January 27, 1993  UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT

                                         

No. 92-1379

             IN RE SPM MANUFACTURING CORPORATION,

                           Debtor.
                                  

          OFFICIAL, UNSECURED CREDITORS' COMMITTEE,

                          Appellant,

                              v.

              PETER M. STERN, CHAPTER 7 TRUSTEE
              OF SPM MANUFACTURING CORPORATION,

                          Appellee,

                             and

                  ROBERT and FRANCES SHAINE,

                          Appellees.

                                         

                         ERRATA SHEET

   The opinion of  this court  issued on January  21, 1993,  is
amended as follows:

   On page 20, last line of footnote 8, replace "note 11." with
"note 13."

January 21, 1993  UNITED STATES COURT OF APPEALS
                    FOR THE FIRST CIRCUIT
                                         

No. 92-1379
             IN RE SPM MANUFACTURING CORPORATION,

                           Debtor.
                                  

          OFFICIAL, UNSECURED CREDITORS' COMMITTEE,
                          Appellant,

                              v.
              PETER M. STERN, CHAPTER 7 TRUSTEE
              OF SPM MANUFACTURING CORPORATION,

                          Appellee,
                             and

                  ROBERT and FRANCES SHAINE,
                          Appellees.

                                         
         APPEAL FROM THE UNITED STATES DISTRICT COURT

              FOR THE DISTRICT OF MASSACHUSETTS
        [Hon. Frank H. Freedman, U.S. District Judge]
                                                    

                                         
                            Before

                   Torruella, Circuit Judge,
                                           
               Campbell, Senior Circuit Judge,
                                             

                 and Brody,* District Judge.
                                           
                                         

William  C. Penkethman  with whom  David  J. Noonan  and  Kamberg,
                                                                  
Berman, P.C. were on brief for appellant.
        
Peter  M. Stern  with  whom Cynthia  J. Gagne  and  Law  Office of
                                                                  
Peter M. Stern  were on brief for  appellee Peter M. Stern,  Chapter 7
          
Trustee of SPM Manufacturing Corporation.
J.  Daniel Marr with  whom Hamblett  &amp; Kerrigan P.A.  was on brief
                                                    
for appellees Robert and Frances Shaine.

                                         

                                         

                

*Of the District of Maine, sitting by designation.

          CAMPBELL, Senior Circuit Judge.  The district court
                                        

affirmed a  bankruptcy court order which  compelled a secured

creditor  to  pay to  the debtor's  estate  a portion  of the

proceeds  it  had received  in  satisfaction  of its  allowed

secured claim.   The bankruptcy court's  order contravened an

agreement  between  the  secured creditor  and  the  general,

unsecured  creditors  to  share  in  the  proceeds  from  the

former's secured interest.   The  bankruptcy court  believed,

and  the  district  court  agreed,  that  such  an  agreement

violated  Bankruptcy Code  policy.   Appellant,  the Official

Unsecured Creditors' Committee which entered the agreement on

behalf of  the general, unsecured creditors,  argues that the

bankruptcy court's order  to pay over  the disputed funds  to

the estate was an error of law.  We agree with appellant, and

so  reverse the district court judgment,  vacate the order in

part and remand to the bankruptcy court.

                        I. BACKGROUND
                                     

          Debtor  SPM  Manufacturing  Corporation  ("SPM"  or

"Debtor"), a  family-owned manufacturer  of photo albums  and

related products based in Springfield, Massachusetts, filed a

voluntary petition for relief under  Chapter 11 of the United

States Bankruptcy  Code ("Code")  on  April 3,  1989, in  the

United  States   Bankruptcy   Court  for   the  District   of

Massachusetts.   See 11 U.S.C.   1101 et seq.  SPM management
                                             

continued to operate  the company as  a debtor in  possession

("DIP")  pursuant to 11 U.S.C.    1101(1) and 1107.  Appellee

Robert  Shaine continued to serve as president of SPM and was

an  unsecured "insider"  creditor.   Appellee  Frances Shaine

continued on as  chair of the  board of SPM,  in addition  to

being a stockholder and having responsibility for the general

administrative functions of SPM.

          Appellant  Official Unsecured  Creditors' Committee

("Committee") was appointed by the  bankruptcy court pursuant

to 11 U.S.C.   1102(a) on April 13, 1989.  When SPM filed for

bankruptcy  protection, the  company owed  approximately $5.5

million  to the  general, unsecured creditors  represented by

the  Committee,  including  International Paper  Company  and

other  suppliers.1   Approximately  $9  million  was owed  to

Citizens Savings  Bank ("Citizens"  or "Bank"), which  held a

perfected,  first security  interest in  all of  SPM's assets

except  certain  real  estate.    Unsecured  debts  that  had

priority  under  section  507(a)  of the  Code,  11  U.S.C.  

507(a), consisted  primarily of a tax  claim of approximately

$750,000 held by the  Internal Revenue Service ("I.R.S.") for

unpaid withholding taxes.   The Shaines are personally liable

                    

1.   For simplicity,  this opinion uses only  the approximate
value  of the various claims  against the Debtor.   The exact
amounts of these claims are not at issue in this appeal.

                             -4-

for whatever portion of that tax claim is not paid out of the

estate.2

          Chapter  11  proceedings  to  reorganize  SPM  were

contentious and unproductive.   Though the  DIP filed a  plan

for  reorganization  in  September  1989,  later  amended  in

November  1989, the plan was never  confirmed.  The Committee

decided  at about  the  same time  that reorganization  under

current management was unfeasible,  but that a liquidation of

SPM's  assets would  leave nothing  for any  creditor besides

Citizens,  whose  secured claim  exceeded  the  value of  its

collateral    (substantially    all    of   SPM's    assets).

Consequently, the  Committee began discussions  with Citizens

about cooperating  in the bankruptcy proceedings  to maximize

the  value of  SPM's assets  and provide  some return  to the

general, unsecured creditors.  

          On October  12,  1989, the  Committee and  Citizens

executed the agreement ("Agreement")  which is the subject of

this appeal.  The  Agreement recites the opinion of  Citizens

and the Committee that, "through their mutual cooperation . .

.  in order to maximize recovery on their respective debts it

is in  their mutual interest  to enter into  this Agreement."

The contract explicitly states that  the Committee negotiated

                    

2.  Other creditors  not relevant to this  appeal are various
"insiders" and Heritage Bank for Savings, which held  a valid
first  mortgage  on real  estate  owned  by  SPM in  Holyoke,
Massachusetts.

                             -5-

and  executed  the  Agreement   on  behalf  of  the  general,

unsecured creditors,  "[e]xclusive  of the  Internal  Revenue

Service and potential 'insider' creditors."

          Citizens and the  Committee agreed to  cooperate in

the  following manner:  (1) to  "take all  actions reasonably

necessary,  including,  without  limitation,   initiation  of

motions  and filing of other  pleadings in the Proceeding, to

replace Debtor's current CEO with  [a] New Manager"; (2)  "to

work together  to formulate a joint  plan of reorganization";

and (3) to "negotiate with one another in good faith to reach

mutually acceptable  agreements" with respect to  a number of

details of the joint plan for reorganization.

