
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________        No. 94-2233                           INDIAN MOTOCYCLE ASSOCIATES III                                 LIMITED PARTNERSHIP,                                      Appellant,                                          v.                        MASSACHUSETTS HOUSING FINANCE AGENCY,                                      Appellee,                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                 [Hon. Frank H. Freedman, Senior U.S. District Judge]                                          __________________________                                                                                      ____________________                               Torruella, Chief Judge,                                          ___________                            Cyr and Stahl, Circuit Judges.                                           ______________                                                                                      ____________________             Paul  R.  Salvage, with  whom Susan  Luttrell  Burns and  Bacon &             _________________             ______________________      _______        Wilson, P.C. were on brief for appellant.        ____________             Kevin C. Maynard, with whom Mark D. Cress and Bulkley, Richardson             ________________            _____________     ___________________        and Gelinas were on brief for appellee.        ___________                                                                                      ____________________                                   October 2, 1995                                                                                      ____________________                    CYR, Circuit  Judge.   Indian Motocycle  Associates III                    CYR, Circuit  Judge.                         ______________          Limited Partnership, a chapter 7  debtor, appeals from a district          court  order  reversing  a  bankruptcy   court  decision  denying          appellee Massachusetts Housing  Finance Agency's ("MHFA")  motion          to compel the chapter 7 debtor to restore diverted cash collater-          al to the  chapter 7 estate.  We vacate  the district court order          and remand to the bankruptcy court for further proceedings.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________          A.   The Regulatory Agreement          A.   The Regulatory Agreement               ________________________                    In   1987,  MHFA  loaned  Indian  Motocycle  Associates          Limited Partnership ("Indian Motocycle")  $8.6 million to develop          low-income  housing  in Springfield,  Massachusetts [hereinafter:          "the  Project"].   Under  a  program authorized  by  the National          Housing  Act  ("NHA"), 12  U.S.C.     1701,  1709, 1715k  et seq.                                                                    __ ____          (1994);  24 C.F.R   250.1 (1994), the United States Department of          Housing and  Urban Development ("HUD") coinsured the non-recourse          mortgage  loan.1  In order to qualify for HUD coinsurance, Indian          Motocycle  signed  a  "Regulatory Agreement,"  obligating  it  to          comply with pertinent HUD  regulations and conditions whereby the          individual  Indian Motocycle partners  assumed personal liability          "for funds or property of the Project which come into their hands          and which they are  not entitled to retain;  and . . .  for their                                        ____________________               1NHA coinsurance  permits the  private lender to  assign its          note  and mortgage to HUD if unable to collect from the borrower.          See 12 U.S.C.   1710.          ___                                          2          own acts and  deeds or acts and deeds  of their authorized agents          that are in violation  of the provisions of this Agreement."  The          Regulatory Agreement is incorporated into the mortgage by express          reference.                    In addition to conveying a  first mortgage on all  real          property belonging to the  Project, Indian Motocycle assigned all          its  Project leases, rents, profits  and income to  MHFA "for the          purpose of discharging the [note]."   See Mortgage   4; 12 U.S.C.                                                ___            1715k(d)(2)(A).   MHFA in  turn authorized Indian  Motocycle to          collect and apply Project rents to enumerated purposes, including          loan repayments and "reasonable  expenses necessary to the opera-          tion and  maintenance of the  Project."   Regulatory Agreement             3(b). Indian Motocycle's right to collect Project rents terminat-          ed upon default.  See Mortgage   4.  In the event the debtor were                            ___          to breach the Regulatory Agreement, MHFA or HUD would be entitled          to seek specific performance,  injunctive relief, or the appoint-          ment of a receiver for the Project.  See  Regulatory Agreement                                                  ___          17-18. The  mortgage and Regulatory Agreement  were duly recorded          by MHFA.                     In 1989,  Indian  Motocycle transferred  its  ownership          interest  in  the  Project  to Indian  Motocycle  Associates  III          Limited Partnership, which assumed the MHFA note and mortgage; in          August 1992,  it  defaulted.   MHFA promptly  tendered notice  of          default  but took no immediate steps to acquire possession of the          Project (as by foreclosure) or the rents (as  by appointment of a          receiver).   Meanwhile, Indian Motocycle  Associates III  Limited                                          3          Partnership had withdrawn  $65,000 from the  rents on deposit  in          the  Project  operating  accounts,  with which,  inter  alia,  it                                                           _____  ____          retained  counsel  in  contemplation  of the  commencement  of  a          voluntary chapter 11 proceeding ($35,000 retainer) and an accoun-          tant  (Coopers & Lybrand) to  prepare a prepetition  audit of the          Project  ($20,000).2    On  December 15,  1992,  following  these          disbursements, Indian Motocycle  Associates III Limited  Partner-          ship (hereinafter:   "debtor") filed its chapter 11  petition and          continued  to operate  the Project  as a  debtor in  possession.3          Pursuant to  the Regulatory  Agreement,  MHFA filed  a motion  to          compel the  debtor "to restore  [the $65,000 in  cash collateral]          improperly diverted from the [chapter 11] estate in  violation of          Title II of the [NHA]."4            B.   The Bankruptcy Court Decision          B.   The Bankruptcy Court Decision               _____________________________                    The  bankruptcy  court   ruled  that  the  unauthorized          prepetition transfer of MHFA cash collateral to retain chapter 11                                        ____________________               2An additional $5,000 was used  to retain counsel to prepare          and  file a proof of claim in  behalf of Indian Motocycle Associ-                                     __  ______          ates  III Limited  Partnership in  an unrelated  bankruptcy case.          Another $5,000 was transferred to a business owned by a principal          of  the debtor's  managing  general partner,  for  a purpose  not          disclosed in the appellate record.  See infra notes 18 & 20.                                              ___ _____               3The  chapter  11 proceeding  has  since  been converted  to          chapter 7,  see Bankruptcy Code    1112, 11 U.S.C.    1112, and a                      ___          chapter 7 trustee has been appointed, id.   702.                                                ___               4At the same time, MHFA sought to sequester all postpetition          rents.   Thereafter, on June 23, 1993,  prior to denying the MHFA          motion to  compel, the bankruptcy  court granted an  interim MHFA          motion for relief from the automatic stay.  See Bankruptcy Code                                                        ___          362(d), 11 U.S.C.    362(d).   