Summary
holding that Supreme Court Timbers decision did not apply retroactively to case where final order had been entered and not appealed
Summary of this case from Matter of M4 Enterprises, Inc.Opinion
Bankruptcy No. A86-09082-WHD.
August 24, 1988.
Nolan B. Harmon, Harmon, Smith Bridges, Atlanta, Ga., for debtor.
Terrence McQuade, Glass, McCullough, Sherrill Harrold, Atlanta, Ga., for Equitable Life Assur. Soc. of the U.S.
ORDER
This case came before the Court on May 11, 1988 for a hearing on the above-referenced debtor's motion to have certain payments which he has made to the Equitable Life Assurance Society of the United States ("the Equitable") refunded to him.
The payments in question have been made by the debtor pursuant to an order entered on April 21, 1987 which required the debtor to pay the Equitable current post-petition interest in order to adequately protect the Equitable's interest in its collateral. Such post-petition interest payments had not been required as a matter of law in this district to be made to a secured creditor. However, this Court had previously held that such payments may be ordered in the discretion of the bankruptcy judge. See In re Peach State Distributing Co., 58 B.R. 873 (Bankr.N.D.Ga. 1986) (adopting the approach taken by In re Briggs Transp. Co., 780 F.2d 1339 (8th Cir. 1985)). The debtor did not appeal the adequate protection order entered in the case at bar.
The debtor asserts that the payments should now be refunded to him in light of the Supreme Court's recent decision in United Savings Association of Texas v. Timbers of Inwood Forest Associates, Ltd., ___ U.S. ___, 108 S.Ct. 626, 98 L.Ed. 2d 740 (1988), which held that an undersecured creditor is not entitled to interest on its collateral during the pendency of the automatic stay to assure adequate protection.
Whether a Supreme Court decision should be given retroactive effect depends on the factors enunciated in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971). It appears that there are presently only two published decisions which address the question of retroactivity with regard to the Timbers case.
In In re Cimarron Investors, 848 F.2d 974 (9th Cir. 1988), the debtor had appealed an order which required monthly payments of interest to a creditor, and the appeal was pending before the Circuit Court when the Timbers decision was rendered. The Ninth Circuit held that the Supreme Court decision should be applied "retroactively" in such a case under the Huson criteria.
It appears that the analysis should be different when a party files no appeal of an Order which turns out not to be in accordance with a subsequently decided Supreme Court opinion. In such a case, other parties may have relied upon the failure to appeal so that it may be unfair to apply retroactively the Supreme Court decision in light of the third Huson factor: whether retroactive application could produce "substantial inequitable results" in individual cases. Huson, 404 U.S. at 107, 92 S.Ct. at 355.
This was the situation in In re Sherwood Square Associates, 87 B.R. 388, 17 B.C.D. 1003 (Bankr.D.Md. 1988), in which the debtor unilaterally ceased making adequate protection payments on the basis of the Timbers case. The Sherwood Square court held that the Timbers decision should not apply retroactively.
The Sherwood Square case also held that the adequate protection payments made by the debtor could be applied toward the amount which the creditor was to receive under the Chapter 11 plan. That question is not currently before this Court.
Similarly, in the case at bar, the Court finds that the Huson factors dictate that the Timbers decision not be applied retroactively. First, the Timbers decision overruled past precedent on which the litigants may have relied. See Huson, 404 U.S. at 106, 92 S.Ct. at 355. Also, inequity could result from retroactive application, because the creditor relied upon the adequate protection payments in framing its strategy for several months prior to the Timbers decision and the debtor relied on the payments to defend against the creditor's request for relief from the automatic stay.
Accordingly, it is ORDERED that the debtor's motion to have payments refunded to him is DENIED.
IT IS SO ORDERED.