Court Opinion

ID: 9410579
Source: CourtListenerOpinion
Date Created: 2023-07-21 21:01:16.875804+00
Date Added: 2024-06-11T17:20:58.610756
License: Public Domain

FILED
                          NOT FOR PUBLICATION                                     JUL 21 2023
                                                                             SUSAN M. SPRAUL, CLERK
                                                                                U.S. BKCY. APP. PANEL
          UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
                    OF THE NINTH CIRCUIT

 In re:                                             BAP No. NC-22-1220-CBG
 PROFESSIONAL TECHNICAL                             BAP No. NC-22-1228-CBG
 SECURITY SERVICES, INC.,                           (related appeals)
              Debtor.
                                                    Bk. No. 3:22-bk-30062-HLB
 COMMITTEE OF CREDITORS
 HOLDING UNSECURED CLAIMS;
 BRINKMAN LAW GROUP, PC;
 DUNDON ADVISERS LLC,
              Appellants,                           MEMORANDUM*
 v.
 INTERNAL REVENUE SERVICE;
 JANINA M. HOSKINS, Chapter 7
 Trustee,
              Appellees.

              Appeal from the United States Bankruptcy Court
                   for the Northern District of California
             Hannah L. Blumenstiel, Bankruptcy Judge, Presiding

Before: CORBIT, BRAND, and GAN, Bankruptcy Judges.

      *
        This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
                                 INTRODUCTION

      The official unsecured creditor’s committee (“Committee”) appeals

the bankruptcy court’s order overruling its objection to chapter 11 1 debtor

Professional Technical Security Services Inc.’s (“PTSS”) motion to sell

substantially all of its assets pursuant to § 363. The Committee also appeals

the order approving a stipulation between PTSS and the U.S. Department

of the Treasury, Internal Revenue Service (“IRS”) relating to the

distribution of proceeds from the § 363 sale. Because we find no error, we

AFFIRM.

                                        FACTS

A.    History

      PTSS was a privately held San Francisco-based security company

with approximately 580 employees. 2 PTSS provided personalized and

professional unarmed security services in high-rise and commercial

properties. PTSS’s failure to pay federal taxes for years caused it to incur

significant tax debt and contributed to PTSS’s financial difficulties. Tax

debt represented roughly 90% of PTSS’s outstanding debts.

      1   Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Cal. Com. Code” references are to the California
Commercial Code.
        2 We exercise our discretion to take judicial notice of documents electronically

filed in the main case and adversary proceeding. See Atwood v. Chase Manhattan Mortg.
Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
                                            2
B.    Chapter 11 bankruptcy

      1.    First day motions including motion to use cash collateral

      In February 2022, PTSS filed a voluntary chapter 11 petition with the

intent to continue operating as a debtor-in-possession (“DIP”). As part of

its first day motions, PTSS requested court authorization to use its cash

collateral (the “Cash Collateral Motion”). The Cash Collateral Motion

identified three entities that had a security interest in PTSS’s cash collateral:

City National Bank; the IRS; and the Employment Development

Department (collectively, the “Secured Parties”). To provide adequate

protection, PTSS proposed to grant post-petition replacement liens to the

Secured Parties in the “same amounts and priority as the Secured Parties’

existing rights in the Cash Collateral (as may later be determined in this

case).” The Cash Collateral Motion identified PTSS’s cash collateral as its

checking and savings accounts and its accounts receivable.

      2.    Cash Collateral Motion approved

      On February 4, 2022, after a hearing on the first day motions, the

bankruptcy court entered an interim cash collateral order. After another

hearing on March 17th, the court entered a final order granting PTSS’s

Cash Collateral Motion (“Final Cash Collateral Order”). The Final Cash

Collateral Order stated in relevant part that in “consideration for the use of

the Cash Collateral, the Secured Parties shall receive as adequate protection

a post-petition replacement lien on all cash collateral generated post-

petition, in the same order of priority as existed prepetition.” In May, the
                                        3
Office of the United States Trustee for the Northern District of California

appointed the Committee pursuant to § 1102(a).

