, Globe asked RDI to hold off actual delivery
on some of the components. Both parties agree, however,
that RDI fulfilled its delivery obligations by making the
components available to Globe even though Globe never
physically took possession of the full line.
   On January 19, 2001, everything changed when Globe
filed for bankruptcy and abandoned its plans to use the
equipment line. Globe’s bankruptcy trustee, Gordon E.
Gouveia, sought to recover Globe’s November 2 payment to
RDI, on the straightforward ground that the payment was
made on or within the 90-day period before Globe filed its
bankruptcy petition, see 11 U.S.C. § 547(b), and was
otherwise eligible for avoidance. RDI took the position that
it was entitled to keep the money because the payment
was made for a debt “incurred by the debtor in the ordi-
nary course of business or financial affairs of the debtor
and the transferee,” or, in the alternative, it was for “new
value.” See 11 U.S.C. §§ 547(c)(2), (4). Neither the bank-
ruptcy court nor the district court agreed with these
arguments. On appeal, RDI presses only its new value
argument.


                            II
  Under the Bankruptcy Code, the trustee is not entitled
to avoid a transfer
6                                               No. 05-4749

    (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—
    (A) not secured by an otherwise unavoidable security
    interest; and
    (B) on account of which new value the debtor did not
    make an otherwise unavoidable transfer to or for the
    benefit of such creditor . . . .
11 U.S.C. § 547(c)(4). The Code defines “new value” as
    money or money’s worth in goods, services, or new
    credit, or release by a transferee of property previously
    transferred to such transferee in a transaction that
    is neither void nor voidable by the debtor or the
    trustee under any applicable law, including proceeds
    of such property, but does not include an obligation
    substituted for an existing obligation.
11 U.S.C. § 547(a)(2).
  The critical issue here, as the bankruptcy judge recog-
nized, is whether the components that RDI delivered
after November 2 provided new value to Globe. RDI claims
that the district court erred in its “new value” analysis
in two respects: first, by concluding that a party does not
provide “new value” when it furnishes something of value
under a pre-existing agreement with the debtor; and
second, by ruling that a party does not provide “new value”
when the debtor does not use the transferred item in
the manner that the debtor intended when it first sought
the item. We address these two arguments in turn.


                             A
  RDI argues that Congress chose not to exclude existing
contractual obligations from its definition of “new value”
No. 05-4749                                              7

in the Bankruptcy Code. We are not sure how it gleans
that interpretation from the language of the statute,
which we have reproduced above. To insist that “new
value” be “new” is not reading an additional requirement
into the statutory definition. As the trustee correctly
points out, Congress intended the definition of “new
value” to codify the principle of consideration from con-
tract law. In re Spada, 903 F.2d 971, 976 (3d Cir. 1990).
That familiar principle requires “consideration” to be
something that the promisor is not already obliged to
give to the promisee (that is, something additional
or new); the “[p]erformance of a legal duty owed to a
promisor . . . is not consideration.” Restatement (Second)
of Contracts § 73.
  As of the beginning of November 2000, RDI already had
an obligation to deliver the portion of the line equipment
to Globe that it sent during November, and Globe already
had an obligation to make its scheduled payment on the
contract. Those obligations gave rise to a pre-existing
set of possible remedies. If Globe had not made its Novem-
ber 2, 2000, payment, RDI could have availed itself of one
of the remedies the Indiana version of the UCC recognizes,
such as withholding delivery of additional goods. See IC
§ 26-1-2-703 (UCC § 2-703); see also Restatement (Second)
of Contracts § 237. If RDI had learned of Globe’s finan-
cial difficulties, then RDI could have suspended delivery
until it received assurances from Globe that Globe was
prepared to fulfill its own contractual obligations. See IC
§ 26-1-2-609(1) (UCC § 2-609(1)). Or if Globe had told RDI
that it would be unable to make the final payment under
the contract, this anticipatory repudiation would have
entitled RDI either to resort to any remedy for breach of
contract or to suspend its own performance (here, delivery
of goods). See IC § 26-1-2-610 (UCC § 2-610); compare
Central Trust Co. of Ill. v. Chicago Auditorium Ass’n, 240
U.S. 581, 589 (1916) (holding that “[w]here a party bound
8                                            No. 05-4749

