Monday, January 26, 2015

In Re Hokulani Square (9th Cir. - Jan. 26, 2015)

Sometimes the Ninth Circuit is required to answer seemingly esoteric questions.  Like:

What is "money"?

Clearly, money is money.  But what about things like money?  Or in lieu thereof?

This matters here because trustees of bankruptcy estates can get compensated based, pursuant to 11 U.S.C. § 326(a), on a percentage of "moneys disbursed or turned over in the case by the trustee to parties in interest."  That's not a problem when, say, the trustee gives $1,000,000 to a creditor.

But what about when the trustee gives a house worth $1,000,000 to a creditor?

Seems like the practical effect is the same.  But is the house "moneys"?

This happens more than you might think.  Particularly with respect to creditors bids.  Let's say a bank lends a guy $1,000,000 to buy a condo, then the dude goes bankrupt.  The trustee then auctions off the property.  Lots of times -- particularly in the modern "underwater real estate" era -- the bank is the one who ends up with the condo at the auction, by making a bid that's not "real" money but instead is the value of its loan.

Does the trustee get compensated based on the value of the condo?  Or does that not count at all?

Not counting the house (and/or credit bid) as "moneys" might have absurd consequences.  For example, if the bank wins the credit bid with its $1,000,000 loan, then the trustee gets nothing.  But if the trustee does the exact same amount of work, and someone outbids the bank by a single dollar (i.e., pays $1,000,001 for the condo), the trustee potentially gets paid a percentage of the whole $1,000,001, which seems crazy.  Similarly, if the bank bids $1,000,000, and actually pays $1,000,000, but then gets back its $1,000,000 because it has a loan of $1,000,000, the trustee again might get a portion of the million, even though he'd get absolutely nothing if the bank "shorthanded" this process by simply making a credit bid.

Judge Kozinski nonetheless holds that's what the statute requires.  Because it's "plain" and "clear" and "unambiguous" that money just means money, not property.

But I wonder.

Judge Kozinski starts out by quoting the definition of "money" in the Third International Dictionary: "something generally accepted as a medium of exchange, measure of value, or means of payment."  I get that.  But doesn't property qualify under this very definition?  If Judge Kozinski goes out to dinner and leaves his wallet at home, I'm quite confident the restaurant will take his house -- and/or his watch -- in lieu of cash.  Doesn't that mean that property (both real and personal) is a generally accepted "medium of exchange, measure of value, or means of payment;" indeed, all three?

Plus, the very definition that Judge Kozinski cites goes on to qualify its meaning by saying that "something generally accepted as a medium of exchange, measure of value, or means of payment" includes not only "paper money" and coins but also "money of account".  Property might potentially qualify there as well.

I'm ultimately just not persuaded that the word "money" is nearly as clear as Judge Kozinski would read it.  So I might delve more deeply into -- and care more rigorously about -- the policy results that might follow from defining money more narrowly.  Particularly if I think that Congress would not have wanted trustees to be artificially compensated by cash exchanges over economically identical (but noncash) transactions.

I also think that "money" (or, more accurately, "moneys") means different things in different contexts.  Were someone to say at a restaurant that he didn't have any "money," I agree that I'd interpret that to mean that he doesn't have any cash.  (I am not sure I'd say the same thing were he to say that he didn't have any "moneys," but I'd have to think about that more.)

By contrast, were a robber to come up to me and say "Your money or your life," and I were to have in my wallet a stack of bills plus a gold ingot worth $1,000, I would not at all think that the person was only asking for my cash.  Nor would I be at all surprised if he shot me were he to discover that I had retained the ingot in reliance upon his purportedly "clear" instruction that I only give him my paper bills.

Whole books have been written about "What is money?"  I think those texts might be a lot shorter if the answer was as crystal clear as the Ninth Circuit takes it to be.