Court Opinion

ID: 9480274
Source: CourtListenerOpinion
Date Created: 2023-08-05 07:42:57.085039+00
Date Added: 2024-06-11T17:47:34.704476
License: Public Domain

HULL, Chief District Judge,
dissenting.
I concur in the judgment of the court insofar as it finds that NYLIC has standing to object to the post-petition financing arrangement and to appeal from the bankruptcy court to the district court. However, I must respectfully dissent from its interpretation of 11 U.S.C. § 364(e) and from its suggestion that NYLIC’s appeal was procedurally defective because of its failure to obtain a stay and saved only because the bankruptcy court did not address the good faith issue.
As the majority correctly noted, the legislative history of Section 364(e) indicates that this section was intended to protect the good faith post-petition lender. It does not protect the pre-petition creditors, even if, in some situations, these entities are also the post-petition lenders. And it should not be read to insulate from appellate review every challenge to the legality of deals pre-petition creditors may make in order to ensure themselves “adequate protection.”
Section 364(e) does not require a stay. It merely ensures that, in the absence of a stay, if an appeal results in a reversal or modification of an authorization of post-petition credit, the superpriority lien granted to any institution that extended post-petition credit in good faith will not be affected.
As a practical matter, it is unrealistic to expect the party seeking an appeal to obtain a stay of an emergency extension of post-petition credit because this would have the effect of destroying the debtor-in-possession just at the moment it was trying to save itself through reorganization. Appeals which merely challenge the terms provided pre-petition creditors should be allowed to proceed without a stay.
As pointed out by Judge Merritt in his dissent in In re Ellingsen MacLean Oil Co., Inc., 834 F.2d 599 (6th Cir.1987), the Section 364(e) protection speeds the extension of emergency credit because lenders are assured that their security for the loan — the superpriority — will not be taken away after the funds have been advanced. The court should be very sensitive to the problems facing bankruptcy courts and their need to rapidly arrange post-petition financing without sacrificing pre-petition creditors. Obviously bargains will be struck which will not satisfy all parties. However, the need for an efficient, practical, emergency response should not outweigh the fundamental right to judicial review on appeal. If a simple finding of good faith by a bankruptcy court would insulate from appellate review any arrangement, even an illegal one, in the absence of a stay, then an essential element of our legal system would have been sacrificed in the name of expediency.
Accordingly, I would reverse the district court’s dismissal and remand this case to the district court for consideration of NYL-IC’s appeal on its merits.