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    Harbor National Bank of Boston v. Sid Kumins, Inc., 696 F.2d 9, 1st Cir. (1982)

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    This document is a summary of a court case regarding whether an attachment obtained by Sid Kumins, Inc. on a debt owed by a debtor in bankruptcy was a voidable preference under bankruptcy law. The court held that under both Massachusetts law and federal bankruptcy law, the attachment was made/took effect on July 17, 1979 when the sheriffs made the attachment, not on July 18th when it was recorded, and therefore it occurred outside the 90-day preference period prior to the bankruptcy filing on October 16, 1979 and was not a voidable preference. The court rejected the arguments of another creditor, Harbor National Bank, that the attachment was not made until recorded under Massachusetts law or that it should be considered made on the date

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    Harbor National Bank of Boston v. Sid Kumins, Inc., 696 F.2d 9, 1st Cir. (1982)

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    This document is a summary of a court case regarding whether an attachment obtained by Sid Kumins, Inc. on a debt owed by a debtor in bankruptcy was a voidable preference under bankruptcy law. The court held that under both Massachusetts law and federal bankruptcy law, the attachment was made/took effect on July 17, 1979 when the sheriffs made the attachment, not on July 18th when it was recorded, and therefore it occurred outside the 90-day preference period prior to the bankruptcy filing on October 16, 1979 and was not a voidable preference. The court rejected the arguments of another creditor, Harbor National Bank, that the attachment was not made until recorded under Massachusetts law or that it should be considered made on the date

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    Filed: 1982-12-21 Precedential Status: Precedential Citations: 696 F.2d 9 Docket: 82-1182

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    This document is a summary of a court case regarding whether an attachment obtained by Sid Kumins, Inc. on a debt owed by a debtor in bankruptcy was a voidable preference under bankruptcy law. The court held that under both Massachusetts law and federal bankruptcy law, the attachment was made/took effect on July 17, 1979 when the sheriffs made the attachment, not on July 18th when it was recorded, and therefore it occurred outside the 90-day preference period prior to the bankruptcy filing on October 16, 1979 and was not a voidable preference. The court rejected the arguments of another creditor, Harbor National Bank, that the attachment was not made until recorded under Massachusetts law or that it should be considered made on the date

    Copyright:

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    133 views6 pages

    Harbor National Bank of Boston v. Sid Kumins, Inc., 696 F.2d 9, 1st Cir. (1982)

    Uploaded by

    Scribd Government Docs
    This document is a summary of a court case regarding whether an attachment obtained by Sid Kumins, Inc. on a debt owed by a debtor in bankruptcy was a voidable preference under bankruptcy law. The court held that under both Massachusetts law and federal bankruptcy law, the attachment was made/took effect on July 17, 1979 when the sheriffs made the attachment, not on July 18th when it was recorded, and therefore it occurred outside the 90-day preference period prior to the bankruptcy filing on October 16, 1979 and was not a voidable preference. The court rejected the arguments of another creditor, Harbor National Bank, that the attachment was not made until recorded under Massachusetts law or that it should be considered made on the date

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    of 6

    696 F.

    2d 9
    9 Bankr.Ct.Dec. 1423, Bankr. L. Rep. P 68,909

    HARBOR NATIONAL BANK OF BOSTON, Plaintiff,


    Appellant,
    v.
    SID KUMINS, INC., Defendant, Appellee.
    No. 82-1182.

    United States Court of Appeals,


    First Circuit.
    Argued Sept. 13, 1982.
    Decided Dec. 21, 1982.

    Mitchell H. Cohen, Boston, Mass., with whom Lappin, Rosen, Goldberg,


    Slavet, Levenson & Wekstein, Boston, Mass., was on brief, for plaintiff,
    appellant.
    Alan Garber, Boston, Mass., with whom Mason & Martin, Boston, Mass.,
    was on brief, for defendant, appellee.
    Before DAVIS * , CAMPBELL and BREYER, Circuit Judges.
    OSCAR H. DAVIS, Circuit Judge.

