ÿWPCgT êã§;ÿë%ܧ\0Ü"òeM `ì—íPyŽmÙ"ïuñ‹üDpŠhss$(¦\Ff)Á&öÎý˜¡φIE«¸¾ áï oûQSV‰ Só|HÖûi³yÁІ‰¿5l“b­Õ­î%ä;ôÂ#ñF¢ª;1”`£9®ØúmX'ÞsG&ÊÔŒö—Ù±ô¿lŒp4³æ”V`öÑó„Ì×ÔTÀC2u?ÊÅ3w†ê¼Tñ†7Óù˜ÎÓÞNY=æåPK|®¥® ¢A˜"›ÁÔÆ3^…ºÇ‰úרÐóŸ[2ð‹Ø¬»`Ñ9ÉVU-6ÉPòwD\g)_°>¦CÕˆæ p\¸sÃóøÖ}—œ»h¬%2þ’ÓŒS¨µ“DàBZN”tû Œihšax¾ÔUGŒ3µ]gjoùááªö„ÿ.“ÖWëEЍOι¾ØâžcœÃNÃË…Gp­ab Ýî6ûtñX×Þ¯øœá‡²Ö[r– fð_øÉo|Ñ£ˆ¿ÙECH©_Eúýå NƒL^©|û yÊ÷º5©xÞŠ¡Í¤ ;ªô©–ƒ¸óbŽ{“Ås»é-ýЛ7ZÉ24‰îúû_ó:*›®Ÿ¥ã´ôbztâF>¯rj‡=bv#ÁtU†>5 %s 0fy UBß M! UR6% ^ [ wg 4k  Ž m § 0Õ( 0DýbA¯IâøÚMôÄø¿¼U<{ (· UFß €%!Ý¥"ï‚&âq)MS+W+m+Mˆ.ˆ.FŒ.MÒ/Ò/ 01Ö/ 0=0 0ÈD0 B 1 0>)1 0Êg1 0´12 0´å2 0a™3 0´ú3 0´®4 09b5›5 0ܶ7 02’8 0üÄ8 0:À9 0…ú9 0_: 0 Þ: 0kè; 0ÇS= B*? D3D? Cw? D+‘? 0Ǽ? 0çƒA 06jB 0 B 0:¨C 0hâC 0FJDU>DU*ÎDÎDNøDøD¹úDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúDúD´³M˜HP LaserJet 4,ü,,,,,ü0<è\( 9Z+&Courier RegularX(>`­$¡¡Ô€XÆXXXÔÔ€XÆXXXÆÔ<þ6X9`(*Courier 12pt10cpi<þ6X9`(Courier NewT|¢,s «Xƒ,essnet3|x1ÿU‹ÿÀÀÀ wÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú5Ú  ÚóóÝ  Ýà ` àÔ‡XÒ‡XXXÒ‡ÔThe€government€also€argues€that€the€bankruptcy€courtÐ ° Ðexceeded€the€scope€of€the€hearing€by€addressing€postpetition€setoffÐ xÈ Ðrights€at€all,€because€in€the€government's€view€postpetitionÐ @ Ðsetoffs€are€never€covered€by€the€automatic€stay.€€The€governmentÐ X Ðbases€this€argument€on€a€reading€of€11€U.S.C.€ðð362(a)(7),€whichÐ Ð  Ðextends€the€automatic€stay€to€cover€the€exercise€of€prepetitionÐ ˜è Ðsetoffs€but€by€its€terms€does€not€cover€postpetition€setoffs.€Ð ` ° ÐBecause€we€hold€that€the€bankruptcy€court€erred€in€concluding€thatÐ ( x Ðthe€government€had€no€postpetition€setoff€rights,€we€do€not€decideÐ ð @ Ðwhether€it€lacked€authority€to€consider€those€rights€at€all.Ô#†XÒ‡XXXÒ‡#Ô(…(2Øt$¤¤Ý ƒ`­!ÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÝ  ÝÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú0Ú  Úóó(#Ã$òòÚ  Ú0Ú  Úóó- ù- ¥Ô_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú11Ú  ÚóóÝ  Ýà ` àÔ‡XÒ‡XXXÒ‡ÔOn€July€1,€2001,€Revised€Article€Nine€of€the€UniformÐ ° ÐCommercial€Code€took€effect€in€Massachusetts,€as€in€all€fiftyÐ xÈ Ðstates.