MHFA represents that it  has since          foreclosed  upon all  collateral except  the  monies at  issue on          appeal.                                          4          counsel violated the  Regulatory Agreement.   In re Indian  Moto-                                                        ___________________          cycle Assocs. III Ltd. Partnership,  161 B.R. 865, 867-68 (Bankr.          __________________________________          D.  Mass. 1994).5   The  court nonetheless  denied the  motion to          compel the debtor  to restore  the $65,000 to  MHFA, noting  that          Regulatory Agreement violations by the debtor were  "irrelevant,"          given  that the motion to compel purported to assert MHFA's legal          rights against the debtor  only and that no  adversary proceeding          had  yet been  commenced against  the debtor's  general partners,          attorneys or accountants, the transferees  in possession.  Id. at                                                                     ___          868.                    During  the  bankruptcy  court  proceedings,  MHFA  had          relied on case  law to  the effect that  a debtor's  unauthorized          prepetition  disbursement of  rents securing an  NHA-insured loan          warrants  postpetition relief  compelling the  debtor  and/or its          attorneys to restore the  encumbered funds to the debtor  estate.          Id.  The bankruptcy  court reasoned, however, that  the requested          ___          relief would undermine the Bankruptcy Code distribution scheme by          entitling  $65,000 of  the HUD/MHFA  unsecured claim  against the          chapter 11 estate to "super priority" status.                      On intermediate appeal, the district court reversed and          remanded to the bankruptcy court for entry of an order compelling          the  "[d]ebtor to  restore  the distributions  diverted from  the                                        ____________________               5The  bankruptcy court  traced the  source of  the contested          monies directly to Project rents, as distinguished from individu-          al partner advances as suggested by the debtor.  Id.  at 867.  On                                                           ___          the  other hand,  the court  mistakenly characterized  the entire          $65,000 distribution as a  retainer fee for legal services.   Id.                                                                        ___          at 865; see infra note 6.                  ___ _____                                          5          estate."   Massachusetts  Hous. Fin.  Agency v.  Indian Motocycle                     _________________________________     ________________          Assocs. III Ltd. Partnership (In  re Indian Motocycle Assocs. III          ____________________________  ___________________________________          Ltd.  Partnership), 174 B.R. 351, 357-58  (D. Mass. 1994) (citing          _________________          Bankruptcy  Code    105(a), 11  U.S.C.    105(a)  (empowering the          court to "issue any order, process, or judgment that is necessary          or appropriate to carry out the provisions of this title")).                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________                    The debtor contends that the bankruptcy court correctly          determined  that  it lacked  authority  under  Bankruptcy Code             105(a) to order a chapter 11 debtor    even one who concedes that          it improperly  diverted a  secured creditor's  collateral shortly          before filing its chapter 11 petition     to return the collater-          al (or its  monetary equivalent) to  the chapter 11 estate.   The          debtor argues  that it no  longer retained a  property "interest"          in, or control over, the diverted collateral on the date it filed          its chapter  11 petition  and, accordingly, the  collateral never          became property of the chapter 11 estate  amenable to administra-          tion.  See Bankruptcy Code   541(a)(1), (6),  11 U.S.C.   541(a)-                 ___          (1), (6) (providing  that estate  is comprised of  "all legal  or          equitable interests of the debtor in property as of the commence-                                                        __ __ ___ _________          ment of the case," including "rents . . . from [real] property of          ____ __ ___ ____          the  estate") (emphasis  added).  Further,  the debtor  says, its          diversion of the  encumbered rents  did not alter  the amount  of                                                                 ______          MHFA's  claim  against  the  debtor estate,  which  remained  the          balance outstanding  on the  note at the  date of the  chapter 11                                          6          petition.   Finally, the debtor argues that  the bankruptcy court          correctly  declined to  follow  those courts  which have  ordered          chapter  11 debtors in possession to restore to the debtor estate          diverted  NHA-encumbered rents, see  infra Section  II.A.2, since                                          ___  _____          those cases did not  involve a non-federal agency like  MHFA, nor          did  those courts  cite  to legislative  history indicating  that          Congress intended that NHA  policy override the debtor protection          policy  underlying the  Bankruptcy Code,  including the  right to          utilize  monies in  the debtor's  possession to  fund prepetition          retainers of chapter 11 counsel.            A.   Injunctive Relief          A.   Injunctive Relief               _________________                    We  review challenged  rulings of  law by  the district          court  de novo and contested  findings of fact  by the bankruptcy                 __ ____          court for  clear error.  See  In re Laroche, 969  F.3d 1299, 1301                                   ___  _____________          (1st Cir.  1992).6   A bankruptcy  court's  decision granting  or          denying injunctive relief pursuant to Bankruptcy Code   105(a) is          reviewed only for abuse  of discretion.  See, e.g.,  Western Auto                                                   ___  ____   ____________                                        ____________________               6On appeal,  neither party  challenges the  bankruptcy court          findings  that (1) the entire $65,000 was disbursed as a retainer          for legal  services, and (2) the entire disbursement breached the          Regulatory  Agreement.   Although this  first finding  is not  an          accurate  reflection of the record  evidence, cf. supra  note 2 &                                                        ___ _____          accompanying text; note 5,  it does not infect the  legal conclu-          sions  reached  by the  bankruptcy  court,  nor  our decision  on          appeal.  Nor  need we  address the bankruptcy  court ruling  that          these  disbursements, as  a  matter of  law,  did not  constitute          _____          "reasonable expenses  necessary to the operation  and maintenance          of the Project."  In  re Indian Motocycle Assocs. III  Ltd. Part-                            _______________________________________________          nership, 161 B.R. at 868 (citing United States v. Frank, 587 F.2d          _______                          _____________    _____          924 (8th Cir.  1978) (legal fees not  "reasonable expenses" under          HUD regulatory  agreement)).   Similarly, we decline  to consider          whether  the prepetition  disbursements  for accounting  services          violated  the Regulatory  Agreement,  since the  bankruptcy court          made no relevant findings.                                            7          Supply  Co. v. Savage  Arms, Inc. (In  re Savage Arms,  Inc.), 43          ___________    __________________  _________________________          F.3d  714,  719 n.8  (1st Cir.  1994).   "Four  principal factors          govern the appropriateness  of permanent  injunctive relief:  (1)          whether the plaintiff  has prevailed on  the merits; (2)  whether          the plaintiff  will suffer irreparable  injury absent  injunctive          relief;  (3) whether the harm to the plaintiff outweighs any harm          threatened by the injunction; and (4) whether the public interest          will be adversely affected by the  injunction."  