    The issue is whether an attachment obtained by defendant-appellee Sid


    Kumins, Inc. (Kumins) on a debt owed by a debtor in bankruptcy was a
    voidable preference within 11 U.S.C. Sec. 547(b)(4)(A) of the Bankruptcy
    Code, as having been made on or within 90 days before the date of the filing of
    the bankruptcy petition. The agreed facts are that on June 28, 1979, Kumins
    brought an action against Robert Wolf in a Massachusetts state court, and on
    that day the court approved, ex parte, a real estate attachment; the attachment
    was made by the sheriffs on Wolf's property in Massachusetts on July 17, 1979;
    the attachment was recorded on July 18, 1979; and on October 16, 1979, an
    involuntary creditor's petition in bankruptcy was filed against Wolf in the
    Bankruptcy Court for the District of Massachusetts.

    In November 1980 Kumins sought from the Bankruptcy Court a determination

    In November 1980 Kumins sought from the Bankruptcy Court a determination


    that its real estate attachment was valid and perfected. Harbor National Bank of
    Boston (Harbor), one of Wolf's other creditors in the bankruptcy proceedings,
    challenged that position by motion for summary judgment, and the question
    was presented (on the agreed facts) to the Bankruptcy Judge. He decided that
    Kumins' attachment was not a voidable preference. On review by the District
    Court, that order was affirmed. This appeal followed.

    The Bankruptcy Code, 11 U.S.C. Sec. 547(b)(4), provides that the bankruptcy
    trustee may avoid any transfer of property of the debtor "made (A) on or within
    90 days before the date of the filing of the petition." Harbor claims that here the
    attachment (conceded to be a transfer of property under Sec. 547) was made
    within the avoidable period, while Kumins and the courts below say that it was
    made just outside that period. Harbor has two independent arguments, both of
    which were rejected by the District Court and which we, too, refuse to accept.

    Bankruptcy Rule 906(a) ("Time--Computation") declares that in computing any


    period of time in a bankruptcy case Rule 6(a) of the Federal Rules of Civil
    Procedure applies. In turn, Rule 6(a) ("Time--Computation") provides:

    In computing any period of time prescribed or allowed by these rules, by the


    local rules of any district court, by order of court, or by any applicable statute,
    the day of the act, event, or default from which the designated period of time
    begins to run shall not be included. The last day of the period so computed shall
    be included, unless it is a Saturday, a Sunday, or a legal holiday, in which event
    the period runs until the end of the next day which is not a Saturday, a Sunday,
    or a legal holiday.

    This method controls the computation of a period prior to the commencement


    of the bankruptcy case (4 COLLIER ON BANKRUPTCY, p 547.28 at 547-109
    (15th ed. 1981)) and requires the exclusion of one of the terminal dates and the
    inclusion of the other (the two significant dates being the date of the petition
    and the date of the attachment). There is some disagreement as to which of the
    two dates is to be included and which excluded, but that controversy is
    irrelevant here because in either event the crucial 90th day under the Rule was
    July 18, 1979. On that view, if Kumins' attachment was made on July 17th, it
    was beyond the statutory period.

    Harbor's first argument is that the statute, Sec. 547(b)(4)(A), supra, gives an
    additional day because it cumulates the date of the petition itself--included, it is
    said, by the statute's specific use of "on" the date of the petition--plus the 90
    days covered by the statutory terms "within 90 days before the date" of the

    petition, as those words must be interpreted under Bankruptcy Rule 906(a) and
    Rule 6(a) of the Federal Rules of Civil Procedure.
    8

    The error in this position is that, contrary to the plain requirement of the Rules
    that one and only one of the two terminal dates is to be included,1 Harbor's
    reading includes both terminal dates (or, alternatively, counts the petition date
    twice). Appellant seeks to avoid that unacceptable result by arguing that,
    through Congress' designation of the petition date separately, Sec. 547(b)(4)(A)
    shows that that date cannot be the date of the "act" or "event" for the
    computation of the 90 days under Rule 6(a), but the day before (here, October
    15, 1979) must be the day of the "act" or "event" to be excluded under that
    Rule. That semantic position has never, so far as we can tell, been adopted by
    any court or authority, and there is no legislative indication that it was intended.
    More than that, it makes no sense; nothing happened on October 15th with
    respect to the bankruptcy proceeding, and it simply cannot be considered the
    day of an "act" or "event" for the purposes of Rule 6(a). It is much more likely
    that, as Judge Garrity observed below, the drafters of the Act wished to make
    doubly sure that, if a transfer was made on the very day of the petition, there
    could be no question (particularly in view of the method of computation
    required by the Rule) as to the voidability of that transfer.