      3.     Committee’s motion to reconsider the Final Cash Collateral
             Order denied

      On June 29, 2022, the Committee filed a motion to reconsider the

Final Cash Collateral Order. Both PTSS and City National Bank filed

responses. After a hearing, the bankruptcy court denied the Committee’s

motion “for the reasons stated on the record.” The Committee did not

appeal the denial order.

C.    PTSS’s § 363 sale motion and IRS stipulation

      Despite PTSS’s efforts to reorganize, PTSS’s continued operations

resulted in a “net loss of roughly $500,000 per month post-petition.” Based

on its ongoing losses, PTSS decided to pursue a § 363 sale. Accordingly,

PTSS sought and received approval from the bankruptcy court to employ

B. Riley Advisory Services (“B. Riley”) to assist with the “§ 363 sale

process.” Beginning in May, B. Riley implemented a comprehensive

marketing strategy to sell PTSS’s assets. Despite “robust” marketing, PTSS

received only one qualified bid. The Buyer 3 offered to purchase PTSS’s

assets for $4.6 million (“Sale Proceeds”). 4

      3
         In the Sale Motion, PTSS identified the buyer as Paladin Security Group Ltd., a
Canadian corporation with no connection to PTSS. However, just a week later, in the
stipulation with the IRS and in the Order approving the sale motion, the buyer is
identified as “PalAmerican Security (California) Inc.,” a Delaware corporation. There is
no explanation for the change of the entity in the record provided.
       4 The terms of the sale indicated that the price represented approximately $1.6

                                           4
      1.     § 363 Sale Motion

      On September 12, 2022, PTSS filed a motion pursuant to § 363 seeking

an order (1) authorizing the sale of substantially all of its assets free and

clear of liens, (2) approving the assignment of certain executory contracts,

and (3) approving a negotiated compromise with B. Riley for reduced fees

(“Sale Motion”).

      PTSS acknowledged that Buyer’s offer was not sufficient to pay all

secured claims, it nevertheless asserted that the sale was “based upon its

sound business judgment,” and that Buyer’s offer was fair, reasonable, and

in the creditors’ best interest. Buyer was a good faith purchaser within the

meaning of § 363(m), according to PTSS, because the Buyer had no

previous relationship with PTSS and the sale was negotiated at arm’s

length by sophisticated parties.

      PTSS asserted that its assets should be sold free and clear of all liens

pursuant to § 363(f) for three reasons. First, the sale satisfied § 363(f)(1)

(“such a sale is permitted under applicable non-bankruptcy law”) because

absent the sale, City National Bank would foreclose on its interest and the

assets would be sold free and clear of junior liens. Second, the sale satisfied

§ 363(f)(2) (“the party asserting such a lien, claim or interest consents to

such sale”) because PTSS anticipated that both City National Bank and the

IRS would consent to the Sale. In a footnote, PTSS explained that it

million for accounts receivable, $1.9 million for unbilled work-in-progress, and a $1.1
million premium.
                                            5
anticipated that the IRS would agree to the sale if the IRS was paid the

balance of the Sale Proceeds remaining after paying City National Bank’s

claim and paying $500,000 for administrative claims (“Estate Carveout”)

and $200,000 for B. Riley’s reduced commission fees (“Commission

Carveout”). Third, the sale satisfied § 363(f)(4) (“the interest is the subject

of a bona fide dispute”) because a bona fide dispute existed as to the IRS’s

claim based on the Committee’s motion to reconsider the Final Cash

Collateral Order.

