Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-87-02339/USCOURTS-ca10-87-02339-0/pdf.json

Parties Involved:
Clark Tanklines Company
Appellee
Williamsburg Savings Bank
Not Party
Zions First National Bank
Appellant

Document Text:

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

Uni!stJ&t L E D ,,, • Co~rt of Appeals ienth Circuit 

MAR 141989 

In re: CLARK TANKLINES COMPANY, 

Debtor, 

ZIONS FIRST NATIONAL BANK, 

Appellant, 

and 

WILLIAMSBURG SAVINGS BANK, 

v. 

CLARK TANKLINES COMPANY, 

Appellee. 

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ORDER AND JUDGMENT* 

ROBERT L. HOECKER 

Clerk 

No. 87-2339 

(D.C. No. 86-C-982) 

(D. Utah) 

Before SEYMOUR and SETH, Circuit Judges, and SEAY, Chief Judge.** 

**Honorable Frank H. Seay, Chief Judge, United States District 

Court for the Eastern District of Oklahoma, sitting by 

designation. 

Appellant Zions First National Bank (Zions) appeals the 

decision of the United States Bankruptcy Court for the District of 

*This order and judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 1 
Utah, affirmed by the United States District Court. Zions 

presents issues in three areas: (1) adequate protection of an 

undersecured creditor; (2) perfection of security in leasehold 

interests in rolling stock; and (3) termination of the automatic 

stay by law pursuant to 11 U.S.C. § 362(e) (1976 & Supp. V, 1981). 

We affirm. 

The following brief procedural and factual history of this 

bankruptcy case is taken in part from the district court 

memorandum decision and order. 

The debtor, Clark Tanklines Company (Clark), was engaged in 

the interstate transportation of goods as a licensed commercial 

motor carrier. Its business was located in Salt Lake City, Utah, 

with a terminal in Duchesne, Utah. Clark obtained part of its 

financing through a series of loans made by Zions and Williamsburg 

Savings Bank. These loans were secured by, among other property 

in which Clark did not hold an interest, Clark's real property in 

Salt Lake City and Duchesne, Clark's leasehold interest in certain 

rolling stock, and Clark's interest in other personal property. 

Clark's only interest in some of the vehicles purportedly held as 

collateral by Zions was a leasehold interest. Zions attempted to 

perfect a security interest in Clark's leasehold interest in these 

vehicles by having Zions' name noted as a lienholder on the titles 

and by filing a UCC-1 filing statement listing these certain 

vehicles by unit number, make and designation, but without 

indicating that Clark owned only a leasehold interest in the 

vehicles. 

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Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 2 
Clark filed a voluntary petition for relief under Chapter 11 

of the Bankruptcy Code on February 7, 1986, continuing to operate 

its business as a debtor in possession. Zions filed a motion for 

relief from automatic stay on April 3, 1986. The bankruptcy court 

issued its findings of fact and conclusions of law on August 6, 

1986, dated as of July 7, 1986. Zions was denied relief from the 

stay, but the court ordered that Clark make 

payments to Zions. Zions appealed to 

adequate protection 

the district court. 

Following oral argument to the district court on appeal, Clark 

moved in the bankruptcy court to convert its Chapter 11 proceeding 

to a Chapter 7 proceeding. This motion has been granted. The 

district court upheld the bankruptcy court's order, and Zions has 

appealed to this court. 

I . 

Zions asks us to review two issues concerning the bankruptcy 

court's fashioning of adequate protection for it as an 

undersecured creditor. We review decisions concerning adequate 

protection of an undersecured creditor during the automatic stay 

of a bankruptcy proceeding under a clearly erroneous standard. In 

re O'Connor, 808 F.2d 1393, 1395 (10th Cir. 1987); In re Martin, 

761 F.2d 472, 474 (8th Cir. 1985); Bankr. R. 7052; Bankr. R. 8013. 

The bankruptcy court scheduled monthly cash payments from 

Clark to Zions to cover depreciation of certain vehicles in which 

Zions had a valid security interest. The court ordered the 

payments to begin as of June 15, 1986, thirty days after the final 

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Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 3 
hearing on Zions' motion for relief under the automatic stay. 

Zions requests that those payments be ordered to begin as of the 

date of Clark's original bankruptcy petition, February 7, 1986. 

Zions cites the transcript of a ruling from the bench in a 

case in the District of Utah Bankruptcy Court and an unpublished 

decision of the United States District Court for the District of 

Utah for authority that such relief should begin as of the filing 

date. Under 10th Cir. R. 36.3, this court will not recognize an 

unpublished opinion as authority, much less an unpublished order 

from the bench. 

We are even less inclined to follow this proposal because of 

its policy implications. As soon as a debtor files a petition 

with the bankruptcy court, 11 U.S.C. § 362 imposes an automatic 

stay on any activity by which the debtor's creditors could convert 

any of the debtor's property to their own control. The automatic 

stay is designed as a four-month "breathing spell'' during which 

time the debtor has an opportunity, unhindered by pressures from 

its creditors, to reorganize and order its financial affairs. The 

stay is also designed to prevent some creditors from gaining an 

advantage in the distribution of the debtor's property to the 

detriment of other creditors. In re Ahlers, 794 F.2d 388, 393-94 

(8th Cir. 1986), rev'd on other grounds sub nom. Norwest Bank 

Worthington v. Ahlers, 108 S. Ct. 963 (1988); In re Mellor, 734 

F.2d 1396, 1399 (9th Cir. 1984); H.R. Rep. No. 595, 95th Cong., 2d 

Sess. 340, reprinted in 1978 U.S. Code Cong. & Admin. News 5963, 

6296-97; Sack, Adequate Protection, 2 Bank. Dev. J. 21, 26-27 

(1985). An undersecured creditor desiring relief from the 

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Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 4 
automatic stay may request such relief. 11 U.S.C. § 362(d). The 

bankruptcy court may deny relief from the automatic stay but grant 

the creditor adequate protection from a loss in the value of its 

collateral. 11 u.s.c. § 361. 