          Citizens  and the  Committee also  agreed to  share

whatever  proceeds   they  received   as  a  result   of  the

reorganization or liquidation of the Debtor.  Section  2.4 of

the  Agreement   specified   the  terms   of   the   "sharing

arrangement":

               Any  and  all  net proceeds  of  the
          sale, refinancing or other disposition of
          the assets of SPM and also North American
          Album  Corporation  or  any other  entity
          whose  assets  are  subject to  Citizens'
          security   interest   (net  proceeds   is
          defined as those proceeds remaining after
          payment of administrative expenses  as so
          defined  by 11 U.S.C.   503, specifically
          including  attorney's  fees and  expenses
          incurred   by   the   Committee  and   by
          Citizens) received by Citizens and/or the
          Creditors'   Committee    from   Debtor's
          operations in whatever form said proceeds
          make [sic] take (including  proceeds from
          the operation of  any successor  entity's

                             -6-

          business) or from the sale or disposition
          of the  Debtor's or a  successor's assets
          and/or  stock  shall  be divided  between
          Citizens and the Creditors'  Committee as
          follows:
               1.  The  first  $3,000,000  of  such
          proceeds  shall be shared 90% to Citizens
          and 10% to  the Creditors' Committee .  .
          .;
               2.  The  second $3,000,000  shall be
          shared   by   citizens   [sic]  and   the
          Creditors'  Committee  with 80%  going to
          Citizens  and  20%   to  the   Creditors'
          Committee;
               3.  The  next  $3,000,000  shall  be
          shared  70% to  Citizens and  30%  to the
          Creditors' Committee;
               4.  The  next  $3,000,000  shall  be
          shared  60% to  Citizens  and 40%  to the
          Creditors' Committee; and
               5.   All   proceeds  in   excess  of
          $12,000,000  shall  go to  the Creditor's
          Committee.

The  Agreement  contained  a standard  savings  clause  which

provided that "[i]n the event of any term or provision hereof

is invalid or unenforceable [the] remainder of this Agreement

shall be  valid and  enforceable to  the extent permitted  by

law."

          Thereafter,  the  Committee   and  the  Bank  filed

numerous  motions,  both independently  and  jointly, seeking

unsuccessfully  a  change in  SPM's  management,  a grant  of

relief from the automatic  stay for Citizens, the appointment

of  a Chapter  11 trustee,  and conversion  of the  case from

Chapter 11  to Chapter 7.   At a  motion hearing  in December

1989, the Agreement was  filed with the court as  an exhibit.

The court  expressed concern  about  the Agreement's  sharing

                             -7-

provision,  characterizing it  as a  "tax-avoidance" scheme.3

However, at no time during the reorganization proceedings did

any creditor,  the Shaines or other  interested party4 object

to  the  mutual promises  by  Citizens and  the  Committee to

cooperate during the reorganization  proceedings.  The  court

never formally  approved or disapproved the  Agreement before

January 1991.

          After  it became  apparent  that SPM  could not  be

successfully  reorganized,  the  bankruptcy court  granted  a

motion by Citizens on  April 16, 1990, to appoint  a receiver

with the  power to negotiate  a sale  of all of  SPM's assets

pursuant to 11 U.S.C.   363(b).  On December  19, 1990, SPM's

assets were  sold to  Heritage  Albums, Inc.  for a  purchase

price of $5,000,000.00.   On December 21,  1990, a previously

entered order went into  effect granting Citizens relief from

the automatic stay, see  11 U.S.C.   362, and  converting the
                       

case into a Chapter 7 liquidation proceeding, see 11 U.S.C.  
                                                 

                    

3.   When he  first saw  the Agreement, the  bankruptcy judge
indicated that  he thought it might  violate section 1129(d),
which prohibits confirmation of a reorganization plan "if the
principal purpose of the plan is the avoidance of taxes."  11
U.S.C.    1129(d).   Appellees  long ago  abandoned the  tax-
avoidance argument,  probably because the Agreement  is not a
"plan" requiring confirmation  within the meaning of  section
1129  and thus  not subject  to the  requirements of  section
1129(d).

4.   Appellee  Stern  was  not  appointed as  the  Chapter  7
trustee until December 1990.

                             -8-

1112(b).   After  conversion to  Chapter 7,  appellee Trustee

Stern was appointed.  See 11 U.S.C.   701(a).
                         

          On December  24, 1990, the  Committee and  Citizens

filed a  joint motion for "Entry of  Order Requiring Delivery

of  Proceeds  and  Requiring  Expedited  Determination" which

requested distribution of the sale proceeds to Citizens.  The

motion  recited  that  the   entire  amount  was  subject  to

Citizens' security interest pursuant to  11 U.S.C.   506  and

announced  that, after  receiving the  $5 million  and paying

various  administrative fees,  "Citizens  will  distribute  a

portion  of  the  net   proceeds  to  Kamberg,  Berman,  P.C.

[Committee's counsel] in accordance with its October 12, 1989

agreement  with  the Committee."    At a  hearing  before the

bankruptcy  court on  January  3, 1991,  the  Debtor and  the

Shaines objected  to the  motion, arguing that  the Agreement

distributed proceeds to general, unsecured creditors ahead of

the  priority tax  creditors  in violation  of the  statutory

scheme for distribution.  See 11 U.S.C.    724-726.  Citizens
                             

and the Committee responded  that the $5 million  belonged to

Citizens and that the Bank had a right  to share its proceeds

with  the  Committee  without  paying  the  I.R.S.  or  other

creditors first.         The    bankruptcy    court   granted

Citizens'  and  the  Committee's  motion  to  the  extent  it

requested satisfaction of Citizens' allowed secured claim for

$5  million,  but  rejected  the  motion  to  the  extent  it

                             -9-

requested  approval  of the  Agreement's  sharing provision.5

The bankruptcy  judge explained that he  viewed the Agreement

as  a form of proceeds distribution which did not comply with

the Code.

               I am not approving  any distribution
          that   is  not  in  accordance  with  the
          priority  of the  bankruptcy code,  and I
          think I made that abundantly clear a long
          time  ago.   I'm  not going  to have  the
          bankruptcy code, have  an end-run  around
          it  in  this court.    The  law sets  out
          certain  priorities,  and your  committee
          has  absolutely  no  authority to  short-
          circuit  those priorities, and  I want to
          make that clear.

Furthermore,  the bankruptcy  court explained,  the Committee

has a duty to the bankruptcy estate.

               I rule that the  committee, although
          it certainly had  authority to  negotiate
          something   for   the   benefit  of   the
          bankruptcy  estate,  that  authority  was
          just that, for the benefit  of the entire
          bankruptcy estate, and the  committee had
          no authority, never thought it had    and
          if it  did [ask  for court  approval], it
          would  not  have  been  given  it      to
          negotiate  something  for the  benefit of
          some sets of  creditors of the bankruptcy
          estate.
               It  is  perfectly true  that without
          the agreement the bankruptcy estate would
          get  nothing, but once  the committee was
          in operation it had to, it's required  by

                    

5.   On  its face, the  motion by Citizens  and the Committee
does not request approval of the Agreement.  However,  during
the motion hearing, counsel  for Citizens requested the court
to order the Chapter 7 trustee to oversee the distribution of
proceeds  to the  general,  unsecured creditors.   The  court
treated this request  as part  of the motion  and refused  to
grant  it.    We  consider  the  mechanics  of  the  proceeds
distribution infra in Part III.
                  

