Ricky Wayne Bracewell v. Walter W. Kelley

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JUNE 30, 2006
No. 05-11951 THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 04-00033-CV-HL-6
BKCY No. 02-60546-BKC-JTL

In Re:

RICKY WAYNE BRACEWELL,

Debtor.

-------------------------------------------------

RICKY WAYNE BRACEWELL,

Plaintiff-Appellee,

versus

WALTER W. KELLEY,

Defendant-Appellant.

________________________

Appeal from the United States District Court
for the Middle District of Georgia
_________________________

(June 30, 2006)
Before CARNES, HULL and PRYOR, Circuit Judges.

CARNES, Circuit Judge:

This is an appeal by the trustee of the bankruptcy estate of Ricky Bracewell

from an order of the district court excluding from the estate a payment Bracewell

received under the Agricultural Assistance Act of 2003 for crop losses he had

sustained. The appeal turns on the issue of whether a crop disaster payment is

property of the debtor’s estate under 11 U.S.C. § 541(a)(1) or (a)(6) if the losses

occurred before the bankruptcy filing or conversion date but the legislation

authorizing the payment came afterwards. The bankruptcy court ruled that the

payments were property of the estate under § 541(a)(1) but not under (a)(6). On

Bracewell’s appeal, the district court ruled that the payment was not property of the

bankruptcy estate under either subsection of § 541. This is the trustee’s appeal

from that ruling.

I.

The facts have been stipulated throughout these proceedings. Ricky

Bracewell planted approximately 223 acres of seed wheat in November 2000 and

approximately 374 acres of seed cotton in May 2001. A drought in 2001

substantially reduced Bracewell’s crop yields. As a result, he was unable to repay

the debts he had incurred to produce the crops. Bracewell filed a Chapter 12

2
bankruptcy petition on May 29, 2002, and he converted it to a Chapter 7 case on

January 2, 2003.

In July 2002, while Bracewell’s bankruptcy petition was pending, the

Emergency Farmer and Rancher Assistance Act of 2002 was introduced in the

House of Representatives. H.R. 5310, 107th Cong. (2002). That proposed

legislation was not enacted. In January 2003, after Bracewell had converted his

bankruptcy case to chapter 7, Congress reconvened and the legislation was

reintroduced as The Agricultural Assistance Act of 2003. H.R.J. Res. 2, 108th

Cong. (2003). The Act was signed into law on February 20, 2003. Agricultural

Assistance Act of 2003, Pub. L. No. 108-7, div. N, tit. II, 117 Stat. 538 (2003). It

provided for monetary assistance to farmers who had suffered losses to their 2001

or 2002 crops due to weather-related disasters or emergency conditions. Id. §

202(a), 117 Stat. at 538. Under the Act farmers who had suffered losses to both

their 2001 and 2002 crops could receive assistance for only one year’s loss, the

year to be selected by each farmer. Id. § 202(c), 117 Stat. at 538. On January 30,

2004, Bracewell applied to the Department of Agriculture’s Farm Service Agency

for a payment as a result of the losses he had suffered to his 2001 wheat and cotton

crops. He received that payment, in the amount of $41,566, on February 19, 2004,

while his Chapter 7 case was still pending in the bankruptcy court.

3
 II.

A.

We begin our legal discussion by taking up the question of whether the crop

disaster payment to Bracewell is property of the bankruptcy estate under §

541(a)(1), which is an issue of first impression in this circuit. Section 541(a)(1)

defines property of the bankruptcy estate as “all legal or equitable interests of the

debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1).

The plain language of that provision is clear, and it makes the commencement of

the bankruptcy case the key date for property definition purposes.1 That means the

property of the debtor’s estate is property the debtor had when the bankruptcy case

commences, not property he acquires thereafter. Our most closely analagous

decision, as well as the only two courts of appeals decisions that are directly on

1
There is one wrinkle in cases, like the present one, which began as Chapter 12
proceedings but were converted to Chapter 7. Section 1207(a) of the Bankruptcy Code, which
applies to Chapter 12 cases, expands the definition of property of the estate to include: “all
property of the kind specified in such section [§ 541] that the debtor acquires after the
commencement of the case but before the case is closed, dismissed, or converted to a case under
chapter 7 of this title . . . .” 11 U.S.C. § 1207(a)(1). The practical effect of that expansion in the
temporal limitation is to move the cutoff date for the acquisition of property from the filing of
the bankruptcy case to the time it is converted under Chapter 7. In the present case that
provision makes no difference because Bracewell’s crop losses occurred before his bankruptcy
petition was filed, and Congress’ enactment of the legislation authorizing payments occurred not
only after Bracewell’s petition was filed but also after he converted it to a Chapter 7 proceeding.
Probably for that reason, the parties do not mention § 1207(a)(1) but instead stake their positions
regarding this issue on § 541(a)(1). We will focus our discussion on § 541(a)(1) as well.

4
point, confirm that the clear temporal limitation which is so plain on the face of the

statutory language controls.

The specific issue in Witko v. Menotte (In re Witko), 374 F.3d 1040 (11th

Cir. 2004), was whether a legal malpractice claim was property of the estate. Id. at

1042. After Witko filed a petition for bankruptcy, he was denied alimony in a

separate legal proceeding. Id. at 1042. Thereafter, and while his bankruptcy case

was still pending, Witko sued his divorce counsel for malpractice. Id. The trustee

intervened, seeking a determination that Witko’s malpractice claim was property of

the estate. Id. We held that it was not, because a debtor’s estate cannot be greater

than the property rights the debtor had at the commencement of the case. See id. at

1042–43. We reasoned that: “Applying the appropriate state law, Witko’s legal

malpractice cause of action did not exist until his alimony action concluded with an

adverse outcome that was proximately caused by his attorney’s negligence,” id. at

1043, and that outcome did not happen until after the commencement of the

bankruptcy case. Id. at 1044. As a result, the property interest in the malpractice

claim did not come into existence until after the bankruptcy case had already

commenced. Id. The same is true here. Bracewell’s property interest in a claim

to payments under the Agricultural Assistance Act of 2003 did not come into

5
existence or accrue until that legislation became law, which was after his

bankruptcy petition had been filed.

The two federal appeals court decisions directly on point are Drewes v. Vote

(In re Vote), 276 F.3d 1024 (8th Cir. 2002), and Burgess v. Sikes (In re Burgess),

438 F.3d 493 (5th Cir. 2006) (en banc). In the Eighth Circuit case the debtor,

Vote, filed a bankruptcy petition on September 7, 1999, which was six weeks

before legislation was passed providing payments for crop losses suffered during

1999. Vote, 276 F.3d at 1026. Thereafter, Vote received more than $33,000 under

that legislation because he had not been able to plant a crop in 1999. Id. The

Eighth Circuit held that the payments were not “legal or equitable interests of the

debtor in property as of the commencement of the case” within the meaning of §

541(a)(1). Id. at 1027. It reasoned that to include the payments in the estate would

give the trustee rights beyond those that Vote had at the commencement of the

case, because Vote “had no interest of any kind” until the assistance legislation

became law. Id.

The Fifth Circuit, sitting en banc, has also recently addressed this precise

issue. The Burgess case involved disaster payments under the Agricultural

Assistance Act of 2003, the same legislation involved in this case. See Burgess,

438 F.3d at 495. The only factual difference from this case is that Burgess had

6
received a discharge from bankruptcy before the legislation was enacted. See id.

The trustee filed a motion to re-open. Id. The Fifth Circuit held that the case

should not be re-opened because the assistance payments were not property of the

estate. Id. at 496. It began with the proposition that only property “‘in which the

debtor has a legal or equitable interest at the time of bankruptcy comes into the

estate.’” Id. at 499 (quoting Goff v. Taylor (In re Goff), 706 F.2d 574, 578 (5th

Cir. 1983) (quotation marks omitted), overruled on other grounds by Patterson v.

Shumate, 504 U.S. 753, 112 S. Ct. 2242 (1992)). The debtor did not have a legal

or equitable interest in crop loss payments under legislation that had not been

enacted at the time he filed his bankruptcy petition. Id. at 503. He had only a

“mere hope” that legislation would be enacted providing payments to cover his

crop loss. Id. If a hope at the time of filing were enough, the Court explained,

“any postpetition legislation or contract could retroactively create property of the

estate.” Id. The Burgess court also held that the crop loss itself was not property

of the estate which would bring in the disaster payment as proceeds. Id. If the fact

that the crop loss preceded the filing were enough by itself, the language of §

541(a)(1) —“a legal or equitable interest as of the commencement of the

case”—would have no effect. Id. There can be no legal or equitable interest in

7
payment without law authorizing it, and at the time of filing that law did not exist.

See id.

The Ninth Circuit’s decision in Sliney v. Battley (In re Schmitz), 270 F.3d

1254 (9th Cir. 2001), is in accord with these decisions although Schmitz presented

a slightly different question. After the filing of his bankruptcy petition, Schmitz

was awarded a fishing quota or right for future years. Id. at 1255. The quota was

calculated based on Schmitz’s pre-filing fishing history. Id. The Ninth Circuit

held that the quota rights were not part of the bankruptcy estate because the

regulations creating those rights were not adopted until after the bankruptcy

petition was filed. Id. at 1257–58. Even though the quota was calculated based on

Schmitz’s pre-filing fishing history, that history had no value until the regulations

were promulgated. Id. at 1257. At the time he filed, Schmitz had nothing beyond

the hope based on his interest. Id.

