United States Court of Appeals
For the First Circuit
No. 00-2236
IN RE 229 MAIN STREET LIMITED PARTNERSHIP,
Debtor.
___________________
229 MAIN STREET LIMITED PARTNERSHIP,
Appellant,
v.
MASSACHUSETTS DEPARTMENT OF ENVIRONMENTAL PROTECTION ET AL.,
Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Patti B. Saris, U.S. District Judge]
Before
Selya, Circuit Judge,
Cyr, Senior Circuit Judge,
and Lipez, Circuit Judge.
Catherine J. Savoie, with whom Rosanna Sattler, Susan S.
Riedel, and Posternak, Blankstein & Lund, L.L.P. were on brief,
for appellant.
Dana M. Gershengorn, Assistant Attorney General, with whom
Thomas F. Reilly, Attorney General, was on brief, for appellees.
August 22, 2001
SELYA, Circuit Judge. Like the contaminated property
that gave rise to it, the case before us demands careful
handling. The pivotal question, heretofore untouched by any
appellate court, is whether the automatic stay provision of the
Bankruptcy Code, 11 U.S.C. § 362(a), prevents a state from
simultaneously creating and perfecting an environmental
superlien on a debtor's property after the institution of a
bankruptcy proceeding. Both the bankruptcy court and the
district court answered this surpassingly close question in the
negative, holding that the environmental superlien evades the
grasp of the automatic stay. We affirm.
I. BACKGROUND
The debtor, 229 Main Street Limited Partnership, owns
a shopping plaza on Main Street in Natick, Massachusetts (the
Property). For many years, a dry cleaning business leased space
in the plaza. As a result, the Property became profoundly
contaminated with chemicals and other pollutants. In time, the
Massachusetts Department of Environmental Protection (the
Commonwealth) concluded that contamination from the Property
posed a dire threat to drinking water in the town of Natick. To
avert this threat, the Commonwealth spent large sums of money on
emergency cleanup activities. It then sought reimbursement for
these expenses, along with assurances in respect to anticipated
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future expenditures, from the debtor. Moreover, the
Commonwealth informed the debtor, by letter dated November 5,
1998, that it intended to record a lien against the Property to
secure present and future cleanup costs. See Mass. Gen. Laws
ch. 21E, § 13 (the environmental superlien statute).
Initially, the debtor denied responsibility for the
contamination and contested the dollar amount that the
Commonwealth placed on cleanup costs. Accordingly, it demanded
an adjudicatory hearing. See 310 C.M.R. § 40.1254. The hearing
moved slowly. Before it concluded, the debtor filed a voluntary
petition under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§
1101-1174. By the debtor's own admission, a principal reason
behind this filing was a desire to avoid perfection of the
Commonwealth's lien. To that extent, the maneuver failed; the
hearing officer ruled that the environmental superlien statute
fell within an exception to the automatic stay and refused to
adjourn the administrative proceeding.
The debtor countered by asking the bankruptcy court to
hold the Commonwealth in contempt for continuing to press
forward in the postpetition period. The bankruptcy court
refused the debtor's request. When the debtor appealed, the
district court followed suit, ruling that the automatic stay did
not preclude continuation of the proceedings necessary to
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perfect the Commonwealth's environmental superlien. See 229
Main St. Ltd. P'ship v. Mass. Dep't of Envt'l Prot., 251 B.R.
186, 193 (D. Mass. 2000). This appeal ensued. Because its
resolution turns on questions of statutory interpretation, we
exercise plenary review. See Soares v. Brockton Credit Union
(In re Soares), 107 F.3d 969, 973 (1st Cir. 1997).
II. THE STATUTES
As this case perches at a crossroads formed by the
intersection of federal and state law, we set out the pieces of
the statutory puzzle before attempting to fit them together. We
begin with familiar fare: the automatic stay provision.
The automatic stay, 11 U.S.C. § 362(a), is one of the
fundamental protections afforded to debtors by the bankruptcy
laws. Midatlantic Nat'l Bank v. N.J. Dep't of Envt'l Prot., 474
U.S. 494, 503 (1986). It gives debtors breathing room by
stopping collection efforts in their tracks and permitting their
resumption only when the stay is lifted by the bankruptcy court
or dissolved by operation of law. Soares, 107 F.3d at 975. To
accomplish these objectives, the statute provides that the
filing of a bankruptcy petition halts a wide variety of
specified creditor activities. See 11 U.S.C. § 362(a). This
appeal does not require us to call the roll. It suffices for
present purposes to note that the stay applies, inter alia, to
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"any act to create, perfect, or enforce any lien against
property of the estate." Id. § 362(a)(4).
