                     United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                     ___________

                                     No. 05-3108
                                     No. 05-3196
                                     ___________

In re: Bridge Information Systems, Inc., *
                                                 *
               Debtor,                           *
------------------------------------------------ *
                                                 *
Scott P. Peltz, Administrator,                   *
                                                 * Appeals from the United States
               Appellant/Cross-Appellee, * Bankruptcy Appellate Panel.
                                                 *
        v.                                       *
                                                 *
Edward C. Vancil, Inc.,                          *
                                                 *
               Appellee/Cross-Appellant. *
                                          ___________

                              Submitted: May 15, 2006
                                 Filed: January 10, 2007
                                  ___________

Before MURPHY, JOHN R. GIBSON, and BENTON, Circuit Judges.
                           ___________

JOHN R. GIBSON, Circuit Judge.

       Scott Peltz appeals from the Bankruptcy Appellate Panel’s decision reversing
the bankruptcy court’s order granting summary judgment to Peltz in his preference
action against Edward C. Vancil, Inc. Peltz is the Chapter 11 plan administrator for
the debtor, Bridge Information Systems, Inc. Vancil leased office space for its law
practice in commercial property owned by Bridge. Bridge and Vancil entered into a
settlement agreement and Bridge paid Vancil $46,176.77 under that agreement less
than two months before Bridge filed its Chapter 11 petition. Peltz filed this adversary
proceeding to avoid the payment as a preferential transfer under 11 U.S.C. § 547(b),
see 11 U.S.C. § 550(a)(1), and the bankruptcy court conducted a trial on the complaint
and entered judgment in favor of Peltz. Vancil appealed to the Bankruptcy Appellate
Panel, which reversed the bankruptcy court and remanded for entry of judgment in
favor of Vancil. Peltz v. Edward C. Vancil, Inc. (In re Bridge Info. Sys., Inc.), 327
B.R. 382 (B.A.P. 8th Cir. 2005). On appeal, Peltz asserts that the bankruptcy court
was correct in ruling that the payment was preferential because it was made on
account of an antecedent debt. Vancil filed a cross-appeal. We affirm the Bankruptcy
Appellate Panel’s decision and consequently do not reach the issues in the cross-
appeal.

       Vancil first entered into a thirty-month lease agreement with Scott Properties,
Bridge’s predecessor-in-interest, in 1994. Before the lease expired, the parties
executed a three-year extension until May 31, 2000. This extension provided Vancil
the option to renew the lease for two more three-year terms with all of the same
provisions except base rent. The agreement specified that the base rent of any new
lease that would result from Vancil exercising its option would be "market rate,"
defined as "the rental rate quoted by Landlord for the building in which Tenant is
located at the time the renewal option is exercised."

       Bridge purchased the property from Scott Properties while Vancil was a tenant
under its first lease extension. On July 2, 1999, the Sansone Group, which Bridge had
hired to manage the property, sent a letter to Vancil announcing that Bridge did not
intend to renew any of the existing leases because it intended to use the building "to
accommodate Bridge’s continued growth and need for additional office space." In
fact, because it was anxious to occupy space quickly, Bridge offered to pay Vancil
$10,837 if it would vacate the premises by March 31, 2000, two months before its
unrenewed lease would expire. This amount included a market adjustment for the

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difference between the rental rate Vancil could expect to pay for similar property and
the rate it was paying, moving costs, an incentive, and a signing bonus. The offer was
to remain open for two weeks only.

       Vancil replied to the Sansone letter that same day, asking for figures to support
each individual category of the relocation compensation package. Vancil also asked
for "confirm[ation] that your records demonstrate that my lease entitles me to two (2)
options which I have always and still intend to exercise." Vancil did not accept the
buy-out offer. Instead, on December 15, 1999, Vancil sent a letter to Bridge and
Sansone informing them of its intention to exercise the first of two three-year options
to renew its existing lease, which would have extended the lease to May 31, 2003.
Sansone acknowledged Vancil’s statement and set the market rate for the lease
extension at $30 per square foot, double its current rate. Vancil disputed the market
rate and asked Sansone to identify any tenant or potential tenant in the same building
to whom Sansone was quoting a market rate of $30. Sansone informed Vancil that it
was the only tenant with a renewal option in its lease, and because Bridge was no
longer marketing the building, Vancil was the only tenant to receive a market rate
quote.