                             -10-

          law, to act for the benefit of the entire
          estate . . . .

          In accordance  with its ruling at  the hearing, the

bankruptcy court  issued a  Disbursement Order on  January 8,

1991, ordering the following:

          1.   Citizens is  the holder of  a valid,
          perfected and  enforceable first security
          interest  in  all  assets  of  the Debtor
          excepting only the  real estate owned  by
          the Debtor;

          2.   Citizens has  a first priority  lien
          and security interest in all of the post-
          petition    accounts    receivable    and
          inventory of the Debtor;

          3.   Citizens'  claim  is  allowed  as  a
          secured   claim   in   the    amount   of
          $5,000,000.00, with the remainder allowed
          as an unsecured claim;

          4.   The net cash proceeds  from the sale
          of the Debtor's assets held  by Goldstein
          &amp;   Manello  [Debtor's   counsel],  after
          payment of its  fee and expenses and  the
          fee and expenses of Kamberg,  Berman P.C.
          [the Committee's counsel], shall  be paid
          over to  Citizens by Goldstein  &amp; Manello
          in  partial   satisfaction  of  Citizens'
          claim.

          5.  Citizens shall  pay from the net cash
          proceeds paid over to  it by Goldstein  &amp;
          Manello  as aforesaid  such  fees of  the
          Examiner and any other  party as shall be
          approved  by  order of  this  court after
          notice and hearing.6

                    

6.  Citizens   had  previously  agreed   to  the  payment  of
counsel's  fees and  other administrative  expenses from  the
sale  proceeds; it had  included paragraphs four  and five in
its proposed order attached to the joint motion.

                             -11-

Although   the  court  acknowledged  that  Citizens'  allowed

secured  claim  was  $5  million,  paragraph   six  compelled

Citizens to pay part of that  amount to the Chapter 7 trustee

for distribution to other creditors:

          6.  After payment  of all fees,  Citizens
          shall  compute  the  amount  due  to  the
          Committee under the agreement  of October
          12,   1989   between  Citizens   and  the
          Committee.   Citizens shall then pay such
          amount  to the  trustee in  bankruptcy of
          SPM Manufacturing  Corporation, who shall
          administer  the  same in  accordance with
          the  provisions  of  the Bankruptcy  Code
          including    the     Code's    provisions
          concerning priority for tax claims.

The effect  of paragraph six of  the order is to  deprive the

general, unsecured  creditors of  any amount they  would have

received under  the Agreement and to benefit  the I.R.S., the

other priority creditors, and  the Shaines who, as principals

of SPM,  would be personally  liable for  the underlying  tax

obligations.

          Citizens  and the Committee  made timely objections

to the order and appealed to the United States District Court

for the District  of Massachusetts.   Trustee  Stern and  the

Shaines appeared as  appellees, and the funds were  placed in

escrow pending  outcome of  the appeal.   The  district court

affirmed the bankruptcy court order, reasoning that it was  a

proper  exercise of the  bankruptcy court's  equitable powers

under section 105(a) of the Code.  "[T]he  Disbursement Order

furthers the  legislative distribution  scheme  in Chapter  7

                             -12-

cases and []  the Sharing  Agreement, in  its original  form,

thwarts  that scheme."  The district court explained that, in

accordance with the Code  and Massachusetts contract law, the

bankruptcy court "reformed" the  Agreement to comply with the

distribution scheme of the Code.

          The  Committee  filed  a  timely  appeal  from  the

district  court's order.  The  Bank, conceding that the funds

in  escrow belong either to  the Committee or  to the estate,

does not join the  appeal.  This court has  jurisdiction over

this appeal pursuant to 28 U.S.C.   158(d).

                             -13-

                        II. DISCUSSION
                                      

          The facts are essentially undisputed.  The issue on

appeal is whether the  bankruptcy court erred as a  matter of

law in ordering Citizens  to pay to the Trustee  that portion

of the Bank's secured interest  which, according to the terms

of the Agreement,  was due to  the Committee.   In an  appeal

from  district court review of  a bankruptcy court order, the

court of appeals independently reviews the bankruptcy court's

decision, applying the clearly erroneous standard to findings

of  fact and  de novo review  to conclusions  of law.   In re
                                                             

LaRoche,  969 F.2d 1299, 1301  (1st Cir. 1992);  In re G.S.F.
                                                             

Corp.,  938 F.2d  1467,  1474 (1st  Cir.  1991).   Where  the
     

language of a contract is unambiguous, the bankruptcy court's

interpretation of  it is subject  to de  novo review.   In re
                                                             

Sublett,  895 F.2d 1381, 1384  (11th Cir. 1990).   No special
       

deference is owed to the district court's determinations.  In
                                                             

re G.S.F. Corp., 938 F.2d at 1474.
               

          Appellees   argue  that  the  order  was  a  proper

exercise  of the  bankruptcy court's  equitable  powers under

section 105(a) of  the Code.   The bankruptcy  court has  the

equitable  power "to  issue any  order, process,  or judgment

that is necessary or appropriate to carry out provisions"  of

the  Code.  11 U.S.C.   105(a).  However, "whatever equitable

powers remain in the  bankruptcy courts must and can  only be

exercised  within  the  confines  of  the  Bankruptcy  Code."

                             -14-

Norwest Bank Worthington v. Ahlers, 485  U.S. 197, 206 (1988)
                                  

(unanimous  decision); see also In re Plaza de Diego Shopping
                                                             

Ctr.,  Inc., 911  F.2d 820,  830-31 (1st  Cir. 1990)  ("[T]he
           

bankruptcy court's equitable discretion is limited and cannot

be used in  a manner  inconsistent with the  commands of  the

Bankruptcy Code.").   That is,  the bankruptcy  court has  no

equitable power  to deprive  creditors of rights  or remedies

available to them under the Code.  See Norwest Bank, 485 U.S.
                                                   

at 206-07; In re Grissom, 955 F.2d 1440,  1449 n.8 (11th Cir.
                        

1992).  Nor  does section 105(a)  authorize courts to  create

substantive rights that  are otherwise unavailable  under the

Code, or  to expand  the contractual obligations  of parties.

United States v. Pepperman, 976 F.2d 123, 131 (3d Cir. 1992);
                          

United States v. Sutton, 786 F.2d 1305 (5th Cir. 1986).  
                       

          Appellees portray the bankruptcy court's order as a

mere "reform" of  the Agreement.   In their  view, the  court

simply substituted the bankruptcy estate for the Committee as

the  proper  beneficiary  of  the sharing  provision  of  the

Agreement.     Appellant   responds  that   transferring  the

contractual  right to  receive payment  from  one party  to a

third  party goes  beyond mere  "reform."   The question  now

before us is whether  an order compelling Citizens to  pay to

the estate  from monies  realized under its  secured interest

the  amount required  by  the Agreement  to  be paid  to  the

Committee is  within the  equitable powers of  the bankruptcy

                             -15-

court.7    Because  section   105(a)  is  not  a   source  of

substantive   rights,  the   bankruptcy  court's   order  was

legitimate only  to the extent  that some other  provision of

the  Code  or other  applicable  law entitled  the  estate to

receive the disputed funds.  See In re Morristown &amp; Erie R.R.
                                                             

Co., 885 F.2d 98, 100 (3d Cir. 1989).
   

