Opinion ID: 199934
Heading Depth: 3
Heading Rank: 2

Heading: Failure to object to Fleet's June 13 motion

Text: 57 The bankruptcy court held that the government had waived its right of setoff by failing to object to the Bank's Lift Stay Motion in which the Bank expressly stated its intention to liquidate its collateral, including the accounts receivable. Id. This ground apparently encompasses the silence of counsel for the IRS at the June 17 hearing as well as the absence of written filings. As a matter of logic, waiver does not follow from this silence for the same reason that it does not follow from the government's acquiescence in the borrowing orders: lifting the order as to Fleet affected Fleet's rights against Calore, but had no effect on Fleet's or Calore's rights against the government, and therefore acquiescence in the lifting was not inconsistent with the government's intention to assert its setoff rights. 58 To treat the bankruptcy court's opinion fairly, however, we take a broader view of the significance of the court's actions at the June 17 hearing. By granting Fleet permission to sell Calore's assets, while at the same time postponing the requests of all other creditors, the court intended to allow Fleet to sell the assets as a group and therefore to preserve Calore's value as a going concern. In effect, the court was allowing Fleet to pursue a course of action quite similar to the earlier motion for a sale of assets under 11 U.S.C. § 363, which the court had denied on June 10 primarily because of its effect on the government's rights. From the court's perspective, it had scrupulously protected the government's rights on June 10, despite the accusations of Fleet and other creditors at the time that the government's position was unreasonable. A mere week later, the government felt once more that its rights were threatened; but counsel, rather than raising a setoff argument to the court, sat by in silence and allowed events he had already set in motion to frustrate the purpose, if not the literal language, of the court's order. It may be, as counsel said in a later affidavit to the court, that he did not know for sure that the GSA still owed Calore money and so that a substantial setoff remained possible. Even so, he had an inkling that this might be so, and should have shown greater candor. 59 The subsequent history of this case has shown that counsel's silence, whether or not it was waiver or inequitable conduct, was certainly unwise. We discourage similar conduct by bankruptcy litigants, including the government, in the future. Nevertheless, the question whether silence constitutes waiver requires an inquiry, as we have discussed above, on all the facts of the case. See 5 Collier, supra, ¶ 553.07[2]. It is unsuitable for resolution in a nonevidentiary hearing. The concerns raised by the bankruptcy court, although significant, did not give it sufficient grounds to conclude as a matter of law that the government had so clearly waived its right of setoff as to lack even a colorable claim. Therefore, counsel's silence at the June 17 hearing does not support the bankruptcy court's finding of waiver. If and when a court more fully develops the facts of this case, our holding today will not preclude Fleet from arguing that on those facts the government's silence amounted to waiver.