Morgan Guar. Trust Co. of New York v. American Sav. and Loan Ass'n

Decision Date26 November 1986
Docket NumberNo. 85-5817,85-5817
Parties, 2 UCC Rep.Serv.2d 785 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York corporation, Plaintiff- Appellant, v. AMERICAN SAVINGS AND LOAN ASSOCIATION, a California corporation, Defendant- Third Party-Plaintiff-Appellee, and The Chase Manhattan Bank, N.A., Third Party Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Richard K. Simon, Kadison, Pfaelzer, Woodard, Quinn, & Rossi, Los Angeles, Cal., for plaintiff-appellant.

Richard H. Cooper, Freshman, Mulvaney, Marantz, Comsky, Kahan & Deutsch, Beverly Hills, Cal., Roger A. Ferree, McCutchen, Black, Verleger & Shea, Los Angeles, Cal., for defendant-third party-plaintiff-appellee.

Appeal from the United States District Court for the Central District of California.

Before FLETCHER, NELSON, and HALL, Circuit Judges.

FLETCHER, Circuit Judge:

Morgan Guaranty Trust Company of New York appeals from the district court's grant of summary judgment in favor of American Savings & Loan Association and Chase Manhattan Bank on Morgan's claims for unjust enrichment, money had and received, and conversion. This appeal centers around a question of first impression: whether a holder-in-due-course is entitled to retain funds mistakenly paid to it on notes presented after the holder has knowledge that the maker of the notes has filed a petition for bankruptcy. We hold that it is not so entitled, and reverse in part.


The material facts of the case are undisputed. On July 8, 1982, American purchased two Manville Corporation bearer notes due and payable September 2, 1982, at Morgan, each with a face value of $5 million. The notes were held for American by Chase until maturity.

On August 26, 1982, Manville filed a Chapter 11 petition in bankruptcy. In response to the filing, Morgan, which held On September 2, Chase, acting without instructions from American, presented the notes to Morgan through the New York Clearing House 2:00 a.m. exchange. 1 Morgan effected a provisional settlement of $10 million for the notes at 10:00 a.m. that day. Under Clearing House rules, once the provisional settlement was made, Morgan could revoke it only by taking action before 3:00 p.m. the same day.

several Manville accounts, instituted special procedures to process Manville notes and checks. American, aware of the bankruptcy, did not anticipate payment of the notes on September 2.

Morgan processed the notes in accordance with its special procedures for dealing with Manville paper. Unfortunately, the employees in the special channels were unfamiliar with Clearing House procedures. By the time bankruptcy counsel had been consulted and the decision to dishonor the notes was conveyed, it was 4:00 p.m., too late to revoke the settlement.

The next day, Chase transferred $10 million credit to American. Morgan demanded repayment of the money, first from Chase, then from American. American refused to return the money.

Morgan filed this action against American. American filed a third-party complaint against Chase seeking indemnity if American should be found liable on a promise by Chase, acting as its agent, to return the money to Morgan. American and Morgan filed cross-motions for summary judgment and Chase filed a motion to dismiss for failure to state a claim. American then moved for partial summary judgment on the issues raised in Chase's motion. All motions were presented and heard together.

The district court granted American's motion for summary judgment. Morgan Guaranty Trust Co. v. American Savings & Loan Assoc., 605 F.Supp. 1086 (C.D.Cal.1985). The court found Morgan's claims for unjust enrichment, and money had and received, barred by section 3-418 of the New York Uniform Commercial Code. 605 F.Supp. at 1090-93. It found that the action for conversion would not lie because Morgan had not established any legal or equitable right to the money and because there was no specific, identifiable fund capable of being converted. Id. at 1094. 2 Morgan timely appeals.


We review a grant of summary judgment de novo. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986). Where the facts are undisputed, we confine our inquiry to whether the district court correctly applied the relevant substantive law. See id.

I. Presentment and the Automatic Stay

When Manville filed its petition in bankruptcy, it triggered the automatic stay provisions of 11 U.S.C. Sec. 362(a) (1982). 3 Actions taken in violation of the automatic stay are void. Sambo's Restaurants, Inc. v. Wheeler (In re Sambo's Restaurants, Inc.), 754 F.2d 811, 816 (9th Cir.1985). Subsection 362(a)(6) stays "any act to collect, assess, or recover a claim against the debtor that arose before [the filing of the petition]." Morgan argues that Chase's presentment of the notes was an act to collect a claim against Manville, and therefore violated subsection 362(a)(6), and was void.

