Retail Clerks Welfare Trust v. McCarty (In re Van de Kamp's Dutch Bakeries)

In this bankruptcy action, the district court upheld a Chapter 7 trustee’s avoidance of a transfer and preservation of the interest for the benefit of the bankrupt’s estate. In doing so, the court rejected appellants’ arguments that a transfer that could have been avoided by a competing lienholder in a separate, prepetition state court action should not be susceptible to preservation under 11 U.S.C. § 551 (1988). We have jurisdiction under 28 U.S.C. § 158 (d) (1982 & Supp. V 1987), and we affirm.

BACKGROUND

In January, 1985, Donald Rudd, President of Van De Kamp’s Dutch Bakeries, Inc. (“VDK”) sold his interest in VDK to Arctic Star, Inc. (“ASI”). ASI paid Rudd $50,000 and assumed a $300,000 promissory note previously executed by Rudd to Universal Services, Inc. (“USI”). VDK then executed a security agreement in favor of Rudd to secure payment of ASI’s obligation to USI. A financing statement was filed with the Washington Department of Licensing.

In May, 1985, appellants, the Retail Clerks Welfare Trust, Retail Clerks Pension Fund, and Washington Bakers Welfare Trust (hereinafter collectively referred to as the “Trusts”) recorded a lien for unpaid benefit contributions.…