We realize that "in certain circumstances the entire reorganization effort may be thwarted if emergency relief is withheld" and that reorganization under the Bankruptcy Code "is a perilous process, seldom more so than at the outset of the proceedings when the debtor is often without sufficient cash flow to fund essential business operations." In re Sullivan Ford Sales, 2 B.R. 350, 355 (Bankr.D.Me. 1980). It is for this very reason that Congress specified that hearings concerning the use of cash collateral "shall be scheduled in accordance with the needs of the debtor."
As a result of the payments authorized by Judge Babitt, Armstrong's share of the monies owed Phillips' top fourteen creditors jumped from 35% to 61%. Relying upon various provisions of the Bankruptcy Code as well as the decisions in In re Texlon Corp., 596 F.2d 1092 (2d Cir. 1979), and In re Sullivan Ford Sales, 2 B.R. 350 (Bkrtcy.D.Me. 1980), Armstrong challenges the Bankruptcy Court's orders as improper, ex parte authorizations of preferential payments. At the root of the many difficulties posed by this appeal is the nature of the potential liens available to the "preferred" supplier-creditors.
See, e. g., In re Sullivan Ford Sales, Inc., 2 B.R. 350, 1 CBC 2d 400, 5 BCD 1288 (D.Me. 1980). The exigent nature of the circumstances may have warranted ex parte relief, but not without reasonable efforts to provide advance notice to parties in interest.
See, e.g., In re Sullivan Ford Sales, 2 B.R. 350, 353-54 n. 10 (Bankr.D.Me. 1980) (citing Report of the Comm. on the Judiciary, House of Representatives, To Accompany H.R. 8200, H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 4, 89-91, 99, 107 (1977) U.S. Code Cong. Admin.News 1978, p. 5787, 5790, 5875-5877, 5885, 5893.). Under the Code, therefore, the debtor in possession or trustee must ensure "parties in interest" adequate notice and opportunity to be heard before their interests may be adversely affected.
The primary purpose of this definition, as described in its legislative history, is to eliminate the direct involvement of the bankruptcy court in administrative matters such as the approval of requests for relief absent a dispute.In re Sullivan Ford Sales, 2 B.R. 350, 354 (Bankr.D.Me. 1980). 11 U.S.C. § 102(1)(A) (1986).
We agree with the well-reasoned authority holding that some notice and opportunity to object is required before priority ahead of other administrative expenses can be authorized under § 364(c). In re Sullivan Ford Sales, Inc., 2 B.R. 350, 5 BANKR.CT.DEC. (CRR) 1288, 1 COLLIER BANKR.CAS.2d (MB) 397 (Bankr.Me.1980); In re Garland Corp., 6 B.R. 456, 3 COLLIER BANKR.CAS.2d (MB) 24 (Bankr. 1st Cir.
But, under the bankruptcy stay statute, we have held that this same language does not require an actual hearing in every case. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 814 F.2d 844, 847 (1st Cir. 1987) (affirming decision vacating stay without a hearing where "the court had the benefit of the papers filed by both parties" and the debtor "identified no ... viable reasons for maintaining the stay"); see also In re Sullivan Ford Sales, 2 B.R. 350, 354 (Bankr. D. Me. 1980) ("There was complete awareness on the part of the principal congressional architect of the Code that ‘after notice and a hearing’ did not contemplate a hearing in every instance."). A hearing may be unnecessary where, for example, the material facts are not disputed.
The words "after notice and hearing" denote notice and an opportunity for a hearing as appropriate in the particular circumstances, but a hearing — much less an evidentiary hearing — is not required in every instance. See 11 U.S.C. § 102(1)(A)-(B) (1993) (providing that a hearing is not necessary if, after proper notice, a hearing is not seasonably requested by a party in interest, or if there is insufficient time for a hearing); In re Sullivan Ford Sales, 2 B.R. 350, 354 (Bankr. D. Me. 1980) (applying statute); see also Aoude v. Mobil Oil Corp., 862 F.2d 890, 894 (1st Cir. 1988) (explaining that many matters can be adequately "heard" on the papers as long as the parties had "a fair opportunity" to offer relevant facts and arguments to the court and to confront their adversaries' submissions). In the case at hand, the request for payment of the administrative claims, sent to the appellant, comprised the requisite notice.
Id. at 324-25 (" [T]he procedural hurdles of Rule 65 are intended to force both the movant and the court to act with great care in seeking and issuing an ex parte restraining order." ); Matter of Sullivan Ford Sales, 2 B.R. 350, 356-57 (Bankr.D.Me.1980) (" The extraordinary nature of ex parte relief requires exceptional scrutiny on the part of the court as the only real protection against loss or damage to the property interests of innocent parties." ); Austin v. Altman, 332 F.2d 273, 275 (2d Cir.1964) (" This case presents a vivid example of the dangers and embarrassments of hasty action in hearing only one side when the other parties concerned could easily have been summoned for a preliminary hearing."
The Bankruptcy Code of 1978 eliminated this requirement through § 363(b)(1) and § 102(1)(B)(i) in an effort to reduce the onerous supervisory and administrative duties which accompanied such a requirement. See In re Sullivan Ford Sales, 2 B.R. 350, 353-54 (Bankr.D.Me. 1980). Notwithstanding this change, however, bankruptcy reform did not go as far as the Guarantors urge in their appeal; the Code does not prohibit the bankruptcy court from taking on these tasks, if the court deems such an action appropriate.