      2.    IRS Stipulation

      Following the Sale Motion, PTSS filed a proposed “Stipulation for

Consent to Sale of Substantially All of the Debtor’s Assets Free and Clear of

Liens; for Carveout from Sale Proceeds, and Payment of the Secured Claim

to the IRS” (the “IRS Stipulation”). The IRS Stipulation provided for the

distribution of Sale Proceeds in the following order: (1) City National

Bank’s claim; (2) Estate and Commission Carveouts; and (3) all remaining

Sale Proceeds to the IRS. The IRS Stipulation also provided that the IRS

would continue to have a secured claim against PTSS’s assets that were not

included in the § 363 sale to the “same extent, validity and priority as it had

prior to PTSS’s bankruptcy filing.”

      3.    Committee’s limited objection to PTSS’s Sale Motion

      The Committee filed a limited opposition to the Sale Motion. The

Committee complained that because PTSS’s principal, Sergio Reyes Jr., was

co-liable for the tax debt, he had a conflict of interest and should not have

                                        6
been the one to negotiate a deal with the IRS because it put him in a “better

position than he would be absent the deal.”

      Without legal or evidentiary support, the Committee also asserted

that the IRS had no lien on PTSS’s “cash, A/R, or [work-in-progress] by

operation of California and Bankruptcy Law,” and therefore the Sale

Proceeds were “traceable to property over which the IRS had no valid

lien.” Finally, the Committee also asserted that the Carveouts were

impermissible because it allowed those claimants to “step ahead of all

other administrative claimholders.”

      4.     Sale Motion approved

      After two hearings and additional briefing, the bankruptcy court

entered an order granting the Sale Motion (“Sale Order”).5

      The bankruptcy court determined that the § 363 sale should be

approved and effective immediately after finding that: notice was proper

and interested parties had the opportunity to be heard; compelling

circumstances existed for the sale and the sale was a reasonable exercise of

PTSS’s sound business judgment and in the best interest of the creditors;

Buyer was a good faith purchaser; Buyer’s offer was the highest and best

and provided fair and reasonable consideration for PTSS’s assets; Secured

      5  The Sale Order was captioned: Order Granting Debtor’s Motion for Entry of an
Order (I) Authorizing the Sale of Substantially All of Debtor’s Assets Free and Clear of
Liens (II) Approving the Assignment of Executory Contracts, (III) Allowing Payment of
Compromised Fee to B. Riley Upon Closing and (IV) Granting Related Relief.
                                           7
Creditors were adequately protected satisfying § 363(e); and the sale did

not constitute a sub rosa chapter 11 plan.

      The bankruptcy court allowed PTSS to pay City National Bank’s

claim from the Sale Proceeds, but ordered the remaining Sale Proceeds held

“in trust . . . pending further orders of the court.”

      5.    Additional briefing and proceedings regarding distribution
            of remaining Sale Proceeds

      Both PTSS and the IRS filed additional briefing regarding the IRS’s

right to the remaining Sale Proceeds. PTSS explained that, as adequate

protection for the use of its cash collateral, it intended to maintain the IRS’s

prepetition rights, which were all encompassing, because at the time the

petition was filed, the IRS had a valid lien under the Federal Tax Lien Act

on all of PTSS’s assets. Accordingly, the Final Cash Collateral Order

provided the IRS with adequate protection in the form of a post-petition

replacement lien to the same extent as the IRS held prepetition.

      In supplemental briefing, the IRS also noted that the Committee was

merely repeating arguments previously raised and rejected by the

bankruptcy court. Contrary to the Committee’s assertions, the IRS argued

that the Final Cash Collateral Order granted the IRS a replacement lien in

PTSS’s post-petition assets, such as PTSS’s “cash, accounts receivables, and

work in progress, to the same extent as they existed on the petition date.”

Furthermore, the Committee should have filed an adversary action if it

wanted to challenge the validity and extent of the IRS’s lien.

                                        8
      In a sur-reply, the Committee argued that the definition of cash

collateral in § 363(a) did not include all assets and specifically did not

include accounts receivable or work-in-progress.