Thus, the circuits that have considered the issue are in agreement that no

legal or equitable interest exists until assistance legislation becomes law; before

then the debtor has only a hope and maybe an expectation that legislation will be

enacted for his relief, but that is not enough. See In re Schmitz, 270 F.3d at 1257

(holding that “a hope, a wish and a prayer” is insufficient under § 541(a)(1)). We

join the other circuits and conclude that until legislation was enacted authorizing

8
the disaster payments and specifying the criteria for those payments, Bracewell had

no legal or equitable interest in a payment. This is true even though before he filed

his case he satisfied the criteria for payment that, as it turns out, Congress would

eventually require. The fact that Congress regularly enacts this type of legislation

did not give Bracewell any legal or equitable interest in the payment he would

receive if Congress acted as it had in the past. “If” is a big word. Cf. Barnette v.

Evans, 673 F.2d 1250, 1252 (11th Cir. 1982) (rejecting the rationale of a

bankruptcy court that we characterized as: “if we had some ham, we could have

ham and eggs, if we had some eggs”).

Not until the enactment of the legislation elevated Bracewell’s hope to an

entitlement did it become an interest cognizable under § 541(a)(1). As the district

court explained in its opinion in this case:

Without the crop disaster legislation, growing crops and suffering
crop loss—no matter how sufficiently rooted to the pre-bankruptcy
past—are of no legal significance and create no right. This is why the
bankruptcy court’s statement, “Upon the occurrence of the disaster,
[Appellant] had the right to collect disaster payments from the
government, if such legislation [were] passed,” employs circular
reasoning. Indeed, it is the crop disaster legislation that makes
growing and suffering certain crop losses relevant by attaching new
legal consequences to events completed before the legislation’s
enactment.

Bracewell v. Kelley (In re Bracewell), 322 B.R. 698, 707 (M.D. Ga. 2005).

9
 Our conclusion that a debtor has no cognizable interest in a payment that

Congress has not yet authorized through legislation is also in accord with most of

the bankruptcy courts that have considered the issue. Cf. Boyett v. Moore (In re

Boyett), 250 B.R. 817, 822 (Bankr. S.D. Ga. 2000); Drewes v. Lesmeister (In re

Lesmeister), 242 B.R. 920, 925 (Bankr. D.N.D. 1999). We are aware that Lemos

v. Rakozy (In re Lemos), 243 B.R. 96 (Bankr. D. Idaho 1999), is to the contrary

but do not find that court’s reasoning to be persuasive, a sentiment that is

apparently now shared by the very court that issued the decision. See In re

Stallings, 290 B.R. 777, 781 (D. Idaho 2003) (noting that “the legal landscape has

changed” since the Lemos decision was issued).

The existence of § 1207, which we noted in passing earlier in this opinion,

see p.7 n.1, above, provides an additional reason for concluding that § 541(a)(1)’s

language defining property interests of the estate as those that existed “as of the

commencement of the case” clearly is a temporal limitation. Congress enacted

Chapter 12 of the Bankruptcy Code, the chapter under which Bracewell originally

filed for bankruptcy, in 1986. Bankruptcy Judges, United States Trustees, and

Family Farmer Bankruptcy Act of 1986, Pub. L. 99-554, § 255, 100 Stat. 3088

(Oct. 27, 1986). Section 1207 expands, for cases falling under it, the definition of

property of the estate under § 541 to include “all property of the kind specified in

10
such section that the debtor acquires after the commencement of the case but

before the case is closed, dismissed, or converted to a case under chapter 7 of this

title, whichever occurs first.” 11 U.S.C. § 1207(a)(1). If § 541(a)(1) did not

generally limit the property of the estate to that which existed at the time of filing,

there would be no reason for § 1207(a)(1) to extend the cutoff point to the earlier

of the closing, dismissal, or conversion date in Chapter 12 cases. Reading §

541(a)(1) the way the trustee and our dissenting colleague urge would render §

1207(a)(1) largely superfluous, and statutes ought to be read so that every

provision has a purpose and field of operation. See, e.g., TRW Inc. v. Andrews,

534 U.S. 19, 31, 122 S. Ct. 441, 449 (2001) (“It is a cardinal principle of statutory

construction that a statute ought, upon the whole, to be so construed that, if it can

be prevented, no clause, sentence, or word shall be superfluous, void, or

insignificant.”) (internal quotation marks omitted); Conn. Nat’l Bank v. Germain,

503 U.S. 249, 253, 112 S. Ct. 1146, 1149 (1992) (“[C]ourts should disfavor

interpretations of statutes that render language superfluous.”); Bouchar Transp. Co.

v. Updegraff, 147 F.3d 1344, 1351 (11th Cir. 1998) (“[W]e avoid statutory

constructions that render provisions meaningless.”).

11
 B.

The dissenting opinion in this case follows the tracks of the Burgess

dissenters and joins them on what is essentially one long, forced march against the

plain language that governs the issue. Congress said “property as of the

commencement of the case,” 11 U.S.C. § 541(a)(1), and that is the language we

must apply. The Burgess dissenters contended that § 541(a)(1) and (6) are

“sufficiently broad to encompass the disaster payments.” Burgess, 438 F.3d at 508

(Jones, C.J., dissenting). Their argument was that the purposes of bankruptcy

require a “comprehensive administration of the debtor’s property,” which justifies

a broad reading of § 541. Id. at 509. A broad reading is one thing; a reading

contrary to the plain meaning of clear statutory language is another. Our

dissenting colleague, like the dissenters in Burgess, would read § 541(a)(1)’s plain

statutory language “as of the commencement of the case” so “broadly” that it no

longer means “as of the commencement of the case.” We do not question their

good faith or the sincerity of their belief that construing the language as they do

would better further what they see as the purposes of the Bankruptcy Code and

their notion of good policy. We do, however, disagree with the implicit premise of

their position: that it is the function of judges to modify legislative language to

12
better suit what they perceive to be Congress’ purposes and the felt necessities of

their policy views.

The Supreme Court and this Court have warned on countless occasions

against judges “improving” plain statutory language in order to better carry out

what they perceive to be the legislative purposes. See, e.g., Lamie v. U.S. Trustee,

540 U.S. 526, 538, 124 S. Ct. 1023, 1032 (2004) (“Our unwillingness to soften the

import of Congress’ chosen words even if we believe the words lead to a harsh

outcome is longstanding. It results from deference to the supremacy of the

Legislature, as well as recognition that Congressmen typically vote on the language

of a bill.”) (internal quotation marks omitted); Artuz v. Bennett, 531 U.S. 4, 10,

121 S. Ct. 361, 365 (2000) (“Whatever merits these and other policy arguments

may have, it is not the province of this Court to rewrite the statute to accommodate

them. . . . [T]he text . . . may, for all we know, have slighted policy concerns on

one or the other side of the issue as part of the legislative compromise that enabled

the law to be enacted.”); Conn. Nat’l Bank, 503 U.S. at 254, 112 S. Ct. at 1149

(“When the words of a statute are unambiguous, then, this first canon is also the

last: judicial inquiry is complete.”) (internal quotation marks omitted); Badaracco

v. Comm’r of Internal Revenue, 464 U.S. 386, 398, 104 S. Ct. 756, 764 (1984)

(“Courts are not authorized to rewrite a statute because they might deem its effects

13
susceptible of improvement.”); Wright v. Sec’y for Dept. of Corr., 278 F.3d 1245,

1255 (11th Cir. 2002) (“Our function is to apply statutes, to carry out the

expression of the legislative will that is embodied in them, not to ‘improve’

statutes by altering them.”); Harris v. Garner, 216 F.3d 970, 976 (11th Cir. 2000)

(en banc) (“We will not do to the statutory language what Congress did not do

with it, because the role of the judicial branch is to apply statutory language, not to

rewrite it.”).

If, in the face of plain statutory language, an opinion runs on about purposes

and policies, it is a sure sign the revision knife is out and an effort is being made to

slice and dice clear language to make way for the policy preferences of the writer.

It justifies Justice Scalia’s recent criticism that talk about “advancing ‘the purpose

of the Act’” is the “last resort of extravagant interpretation.” Rapanos v. United

States, __ U.S. __, __ S. Ct. __, 2006 WL 1667087, at *21 (June 19, 2006)

(plurality opinion). As he explained, it is an approach that runs counter to the truth

“that no law pursues its purpose at all costs, and that the textual limitations upon a

law’s scope are no less a part of its ‘purpose’ than its substantive authorizations.”

Id. The dissenting opinion in this case refines the extravagant interpretation

approach by suggesting that the statutory language “property as of the

commencement of the case” is ambiguous as to whether it covers an interest

14
created by a pre-petition crop loss. We disagree. The language is perfectly clear.

It covers exactly what it says it covers, which are any interests that are “property as

of the commencement of the case” and none that are not. If an interest is not

property on the date a case is filed, it is not covered.

The Burgess dissenters relied primarily on two Supreme Court decisions,

Segal v. Rochelle, 382 U.S. 375, 86 S. Ct. 511 (1966), and United States v.

Whiting Pools, 462 U.S. 198, 103 S. Ct. 2309 (1983), both of which are readily

distinguishable. In Segal the Supreme Court held that certain loss-carryback tax

refunds were property of the bankruptcy estate. 382 U.S. at 380, 86 S. Ct. at 515.

The debtors argued that the refunds were not property of the estate because,

although the losses entitling them to the refunds were suffered before they filed

their bankruptcy petitions, under the statutory scheme no refunds could be claimed

until the end of the year. Id. at 380, 86 S. Ct. at 515. According to the Court, the

purposes of the Bankruptcy Act, rather than a particular federal or state definition,

would ultimately determine whether any particular item constituted property of the

estate. Id. at 379, 86 S. Ct. at 515. The Court noted that “property” of the

bankruptcy estate should be broadly construed and that “an interest is not outside

its reach because it is novel or contingent or because enjoyment must be

postponed.” Id. The Court ultimately held that the refund claim was “sufficiently

15
rooted in the pre-bankruptcy past and so little entangled with the bankrupts’ ability

to make an unencumbered fresh start that it should be regarded as ‘property.’” Id.

at 380, 86 S. Ct. at 515. According to the Burgess dissent, Segal means that a loss

as of the date of bankruptcy “can later yield property includable in the debtor’s

estate.” Burgess, 438 F.3d at 511.