          Appellees argue  that the  order was  authorized on

three  different  grounds:  (1)  the Agreement  attempted  to

distribute property not in accordance with the priorities and

distribution scheme of  Code sections  507 and  726; (2)  the

Committee had a duty to negotiate on behalf of all creditors,

not  just  the  general,  unsecured creditors;  and  (3)  the

Agreement altered  the balance  of  power in  the Chapter  11

reorganization  proceedings.    We  consider   each  argument

separately.

              A. Distribution Scheme of the Code
                                                

          Appellees   argue   that   allowing  the   general,

unsecured  creditors  to receive  money  under the  Agreement

while priority tax creditors  receive nothing would  conflict

with  the statutory  scheme  for  distribution of  bankruptcy

estate  property.   See 11  U.S.C.    507,  726.   Thus, they
                       

                    

7.  The parties in their  briefs assume that the amount  owed
to the  Committee under the Agreement  would be approximately
$700,000.   However, the actual  amount could be  less due to
payment  of   administrative  fees  and  expenses   prior  to
distribution of the proceeds.  This is not a matter for us to
resolve.

                             -16-

contend,  the bankruptcy  court properly  acted in  equity to

prevent  a  violation  of  the  Code's  distribution  scheme.

Section 726 provides, in relevant part, that:

          [P]roperty   of   the  estate   shall  be
          distributed    
               (1)   first, in payment of claims of
          the  kind specified in,  and in the order
          specified in, section 507 of the title;
               (2)  second,  in   payment  of   any
          allowed  unsecured  claim,  other than  a
          claim  of a  kind specified  in paragraph
          (1),  (3),  or  (4)  of  this subsection,
          proof of which is [timely filed.]

11 U.S.C.   726(a).  Section 507 of the Code identifies those

expenses and  claims which  have priority over  other claims,

including  administrative  expenses  allowed   under  section

503(b), claims for wages,  and unsecured tax claims.   See 11
                                                          

U.S.C.   507(a)(1), (3), (7).

          However,  the  distribution scheme  of  section 726

(and, by implication, the priorities of section 507) does not

come  into play  until all  valid liens  on the  property are

satisfied.   See United States  v. Speers, 382  U.S. 266, 269
                                         

n.3 (1965); Goggin v. Division  of Labor Law Enforcement, 336
                                                        

U.S. 118,  126-127 (1949).   If a  lien is perfected  and not

otherwise invalidated by law, it must be satisfied out of the

assets  it encumbers before  any proceeds  of the  assets are

available  to  unsecured  claimants, including  those  having

priority (such as  priority tax creditors).   In re  Darnell,
                                                            

834  F.2d 1263, 1265 (6th Cir. 1987).   Citizens held a valid

lien on  all  of the  SPM  assets;  these were  sold  for  $5

                             -17-

million.    The bankruptcy  court  allowed  Citizens' secured

claim in that amount.   Clearly, then, absent the  order, the

entire $5 million belonged to Citizens in satisfaction of its

lien,  leaving nothing  for the estate  to distribute  to the

other creditors, including the I.R.S.  The bankruptcy court's

order  forced Citizens to transfer to the estate a portion of

its own $5 million notwithstanding the court's recognition of

Citizens' right to receive that sum in full.

          Because  Citizens' secured  claim  absorbed all  of

SPM's assets, there was  nothing left for any  other creditor

in  this  case.    Ordinarily,  in  such  circumstances,  the

distributional priorities of sections  726 and 507 would have

been  mooted.   Appellees  defend  the outcome  below  on the

ground that the Agreement improperly syphoned proceeds to the

general,  unsecured  creditors "at  the  expense  of priority

creditors."   However,  it is  hard to  see how  the priority

creditors lost anything owed them given the  fact there would

have been nothing left  for the priority creditors after  the

$5 million was distributed  to Citizens.  The  "syphoning" of

the money to general,  unsecured creditors came entirely from

the  $5 million belonging to  Citizens, to which  no one else

had any claim of right under the Bankruptcy Code.

          Appellees point to the Agreement's  sharing formula

and ask  how the parties  could contemplate sharing  over $12

million  when Citizens' claim was worth only $9 million.  The

                             -18-

Agreement,  it  is  said,  could   not  contemplate  dividing

property  that did not belong to the parties to the contract.

But  appellees' assertion  is based  on a  misreading of  the

Agreement.  The Agreement merely states that Citizens and the

general, unsecured creditors will pool whatever they received
                                                             

from  the bankruptcy  estate (either  in a  reorganization or

liquidation)  and will  then  divide the  pooled funds  among

themselves.   Any sharing  between Citizens and  the general,

unsecured creditors  was to  occur after distribution  of the
                                        

estate property, having no  effect whatever on the bankruptcy

distributions to other creditors.

          This crucial  fact remains true under any scenario.

When the Agreement was signed in October 1989, the value of a

reorganized  or  liquidated  SPM   was  unknown.    Assume  a

liquidation would have produced  $15 million after payment of

the various  administrative expenses.  If  that had happened,

the  first  $9  million  would  have  gone   to  Citizens  in

satisfaction of its  lien, and  the rest of  the money  would

have been  distributed pursuant to section  726 (assuming the

case  had already been converted  to Chapter 7).   Hence, the

next $800,000 or so would have been distributed to the I.R.S.

and other priority creditors,  and the remaining $5.2 million

would  have  gone  to  the general,  unsecured  creditors  in

virtual  satisfaction of  their  $5.5 million  claim, leaving

nothing for "insiders" and  other subordinated creditors.  By

                             -19-

its  terms, the sharing formula  in the Agreement  is to take

effect  only  after a  proper  distribution  under the  Code.

Citizens and the  Committee would have pooled  only their own

bankruptcy dividends   for a combined $14.2  million and then

split  this  sum  according   to  the  Agreement's   formula.

Distributions  to the  I.R.S. and  all other  creditors under

section   726  would  be  unaffected.     Under  any  set  of

assumptions, then, the Agreement does not distribute property

of the estate "at the expense of" priority creditors nor does

it  violate  the distribution  scheme of  section 726  or the

priorities of section 507.  

          Appellees  argue,  in  the  alternative,  that  the

Agreement   conflicts  with   the   spirit   of  the   Code's

distribution  scheme, under  which priority  creditors always

get paid in full  before general, unsecured creditors receive

anything.    Appellees  contend  that  Congress never  wanted

unsecured  creditors     especially creditors  represented by

the  official   creditors'  committee       to  be   able  to

"circumvent"   this  scheme   by  negotiating   with  secured

creditors to  increase the  return received for  their claims

against the debtor.   Appellees' theory, however, goes beyond

anything appearing  expressly or by implication  in the Code.

Section   726  and  the   other  Code   provisions  governing

priorities  of  creditors  apply  only  to  distributions  of

property of the estate.  The  Code does not govern the rights

                             -20-

of  creditors  to  transfer  or receive  nonestate  property.