€€òòSeeóó€2001€Mass.€Acts€26.€€Our€discussion€of€the€law,€ofÐ @ Ðcourse,€applies€the€law€as€it€was€in€effect€at€the€time€the€eventsÐ X Ðtook€place.Ô#†XÒ‡XXXÒ‡#Ôò òó ó ØÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú8Ú  ÚóóÝ  Ýà ` àÔ‡XÒ‡XXXÒ‡ÔThe€bankruptcy€court€commented€in€its€opinion€that€theÐ ° Ðlanguage€in€the€April€1€objection€was€too€general.€€òòCalore€Expressóó,Ð xÈ Ð199€Ô_ÔB.R.Ô_Ô€at€433.€€We€see€no€difficulty€in€the€use€of€a€generalÐ @ Ðstatement€to€rescind€a€general€waiver€such€as€the€one€contained€inÐ X Ðthe€January€25€proof€of€claim.Ô#†XÒ‡XXXÒ‡#Ô Calore ºÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú12Ú  ÚóóÝ  ÝÓ Óà ` àThe€relevant€part€of€section€9-312€reads:Ð °  ÐÓ úÓà0  à(5)€In€all€cases€not€governed€by€other€rules€stated€in€thisÐ ° Ðsection€...€priority€between€conflicting€security€interestsÐ xÈ Ðin€the€same€collateral€shall€be€determined€according€to€theÐ @ Ðfollowing€rules:€ÐX(#(# Ðà0  àà0` (#(#à(a)€Conflicting€security€interests€rank€according€toÐ Ð  Ðpriority€in€time€of€filing€or€perfection....€Ð˜è` (#` (# ÐÓ Óà0  àà0` (#(#à(b)€So€long€as€conflicting€security€interests€areÐ ` ° Ðunperfected,€the€first€to€attach€has€priority.Ð( x` (#` (# ÐÓ \ÓÔ‡XÒ‡XXXÒ‡ÔMass.€Gen.€Laws€ch.€106,€ðð9-312€(2000)€(repealed€2001).Ô#†XÒ‡XXXÒ‡=#Ô µÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú13Ú  ÚóóÝ  ÝÓ Óà ` àThe€relevant€part€of€section€9-318€reads:Ð ° ÐÓ úÓÔ‡XÒ‡XXXÒ‡Ôà  à(1)€.€.€.€[Ô_ÔT]heÔ_Ô€rights€of€an€assignee€are€subject€toÐ @ Ðà0  àà0` (#(#à(a)€all€the€terms€of€the€contract€between€the€accountÐ X Ðdebtor€and€assignor€and€any€defense€or€claim€arisingÐ Ð  Ðtherefrom;€andИè` (#` (# ÐÓ Óà0  àà0` (#(#à(b)€any€other€defense€or€claim€of€the€account€debtorÐ ` ° Ðagainst€the€assignor€which€accrues€before€the€accountÐ ( x Ðdebtor€receives€notification€of€the€assignment.Ðð @` (#` (# ÐÓ æÓÔ#†XÒ‡XXXÒ‡r#ÔÔ‡XÒ‡XXXÒ‡ÔMass.€Gen.€Laws€ch.€106,€ðð9-318€(2000)€(repealed€2001).