In Re Northern Merchandise, Inc., Debtor, Frontier Bank v. Ronald G. Brown, Chapter 7 Trustee

Frontier Bank (“Frontier”) appeals a decision of the Bankruptcy Appellate Panel (“BAP”) affirming in part the bankruptcy court’s summary judgment in favor of Ronald G. Brown, Chapter 7 Trustee (“Trustee”), in the Trustee’s action alleging that Frontier received a fraudulent transfer from Chapter 7 Debtor Northern Merchandise, Inc. (“Debtor”). Specifically, Frontier challenges the BAP’s ruling that Debtor did not receive reasonably equivalent value under 11 U.S.C. § 548 (a)(1)(B) in exchange for a security interest it granted to Frontier and, thus, Frontier was not protected under 11 U.S.C. § 548 (c). We have jurisdiction pursuant to 28 U.S.C. § 1291 . Reviewing the bankruptcy court’s decision to grant summary judgment de novo, Conestoga Services Corp. v. Executive Risk Indemnity, Inc., 312 F.3d 976, 980 (9th Cir.2002), we reverse.

I. Background

In 1997, Debtor, a company that sold general merchandise to grocery stores, was incorporated by Paul Weingartner, Gary David, and Paul Benjamin. In February 1998, Frontier loaned $60,000 to the newly formed company. The loan was evidenced by a promissory note in the amount of $60,000, secured by a commercial financing agreement granting…