The Segal decision cannot mean what the Burgess dissenters say it does

about the present Bankruptcy Code, because Segal was decided twelve years

before Congress overhauled the Bankruptcy Code in 1978. It was during that

overhaul that Congress added the critical language of § 541(a)(1), restricting

property of the estate to that which existed “as of the commencement of the case.”

See DirecTV, Inc. v. Brown, 371 F.3d 814, 817 (11th Cir. 2004) (“[C]hanges in

statutory language generally indicate an intent of Congress to change the meaning

of the statute.”) (internal quotation marks, alterations, and citations omitted);

Muscogee Nation v. Hodel, 851 F.2d 1239, 1444 (D.C. Cir. 1988) (“Where the

words of a later statute differ from those of a previous one on the same or related

subject, the Congress must have intended them to have a different meaning.”). The

§ 541(a)(1) definition, with its explicit temporal limitation, controls our analysis

rather than Segal’s test. See Burgess, 438 F.3d at 498 (“Segal’s ‘sufficiently

rooted’ test did not survive the enactment of the Bankruptcy Code.”); In re Vote,

16
276 F.3d at 1026 (“To find for the trustee on the basis that the payments were

‘sufficiently rooted’ would allow the trustee to assert more rights than Vote had at

the commencement of his case. The legislative history of the 1978 Bankruptcy

Code makes clear that despite the broad scope of § 541, it is not intended to

[expand] the debtor’s rights against others more than they exist at the

commencement of the case.”) (internal quotation marks omitted). The Segal

decision told us how to define property under the old bankruptcy code, before it

was amended in 1978 to include an explicit definition of property. We will not

attribute to the Supreme Court an intent to construe legislative language that it had

not seen and which would not even exist for another dozen years.

Our dissenting colleague relies on the Segal decision, as did the Burgess

dissenters, and we think that his reliance is misplaced for the same reasons theirs

was. He does add another component to the argument about Segal. In support of

the proposition that Segal’s “sufficiently rooted” test should be allowed to trump

the later-enacted, plain language of § 541(a)(1), he cites our decision in In re

Alvarez, 224 F.3d 1273 (11th Cir. 2000). In that case, as in our Witko decision, we

had to determine whether the debtor’s legal malpractice action was part of the

bankruptcy estate. Id. at 1275. We held that it was. Id. at 1278. The basis for the

legal malpractice action was the filing of the bankruptcy case itself. Id. at 1275.

17
The debtor had instructed his attorney to file a Chapter 11 reorganization petition

on his behalf, but that attorney filed a Chapter 7 petition instead. Id.

We began our analysis in Alvarez by examining the legal malpractice claim,

looking to its elements under Florida law to determine exactly when the cause of

action accrued. Id. at 1276–77. We determined that the cause of action had

accrued under state law at the moment Alvarez’s bankruptcy petition was filed and,

therefore, concluded that Alvarez had a cause of action “as of the commencement”

of his bankruptcy case which was property of the estate under § 541(a)(1). Id. at

1278. This is precisely the same analysis which we later applied in the Witko case

and it is not dependent at all on the Segal “sufficiently rooted” analysis. See

Witko, 374 F.3d at 1042–43. This is the holding of Alvarez and the analysis that

we are bound to follow: we look to state law to determine when a claim arises, and

if it arises on or before the commencement of the bankruptcy case, it is part of the

bankruptcy estate.

The dissent has been led astray by some superfluous language in Alvarez

which was not necessary to its holding. The Alvarez opinion says that it is not

deciding if federal or state law governs the question of whether the malpractice

action was property of the estate, because under either approach the claim was

property of the estate. Alvarez, 244 F.3d at 1276 (“We decline to decide the

18
question of which law governs this determination, because in either event, we

conclude that this legal malpractice claim is property of Alvarez’s bankruptcy

estate.”). It examines Florida law and concludes that under it the claim would be

property of the estate if state law governs the definition of property. It then

explains why under the Segal test the claim would also be property of the estate if

federal law governs the definition of property. Id. at 1278–79.

The real reason that the Alvarez panel did not have to decide whether state

or federal law governed the definition of property for purposes of the bankruptcy

estate is that question had already been decided. Prior panel decisions had held

that the question of whether a debtor’s interest in property is property of the estate

is a federal question, but the definition of property, issues about the nature and

existence of the debtor’s interest, are issues of state law. See, e.g., Hall Motors,

Inc. v. Lewis (In re Lewis), 137 F.3d 1280, 1283 (11th Cir. 1998); Southtrust Bank

of Alabama v. Thomas (In re Thomas), 883 F.2d 991, 995 (11th Cir. 1989). The

Alvarez panel was bound by those decisions, although its implication that the

question was still open was harmless to that appeal since it did not affect the result.

It has, however, confused our colleague. In any event, to the extent that anything

in the Alvarez opinion supports the dissent’s position it is contrary to the holdings

in In re Lewis and In re Thomas, and under the prior panel precedent rule we are

19
obliged to follow those earlier decisions. See United States v. Hornaday, 392 F.3d

1306, 1316 (11th Cir. 2004); Cohen v. Office Depot, Inc., 204 F.3d 1069, 1072

(11th Cir. 2000). The Witko decision, which came after Alvarez, did the right

thing in following the earlier panel decisions.

The Burgess dissenters’ reliance on the Supreme Court’s decision in

Whiting Pools is also misplaced, but for a different reason. In that case the Court

addressed the question of whether certain personal property seized by the IRS the

day before the debtor filed for bankruptcy was subject to being turned over to the

debtor under § 542(a) of the Bankruptcy Code. United States v. Whiting Pools,

462 U.S. 198, 199–200, 103 S. Ct. 2309, 2310–11 (1983). The case was about §

542(a), but § 541(a)(1) was implicated because § 542(a) authorizes turnover of

property in another’s possession only if it is property of the estate. See id. at

205–07, 103 S. Ct. at 2313–15. For that reason, the Court had to determine

whether the seized property the debtor wanted the IRS to return was property of the

estate. The Court stated that “[a]lthough [section 541(a)(1) and section 542(a)]

could be read to limit the estate to those interests of the debtor in property at the

time of the filing of the petition, we view them as a definition of what is included

in the estate, rather than as a limitation.” Id. at 203, 103 S. Ct. at 2312. It is this

20
statement that the Burgess dissenters seized upon. See Burgess, 438 F.3d at 510

(Jones, C.J., dissenting).

We do not read that decision as they do. We do not interpret the statement

quoted from the Whiting Pools opinion to hold that § 541(a)(1) does not mean

what it says; we do not interpret it to mean that provision does not impose a

temporal limitation on the definition of property of the estate. Instead, we interpret

the statement in the context in which it was made. The Court was dealing with

property for which the debtor had legal title but not possession at the key time,

which was the date the reorganization petition was filed in that Chapter 11 case.

The Court concluded in Whiting Pools, that Ҥ 542(a) grants to the estate a

possessory interest in certain property of the debtor that was not held by the debtor

at the commencement of reorganization proceedings.” 462 U.S. at 207, 103 S. Ct.

at 2314–15 (emphasis added). The Court applied the § 541(a)(1) temporal

limitation to whether the debtor had legal title of the property at the time the estate

was created, as we do here. It also held that § 541(a)(1) did not require the debtor

to have possession of the property, in addition to a legal or equitable interest in it,

to the extent that § 542(a) permits the trustee to take possession.

In other words, in Whiting Pools the Court determined that § 541(a)(1) was

“intended to include in the estate any property made available to the estate by other

21
provisions of the Bankruptcy Code,” and that § 541(a)(1) would not limit other

Code provisions which bring into the estate property that the debtor did not have a

possessory interest in at the time of filing. Id. at 205, 103 S. Ct. at 2314–15.

Thus, in Whiting Pools, the debtor did have interests in the disputed property “as

of the commencement of the case.” The Whiting Pools opinion explains how §

542(a) works together with § 541(a)(1). It does not purport to decide how §

541(a)(1) operates in a case, like this one, in which § 542(a) is not implicated.

Our dissenting colleague argues that decisions of the Supreme Court and this

Court establish that a crop loss automatically creates property rights. The Supreme

Court cases that the dissent relies on are two cases from the 1800’s, Williams v.

Heard, 140 U.S. 529, 11 S. Ct. 885 (1891), and Milnor v. Metz, 41 U.S. 221

(1842). Of course, both of those decisions pre-date the adoption of the Bankruptcy

Code, and the critical language we are interpreting, by a century or so. Not only

that, but both cases are distinguishable because the debtors had claims which pre-

existed their bankruptcy filings. In Williams the Court noted that “the act of

congress did not create the rights. They had existed at all times since the losses

occurred.” Williams, 140 U.S. at 541, 11 S. Ct. at 888. Similarly, in Milnor the

Court noted that if “a similar claim on the part of Milnor [had] existed against an

individual, instead of the government, then there can be no doubt, he could have

22
recovered by suit . . . . As the government was equally bound to do its debtor

justice, in a different mode, with an individual, we think no sound distinction exists

in the two cases.” Milnor, 41 U.S. at 227. Those two statements indicate why

those cases were different from this case. The debtors had pre-existing claims

which were property of the estate. In this case there was only the crop loss itself

with no claim of entitlement arising from it until Congress created one. The crop

loss was the result of an act of nature and by itself did not give rise to a claim

against anyone. Bracewell had no right to be compensated until Congress enacted

the legislation giving him a right and that did not occur until after he had filed for

bankruptcy, or in the critically important words of § 541(a)(1), not until after “as of

the commencement of the case.”