       Vancil viewed the rate as "an arbitrary number created out of thin air to be used
in an attempt to remove me from this building." In its January 25, 2000, letter to that
effect, Vancil also reiterated that it intended to stay in the building and to comply with
its lease requirements. In turn, Vancil expected Bridge to fulfill its obligations,
including setting a reasonable market rate.

      Although the record does not reflect the substance of their conversations, later
correspondence indicates that Sansone suggested alternative office space for Vancil’s
law practice and said that it would urge Bridge to revise its proposal to buy out the
balance of Vancil’s lease. In a letter of April 11, 2000, Vancil informed Sansone that,
while it still intended to remain, it would consider relocating if Bridge would see to

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it that Vancil would incur no cost and would have minimal disruption to its office and
practice. Sansone responded six days later with an offer from Bridge to pay a
"termination fee" of $28,000 to cover "out of pocket costs" and provide "a sizable
incentive." Vancil did not explicitly reject the offer, but wrote in an April 19 letter
that other tenants had reported receiving compensation offers in excess of $61,000 to
terminate their leases, and Vancil would not accept less compensation than Bridge was
paying other tenants.

       One month later, Sansone sent a letter informing Vancil that Bridge considered
its lease terminated as of May 31, 2000, "due to your non-acceptance of the
determined market rental rate for your option period." Vancil’s response was in the
form of a petition, filed in state court on May 31, which sought a declaration that its
lease continued to be in full force and effect at a fair market rate of between $17.50
and $19.50 per square foot. Vancil also informed Bridge that it would continue
paying rent at a rate of $19.50.

       Based on its earlier declaration that Vancil’s lease would expire on May 31,
Bridge made written demand of Vancil, in a June 7 letter, for immediate possession
of the premises. Bridge formalized its demand by filing an unlawful detainer action
in state court on June 30. From that point, the parties negotiated through their
respective attorneys. Bridge made an offer of settlement to which Vancil made a
September 14 counter proposal. Another round or two of offers and demands took
place over the next two months, and throughout the negotiations the attorneys
characterized their efforts as working towards a resolution of their clients’ dispute.

       The parties ultimately executed a Mutual Settlement Agreement and Release
on December 28, 2000, that generally characterizes the settlement as a compromise
of the parties’ disputes. The only specific mention of the source of the dispute is in
the preamble, which recites that "a dispute arose between Bridge and Vancil as to
whether Vancil, in December, 1999, effectively renewed his lease upon the Premises

                                         -4-
for another three year term." The agreement allowed Vancil to continue its lease rent-
free for another two months and called for a $61,176.77 payment by Bridge to Vancil.
The settlement payment was to be divided into two checks; the first was to be in the
amount of $46,176.77 and be delivered upon execution of the Agreement. The
second, in the amount of $15,000, was to be delivered upon Vancil’s vacating of the
premises. The first check was delivered as agreed and Vancil vacated the premises
as required by the Settlement Agreement, but Bridge did not make the second payment
because in the interim it had filed its petition for relief under Chapter 11. Vancil later
filed a claim against Bridge’s bankruptcy estate for the $15,000 second installment.