    The more troublesome point urged by appellant revolves around the fact that
    the attachment was on real estate and though made by the sheriffs on July 17th
    was not recorded until July 18th, which was just within the statutory 90-day
    span. Harbor says that the attachment was not made, for bankruptcy purposes,
    until it was recorded. The underlying basis for this contention is the
    Massachusetts legislation on real estate attachments, Secs. 63 and 66 of
    Mass.Gen.Laws Ann. ch. 223 (as Harbor interprets them).2

    10

    The reference points for solving this problem are set by the Bankruptcy Code.
    Section 547(b)(4) declares a "transfer of property" avoidable if it was "made"
    within 90 days of the petition. Section 547(e)(2) then provides that for the
    purposes of Sec. 547, a "transfer is made--(A) at the time such transfer takes
    effect between the transferor and the transferee, if said transfer is perfected at,
    or within 10 days after, such time." "Perfection" of a transfer of real property
    (other than fixtures) is defined by Sec. 547(e)(1)(A) as occurring when a bona
    fide purchaser of said property from the debtor cannot acquire an interest
    superior to the interest of the transferee.3

    11

    Applying Secs. 547(b)(4) and (e)(2)(A), supra, the Bankruptcy Court and the
    District Court first looked to Massachusetts law, because state property rights
    are involved, to determine the date the attachment took effect between Wolf

    and Kumins (see In re Lyon Carpet Co., 25 F.2d 509, 511 (D.Mass.1928)) and
    concluded that under Sec. 66, note 2, supra, the effective date was July 17,
    1979. Their reasoning was that (a) under that provision, if recordation is made
    within three days after the making of the attachment, the attachment "shall take
    effect from the time it was made," and (b) recordation occurred here on July
    18th, within three days.
    12

    The next step under the federal law (Sec. 547(e)(2)(A)) was to see if perfection
    occurred within ten days. The courts held in this instance it did because Sec.
    547(e)(1)(A), supra, hinges perfection to the time when a bona fide purchaser
    would no longer be protected against the attachment interest and under Sec. 66
    of the Massachusetts statute an attachment is valid against a bona fide
    purchaser when recorded. That happened here on July 18th, within 10 days of
    when the attachment took effect on July 17th. The end-result was that under
    Secs. 547(b)(4) and 547(e)(2), supra, the transfer was "made" on July 17th, and
    therefore not avoidable.

    13

    Harbor's challenge to that chain-of-reasoning is this: Sec. 66 (taken together


    with Sec. 63) provides for a real estate attachment to take effect only when it is
    recorded, and therefore the transfer cannot be "made" before then. Invoking
    Sec. 544(a)(3) of the Bankruptcy Code, which gives the trustee the status of a
    bona fide purchaser of real property from the debtor, appellant first points out
    that Secs. 63 and 66 make the attachment "valid" against a bona fide purchaser
    for value only when it is recorded; Harbor then equates (for real estate
    attachments) the term "valid" with the time the attachment is "made" and "takes
    effect."

    14

    We agree, however, with the courts below that, though it does give one special
    advantage to bona fide purchasers of real estate, Massachusetts law does not
    make the sharp separation Harbor asserts between real estate attachments and
    other attachments. The first part of Sec. 66 declares broadly and unqualifiedly
    that, if the attachment is recorded within three days "after the day when the
    attachment was made the attachment shall take effect from the time it was
    made" (emphasis added). This provides, for all attachments, a relation-back
    mechanism which, in its wording ("made", "take effect") fits the precise
    language of the federal Code as to when a transfer is made (Secs. 547(b)(4),
    547(e)(2)(A), supra). Then follows in Sec. 66 the special treatment of real estate
    attachments; these "shall in no case be valid against purchasers in good faith
    and for value * * * before the time" of recordation (emphasis added). That later
    portion of Sec. 66 does not say that, for good faith purchasers, real estate
    attachments are not "made" and do not "take effect" until recordation.4

