Cimmaron Oil Co., Inc. v. Cameron Consultants, Inc.Cimmaron Oil Co., Inc. v. Cameron Consultants, Inc.
OPINION
Appellant, Cimmaron Oil Company, Inc. (“Cimmaron”), a chapter 11 debtor, appeals from a summary judgment denying its attempt to avoid two pre-petition payments as being
The question on appeal is whether payments made to a lien creditor during the preference period, which result in the creditor’s taking no affirmative steps to perfect its statutory lien rights, are avoidable pursuant to
I.
BACKGROUND
The material
1
facts are substantially undisputed. Since 1978, Cimmaron has been in oil and gas exploration, development, and production. At the time in question, Cimmaron owned and operated two wells in Hood County, Texas. On December 18, 1980, January 31, 1981, and February 3, 1981, Consultants provided field office geological services to Cimmaron in relation to the two wells. On January 26, February 19, and February 26, 1981, Consultants sent statements to Cimmaron detailing the nature of the services performed. On March 31, 1981, Cimmaron issued a check to Consultants in the amount of $7,548.20 in payment for the January 26 and February 19 invoices. The check cleared on April 15, 1981. On April 2, 1981, Cimmaron is
Prior to accepting payment for its services, Consultants undertook no affirmative efforts to perfect liens on either well. Upon accepting payment for services, Consultants did not relinquish or actually release a notice of lien or existing lien.
In February 1985, Cimmaron commenced an adversary proceeding against Consultants and several other creditors to avoid certain payments as being preferential transfers or unauthorized post-petition transfers. In the proceeding Cimmaron sought to avoid the $7,548.20 and $1,325.00 payments to Consultants.
3
In due course the parties filed motions for summary judgment. On the basis of
II.
DISCUSSION
The question presented by this appeal has not yet been decided by the Fifth Circuit. The courts that have decided the question are split. Some courts
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have construed
The trustee may not avoid under this section a transfer—
(1) to the extent that such transfer was
(A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange[.]
To come within the
On appeal, Cimmaron challenges the bankruptcy court’s legal conclusion that Consultants exchanged new value merely by accepting payments and giving up the right to perfect its statutory liens without undertaking any affirmative steps to perfect its liens or to relinquish or actually release a notice of lien or existing lien. Cimmaron reasons that Consultants had only an inchoate lien right that did not vest because Cimmaron paid Consultants for its services; absent any vesting through perfecting under Texas law, the inchoate lien right did not constitute any “value” and therefore could not be “new value” within the meaning of
Consultants contends that the lien right was not inchoate because it took effect the day Consultants performed the work. Consultants argues that under Texas law it had six months from the date the work was performed to perfect the lien and that timely filing related back to the date the work was done. TEX.REV.CIV.STAT.ANN. art. 5473, which was the operative statute in 1981, and which has since been re-codified, 8 provided that any contractor who performed under contract with the owner of an oil and gas interest in land shall have a lien on the land or leasehold interest therein. Article 5476b provided that the indebtedness was deemed to have accrued at the date of the last delivery of the material or services provided. Once the lien was perfected it related back to the date of inception of the lien.
Based upon this interpretation of Texas law, Consultants contends that its liens on the two wells existed at the time it was paid and that, had it not been paid, the liens
The court concludes that Congress did not intend the
The court begins the process of statutory interpretation, as it must, with the language of the statute itself.
United States v. James,
— U.S. -,
... money or money’s worth in goods, services, or new credit, or release by a transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the debtor or the trustee under any applicable law, but does not include an obligation substituted for an existing obligation!;.] 9
This court concludes that forgoing, by operation of law, the right to perfect a lien is not the exchanging of “new value” with the debtor because it is not money or money’s worth in goods, services, or new credit, nor is it a release of property by the lienor that has previously been transferred to the lienor. Congress carefully defined “new value” in
As the court held in
Fuel Oil Supply,
to reason that the list of what constitutes “new value” is not exclusive is to ignore the wording of the bankruptcy statute. Congress apparently meant a precise definition when it listed what constitutes new value. Congress could have allowed courts to expand upon the doctrine of new value by legislating that new value
includes
certain transactions. Instead, Congress stated what new value
means,
which should retard case law expansion.
Where, as here, the plain language of the statute appears to settle the question, the court will look to the legislative history only to determine whether there is a clearly expressed legislative intention, contrary to that language, which would require the court to question the strong presumption that Congress expresses its intent through the language it chooses.