While the automatic stay is an important part of the
bankruptcy protection framework, it is not an absolute.
Congress has crafted certain exceptions to the automatic stay.
See id. § 362(b). One of them, pertinent here, makes the
automatic stay inapplicable to "any act to perfect, or to
maintain or continue the perfection of, an interest in property
to the extent that the [bankruptcy] trustee's rights and powers
are subject to such perfection under section 546(b) of [the
Bankruptcy Code]." Id. § 362(b)(3). The companion statute, 11
U.S.C. § 546(b), limits the debtor's powers to avoid statutory
liens1 by providing that they "are subject to any generally
applicable law that permits perfection of an interest in
property to be effective against an entity that acquires rights
in such property before the date of perfection." Id. §
546(b)(1)(A). Thus, sections 362(b)(3) and 546(b)(1)(A), read
together, plot the boundaries of the exception to the automatic
stay which is at issue here.
1
Many of these statutes refer to the trustee in bankruptcy,
acting in the debtor's stead. For simplicity's sake, we refer
throughout to debtors (although such references encompass
trustees wherever applicable).
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To this point, we have been discussing relevant federal
statutes. But this appeal also involves a state environmental
superlien statute, Mass. Gen. Laws ch. 21E, § 13 (formally known
as the Massachusetts Oil and Hazardous Material Prevention Act).
The state legislature designed this statute to assure the prompt
and efficient cleanup of hazardous materials.2 Acme Laundry Co.
v. Sec'y of Envt'l Affairs, 575 N.E.2d 1086, 1089 (Mass. 1991).
It provides in pertinent part that once the Commonwealth spends
money assessing or cleaning up a polluted tract of land, it may
place a priority lien on that property:
Any liability to the commonwealth [for
cleanup costs] shall constitute a debt to
the commonwealth. Any such debt . . . shall
constitute a lien on all property owned by
persons liable under this chapter when a
statement of claim naming such persons is
recorded, registered or filed. . . . Any
lien recorded, registered or filed pursuant
to this section shall have priority over any
encumbrance theretofore recorded, registered
or filed with respect to any site . . .
described in such statement of claim.
Mass. Gen. Laws ch. 21E, § 13.
2At least two Justices of the United States Supreme Court
have signaled support for such state initiatives. See
Midatlantic Nat'l Bank, 474 U.S. at 517 (Rehnquist, J.,
dissenting) ("States retain considerable latitude to ensure that
priority status is allotted to their cleanup claims."); Ohio v.
Kovacs, 469 U.S. 274, 286 (1985) (O'Connor, J., concurring)
(suggesting that "a State may protect its interest in the
enforcement of its environmental laws by giving cleanup
judgments the status of statutory liens or secured claims").
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The question here is whether the environmental
superlien fits within the exception described in sections
362(b)(3) and 546(b) of the Bankruptcy Code. The debtor argues
that the superlien falls outside the narrow boundaries of the
exception and thus succumbs to the automatic stay. The
Commonwealth demurs, maintaining that its superlien comes within
the safe harbor dredged by the exception and thus evades the
automatic stay. In the pages that follow, we examine these
dueling interpretations.
III. THE STATUTES IN ACTION
Eligibility for the pertinent exception to the
automatic stay depends upon the existence vel non of three
elements: there must be (1) an "act to perfect" (2) an
"interest in property" (3) under circumstances in which the
perfection-authorizing statute fits within the contours of
section 546(b)(1)(A). We deal with the first two elements in
Part III(A), reserving the third for discussion in Part III(B).
A. Section 362(b)(3).
In parsing section 362(b)(3), we alter the natural
progression: because the question of what constitutes an
interest in property is crucial to the resolution of the
questions that follow — both section 362(b)(3) and section
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546(b)(1)(A) contain an "interest in property" requirement — we
begin there.
1. "Interest in property." The threshold question is
whether the Commonwealth had a prepetition interest in the
Property.3 Although the parties are at loggerheads on a variety
of issues, they are in perfect harmony on two important
preliminary matters. First, the debtor acknowledges at this
point in the proceedings that it was indebted to the
Commonwealth under chapter 21E. This is as it should be, for
Massachusetts law makes it pellucid that once the Commonwealth
expends any funds in connection with the assessment or cleanup
of a contaminated property, a debt is created. See Acme
Laundry, 575 N.E.2d at 1090. Second, it is beyond cavil that at
the time the debtor sought the protection of the bankruptcy
court, the Commonwealth had not recorded a lien against the
Property.
