Opinion ID: 779630
Heading Depth: 2
Heading Rank: 3

Heading: Cases

Text: 50 The Trustee and the IRS cite a number of cases in support of their respective interpretations. However, the parties' citations and our own research have not uncovered any decision addressing the same issue that we face. 51 The Trustee argues that two cases discussing the validity of cash collateral orders support his position. In re Bino's Inc., 182 B.R. 784 (Bankr.N.D.Ill.1995); In re Life Imaging Corp., 131 B.R. 174 (Bankr.D.Colo.1991). Although those cases contain isolated passages favoring the Trustee, neither is entirely on point because the IRS in both cases already had a statutory lien on the property in question, which was converted to a judicial lien by agreement of the parties. The courts in those cases thus focused on the fact that, by compromising the tax claim, the trustee was bargain[ing] away the tax lien subordination provisions of § 724(b) and attempting to override the subordination provisions of § 724(b). Bino's, 182 B.R. at 787-88. 52 In the present case, however, the IRS did not have a statutory lien on the ARC collateral but, instead, had actual possession of the funds. Therefore, in the absence of the parties' agreement, there would have been no lien to subordinate pursuant to § 724(b). Accordingly, the parties cannot be said to have been bargaining away or overriding § 724(b), and Life Imaging and Bino's are inapposite. 53 Moreover, those two decisions do not represent the only approach adopted by courts in cash collateral order cases. For example, in In re Buzzworm, Inc., 178 B.R. 503, 505 (Bankr.D.Colo. 1994), the court concluded that enforcement of a cash collateral agreement need not violate the statute: [A] tax lien creditor, under the right circumstances, may avoid, by agreement, the distribution scheme under Section 724(b) .... The court's rejection of the approach adopted in Bino's and Life Imaging is well reasoned and relies on the text of the statute, its legislative history, and public policy considerations. Id. at 509-12. Thus, contrary to the Trustee's claims, the cash collateral cases do not necessarily support his interpretation of § 724(b). 54 Other cases discussing § 724(b) are of little help in determining whether the statute applies to judicial liens. Accordingly, we move to our final consideration: the policies underlying Congress' enactment of the statute and the policy consequences of adopting each party's construction of § 724(b).