Id.  The present                                                           __          appeal implicates only the first two factors.                    1.   Injury                    1.   Injury                         ______                    Although  the bankruptcy court  ruled that the debtor's          prepetition  transfer of  MHFA's  cash collateral  constituted  a          conversion, it concluded  that injunctive relief  was unwarranted          since the amount owed MHFA by the chapter  11 estate remained the          same.   To the extent this ruling suggests that MHFA sustained no          cognizable injury, we  disagree.   Since there  is no  indication          that  MHFA's claim was over-secured, the conversion by the debtor          of the  $65,000 cash collateral  reduced MHFA's secured  claim by          that amount, leaving  MHFA with an  unsecured claim for  $65,000.          See Bankruptcy  Code   506(a), (b), 11  U.S.C.   506(a), (b); see          ___                                                           ___          also id.    541(a)(6) ("Such estate is comprised of  . . . [p]ro-          ____ ___          ceeds, product, offspring,  rents, or profits of or from property                                      _____          of the estate [viz., the Project]") (emphasis added).                      The advantage to holding a secured claim to these rents          in the chapter 11 proceeding is not to  be underestimated.  Since          the rents  constituted "cash collateral" securing  the MHFA note,                                          8          id.   363(a)  ("cash collateral"  includes "cash .  . .  whenever          ___          acquired in which the  estate and an entity other than the estate          have an interest and  includes . . . rents  . . . ."); cf.  id.                                                                   ___  ___          552(b) (governing enforceability of prepetition security interest          against  postpetition  rents),  the  rents could  not  have  been          expended or transferred without MHFA consent, id.   363(c)(2)(A),                                                        ___          and  bankruptcy  court  authorization  conditioned  on  "adequate          ___          protection" for  MHFA's security  interest, id.     363(c)(2)(B),                                                      ___          361, 363(e).  Thus, restoration  of the converted cash collateral          to  the chapter 11 estate would have represented neither an empty          judicial exercise,  nor a windfall  or "super priority"  to MHFA,          but  appropriate  recognition  of  the  valuable  legal advantage          enjoyed by the holder of a secured claim in a bankruptcy proceed-          ing.                     Nevertheless,  we do  not  think  the bankruptcy  court          ruling  should  be interpreted  simply  as  a determination  that          secured  NHA  lenders  in  these  circumstances  neither  sustain          cognizable  injury nor  have  any recourse  for recovering  their          collateral, but  rather as a determination  that MHFA prematurely                                                                ___________          sought extraordinary injunctive relief against the wrong party                                                                _____ _____          the  chapter 11  debtor     without  first attempting  to exhaust          other available remedies against nondebtors.                 2.  "Irreparability" of Injury; Adequacy of Remedy at Law               2.  "Irreparability" of Injury; Adequacy of Remedy at Law                    ____________________________________________________                    Every  court  which  has  considered the  question  has          determined that the NHA  empowers HUD to enforce  its prepetition          rights under  a Regulatory Agreement  notwithstanding the initia-                                          9          tion of a  chapter 11 proceeding by or  against the NHA borrower.          See, e.g., In re  EES Lambert Assocs., 43  B.R. 689, 691  (Bankr.          ___  ____  __________________________          N.D. Ill.  1984),  aff'd, 63  B.R. 174  (N.D. Ill.  1986); In  re                             _____                                   ______          Marion Carefree Ltd. Partnership, No. 93-33011, 1994 Bankr. LEXIS          ________________________________          398, at  *8-9 (Bankr. N.D. Ohio  Mar. 17, 1994); In  re Tampa Bay                                                           ________________          Briarwood Assocs., Ltd., 118  B.R. 126, 128-29 (Bankr. M.D.  Fla.          _______________________          1990); In  re Garden Manor Assocs., 70 B.R. 477, 486 (Bankr. N.D.                 ___________________________          Cal. 1987);   In re TWO-KMF Dev. Assoc., 63 B.R. 149, 151 (Bankr.                        _________________________          N.D. Ill. 1985);   In re  Hil'Crest Apartments, 50 B.R.  610, 613                             ___________________________          (Bankr.  N.D.  Ill. 1985).    Three principal  grounds  appear to          support postpetition enforcement of the NHA  lender's prepetition          contract  remedies notwithstanding  the fact  that the  debtor no          longer has possession of, or access to, the precise collateral it          diverted prior to the petition.                      First,  the  debtor's  own  partners  are  the  parties          principally  benefited by  the prepetition  diversion of  the HUD          collateral     most notably in  this case the  fees for retaining          professional assistance  in  fending off  any  MHFA  foreclosure,          thereby  safeguarding  their personal  financial  investments7 at          the  expense  of low-income  Project  residents     the  intended                                        ____________________               7The NHA allows HUD to coinsure non-recourse mortgages under          which the partners are relieved from individual liability for the          partnership obligation  under the note.   But the  NHA conditions          that relief on the partners' agreement to assume personal liabil-          ity "for funds or property  of the Project which come  into their          hands and which they  are not entitled to retain;  and . . .  for          their own  acts and deeds or  acts and deeds of  their authorized          agents that are  in violation  of the provisions  of this  Agree-          ment."  See In re Hil'crest Apartments, 50 B.R. at  612-13 (part-                  ___ __________________________          ners relieved of personal  liability on partnership obligation in          return for their agreement to restrictions on transfer of rents).                                          10          principal beneficiaries of  the NHA.  See In  re Garden Manor, 70                                                ___ ___________________          B.R. at  485; In re Hil'crest  Apartments, 50 B.R. at  612; In re                        ___________________________                   _____          EES Lambert, 43 B.R. at 690.  But for the unauthorized diversion,          ___________          the  rents  normally would  have  been  applied, as  appropriate,          toward Project maintenance.   See In re Garden Manor,  70 B.R. at                                        ___ __________________          483,  485 (regulatory  agreement is  not an  "executory contract"          subject to rejection by debtor) (citing Bankruptcy Code   365).                    Second,  the  assignment-of-rents   provision  in   the          Regulatory  Agreement  is not  merely a  term  in a  private loan          agreement, but a  contractual precondition  to coinsurance  which          Congress expected HUD to enforce in the  public interest.  See 12                                           __ ___  ______ ________   ___          U.S.C.    1709, 1715k, 1715v(c)(4) (listing numerous restrictions          on  NHA mortgagors).   Permitting  partnership debtors,  or their          individual  partners, to divert  public funds with  any degree of          impunity threatens significant depletion  of the treasury, see In                                                                     ___ __          re  Garden Manor, 70 B.R. at 483, and ultimately undercuts public          ________________          confidence  in  the efficacy  of  federal  housing, lending,  and          insurance  programs,  thereby  subverting   Congress's  announced          intention to promote private construction of low-income  housing.          