Union Bank v. Wolas, 502 U.S. 151 (1991)

Page:   Index   1  2  3  4  5  6  7  8  9  10  11  12  13  Next

OCTOBER TERM, 1991

Syllabus

UNION BANK v. WOLAS, chapter 7 trustee for the ESTATE OF ZZZZ BEST CO., INC.

certiorari to the united states court of appeals for the ninth circuit

No. 90-1491. Argued November 5, 1991—Decided December 11, 1991

During the 90-day period preceding its filing of a petition under Chapter 7 of the Bankruptcy Code, ZZZZ Best Co., Inc. (Debtor) made two interest payments and paid a loan commitment fee on its long-term debt to petitioner, Union Bank (Bank). After he was appointed trustee of the Debtor's estate, respondent Wolas filed a complaint against the Bank to recover those payments as voidable preferences under 11 U. S. C. 547(b). The Bankruptcy Court held that the payments were transfers made in the ordinary course of business pursuant to 547(c)(2) and thus were excepted from 547(b). The District Court affirmed, but the Court of Appeals reversed, holding that the ordinary course of business exception was not available to long-term creditors.

Held: 1. Payments on long-term debt, as well as those on short-term debt, may qualify for the ordinary course of business exception to the trustee's power to avoid preferential transfers. Section 547(c)(2) contains no language distinguishing between long- and short-term debt and, therefore, provides no support for Wolas' contention that its coverage extends only to short-term debt. Moreover, 547's relevant history in part supports, and is not otherwise inconsistent with, a literal reading of the statute. While 547(c)(2), as originally enacted, was limited to payments made within 45 days of the date a debt was incurred, Congress amended the provision in 1984 by deleting the time limitation entirely. That Congress may have intended only to address particular concerns of specific short-term creditors in the amendment or may not have foreseen all of the consequences of its statutory enactment is insufficient reason for refusing to give effect to 547(c)(2)'s plain meaning. Also unpersuasive is Wolas' argument that Congress originally enacted 547(c)(2) to codify a judicially crafted "current expense" rule covering contemporaneous exchanges for new value, since other 547(c) exceptions occupy some (if not all) of the territory previously covered by that rule, and since there is no extrinsic evidence that Congress intended to codify the rule in 547(c)(2). Nor does the fact that the exception's availability to long-term creditors may not directly further 547's underlying policy of equality of distribution among all creditors support

151

Page:   Index   1  2  3  4  5  6  7  8  9  10  11  12  13  Next

Last modified: October 4, 2007