
USCA1 Opinion

	




          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  & 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                                    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                      &   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  & Manello                      in  partial   satisfaction  of  Citizens'                      claim.                      5.  Citizens shall  pay from the net cash                      proceeds paid over to  it by Goldstein  &                      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                                    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 & 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                          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  & 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 & 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                          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 &  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                  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 & 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                                  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                                   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-