While  the  debtor and  the trustee  are  not allowed  to pay

nonpriority creditors  ahead of priority  creditors, see King
                                                             

v.  United  States,  379   U.S.  329  (1964),  creditors  are
                  

generally free to  do whatever they wish  with the bankruptcy

dividends they  receive, including  to share them  with other

creditors.   Cf. In re  Allegheny Int'l, Inc.,  100 B.R. 241,
                                             

243 (Bankr. W.D. Pa. 1988) (remarking that the Code "does not

permit a debtor to  pay its pre-petition debts to  suppliers,

at a discount or otherwise, before  confirmation of the plan,

but  it appears to allow third parties to purchase the claims

of those suppliers").

          In  this case,  the proceeds of  the sale  of SPM's

assets  pursuant  to 11  U.S.C.    363  were property  of the

estate and thus the Code governed their use and distribution.

However, once the court lifted the automatic stay and ordered

those proceeds distributed to Citizens in proper satisfaction

of  its lien, that money became the property of Citizens, not

of the estate.   Appellees concede that the  bankruptcy court

has  no authority  to control  how  Citizens disposes  of the

proceeds once it receives them.  There is nothing in the Code

forbidding Citizens  to have  voluntarily paid part  of these

monies to  some or  all of  the general,  unsecured creditors

after the bankruptcy proceedings finished.

                             -21-

          Thus,  appellees'  argument  reduces to  contending

that although  a  secured  creditor  is  free  to  share  its

proceeds   with   nonpriority   creditors  after   bankruptcy

proceedings have concluded, it may not enter into a  contract

during  bankruptcy in which it promises to do the same thing.
      

Again,  appellees' argument  lacks statutory  support for  it

confuses  estate  property  and   nonestate  property.    The

parties' agreement to share  the proceeds could be seen  as a

partial assignment  by  Citizens and  the general,  unsecured

creditors of  their rights to  receive bankruptcy dividends.8

See  David  Gray  Carlson,   A  Theory  of  Contractual  Debt
                                                             

Subordination and Lien  Priority, 38 Vand. L.  Rev. 975, 996-
                                

1004  (1985).     A  right  to  receive   payment  is  freely

transferable  and  assignable  in  Massachusetts  without the

consent  of the  debtor  and without  affecting the  debtor's

obligation to pay the underlying debt.  See Mass. Gen. L. ch.
                                           

106,   9-318; Graves Equipment,  Inc. v. M. DeMatteo  Constr.
                                                             

Co., 397 Mass. 110, 489 N.E.2d 1010, 1012 (1986) ("Section 9-
   

318(1)(a) incorporates  the common law rule  that an assignee

of contract  rights stands in the shoes of the assignor . . .

.").  The Agreement did not affect estate property, i.e., the

sale  proceeds,  but only  concerned the  contacting parties'

claims against the estate,  i.e., their rights to be  paid by
      

                    

8.   We do not decide exactly how to categorize the Agreement
because that issue  is not  necessary to our  decision.   See
                                                             
infra note 13.
     

                             -22-

the estate.  We find no support in the Code  for banning this

type of contractual assignment in all cases.

          Appellees suggest  the policy of the  Code is that,

regardless   of  the  source  of  the  payments,  nonpriority

creditors should  never receive a  return on their  claims if

priority  creditors receive  nothing.   This  theory of  Code

policy is directly contradicted  by the fact that nonpriority

creditors   routinely receive payment from  third parties for

their  claims without interference  by the  bankruptcy court.

Unsecured creditors often sell their claims to third parties,

e.g.,  for 30  cents on  the dollar,  in order  to avoid  the

uncertainty and  delay of bankruptcy proceedings.   See Chaim
                                                       

J. Fortgang  &amp; Thomas Moers Mayer, Trading  Claims and Taking
                                                             

Control  of Corporations in Chapter 11, 12 Cardozo L. Rev. 1,
                                      

2-3 (1990).  The Code does not speak to the validity of claim

transfers,  and the Bankruptcy  Rules provide only procedures

for  the filing  of notice  required for  a transferee  to be

recognized  as  the holder  of the  claim.   See  Bankr. Rule
                                                

3001(e)9;  In re  Odd  Lot Trading,  Inc.  115 B.R.  97,  100
                                         

                    

9.  Bankruptcy  Rule 3001(e)(2) sets  out the  procedures for
transfers of claims  other than for  security after proof  of
the claim is filed:

            If a  claim other  than one based  on a
          publicly traded note, bond,  or debenture
          has  been  transferred  other   than  for
          security  after  the proof  of  claim has
          been  filed,  evidence  of  the  transfer
          shall be  filed by the  transferee.   The
          clerk   shall   immediately  notify   the

                             -23-

(Bankr. N.D. Ohio 1990); Fortgang &amp; Mayer, Trading Claims, at
                                                         

                    

          alleged  transferor by mail  . . .  .  If
          the  alleged  transferor  files a  timely
          objection  and  the  court  finds,  after
          notice and a hearing, that the claim  has
          been transferred other than for security,
          it shall enter  an order substituting the
          transferee  for  the  transferor.    If a
          timely  objection is  not  filed  by  the
          alleged transferor,  the transferee shall
          be substituted for the transferor.

Bankr.Rule 3001(e)(2).
          Prior to 1991, some courts interpreted Rule 3001 as
authorization  for courts  "to  monitor the  manner in  which
claims are transferred or assigned and thereby prevent, inter
alia,  the improper proliferation  of claims,  wrongdoing and
inequitable conduct."  In re Ionosphere Clubs, Inc., 119 B.R.
                                                   
440, 443 (Bankr. S.D.N.Y. 1990).  Rule 3001(e) was amended in
1991  to restrict the bankruptcy court's power to inspect the
terms of such transfers.   See In re  Odd Lot Trading,  Inc.,
                                                            
115 B.R. 97, 100-01  (Bankr. N.D. Ohio 1990).   Transfers are
no longer required to be  unconditional and assignees do  not
have  to  submit to  the bankruptcy  court  the terms  of the
transfer for  its approval.  Consequently,  under the amended
rule,  the bankruptcy  court  cannot disapprove  the transfer
because of  its terms,  e.g., inadequate consideration.   The
1991 Advisory Committee Note explains that:

            Subdivision (e) is amended to limit the
          court's  role  to  the   adjudication  of
          disputes   regarding   the  transfer   of
          claims.  .  .  .  If  a  claim  has  been
          transferred other than for security after
          a  proof  of claim  has  been filed,  the
          transferee   is   substituted   for   the
          transferor.   In  that  event, the  clerk
          should note the transfer without the need
          for   court  approval.     If   a  timely
          objection is  filed, the court's  role is
          to determine whether a transfer  has been
          made    that    is   enforceable    under
          nonbankruptcy  law.    This rule  is  not
          intended    either   to    encourage   or
          discourage   postpetition   transfers  of
          claims . . . .

Bankr. Rule 3001, Advisory Committee Notes, 1991 Amendment.