Id.          ___                    Third, these cases point out that there is  no inherent          inconsistency between the  policies of the NHA and the Bankruptcy          Code,  in that the  partnership debtor, and  its individual part-          ners, remain free to  retain chapter 11 counsel provided  they do          not fund their retainers  with the NHA lender's  cash collateral.                                          11          Id.  at 482, 486; In re TWO-KMF,  63 B.R. at 151; In re Hil'crest          ___               _____________                   _______________          Apartments, 50 B.R. at 612.          __________                    Notwithstanding the  strong judicial support  for these          general policy considerations, however,  we are given great pause          at  the prospect  of  fashioning extraordinary  injunctive relief          absent  either demonstrated compliance with the explicit require-                  ______          ments  of the enabling provision  in the Bankruptcy  Code, see 11                                                                     ___          U.S.C.    105(a), or some clear  indication in the NHA  that Con-                            __          gress envisioned  such an accommodation  between the NHA  and the          Bankruptcy Code.  Thus, we think it is not enough simply to point          to the importance of  safeguarding the integrity of the  NHA loan          program, where neither the  NHA, the Regulatory Agreement entered          into pursuant to the  NHA, nor the Bankruptcy Code itself so much          as  intimates that a  bankruptcy court  may fashion  the extraor-          dinary "reimbursement" relief sought by MHFA.                      No matter how compelling  the public policy reasons for          formulating such extraordinary relief, it must be recognized that          the right and remedy  are judge-made.  Bankruptcy courts  must be                                    __________          especially cautious about embarking  upon a lawmaking exercise in          circumstances  where the  injured party has  neither demonstrated          that it has exhausted,  nor even pursued, efficacious alternative                                           _______          forms of  relief  which,  if available,  might  well  preclude  a          finding that  the  relief sought  from  the bankruptcy  court  is          either "necessary or appropriate  to carry out the provisions  of          [the  Bankruptcy Code]."  Bankruptcy  Code   105(a),  11 U.S.C.            105(a).   See generally Lopez  v. Garriga, 917  F.2d 63, 68  (1st                    ___ _________ _____     _______                                          12          Cir. 1990) (noting that injunction-seeker must first show that he          has  "no adequate  remedy  at law");  see  also Baker  v.  United                                                ___  ____ _____      ______          States, 27 F.2d 863,  875 (1st Cir. 1928) ("Where  courts intrude          ______          into  their decree their opinions  on questions of public policy,          they in  effect constitute  the judicial tribunals  as law-making          bodies in usurpation of  the powers of the Legislature.")  (cita-          tion  omitted).8   We  therefore  decline to  endorse  the MHFA's          request for extraordinary injunctive relief under Bankruptcy Code             105(a), absent  any showing  or appearance  that it  is either          "necessary  or appropriate  to carry out  the provisions"  of the          Bankruptcy  Code.   See  Bankruptcy Code     105(a), 11  U.S.C.                                ___          105(a).          B.   Alternative Remedies          B.   Alternative Remedies               ____________________                    MHFA  has not  demonstrated  that it  is without  other          viable remedies against the debtor's general partners, chapter 11          counsel, and/or  its accounting firm, for  restoring the diverted          collateral or its equivalent.                                        ____________________               8Of course,  federal  courts may  be expected  to engage  in          lawmaking  where Congress  "ambiguously  addresses" an  issue  in          general  terms, but  deliberately  leaves "an  interstice" to  be          filled  by  the courts  in conformity  with  the purposes  of the          statute.  See Conille  v. Secretary of Hous. and  Urban Dev., 840                    ___ _______     __________________________________          F.2d 105, 110  n.6 (1st Cir. 1988).  This  principle is of little          utility  in the instant case, however, for two principal reasons.          First, there is no apparent interstice in the NHA, which express-          ly prescribes severe criminal penalties for violating HUD Regula-          tory  Agreements, see 12  U.S.C.    1715z(19) ($250,000  fine, 5-                            ___          years' imprisonment), thereby  providing a powerful  deterrent to          unauthorized prepetition diversions of HUD collateral by debtors.          Second,  the "reimbursement"  remedy requested  by MHFA  not only          necessitates  a  judicial assessment  of NHA  policy, but  of any          conflicting Bankruptcy Code policy.  We do not regard this  as an          appropriate invitation to engage in judicial lawmaking, except as          a last resort.                                           13               1.   The General Partners               1.   The General Partners                    ____________________                    Whether or not it perfected its lien in the prepetition          rents, see infra Section  II.B.2, MHFA could have sued  the debt-                 ___ _____          or's general partners  for the value  of the diverted  collateral          (or, at the  very least, for any deficiency between  the value of          its  collateral and any amount  recovered by MHFA  on its $65,000          unsecured  claim  against the  chapter 11  estate), based  on the          Regulatory  Agreement  provision  that  expressly  obligates  the          partners  "for funds or property  of the Project  which come into          their hands and  which they are not entitled to retain; and . . .          for their  own acts and deeds  or acts and deeds  of their autho-          rized  agents that  are in  violation of  the provisions  of this          Agreement."  See, e.g.,  Austin v. UNARCO Indus., Inc.,  705 F.2d                       ___  ____   ______    ___________________          1, 4 (1st Cir.) (automatic stay normally does not foreclose suits          against  general partners  of bankrupt  partnership), cert.  dis-                                                                _____  ____          missed,  463 U.S. 1247 (1983); see also supra  notes 4 & 7.  MHFA          ______                         ___ ____ _____          has not alleged, nor does the appellate record disclose, that the          general partners are insolvent.               2.   Chapter 11 Counsel                 2.   Chapter 11 Counsel                      __________________                    a)   Perfection of MHFA Lien                    a)   Perfection of MHFA Lien                         _______________________                    In order  to obtain  any meaningful relief  against the          debtor  or the  transferees of  the $65,000  in other  venues, of          course, MHFA would have  to demonstrate that it held  a perfected          lien or  security interest in  the diverted rents;  otherwise, as          property  of the chapter 11 estate, see Bankruptcy Code   541(a)-                                              ___          (6),  any unperfected  lien  on the  rents  would be  subject  to                                          14          avoidance  by the  debtor in possession  pursuant to  its "strong          arm" powers.  See  id.    544(a) ("strong arm  powers"), 1107(a);                        ___  ___          see generally  In  re Ryan,  851 F.2d  502, 512  (1st Cir.  1988)          ___ _________  ___________          (trustee); In re  Wabash Valley  Power Ass'n, 114  B.R. 613,  617                     _________________________________          (S.D. Ind. 1990) (debtor in possession).  