    15

    One cannot be absolutely certain but it appears to us that this difference in


    language was not inadvertent but was meant to say that, while real property
    attachments were "made" and "took effect" at the same time and in the same
    way as all other attachments, good faith purchasers of real estate were specially
    protected if they acquired their interest during the short period (at most three
    days) of possible relation-back. After those three days, Sec. 66 itself provides
    that the attachment "takes effect" for all attachments on recordation; it is only
    attachments that are made and perfected within three days that "take effect" on
    the day made. In other words, we think that Sec. 66 specially limits the time of
    perfection, for bona fide purchasers of real estate, to the date of recordation, but
    does not affect the "making" or "taking effect" of those attachments recorded
    within three days. It is not unusual for legislation to distinguish between the
    "making" or "taking effect" of an attachment and its "perfection." Sections
    547(e)(1)(A) and (e)(2)(A) of the Bankruptcy Code make that distinction
    expressly.5

    16

    Even if we are wrong in so interpreting Sec. 66, that error cannot affect this
    case. We can assume arguendo that Harbor was a bona fide purchaser, but,
    contrary to appellant's argument, the significant relationship for these
    bankruptcy purposes is not that between the two creditors (Kumins and
    Harbor), but that between the debtor (Wolf) and the attaching creditor
    (Kumins). The Bankruptcy Code specifically so provides (in Sec. 547(e)(2)(A))
    when it says that "a transfer is made--(A) at the time such transfer takes effect
    between the transferor and transferee" (if perfection occurs within 10 days)
    (emphasis added). Wolf and Kumins are the transferor and transferee.

    17

    It is likewise unimportant to this case that the bankruptcy trustee had the rights
    and powers of a bona fide purchaser under Sec. 544(a)(3). That provision gave
    such status to the trustee only "as of the commencement of the case" (October
    19, 1979), meaning that the trustee acquires a good faith creditor's status as of
    the petition's filing, "not at an anterior point of time." Lewis v. Manufacturers
    National Bank, 364 U.S. 603, 607, 81 S.Ct. 347, 349, 5 L.Ed.2d 323 (1961). By
    that date, however, Kumins' attachment had been recorded and the trustee had
    full notice. Obviously, neither Sec. 63 or Sec. 66 of the Massachusetts laws was
    intended to protect a subsequent purchaser who, when he became a purchaser,
    already had the most authoritative notice of the attachment--recordation.

    18

    The judgment of the District Court was correct and is

    19

    Affirmed.

    Of the Federal Circuit, sitting by designation

    By its own terms, Rule 6(a) applies to the computation of a period of time
    prescribed "by any applicable statute."

    Sec. 63 reads:
    "Copy of writ; deposit in registry of deeds
    No attachment of land or of any leasehold estate shall be valid against a
    subsequent attaching creditor, or against a subsequent purchaser in good faith
    and for value, unless the officer deposits a certified copy of the writ of
    attachment and so much of his return thereon as relates to the attachment of the
    estate, in the registry of deeds for the county or district where the land lies."
    Sec. 66 provides in relevant part:
    "Attachment; time of taking effect. If the copy of the writ is deposited, as
    aforesaid, within three days after the day when the attachment was made the
    attachment shall take effect from the time it was made, otherwise, from the time
    when the copy is so deposited; but attachments of land, and of leasehold estates
    which have an original term of more than seven years, shall in no case be valid
    against purchasers in good faith and for value, other than parties defendant,
    before the time when the copy is deposited as aforesaid * * * ".

    All emphasis in the statutory quotations is added

    Section 63 likewise uses the term "valid," rather than "made" or "take effect."

    The decisions plaintiff cites as considering an attachment made on recordation


    involve either jurisdictions that appear to be without the relation-back provision
    of Massachusetts, or instances in which the attachment was made and recorded
    on the same day

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