       RECOMMENDED FOR FULL-TEXT PUBLICATION
            Pursuant to Sixth Circuit Rule 206
    ELECTRONIC CITATION: 2000 FED App. 0038P (6th Cir.)
                File Name: 00a0038p.06


UNITED STATES COURT OF APPEALS
              FOR THE SIXTH CIRCUIT
                _________________


                                 ;
                                  
In Re: SHELTON HARRISON

                        Debtor. 
CHEVROLET, INC.,
                                  
________________________ 
                                       No. 98-6537

                                  
                                   >
GEORGE W. STEVENSON,              
                                  
                                  
Trustee for Shelton Harrison

            Plaintiff-Appellant, 
Chevrolet, Inc.,
                                  
                                  
            v.                    
                                  
                                  
                                  
LEISURE GUIDE OF AMERICA,

           Defendant-Appellee. 
INC., d/b/a LEISURE VANS,
                                  
                                  
                                 1

      Appeal from the United States District Court
   for the Western District of Tennessee at Memphis.
  No. 96-02875—Jon Phipps McCalla, District Judge.
              Argued: September 16, 1999
          Decided and Filed: January 31, 2000



                             1
2       In re Shelton Harrison Chevrolet, Inc.       No. 98-6537

 Before: RYAN, MOORE, and GIBSON,* Circuit Judges.
                     _________________
                           COUNSEL
ARGUED: Michael P. Coury, WARING COX, PLC,
Memphis, Tennessee, for Appellant. Steven N. Douglass,
APPERSON, CRUMP & MAXWELL, Memphis, Tennessee,
for Appellee. ON BRIEF: Michael P. Coury, WARING
COX, PLC, Memphis, Tennessee, for Appellant. Steven N.
Douglass, Toni Campbell Parker, APPERSON, CRUMP &
MAXWELL, Memphis, Tennessee, for Appellee.
  RYAN, J., delivered the opinion of the court, in which
MOORE, J., joined. GIBSON, J. (p. 9), delivered a separate
dissenting opinion.
                     _________________
                         OPINION
                     _________________
  RYAN, Circuit Judge. The issue in this case is whether,
under the “contemporaneous exchange” exception to a
bankruptcy trustee’s avoidance powers pursuant to 11 U.S.C.
§ 547 (1993), a document called a Manufacturer’s Statement
of Origin (MSO) has “new value” when it is delivered to the
purchaser of a new vehicle more than a week after the
purchaser pays for the vehicle.
  We hold that, in this case at least, the MSO did not itself
have “new value” and reverse the judgment of the district
court.




    *
    The Honorable John R. Gibson, Circuit Judge of the United States
Court of Appeals for the Eighth Circuit, sitting by designation.
No. 98-6537     In re Shelton Harrison Chevrolet, Inc.      3

                              I.
  Shelton Harrison Chevrolet, Inc., was an automobile dealer
operating in Tennessee. Leisure Guide of America, Inc., d/b/a
Leisure Vans, is a Georgia corporation that customizes vans
for resale to retail automobile dealers. Between June and
August 1991, Shelton placed orders to purchase six
customized vans from Leisure Vans and received delivery of
the vans between August 22 and 24. Upon delivery, Shelton
tendered six checks to Leisure Vans for these vehicles in the
amounts of $7,995, $7,995, $4,145, $5295, $5295, and $5295.
When all six checks bounced, the President of Leisure Vans
called Shelton and was assured that the checks would clear if
presented again. Leisure Vans proceeded to present the same
checks for payment, and the checks were honored on
September 4, 1991. After the checks cleared, Leisure Vans
delivered the MSOs on the six vehicles to Shelton.
  There was no security agreement between Leisure Vans and
Shelton to secure payment of the van conversion packages.
Shelton did not sell any of the converted vans before it
received the MSOs.
                             II.
   Shelton filed a petition for relief under Chapter 11 of the
Bankruptcy Code on November 26, 1991, less than 90 days
after Shelton’s checks cleared and Leisure Vans transferred
the MSOs. The Chapter 11 proceeding was subsequently
converted to a Chapter 7 proceeding. In 1994, the bankruptcy
trustee filed a complaint against Leisure Vans to recover
preferential transfers totaling $36,020, the sum of Shelton’s
checks for the six customized vans, pursuant to 11 U.S.C.
§ 547(b). The trustee and defendant Leisure Vans filed cross-
motions for summary judgment. The bankruptcy court held
that the bankruptcy trustee could not avoid the transfers
because the delivery of the MSOs in exchange for the honored
checks constituted a contemporaneous exchange for new
value, establishing an exception to the trustee’s avoidance
authority under section 547(c)(1). Thus, the bankruptcy court
granted summary judgment in favor of Leisure Vans.
4    In re Shelton Harrison Chevrolet, Inc.       No. 98-6537      No. 98-6537      In re Shelton Harrison Chevrolet, Inc.         9