And once its unperfect-          ed lien was  voided under  Bankruptcy Code    544(a), MHFA  would          have had  no right to control  the disposition of  any portion of          the $65,000  in cash  collateral which remained  property of  the          chapter 7  estate, cf.  Bankruptcy Code    363(a),  (c)(2), (e),9                             ___          nor any right of recourse to lien foreclosure proceedings outside          the bankruptcy court against third party transferees who acquired          title to the  rents prior  to the debtor's  chapter 11  petition,          cf.,  e.g., In  re McBee,  714 F.2d  1316, 1326  (5th  Cir. 1983)          ___   ____  ____________          (perfected  security  interest  in  collateral   continues  after          collateral is  conveyed).  Nevertheless,  we agree with  the dis-          trict  court that the MHFA  security interest in  these rents had          been perfected before the chapter 11 petition was filed.   See In                                                                     ___ __          re Indian  Motocycle Assocs.  III Ltd.  Partnership, 174  B.R. at          ___________________________________________________          356.                                        ____________________               9Following appointment  of the chapter 7  trustee, see supra                                                                  ___ _____          note 3, all avoidance powers  resided exclusively in the trustee,          not in  the debtor.  See  Bankruptcy Code   1107(a),  11 U.S.C.                                 ___          1107(a).  We  assume arguendo  that the chapter  7 trustee  would                               ________          attempt to avoid MHFA's lien in order that the net proceeds could          be  applied to  claims  against the  estate,  including any  MHFA          claim.  For present purposes, however, we confine ourselves to an          assessment  of the debtor's avoidance  powers at the  time of the          bankruptcy  court ruling; that is, during the chapter 11 proceed-          ing.                                           15                    Although  the  prepetition  perfection  of  a  security          interest  in property  of the  estate normally  is determined  in          reference  to applicable state law, see  Butner v. United States,                                   _____ ___  ___  ______    _____________          440 U.S. 48, 55 (1979), it is now well settled  that the require-          ments  for perfecting  a  federal agency's  security interest  in          property  securing  federally-insured  loans      a  subject  not          addressed by  the NHA    is controlled by federal common law, see                                                                        ___          United States v. Kimbell  Foods, Inc., 440 U.S. 715,  726 (1979);          _____________    ____________________          Butner, 440 U.S. at  55 (noting that state law  governing perfec-          ______          tion of security interests  applies "unless some federal interest          requires a  different result");10 United States  v. Landmark Park                                            _____________     _____________          & Assocs., 795 F.2d  683, 685-86 (8th Cir. 1986)  (rents); United          _________                                                  ______          States v. Floral Park  Dev. Co., 619 F.  Supp. 144, 147-48  (S.D.          ______    _____________________          Ohio  1985) (rents); United States v. Borden Fin. Corp., 164 B.R.                               _____________    _________________          260, 264 (E.D. La.  1994) (rents); cf. Graham v.  Security Sav. &                                             ___ ______     _______________          Loan,  125 F.R.D. 687, 692 (N.D. Ind. 1989) (federal law controls          ____          government's rights in litigation involving  federally guaranteed          student loans), aff'd sub nom.  Veal v. First Am. Sav.  Bank, 914                          _____ ___ ____  ____    ____________________          F.2d 909 (7th Cir. 1990); cf.  also Conille v. Secretary of Hous.                                    ___  ____ _______    __________________          and  Urban  Dev., 840  F.2d 105,  109  (1st Cir.  1988) (applying          ________________          federal common law to litigation involving scope of HUD's obliga-                                        ____________________               10Butner,  a Bankruptcy Act  case, remains  viable precedent                 ______          under the Bankruptcy Code.   See Wolters Village Ltd.  v. Village                                       ___ ____________________     _______          Properties,  Ltd. (In re Village Properties, Ltd.), 723 F.2d 441,          _________________  ______________________________          443 (5th Cir.), cert. denied, 466 U.S. 974 (1984).                          _____ ______                                          16          tions as NHA landlord, after finding NHA left this issue for  the          courts).11   Under established federal common  law, HUD's securi-          ty  interest  in post-default  NHA  rents  normally is  perfected          simply by recording  a HUD mortgage  containing an assignment  of                    _________          rents, which places third parties on notice of the HUD lien.  See                                                                        ___          Landmark  Park &  Assocs., 795  F.2d at  685-86 (noting  need for          _________________________          uniform federal rule in  face of discordant state  rules relating          to perfection  of security  interests in rents);  In re  Westwood                                                            _______________          Plaza Apartments, Ltd., 154 B.R. 916, 920 (Bankr. E.D. Tex. 1993)          ______________________          (same);  cf. In re Executive  House Assocs., 99  B.R. 266, 275-76                   ___ ______________________________          (Bankr. E.D. Pa. 1989) (adopting Landmark Park "perfection" rule,                                           _____________          but  noting that other required  means of perfection  may be pre-          scribed in  security agreement;  e.g., an express  declaration of          default).   Of course,  in our case the  debtor concedes that the          HUD mortgage and Regulatory  Agreement were duly recorded in  the          appropriate  registry of deeds, and that it had received a notice          of default under the note before disbursing the $65,000.12                                         ____________________               11Like  the  district  court,  we see  no  policy  basis for          distinguishing  the instant  case  simply because  MHFA, a  state          agency, rather than HUD, is the party presently seeking return of          the  collateral.   Under the  NHA coinsurance  regime, MHFA  will          assign the note to  HUD in return for payment  of any unrecovered          deficiency.  See 12 U.S.C.   1710; see also supra note 1.  In all                       ___                   ___ ____ _____          events, given  our  determination, infra,  that  MHFA's  security                                             _____          interest was perfected under  both federal and Massachusetts law,                                        ____         ___          the distinction is inconsequential.  See Conille, 840 F.2d at 110                                               ___ _______          (no need to adopt federal common law where there is "no 'signifi-          cant conflict between some federal policy or interest and the use          of state law'") (citation omitted).               12We note that the debtor's opening  appellate brief did not          challenge  the  district  court  ruling that  the  MHFA  security          interest in rents had  been perfected.  Issues presented  for the          first  time in  a reply  brief normally  are deemed waived.   See                                                                        ___                                          17                    Moreover, even if  it were to  be assumed that  federal          common  law does  not govern  the perfection  of MHFA's  security          interest, see supra note  11, the same result would  obtain under                    ___ _____          Massachusetts law.13   In Prudential  Ins. Co. of  Am. v.  