      6.    Bankruptcy court overrules the Committee’s limited
            opposition

      At a hearing on October 25, 2022, the bankruptcy court articulated

several reasons why it was overruling the Committee’s limited opposition.

      First, the Committee had failed to appear at the hearing. Second, the

Committee’s arguments were previously raised and rejected for the reasons

previously articulated by the court “on the record.” Third, the Committee’s

arguments lacked merit. The bankruptcy court reasoned that the IRS’s lien

arose pursuant to 26 U.S.C. § 6321 and attached to all PTSS’s prepetition

assets. The IRS’s tax lien was not limited to property then held by PTSS but

continued to attach to interests acquired by PTSS until the lien was

satisfied. The court acknowledged that the automatic stay generally stops

the attachment of liens to post-petition property. However, both cash

collateral orders “clearly stated” that the Secured Parties would “receive, as

adequate protection, a post-petition replacement lien on all cash collateral

generated post-petition in the same order of priority as existed

prepetition.” The bankruptcy court determined this language evidenced

PTSS’s and the court’s intent to maintain the status quo of the IRS’s secured

interest in PTSS’s assets post-petition. Furthermore, the bankruptcy court

rejected the Committee’s argument that the holdings in United States v.

                                       9
Fuller (In re Fuller), 134 B.R. 945, 946 (9th Cir. 1992) and United States v.

McGugin (In re Braund), 423 F.2d 718 (9th Cir. 1970) applied because those

cases were chapter 7 cases and neither involved cash collateral orders.

      Following the hearing, the bankruptcy court entered an order

overruling the Committee’s opposition “in its entirety. . . for the reasons

stated on the record” (“Order Overruling Committee’s Opposition”).

      7.    Bankruptcy court approves IRS Stipulation

      On November 3, 2022, the bankruptcy court entered an order

approving the IRS Stipulation (“Order Approving IRS Stipulation”). The

order directed PTSS to “pay the balance of the Sale Proceeds arising from

the Sale . . . in accordance with the terms of the IRS Stipulation.”

      The Committee timely appealed both the Order Overruling

Committee’s Opposition and the Order Approving IRS Stipulation. 6

                                JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and

§ 157(b)(2)(A), (M). We have jurisdiction under 28 U.S.C. § 158.

                                     ISSUES

      Did the bankruptcy court err in determining that the Sale Proceeds

were cash collateral?

      6
        BAP No. NC-22-1220 is the appeal of the Order Overruling Committee’s
Opposition and BAP No. NC-22-1228 is the appeal of the Order Approving IRS
Stipulation.
                                        10
      Did the bankruptcy court abuse its discretion in approving the IRS

Stipulation?

                         STANDARDS OF REVIEW

      We review de novo the legal standard used by the trial judge to

determine whether the funds in question are cash collateral. Zeeway Corp. v.

Rio Salado Bank (In re Zeeway Corp.), 71 B.R. 210, 211 (9th Cir. BAP 1987).

Under de novo review, “we consider a matter anew, as if no decision had

been made previously.” Francis v. Wallace (In re Francis), 505 B.R. 914, 917

(9th Cir. 2014). We review the bankruptcy court's fact findings underlying

its legal conclusions for clear error. Bronitsky v. Bea (In re Bea), 533 B.R. 283,

285 (9th Cir. BAP 2015). We must affirm the bankruptcy court's fact

findings unless those findings are illogical, implausible, or without support

in inferences that may be drawn from the facts in the record. United States

v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc). A bankruptcy

court's decisions to approve a sale of estate property under § 363 or to

approve a compromise of a claim under Rule 9019 are reviewed for abuse

of discretion. Debbie Reynolds Hotel & Casino, Inc. v. Calstar Corp. (In re

Debbie Reynolds Hotel & Casino, Inc.), 255 F.3d 1061, 1065 (9th Cir. 2001). A

bankruptcy court abuses its discretion if it applies an incorrect legal

standard or its factual findings are illogical, implausible, or without

support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832

(9th Cir. 2011).