      Peltz, the Plan Administrator, brought this adversary action against Vancil,
seeking to avoid the settlement payment of $46,176.77 as a preferential transfer under
11 U.S.C. § 547(b). See 11 U.S.C. § 550(a)(1). Vancil filed a summary judgment
motion, which the bankruptcy court denied with leave to renew after the close of
discovery. Peltz v. Edward C. Vancil, Inc. (In re Bridge Info. Sys., Inc.), 302 B.R. 41,
44 (Bankr. E.D. Mo. 2003) ("Vancil I"). The court likewise denied Vancil’s renewed
motion, id. at 49, conducted a trial, and ultimately entered judgment in favor of Peltz.
Vancil appealed to the Bankruptcy Appellate Panel for the Eighth Circuit. The Panel
reversed the bankruptcy court judgment and remanded for entry of judgment in favor
of Vancil. Peltz v. Edward C. Vancil, Inc. (In re Bridge Info. Sys., Inc.), 327 B.R. 382
(B.A.P. 8th Cir. 2005) ("Vancil II"). This appeal followed.

                                            I.

       Peltz argues that the bankruptcy court correctly found that the $46,176.77
settlement payment was a preferential transfer because it was made on account of an
antecedent debt, and urges this court to reject the Bankruptcy Appellate Panel’s
contrary finding. Peltz brought this preference action under § 547 of the Bankruptcy
Code. That section allows Peltz to avoid a transfer on account of an antecedent debt
made within 90 days before Bridge filed its bankruptcy petition, if Bridge was

                                           -5-
insolvent on the date of the transfer or became insolvent because of it, and if Vancil
received more than it would have received in a Chapter 7 liquidation. See 11 U.S.C.
§ 547(b). The parties agree that all of the elements of section 547(b) are satisfied
except that they dispute whether the payment was made on account of an antecedent
debt. We review under the same standards used by the Bankruptcy Appellate Panel,
which means we review the bankruptcy court’s factual findings for clear error and its
legal conclusions de novo. Moon v. Anderson (In re Hixon), 387 F.3d 695, 700 (8th
Cir. 2004).

       "A debt is ‘antecedent’ if it was incurred before the allegedly preferential
transfer." Jones Truck Lines, Inc. v. Cent. States, S.E. & S.W. Areas Pension Fund
(In re Jones Truck Lines, Inc.), 130 F.3d 323, 329 (8th Cir. 1997). The date a debt is
incurred is "the date upon which the debtor first becomes legally bound to pay." Iowa
Premium Serv. Co., Inc. v. First Nat’l Bank in St. Louis (In re Iowa Premium Serv.
Co., Inc.), 695 F.2d 1109, 1111 (8th Cir. 1982). Here, where the date the debt was
incurred is at issue, the determination of whether the transfer was made on account of
an antecedent debt is a mixed question of law and fact, which we review de novo. See
Southmark Corp. v. Marley (In re Southmark Corp.), 62 F.3d 104, 106 (5th Cir. 1995).

       Peltz asserts that the latest date on which Bridge incurred its debt to Vancil was
May 31, 2000, when Vancil filed its petition in state court seeking a declaratory
judgment that its lease was still in effect because Vancil had exercised its option to
extend the lease beyond that date. Although Vancil did not seek damages in that suit,
Peltz asserts that Vancil’s position that Bridge’s quoted market rate was inconsistent
with the terms of the lease equates to Bridge breaching the lease. Peltz further asserts
that the breach gave rise to a right for Vancil to recover damages, even if Vancil did
not seek them. In the alternative, Peltz advocates the bankruptcy court’s finding that
Bridge anticipatorily breached the lease on May 19, 2000, when it sent a letter
informing Vancil that Bridge considered the lease terminated as of May 31 because
Vancil had not accepted its determined market rental rate. The bankruptcy court held

                                          -6-
that the anticipatory breach gave rise to a claim against Bridge, and that claim and
debt are synonymous under the Bankruptcy Code.

      Although the Code does not define when the debtor incurs a debt, it does
      define a "debt" as a liability on a claim. 11 U.S.C. § 101(12).
      Accordingly, the concept of a debt and a claim are coextensive under the
      Code and a debtor incurs a debt to the creditor for purposes of §
      547(b)(2) as soon as the creditor would have had a claim against the
      debtor’s estate.