Boston                                    ____________________________     ______          Harbor Marina Co.,  159 B.R.  616 (D. Mass.  1993), the  district          _________________          court  held that  a  Massachusetts mortgagee  which recorded  its          assignment of rents in the registry of deeds as an adjunct to its          mortgage, "perfected" its lien  in the rents so as  to constitute          the rents "cash  collateral" under Bankruptcy Code    363(a), and          that there was no need for the creditor to take possession of the          real property (e.g., as by foreclosure) or the rents (e.g., as by                                        ____________________          Clarke v. Kentucky Fried Chicken, 57 F.3d 21, 27 (1st Cir. 1995).          ______    ______________________          There is  no basis for  relief from  waiver in the  instant case.          Even  in its reply  brief, the  debtor chose  not to  discuss the          implications of Kimbell or  Butner on the choice-of-law question;                          _______     ______          instead  simply stating  its  conclusion  that Massachusetts  law          should be applied.  See Williams v. Poulos, 11 F.3d 271, 285 (1st                              ___ ________    ______          Cir.  1993) (issues  adverted to  in perfunctory  manner, without          adequate argumentation, deemed waived).                 13Although MHFA concedes  that it did  not file a  financing          statement,  the  law  in  most  states, including  Massachusetts,          classifies  an assignment of rents as an interest in real proper-                                                               ____ _______          ty.   Thus,  parties  with  security  interests in  future  rents          __          generated from  encumbered real property need not comply with the          Uniform Commercial  Code.  See Mass.  Gen. L. Ann. ch.  106,   9-                                     ___          104(j) (excluding assignments of rent from Massachusetts U.C.C.);          see  also, e.g., Commerce Bank  v. Mountain View  Village, 5 F.3d          ___  ____  ____  _____________     ______________________          34, 39 (3d Cir.  1993); J.H. Streiker & Co. v. SeSide  Co. (In re                                  ___________________    ___________  _____          SeSide Co.), 152 B.R. 878, 882 (E.D.  Pa. 1993); First Nat'l Bank          __________                                       ________________          v. United States (In re Dorsey), 155 B.R. 263, 267 (Bankr. D. Me.             _____________  ____________          1993);  see generally  Laurence D.  Cherkis, Collier  Real Estate                  ___ _________                        ____________________          Transactions and  the Bankruptcy Code   2.03[1],  at 2-65 (1992).          _____________________________________          Instead,  the  mortgage  and assignment  of  rents  need  only be          recorded  in the appropriate registry  of deeds.   See Mass. Gen.                                                             ___          Laws Ann. ch. 183,    4 (providing that unrecorded  assignment of          rents  is invalid against third parties,  except for persons with          actual knowledge); see also  In re Cadwell's Corners Partnership,                             ___ ____  ___________________________________          174 B.R. 744, 754 (Bankr. N.D. Ill. 1994) (same).                                          18          appointment  of a receiver) prior to the filing of the bankruptcy          petition.   Id. at 620-22 (recognizing  distinction between "per-                      ___          fection," which governs  secured creditor's rights against  third          parties,  and "enforcement" of  liens, which  controls creditor's          rights against its debtor;  rejecting theory that such "inchoate"          or  unenforced security  interests are voidable  under Bankruptcy          Code    544(a)); see also H.R.  Rep. No. 95-595,  95th Cong., 1st                           ___ ____          Sess. 312 (1978) ("[T]he definition of  'lien' is new and is very          broad  . .  . [and]  [i]t includes  'inchoate lien[s]'").14   The          Prudential court noted also that the "recordation" rule was  fast          __________          becoming  the  majority rule  among  the  states, thus  providing          further  support  for  the  "uniform" federal  rule  of  decision          adopted  in  Landmark.15   See Conille,  840  F.2d at  112-13 (in                       ________      ___ _______          fashioning appropriate federal rule of decision, court should not                                        ____________________               14The "possession" theory rejected in Prudential, supra, had                                                     __________  _____          essentially  sounded the  knell  for most  security interests  in          rents  in the bankruptcy context,  since the holder  of a secured          claim is precluded  by the  automatic stay from  taking the  very          steps required to reduce  rents to possession.  See,  e.g., Bank-                                                          ___   ____          ruptcy Code   362(a)(1), (a)(3), (a)(4).                15See  In re  Park at  Dash Point  L.P., 121  B.R. 850,  855                 ___  ________________________________          (Bankr.  W.D. Wash. 1990), aff'd, 152 B.R. 300 (W.D. Wash. 1991),                                     _____          aff'd, 985  F.2d 1008 (9th Cir. 1993);  In re Vienna Park Proper-          _____                                   _________________________          ties, 976 F.2d 106,  112-13 (2d Cir. 1992) (Virginia  law); In re          ____                                                        _____          SeSide Co., 152  B.R. at 884; In re Wiston XXIV Ltd. Partnership,          __________                    __________________________________          147 B.R. 575, 580-81  (D. Kan. 1992), appeal dismissed,  988 F.2d                                                ______ _________          1012  (10th Cir. 1993); Midlantic Nat'l Bank v. Sourlis, 141 B.R.                                  ____________________    _______          826, 832 (D.N.J. 1992); Creekstone  Apartments Assocs. v. RTC (In                                  ______________________________    ___  __          re Creekstone Apartments Assocs.), 165 B.R. 845, 851 (Bankr. M.D.          ________________________________          Tenn. 1993); SLC Ltd. V. v. Bradford Group West, Inc.  (In re SLC                       __________     _________________________   _________          Ltd. V),  152 B.R. 755, 760-62  (Bankr. D. Utah 1993);  In re KNM          ______                                                  _________          Roswell Ltd.  Partnership, 126  B.R. 548,  554 (Bankr.  N.D. Ill.          _________________________          1991); In re Rancourt, 123 B.R. 143, 147-48 (Bankr. D.N.H. 1991);                 ______________          In re Foxhill  Place Assoc., 119  B.R. 708, 711 (Bankr.  W.D. Mo.          ___________________________          1990); cf. Commerce Bank, 5 F.3d at 39 (recordation, coupled with                 ___ _____________          notice to tenants).                                           19          adopt forum state's law if it would frustrate NHA's purposes, but          may consult  other states'  law as  a "source"  for the more  apt                                              _          federal common  law rule) (citing  Kimbell Foods, Inc.,  440 U.S.                                             ___________________          715  (1979)).16  Accordingly, we  conclude that the  MHFA lien on          rents was fully perfected prior to the chapter 11 petition, hence          not voidable under Bankruptcy Code   544(a).                    b)   Law Firm                    b)   Law Firm                         ________                    MHFA concedes that it  can proceed against the debtor's          counsel in the bankruptcy  court only if the $35,000  in diverted          cash collateral, intended  as a  prepetition "retainer,"  remains          property of the estate, presumably as a  fund held "in trust" for          the debtor.  