Zilkha Energy Co. v. Leighton, No. 89-6306

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Writing for the CourtBefore MOORE, TACHA and BRORBY; JOHN P. MOORE
Citation920 F.2d 1520
Parties24 Collier Bankr.Cas.2d 299, 21 Bankr.Ct.Dec. 191, Bankr. L. Rep. P 73,745 ZILKHA ENERGY COMPANY, Plaintiff-Appellant, v. Arthur LEIGHTON, Verna Leighton, George W. Leighton, Susan Kay Stansberry, Ann E. Thompson, and Michael Frank Thompson, Defendants-Appellees.
Docket NumberNo. 89-6306
Decision Date10 December 1990

Page 1520

920 F.2d 1520
24 Collier Bankr.Cas.2d 299, 21 Bankr.Ct.Dec. 191,
Bankr. L. Rep. P 73,745
ZILKHA ENERGY COMPANY, Plaintiff-Appellant,
v.
Arthur LEIGHTON, Verna Leighton, George W. Leighton, Susan
Kay Stansberry, Ann E. Thompson, and Michael Frank
Thompson, Defendants-Appellees.
No. 89-6306.
United States Court of Appeals,
Tenth Circuit.
Dec. 10, 1990.

Page 1521

William A. Johnson (David E. Pepper with him on the briefs), of Linn & Helms, Oklahoma City, Okl., for plaintiff-appellant.

James C. Bass (Roger D. Everett with him on the briefs), of Porta, Bass, Bass and Everett, P.C., El Reno, Okl., for defendants-appellees.

Before MOORE, TACHA and BRORBY, Circuit Judges.

JOHN P. MOORE, Circuit Judge.

This is an appeal from the dismissal of a complaint seeking recovery of alleged overpayments of oil and gas royalties. Plaintiff, successor to a chapter 11 debtor in possession, sought recovery on three theories, including a bankruptcy law claim of a trustee's right to pursue actions as an hypothetical lien creditor under 11 U.S.C. Sec. 544(a)(1). The district court dismissed the action as time barred. While part of the court's reasoning led to the right conclusion on the bankruptcy issues, the judgment must be reversed for further consideration of whether laches bars recovery on plaintiff's state law equitable claim.

Plaintiff Zilkha Energy Company, on March 14, 1989, filed an amended complaint 1 in the United States District Court

Page 1522

for the Western District of Oklahoma asserting that it had filed a chapter 11 petition for reorganization in September 1984. 2 It further averred that in July 1983 Zilkha overpaid each of the defendants his or her share of the royalties of an oil and gas lease. Plaintiff claimed that each defendant knew of the overpayment and nonetheless failed to notify Zilkha of its error. Zilkha asserted it did not discover the overpayments until March 1987. 3 Plaintiff claimed the overpayment "constitutes a preference under Sec. 548 of the Bankruptcy Code and also constitutes a transfer that may be avoided by Zilkha under Sec. 544 of the Bankruptcy Code." On the basis of this predicate, plaintiff sought restitution and damages for unjust enrichment.

Defendants moved under Fed.R.Civ.P. 12(b)(6) to dismiss the amended complaint on the ground that it was "not filed within the time allowed by law as provided by 12 O.S. Sec. 95, [the Oklahoma statute of limitations for contract actions] and other applicable statutory case law." Defendants further contended the alleged overpayment was not a preferential transfer under Sec. 548 of the Bankruptcy Code, and summarily argued Sec. 544 did not apply to the case because the defendants are not creditors of the chapter 11 debtor. Defendants asserted Sec. 544 applies only to "the rights of the trustee of a bankrupt as against the creditors of the bankrupt."

Plaintiff responded, contending the state statute of limitations was not applicable because the action was in equity governed only by the doctrine of laches. 4 Plaintiff further argued as a debtor in possession it was vested with the rights and powers of a bankruptcy trustee, one of which was to assert claims as an hypothetical lien creditor under Sec. 544 of the Bankruptcy Code. Following that basis, plaintiff claimed Oklahoma law would permit one of its lien creditors to maintain an action to recover from a third party an "equitable interest" possessed by Zilkha. Okla.Stat.Ann. tit. 12, Sec. 841 (1988); Rucks-Brandt Const. Corp. v. Silver, 194 Okl. 324, 151 P.2d 399 (1944).

The district court granted defendants' motion to dismiss. Analyzing the amended complaint, the court concluded plaintiff's action was grounded in the lease and rejected the claim of restitution and unjust enrichment as "form over substance." As such, the suit was barred by the Oklahoma five-year statute of limitations. Next the court concluded plaintiff could not maintain an action for fraudulent concealment because "fraudulent concealment of an overpayment cannot be perpetrated upon the party who issued the check." Because plaintiff discovered the error from its own books and records, the court stated, "[c]ommon sense dictates that Plaintiff now cannot be heard to complain that Defendants 'concealed' that which existed in Plaintiff's records." 5 Relying upon 11 U.S.C. Sec. 547(b)(4)(A), the court concluded plaintiff could not assert a claim under Sec. 547 of the Bankruptcy Code because the transfer was not allegedly made within ninety days of

Page 1523

the filing of the petition. 6 Finally, the court held plaintiff was not entitled to assert a claim under Sec. 544 because that section "concerns a trustee avoiding transfer of property by creditors."

