Ambassador Factors v. First American Bulk Carrier Corp. (In re Topgallant Lines, Inc.)

208 B.R. 584, 1996 Bankr. LEXIS 1873
CourtUnited States Bankruptcy Court, S.D. Georgia
DecidedAugust 30, 1996
DocketBankruptcy No. 89-41996; Adversary No. 90-4072
StatusPublished
Cited by1 cases

This text of 208 B.R. 584 (Ambassador Factors v. First American Bulk Carrier Corp. (In re Topgallant Lines, Inc.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ambassador Factors v. First American Bulk Carrier Corp. (In re Topgallant Lines, Inc.), 208 B.R. 584, 1996 Bankr. LEXIS 1873 (Ga. 1996).

Opinion

LAMAR W. DAVIS, Jr., Bankruptcy Judge.

ORDER ON MOTIONS TO AMEND PRE-TRIAL

First American Bulk Carrier Corporation (“FABC”) has asked this Court to reconsider and amend the Pre-Trial Order filed on August 12, 1996, to recognize its standing to pursue a Section 506(c) claim against Ambassador Factors’ collateral consisting of freights of the final voyage of the MTV Delaware Bay. That Motion is denied. Although FABC correctly argues that the majority view supports its position, the matter has not been decided in this Circuit. I have carefully read the decisions on both sides of this issue and find the minority view better reasoned. Compare In re McKeesport Steel Castings Company, 799 F.2d 91, 94 (3rd Cir.1986) (“[t]he rule that individual creditors cannot act in lieu of the trustee is often breached when sufficient reason exists to permit the breach”) with In re JKJ Chevrolet, Inc., 26 F.3d 481, 484 (4th Cir.1994).

The language of § 506(c) is clear and unambiguous. It grants only trustees the authority to seek recovery of post-petition costs and expenses from the collateral of a secured creditor (footnote omitted). Limiting § 506(c) standing to trustees in the context of Chapter 7 proceedings is also consistent with a fundamental purpose of the Bankruptcy Code — equitable distribution to similarly situated creditors.

I am cognizant of the practical argument adopted by McKeesport and its progeny that granting standing to a creditor is equitable in nature and is designed to prevent a windfall to the secured creditor. See United States v. Boatmen’s First National Bank of Kansas City, 5 F.3d 1157 (8th Cir.1993). However, the Fourth Circuit Court of Appeals in In re JKJ Chevrolet, Inc., 26 F.3d at 484, adequately addresses the question of which branch of government is empowered to correct this arguable inequity.

Allowing a claimant to proceed directly against a secured creditor would circumvent this distribution scheme, potentially causing an inequitable division of the estate. For example, if an estate has no unencumbered assets, an administrative claimant recovering directly from a secured creditor might receive full reimbursement while other administrative claimants, whose services were also necessary to the preservation of the estate, would receive nothing. An administrative claimant proceeding against a secured creditor in effect would be granted priority over the other claimants in its same class. We are of the opinion that if Congress had intended to alter so fundamentally the structure and principles underlying bankruptcy proceedings, it would have done so expressly (emphasis added) (footnotes omitted).

Id.; see also In re Dyac Corporation, 164 B.R. 574, 579 (N.D.Ohio 1994) (“[i]t is not that they are without remedy because their remedy lies under § 503(b)(1) and the distribution provided under § 726. Their problem is that there is no money in the estate”); Matter of Oakland Care Center Inc., 142 B.R. 791, 794 (E.D.Mich.1992) (“it is not up to this Court to restructure the Bankruptcy Code priorities or to rewrite legislation”); Matter of Great Northern Forest Products, Inc., 135 B.R. 46, 69 (Bankr.W.D.Mich.1991) (“[i]f a party other than the trustee or debtor in possession shall have independent standing to surcharge pursuant to § 506(c), it must be by edict of Congress”).

Finally, I am mindful of the fact that when faced with clear statutory, language the Supreme Court has not been inclined to follow a view it finds to be unsupported by the statutory language even where there are “isolated excerpts from the legislative history” that support a different view. See Patterson v. Shumate, 504 U.S. 753, 761, n. 4, 112 S.Ct. 2242, 2248, n. 4, 119 L.Ed.2d 519 (1992).

[1] In our view, the plain language of the Bankruptcy Code and ERISA is our determinant____ The text of § 541(c)(2) does not support petitioner’s contention that “applicable nonbankruptey law” is limited to state law. Plainly read, the provision encompasses any relevant nonbankruptcy law, including federal law such as [587]*587ERISA. We must enforce the statute according to its terms.

Id. at 757-59, 112 S.Ct. at 2247 (Blackmun, J.).

When the phrase “applicable nonbankruptcy law” is considered in isolation, the phenomenon that three Courts of Appeals could have thought it a synonym for “state law” is mystifying. When the phrase is considered together with the rest of the Bankruptcy Code (in which Congress chose to refer to state law as, logically enough, “state law”), the phenomenon calls into question whether our legal culture has so far departed from attention to text, or is so lacking in agreed-upon methodology for creating and interpreting text, that it any longer makes sense to talk of “a government of laws, not of men.”

Id. at 766, 112 S.Ct. at 2250-51 (Scalia, J., concurring); see also In re Colortex Industries, Inc., 19 F.3d 1371, 1375 (11th Cir.1994) (“[rjules of statutory construction dictate that the plain meaning is conclusive, ‘except in the “rare cases [in which] the literal application of the statute will produce a result demonstrably at odds with the intent of its drafters.” ’ ”) (quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 1031, 103 L.Ed.2d 290 (1989).)

FABC also contends that this Court’s January 10, 1990, Order in related adversary proceedings demands a different result. That Order stated in relevant part that Ambassador’s receipt of freights was without prejudice to “any right to recovery from the Funds of administrative expense claims properly chargeable thereto.” Ambassador Factors v. First American Bulk Carrier Corp. (Matter of Topgallant Lines, Inc.), Case No. 89-41996, Adv. Proc. 89-4125, Doc. No. 14, slip op., p. 5 (Bankr.S.D.Ga., Jan. 10, 1990 ) (Davis, J.). FABC argues that this language contemplates its Section 506(e) claim. By use of the term “administrative expense” I hold that the order contemplated only a Section 503(b)(1) claim, particularly in light of the fact that upon FABC’s earlier motion to amend the Temporary Restraining Order, and after a hearing, this Court deleted from a proposed order the following language which more clearly contemplated a Section 506(c) claim:

... (2) any claim against or lien in the Funds that FABC holds by virtue of expenses incurred by it in the operation of the Debtor’s container service, including expenses incurred in the carrying, delivering, and discharging of cargoes, which expenses include crew, discharge, and port expenses,

Ambassador Factors v. First American Bulk Carrier Corp. (Matter of Topgallant Lines, Inc.), Case No. 89-41996, Adv. Proc. 89-4125, Doc. No. 9, slip op. (Bankr.S.D.Ga., Dec. 29, 1989) (Davis, J.). Thereafter when the January 10, 1990, preliminary injunction was entered, this deleted language was again omitted.

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208 B.R. 584, 1996 Bankr. LEXIS 1873, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ambassador-factors-v-first-american-bulk-carrier-corp-in-re-topgallant-gasb-1996.