Like the Supreme Court decisions our dissenting colleague relies upon, our

decisions in Witko and Alvarez do not support the proposition that a loss creates a

contingent interest which may be property of the bankruptcy estate. The dissenting

opinion makes the same error with respect to both cases, asserting that in each we

decided whether the debtor’s malpractice suit was property of the estate by

determining whether the debtor had suffered harm pre-petition. All that Witko and

Alvarez recognize in this respect is that suffering harm is a necessary, although not

sufficient, element of a legal malpractice claim under the relevant state law in both

23
cases. In both cases the Court determined whether all the elements of a

malpractice cause of action, including the suffering of harm, existed at the time the

debtors filed their bankruptcy petition. Neither decision held or implied that harm

alone would be legally sufficient. Instead, what we did in Witko and Alvarez is

what we have done here, which is determine whether on the date the bankruptcy

case commenced the debtor had an enforceable property right—there a malpractice

claim, here a claim for crop loss payments under a congressional act.

III.

The next question we address is whether anything in § 541(a)(6) expands the

definition of property enough to encompass the disaster relief payment Bracewell

received. That provision extends the definition of property of the estate to include

“[p]roceeds, product, offspring, rents, or profits of or from property of the estate . .

. .” 11 U.S.C. § 541(a)(6). The key language for present purposes is that the

proceeds must be “of or from property of the estate.” See id. If the property of the

estate does not include a potential future payment that the debtor is not legally

entitled to receive at the time of filing, nothing in § 541(a)(6) pushes the later-

acquired legal or equitable interest back into the estate. As we have discussed at

some length already, Bracewell did not have a cognizable interest in his hoped for

relief payment until the Agriculture Assistance Act of 2003 came into being, and

24
that occurred after he had already filed his petition. Thus, the property of his estate

did not include an interest that could generate proceeds.

We are not persuaded by the trustee’s contention that the payments are

proceeds because they relate back to a pre-petition crop. He argues that the

payment is a substitute or compensation for the portion of the debtor’s crops that

did not grow because of the disaster. We agree that any compensation the debtor

receives directly from disposition of the pre-petition crops, after the filing date, is

proceeds of property of the estate. However, in the Agricultural Assistance Act of

2003 Congress did not purport to purchase the ruined crops of farmers like

Bracewell. Instead, Congress provided assistance to farmers like him because of

losses they had suffered in the past. See Agricultural Assistance Act of 2003, §

202(a) (“The Secretary . . . shall use such sums as are necessary . . . to make

emergency financial assistance available to producers on a farm that have incurred

qualifying losses for the 2001 or 2002 crop of an agricultural commodity due to

damaging weather or related condition . . .”). Because this assistance was not

given in exchange for property of the estate, it is not proceeds of property of the

estate.

The en banc Fifth Circuit reached this same conclusion in the Burgess case.

See Burgess, 438 F.3d at 503. It held that Burgess, whose situation is identical to

25
Bracewell’s, had no interest in property at the commencement of the bankruptcy

case that could mature into the crop disaster payment. Id. at 504. As the court

explained, “[i]f Burgess had no right or interest that constituted property within the

meaning of § 541(a)(1) at the commencement of the case, then the payment he later

received cannot be proceeds of property of the estate under § 541(a)(6).” Id. at

499.

The dissenters in Burgess and our dissenting colleague assert that under the

applicable state law the disaster payments would be characterized as proceeds of

the lost crops. Id. at 517; dissenting opinion at 56-60. The argument is that under

Georgia law collateral includes “inchoate rights, in any and all crops to be planted,

grown or produced on [the] property in the future,” dissenting opinion at 56-57

(quoting Sw. Ga. Prod. Credit Ass’n v. James, 350 S.E.2d 786, 788 (Ga. Ct. App.

1986), and proceeds are “claims arising out of the loss[] . . . or damage to the

collateral.” Id. (quoting O.C.G.A. § 11-9-102(a)(63). While we do look to state

law to define what is property, the dissenting position overlooks the fact that

“whether a debtor’s interest constitutes property of the estate is a federal question.”

Lewis, 137 F.3d at 1283 (quotation marks omitted). Therefore, a property interest,

however it is characterized by state law, can only be property of the estate if it is

within the definition contained in the federal Bankruptcy Code. Under § 541(a)(6)

26
that interest must be “[p]roceeds . . . of or from property of the estate” in order to

be property of the bankruptcy estate. 11 U.S.C. § 541(a)(6). And to be property of

the estate for proceeds generating purposes, it must have been property of the

estate at the time the bankruptcy petition was filed.

The dissenters also worry about problems that would result for debtors and

creditors if the payments are defined as proceeds by state law but not included in

the bankruptcy estate. If there is any cause for concern about that, the fact remains

that we are not commissioned to cure problems in the operation of statutory

schemes Congress has designed. The Supreme Court has pointedly stated that

“[c]ourts are not authorized to rewrite a statute because they might deem its effects

susceptible of improvement,” Badaracco v. Comm’r of Internal Revenue, 464 U.S.

386, 398, 104 S. Ct. 756, 764 (1984), and we have recognized that “[o]ur function

is to apply statutes, to carry out the expression of the legislative will that is

embodied in them, not to ‘improve’ statutes by altering them.” Wright v. Sec'y for

Dep’t of Corr., 278 F.3d 1245, 1255 (11th Cir. 2002). If there are problems with

the way a statute operates, Congress can alter the statute to eliminate those

problems; we cannot. Only judicial activists use interpretation as a tool for

improving statutes to their liking, and none of us are judicial activists.

27
 To be sure, there is some support in the decisions of bankruptcy courts for

the position that crop disaster payments to which a debtor becomes entitled after

filing or conversion are proceeds under § 541(a)(6). See FarmPro Servs., Inc. v.

Brown (In re FarmPro Servs., Inc.), 276 B.R. 620 (D. N.D. 2002); Lemos v.

Rakozy (In re Lemos), 243 B.R. 96 (Bankr. D. Idaho 1999); White v. United States

(In re White), No. BRLBB-00971C, 1989 WL 146417 (Bankr. N.D. Iowa Oct. 27,

1989). We are aware of those decisions but do not find them to be persuasive.

None of them raises an argument that we have not already addressed. They all fail

to give full allegiance to the congressional will manifested in the plain language of

the Bankruptcy Code.

The trustee attempts to analogize disaster assistance to insurance payments.

Insurance payments are explicitly included in the UCC definition of “proceeds,”

U.C.C. § 9-306(1), and there is authority for the proposition that the bankruptcy

Code’s definition of “proceeds” is at least as broad as the UCC definition. See,

e.g., Unsecured Creditors Comm. v. Marepcon Fin. Corp. (In re Bumper Sales,

Inc.), 907 F.2d 1430, 1437 (4th Cir. 1990). There is a difference between

insurance payments stemming from the destruction of property in the estate and

disaster assistance authorized after the estate was created as a result of property

that was destroyed before the estate came into being.

28
 The analogy to insurance would be closer if an assistance payment were for

losses suffered to crops that were in the estate at the time the petition was filed.

That, however, is not what happened here. The relief payment did not stem from

any loss to property of the estate, because the crops were already lost before the

estate came into being. Still, if the debtor had at the time of filing a legal or

equitable right to a payment for crop losses, the situation would be like one in

which the debtor had a right to insurance proceeds at the time of filing. See First

State Bank of Abernathy v. Holder (In re Nivens), 22 B.R. 287, 291 (Bankr.

N.D.Tex. 1982). But, as we held earlier, there is no legal or equitable right to crop

assistance payments until the authorizing legislation is enacted.

For these reasons we agree with the Fifth Circuit’s holding in Burgess that if

Bracewell “had no right or interest that constituted property within the meaning of

§ 541(a)(1) at the commencement of the case, then the payment he later received

cannot be proceeds of property of the estate under § 541(a)(6).” Burgess, 438 F.3d

at 499. If the law creating the right to a disaster payment exists before the debtor

files for bankruptcy and the debtor subsequently applies for and receives the

payment, it could be proceeds of property of the estate. But if the disaster

assistance legislation is not law at the time of filing, the debtor at that time has no

29
legal or equitable interest in the payment and so there is no property of the estate to

generate proceeds.

IV.

Because the crop disaster payment made to Bracewell was not property of

the bankruptcy estate under § 541(a)(1) or § 541(a)(6), the district court’s order is

AFFIRMED.

30
PRYOR, Circuit Judge, dissenting:

“‘If’ is a big word,” Bracewell v. Kelley, No. 05-11951, slip op. at 9 (11th

Cir. June 30, 2006), but it is not the determinative word in this appeal for two

reasons. First, Bracewell’s crop disaster payment is part of the debtor estate

because “property of the estate” includes the contingent interest in disaster relief

created by a reduced yield. See 11 U.S.C. § 541(a)(1). Second, Bracewell’s crop

disaster payment is “proceeds . . . from property of the estate” under the settled

state law of property rights. 11 U.S.C. § 541(a)(6). I respectfully dissent.

I. BACKGROUND

I first explain the history of the Agricultural Assistance Act of 2003 and its

interaction with Bracewell’s conversion under Chapter 7. The majority opinion

appropriately and accurately explains what we know from the record: A drought

caused Bracewell to suffer lower-than-expected yields. On May 29, 2002, because

Bracewell was unable to pay for his farm-related debt, Bracewell filed a petition

under Chapter 12 of the Bankruptcy Code. In a Chapter 12 proceeding,

Bracewell’s crop disaster payment would have been included in the bankruptcy

estate. Although not part of the record or evidence, other events illustrate the

potential for abuse that the decision of the majority allows.

31
 In the real world, in June 2002, a month after Bracewell filed his bankruptcy

petition, several members of Congress announced to the press that they had begun

work to provide drought assistance to farmers. See, e.g., Press Release,

Congressman Tom Osborne, Osborne Refuses to Send Congress Home Without

Securing Drought Assistance (Oct. 16, 2002), available at http://www.house.gov

/apps/list/press/ne03_osborne/pr20021016crno.html. In July, Congressman John

Thune sponsored the Emergency Farmer and Rancher Assistance Act of 2002 to

grant relief for crop losses in 2001 and 2002. H.R. 5310, 107th Cong. (2002).