Ô#†XÒ‡XXXÒ‡8#Ô› ¯ `$Times NewRoman< ° 9Z+‹.Courier New Regular vÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú3Ú  ÚóóÝ  Ýà ` àThe€IRS€attorney€who€made€the€phone€call€did€not€appearÐ ° Ðfor€the€government€before€this€court. ÓÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú14Ú  ÚóóÝ  Ýà ` àFleet€might€have€made,€but€did€not€make,€the€somewhatÐ e Ðanalogous€argument€that€a€claim€of€the€IRS€and€a€debt€of€the€GSAÐ -È Ðare€not€mutual€for€the€purpose€of€setoff.€€The€bankruptcy€courtÐ õ Ðraised€but€did€not€answer€that€question.€€òòCalore€Expressóó,€199€Ô_ÔB.R.Ô_ÔÐ ½X Ðat€432€&€n.7.€€As€we€lack€the€benefit€of€decisions€by€either€theÐ …  Ðbankruptcy€court€or€the€district€court,€and€as€the€parties€have€notÐ Mè Ðbriefed€the€issue,€we€also€decline€to€answer€that€question€today.€Ð  ° ÐIt€will€remain€for€any€further€proceedings€brought€by€theÐ Ý x Ðgovernment. åÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú9Ú  ÚóóÝ  Ýà ` àAs€discussed€earlier,€both€inquiries€should€also€takeÐ ° Ðinto€account€the€relevance,€if€any,€of€the€principles€set€forth€inÐ xÈ ÐòòOffice€of€Personnel€Managementóó€v.€òòRichmondóó,€496€U.S.€414€(1990),Ð @ Ðand€òòÔ_ÔNoonanÔ_Ôóó€v.€òòSecretary€of€Health€and€Human€Servicesóó€(òòIn€re€Ô_ÔLudlowÔ_ÔÐ X ÐHospital€Society,€Inc.óó),€124€F.3d€22€(1st€Cir.€1997). ØÝ ƒØt$ÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú10Ú  ÚóóÝ  ÝÔ_ÔÓ=€Ò‡ÐXdÐd=Óà ` àThe€bankruptcy€court€applied€the€law€of€Massachusetts€toÐ ° Ðthis€case,€and€the€parties€do€not€dispute€that€Massachusetts's€lawÐ xÈ Ðapplies,€although€they€do€dispute€its€content. Ñ e Ñ Ô_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú6Ú  ÚóóÝ  Ýà ` àThe€bankruptcy€court€also€did€not€take€into€accountÐ ° Ðwhether€any€actual€reliance€of€Fleet€on€the€continuing€availabilityÐ xÈ Ðof€funds€that€Calore€should€have€used€to€pay€postpetition€taxes€wasÐ @ Ðunreasonable€as€a€matter€of€law.€€Such€taxes€are€to€be€paid€in€theÐ X Ðordinary€course€of€business.€€òòSeeóó€òòUnited€Statesóó€v.€òòÔ_ÔYellinÔ_Ôóó€(òòIn€reÐ Ð   ÐWeinsteinóó),€272€F.3d€39,€47€(1st€Cir.