In the case before us, the district court found that a 

four-month delay between the filing of the petition and the 

commencement of adequate protection payments was not unreasonable. 

It further found that absent congressionally mandated fixed dates 

for the commencement of adequate protection payments, the 

bankruptcy court can exercise its discretion in fashioning that 

remedy. The district court relied on In re Ahlers, 794 F.2d at 

394, for the proposition that adequate protection should provide a 

creditor with its bargained for rights, as nearly as possible, and 

that bankruptcy courts must review each bankruptcy on a case by 

case basis when fashioning relief. Note that in this case the 

creditor's adequate protection consisted of preservation of the 

value of Zions' security interest in rolling stock in the face of 

depreciation. 

We find no error in the district court's conclusion 

concerning this matter. See H.R. Rep. No. 595, 95th Cong. 2d 

Sess. 339, reprinted in 1978 U.S. Code Cong. & Admin. News 5963, 

6295. The bankruptcy court has wide latitude in fashioning 

protection for the undersecured creditor which will also protect 

the debtor's other creditors and allow the debtor an opportunity 

to construct a plan for financial rehabilitation. In re Briggs 

Transp. Co., 780 F.2d 1339, 1349 (8th Cir. 1985). "[E]quitable 

principles govern the exercise of bankruptcy jurisdiction." Id. 

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Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 5 
at 1343; see also, United Sav. Ass'n of Texas v. Timbers of Inwood 

Forest Assocs., Ltd., 108 S. Ct. 626 (1988}(§ 362(d}(l} does not 

protect a secured party's right to immediate foreclosure). 

Second, Zions complains that the bankruptcy court erred when 

it allowed Clark to buy out Zions' interest in three pieces of 

rolling stock as part of the adequate protection relief it 

fashioned for Zions. Zions claims that it was permanently 

precluded from other actions it could have taken with respect to 

its interest in the three pieces of rolling stock. 

court cited§ 36l[b](3) for the proposition that the 

The district 

bankruptcy 

court could provide creditors with the "indubitable equivalent of 

such entities' interest in such property." The district court 

went on to find that a buy out of the cash value of Zions' 

security interest was an ''indubitable equivalent" of Zions' 

interest. This finding was not clearly erroneous. 

II. 

The bankruptcy court found that no adequate protection cash 

payment covering depreciation needed to be made for certain 

rolling stock in which Zions claimed to have a security interest. 

The bankruptcy court found that, as a matter of state law, Zions 

had failed to perfect its security interest in the equipment by 

neglecting to note on the motor vehicle title certificates to the 

vehicles and on the UCC-1 financing statement that it held a 

security interest in Clark's leasehold interest. 

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Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 6 
A bankruptcy court is bound by state law in the determination 

of ownership interests in property. See, e.g., Pearson v. Salina 

Coffee House, Inc., 831 F.2d 1531, 1532-33 (10th Cir. 

1987)(whether security interest is perfected). In Utah, it is 

well settled that: 

The general rule governing liens on motor 

vehicles not in a dealer's inventory is that 

perfection of a lien is governed exclusively 

by the filing and title provisions of the 

Motor Vehicle Act, U.C.A., 1953, §§ 41-1-81 to 

41-1-86. See §§ 41-1-80, 41-1-87, 

70A-9-302(3)(b-) - and (4). Under these 

provisions the perfection of a lien on [motor 

vehicles] depends upon the appearance of the 

lien interest on the vehicle's certificate of 

t itle. See§ 41-1-83. 

Draper Bank and Trust Co. v. Lawson, 675 P.2d 1174, 1177 (Utah 

1983). The bankruptcy court found that Zions did not show the 

lien interest, that of Clark's leasehold interest, on the 

certificates of title and therefore Zions did not have a perfected 

security interest in these vehicles for the court to protect in 

Clark's bankruptcy. The court did not err in this matter. 

Further, Zions claims that Clark did not have standing to 

raise the issue of Zions' perfection of a security interest in 

vehicles in which Clark had no equity interest. The district 

court ruled that Clark's leasehold interest in the vehicles was a 

property interest, giving Clark standing to raise the issue of 

Zions' perfection of its security interest in the vehicles. We 

agree. 

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Appellate Case: 87-2339 Document: 010110024611 Date Filed: 03/14/1989 Page: 7 
III. 

Finally, Zions claims that the bankruptcy court's order 

calling for adequate protection of Zions' collateral during the 

automatic stay was moot, since the bankruptcy court's final order 

on Zions' motion for relief from stay was filed more than thirty 

days after the final hearing on Zions' motion for relief from 

stay, hence the automatic stay had ceased to exist by operation of 

law, pursuant to 11 u.s.c. § 362(e) and Bankr. R. 400l(b). The 

district court ruled that this issue was moot because Clark's 

bankruptcy had been converted to a Chapter 7. The import of the 

conversion was that since Clark was not making the payments 

required by the bankruptcy court's order fashioning adequate 

protection for Zions, the stay was terminated as to Zions. We are 

not persuaded by appellant's arguments. 

The judgment of the United States District Court for the 

District of Utah is AFFIRMED. 

The mandate shall issue forthwith. 

ENTERED FOR THE COURT 

PER CURIAM 

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