These agreed facts bring us to the crucial question:
Did the Commonwealth have an interest in the Property at the
time the debtor filed its bankruptcy petition? On that issue,
3
The Commonwealth advances the argument that an interest in
property need not arise prior to the filing of a bankruptcy
petition in order to qualify for consideration under section
362(b)(3). Because we find that the Commonwealth had a
prepetition interest in the Property, see text infra, we need
not reach the question of whether a postpetition interest,
standing alone, could satisfy this element of the test.
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the harmony dissipates. The debtor contends that section
362(b)(3)'s "interest in property" requirement only can be
satisfied by the existence, prepetition, of a lien; and that,
since no such lien was of record when the bankruptcy court's
jurisdiction attached, the Commonwealth had no interest in the
Property (and, therefore, cannot qualify for the balm of section
362(b)(3)). The Commonwealth sings a different tune. It
asserts that the term "interest in property," as used in section
362(b)(3), is broader than the term "lien"; and that it had a
prepetition interest in the Property arising out of a medley of
factors, including its expenditures for cleanup, its right to
record a superlien, its notice to the debtor that it intended to
record such a lien, and its taking of all possible
administrative steps toward recordation.
We conclude that the term "interest in property" is not
synonymous with the term "lien." In arriving at this
conclusion, we look first to the plain language of section
362(b)(3). See Boivin v. Black, 225 F.3d 36, 40 (1st Cir. 2000)
(explaining that all statutory analysis must begin with the
language of the particular statute sub judice). The language of
an unambiguous statute normally determines its meaning. Freytag
v. Commissioner, 501 U.S. 868, 873 (1991); State of R.I. v.
Narragansett Indian Tribe, 19 F.3d 685, 698 (1st Cir. 1994). It
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follows inexorably that when a statute's plain language points
in a single direction, an inquiring court ordinarily should look
no further. United States v. Hilario, 218 F.3d 19, 23 (1st
Cir.), cert. denied, 121 S. Ct. 572 (2000). These principles
apply here.
Congress is familiar with the word "lien," and used
that word frequently in drafting the Bankruptcy Code. E.g., 11
U.S.C. §§ 361(a), 364, 544(a), 545. It is an orthodox tenet of
statutory construction that "where Congress includes particular
language in one section of a statute, but omits it in another
section of the same Act, it is generally presumed that Congress
acts intentionally and purposely in the disparate inclusion or
exclusion." Duncan v. Walker, 121 S. Ct. 2120, 2125 (2001)
(quoting Bates v. United States, 522 U.S. 23, 29-30 (1997)).
Honoring this tenet, we ascribe considerable significance to the
fact that section 362(b)(3) uses the term "interest in property"
r a t h e r t h a n t h e t e r m " l i e n . "
Giving Congress's word choices their full effect is an
especially attractive option here. After all, the text of
section 362(b)(3) is straightforward and leads to a perfectly
plausible result. That makes the case for plain meaning
extremely compelling. See Pritzker v. Yari, 42 F.3d 53, 67-68
(1st Cir. 1994) ("As a fundamental principle of statutory
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construction, we will not depart from, or otherwise embellish,
the language of a statute absent either undeniable textual
ambiguity or some other extraordinary consideration, such as the
prospect of yielding a patently absurd result."). We therefore
conclude that the term "interest in property" as used in section
362(b)(3) is broader than the term "lien." Accord Lincoln Sav.
Bank v. Suffolk County Treasurer (In re Parr Meadows Racing
Ass'n), 880 F.2d 1540, 1548 (2d Cir. 1989) (finding that state's
interest in property dated from the assessment of real property
taxes rather than from the recordation of a tax lien);4 Maryland
Nat'l Bank v. Mayor & City Council of Baltimore (In re Maryland
Glass Corp.), 723 F.2d 1138, 1142 (4th Cir. 1983) (concluding
that state had an interest in real property, in the form of a
right to require that sale proceeds be applied first to taxes
due at the time of sale, notwithstanding absence of lien); Fitch
v. Jones & Lamson Mach. Co. (In re Jones & Lamson Mach. Co.),
113 B.R. 124, 129 (Bankr. D. Conn. 1990) (finding that interest
4To be sure, the specific holding in Parr Meadows has been
rendered moot by the enactment of 11 U.S.C. § 362(b)(18)
(providing that the filing of a bankruptcy petition does not
operate as a stay "of the creation or perfection of a statutory
lien for an ad valorem property tax . . . if such tax comes due
after the filing of the petition"). The reasoning of the Parr
Meadows court nonetheless remains instructive, and we cite to
the opinion on that basis.
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in property arose when employees performed services for the
debtor rather than when lien was created).