If the presentment had taken place today, clearly the automatic stay would not void it. 11 U.S.C. Sec. 362(b)(10) (Supp.1984) Subsection 362(a)(6) uses very broad language and courts generally construe the automatic stay provisions broadly. See, e.g., Coben v. Lebrun (In re Golden Plan of California, Inc.), 37 B.R. 167, 170 (Bankr.E.D.Cal.1984); Wallingford's Fruit House v. Inhabitants of the City of Auburn (In re Wallingford's Fruit House ), 30 B.R. 654, 659 (Bankr.D.Me.1983). However, the language of the other provisions of the automatic stay suggests that mere requests for payment are not barred absent coercion or harassment by the creditor. These provisions stay acts that immediately or potentially threaten the debtor's possession of its property: commencement of judicial proceedings; enforcement of judgments; creation and enforcement of liens; and setoffs of debts owing to the debtor against claims against the debtor. 11 U.S.C. Secs. 362(a)(1), (2), (4), (5), (7) & (8). The activities that are specifically prohibited all involve attempts to confiscate the debtor's property or require the debtor to act affirmatively to protect its interests. Presentment and other requests for payment unaccompanied by coercion or harassment do not appear to fall within the prohibitions of section 362(a).

exempts from the stay the presentment of negotiable instruments. However, subsection 362(b)(10) applies only to cases filed after October 8, 1984, see Pub.L. 98-353, Sec. 553(a) (1984), so it does not govern this case. We must decide whether the automatic stay prohibited presentment prior to that date. We conclude that it did not.

The reasons for the automatic stay also suggest that it does not bar presentment. The statute seeks to ensure orderly administration of the debtor's estate to protect the creditors' right to equality of distribution, see Superior Paint Manufacturing Co. v. Lopez-Soto (In re Lopez-Soto ), 764 F.2d 23, 27 (1st Cir.1985); Holtkamp v. Littlefield (In re Holtkamp ), 669 F.2d 505, 508 (7th Cir.1982); Sen.Rep. No. 989, 95th Cong., 2d Sess. at 49 (1978); reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5835; H.Rep. No. 595, 95th Cong. 1st Sess. at 340 (1977), reprinted in 1978 U.S.Code. Cong. & Ad.News 5787, 6297; see also First National Bank of Anchorage and Alaska Title Guaranty Co. v. Roach (In re Roach ), 660 F.2d 1316, 1318-19 (9th Cir.1981); to provide a breathing spell for the debtor, Roach, 660 F.2d at 1318; H.Rep. No. 595 at 121, reprinted in 1978 U.S.Code Cong. & Ad.News at 6082; and to maintain the status quo, Roach, 660 F.2d at 1319; United States v. Sayres, 43 B.R. 437, 439 (W.D.N.Y.1984); United Mutual Savings Bank v. Doud (In re Doud ), 30 B.R. 731, 734 (Bankr. W.D.Wash.1983). An additional purpose of the stay, to which Congress specifically addressed subsection 362(a)(6), is to prevent harassment of the debtor by sophisticated creditors. Sen.Rep. No. 989 at 50-51, reprinted in 1978 U.S.Code Cong. & Ad. News at 5836-37; H.Rep. No. 595 at 125-26, 342, reprinted in 1978 U.S.Code Cong. & Ad.News at 6086-87, 6298; see Roach, 660 F.2d at 1318; Brown v. Pennsylvania State Employees Credit Union (In re Brown ) 49 B.R. 558, 561 (Bankr.M.D.Penn.1985).

Voiding the presentment of notes of a bankrupt maker does not appear to further any of these purposes. The mere act of presentment does not interfere with orderly administration of the estate, the debtor's "breathing spell," or the status quo. Presentment cannot be characterized as harassment, particularly where the creditor presents its notes to the payor bank, rather than to the debtor. See Brown, 49 B.R. at 561 (letter from credit union to debtor violated automatic stay when sent directly to debtor rather than to his attorney). We conclude that the language and purposes of section 362(a) do not bar mere requests for payment unless some element of coercion or harassment is involved. 4 Cf. Roach, 660 Our conclusion that presentment did not violate the automatic stay prior to the enactment of subsection 362(b)(10) is buttressed by the legislative history of the subsection. Congress intended the subsection to be a clarifying amendment, not a change in the law. 5 Although such subsequent legislative history is not conclusive, we are entitled to give it weight when the meaning of the statute and original congressional intent are in doubt. Seatrain Ship Building Corp. v. Shell Oil Co., 444 U.S. 572, 596, 100 S.Ct. 800, 813, 63 L.Ed.2d 36 (1980).

F.2d at 1318-19 (bank's notice of postponement of sale of debtor's property specifying new date does not violate automatic stay where bank did not "harass, interfere, or gain any advantage").

Morgan points to no cases holding that section 362(a) bars a creditor's request for payment unaccompanied by coercion or harassment. In light of this absence of authority, the language and purposes of the stay provisions, and the subsequent legislative history, we hold that the presentment of the Manville notes did not...

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