Vancil I, 302 B.R. at 45-46 (citations omitted). The bankruptcy court’s finding of
anticipatory repudiation of the lease – accomplished through Bridge’s May 19, 2000,
letter terminating the lease – compelled its conclusion that Bridge’s settlement
payment to Vancil was on account of an antecedent debt.

       The Bankruptcy Appellate Panel analyzed the situation differently. It first
noted that the bankruptcy court was obligated but had failed to look behind the
settlement agreement to discern the nature of the dispute. Vancil II, 327 B.R. at 386-
87 (citing Archer v. Warner, 538 U.S. 314, 320-21 (2003)). While the Panel agreed
that the doctrine of anticipatory breach by repudiation exists under Missouri law, it
concluded that it does not apply in this case. The undisputed facts concerning the
parties’ behavior after May 19 revealed that neither party acted as though the lease
was terminated; Vancil continued paying rent, Bridge continued to accept the rent, and
Vancil remained in the building. Therefore, Vancil suffered no damages as a result
of Bridge’s May 19 letter and no debt was created. Id. at 388.

      [T]he dispute between the parties was over the market value of the rent
      under the option to renew. Had Vancil, Inc. prevailed in its lawsuit, the
      issue would have been how much rent it owed Bridge, not how much
      money Bridge owed to it. . . .

      In Missouri the holder of an option to renew a lease has an interest in the
      land. . . . The dispute here was as to the market rate of rent Vancil, Inc.

                                         -7-
       would pay to Bridge after Vancil, Inc. validly exercised one of its
       options to renew the Lease. The settlement simply involved an
       agreement to purchase those options from Vancil, Inc. . . .

       That is not a payment on account of an antecedent debt; therefore,
       section 547(b) of the Code is not applicable. We conclude the
       [bankruptcy] court erred when it failed to look behind the settlement to
       discern that this was a negotiation over the value of an asset, and when
       it incorrectly based its holding on the doctrine of anticipatory breach of
       contract.

Id. at 388-89 (internal quotations omitted). Peltz argues that Bridge’s conduct on and
after May 19 cannot evidence anything other than a clear intention to repudiate the
lease. The undisputed facts show otherwise. The May 19 letter was part of the
ongoing sparring between Bridge and Vancil that began with Bridge’s first offer to
buy out the remaining eleven months of Vancil’s lease. Bridge had just purchased the
property before it made that offer, and at the time did not realize that Vancil’s lease
was unique among the building’s tenants in that it contained two renewal options.
Throughout the correspondence that followed, the parties had a habit of not directly
responding to each other but of instead asserting a new position. Before Bridge sent
its May 19 letter, Vancil had notified Bridge that it was exercising its option to renew
its lease and repeated its intention to remain in the building and pay rent. Bridge had
increased its offer in April, a component of which it called a "termination fee," and
Vancil had questioned the adequacy of the offer as compared to what Bridge was
paying other tenants to buy out their leases.

        After Bridge sent its May 19 letter, the parties filed dueling state court petitions
and continued to negotiate. Bridge made another settlement offer and the parties went
through a number of counter-offers before arriving at their settlement in December.
Viewed in the context of the facts as a whole, there is nothing in Bridge’s May 19
letter that makes it stand out as a defining act in the midst of the parties’ eighteen-
month negotiations.

                                            -8-
       The Bankruptcy Appellate Panel correctly applied the law to the facts to reach
its conclusion that Bridge’s payment to Vancil was not on account of an antecedent
debt. Instead, it was a payment by the landlord to the tenant to buy out the tenant’s
future option, as provided in its lease, to renew for two more three-year terms. We
need not repeat the court’s well-reasoned opinion, including its analysis of relevant
case law, but we approve of it.