In an effort to force-feed its narrow construction of
the phrase "interest in property," the debtor points out that
the Bankruptcy Code defines a lien as an "interest in property"
(specifically, as an "interest in property to secure payment of
a debt or performance of an obligation," 11 U.S.C. § 101(37)).
But the mere fact that a lien is one kind of interest in
property does not mean that a lien is the only kind of interest
in property recognized by section 362(b)(3). Cf. Maryland
Glass, 723 F.2d at 1141-42 (finding that the term "interest in
property," as used in 11 U.S.C. § 546(b), is not limited to
liens).
Finally, the debtor adverts to decisions that have
equated an interest in property under section 362(b)(3) with a
lien. E.g., Equibank, N.A. v. Wheeling-Pittsburgh Steel Corp.,
884 F.2d 80, 85 (3d Cir. 1989) (equating "interest in property"
with "lien" in context of real property taxes). Withal,
"[p]roperty interests are created and defined by state law,"
Butner v. United States, 440 U.S. 48, 55 (1979), and these cases
often turn on differences in state law, e.g, CS First Boston
Mortgage Capital Corp. v. RV Centennial P'ship (In re RV
Centennial P'ship), 202 B.R. 774, 777 (Bankr. D. Colo. 1996)
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(distinguishing case from similar bankruptcy cases based upon
differences in state property law). The fact that "interest in
property" and "lien" may be synonymous under the law of a
particular state or under a particular state statute does not
render the terms coextensive for purposes of the Bankruptcy
Code.
That ends this phase of our inquiry. We hold that
"interest in property," as that term is used in 11 U.S.C. §
362(b)(3), is unequivalent to, and broader than, the term
"lien." With that definitional building block in place, we move
to the question of whether, under Massachusetts law, the
Commonwealth had an interest in the Property.
The parties reasonably assume that, under the
environmental superlien statute, a debt comes into being once
the Commonwealth has incurred expenses relating to the cleanup
of a particular piece of property; the debt ripens into a lien
when recorded; and recording the lien simultaneously perfects
it. See Mass. Gen. Laws ch. 21E, § 13. But these reference
points have limited utility for purposes of our inquiry: after
all, a section 13 debt is not an interest in property, see In re
Microfab, Inc., 105 B.R. 152, 159 n.10 (Bankr. D. Mass. 1989),
and, as discussed above, the term "lien" cannot be employed as
a proxy for an "interest in property." Thus, we search for
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guidance beyond the four corners of the environmental superlien
statute.
In Acme Laundry, the Massachusetts Supreme Judicial
Court (SJC) dealt extensively with the superlien statute. While
the court did not directly answer the question before us, its
discussion is quite helpful. For example, the SJC limned the
statute's central purpose: to assure that the costs of
environmental cleanup are "borne by those who are responsible
for the release because they own or owned the land or because
they caused the spill." 575 N.E.2d at 1089. The importance
that the legislature attaches to this goal is illustrated by the
severe sanctions imposed on those who violate cleanup orders.
See Mass. Gen. Laws ch. 21E, § 11 (providing for civil
penalties, fines, and imprisonment). The SJC also made clear
that the liability created by the Commonwealth's expenditure of
funds is wide-ranging, encompassing future costs and immediately
triggering the right to record a lien. Acme Laundry, 575 N.E.2d
at 1090.
In this case, the debtor was liable to the Commonwealth
for past and future cleanup costs; the Commonwealth had a
present right to record a lien on the Property; and it had set
that process in motion by notifying the debtor of its intentions
and participating vigorously in the administrative hearing
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process. Viewing these facts through the prism of Acme Laundry,
we conclude, as did the district court, 229 Main St., 251 B.R.
at 192, that this amalgam — the Commonwealth's expenditures,
together with its notice of intent to record a lien and its
tenacious pursuit of that lien through administrative channels
— sufficed to satisfy section 362(b)(3)'s "interest in property"
requirement.
We find support for this conclusion in the only
reported case directly in point. In that case, In re Perona
Bros., Inc., 186 B.R. 833 (D.N.J. 1995), the district court
considered the question of a state's prepetition interest in
property in the context of an environmental superlien and
concluded that far less than what exists here was sufficient to
establish such an interest. The court determined that New
Jersey obtained an interest in the debtor's property on the date
the state notified the debtor that it would place a
superpriority lien on the property if it had to commence the
cleanup of toxic waste. Id. at 839. Although the state's only
prepetition act was this notice — the totality of the state's
cleanup efforts occurred postpetition, id. at 835 — the court
found that solitary act sufficient to establish an interest in
the property. Id. If the facts of Perona Bros. yielded an
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interest in property, then a fortiori, the facts of the instant
case can yield no less.