Congress recessed at the end of that year before the legislation was enacted. Id.

On Friday, January 3, 2003, Bracewell converted his case under Chapter 7.

Four days later, on Tuesday, January 7, 2003, Congress reconvened, and the

drought assistance legislation was reintroduced in the House as part of an

appropriations bill. 108 Bill Tracking H.J. Res. 2. On February 20, 2003,

Congress enacted the Agricultural Assistance Act of 2003, which provided

financial assistance to farmers who suffered crop losses in 2001 and 2002. Id. As

the record shows, Bracewell then argued successfully that the money he later

received from the government should not be included in the bankruptcy estate

because he converted his case under Chapter 7 before Congress enacted the

Agricultural Assistance Act of 2003.

32
 I have no idea whether Bracewell knew about the proceedings in Congress

that led to the enactment of the Agricultural Assistance Act of 2003. There is no

evidence that he did, but we should not be oblivious to the possibility that some

farmers already pay attention to these sorts of matters, and the majority opinion

will cause farmers in bankruptcy to monitor them more closely. The workings of

Congress are reported by the press, and farmers who suffer natural disasters

already have incentives to investigate the likelihood of forthcoming relief. The

majority opinion now gives them even more incentives. As we consider whether

losses that ripen into post-petition gain are included in the debtor estate, the

background of these real-world consequences should not be forgotten. See Fed R.

Evid. 201 advisory committee’s note (“The judicial process cannot construct every

case from scratch, like Descartes creating a world based on the postulate Cogito

ergo sum.” (quoting Kenneth Davis, A System of Judicial Notice Based on

Fairness and Convenience, in Perspectives of Law 69, 73 (1964)).

In the context of this chronology, it becomes clear why the decision of the

majority runs contrary to the policy goals of the Bankruptcy Code. Three

fundamental policies of the Bankruptcy Code are (1) to discourage a race of

creditors to the courthouse, Union Bank v. Wolas, 502 U.S. 151, 161, 112 S. Ct.

527, 533 (1991), (2) to preserve the security interests of creditors, United States v.

33
Whiting Pools, Inc., 462 U.S. 198, 204, 103 S. Ct. 2309, 2313 (1983), and (3) “to

prevent a party from receiving a windfall merely by reason of the happenstance of

bankruptcy.” Butner, 440 U.S. at 55, 99 S. Ct. at 918 (internal quotations and

citation omitted). Instead of discouraging a creditors’ race to the courthouse, the

decision of the majority encourages debtors who are farmers to race to the

courthouse to file or convert cases under Chapter 7 before Congress enacts farm

assistance bills. Instead of preserving creditors’ security interests, the decision of

the majority impairs security interests in crops damaged by natural disasters.

Instead of a fresh start for debtors, the decision of the majority grants debtors who

are farmers a windfall. A thorough inspection of the statutory language, precedents

of the Supreme Court and our Court, and the legislative history of the Bankruptcy

Code compels me to conclude that Congress did not intend to overturn the settled

policy goals of bankruptcy in this circumstance.

II. DISCUSSION

My discussion is divided in two parts. I first look to the Bankruptcy Code,

Supreme Court precedent, and legislative history to address the erroneous

assumption of the majority that a loss incurred before the commencement of

bankruptcy does not create a contingent interest that is “property of the estate.” 11

U.S.C. § 541(a)(1). I next review the state law of property rights to conclude that

34
Bracewell’s crop disaster payment is “proceeds of the estate.” 11 U.S.C. §

541(a)(6). Under either view, the decision of the district court to exclude

Bracewell’s crop disaster payments from the debtor estate was wrong.

A. A Contingent Interest Created by a Loss Is “Property” of the Debtor Estate.

Section 541(a)(1) of the Bankruptcy Code provides that property of the

debtor estate “is comprised of . . . all legal or equitable interests of the debtor in

property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). All

property interests of the debtor vest in the bankruptcy estate when the debtor files

for bankruptcy. See 11 U.S.C. § 301; In re Alvarez, 224 F.3d 1273, 1277 (11th

Cir. 2000). “Property” has a broad meaning that encompasses “everything of value

the bankrupt may possess in alienable or leviable form when he files his petition.”

Segal v. Rochelle, 382 U.S. 375, 379, 86 S. Ct. 511, 515 (1966). Section 541 is “a

definition of what is included in the estate, rather than . . . a limitation” on the

estate. Whiting Pools, 462 U.S. at 203, 103 S. Ct. at 2312.

Although the majority finds the statutory language of section 541(a)(1)

“clear” and “so plain,” Bracewell, slip op. at 4-5, I do not. I am unable to find any

mention in section 541(a)(1) about whether an interest created by a pre-petition

crop loss constitutes “property as of the commencement of the case.” 11 U.S.C.

§ 541(a)(1). If anything, the definition of “property” as “all legal or equitable

35
interests . . . as of the commencement of the case,” id. (emphasis added), suggests

that Bracewell’s crop loss is a contingent interest in property included in the

bankruptcy estate, but the text of section 541 does not resolve that issue

definitively.

The majority’s alleged reliance on statutory text rests not on the plain

language, but on two unsound assumptions. First, the majority assumes that a

contingent interest in the form of a reduced yield is not a “legal or equitable

interest” in property. Second, the majority assumes that whether a property interest

exists “as of the commencement of the case” depends on the date of the enabling

legislation for the crop disaster payment, instead of the date of the crop loss. The

statutory language, legislative history, and controlling precedents from the

Supreme Court establish that both assumptions are erroneous.

Two principles govern whether a loss incurred pre-petition is an interest

included in the debtor estate. First, contrary to the majority’s first assumption, a

loss may give rise to a property interest before enabling legislation grants payment

for the loss. Williams v. Heard, 140 U.S. 529, 541, 11 S. Ct. 885, 888 (1891).

Second, contrary to the majority’s second assumption, whether an interest accrued

“as of the commencement of the case,” 11 U.S.C. § 541(a), is determined by

reference to the date the loss is incurred, not the date the payment is received, see

36
Williams, 140 U.S. at 541, 11 S. Ct. at 888. A post-petition gain is “sufficiently

rooted in the pre-bankruptcy past” if a corresponding loss was incurred pre-

petition. See Segal, 382 U.S. at 380, 86 S. Ct. at 515.

The Supreme Court has held that the debtor estate includes contingent

interests that ripen into legal rights after commencement of the bankruptcy

proceeding. In Segal, the Court held that a potential loss-carryback tax refund

constituted “property” under the Bankruptcy Code. 382 U.S. at 381, 86 S. Ct. at

516. The Court stated that “property” under section 541 is “construed most

generously and an interest is not outside its reach because it is novel or contingent

or because enjoyment must be postponed.” Id. at 379, 86 S. Ct. at 515. Although

the debtor in Segal could not establish a right to a tax refund until the end of the

tax year, “postponed enjoyment does not disqualify an interest as ‘property’” and

“contingency in the abstract is no bar.” Id. at 380, 86 S. Ct. at 515. The Court

explained that “taxes had been paid on net income within the past three years, and

the year of bankruptcy at that point exhibited a net operating loss.” Id. Because

the prospective refund was “sufficiently rooted in the prebankruptcy past and so

little entangled with the bankrupts’ ability to make an unencumbered fresh start,”

the tax refund, once received, was included in the debtor estate. Id.

37
 To avoid the binding authority of Segal, the majority argues that Segal was

superseded by the enactment of the Bankruptcy Code. The majority states that it

“will not attribute to the Supreme Court an intent to construe legislative language

that it had not seen and which would not even exist for another dozen years.”

Bracewell, slip op. at 17. As support, the majority cites to Drewes v. Vote (In re

Vote), 261 B.R. 439, 443–44 (B.A.P. 8th Cir. 2001), and Burgess v. Sikes (In re

Burgess), 438 F.3d 493, 498 (5th Cir. 2006) (en banc), where the Bankruptcy

Appellate Panel for the Eighth Circuit and the Fifth Circuit respectively

distinguished Segal to conclude that crop disaster payments are not part of the

debtor estate.

The court in Vote limited the test in Segal to tax refunds because of the

legislative history of the Bankruptcy Code. The court explained that Congress may

have intended to limit the holding of Segal to tax refunds when it enacted the new

Bankruptcy Code. Vote, 261 B.R. at 443–44. Because the court found the

precedential value of Segal to be questionable and the crop disaster legislation was

enacted post-petition, the court concluded that such payments are not part of the

debtor estate. Id.

The Fifth Circuit also distinguished Segal because “although Congress has

specifically approved of Segal’s result, Segal’s ‘sufficiently rooted’ test did not

38
survive the enactment of the Bankruptcy Code.” Burgess, 438 F.3d at 498. The

court in Burgess explained that the statutory language considered in Segal is

different from the language of section 541. “Thus, under current law, a debtor’s

interest in property may be contingent . . . until after bankruptcy, but the debtor

must have had a prepetition legal interest nonetheless.” Id. at 499. The Fifth

Circuit concluded that the debtor had no legal interest in the crop disaster payment

“because the legislation authorizing the payment had not yet been enacted.” Id.

The statutory text, our precedent, and legislative history establish that

“[t]here is little or no support” for the view of the majority and the Fifth Circuit

that the current Bankruptcy Code superseded the holding in Segal. Id. at 512

(Jones, C.J., dissenting). First, section 541 did not supersede Segal because

Congress did not materially alter the text of the statute. The previous version of

the Code provided, “The trustee of the estate of a bankrupt . . . shall . . . be vested

by operation of law with the title of the bankrupt as of the date of the filing of the

petition . . . to all of the following kinds of property wherever located.” 11 U.S.C.