by an executory contract repudiates his obligations or
disables himself from performing them before the time for
performance, the promisee has the option to treat the
contract as ended”).
  All of this goes to show that both Globe’s obligation to
pay and RDI’s obligation to deliver the goods were any-
thing but “new” in November 2000. Indeed, in analyzing
a distinct “new value” argument in a bankruptcy appeal,
this court recently concluded that a creditor’s ability to
resort to other remedies or actions if a debtor does not
make required payments under a contract does not mean
that the debtor has received “new value” in return for
payments made. In re ABC-Naco, Inc., 2007 WL 1040242,
*3 (7th Cir. Apr. 9, 2007).
  RDI makes much of the statutory language defining
“new value,” but this definition does not help it. “New
value” does not include an obligation substituted for an
existing obligation. In this connection, it is important
to look at the particular contract between these two
parties. It was one unified contract, for more than $4
million, for the delivery of a single complex equipment
manufacturing line. The fact that the parties structured
both payment and delivery obligations under the con-
tract to extend over a period of time does not transform
each payment, or each delivery of goods, into an independ-
ent transaction. If RDI had decided to furnish something
outside the confines of the contract to Globe, within the
preference period, and Globe had paid for it, we would
have a different case. If RDI and Globe had agreed to
a straightforward installment contract, our analysis
would again be different. But under the contract the
parties actually had, RDI’s delivery during the preference
period of equipment components it was obliged to furnish
does not constitute “new value.”
No. 05-4749                                               9

                            B
  The trustee also argues that the equipment delivered in
November did not replenish the debtor’s estate and thus
cannot be considered as some type of offset to Globe’s
payment. We would only have to reach this point if we
thought that the equipment qualified as “new value.”
Because we have rejected that argument, we make only
a few comments about this alternate ground.
  In assessing whether a creditor has provided “new value”
to a debtor, courts sometimes ask whether the preference
payment being avoided has been “repaid to the bankruptcy
estate,” In re Prescott, 805 F.2d 719, 731 (7th Cir. 1986),
that is “whether the new value replenishes the [debtor’s]
estate.” Kroh Bros. Dev. Co. v. Cont’l Constr. Eng’rs, Inc.,
930 F.2d 648, 652 (8th Cir. 1991). RDI contends, in effect,
that Globe’s payment to it did not reduce the debtor’s
estate at all, because the equipment it received was the
exact equivalent of the money it paid to RDI. If that were
true, and the costs of producing the equipment line was
the proper measure of the value received by Globe, then
there would be no net gain to RDI for the trustee to
recoup in a preference action. The trustee argues, how-
ever, that Globe was never in a position to use the equip-
ment line. The value of the November shipment to Globe
was thus either zero or at most whatever Globe recovered
by selling portions of the equipment line at auction.
  Our real problem with this argument is that it was
never developed properly. We know that RDI delivered
nearly all the components of the equipment line to Globe.
We also know that RDI attempted and offered to deliver
the rest, and refrained from doing so only at Globe’s
insistence. In principle, when a debtor takes possession of
goods from a creditor during the preference period, the
value of those goods is measured at the time the property
is transferred to the debtor. In re Robinson Bros. Drilling,
10                                           No. 05-4749

877 F.2d 32, 33 (10th Cir. 1989). Applying this principle
to RDI’s delivery of the equipment line, however, we are
left in a factual vacuum. RDI claims that the equipment
line was ready for installation and use prior to Globe’s
bankruptcy petition. The trustee asserts this was not the
case. No one ever resolved this dispute, and it appears
that the estate benefitted from the auction of the equip-
ment. Under the circumstances, we see no need to resolve
the question whether Globe ended up using the equip-
ment in the way it had originally planned, or what differ-
ence it would make if it did not.


                           III
  In the end, RDI is in the same position as any creditor
that receives a payment from a debtor on a pre-existing
obligation during the preference period. Perhaps RDI
wishes that it had not delivered those goods in November,
but it had been under a duty to deliver them since the
contract was signed in early 2000. The district court
correctly decided that the trustee was entitled to recover
the payment Globe made to RDI during the preference
period, and RDI must now await compensation along
with the rest of Globe’s creditors. We AFFIRM the judg-
ment of the district court.

A true Copy:
      Teste:

                      ________________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit



                  USCA-02-C-0072—5-4-07