2. "Act to perfect." We next turn to the "act to
perfect" requirement of section 362(b)(3). When the
Commonwealth takes the step of recording under the environmental
superlien statute, that act both creates and perfects its lien.
See Mass. Gen. Laws ch. 21E, § 13. The debtor points out that
while the automatic stay applies to "any act to create, perfect,
or enforce," 11 U.S.C. § 362(a)(4), section 362(b)(3) only
exempts acts to perfect.5 Based on this discrepancy, it
concludes that an act which simultaneously creates and perfects
cannot qualify for an exception to the automatic stay under
section 362(b)(3).
At first glance, there seems to be a deep division of
authority on this point — some bankruptcy courts permitting
simultaneous postpetition creation and perfection of an interest
in property pursuant to section 362(b)(3) and others prohibiting
such a step. But this is not the issue that actually divides
those courts. Instead, the courts split over the issue of what
constitutes an interest in property, and that divergence drives
5In terms, the statute also exempts acts to maintain and
continue perfection. 11 U.S.C. § 362(b)(3). Those categories
are irrelevant for present purposes (and, thus, we disregard
them).
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the seeming disagreement over the status of "creation plus
perfection." In other words, courts that hew to the proposition
that "interest in property" means "lien" do not allow
simultaneous postpetition creation and perfection of liens,
while contrary-minded courts tend to hold the opposite.
This dichotomy makes perfect sense. The availability
of Section 362(b)(3) generally is thought to depend upon the
existence of a prepetition interest in property. See 3 Collier
on Bankruptcy ¶ 362.05[5] (Lawrence P. King ed., 15th ed. rev.
2001) ("Section 362(b)(3) does not authorize the creation of new
rights or interests for the creditor."). But cf. supra note 3.
If the particular interest is a lien, that lien must be in place
prepetition before section 362(b)(3) can come into play. An act
that both creates and perfects a lien postpetition cannot so
qualify. See, e.g., Louisville & Jefferson County Metro. Sewer
Dist. v. Excel Eng'g, Inc. (In re Excel Eng'g, Inc.), 224 B.R.
582, 589-90 (Bankr. W.D. Ky. 1998) (refusing to recognize
validity of postpetition creation and perfection of mechanic's
lien because creditor had no lien at the time debtor filed for
bankruptcy); Watervliet Paper Co. v. City of Watervliet (In re
Shoreham Paper Co.), 117 B.R. 274, 281-83 (Bankr. W.D. Mich.
1990) (finding postpetition creation and perfection of property
tax lien barred by automatic stay because no prepetition
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interest existed); Equitable Life Assur. Soc'y v. Ballentine
Bros. (In re Ballentine Bros.), 86 B.R. 198, 201 (Bankr. D. Neb.
1988) (holding that creation of a postpetition tax levy based on
a prepetition assessment was barred by the automatic stay);
North Side Lumber Co. v. Indus. Indem. Co. (In re North Side
Lumber Co.), 59 B.R. 917, 921-23 (Bankr. D. Or. 1986) (barring
filing of statutory lien that simultaneously created and
perfected an interest in property because lien did not exist at
the time of the bankruptcy filing).
Courts which recognize that there is no necessary
congruence between an interest in property and a lien end up in
a different place. Such courts routinely read the section
362(b)(3) exception to leave room for the simultaneous
postpetition creation and perfection of liens based on
prepetition interests in property. See, e.g., In re Summit
Ventures, Inc., 135 B.R. 483, 492 (Bankr. D. Vt. 1991) (allowing
postpetition creation and perfection of tax lien based on
prepetition interest in form of tax assessment); Jones & Lamson
Mach., 113 B.R. at 129 (permitting postpetition creation and
perfection of mechanic's lien where plaintiffs' work for debtor
constituted their prepetition interest in property); see also
Parr Meadows, 880 F.2d at 1548 (upholding, without discussion,
the simultaneous postpetition creation and perfection of a tax
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lien for section 362(b)(3) purposes where the county's
preexisting tax assessment constituted a prepetition interest in
the property).
In our view, the plain language of section 362(b)(3)
suggests the answer to the question of whether the environmental
superlien statute's simultaneous creation-plus-perfection model
fits under the statutory umbrella. The statute provides in
pertinent part that the automatic stay does not apply to "any
act to perfect . . . an interest in property. . . ." Bearing in
mind that "interest in property" is broader than "lien," see
supra Part III(A)(1), this language appears to cover the
simultaneous creation and perfection of a lien based on a
prepetition interest in property. An act that both creates and
perfects in one fell swoop is an act to perfect. Since section
362(b)(3) says that the filing of a bankruptcy petition does not
automatically stay an act to perfect, the simultaneous
postpetition creation and perfection of a lien may come within
the pertinent exception to the automatic stay so long as the
creditor holds a valid prepetition interest in the property.