                             -24-

19-25.    The circumstances  in  which  claims transfers  are

expressly said to be  invalid are limited.  For  example, the

purchasing of claims by an affiliate or insider of the debtor

for  the  sole  purpose   of  blocking  the  confirmation  of

competing plans  may constitute "bad faith"  for the purposes

of section 1126(e), 11 U.S.C.   1126(e).  See In re Applegate
                                                             

Property, Ltd., 133 B.R. 827, 834-35 (Bankr. W.D. Tex. 1991).
              

An assigned claim may be limited if the assignment involves a

breach of fiduciary duty or  fraud and the breach of duty  or

fraud  enables   the  assignee  to  acquire   the  claim  for

inadequate  consideration.   In re Executive  Office Centers,
                                                             

Inc.,  96 B.R.  642, 649  (Bankr. E.D.  La. 1988).   However,
    

absent  some effect  on the administration  of the  estate or

diminution of estate property, neither the Code nor the Rules

prohibit  or  discourage creditors  from receiving  cash from

nondebtors in exchange for their claims.

          While  the  Agreement in  this  case  might not  be

categorized   as  a  "transfer"  under  Rule  3001(e),10  the

                    

10.  We  do  not decide  whether the  Agreement in  this case
constitutes a "transfer" of claim subject to the requirements
of  Rule 3001  because appellees  did  not raise  this issue.
Even if notice of the Agreement should  have been but was not
filed with  the court, that  failure would not  authorize the
bankruptcy  court to void or alter the Agreement.  Failure to
file notice of a transfer under Rule 3001(e) only affects the
standing  of the transferee as a "creditor" and thus the duty
of   the  trustee  to  make  payment  on  the  claim  to  the
transferee. See Bankr.  Rule 3001(e);  In re  FRG, Inc.,  124
                                                       
B.R. 653, 656-57 (Bankr.  E.D. Pa. 1991); In re  Oxford Royal
                                                             
Mushroom  Prods., Inc.,  93 B.R.  390,  397 (Bankr.  E.D. Pa.
                      
1988).

                             -25-

financial outcomes produced by  the Agreement and by outright

claim  transfers are  analogous.   If the  general, unsecured

creditors  in this case had sold their claims to Citizens (or

another third party)  for cash,  e.g., for ten  cents on  the

dollar, after  all was said  and done the  priority creditors

would  have  received  nothing  and  the  general,  unsecured

creditors would have received  approximately $550,000 (10% of

their $5.5 million total claim).  The  bankruptcy court would

have  had  no authority  to  prevent  the general,  unsecured

creditors  from transferring  their  claims.   In comparison,

under  the  Agreement's  sharing  arrangement   the  general,

unsecured  creditors   would  receive,  under   the  parties'

calculations, see note 7, approximately $700,000 (about 12.5%
                 

of their  claims) while  priority creditors  receive nothing.

Given authority  in the Bankruptcy  Code and Rules  to permit

outright  transfers resulting in general, unsecured creditors

receiving some  money  for their  claims, we  see nothing  to

prohibit the  same result if produced by a partial assignment

or sharing of claims such as accomplished by the Agreement in

this case.

          Because  Code  provisions governing  priorities and

distribution of  estate property gave the estate  no right to

share   in  proceeds  from   Citizens'  secured   claim,  the

bankruptcy court derived no right under those same provisions

                             -26-

to order Citizens to pay a portion of its  own claim proceeds

to the estate.

              B. No Fiduciary Duty to the Estate
                                                

          Appellees argue that  the bankruptcy court  had the

equitable  power to order Citizens  to pay to  the estate the

amount  due to the Committee under  the Agreement because, as

the bankruptcy court ruled:

          [T]he  committee,  although it  certainly
          had authority to negotiate  something for
          the  benefit  of  the bankruptcy  estate,
          that authority  was  just that,  for  the
          benefit of the entire  bankruptcy estate,
          and the committee had  no authority . . .
          to negotiate something for the benefit of
          some  sets of creditors of the bankruptcy
          estate.

Appellees do  not contest the bankruptcy  court's ruling that

the  Committee had the general power to enter contracts.  The

Code expressly authorizes a  committee to "perform such other

services  as are in the  interest of those  represented."  11

U.S.C.     1103(c)(5).    Appellees  also  concede  that  the

Committee's appointment  pursuant  to  11  U.S.C.     1102(a)

charged it only with representation of the general, unsecured

creditors  (not with  representation of  the I.R.S.  or other

priority  creditors).     Nevertheless,  they   contend,  any

agreement  negotiated  by  the  Committee  should  have  been

negotiated  to benefit  the estate  as a  whole and  thus any

contractual right to receive payment from Citizens rightfully

belongs to the estate.

                             -27-

          We do not accept this contention, as it seems based

on  the  erroneous  assumption  that  the Official  Unsecured

Creditors'  Committee is  a  fiduciary for  the  estate as  a

whole.  While a creditors' committee and its members must act

in accordance with the provisions  of the Bankruptcy Code and

with proper regard for the bankruptcy court, the committee is

a  fiduciary for those whom it represents, not for the debtor

or the estate generally.  In re  Microboard Processing, Inc.,
                                                            

95 B.R. 283, 285 (Bankr. D. Conn. 1989); In re Johns-Manville
                                                             

Corp., 60 B.R. 842,  853 (S.D.N.Y.), rev'd on  other grounds,
                                                            

801 F.2d 60 (2d  Cir. 1986).  Thus the  committee's fiduciary

duty,  as such, runs to  the parties or  class it represents.

Markey v. Orr, No.  G89-40886, 1990 U.S. Dist. LEXIS  3005 at
             

*9-*10  (W.D. Mich.  1990);  Pension Benefit  Guar. Corp.  v.
                                                         

Pincus, Verlin,  Hahn, Reich &amp;  Goldstein P.C., 42  B.R. 960,
                                              

963  (E.D.  Pa. 1984);  Microboard,  95 B.R.  at  285; Johns-
                                                             

Mansville,  60  B.R. at  853.   It  is charged  with pursuing
         

whatever lawful course best serves the interests of the class

of creditors represented.  In re Seaescape Cruises, Ltd., 131
                                                        

B.R. 241, 243 (Bankr. S.D. Fla. 1991).

          In this  case, the Committee  reasonably determined

that  entering into  the Agreement with  Citizens was  in the

best  interests of  the  class it  represented,  to wit,  the
                                                       

general, unsecured creditors.  No general, unsecured creditor

objected  to the  Committee's decision,  see In  re Seaescape
                                                             

                             -28-

Cruises, 131 B.R. at  243-44, nor have appellees  offered any
       

evidence or  reason for  us to believe  that the  represented

class  would have been better off had the Committee not acted

as it did.  The contrary appears true.  Although  the Shaines

and the  Debtor may have  preferred a less  active committee,

and  one more  sympathetic to  them, an  effective creditors'

committee  must sometimes be adversarial  if it is to fulfill

its role  in a Chapter 11 case.  In re Seaescape Cruises, 131
                                                        

B.R. at  243; In  re Daig  Corp., 17 B.R.  41, 43  (Bankr. D.
                                

Minn. 1981).