§ 110(a) (1964) (emphases added). The current version of the Code provides that

property of the estate “is comprised of all the following property, wherever located

and by whomever held: . . . all legal or equitable interests of the debtor . . . as of

the commencement of the case.” 11 U.S.C. § 541(a)(1) (emphases added).

39
“[A]bsent express indications to the contrary, the reenactment of statutes in

substantially the same form or their wholesale adoption into other statutory

schemes is presumed to perpetuate and incorporate the judicial baggage that has

accumulated in relation to those provisions.” Rivers v. Rosenthal & Co., 634 F.2d

774 (5th Cir. 1980), vacated on other grounds, 456 U.S. 968, 102 S. Ct. 2228

(1982). The majority does not respond to this argument. The change in statutory

language is legally insignificant because the broad definition of “property” and the

temporal limitation considered in Segal continues in the current version of section

541(a)(1).

Second, our Court has applied Segal twice to guide our interpretation of the

current Bankruptcy Code. See, e.g., Witko v. Menotte (In re Witko), 374 F.3d

1043 (11th Cir. 2004), Alvarez, 224 F.3d at 1278. We stated, in Alvarez, that

although “Segal was decided under the 1898 Act, nothing in the changed language

suggests a change in the relevant Segal holding.” 224 F.3d at 1278 n.13. In

Witko, the decision upon which the majority principally relies, we discussed Segal

at length and relied on Segal for the proposition that a trustee may “seek the

interests existing, though still undetermined in quantity, at the time the debtor filed

his petition.” Witko, 374 F.3d at 1043. Other circuits likewise have applied the

rationale in Segal. See, e.g., In re Yonikus, 996 F.2d 866, 869 & n.3 (7th Cir.

40
1993); In re Schneider, 864 F.2d 683, 685 (10th Cir. 1988); In re Ryerson, 739

F.2d 1423, 1426 (9th Cir. 1984). These decisions explain that the precedential

value of Segal was not diminished by the enactment of the current Bankruptcy

Code.

Third, the majority ignores the legislative history of the current code, which

states that Congress endorsed the conclusion in Segal. “The result of Segal v.

Rochelle, 382 U.S. 375, 15 L. Ed. 2d 428, 86 S. Ct. 511 (1966), is followed . . . .”

See S. Rep. No. 989, 95th Cong., 2d Sess. 82, reprinted in 1978 U.S.C.C.A.N.

5787, 5868; H.R. Rep. No. 595, 95th Cong., 1st Sess. 367, reprinted in 1978

U.S.C.C.A.N. 5963, 6323; see Alvarez, 224 F.3d at 1279 n.13 (stating that “the

legislative history expressly indicates that the current Code follows Segal’s

result”). Despite a professed concern about erroneously ascribing an intent to the

Supreme Court, the majority readily ascribes a dubious intent to Congress based

on, at best, ambiguous language without resorting to legislative history. Cf. CBS

v. Primetime 24 J.V., 245 F.3d 1217, 1224 (11th Cir. 2001). A consistent reading

of both the earlier and later statutory language, the guidance derived from

decisions of our Circuit and sister circuits, and the legislative history leads me to

conclude that the current Bankruptcy Code did not supersede the holding in Segal.

41
 Two venerable decisions of the Supreme Court buttress the holding in Segal.

See Williams v. Heard, 140 U.S. 529, 11 S. Ct. 885 (1891); Milnor v. Metz, 41

U.S. (16 Pet.) 221 (1842). These precedents establish that property rights are

“created by reason of losses having been suffered,” Williams, 140 U.S. at 541, 11

S. Ct. at 888, not by later legislation that provides compensation for those losses.

Each of these decisions supports the Trustee’s argument that Bracewell’s crop loss

was a contingent property interest when he filed for bankruptcy.

The later decision, Williams, involved a payment created by Congress for a

loss suffered during the Civil War. Id. at 539, 11 S. Ct. at 887. The debtor in

Williams had insured ships damaged in the Civil War. Id. at 539–40, 11 S. Ct. at

887. He filed for bankruptcy in 1875 and obtained a discharge in 1877. Id. at 539,

11 S. Ct. at 887. In 1882, five years after the discharge from bankruptcy, Congress

passed legislation to distribute money awarded to the United States from a treaty

executed with Great Britain. Id. The debtor was awarded compensation based on

this legislation. Id. The Supreme Court included the distribution from the treaty in

the bankruptcy estate because “[t]here [was] . . . at all times a possibility that the

government would see that [those who suffered harm] were paid.” Id. at 541, 11 S.

Ct. at 888 (emphasis added). The Court explained that “there was at all times a

moral obligation on the part of the government to do justice to those who had

42
suffered in property. . . . [T]he act of Congress did not create the rights. They had

existed at all times since the losses occurred.” Id.

The earlier decision, Milnor, reached the same result for a debtor who

received a payment based on post-petition legislation. 41 U.S. at 227. In Milnor,

the debtor was a gauger in the port of Philadelphia. 41 U.S. at 225. In 1836, an act

of Congress reduced duties upon wine that required the debtor to perform

extraordinary services “at the instance of the government” without compensation.

Id. at 226. In 1839, the debtor filed for bankruptcy, and in 1840, Congress enacted

legislation that compensated the debtor for his services. Id. at 224. Although

Congress enacted legislation that granted compensation post-petition and “no claim

existed against the United States, which could be judicially recognised as

‘property’” before the debtor filed for bankruptcy, the Court included the

compensation in the debtor estate. Id. at 227.

The majority opinion and the Fifth Circuit distinguished Milnor and

Williams on the grounds that both cases “predate the enactment of the current

Bankruptcy Code by approximately 100 years” and “stand for the proposition that

a prepetition loss is property of the estate if it gives rise to a prepetition legal claim

or interest.” Burgess, 438 F.3d at 503; see Bracewell, slip op. at 22-23. The

Burgess court explained that the debtor in Milnor had a pre-petition legal interest

43
because “even though [debtor] Milnor could not sue the government for the

amount of the debt, the debt still existed.” Burgess, 438 F.3d at 504. The court

also distinguished Williams because “the debtors had a legal claim against

someone,” while the bankrupt farmer in Burgess “had no claim against anyone.”

Id. at 505. I find both reasons unpersuasive.

That Williams and Milnor were decided before the enactment of the

Bankruptcy Code does not blunt their proposition that “even a prepetition loss of

the debtor’s property may itself constitute property when subsequent events afford

a recovery for the loss.” Id. at 512 (Jones, C.J., dissenting). It is fair to conclude

that Congress was aware of the law of property rights as recognized in bankruptcy

when it enacted the current version of the Bankruptcy Code because “[i]t is always

appropriate to assume that our elected representatives, like other citizens, know the

law.” Cannon v. Univ. of Chi., 441 U.S. 677, 696–97, 99 S. Ct. 1957–58 (1979).

Although the Courts in Williams and Milnor did not consider the current version of

section 541(a), they nonetheless confronted what is a “legal or equitable interest”

included in the debtor estate. Compare Williams, 140 U.S. at 538, 11 S. Ct. at 887

(“[N]o individual claimant had, as a matter of strict legal or equitable right, any

lien upon the fund awarded, nor was Congress under any legal or equitable

obligation to pay any claim out of the proceeds of that fund.” (emphases added)),

44
and Milnor, 41 U.S. at 226 (analogizing the debtor’s right to cases where debtors

had no “equitable or legal set-off”), with 11 U.S.C. § 541(a) (“Such estate is

comprised of . . . all legal or equitable interests . . . .” (emphasis added)). Both

decisions are applicable to Bracewell’s crop disaster payment because they address

the limits of a contingent property interest in the bankruptcy context.

The factual distinctions between Williams and Milnor, on the one hand, and

Bracewell’s crop disaster payment, on the other hand, are immaterial. Although in

Milnor “[t]he services performed by Milnor were at the instance of the

government” and “the government was equally bound to do its debtor justice,”

Milnor, 41 U.S. at 227, Milnor had no enforceable right against the government

when he filed for bankruptcy. Although the Fifth Circuit found significant in

Williams that “the debtors had a legal claim against someone,” Burgess, 438 F.3d

at 505, the fact remains that the debtor had no enforceable rights against the

government. See Williams, 140 U.S. at 538, 11 S. Ct. at 887 (“[N]o individual

claimant had, as a matter of strict legal or equitable right, any lien upon the fund

awarded.”). Although the possibility was remote that Britain would compensate

American casualties of war and Congress would enact legislation that granted

relief five years after the debtors were discharged from bankruptcy, the Supreme

Court concluded this eventuality was sufficient to create a contingent interest to be

45
included in the debtor estate. See id. (“Congress [was] under [no] legal or

equitable obligation to pay any claim out of the proceeds of that fund.”). The

contingent interests held by the debtors in Williams and Milnor were premised on

their pre-petition losses and the possibility, however remote, of compensation.

As in Williams, “[t]here was at least a possibility” that Congress would

enact legislation to grant Bracewell relief, id., because “[g]overnment payments to

farmers have long represented a major source of income for American farmers and

ranchers,” John K. Pearson, Lien on Me: Revised Article 9 and Government

Entitlement Program Payments, 22-8 Am. Bankr. Ins. J. 24, 24 (2003).

Bracewell’s crop loss established “a possibility coupled with an interest” sufficient

to be included in the debtor estate. Williams, 140 U.S. at 538, 11 S. Ct. at 887.

The crop loss that Bracewell suffered pre-petition established a contingent property

interest that ripened into a gain post-petition due to legislation enacted by

Congress. “But the act of Congress did not create the rights. They had existed at

all times since the losses occurred.” Id. at 541, 11 S. Ct. at 888.