                                        11
                                 DISCUSSION

      The Committee argues that the bankruptcy court erred in both

overruling its opposition to the § 363 sale and in approving the IRS

Stipulation because the Sale Proceeds were not cash collateral as defined in

§ 363(a) and therefore, not subject to the IRS’s post-petition replacement

lien. We disagree.

A.    Federal tax liens

      Because PTSS was delinquent in paying its federal taxes, the IRS

obtained a lien on all PTSS’s prepetition “property and rights to property,

whether real or personal.” 26 U.S.C. § 6321. The broad statutory language

“reveals on its face that Congress meant to reach every interest in property

that a taxpayer might have.” United States v. Nat’l Bank of Com., 472 U.S.

713, 719-720 (1985) (citation omitted); see also Glass City Bank of Jeanette, Pa.,

v. United States, 326 U.S. 265, 267 (1945) (“Stronger language could hardly

have been selected to reveal a purpose to assure the collection of taxes.”);

Drye v. United States, 528 U.S. 49, 56 (1999) (“When Congress so broadly

uses the term ‘property,’ . . . the Legislature aims to reach every species of

right or interest protected by law and having an exchangeable value.”).

      Importantly, the tax lien attached not only to property belonging to

PTSS as of the date the lien arose, but also attached to property and rights

to property PTSS thereafter acquired, at any time, during the life of the lien.

26 U.S.C. § 6322 (the lien “arise[s] at the time the assessment is made and

shall continue until the liability for the amount so assessed . . . is satisfied”).

                                        12
B.    The automatic stay, cash collateral, and adequate protection

      Despite the broad reach of federal tax liens, a bankruptcy petition

generally works to prevent pre-petition liens and other obligations from

attaching to property after the petition has been filed. § 362(a); In re Fuller,

134 B.R. at 947. Under § 362, the stay is effective against all entities and any

act. “Entities” encompasses governmental units and includes the IRS.

United States v. Whiting Pools, Inc., 462 U.S. 198, 209 (1982). Accordingly,

because PTSS filed a bankruptcy petition, the automatic stay prevented the

IRS from enforcing its liens. However, the IRS’s “tax lien [was] not

dissolved; nor is its status as a secured creditor destroyed.” Id. at 211.

      Beyond impacting creditors, PTSS’s chapter 11 bankruptcy petition

also halted PTSS’s ability to use its cash collateral in which the Secured

Parties had an interest. A debtor-in-possession may use cash collateral,

even in the ordinary course of business, only if the creditors consent or the

court grants authorization. § 363(c)(2); § 1107(a). “There is an inherent

tension between a debtor's need to use its cash to continue operating and a

secured creditor's right to preserve its security interest in the debtor’s cash

proceeds.” Sec. Leasing Partners, LP v. ProAlert, LLC (In re Proalert, LLC), 314

B.R. 436, 441 (9th Cir. BAP 2004) (cleaned up). If the court authorizes the

use of cash collateral, that use must be conditioned as necessary to provide

adequate protection of the creditor's interest in the collateral. § 363(e).

      Because it needed access to its cash collateral to continue operations,

PTSS sought and obtained court authorization. As adequate protection,

                                       13
PTSS provided the Secured Parties a “post-petition replacement lien on all

cash collateral generated post-petition, in the same order of priority as

existed prepetition.” The question is whether the post-petition replacement

lien covers all of the Sale Proceeds.

C.   The Committee has not demonstrated that the bankruptcy court
     erred in determining the Sale Proceeds qualified as cash collateral.

      Although the Committee appeals both the Order Overruling

Committee’s Opposition and the Order Approving IRS Stipulation, it is

evident from the briefing that the Committee is not objecting to the

propriety of the § 363 sale, rather, the Committee is solely concerned with

the distribution of Sale Proceeds to the IRS. The Committee argued to the

bankruptcy court, and again on appeal, that the Sale Proceeds do not

qualify as cash collateral and therefore, were not subject to the IRS’s post-

petition replacement liens.