We buttress this conclusion with two practical
observations. First, applying the debtor's interpretation —
that section 362(b)(3)'s use of the unembellished word "perfect"
means that an act of combined creation and perfection remains
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subject to the automatic stay — would lead to an absurd result.
Under the debtor's theory, an act that effected the concurrent
creation and perfection of a lien would, at one and the same
time, be both stayed (by section 362(a)(4)) and exempted from
the stay (by section 362(a)(3)). We decline to indulge in so
schizophrenic a reading of the Bankruptcy Code.
Second, statutory liens often are created and perfected
by the same act. Congress clearly intended section 546(b)'s
limitation on the debtor's avoidance power to extend to
statutory liens; after all, section 546(b) specifically refers
to section 545, which deals with the avoidance of statutory
liens. Since Congress incorporated section 546(b) into the
section 362(b)(3) exception, it is logical to infer that
Congress intended that statutory liens would, at times, be
exempt from the automatic stay. Under the debtor's
interpretation, a significant class of statutory liens — those
that are created and perfected by the same act — would never be
exempt from the automatic stay. It seems difficult to reconcile
this outcome with Congress's discernible intent.
For these reasons, we conclude that the act of
simultaneous creation and perfection effectuated by the
Massachusetts environmental superlien statute qualifies as an
"act to perfect" under section 362(b)(3).
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B. Section 546(b).
The Bankruptcy Code delineates the scope of a debtor's
power to avoid certain creditor initiatives. But this power is
circumscribed in certain respects. Insofar as it applies to
statutory liens, this power cannot be exercised to curtail "any
generally applicable law that permits perfection of an interest
in property to be effective against an entity that acquires
rights in such property before the date of perfection." 11
U.S.C. § 546(b)(1)(A). The purpose of section 546(b) is to
"protect, in spite of the surprise intervention of a bankruptcy
petition, those whom state law protects by allowing them to
perfect their liens or interests as of an effective date that is
earlier than the date of perfection." H.R. Rep. No. 95-595, at
371-72 (1978), reprinted in 1978 U.S.C.C.A.N. 6327. For a
particular creditor to reach the haven contemplated by section
546(b)(1)(A), three elements must coalesce: (1) the creditor
must act pursuant to a law of general applicability; (2) that
law must allow the creditor to perfect an interest in property;
and (3) such perfection must be effective against previously
acquired rights in the property.
The first of these elements requires little discussion.
For a law to be "generally applicable," it must apply to cases
within and without the bankruptcy sphere. See Makoroff v. City
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of Lockport, 916 F.2d 890, 892 (3d Cir. 1990). The debtor
concedes that the environmental superlien statute here at issue,
Mass. Gen. Laws ch. 21E, § 13, satisfies this definition. The
remaining two elements require more detailed elaboration. We
consolidate our discussion of them.
The debtor asserts that the superlien statute does not
permit "perfection of an interest in property to be effective
against an entity that acquires rights in such property before
the date of perfection." 11 U.S.C. § 546(b)(1)(A). To support
this assertion, it makes three claims: that the Commonwealth
held no prepetition interest in the Property; that perfection
(here, the act of recording) is a prerequisite to establishing
priority, but no act of recordation ever occurred; and that only
state statutes that contain specific "relation back" language
can come within the parameters of section 546(b). We address
these claims sequentially.
Accepting for argument's sake the debtor's view that
section 546(b) requires a interest in property which arises
prepetition, we nonetheless find the debtor's ipse dixit that
the Commonwealth had no prepetition interest in the Property
foreclosed by our earlier determination that the Commonwealth in
fact enjoyed such a prepetition interest. See supra Part
III(A)(1). The debtor nimbly skips to another point — the lack
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of a section 13 lien on the Property. To be sure, there is no
such lien — but that fact does not support the conclusion that
the debtor draws from it. The only reason that the Commonwealth
has not recorded a lien is that its efforts to convert its
interest in the Property into a full-blown lien have been
stalled by the debtor's demand for an adjudicative hearing.
This circumstance does not preclude us from resolving the issue
of whether the environmental superlien statute measures up to
the specific requirements imposed by section 546(b)(1)(A).
