Opinion ID: 474027
Heading Depth: 1
Heading Rank: 6

Heading: Post-petition Transfer of Warrants

Text: 77 The Trustee raises a number of issues regarding post-petition transfers, in particular the transfer of three warrants supposedly applied to the Debtor's loan balance on the day of bankruptcy. On this matter the bankruptcy court found as follows: 78 The contention that the automatic stay was violated, and that preferential transfers occurred, when the bank applied $52,097.53 postpetition presents a difficult issue. When the bank notified debtor on October 14, 1985, that it was terminating the financing arrangements the bank immediately commenced gathering all assets available to it to apply against the line of credit and the guaranties. Three warrants totalling $52,097.53 had issued from the state which had not been received at the First National Bank. The loan officer flew to Austin, arranged for the presentment of the warrants to the State Treasurer, and returned them to Lubbock at a time in the afternoon of October 15, 1980, which is not reflected in the record. The only testimony as to time those proceeds were applied to the debts was that it occurred after the bank had closed for business on that day. 79 Memorandum and Order at 23. The bankruptcy petition was filed at 4:41 p.m. that same day. Id. 80 According to the Bank, the fact that the warrants were processed the night of October 15, 1980, is immaterial since the Bank had possession and started the process of applying those proceeds prior to the time of filing. Appellee's Brief at 36. The warrants were not negotiable instruments; as the Bank correctly notes, they were actually two steps short of cash: 81 These warrants were not a cash item and had to be in turn presented to the State Treasurer's office where the warrant had to be exchanged for a check written on a bank account of the State of Texas. Then this check had to be cashed and turned into cash before the money could actually be realized on the initial warrant. 82 Id. at 4; see also Memorandum and Order at 5 (A warrant is a voucher for payment of a sum of money. It is not a negotiable instrument but is an order by which the drawer authorizes the State Treasurer to pay a particular sum of money.). Thus even on the Bank's own version, or theory, of what happened when, the actual transfer of $52,097.53 to the Bank could not possibly have occurred before the filing of the bankruptcy petition. Our conclusion is fortified by the Bank's explanation, in a different context, of its treatment of the warrants: 83 [T]he Bank never asserted its interest in the cash proceeds until such time as those cash proceeds were actually deposited into the bank account of the Debtor, at the Bank. Then and only then would the Bank assert its interest in the proceeds of its collateral by applying the proceeds to the line of credit. Thus, the Bank has made no claim to the warrants which were secured and received by the Trustee, after the date of the filing of the bankruptcy because the warrants themselves were not the proceeds of the accounts receivable of the Debtor. 84 Appellee's Brief at 6-7. In the case of the last three warrants, moreover, the proceeds of the warrants were never even deposited in the Debtor's account. Memorandum and Order at 24; Testimony of Randy Neugebauer, II Statement of Facts 253-56, 297. 85 The Bank's behavior in this instance is a perfect example of the sort of last minute grab that Congress attempted to prevent in the automatic stay provisions of 11 U.S.C. Sec. 362. See Jackson supra, 36 Stan.L.Rev. at 760-64. We therefore hold that the $52,097.53 involved here must be returned to the estate pursuant to 11 U.S.C. Sec. 549.