          The creditors' committee is not  merely a
          conduit through whom the debtor speaks to
          and negotiates  with creditors generally.
          On the contrary, it is purposely intended
          to  represent  the necessarily  different
          interests and concerns  of the  creditors
          it  represents.   It must  necessarily be
          adversarial  in  a   sense,  though   its
          relation   with   the   debtor   may   be
          supportive and friendly.  There is simply
          no other entity  established by the  Code
          to guard those  interests.  The committee
          as the sum of its members is not intended
          to be  merely an  arbiter but  a partisan
          which will  aid, assist, and  monitor the
          debtor pursuant to its own self-interest.

In re  Daig Corp., 17  B.R. at  43.  We  conclude, therefore,
                 

that the bankruptcy court erred as a matter of law insofar as

it felt that  the Committee  was under a  particular duty  to

negotiate  the sharing  provision  of the  Agreement for  the

benefit of the estate as a whole.

      C. Balance of Power in Reorganization Proceedings
                                                       

                             -29-

          Appellees contend that the bankruptcy court's order

equitably  prevented Citizens and  the Committee from forming

an  alliance  which  would  destroy the  "balance  of  power"

allegedly created  by the  Code, especially sections  507 and

1129.   The  Agreement  between Citizens  and the  Committee,

appellees argue, frustrated SPM's attempts to reorganize and,

if similar  agreements are  permitted in future  cases, could

create  "chaos"  and   "free  for  alls"  in   reorganization

proceedings.

          The first  part of appellees' argument     that the

Agreement  actually prevented  the Debtor  in this  case from

successfully reorganizing    was  not timely raised below and

we do  not, therefore, consider it.  Issues not raised in the

bankruptcy court are ordinarily  not considered for the first

time on appeal.  In re LaRoche, 969 F.2d 1299, 1305 (1st Cir.
                              

1992);  In re Burgess, 955 F.2d 134, 136 n.2 (1st Cir. 1992);
                     

Liakas  v. Creditors' Committee  of Deja  Vu, Inc.,  780 F.2d
                                                  

176,  179 (1st Cir. 1986).   This principle  applies to cases

where,  as  here, a  party attempts  to justify  a bankruptcy

court  order with a theory not raised before or considered by

the bankruptcy court.   In  re Sun Runner  Marine, Inc.,  945
                                                       

F.2d 1089, 1095 (9th Cir. 1991).   Though the Shaines knew of

the Agreement's  existence  since December  1989, they  never

complained to  the bankruptcy  court about Citizens'  and the

Committee's  joining  of  forces  during  the  reorganization

                             -30-

proceedings;   they   raised   questions   only   about   the

distribution of Citizens' proceeds to  nonpriority creditors.

The bankruptcy court  gave no indication in  its findings and

rulings that it was bothered by that aspect of the Agreement.

Not until oral argument before  the district court hearing on

this appeal  did  the  Shaines  and the  Trustee  invoke  the

alleged negative  effects on reorganization of  the Citizens-

Committee alliance.  

          It  is  true  that,  in the  interest  of  justice,

parties are sometimes permitted to offer unraised alternative

rationales  for  affirming a  judgment.    See,  e.g., In  re
                                                             

Killebrew,  888  F.2d  1516,  1521  (5th  Cir.  1989).    But
         

appellees' contention  here that the Agreement  disrupted the

Debtor's reorganization proceedings is essentially  a factual

issue requiring  findings of fact  not now  contained in  the

record before  us.   The bankruptcy  court, not the  district

court or court of  appeals, is the only tribunal  equipped to

make evidentiary findings on relevant factual matters such as

whether the parties acted  in bad faith, whether  the parties

intended to frustrate attempts  to reorganize the Debtor, and

whether the  parties' actions  actually prevented  the Debtor

from successfully reorganizing.   See Bankruptcy Rules  7052,
                                     

8013; In re Sublett, 895 F.2d at 1384.  We are in no position
                   

to  ascertain by  ourselves whether  the Agreement,  in fact,

interfered unjustifiably with the reorganization proceedings.

                             -31-

See In re  Sun Runner Marine,  945 F.2d at  1095 ("We do  not
                            

know  what legal  standard  the bankruptcy  court would  have

applied,  or whether  the bankruptcy  court would  have found

facts warranting  [the parties'  requested  order], had  that

issue been presented to it.")

          We respond  briefly to  appellees' warning  that if

this  agreement stands,  creditors  in the  future will  form

alliances  to  defeat attempts  to reorganize,  extort higher

payouts from  debtors, and generally create  chaos in Chapter

11.  Our  focus is  necessarily on  the particular  agreement

before   us,   to  see   whether   it   conflicts  with   the

reorganization  provisions of  Chapter  11  and  whether  the

record supports  appellees' portrait  of the dire  effects of

giving effect to such a contract.  Insofar as we can see, the

parties'  promises made  in  the Agreement  were well  within

their  rights under the Bankruptcy  Code: they agreed to move

the  bankruptcy   court  to  replace   the  Debtor's  current

management,  see 11  U.S.C.    1104(a),(b), and to  propose a
                

plan  of reorganization, see 11 U.S.C.   1121(c).  The record
                            

shows  that, in addition to the joint motions contemplated by

the Agreement, the  parties moved for conversion  of the case

to  Chapter 7.    This  action was  allowed  by  11 U.S.C.   

1112(b).  We see no indication in the Agreement that Citizens

and  the  Committee  agreed  to  vote  for  or   against  any

particular plans, a restriction  which could raise charges of

                             -32-

bad faith.  See 11 U.S.C.   1126(e); Young v. Higbee Co., 324
                                                        

U.S. 204, 210-11 (1945).   Appellees have not pointed  to any

other Code  provision implicated by  the parties' cooperative

efforts.    Looking at  the  ones mentioned,  we  cannot find

support   for  appellees'   assertion  that   this  agreement

conflicts  with  any  policy   in  favor  of  reorganizations

manifested by Chapter 11.

          As for  future cases,  we note that  the bankruptcy

court  always retains  the power  to monitor and  control the

tenor  of  reorganization  proceedings.    If  the  unsecured

creditors' committee fails to  be properly  representative of

the unsecured  creditors, any party  in interest can  move to

have  the   committee  reconstituted.     See  11   U.S.C.   
                                             

1102(a)(2); In  re Daig Corp., 17 B.R. at 42.  If an entity's

                             

acceptance or rejection of a plan is not made in  good faith,

or was not solicited or procured in good faith, the court can

disqualify that vote.   See 11  U.S.C.    1126(e).  The  good
                           

faith requirement  bars creditors  from  casting their  votes

from ulterior motives, such as coercing a higher payment from

the debtor's estate, pure malice, and advancing the interests

of a competing business.  In re Federal Support Co., 859 F.2d
                                                   

17, 19 (4th Cir. 1988).  The record contains no evidence that

Citizens  and  the  Committee  harbored  any   such  sinister

designs.

                             -33-

          Appellees  assert  that  creditors  should  not  do

anything to  alter the usual divergence  of interests between

secured  and unsecured  creditors.   While  secured creditors

might  generally prefer  liquidation and  unsecured creditors

might generally  support reorganization, the Code surely does

not  require them to take  such positions.   No two creditors

have identical  interests, see  In re  Microboard Processing,
                                                             

Inc., 95 B.R. at 285, and the Code implicitly recognizes that
    

fact  by providing  a procedural  framework for  handling the

various divergent  interests of the parties  to a bankruptcy.

