Union Bank v. Wolas

LOCATION: Dougherty Superior Court

DOCKET NO.: 90-1491
DECIDED BY: Rehnquist Court (1991-1993)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 502 US 151 (1991)
ARGUED: Nov 05, 1991
DECIDED: Dec 11, 1991

Herbert Wolas - on behalf of the Respondent
John A. Graham - on behalf of the Petitioner

Facts of the case


Media for Union Bank v. Wolas

Audio Transcription for Oral Argument - November 05, 1991 in Union Bank v. Wolas

William H. Rehnquist:

We'll hear argument next in No. 90-1491, Union Bank v. Herbert Wolas.

Mr. Graham.

Spectators are admonished to not talk until you get outside the courtroom.

The Court remains in session.

John A. Graham:

Mr. Chief Justice, and may it please the Court:

The issue in this case is the proper interpretation and application of section 547(c)(2) of the Bankruptcy Code.

Section 547(c)(2) is one of several statutory limitations on a bankruptcy trustee's right to recover payments from creditors, and it protects ordinary course of business payments.

The plain meaning of the statute exempts all ordinary course payments, and the statute does not limit its protection to any particular class or type of creditor.

We submit that the statute must control the result in this case, because this is not one of those rare cases where the literal words of the statute are in conflict with congressional intent.

I also submit that this is one of... this is a very straightforward plain meaning case, because what is different in this case, as opposed to some of the other court cases, is that Congress amended the statute and deleted a specific time restriction which was contained in the 1978 Bankruptcy Code.

Under the 1978 Bankruptcy Code, payments were only protected if they were made within 45 days of when the debt was incurred.


John Paul Stevens:

Mr. Graham, before you get into the legislative history of the prior statute, sticking for the moment with the plain language of the statute, how big was this loan?

John A. Graham:

--$7 million.

John Paul Stevens:

And are $7 million loans, borrowings, made in the ordinary course of business?

John A. Graham:

Yes, for Union Bank, which is a large commercial lender--

John Paul Stevens:

No, but for the... is it the ordinary course of business for the bank or the ordinary course of business of the borrower?

John A. Graham:

--The statute requires it to be in the ordinary course of both the borrower and the lender.

John Paul Stevens:

No, but my question is, is it the ordinary course of this borrower to make $7 million unsecured loans?

Isn't that the... under plain language, isn't that the issue for us... or one of the issues?

John A. Graham:

That would be a factual issue that would need to be determined in the trial court.

It is this--

John Paul Stevens:

If this is the only loan of this magnitude it had ever made, and never borrowed more than $1,000 before, what would you say?

John A. Graham:

--Then I would say that as to that particular corporation or business' operation it was not ordinary.

But the statute in this case, was determined by the Ninth Circuit not to apply to any long-term plan.

John Paul Stevens:

I understand.

I understand that.

John A. Graham:

I do agree with Your Honor that there is a standard of ordinariness that must be analyzed on a factual basis.

John Paul Stevens:

Both with respect to incurring the debt, and also with respect to the payments.

John A. Graham:

That's correct, and I would turn... just for example... to Black's Law Dictionary that says something that is ordinary is normal and customary, and not characterized by peculiar or unusual circumstances.