   The district court affirmed. The district court held that the                         _______________
bankruptcy court’s determination that the MSOs had a value
approximately equal to that of the vehicles was not clearly                                 DISSENT
erroneous. The court relied upon Tennessee’s motor vehicle                               _______________
registration statute, which requires a person who buys a new
vehicle from a dealer to submit an MSO to the state in order          JOHN R. GIBSON, Circuit Judge, dissenting. I must
to obtain a certificate of title. Based upon this law, the court   confess that my concerns with the conclusion the court
held that Leisure Vans’s release of the MSOs upon receipt of       reaches today may spring from the potential conflict between
payment constituted a contemporaneous exchange for new             Tennessee's vehicle registration laws and the state's
value under section 547(c)(1).                                     requirements for obtaining a certificate of title, and the court's
                                                                   interpretation in Couch v. Cockroft, 490 S.W.2d 713 (Tenn.
                              III.                                 Ct. App. 1972) of the entrustment provisions of the Uniform
                                                                   Commercial Code. I am persuaded by the district court's
   We review the grant of summary judgment de novo. In re          analysis of Couch, and I agree that there was new value in the
Larbar Corp., 177 F.3d 439, 443 (6th Cir. 1999). Summary           transfer of the MSOs. For these reasons I would affirm on the
judgment is appropriate “if the pleadings, depositions,            basis of the district court's affirmance of the bankruptcy court
answers to interrogatories, and admissions on file, together       opinion.
with the affidavits, if any, show that there is no genuine issue
as to any material fact and that the moving party is entitled to
a judgment as a matter of law.” Fed. R. Civ. P. 56(c); Fed. R.
Bankr. P. 7056(c). We note at the outset that the district
court, in reviewing for clear error the bankruptcy court’s
holding that the MSOs constituted “new value,” applied the
wrong standard of review.
   Section 547 of the Bankruptcy Code authorizes bankruptcy
trustees to avoid preferential transfers. Specifically, the
bankruptcy trustee “‘may avoid any transfer’ of the debtor’s
property to a creditor ‘for or on account of an antecedent debt
owed by the debtor before such transfer was made’ that
diminishes the estate or creates an inequality among classes
of creditors, if the debtor was insolvent, and the transfer was
made within 90 days of the filing of the [bankruptcy]
petition.” In re Pitman, 843 F.2d 235, 238 (6th Cir. 1988)
(quoting 11 U.S.C. § 547(b)). The provision is designed “to
accomplish proportionate distribution of the debtor’s assets
among its creditors, and therefore to prevent a transfer to one
creditor that would diminish the estate of the debtor that
otherwise would be available for distribution to all.” In re
Nucorp Energy, Inc., 902 F.2d 729, 733 (9th Cir. 1990).
8    In re Shelton Harrison Chevrolet, Inc.       No. 98-6537      No. 98-6537     In re Shelton Harrison Chevrolet, Inc.        5

[the title documents] to resell the vehicles to consumers.” Id.      Section 547(c)(1) establishes an exception to section 547(b)
We do not find this reasoning persuasive. The Ninth Circuit        avoidance, providing:
cited no authority in support of its finding that the debtor
could not resell the vehicles without title documents. In any        (c) The trustee may not avoid under this section a
event, Tennessee law supports the opposite conclusion.               transfer—
  In summary, we hold that Leisure Vans failed to present a              (1) to the extent that such transfer was—
genuine issue of material fact as to whether the MSOs
constituted “new value” under the contemporaneous exchange                  (A) intended by the debtor and the creditor to or
exception to the bankruptcy trustee’s avoidance powers.                     for whose benefit such transfer was made to be a
Shelton derived the full value of the customized vans upon                  contemporaneous exchange for new value given
receipt because it had the ability to sell the vans immediately,            to the debtor; and
without the MSOs. The MSOs, in turn, had no independent
value and, indeed, did not even augment the value of the vans               (B) in fact a substantially contemporaneous
to Shelton. Therefore, Leisure Vans was not entitled to                     exchange.
summary judgment based upon the contemporaneous
exchange exception.                                                (Emphasis added.) “New value,” as used in this subsection,
                                                                   means:
                              IV.
                                                                     money or money’s worth in goods, services, or new
  The district court’s affirmance of the bankruptcy court’s          credit, or release by a transferee of property previously
grant of summary judgment in favor of Leisure Vans is                transferred to such transferee in a transaction that is
REVERSED and the case is REMANDED to the bankruptcy                  neither void nor voidable by the debtor or the trustee
court for further proceedings.                                       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) (1993).
                                                                     The contemporaneous exchange exception under section
                                                                   547(c)(1), thus, has three elements: (1) both the debtor and
                                                                   creditor must intend the transfer to be a contemporaneous
                                                                   exchange; (2) the exchange must, in fact, be
                                                                   contemporaneous; and (3) the exchange must be for new
                                                                   value. In re Gateway Pac. Corp., 153 F.3d 915, 918 (8th Cir.
                                                                   1998). The burden is on the creditor, Leisure Vans, to
                                                                   demonstrate the elements of this exception. 11 U.S.C.
                                                                   § 547(g) (1993).
                                                                      The purpose of the contemporaneous exchange exception
                                                                   is to “encourage creditors to continue doing business with
6     In re Shelton Harrison Chevrolet, Inc.       No. 98-6537      No. 98-6537     In re Shelton Harrison Chevrolet, Inc.       7

