Vanston Bondholders Protective Committee v. Green

Status

728 later cases cite Vanston Bondholders Protective Committee v. Green; 83 of those citations sat close to treatment language and were flagged for reading, and all of them have been read. Citations that did not sit near treatment language were not flagged and were not read one by one, so a court that weakened this case without using any of that language would not appear here.

Treatments

Superseded by statute

• The Supreme Court held that § 506(b) enacted a statutory standard contrary to the pre-Code equitable approach for postpetition interest on oversecured claims, displacing that aspect of Vanston.

  United States v. Ron Pair Enterprises, Inc. · Supreme Court of the United States · filed February 22, 1989

  More importantly, this “rule,” in the few cases where it was recognized, was only a guide to the trustee’s exercise of his powers in the particular circumstances of the case. We have noted that “the touchstone of each decision on allowance of interest in bankruptcy . . . has been a balance of equities between creditor and creditor or between creditors and the debtor.” Vanston Bondholders Protective Committee v. Green, 329 U. S., at 165. All the exceptions to the denial of postpetition interest “are not rigid doctrinal categories. Rather, they are flexible guidelines which have been developed by the courts in the exercise of their equitable powers in insolvency proceedings.” In re Boston & Maine Corp., 719 F. 2d, at 496. None of the cases cited by the Court of Appeals states that the doctrine does anything more than provide a bankruptcy court with guidance in the exercise of its equitable powers. As such, there is no reason to think that Congress, in enacting a contrary standard, would have felt the need expressly to repudiate it.

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• The court held that the Bankruptcy Code superseded Vanston's pre-Code equitable discretion over postpetition interest with the specific rules Congress enacted in §§ 502(b), 506(b), and 726(a)(5).

  In Re Manchester Gas Storage, Inc. · Bankr. N.D. Okla. · filed January 28, 2004

  This Court is not comfortable with the notion that the Vanston case gives permission to present-day bankruptcy courts bound by the Bankruptcy Code to override Section 502(b) of the Code by invoking equity. The Code specifically adopted parts of the pre-Code jurisprudence concerning postpetition interest in Sections 502(b) and (b)(2), 506(b), and 726. Congress eliminated the subjectivity of pre-Code discretion and specifically prohibited allowance of postpetition interest by enacting Section 502(b) and specifically mandated allowance of such interest in enacting 506(b) and 726(a)(5). The concept that postpetition interest is a matter of the bankruptcy court’s equitable discretion has been superseded by statute.

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Questioned

• The Fifth Circuit questioned whether the federal choice-of-law approach attributed to Vanston survived the Bankruptcy Code or Butner, while acknowledging that a lower court could not declare Supreme Court precedent overruled.

  Deutsche Bank v. US Energy Dev · Fifth Circuit · filed February 3, 2021

  Others derive the imperative to employ federal choice of law rules, and specifically the Restatement factors, from Vanston Bondholders Protective Comm. v. Green, 329 U.S. 156, 67 S. Ct. 237 (1946), see In re Lindsay, 59 F.3d 942, 948 (9th Cir. 1995). Vanston’s adoption of a federal choice of law in that case was met with a dissent by Justice Frankfurter, who noted that underlying creditors’ rights in bankruptcy nearly always derive from and therefore must be adjudicated according to state law. Frankfurter’s views were powerfully echoed by the unanimous Supreme Court in Butner v. United States, 440 U.S. 48, 99 S. Ct. 914 (1979). Lower courts may not prematurely declare Supreme Court cases to be “overruled,” however, it is very doubtful that Vanston survives either the enactment of the Bankruptcy Code or the import of Butner. In addition, Vanston did not apply a federal choice of law to an adversary proceeding arising wholly under state law.

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