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Union Bank v. Wolas

Court Documents
Concurring Opinion

United States Supreme Court

502 U.S. 151

Union Bank  v.  Wolas

No. 90-1491  Argued: Nov. 5, 1991. --- Decided: Dec 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.


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 While § 547(c)(2), as originally enacted, was limited to payments made within 45 days of the date a debt was incurred, Congress amended the provision in 1984 by deleting the time limitation entirely.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 Also unpersuasive is Wolas' argument that Congress originally enacted § 547(c)(2) to codify a judicially crafted "current expense" rule covering contemporaneous exchanges for new value, since other § 547(c) exceptions occupy some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 limiting § 547(c)(2) to short-term debt, for it does further the provision's other policy of deterring creditors from racing to the courthouse to dismember a debtor and may indirectly further the equal distribution goal as well. Pp. 154-162.

2. The question whether the Bankruptcy Court correctly concluded that the Debtor's payments qualify for the ordinary course of business exception remains open for the Court of Appeals on remand. P.162.

921 F.2d 968 (CA9 1990), reversed and remanded.

STEVENS, J., delivered the opinion for a unanimous Court. SCALIA, J., filed a concurring opinion.

John A. Graham, Los Angeles, Cal., for petitioner; Lesley Anne Hawes, Donald Robert Meyer, Stephen Howard Weiss, Los Angeles, Cal., on brief.

Herbert Wolas, South Pasadena, Cal., for respondent.

Justice STEVENS delivered the opinion of the Court.


This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).