Last, the debtor suggests, citing a snippet plucked
from section 546(b)'s legislative history, that a state statute
must explicitly provide that perfection relate back to a
prepetition date in order to fit within the safe harbor
contemplated by section 546(b)(1)(A). There are three reasons
why we find this suggestion unconvincing. The short response to
it is that section 546(b)(1)(A) enunciates no such requirement,
and courts cannot limit legislation by cavalierly conjuring up
qualifications that the legislature has either eschewed or
neglected to consider. See Brogan v. United States, 522 U.S.
398, 408 (1998); United States v. Sebaggala ___ F.3d ___, ___
(1st Cir. 2001) [No. 99-1349, slip op. at 7-8]. Nor can
legislative history save this sinking ship. While legislative
history sometimes can be a useful aid to statutory construction,
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recourse to it is impermissible to vary the words of an
unambiguous statute where those words, straightforwardly
applied, yield an entirely plausible result. Narragansett
Indian Tribe, 19 F.3d at 698; United States v. Charles George
Trucking Co., 823 F.2d 685, 688 (1st Cir. 1987). That is the
case here.
The sockdolager is that the excerpt from the
legislative history which the debtor hawks, read in context,
does not contradict the statutory text. That excerpt states
that "the rights granted under this subsection prevail over the
trustee only if the transferee has perfected the transfer in
accordance with applicable law and the perfection relates back
to a date that is before the commencement of the case." H.R.
Rep. No. 95-595, supra, at 371. Contrary to the debtor's
importunings, this sentence does not impose a specific relation-
back requirement; it merely reiterates that, to qualify for the
safe harbor, the perfection must have a retroactive effect in
the sense that once an interest is perfected it will take
priority over earlier perfected interests. See Klein v. Civale
& Trovato, Inc. (In re Lionel Corp.), 29 F.3d 88, 93 (2d Cir.
1994) ("As long as an 'applicable law' authorizes perfection
after another party has acquired interests in the property, a
lienor fits within the exception."); In re Albert, 206 B.R. 636,
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640 (Bankr. D. Mass. 1997) (explaining that, once perfected, a
lien that takes priority over earlier liens satisfies the
requirements of section 546(b)(1)(A)); In re 1301 Conn. Ave.
Assocs., 117 B.R. 2, 11 (Bankr. D.D.C. 1990) (noting that
section 546(b) applies to any lien that takes precedence over an
earlier perfected interest in the property).
The debtor has one more shot in its sling. It invites
us to accord decretory significance to the fact that the
legislative history mentions a section of the Uniform Commercial
Code which contains an explicit "relation back" provision,
U.C.C. § 9-301(2),6 as an example of a statute that would find
sanctuary in the safe harbor created by section 546(b)(1)(A).
See H.R. Rep. No. 95-595, supra, at 371. Using this as a
springboard, the debtor leaps to the conclusion that section
546(b)(1)(A) implicitly requires that a qualifying state statute
contain an explicit "relation back" provision. This is simply
too much of a stretch: while U.C.C. § 9-301(2) is one example
of a state statute that fits under the wide umbrella of section
546(b)(1)(A), other types of statutes can find shelter there as
well. The key is not relation back, but, rather, whether the
6
Under U.C.C. § 9-301(2) the perfection of a purchase money
security interest within a certain interval relates back to the
date upon which the interest was acquired. See, e.g., In re
Fiorillo & Co., 19 B.R. 21, 23 (Bankr. S.D.N.Y. 1982).
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statute in question provides for an interest that, once
perfected, trumps earlier-filed claims. See Lionel Corp., 29
F.3d at 93; Albert, 206 B.R. at 640; 1301 Conn. Ave. Assocs.,
117 B.R. at 11.
The three cases that the debtor cites in support of its
argument that section 546(b)(1)(A) requires an explicit
relation-back provision — Makoroff, 916 F.2d 890, Shoreham
Paper, 117 B.R. 274, and In re Prichard Plaza Assocs. Ltd.
P'ship, 84 B.R. 289 (Bankr. D. Mass. 1988) — are unhelpful. We
review them briefly.
Makoroff involved a situation in which local taxing
authorities claimed, pursuant to section 546(b)(1)(A), that they
had a right to a priority lien on the debtor's property to
secure unpaid property taxes accruing after bankruptcy
proceedings had been instituted. 916 F.2d at 891. The court
found section 546(b)(1)(A) inapplicable because the debt did not
relate back to any prepetition interest in the taxed property.
Id. at 893-96. The case stands for the proposition that section
546(b)(1)(A) requires a prepetition interest, not for the
proposition that a statute must contain an explicit relation-
back provision to qualify under section 546(b)(1)(A).