MHFA  cites several so-called "collateral reimburse-          ment"  decisions,  see  supra  Section II.A.2,  in  which  debtor                             ___  _____                              ______          counsel have been directed to surrender to  the bankruptcy estate          _______          monies  diverted to fund prepetition retainers.  See, e.g., In re                                                           ___  ____  _____          Westwood Plaza Apartments,  154 B.R.  at 923 n.11.   MHFA  itself          _________________________          intimated  at oral  argument that  it may  request the  chapter 7          trustee to  recoup the  putative trust  monies from  counsel, see                                                                        ___          Bankruptcy Code    542, 11 U.S.C.    542, see also  In re Sinder,                                                    ___ ____  ____________                                        ____________________               16Though not  retroactively applicable to this  case, see In                                                                     ___ __          re Barkley 3A Investors, 175 B.R. 755, 758 (Bankr. D. Kan. 1994),          _______________________          the  Bankruptcy Reform  Act of  1994, Pub.  L. 103-394  (Oct. 22,          1994),  further supports the trend.  Congress added a new subsec-          tion dealing  separately with the question  whether a prepetition          security interest in rents extends to postpetition  rents.  Under          prior law, the bankruptcy court was required to look to "applica-          ble nonbankruptcy  law," usually state law, see Bankruptcy Code                                                        ___          552(b); the  amendment now  refers the  court exclusively  to the          terms of the parties' "security agreement."  See id.   552(b)(2);                                                       ___ ___          In  re Barkley, 175 B.R. at 758 (noting that, henceforth, "courts          ______________          will  not look to state  law" to determine  security interests in          rents).                                          20          102 B.R. 978, 982-83 (Bankr. S.D. Ohio 1989) (questioning whether          parties other than trustee and debtor in possession have standing          to  bring   542  action), or may  interpose objection  to any fee          application submitted  by debtor  counsel, see Bankruptcy  Code                                                       ___          330, 11 U.S.C.   330.17                    The  question whether the $35,000 "retainer" is subject          to  turnover cannot be resolved  on the present  record, since it          may  ultimately  turn on  the  precise  terms  of any  "retainer"          agreement between  the debtor and its counsel.   See, e.g., In re                                                           ___  ____  _____          McDonald  Bros. Constr.,  Inc., 114 B.R.  989, 1002  (Bankr. N.D.          ______________________________          Ill. 1990) (type of retainer is question of fact); see also In re                                                             ___ ____ _____          DLIC, Inc., 120  B.R. 348,  351 (Bankr. S.D.N.Y.  1990) (type  of          __________          retainer  depends on  intent  of parties).18   Certain  retainers          simply  ensure  counsel's  availability to  represent  the client          (whether  or  not  any legal  services  are  ever  performed), or          constitute prepayment for  all future legal  services to be  per-          formed (e.g.,  a  flat fee).    In these  circumstances,  counsel          acquires full title to the  retainer fee on the date  of payment,                                                   __ ___ ____  __ _______          regardless  whether legal services are ever performed.  See In re                                                                  ___ _____          McDonald, 114 B.R.  at 997-98,  999-1000; see also  In re  Mondie          ________                                  ___ ____  _____________                                        ____________________               17For present purposes, we  assume arguendo that the chapter                                                  ________          7  trustee would be amenable  to MHFA's request  that the trustee          prosecute a   542 turnover action against  the transferees, since          the  commensurate  reduction  in  MHFA's  unsecured  claim  could          increase  the recoveries  of other  holders of  unsecured claims.          See supra note 9.          ___ _____               18The  same rationale would apply to  MHFA's recovery of the          $5,000  which the debtor advanced to retain bankruptcy counsel in          an unrelated bankruptcy case.  See supra note 2.                                         ___ _____                                          21          Forge Co., 154  B.R. 232, 235  (Bankr. N.D. Ohio  1993).  Such  a          _________          retainer is precisely the same as the retainer fee paid Coopers &          Lybrand;  it  never became  part of  the  property of  the debtor          estate,  and is  subject  to turnover  only  if it  "exceeds  the          reasonable  value of services  rendered."  See  Bankruptcy Code                                                       ___          329(b);  In re McDonald, 114 B.R.  at 995-96, 1003 n.18; cf. also                   ______________                                  __  ____          Bankruptcy Code   548(a)(2), 11 U.S.C.    548(a)(2) (avoidance of          prepetition  "fraudulent"  transfers  where   "insolvent"  debtor          "received less than a reasonably equivalent value in exchange for          transfer").19                      On the  other hand,  a "security"  retainer is  held by          counsel to secure payment of anticipated legal services yet to be          rendered.   Under the ethical  rules applicable in most jurisdic-          tions, these monies remain property  of the client until  applied          by  counsel in payment of legal services actually performed.  See                                                                        ___          In re McDonald,  114 B.R. at  999; see also  In re Saturley,  131          ______________                     ___ ____  ______________          B.R. 509,  515 (Bankr. D.  Me. 1991); In  re Lilliston,  127 B.R.                                                ________________          119, 120  (Bankr. D. Md.  1991) (portion of  prepetition retainer          not  earned prior  to  petition is  property  of estate);  In  re                                                                     ______          Fitzsimmons Trucking, Inc., 124 B.R. 556, 558-59 (Bankr. D. Minn.          __________________________          1991) (same).    In  the  instant case,  the  debtor's  equitable          "interest"  in any  unearned portion  of the  retainer, impressed                                        ____________________               19Some courts have  held that debtor  counsel may use  these          two  types of  retainers without  first filing a  fee application          under Bankruptcy Code   330.  See, e.g., In re McDonald, 114 B.R.                                        ___  ____  ______________          at  1002.   In  all events,  these  retainers remain  subject  to          scrutiny under Bankruptcy Code   329 (debtor counsel  must report          all  payments received  for legal  services).   See also  Fed. R.                                                          ___ ____          Bankr. P. 2017.                                           22          with  MHFA's perfected  lien, would have  become property  of the          estate  on the date the chapter 11  petition was filed, see Bank-                                                                  ___          ruptcy Code   541(a)(6), and presumably would remain subject to a          turnover order in a  section 542 action brought by  the debtor in          possession.  See In re McDonald, 114 B.R. at 1000 n.13 (citing In                       ___ ______________                                __          re Gerwer, 898 F.2d 730, 734 (9th Cir. 1990)).            _________                    Of  course,  if  the  $35,000  transfer  constituted  a          "security"  retainer, counsel would be required to file a section          330 fee application  to withdraw  the retainer.   