      Importantly, the Committee has the burden of filing an adequate

record to allow review of the orders it appeals. Drysdale v. Educ. Credit

Mgmt. Corp (In re Drysdale), 248 B.R. 386, 388 (9th Cir. BAP 2000). When

findings of fact and conclusions of law are made orally on the record, a

transcript of those findings is mandatory for appellate review. McCarthy v.

Prince (In re McCarthy), 230 B.R. 414, 416-17 (9th Cir. BAP 1999); Fed. R.

App. Proc. 10(b)(2) (“If the appellant intends to urge on appeal that a

finding or conclusion is unsupported by the evidence or is contrary to the

                                        14
evidence, the appellant shall include in the record a transcript of all

evidence relevant to such finding or conclusion.”).

      PTSS‘s Cash Collateral Motion requested “post-petition replacement

liens, in the same amounts and priority as the Secured Parties’ existing

rights in the Cash Collateral (as may later be determined in this case).”

      Cash collateral is defined in § 363(a) as:

      cash, negotiable instruments, documents of title, securities,
      deposit accounts, or other cash equivalents whenever acquired
      in which the estate and an entity other than the estate have an
      interest and includes the proceeds, products, offspring, rents, or
      profits of property and the fees, charges, accounts or other
      payments for the use or occupancy of rooms and other public
      facilities in hotels, motels, or other lodging properties subject to
      a security interest as provided in section 552(b) of this title,
      whether existing before or after the commencement of a case
      under this title.

      The Sale Proceeds are arguably cash collateral because cash collateral

by definition includes cash, cash equivalents, and proceeds. Furthermore, it

appears that the bankruptcy court considered the definition of cash

collateral, the breadth and intent of its cash collateral orders, and the

Secured Parties’ rights in the cash collateral, several times and at several

hearings. 7 Furthermore, the bankruptcy court’s rulings were based on the

      7
        The relevant hearings include: The February 4th hearing on first day motions,
including the motion to use cash collateral; the March 17th hearing on the Final Cash
Collateral Order; the August 4th hearing on the Committee’s motion to reconsider the
Final Cash Collateral Order; the September 22nd and 28th hearings on PTSS’s Sale
Motion, and the October 25th hearing on the Committee’s limited opposition to the Sale
                                          15
“reasons stated on the record.” As such, the transcripts of those hearings

are critical to our review.

      Despite the importance of the bankruptcy court’s oral findings, the

Committee provided only the transcript of the October 25, 2022, hearing.

The October 25th hearing addressed the Committee’s limited opposition to

the Sale Motion. It was also the hearing at which the Committee failed to

appear and prosecute its opposition. The bankruptcy court subsequently

approved the IRS Stipulation and distribution of the Sale Proceeds to the

IRS based on its finding that the post-petition replacement lien granted to

the IRS by the Final Cash Collateral Order was broad enough to capture all

of the Sale Proceeds.

      Because the Committee only provided the transcript of one hearing,

this panel may presume nothing in the missing transcripts would help the

Committee’s position on appeal. See U.S. Dep't of Educ. v. Carrion (In re

Carrion), 601 B.R. 523, 525 n.3 (9th Cir. BAP 2019). Although our review of

whether the Sale Proceeds are cash collateral is de novo, the panel reviews

the bankruptcy court’s fact findings underlying its legal conclusions for

clear error. From the record provided, we cannot determine that the

bankruptcy court committed clear error in finding that PTSS intended to

provide the IRS with a post-petition replacement lien broad enough to

Motion.
                                      16
capture the Sale Proceeds and that cash collateral included the Sale

Proceeds.

      2.     The bankruptcy court did not abuse its discretion in
             approving the IRS Stipulation.

      The Committee argues on appeal that account receivables and work-

in-progress are not cash collateral. Therefore, according to the Committee,

the Sale Proceeds attributable to account receivables and work-in-progress

are not subject to the IRS’s post-petition replacement lien.