Immigration and Naturalization Service v. Cardoza-Fonseca,
— U.S. -,
Normally, a check is a credit transaction. However, for the purposes of this paragraph, a transfer involving a check is considered to be “intended to be contemporaneous”, and if the check is presented for payment in the normal course of affairs, which the Uniform CommercialCode specifies as 30 days, U.C.C. § 3-503(2)(a), that will amount to a transfer that is “in fact substantially contemporaneous.”
S.Rep. No. 989, 95th Cong., 2d Sess. 88, reprinted in 1978 U.S.Code Cong. & Ad. News 5787, 5874; H.R.Rep. No. 595, 95th Cong., 1st Sess. 373, reprinted in 1978 U.S.Code Cong. & Ad.News 5963, 6329.
The courts that have decided the question as did the bankruptcy court below appear to have been concerned that a contrary interpretation of
Surely receipt of payment itself should not be less secure than the lien which could have secured it.
In
In re Dick Henley, Inc.,
It is unreasonable to conclude that a Debtor can pay a materialman or subcontractor within the preference period in return for the relinquishment of his mechanics lien or right of action on a bond, and then merely wait until the state law remedies are time barred to attack the payments as preferential transfers.
Fortunately, principled statutory interpretation does not require an undesirable result in today’s case. In another exception to the avoiding powers of the trustee, Congress has dealt with the concern articulated by the courts.
B.
Although the language of
Section 67(b) of the former Bankruptcy Act was similarly interpreted by the courts. In
Ricotta v. Burns Coal & Building Supply Co.,
the Second Circuit reasoned that if the creation or perfection of a lien would not have been avoidable under other statutes, then payments which merely avoid the bite of a lien which the trustee could not have successfully attacked should likewise not be avoidable.
This interpretation of
A preference, of course, is any transfer of a bankrupt’s property within a prescribed period of time while the bankrupt is insolvent if its effect is to enable one creditor to obtain a greater percentage of his debt than other creditors of the same class.
In re Roscar Steel Scrap and Metals Corp.,
A transfer of property does not constitute a preference, however, unless the transfer enables a creditor to receive more than such creditor would receive if the case were a chapter 7 case, the transfer had not been made, and the creditor received payment of such debt to the extent provided by the provisions of Title 11.
III.
Although the court differs with the bankruptcy court’s reasoning, it nevertheless concludes that the bankruptcy court correctly granted summary judgment in favor of Consultants. In its capacity as an appellate court, this court may affirm a correct judgment for reasons not given by the court below or advanced to it.
See Laird v. Shell Oil Co.,
AFFIRMED.
Notes
. Pursuant to
. In its brief Consultants disputes the presumption that Cimmaron was insolvent at the time it paid Consultants. (Appellee Br. at 4, 15). The bankruptcy court did not address the issue in granting summary judgment. Because the court affirms the bankruptcy court on the basis of an exception to
. In their briefs the parties appear to focus only upon the $7,548.20 check. (Appellant Br. at 11) (Appellee Br. at 14). However, both the $7,548.20 and the $1,325.00 checks were paid within the 90-day preference period and the take nothing summary judgment in favor of Consultants is equally applicable to both checks.
. The bankruptcy court held:
This Court finds that the transfer of money to Cameron Consultants was intended by the Debtor and the creditor to be a contemporaneous exchange for new value to the Debtor and was in fact a substantial contemporaneous exchange, in that Cameron Consultants, on payment, gave up its right to file valid oil and gas liens.
. These courts have held, under the new Bankruptcy Code, that payments to relinquish a statutory lien constitute new value and that the payments are therefore not avoidable as preferences:
Matter of Anderson Plumbing Co.,
. These courts have held, under the new Bankruptcy Code, that payments to relinquish a statutory lien do not constitute new value and that the payments are thus avoidable as preferences:
In re Fuel Oil Supply and Terminaling, Inc.,
. In 1981, the time of the payments in question,
Except as provided in subsection (c) of this section, the trustee may avoid any transfer of property of the debtor—
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made—
(A)on or within 90 days before the date of the filing of the petition;
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(5) that enables such creditor to receive more than such creditor would receive if—
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
Section 547(b)(1) was subsequently amended by § 462(b)(1) of the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. 98-353, § 462(b)(1).
. TEX.REV.CIV.STAT.ANN. arts. 5473 et seq. have been repealed and are now contained, without substantive change, in Chapter 56 of the Texas Property Code, which took effect January 1, 1984.
. The legislative history to
. The preference provision is also intended to discourage creditors from racing to the courthouse to dismember the debtor during his slide into bankruptcy.
In re Balducci Oil Co., Inc.,
. The oil and gas liens in question are not avoidable pursuant to