IN THE MATTER OF: PERNIE BAILEY DRILLING CO., INC., Dеbtor. W. SIMMONS SANDOZ, Successor Trustee to William F. Baity, Successor Interim Trustee to Hugh William Thistlethwaite, Jr., Etc., Plaintiff-Appellant, versus FEDERAL DEPOSIT INSURANCE CORPORATION, ETC., and NCNB TEXAS NATIONAL BANK, Defendants-Appellees.
No. 92-4209
United States Court of Appeals for the Fifth Circuit
May 28, 1993
POLITZ, Chief Judge, WISDOM and WIENER, Circuit Judges.
The Chapter 7 bankruptcy trustee appeals the ruling of the bankruptcy cоurt, affirmed by the district court, concerning the validity of a secured interest in certain accounts receivable. For the reasons assigned, we affirm.
In March 1982, Pernie Bailey Drilling Company and Interfirst Bank Fannin1 executed an agreement entitled “Security Agreement -- Assignment of Contract Rights” to secure a series of loans. The instrument gave the Bank a security interest in all of Bailey‘s present and future accounts receivable. The instrument was duly recordеd in the mortgage records of various Louisiana parishes in May of 1984 but was never reinscribed.2
In February 1986, J.P. Owen & Co. owed Bailey $1,368,490. This debt is at the core of the present controversy. To facilitate collection the Bank required Bailey to specifically assign all amounts owed by Owen. The Bank sent Owen notice of this assignment, directing that all payments be made directly to it.
In March 1986, Bailey filed for bankruptcy protection under Chapter 11. The Bank promptly requested relief from the automatic stay imposed by
The newly appointed Chapter 7 trustee invoked
The Bailey court rejected the trustee‘s fraudulent сonveyance theory, holding that the Bank‘s security interest remained effective throughout the Bailey bankruptcy. According to the bankruptcy court, the effectiveness of the notice did not cease because the rights of the parties were fixed well before the supposed lapse in recordation. The court suggested that the 1986 conversion to Chapter 7 reinstated the stay as a matter of law. Regrettably, the lack of a single explanation for the court‘s conclusion, understandable as it is in view of the posture of the case, has encouraged both parties to obfuscate. The district court affirmed; the trustee timely appealed. The validity of the Bank‘s security interest in the Owen account is the sole issue presented on appeal. Ultimately, the question is whether the Bank owned the Owen receivable before its notice prescribed or, if not, whether the Bank was still obliged to reinscribe following Bailey‘s filing under Chapter 11 and converting to Chapter 7.
The trustee maintains that the Bank‘s failure to reinscribe terminates its perfected status under Louisiana law3 and, accоrdingly, that the Owen receivable belonged to the bankruptcy estate. The trustee concedes that the recordation was effective at the time Bailey filed the Chapter 11 petition.4 He also concedes that when the Chapter 11 proceeding was initiated, the automatic stay fixed the status quo and reinscription was thereby prevented.5 It is the trustee‘s position that when the bankruptcy court lifted the stay, allowing the Bank to exеrcise its rights in the Owen receivable, it concomitantly revived the Bank‘s duty to reinscribe its notice of assignment. Thus, the trustee attacks what he perceives to be the bankruptcy court‘s conclusion that the conversion tо Chapter 7 reinstated the stay as a matter of law, and argues that the Bank‘s secured status failed because the filing ostensibly lapsed shortly thereafter.
We are not persuaded. In this case the court lifted the stay in the Chаpter 11 proceeding to allow the Bank to take the assets
The character of the Owen receivable at its inception depended on the intentiоn of the parties, an intention not clearly defined a` quo. The bankruptcy court did find, however, that whatever rights the Bank had to the receivable resulted from the 1982 security agreement/assignment and 1984 recording thereof, and nоt from the 1986 assignment.8 Perhaps the court declined to consider whether the 1986 assignment transferred ownership because it found the 1982 pledge to be sufficient to dispose of the issue regardless of whether it transferred ownership. Perhaps the court viewed the
The Bank‘s rights in the Owen receivable came to fruition before the statutory lapse in the recordation on May 30, 1989 because of a number of acts sufficient in themselves or in combination with others: (1) Bailey‘s filing under Chapter 11;10 (2) the Bank‘s notice to Owen of the assignment which, under Louisiana law, provides the assignee with the superior right to payment;11 (3) the Bank‘s filing of a notice of claim; (4) the lifting of the automatic stay and recognition by the Bailey court of the Bank‘s vested right to the Owen receivable;12 and,
When Owen sought the protection of the bankruptcy code, the rights of his creditors became subject thereto. When the сourt confirmed the Owen plan Bailey‘s trustee‘s rights and those taking from and through it were dramatically impacted. Under the bankruptcy code the claims of creditors arising prior to the confirmation are discharged and are payable only as provided by the plan.13 The only enforceable debts of Owen, therefore, were those recognized in the plan. Only the Bank asserted a relevant debt recognized in the Owen plan.
The judiciаl recognition of the assignment and the allowance of the debt formally, finally, and conclusively terminated the Bank‘s security interest and created an actual right to the proceeds. Stripped to essentials, the Owеn receivable represents a right to receive payment from a third party and is a “property interest,” in the sense that it is a thing that may be sold, given
When the Owen court allowed the Bank‘s claim under the assignment, it stated that “all rights of the trustee to avoid or otherwise contest the validity or effect of said claim are fully reserved.” The trustee seizes on this language and argues that the order did not establish any irrevocable rights to the Owen receivable. The obvious aim of this language, however, was merely to recognize the trustee‘s fraudulent conveyance claim in the Bailey bankruptcy proceeding and to preserve his effort to avoid such a transfer. This qualification was appropriate in light of the trustee‘s ongoing attempt to reclaim the Owen receivable under section 548, but we cannot be oblivious to the trustee‘s failure in that regard.
We conclude and hold that reinscription of the notice of assignment was not necessary to preserve the Bank‘s right to the proceeds of the Owen receivable.
We find no merit in the trustee‘s conclusionary complaint that the Bank has taken fatally inconsistent positions in this litigation as respects the challenged asset. The mere assertion of alternate legal positions is not unusual and, most сertainly, is
The judgment appealed is AFFIRMED.