      “The nature and extent of security interests are determined by state

law.” Arnot v. Endresen (In re Endresen), 548 B.R. 258, 269 (9th Cir. BAP

2016) (citation omitted). In California, accounts receivable are generally

considered to be cash collateral. In re Anaheim Elec. Motor, Inc., 137 B.R. 791,

796 (Bankr. C.D. Cal. 1992) (account “[r]eceivable is considered to be ‘cash

collateral’”). Similarly, the defined term cash collateral expressly

encompasses proceeds and under California law, proceeds include

whatever is acquired upon the sale, lease, license, exchange, or other

disposition of collateral.8 Cal. Comm. Code § 9102(a)(64)(A).

      8  California Commercial Code § 9102 includes the following applicable
definitions:
(a)(9) defines “Cash proceeds” as “proceeds that are money, checks, deposit accounts,
or the like.”
(a)(12) defines “Collateral” as property subject to a security interest including:
        (A) Proceeds to which a security interest attaches.
        (B) Accounts, chattel paper, payment intangibles, and promissory notes that have
        been sold.
        ....
                                          17
       “The concept of proceeds is only implicated when one asset is

disposed of and another is acquired as its substitute.” In re Delco Oil, Inc.,

365 B.R. 246, 250 (Bankr. M.D. Fla. 2007) (cleaned up). The “term ‘proceeds’

is to be given a broad and flexible interpretation . . .” Stodd v. Reynard (In re

Shooting Star Enterprises, Inc.), 76 B.R. 154, 156 (9th Cir. BAP 1987), aff'd, 843

F.2d 1576 (9th Cir. 1988); see also Am. Nat'l Bank v. Cloud, 201 Cal. App. 3d

766, 776 (1988) (“‘proceeds’ includes an account arising when the right to

payment accrues”); Producers Cotton Oil Co. v. Amstar Corp., 197 Cal. App.

3d 638, 651 (Cal. Ct. App. 1988) (money from sale of collateral was

proceeds even though never actually received by debtor but by third

party); Unsecured Creditors Comm. v. Marepcon Fin. Corp. (In re Bumper Sales,

Inc.), 907 F.2d 1430, 1437 (4th Cir. 1990) (secured creditor maintained

security interest in post-petition proceeds generated from the sale of the

debtor's prepetition inventory and collection of its accounts).

       In the instant case, the Sale Proceeds were acquired from the sale of

PTSS’s assets. It is undisputed that the IRS had a lien on all PTSS’s

prepetition assets. The Committee has not provided any evidence beyond

mere supposition that the Sale Proceeds are not attributable to sale of

(a)(64) defines “Proceeds,” as any of the following property:
        (A) Whatever is acquired upon the sale, lease, license, exchange, or other
        disposition of collateral.
        (B) Whatever is collected on, or distributed on account of, collateral.
        (C) Rights arising out of collateral.

                                            18
prepetition cash collateral. Because there is a sufficient statutory and

evidentiary basis for the bankruptcy court to find that the Sale Proceeds

were attributable to prepetition cash collateral and therefore, subject to the

IRS’s replacement lien, we cannot find the bankruptcy court erred in

approving the IRS Stipulation and distributing the remaining Sale Proceeds

to the IRS.

D.    The Committee may not raise an issue for the first time on appeal.

      The Committee also argues on appeal that the bankruptcy court erred

in approving the IRS Stipulation because it did not satisfy the Rule 9019(a)

requirements. The Committee did not raise this issue before the

bankruptcy court. Therefore, we need not consider it. Smith v. Marsh, 194

F.3d 1045, 1052 (9th Cir. 1999) (we generally will not consider arguments

raised for the first time on appeal).

                               CONCLUSION

      Based on the foregoing, we AFFIRM.

                                        19