See Elizabeth Warren,  Bankruptcy Policy, 54 U. Chi.  L. Rev.
                                        

775, 785-89 (1987); see also  Elizabeth Warren &amp; Jay Lawrence
                            

Westbrook, The Law  of Debtors and  Creditors 427-35 (2d  ed.
                                             

1991).  While unsecured  creditors may sometimes share common

objectives with  the debtor and current  management, they are

not  required to rubber stamp the proposals of the debtor nor

to  support the retention of  current management.   See In re
                                                             

Federal Support Co.,  859 F.2d at 19 ("It  is well settled []
                   

that good faith  in casting  a vote does  not require of  the

creditor a selfless disinterest.")  The duty of the unsecured

creditors'  committee to  pursue  the best  interests of  the

unsecured  creditors requires different outcomes in different

situations,  and  may  entail  entering  contracts  regarding

reorganization plans,  see, e.g.,  In re Donlevy's  Inc., 111
                                                        

B.R. 1, 2 (Bankr. D. Mass. 1990), recommending rejection of a

                             -34-

debtor's plan of reorganization, or filing motions to convert

a Chapter  11 case to Chapter  7, see, e.g.,  In re Seaescape
                                                             

Cruises, Ltd., 131 B.R.  at 243.  For the  reasons discussed,
             

we  do  not  think  that  the  bankruptcy  court's  order was

justified as a means to enforce the rules or policies spelled

out in Chapter 11.11

                      D. Other Arguments
                                        

          We briefly dispose of the parties' other arguments.

We reject  appellees' argument that Citizens,  by agreeing to

share  some of  its bankruptcy  proceeds with  the Committee,

"carved  out" or "divested itself"  of a portion  of its lien

and  thus the  court  "simply used  its  equitable powers  to

determine who best  was entitled to  receive this carved  out

portion"  of Citizens'  claim.   This  argument is  untenable

because  no  appeal was  taken  from  the bankruptcy  court's

express  ruling that  Citizens,  pursuant to  its $5  million

allowed  secured claim,  was entitled  to receive  the entire

sale proceeds.  Furthermore,  under Massachusetts law a valid

assignment  of  a  debt does  not  divest  the  claim of  its

priority  or alter the  debtor's obligation to  pay the debt;

                    

11.  Even,  indeed, if an  alliance of the  type reflected in
the   Agreement  were   believed  to   contravene  bankruptcy
policies, the remedy     ordering Citizens to pay out  to the
estate funds it  had agreed to pay to the  Committee    would
seem questionable.  If  the Agreement violated public policy,
the  more usual  remedy would  be to  declare it  invalid and
unenforceable  rather than  to enforce  it, out  of Citizens'
pocket, in favor of a nonparty  to the Agreement. 

                             -35-

the assignee steps  into the  shoes of the  assignor for  the

portion  of  the claim  assigned.12   See  Mass. Gen.  L. ch.
                                         

106,    9-302(2); Grise v.  White, 355 Mass.  698, 247 N.E.2d
                                 

385, 388 (1969).

          Because  the  bankruptcy  court's order  compelling

Citizens  to pay the estate from the proceeds of its security

interest was not  authorized by section  105(a), we need  not

consider  the  Committee's argument  that section  510(a), 11

U.S.C.   510(a), required the bankruptcy court to give effect

to  the  Agreement  as  a  subordination  agreement.13    And

because   the  Agreement   did  not  conflict   with  federal

bankruptcy policy, there  is no need to  resolve the parties'

dispute  as  to when  and to  what  extent courts  may, under

Massachusetts  law,  reform  contracts  which  violate public

policy.

                       III. CONCLUSION
                                      

                    

12.  We assume, for the moment,  that the Agreement could  be
characterized as a partial assignment of the parties' claims.
As  explained infra note 13, the issue of how to characterize
                   
the Agreement is not before us.

13.  How to  categorize the Agreement is  no simple question.
It  has  attributes  of  both  a  partial  assignment  and  a
subordination agreement.  See generally David Gray Carlson, A
                                                             
Theory of  Contractual Debt Subordination  and Lien Priority,
                                                            
38 Vand.  L. Rev. 975 (1985)  (discussing the characteristics
of and  enforceability of various types  of subordination and
assignment agreements in bankruptcy).   Even if it cannot  be
deemed a  subordination agreement for purposes of enforcement
pursuant to 11 U.S.C.   510(a), the question on appeal is not
whether the  Agreement is valid and  enforceable, but whether
the  bankruptcy court had  authority under the  Code to issue
its order. 

                             -36-

          For the  reasons discussed above, we  hold that the

bankruptcy court  erred  as  a  matter  of  law  in  ordering

Citizens  to pay  to  the  Trustee  the  amount  due  to  the

Committee under  the Agreement.  Accordingly,  we reverse the

judgment of  the district court  and vacate paragraph  six of

the bankruptcy court's Disbursement Order of January 8, 1991.

          No question is raised in this appeal  as to whether

the  Agreement  is binding  on  Citizens  and the  Committee.

Indeed, Citizens previously expressed, at hearings before the

bankruptcy   court  and  the  district  court,  its  complete

willingness to abide by its obligation under the Agreement to

pay the  Committee the agreed share of the sale proceeds.  At

the  hearing  on  January   3,  1991,  counsel  for  Citizens

requested the court to order the Chapter 7 Trustee to oversee

the distribution  of the  proceeds to the  general, unsecured

creditors.  Appellees Robert and Frances Shaine  point out in

their  appellate  brief that  the  mechanics of  distributing

these proceeds  to the general, unsecured  creditors were not

made clear  in the  Agreement, nor did  the bankruptcy  court

decide how the proceeds should be handled.

          Consequently,   having   reversed  the   bankruptcy

court's order, we remand to the bankruptcy court to determine

whether  to  allow  Citizens'  motion  to  have  the  Trustee

administer the distribution  of the funds due to the general,

                             -37-

unsecured creditors  under the Agreement.   Appellant has not

pointed to any basis  in the Code for authorizing,  let alone

requiring, the  bankruptcy court  or Trustee to  administer a

distribution   of  nonestate  funds  pursuant  to  a  private

agreement.   However, because we  lack a complete  record and

because the precise issue was not appealed, we leave it up to

the  bankruptcy  court  to  decide, in  the  first  instance,

whether  to  order  the  Trustee (rather  than  Citizens)  to

administer the distribution, and to determine  the allocation

of any  related administrative  expenses.  If  the bankruptcy

court  determines  that   the  Trustee  should   not  oversee

distribution,  or if  Citizens withdraws  its motion  for the

Trustee to  administer the  funds, then the  bankruptcy court

shall  distribute  the  funds in  escrow,  including  accrued

interest, to Citizens  subject to  any proper  administrative

charges or other obligations.

          The  district  court  judgment  is   reversed,  the
                                                             

bankruptcy  court order is vacated in part, and the matter is
                                                             

remanded for  further proceedings not inconsistent herewith. 
                                                            

Costs to appellant. 
                  

                             -38-