        On appeal, Peltz relies on two cases that do not appear in the Bankruptcy
Appellate Panel’s opinion. In its brief, Bridge likens this case to Levine v. Custom
Carpet Shop, Inc. (In re Flooring America, Inc.), 302 B.R. 394 (Bankr. N.D. Ga.
2003). Flooring America, the debtor, granted Custom Carpet a franchise to operate
retail stores within an exclusive area. Custom Carpet later accused Flooring America
of breaching the franchise agreement by infringing on its exclusive territory, and
asserted that Flooring America owed it additional money under a vendor rebate
program. The parties entered into a termination and release agreement in which
Flooring America paid Custom Carpet $50,000 for a refund of its franchise fee and
payment for all rebates owed. Their relationship ended with the execution of the
agreement, and less than ninety days later Flooring America filed its bankruptcy
petition. Id. at 396-97.

        The bankruptcy court concluded that the payment was on account of an
antecedent debt. The claim arose when Flooring America breached the exclusive
territory provisions of the franchise agreement and stopped paying rebates to Custom
Carpet. The debt arose at the same time, given the coextensive nature of claim and
debt. Flooring America’s later payment to Custom Carpet was on account of this
antecedent debt. Id. at 402. The only thing Flooring America received in exchange
for its $50,000 settlement payment was freedom from liability on an antecedent debt.
The case bears no resemblance to the facts at hand.




                                         -9-
       Peltz describes Upstairs Gallery, Inc. v. Macklowe West Development Co., L.P.
(In re Upstairs Gallery, Inc.), 167 B.R. 915 (9th Cir. B.A.P. 1994), as having "nearly
identical facts" to this case. The debtor was a tenant who had a five-year lease, but
within two years the tenant and landlord agreed to terminate the lease with the tenant
paying a termination fee. Within ninety days of paying the termination fee, the tenant
filed a petition in bankruptcy. Id. at 916-17. The Bankruptcy Appellate Panel held
that the payment was on account of an antecedent debt that arose at the time the lease
was signed. Under the lease, the landlord had a claim for monthly rental payments
and the tenant had a liability for that claim that equaled a debt. Although the tenant
argued that the payment was not on account of an antecedent debt because it was
giving up future possession along with the payment, the court held that the legal effect
of the payment was that it extinguished the debt for three of the five years of ongoing
monthly rent that the tenant had incurred. "The fact that that debt would have
extended into the future but for the settlement agreement does not change the
antecedent nature of the debt." Id. at 918. This case is easily distinguished. Bridge,
the landlord, did not incur a debt to its tenant, Vancil, by virtue of the lease agreement.
Vancil had no claim to receive payment under the lease.

      The situation in Upstairs Gallery is the more typical scenario in lessor-lessee
preference actions, where a debt is antecedent because the debtor lessee incurred it
before making the payment that is allegedly preferential. There, the lessee’s legal
obligation to pay arises each month the lessee fails to pay rent. No such periodic
obligation to pay arises on the part of the lessor.




                                           -10-
                                          II.

       Vancil raises two arguments in its cross-appeal. In the bankruptcy court, Vancil
contended that even if the settlement payment was preferential, Peltz could not avoid
the transfer because it provided new value to Bridge in exchange for the payment.
The bankruptcy court concluded that Vancil had not submitted sufficient evidence that
it provided Bridge with new value and that, even if it had, Vancil had not established
the quantum of that value. The bankruptcy court also refused to allow testimony from
Vancil’s proposed expert witness who would have offered his opinions concerning
market rates and lease values in the area. The court found that the disclosure of the
witness was untimely under Fed. R. Civ. P. 26(a)(2).

      Because we are affirming the Bankruptcy Appellate Panel’s opinion, the cross-
appeal is moot and we have no reason to rule on these issues.

                                        ***

       The Bankruptcy Appellate Panel accurately applied the law with respect to
antecedent debt and we affirm its opinion. As a result, the bankruptcy court judgment
of March 3, 2005, is reversed, and the matter is remanded to the bankruptcy court for
entry of judgment in favor of Vancil.
                        ______________________________




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