Under both Williams and Milnor, the inclusion of Bracewell’s crop disaster

payment in the debtor estate neither renders the phrase “as of the commencement

of the case” meaningless nor runs “contrary to the plain meaning of the clear

statutory language.” Bracewell, slip op. at 12. The concern of the majority that

46
“any postpetition legislation or contract could retroactively create property of the

estate,” id., slip op. at 7 (citing Burgess, 438 F.3d at 503), is misplaced, because

contingent interests, including losses, incurred after the commencement of the

proceedings are not included in the debtor estate. Only contingent property

interests that exist “as of the commencement of the case” can benefit the estate

when those interests later ripen into post-petition gain.

Until today, our decisions have not deviated from these principles. We have

stated, for example, that a legal malpractice complaint filed post-petition is

“sufficiently rooted in the pre-bankruptcy past” to be included in the debtor estate.

Alvarez, 224 F.3d at 1275. In Alvarez, we concluded that a debtor’s malpractice

suit accrued pre-petition under Florida law because the debtor, Alvarez, suffered

harm pre-petition. Id. at 1277–78. Although Alvarez filed the malpractice

complaint after the bankruptcy petition, Alvarez had suffered “sufficient injury to

indicate that Alvarez had a cognizable interest” pre-petition. Id. at 1277. Because

Alvarez “established an attorney-client relationship . . . prior to his filing for

bankruptcy, and this cause of action arises directly out of Alvarez’s interactions

with the firm prior to filing,” we applied the rationale of Segal to conclude that the

malpractice complaint was included in the bankruptcy estate. Id. at 1278–79.

47
 The majority’s reliance on Witko, rather than Alvarez, is misplaced. In

contrast with Alvarez, in Witko we excluded a complaint filed post-petition from

the debtor estate because the debtor suffered harm post-petition. See Witko, 374

F.3d at 1043. Witko filed for bankruptcy in 1999. Id. at 1042. In 2000, Witko

was denied alimony in a marital dissolution and he filed a malpractice suit against

his divorce counsel. Id. We stated that “interests existing, though still

undetermined in quantity, at the time the debtor filed his petition” are included in

the debtor estate. Id. at 1043. We looked to Florida law and concluded that

Witko’s malpractice suit had not accrued before he filed his petition for bankruptcy

because “[w]hen Witko filed his bankruptcy petition he had not yet suffered any

harm.” Id. at 1043–44. Witko is inapposite to this appeal because, unlike

Bracewell, the debtor in Witko did not suffer a loss until after the commencement

of the bankruptcy case.

Consistent with our precedent in Alvarez, the crop disaster payment

Bracewell received is “property as of the commencement of the case.” Bracewell

planted his crops pre-petition, Bracewell lost his crops pre-petition, and the Act

compensated Bracewell for the crop loss that occurred pre-petition. Bracewell’s

crop loss “point[ed] toward realization of a refund . . . at the time the[] bankruptcy

petition[] [was] filed,” Segal, 382 U.S. at 380, 86 S. Ct. at 515, because “Congress

48
frequently and regularly enacts a variety of farm subsidy programs,” Lemos v.

Rakozy (In re Lemos), 243 B.R. 96, 99 (Bankr. D. Idaho 1999). The crop disaster

payment is “sufficiently rooted in the pre-bankruptcy past.” Segal, 382 U.S. at

380, 86 S. Ct. at 515.

The majority finds solace in decisions of our sister circuits that have

excluded crop disaster payments from the debtor estate when those payments were

received post-petition. See Burgess, 438 F.3d at 497; Vote, 261 B.R. at 442.

These courts and the majority have focused on the date that the legislation is

enacted, instead of the date of the loss, to exclude crop disaster payments from the

debtor estate. See Bracewell, slip op. at 7-8; Burgess, 438 F.3d at 499 (“[H]e did

not have a prepetition claim to, or interest in, the disaster-relief payment because

the legislation authorizing the payment had not yet been enacted.”); Vote, 276 F.3d

at 1026 (“Before Congress passed the Appropriations Act, [the debtor] had no

interest of any kind.”). As the Eighth Circuit reasoned, because “there was no

assurance that Congress would authorize such payments or that the Debtor would

qualify for them if they were authorized,” the crop disaster payments are not

included in the debtor estate. Vote, 276 F.3d at 444 (emphasis added).

In the light of Supreme Court precedent, I find the reasoning of both the

majority and our sister circuits, in Burgess and Vote, unpersuasive. That Congress

49
enacted the legislation post-petition is not outcome determinative because a loss,

by itself, may create a property interest without congressional legislation.

Williams, 140 U.S. at 541, 11 S. Ct. at 888. When the loss accrues “as of the

commencement of the case,” it is included in the debtor estate.

The reliance of the majority on another decision of a sister circuit, In re

Schmitz, 270 F.3d 1254 (9th Cir. 2001), is misplaced. The Ninth Circuit in

Schmitz held that fishing rights assessed post-petition based on the debtor’s fishing

history “were not property of the bankruptcy estate because the regulations

creating them were not adopted until after the bankruptcy petition was filed.” Id. at

1256. Schmitz is inapposite to this appeal because, unlike Bracewell, the debtor in

Schmitz did not suffer a loss before he filed for bankruptcy that was compensated

by post-petition legislation.

Although, as the majority states, “‘If’ is a big word,” Bracewell, slip. op at 9,

it is not the determinative word because “property” includes contingent interests.

Segal, 382 U.S. at 379, 86 S. Ct. at 515. The contingent nature of Bracewell’s

interest is similar to a loss carryback that may result in a tax refund if the taxpayer

has the proper tax characteristics at the end of the year, Segal, 382 U.S. at 381, 86

S. Ct. at 516; a casualty of war that may result in payment from the execution of a

treaty and legislation after the discharge of bankruptcy, Williams, 140 U.S. at 541,

50
11 S. Ct. at 888; the provision of overtime services to the government that may

lead to payment based on post-petition legislation, Milnor, 41 U.S. at 227; or pre-

petition harm caused by legal malpractice that may result in damages pending

judicial process, Alvarez, 224 F.3d at 1277–78. See also In re Dalton, 146 B.R.

460, 463 (Bankr. D. Az. 1992) (holding that a lottery ticket purchased pre-petition

that won post-petition was included in the debtor estate). Bracewell, like the

debtors in Segal, Williams, Milnor, and Alvarez, was not yet entitled to his later

payment when he converted his case under Chapter 7, but the crop disaster

payment he received post-petition related to his pre-bankruptcy past.

The crop loss that Bracewell suffered created a contingent right to receive

crop disaster relief of an unascertained value. After the crop loss, the only

questions that remained were whether Congress would grant relief and whether

Bracewell would fall within the purview of any legislation that Congress enacted.

See http://disaster.fsa.usda.gov/nap.htm (listing eligibility requirements for crop

disaster relief). The crop disaster legislation fixed the value that Bracewell

received for his lost crops, but the earlier absence of legislation did not make

Bracewell’s crop loss, or contingent interest, a nullity. Nothing in the language of

section 541, Supreme Court precedent, or Eleventh Circuit precedent suggests that

the debtor estate only includes property with an absolute value, and I find no

51
principled method to create a sliding scale of contingent property interests that

includes some interests in the debtor estate while excluding others.

The inclusion of crop disaster payments in the debtor estate comports with

the policy of the Bankruptcy Code to prevent debtor abuse. Whether crop disaster

payments are included in the debtor estate should not depend on the date of the

legislative act because a debtor could exclude crop disaster payments if he chose to

file his bankruptcy petition before Congress enacts legislation to grant relief.

Bankruptcy policy dictates whether an interest is included in the debtor estate,

Segal, 382 U.S. at 379, 86 S. Ct. at 515, and a debtor should not be allowed

selectively to exclude property from the debtor estate by choosing the most

advantageous date to file for bankruptcy. “The Bankruptcy Code provides secured

creditors various rights, including the right to adequate protection, and these rights

replace the protection afforded by possession.” Whiting Pools, 462 U.S. at 207,

103 S. Ct. at 2314–15. Other provisions of the Bankruptcy Code protect creditors’

interests and prevent debtor abuse by limiting the debtor’s ability to select property

that will be included in the debtor estate. See 11 U.S.C. § 544(b)(1) (strong arm

provisions); id. § 547 (voidable preferences); id. § 727 (fraudulent transfers); cf.

Yonikus, 996 F.2d at 871 (“Debtors have an absolute duty to report whatever

interests they hold in property, even if they believe their assets are worthless or are

52
unavailable to the bankruptcy estate.”). The exclusion of disaster payments from

the bankrupt estate creates a windfall for the debtor at the expense of creditors

contrary to the design of the Code.

I conclude that Bracewell’s crop loss disaster payment is “property of the

estate.” 11 U.S.C. § 541(a)(1). Because Bracewell planted the crops pre-petition,

lost the crops pre-petition, and legislation compensated him for that pre-petition

loss, Bracewell’s crop disaster payment was “rooted in the prebankruptcy past.”

Segal, 382 U.S. at 380, 86 S. Ct. at 515. I turn next to the majority’s erroneous

conclusion that Bracewell’s crop disaster payment was not “proceeds” of the

debtor estate.

B. Bracewell’s Crop Disaster Payment Is “Proceeds” of the Debtor Estate.

The majority’s devotion to statutory text is nowhere to be found when the

majority concludes that the crop disaster payment is not included in the debtor

estate as “proceeds” despite the plain language of the Georgia version of the

Uniform Commercial Code. The majority states that “[i]f the property of the estate

does not include a potential future payment that the debtor is not legally entitled to

receive at the time of filing, nothing in § 541(a)(6) pushes the later-acquired legal

or equitable interest back into the estate.” Bracewell, slip op. at 24. The majority

concludes that “the property of his estate did not include an interest that could

53
generate proceeds.” Id. at 25. The majority overlooks the fact that, under state

law, an expected yield is a leviable property interest and a crop disaster payment is

“proceeds” of the expected yield.

