Sapir v. Blue Cross/Blue Shield of Greater New York (In Re Yonkers Hamilton Sanitarium Inc.)Sapir v. Blue Cross/Blue Shield of Greater New York (In Re Yonkers Hamilton Sanitarium Inc.)
Jeffrey L. Sapir, Trustee in Bankruptcy for the Yonkers Hamilton Sanitarium, Inc., d/b/a Yonkers Professional Hospital (“Yonkers”), appeals from a decision of the United States Bankruptcy Court,
A full statement of the facts is to be found in Judge Schwartzberg's opinion, familiarity with which is assumed. Appellant presents two questions on appeal.
1. Whether deductions of $72,012 from partial interim payments (“P.I.P.’s”) 90 days prior to the filing of the Appellant’s Chapter 11 petition violated the preferential transfer proscriptions of §§ 547(b)(4)(A) and 553(a) of the Bankruptcy Code.
2. Whether P.I.P. deductions of $61,716 subsequent to Appellant’s Chapter 11 filing violated the automatic stay provisions of Code § 362.
A third issue raised by Appellant in the Bankruptcy Court that P.I.P. deductions in the year prior to the filing of the bankruptcy petition constituted insider preferences under Code § 547(b)(4)(B) — has not been pressed in this appeal.
1. 90 Day Preference
Judge Schwartzberg held that Respondent's P.I.P. deductions constituted re-coupments rather than setoffs and therefore were not preferential transfers within the meaning of Code § 547(b)(4)(A). The distinction between a recoupment and a set-off is that a recoupment, unlike a setoff, does not involve the concept of mutuality of obligations and arises out of a single transaction between creditor and debtor.
Waldschmidt v. CBS, Inc.,
Appellant first contends that Respondent’s P.I.P. deductions constituted setoffs rather than recoupments. In support of this characterization, Appellant maintains that this case involves multiple, rather than single, transactions because “each sale by the trade creditors and each medical service rendered by the debtor represented a separate transaction.” Alternatively, Appellant maintains, each “annual payment cycle” should constitute a separate transaction. Although this argument is creative, it is hardly persuasive. The relevant inquiry here relates to the dealings between Respondent and Appellant—not between Appellant and third parties. The doctrine of recoupment would have little meaning if “single transaction” were defined otherwise.
Equally unpersuasive is Appellant’s contention that the new Bankruptcy Code somehow repealed the doctrine of recoupment that obtained previously under the old Bankruptcy Act. Other than alleging that the new Code “effectuates greater restrictions on setoffs and other preferential types of transfers [calling] for a narrower construction of doctrines, such as recoupment, that lead to the circumvention of these increased restrictions,” Appellant can point to nothing in the language or legislative history of the new Code specifically supporting its interpretation.
The cases cited by Appellant in support of .its contention that recoupments are subject to § 553 are also of no avail.
Matter of Neavear,
Finally, we see no basis for Appellants’ contention that Judge Schwartzberg gave superseding effect to HHS’s statutory or administrative provisions requiring “adjustments” or “recoupments” over the Bankruptcy Code’s prohibitions against preferential transfers. Judge Schwartzberg was merely pointing out that Respondents had a statutory right to seek recoupment that did not depend upon the debtor’s agreement thereto. In any event, Judge Schwartz-berg’s reading of the Bankruptcy Code, with which we concur, was that the recoup-ments involved here were simply not preferential transfers. There is no implication that the provisions of any other statute have overriding effect. Appellant’s reliance on such cases as
United States v. Whiting Pools, Inc.,
- U.S. -,
2. Post-petition transfers and the automatic stay
Appellant has raised no new arguments on this appeal in support of its characterization of post-petition P.I.P. deductions as violative of the automatic stay provisions of Code § 362, although it has cited the case of
In re Dartmouth House Nursing Home, Inc.,
In deciding this question, we are guided by basic principles of equity. In January of 1978, as Appellant concedes, Respondent could have terminated any further payments under the provider agreement. Instead, the parties entered into a subsidiary contract whereby Yonkers’ right to continued payments was contingent upon its assent to the recoupment of past overpay-ments. (See letter from Director of Provider Reimbursement, dated January 3, 1978). This subsidiary contract was still executory at the time of the petition since the full amount of past overpayments had not been recouped.
2
Having accepted the benefit of this executory agreement in the form of continued funding, the Appellant can not now be granted relief from the corresponding burden of the agreement — the recoupment of past overpayments.
Blue Cross of Western Pa.
v.
Monsour Medical Center,
Accordingly, for the reasons stated, the judgment of the Bankruptcy Court is affirmed.
SO ORDERED.
Notes
. The only argument raised by the Social Security Administration against characterizing the deductions as voidable preferences was that “the defendant had no reasonable cause to believe the plaintiff was insolvent” within the ninety-day preference period.
. Appellant contends that the contract was not executory because no performance remained due from Respondent. This view is clearly erroneous, however, since Respondent’s continued payments (or, alternatively, forbearance from terminating payments) constituted performance that remained due at the time of the petition.