Bridgeport Tank Trucks v. Lien Agent
Case Information
*1 Before JONES, Chief Judge, and BARKSDALE and BENAVIDES, Circuit Judges.
PER CURIAM:
Appellants seek to recover attorney fees and costs, under the prior version of 11 U.S.C. § 506(b), as part of their oversecured statutory materialmen’s lien claims against the debtor’s oil and gas wells. We hold that the applicable statute does not permit such costs and fees and AFFIRM the judgments of the bankruptcy and district courts.
BACKGROUND
Appellants, various creditors of Chapter 11 debtor EnRe LP (“EnRe”), performed work on oil and gas wells in Texas and Wyoming. Some of Appellants’ contracts provided that EnRe would pay costs and attorney fees in the event of litigation to collect what EnRe owed. None had an express security agreement. Instead, following industry practice in the oil patch, Appellants all timely filed for and obtained statutory materialmen’s mineral liens (M&M liens) on EnRe’s property pursuant to Texas or Wyoming law. Upon EnRe’s filing bankruptcy, Appellants duly filed proofs of claim. Appellee, the lien agent, allowed the M&M lien claims and included them in Class 8 of the reorganization plan. The bankruptcy court held that Appellants, as oversecured creditors, were entitled to receive principal and interest, which EnRe paid, but they were not entitled to receive attorney fees and costs under 11 U.S.C. § 506(b). The district court affirmed. [1]
DISCUSSION
This court reviews de novo the legal question whether an
oversecured lienholder may receive attorney fees and costs under
the Bankruptcy Code. See, e.g., U.S. Dep’t of Educ. v. Gerhardt
(In re Gerhardt),
*3 Congress recently amended § 506(b) as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 (“BAPCPA”). [2] Nonetheless, as the parties agree, the Act’s amendments are not retroactive, and the prior version of the statute controls. See id. § 1501, 119 Stat. at 216. The controlling version provides:
To the extent that an allowed secured claim is secured by property the value of which, after any recovery under subsection (c) of this section, is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.
Act of Nov. 6, 1978, Pub. L. No. 95-598, § 506(b), 92 Stat. 2549, Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L. No. 98-353, § 448, 98 Stat. 374 (current version at 11 U.S.C. § 506(b)).
The pre-BAPCPA version of the statute authorizes interest
on an oversecured claim without qualification, but it qualifies the
availability of fees, costs, or charges by mandating that they be
both reasonable and provided for under the agreement under which
such claim arose. See United States v. Ron Pair Enters., Inc., 489
U.S. 235, 241,
This requirement, that an agreement covering collection
fees must give rise to the allowed secured claim, explains the
courts’ differential treatment of consensual and nonconsensual
liens. As this court has held, “the plain language of § 506(b)
distinguishes between voluntary secured claims (i.e., security
agreements) and involuntary secured claims (i.e., statutory
liens).” City of Farmers Branch v. Pointer (In re Pointer),
Appellants, relying on dicta from Ron Pair, argue that
the consensual/nonconsensual distinction is not supported by the
statute.
In a footnote, the Ron Pair Court noted that “other
portions of § 506 make no distinction between consensual and
nonconsensual liens” and that “had Congress intended § 506(b) to
apply only to consensual liens, it would have clarified its intent
by using the specific phrase, ‘security interest,’ which the Code
employs to refer to liens created by agreement.” Ron Pair,
Appellants’ more refined position is that their liens are
consensual. Because state law provides for both mineral liens and
attorney fees for collection thereof, albeit in separate statutory
provisions, and because state law is a backdrop to all contracts
performed in the state, it is contended that EnRe “consented” to
liens that included such fees under state law. In other words, M&M
liens
embody
a
consensual
agreement,
unlike
the
purely
*6
nonconsensual tax liens at issue in In re Pointer and other cases
where no agreement existed between the debtor and lien creditor.
See In re Pointer,
Finally, Appellants argue that their claims represent consensual liens because EnRe expressly agreed to grant them substitute liens through a post-bankruptcy cash collateral order. In its cash collateral order, however, the bankruptcy court carried forward the statutory liens, specifically stating that they “shall have the same priority as the prepetition liens of such M&M Lienholders.” The substitute liens merely retained the statutory character of the liens they replaced. They did not “create” a new agreement under which the allowed secured claims arose, thereby giving rise to a right to collection fees under the pre-BAPCPA statute.
CONCLUSION
Because § 506(b), pre-BAPCPA, does not authorize an oversecured creditor’s recovery of attorney fees or costs of collection in connection with the statutory M&M liens at issue in these cases, we AFFIRM .
Notes
[1] In the alternative, Appellant Baker Hughes Incorporated seeks to
recover fees under 11 U.S.C. § 502. This issue is waived, as all parties
stipulated that “the only remaining legal issue [is] the proper interpretation
and application of 11 U.S.C. 506(b).” Accordingly, we review the decisions of
the bankruptcy and district courts addressing § 506(b) only. See, e.g., Ginther
v. Ginther Trusts (In re Ginther Trusts),
[2] The new statute authorizes collection fees if “provided for under the agreement or State statute under which such claim arose.” 11 U.S.C. § 506(b) (emphasis added).