Shoreham Paper is similarly inapposite. There, the
bankruptcy court held that a tax lien created and perfected
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postpetition did not come within the ambit of 546(b)(1)(A)
because the lien did not relate back to a prepetition date. 117
B.R. at 281. The case states no rule requiring that a statute
have an explicit relation-back requirement, and moreover, it is
distinguishable on the ground that the actual amount of the tax
was determined, and the tax bill issued, after the taxpayer had
filed for bankruptcy. See id. at 275-76. This, the court
found, did not give rise to a prepetition interest. Id. at 281.
We regard Prichard Plaza as an outlier. There, the
bankruptcy court coined an oddly suggestive phrase in construing
section 546(b) as applying only to statutes that accorded
"retroactive priority effect." 84 B.R. at 301. But it is not
clear whether the court was advocating a strict requirement that
qualifying state statutes must contain specific "relation back"
language; and, at any rate, a later case from the same court
repudiates such a requirement. See Microfab, 105 B.R. at 158;
see also 1301 Conn. Ave. Assocs., 117 B.R. at 10-11 (rejecting
the idea that section 546(b) contains a strict retroactivity
requirement); cf. In re 1350 Piccard Ltd. P'ship, 148 B.R. 83,
85 (Bankr. D.D.C. 1992) (concluding that any contrary suggestion
in Prichard Plaza has been abrogated).
As opposed to these cases, we find more persuasive the
view of the only other court of appeals to have addressed the
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precise question. In Lionel Corp., 29 F.3d at 93, the Second
Circuit discerned "nothing in § 546(b) indicating that it
applies only when the lienor fits within a 'relation-back'
statute." We share this view and, accordingly, we hold that
there is no requirement that the "generally applicable law"
referenced in section 546(b) contain an explicit relation-back
mechanism.
We now circle back to the original inquiry: whether
the Massachusetts environmental superlien statute meets the
second and third of section 546(b)(1)(A)'s stated criteria, that
is, whether it "permits perfection of an interest in property to
be effective against an entity that acquires rights in such
property before the date of perfection." The gist of section
546(b)(1)(A) is that "the filing of a bankruptcy petition does
not prevent the holder of an interest in property from
perfecting its interest if, absent the bankruptcy filing, the
interest holder could have perfected its interest against an
entity acquiring rights in the property before the date of
perfection." 5 Collier on Bankruptcy, supra, ¶ 546.03[2][a].
In this instance, the environmental superlien statute permits
the perfection of an interest in property by recording,
registering, or filing that interest. See Microfab, 105 B.R. at
156. Such perfection plainly is effective against entities
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which already had acquired rights in the property. See Mass.
Gen. Laws ch. 21E, § 13 ("Any lien recorded, registered or filed
pursuant to this section shall have priority over any
encumbrance theretofore recorded, registered or filed with
respect to any site . . . described in such statement of
claim."); see also Microfab, 105 B.R. at 156 (explaining that
the Commonwealth's lien trumps all other encumbrances, no matter
when filed). These credentials satisfy section 546(b)(1)(A)'s
third criterion, see Lionel Corp., 29 F.3d at 93, and,
therefore, the environmental superlien statute meets all the
eligibility requirements for inclusion within section
546(b)(1)(A).
V. CONCLUSION
We need go no further. The statutory lien that the
Commonwealth wishes to record meets the combined requirements of
section 362(b)(3) and 546(b)(1)(A) and therefore falls within
the exception to the automatic stay carved out by those
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provisions.7 Consequently, we uphold the decisions of the lower
courts.
Affirmed.
7 In its appellate briefs, the debtor theorizes that placing
environmental superliens outside the Bankruptcy Code's automatic
stay provision frustrates congressional intent (and, therefore,
offends the Supremacy Clause). Because this argument was not
raised below, it is waived. See Teamsters, Chauffeurs,
Warehousemen & Helpers Union, Local No. 59 v. Superline Transp.
Co., 953 F.2d 17, 21 (1st Cir. 1992) ("If any principle is
settled in this circuit, it is that, absent the most
extraordinary circumstances, legal theories not raised squarely
in the lower court cannot be broached for the first time on
appeal."). In any event, our conclusion that the superlien
statute falls within an exception created by federal law
precludes any persuasive argument that Congress intended
otherwise.
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229 Main Street Ltd. Partnership v. Massachusetts Department of Environmental Protection (In Re 229 Main Street Ltd. Partnership)
Court: Court of Appeals for the First Circuit
Date filed: 2001-08-22
Citations: 262 F.3d 1, 266 B.R. 1155
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