In re  Burnside                                                            _______________          Steel Foundry Co.,  90 B.R. 942, 945 n.1 (Bankr. N.D. Ill. 1988).          _________________          MHFA  could then  object  to debtor  counsel's  retention of  any          portion of the retainer  not yet devoted to legal  services which          were "actual [and] necessary," see Bankruptcy Code   330, and the                                         ___          bankruptcy court presumably could order debtor counsel to surren-          der the unearned portion as "property of the estate."  See id.                                                                    ___ ___          105(a); 363(e); see  also In  re Westwood  Plaza Apartments,  154                          ___  ____ _________________________________          B.R. at 923 n.11.                      We need not resolve the  precise contours of the poten-          tial  bankruptcy court  remedies  available to  MHFA against  the          debtor's law firm.   Rather, it was MHFA's burden  to demonstrate          the unavailability  of any alternative remedy  for recovering its              ______________  __ ___          collateral.    See supra  Section II.A.2.    Even if  the $35,000                         ___ _____          retainer  is  not property  of the  chapter  7 estate,  hence not          subject  to  chapter  7  administration, MHFA  has  suggested  no          plausible basis for concluding  that it cannot trace  and recover          the  diverted  collateral  in  a  nonbankruptcy  lawsuit directed                                          23          against the  debtor's chapter 11 counsel (which  is not protected          by  the automatic stay, see  Bankruptcy Code    362) to foreclose                                  ___          upon  its prior  lien on the  rents.   On the other  hand, if the                    _____  ____          retainer  remains  property of  the  chapter 7  estate,  MHFA may          pursue  its  bankruptcy  court  remedies  against  the  nondebtor                                                                  _________          chapter 11 counsel.               3.   Accounting Firm                 3.   Accounting Firm                    _______________                    At oral  argument, MHFA  conceded that the  debtor made          its $25,000  prepetition payment to  Coopers & Lybrand  for audit          services which  were completed prior to the  chapter 11 petition.                                         _____ __          See  supra Section  I.A.   Consequently, the  debtor retained  no          ___  _____          legal or equitable  "interest" in these monies as  of the date of          the  chapter 11 petition; and no right  to, or interest in, these          monies  ever became  property  of the  chapter  11 estate.    See                                                                        ___          Bankruptcy  Code   541(a)(6).  MHFA could point to no conceivable          basis upon which  the bankruptcy  court, at this  point in  time,          could  direct Coopers  &  Lybrand to  turn over  any part  of its          $25,000 retainer  to the  chapter 7  estate.  See  id.    542, 11                                                        ___  ___          U.S.C.   542 (third  party, in possession of property  of estate,          may be compelled  to turn it  over to trustee); United  States v.                                                          ______________          Whiting Pools, Inc., 462 U.S. 198 (1983) (even a secured party in          ___________________          possession of collateral constituting "property of the estate" is          subject to   542  turnover order).  Moreover, MHFA  has suggested          no other basis upon  which either the debtor in possession or the          chapter 7 trustee could have avoided  the prepetition transfer to          Coopers  & Lybrand.  See,  e.g., id.     544 (avoidance of unper-                               ___   ____  ___                                          24          fected liens), 545 (avoidance of statutory liens), 547 (avoidance          of   preferences),  548  (avoidance   of  fraudulent  transfers).          Moreover, the  limitations period  for any such  avoidance action          would  appear to  have lapsed.   See id.    546(a)(1)  (two years                                           ___ ___          after order for relief); compare also In re Ollada, 114 B.R. 654,                                   ____________ ____________          655 (Bankr. E.D. Mo.  1990) (  542 has no  comparable limitations          period) with  In re De Berry,  59 B.R. 891,  898 (Bankr. E.D.N.Y.                  ____  _____ ________          1986)  (  542  turnover motion  must  be made  within "reasonable          time").20                      In all events, MHFA  may have a direct cause  of action          against Coopers & Lybrand  outside the bankruptcy court.   Cf. In                                     _______ ___ __________ _____    ___ __          re Indian Motocycle Assocs. III Ltd. Partnership, 161 B.R. at 868          ________________________________________________          ("[S]uch action  . . . would involve only rights among nondebtors          in  a case  having no  prospects of  reorganization [and]  I have          previously granted MHFA relief  from [the automatic] stay."); see                                                                        ___          generally  In re McBee, 714  F.2d at 1326  (noting that perfected          _________  ___________          security  interest  survives  conveyance  of  collateral).    The          automatic stay afforded  no protection to Coopers  & Lybrand, see                                                                        ___          Bankruptcy Code   362, and MHFA may seek to execute its perfected          lien directly.  At least this procedure would allay a troublesome          aspect of the present case, in  that Coopers & Lybrand has  never          received either notice  or a hearing on MHFA's allegedly superior          claim to the $25,000.                                          ____________________               20The  same  rationale would  appear  to  preclude an  order          compelling  turnover of the $5,000 payment the debtor made to the          principal of its managing  general partner, which might otherwise          have  been voidable as  a preferential transfer  to an "insider."          See Bankruptcy Code   547; see also supra note 2.           ___                        ___ ____ _____                                          25                                         III                                         III                                      CONCLUSION                                      CONCLUSION                                      __________                    For the foregoing reasons, we decline MHFA's invitation          to fashion extraordinary judicial  relief under Bankruptcy Code            105(a), absent a showing that the judicial  lawmaking it inevita-          bly entails is either "necessary or appropriate to carry out" any          provision of the Bankruptcy  Code in the circumstances presented.          Accordingly, we vacate the district court decision entitling MHFA          to an  order directing the debtor  to turn over to  the chapter 7          trustee the diverted MHFA cash collateral or its monetary equiva-          lent.  MHFA  shall not  be entitled  to further  relief in  these          chapter  7 proceedings, except on order  of the bankruptcy court,          after appropriate notice and hearing.                      The  district court order  is vacated  and the  case is                    The  district court order  is vacated  and the  case is                    ___  ________ _____ _____  __ _______  ___ ___  ____ __          remanded to the bankruptcy  court for further proceedings consis-          remanded to the bankruptcy  court for further proceedings consis-          ________ __ ___ __________  _____ ___ _______ ___________ _______          tent with this opinion; costs to appellant.          tent with this opinion; costs to appellant.          ____ ____ ____ _______  _____ __ _________                                          26