The dismissal of a complaint pursuant to Fed.R.Civ.P. 12(b)(6) presents a question of law which we review de novo. Bishop v. Federal Intermediate Credit Bank of Wichita, 908 F.2d 658, 663 (10th Cir.1990). In doing so, we accept all factual allegations of the complaint as true, and draw all reasonable inferences in favor of the plaintiff. Id.

From our review, we conclude the district court incorrectly analyzed the bankruptcy claims, but nonetheless reached the proper result. Aside from attributing plaintiff's Sec. 548 avoidance claim to a Sec. 547 preference action, the court misconstrued the significance of Sec. 544. 7

To understand the full import of Sec. 544, one must first understand the power of a bankruptcy trustee to stand in the shoes of an...

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137 practice notes
  • Picard v. JPMorgan Chase & Co., Nos. 11 civ. 913(CM)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • November 1, 2011
    ...remedies provided by state law to judgment lien creditors to satisfy judgments against the debtor.” Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523 (10th Cir.1990). The purpose of this section is to allow the trustee in bankruptcy to cut off any secret or unperfected liens on debtor prop......
  • In re Silver, BAP No. NM-03-042.
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit
    • January 16, 2004
    ...of any such rights. 45. 26 U.S.C. § 6323(b)(1)(A) & (B). 46. Id. § 6323(h)(6). 47. Id. § 6323(h)(1). 48. Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523 (10th 49. 11 U.S.C. § 544(a)(1). Section 544(a) also gives the Trustee the rights and powers of a creditor who obtains an execution aga......
  • Pugh, In re, No. 96-3790
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • October 21, 1998
    ...v. Government Tech. Servs., Inc. (In re Softwaire Centre Int'l, Inc.), 994 F.2d 682 (9th Cir.1993) (same); Zilkha Energy Co. v. Leighton, 920 F.2d 1520 (10th Cir.1990) (same); Feltman v. General Motors Acceptance Corp. (In re Tusa Fla., Inc.), 186 B.R. 542 (Bankr.S.D.Fla.1995) (same). Cf. M......
  • Gressley v. Deutsch, No. 93-CV-213-D.
    • United States
    • United States District Courts. 10th Circuit. District of Wyoming
    • October 5, 1994
    ...Plaintiff's well-pleaded factual allegations and draw all reasonable inferences in Plaintiff's favor. See, Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523 (10th Cir.1990). Dismissal for failure to state a claim is appropriate only if the Plaintiff can 890 F. Supp. 1483 prove no set of fa......
  • Request a trial to view additional results
136 cases
  • Picard v. JPMorgan Chase & Co., Nos. 11 civ. 913(CM)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • November 1, 2011
    ...remedies provided by state law to judgment lien creditors to satisfy judgments against the debtor.” Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523 (10th Cir.1990). The purpose of this section is to allow the trustee in bankruptcy to cut off any secret or unperfected liens on debtor prop......
  • In re Silver, BAP No. NM-03-042.
    • United States
    • Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Tenth Circuit
    • January 16, 2004
    ...of any such rights. 45. 26 U.S.C. § 6323(b)(1)(A) & (B). 46. Id. § 6323(h)(6). 47. Id. § 6323(h)(1). 48. Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523 (10th 49. 11 U.S.C. § 544(a)(1). Section 544(a) also gives the Trustee the rights and powers of a creditor who obtains an execution aga......
  • Pugh, In re, No. 96-3790
    • United States
    • United States Courts of Appeals. United States Court of Appeals (11th Circuit)
    • October 21, 1998
    ...v. Government Tech. Servs., Inc. (In re Softwaire Centre Int'l, Inc.), 994 F.2d 682 (9th Cir.1993) (same); Zilkha Energy Co. v. Leighton, 920 F.2d 1520 (10th Cir.1990) (same); Feltman v. General Motors Acceptance Corp. (In re Tusa Fla., Inc.), 186 B.R. 542 (Bankr.S.D.Fla.1995) (same). Cf. M......
  • Gressley v. Deutsch, No. 93-CV-213-D.
    • United States
    • United States District Courts. 10th Circuit. District of Wyoming
    • October 5, 1994
    ...Plaintiff's well-pleaded factual allegations and draw all reasonable inferences in Plaintiff's favor. See, Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523 (10th Cir.1990). Dismissal for failure to state a claim is appropriate only if the Plaintiff can 890 F. Supp. 1483 prove no set of fa......
  • Request a trial to view additional results
1 books & journal articles
  • The 'Snapshot Rule' and Proceeds of Exempt Property in Chapter 7: Bringing a Doctrine Into Focus.
    • United States
    • American Bankruptcy Law Journal Vol. 95 Nbr. 4, December 2021
    • December 22, 2021
    ...Inc.), 474 F.3d 4 (1st Cir. 2006). (93) 11 U.S.C. [section] 544(a)(1) (emphasis supplied). (94) See, e.g., Zilkha Energy Co. v. Leighton, 920 F.2d 1520 (10th Cir. 1990) (finding debtor in possession had right under [section] 544(a) to file action to enforce right given to any creditor under......

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