troubled debtors who may then be able to avoid bankruptcy           customized vans to Shelton, it could not legally withhold the
altogether.” In re Jones Truck Lines, Inc., 130 F.3d 323, 326       MSOs if Shelton thereafter sold the vans to a buyer in the
(8th Cir. 1997). In addition, this exception recognizes that the    ordinary course of business. Thus, Leisure Vans’s argument
debtor’s payment does not adversely affect other creditors          that the vans were worthless to Shelton without the MSOs is
because the payment is offset by the debtor’s receipt of new        entirely unpersuasive.
value.
                                                                      A contrary holding would also undermine the purposes of
   The district court relied on Tennessee law governing             the contemporaneous exchange exception. First, a holding
vehicle titling and registration in holding that a vehicle MSO      that the MSOs constitute “new value” would not encourage
constitutes “new value” for purposes of the contemporaneous         creditors to do business with troubled debtors. To the
exchange exception. Under Tennessee law, an individual              contrary, such a holding would condone a creditor’s attempt
who purchases a new vehicle from a dealer must submit a bill        to exert leverage over a troubled debtor by retaining a title-
of sale and the MSO to obtain a certificate of title from the       related document until a check clears. Second, because
state. Tenn. Code Ann. § 55-3-103(c) (1998). It is illegal to       Shelton derived no added value from the MSOs, its payments
drive in Tennessee without a certificate of title. Id. § 55-3-      to Leisure Vans would adversely affect other creditors if
102(a)(2) (1998). Based upon this law, the district court held      excepted from the trustee’s avoidance powers.
that the customized vans in Shelton’s possession were
virtually worthless without the MSOs and, thus, the MSOs               Leisure Vans contends that other circuits have held that the
constituted “new value” given to Shelton.                           transfer of title-related documents constitutes new value for
                                                                    purposes of the contemporaneous exchange exception, citing
  The trustee argues that Shelton’s receipt of the MSOs from        In re Grand Chevrolet, Inc., 25 F.3d 728, 734 (9th Cir. 1994),
Leisure Vans did not constitute “new value” because Shelton         and In re Barefoot, 952 F.2d 795, 800 (4th Cir. 1991).
had the ability to sell and transfer legal title to the converted   Leisure Vans misinterprets these cases, however. The Fourth
vans upon receipt of the vans. Thus, Shelton could realize the      Circuit in Barefoot ruled that the contemporaneous exchange
full value of the vehicles without the MSOs. We agree.              exception was inapplicable because contemporaneity was
Under Tennessee law, legal title to the vans passed to Shelton      lacking. The court specifically declined to decide if the
upon delivery, and Shelton could transfer legal title to a buyer    release of MSOs for mobile homes constituted “new value.”
in the ordinary course of business even without a title             Id. at 800 n.*. Moreover, Barefoot is distinguishable because
certificate or an MSO. Couch v. Cockroft, 490 S.W.2d 713,           the parties in that case agreed that the creditor released a
715 (Tenn. Ct. App. 1972). Legal title is, thus, distinct from      purchase money security interest in the mobile homes upon
documentation of title.                                             releasing the MSOs. In this case, Leisure Vans retained no
                                                                    security interest in the vans upon delivery to Shelton.
  Leisure Vans attempts to distinguish this authority, arguing
that even if Shelton could transfer legal title, the vans without     In Grand Chevrolet, 25 F.3d at 734, the Ninth Circuit held
the MSOs were worthless as a practical matter. According to         that title documents to vehicles may have constituted “new
Leisure Vans, no purchaser would choose to buy a van                value” under the contemporaneous exchange rule and
without an MSO because the purchaser would be unable to             remanded to the district court to measure the extent of the
obtain documentation of title and, therefore, could not legally     new value conferred by the transfer of those title documents
drive the vehicle in Tennessee. This argument relies on an          along with unperfected security interests. The court reached
incorrect assumption. Once Leisure Vans delivered the               this conclusion based on its finding that “the debtor needed