Section 541(a)(6) of the Bankruptcy Code provides that the debtor estate

includes “[p]roceeds, product, offspring, rents, or profits of or from property of the

estate . . . .” 11 U.S.C. § 541(a)(6). Congress has stated that “proceeds” under the

Bankruptcy Code is broader than under the Uniform Commercial Code. S. Rep.

No. 989, 95th Cong., 2d Sess., at 83 (1978); H.R. Rep. No. 595, 95th Cong., 1st

Sess., at 368 (1977); 1978 U.S.C.C.A.N. 5787. “[T]he scope of . . . Section

541(a)(6) is quite broad, [and] encompass[es] any conversion in the form of

property of the estate, and anything of value generated by property of the estate.”

In re Hanley, 305 B.R. 84, 86–87 (Bankr. M.D. Fla. 2003) (citations omitted).

Under section 541(a)(6), “proceeds” must come from the “property of the estate”

to be included in the debtor estate.

Although “whether a debtor’s interest constitutes property of the estate is a

federal question,” Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280, 1283

(11th Cir. 1998), the majority agrees that state law governs the creation of property

interests. Bracewell, slip op. at 26; see Butner, 440 U.S. at 54, 99 S. Ct. at 917–18.

“Uniform treatment of property interests by both state and federal courts within a

54
State serves . . . to prevent a party from receiving ‘a windfall merely by reason of

the happenstance of bankruptcy.’” Butner, 440 U.S. at 55, 99 S. Ct. at 918 (quoting

Lewis v. Mfrs. Nat’l Bank, 364 U.S. 603, 609, 81 S. Ct. 347, 350 (1961)). “Unless

some federal interest requires a different result, there is no reason why such

interests should be analyzed differently simply because an interested party is

involved in a bankruptcy proceeding.” Witko, 374 F.3d at 1043.

It is particularly appropriate to look to state law to interpret what is

“proceeds” because the legislative history of section 541(a)(6) explicitly references

the Uniform Commercial Code. “Proceeds here is not used in a confining sense, as

defined in the Uniform Commercial Code, but is intended to be a broad term to

encompass all proceeds of property of the estate.” S. Rep. No. 989, 95th Cong., 2d

Sess., at 83 (1978); H.R. Rep. No. 595, 95th Cong., 1st Sess., at 368 (1977); 1978

U.S.C.C.A.N. 5787. “The definition of proceeds under the UCC is much narrower

than the definition of proceeds under the Bankruptcy Code.” FarmPro Servs., Inc.

v. Brown (In re FarmPro Servs., Inc.), 276 B.R. 620, 626 (Bankr. D. N.D. 2002).

If the definition of “proceeds” in the Uniform Commercial Code is “confining,”

id., then “proceeds” as defined in Bankruptcy Code undoubtedly must be broader.

Because the definition of “proceeds” in the Georgia UCC encompasses a crop

disaster payment and the definition of “proceeds” in the Bankruptcy Code is

55
broader than the UCC, crop disaster payments are a fortiori included in the debtor

estate as “proceeds.”

Georgia law defines “proceeds” as “(A) Whatever is acquired upon . . .

disposition of the collateral; (B) Whatever is collected on, or distributed on account

of, collateral; (C) Rights arising out of collateral; (D) To the extent of the value of

the collateral, claims arising out of the loss[] . . . or damage to the collateral.”

O.C.G.A. § 11-9-102(a)(63). “‘Collateral’ means the property subject to a security

interest or agricultural lien.” Id. § 11-9-102(a)(13). Georgia broadly interprets

“collateral” under the UCC to include “inchoate rights, in any and all crops to be

planted, grown or produced on [the] property in the future.” Sw. Ga. Prod. Credit

Ass’n v. James, 350 S.E.2d 786, 788 (Ga. Ct. App. 1986). Under Georgia law, a

crop disaster payment is the result of a “loss[] . . . or damage to” crops “to be

planted, grown, or produced.” O.C.G.A. § 11-9-102(a)(63)(D); Sw. Ga. Prod.

Credit Ass’n, 350 S.E.2d at 788.

Bracewell’s crop disaster payment is “proceeds” under the Georgia Uniform

Commercial Code. Bracewell received the payment for “the loss of . . . or damage

to” his crops. O.C.G.A. § 11-9-102(a)(63)(D). Bracewell’s payment is “from

property of the estate,” see 11 U.S.C. § 541(a)(6), because the expected crop yield

was a leviable and cognizable property interest under Georgia law. See Sw. Ga.

56
Prod. Credit Ass’n, 350 S.E.2d at 787 (holding that a creditor’s security interest in

“all crops now growing or may hereafter be planted, grown or produced within

seven years from the date hereof and all proceeds therefrom” granted the creditor a

right to receive money from a reduced yield even though “no profit was made”

(internal quotation marks omitted)). Thanks in part to the creditors seeking relief

in his bankruptcy, Bracewell planted crops and, despite a lower-than-expected

yield, obtained a payment for his reduced yield. The crop disaster payment

“ar[ose] out of the loss of . . . or damage to” Bracewell’s expected crops. O.C.G.A.

§ 11-9-102(a)(63)(D). If Bracewell had never planted or expected crops, he never

would have received the crop disaster payment.

The majority reasons that Bracewell’s payment is not proceeds “[b]ecause

th[e crop disaster payment] was not given in exchange for property of the estate,”

Bracewell, slip op. at 25, but Georgia law—and consequently the Bankruptcy

Code—does not limit “proceeds” to items “given in exchange for property of the

estate,” id.; Georgia law requires only that “proceeds” “aris[e] out of the loss of . . .

or damage to” the crops, O.C.G.A. § 11-9-102(a)(63)(D). Proceeds “is meant to

include anything that is received in consequence of the disposition of collateral.”

In re Schmaling, 783 F.2d 680, 683 (7th Cir. 1986) (quoting In re Connelly, 41

B.R. 217, 220 (Bankr. D. Minn. 1984)). The reliance by the majority on the

57
congressional intent of the Agricultural Assistance Act of 2003 to characterize the

payment as “assistance” to farmers, Bracewell, slip op. at 25, is likewise unavailing

because nothing in Georgia law or the Bankruptcy Code excludes a payment meant

as assistance.

The majority expressly declines to discuss decisions that have enforced

security interests in crop disaster payments. Several courts have recognized the

right of a creditor to acquire a security interest in crop disaster payments and

collect the payment through bankruptcy. See Schneider, 864 F.2d at 685; Pombo

v. Ulrich (In re Munger), 495 F.2d 511, 513 (9th Cir. 1974); In re Boyett, 250 B.R.

817, 822 (Bankr. S.D. Ga. 2000); FarmPro Servs., Inc., 276 B.R. at 626; Lemos,

243 B.R. at 101; In re Kruse, 35 B.R. 958, 965 (Bankr. D. Kan. 1983); cf.

Schmaling, 783 F.2d at 683 (concluding that the security agreement in that case did

not cover proceeds, but stating that government entitlements are proceeds where

crops were actually planted). Courts have also concluded that creditors have a

right to proceeds from government programs when the debtor plants crops that

never materialize, although the debtor did not participate in the government

program when the creditor established the security interest. See Kruse, 35 B.R. at

965.

58
 The conclusion of the majority leads to an absurd result. The exclusion of

the payment as proceeds of the debtor estate violates the fundamental tenet of

bankruptcy law to preserve the security interests of creditors within bankruptcy.

“The Bankruptcy Code provides secured creditors various rights, including the

right to adequate protection, and these rights replace the protection afforded by

possession.” Whiting Pools, 462 U.S. at 207, 103 S. Ct. at 2314–15. “[T]he

protections afforded secured creditors under the Code generally adhere first to the

principle that the secured creditor is entitled to priority payment out of its

collateral, and second to the principle that the secured creditor is entitled to receive

the equivalent value of its collateral.” Colliers on Bankruptcy ¶ 506.02 (15th ed.

rev. 2006).

Under the majority’s view, a debtor can effectively void a valid security

interest held by a creditor by filing a bankruptcy petition. Outside of bankruptcy,

under the definition of “proceeds” in Georgia law, a creditor with a security

interest in the proceeds of a debtor’s crop would be able to recover any crop

disaster payment the debtor receives. See O.C.G.A. § 11-9-102(a)(63); cf. Sw. Ga.

Prod. Credit Ass’n, 350 S.E.2d at 787. Within bankruptcy, the same creditor

would be unable to benefit from the crop disaster payment because the payment is

not included in the debtor estate. The conclusion of the majority creates “a

59
windfall merely by reason of the happenstance of bankruptcy.” Lewis, 364 U.S. at

609, 81 S. Ct. at 350. According to the majority, because Bracewell decided to

convert under Chapter 7 before the enactment of the legislation granting him relief,

Bracewell both discharged his pre-bankruptcy debts to his creditors who provided

capital for Bracewell’s pre-bankruptcy crops and voided any security interests in

the proceeds of the crops that the creditors otherwise might have enforced.

Although the majority cautions that we should not seek to improve a statute under

the guise of interpreting it, see Bracewell, slip op. at 12-14, nothing in the statutory

text requires us to interpret “proceeds” in a way that is “so bizarre that Congress

could not have intended it.” Demarest v. Manspeaker, 498 U.S. 184, 190–91, 111

S. Ct. 599, 604 (1991).

To reach the conclusion that crop disaster payments are not proceeds of the

debtor estate, the majority must ignore the text of the Georgia Code, the legislative

history of the Bankruptcy Code, and the fundamental policy goals of secured

transactions and bankruptcy. Under the guise of interpreting section 541(a)(6), the

majority voids valid rights granted to creditors by Georgia law. See Bracewell,

slip op. at 12-14. I must disagree with that conclusion.

Because I would reverse the decision of the district court, I respectfully

dissent.

60