€2001). <Ô_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú1Ú  ÚóóÝ  Ýà ` àShawmut€Bank€is€no€more,€and€Fleet€stands€in€its€shoes.0ÿÿ.Normal<ÿÿ:Definition T<GDÿÿ:Definition LÓ , ÓÓ;1ܰÜ` ¸ hÀpÈ xÐ (#;ÓÓ  ÓÓ8.°°` ¸ hÀpÈ xÐ (#8Ó d8ÿÿ6Definitionòòóó('zÿÿ&H1ò òÔ  ÔÔ‡°°°Ôó óÔ  ÔÔ‡XXXÔ(oÿÿ&H2ò òÔ‡„„„Ôó óÔ‡XXXÔ(oÿÿ&H3ò òÔ‡¼¼¼Ôó óÔ‡XXXÔ(ÿÿ&H4ò òÔ‡XXXÔó óÔ‡XXXÔ(oÿÿ&H5ò òÔ‡ôôôÔó óÔ‡XXXÔ(oÿÿ&H6ò òÔ‡Ôó óÔ‡XXXÔ2ÿÿ0Addressòòóó Ô_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú2Ú  ÚóóÝ  Ýà ` àA€new€version€of€Form€10,€issued€since€the€events€in€thisÐ ° Ðcase,€omits€this€language€and€clearly€states€that€a€creditor€shouldÐ xÈ Ðlist€any€claim€subject€to€setoff€as€a€secured€claim€and€identifyÐ @ Ðthe€setoff.ò òó ó8SPÿÿ6BlockquoteÓ , ÓÓ , ÓÓ;1ܰÜ` ¸ hÀpÈ xÐ (#;ÓÓ  ÓÓ  ÓÓ8.°°` ¸ hÀpÈ xÐ (#8Ó,ÿÿ*CITEòòóó,dlÿÿ*CODEÔ‡ôôôÔÔK‡<þ6X9`(Courier NewKÔÔ‡XXXÔÔS‡Hô\  `&Times New RomanSÔ4ÿÿ2Emphasisòòóó6&)ÿÿ4HyperlinkÔ  ÔÔ  ÔòòÔ ÿ ÔóóÔ  ÔÔ  ÔÔ  Ô<ÿÿ:FollowedHypeòòÔ €€ ÔóóÔ  Ô4goÿÿ2Keyboardò òÔ‡ôôôÔÔK‡<þ6X9`(Courier NewKÔó óÔ‡XXXÔÔS‡Hô\  `&Times New RomanSÔ<“›ÿÿ:PreformattedÓ/%° °Ïî ,KkŠ©È (#/ÓÔ‡ôôôÔÔK‡<þ6X9`(Courier NewKÔÔ‡XXXÔÔS‡Hô\  `&Times New RomanSÔÓ/%° °Ïî ,KkŠ©È (#/Ó<ÃÇÿÿ:z©Bottom of ÓI€>?4$À˜ ** €€d€dIÓÓ  ÓÔB  ÔÔ € ÔÔ‡ÔÔ?‡I%ä2¼A`Arial?ÔÓ9€@?*À  €€d€d9ÓÓ  ÓÔ‡XXXÔÔS‡Hô\  `&Times New RomanSÔÔ € Ô&ÿÿ0 d d===='þÿÈÈÈÈdxd÷ÿdÿÿÿd'ÈÈÈÈdxd<ÃÇÿÿ:z©Top of ForÓI€>?4$À˜** €€d€dIÓÓ  ÓÔB  ÔÔ € ÔÔ‡ÔÔ?‡I%ä2¼A`Arial?ÔÓ9€@?*À  €€d€d9ÓÓ  ÓÔ‡XXXÔÔS‡Hô\  `&Times New RomanSÔÔ € Ô0Klÿÿ.SampleÔK‡<þ6X9`(Courier NewKÔÔS‡Hô\  `&Times New RomanSÔ0ÿÿ.Strongò òó ó8dlÿÿ6TypewriterÔ‡ôôôÔÔK‡<þ6X9`(Courier NewKÔÔ‡XXXÔÔS‡Hô\  `&Times New RomanSÔ4ÿÿ2Variableòòóó:ÿÿ8HTML MarkupÔB  ÔÔ ÿ ÔÔ  Ô2 ÿÿ0CommentÔB  Ôô\  `&Times New Roman%ä2¼A`Arial ¯Ô_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú4Ú  ÚóóÝ  Ýà ` àIn€the€course€of€describing€the€government's€conduct,Ð ° ÐJudge€Ô_ÔFeeneyÔ_Ô's€opinion€stated€that€"Judge€Ô_ÔHillmanÔ_Ô€ruled€that,€atÐ xÈ Ðthe€June€17,€1996€hearing€on€the€Bank's€Lift€Stay€Motion€beforeÐ @ Ðthis€Court,€[counsel€for€the€IRS]€had€violated€his€ethicalÐ X Ðobligations€to€the€parties€.€.€.€and€to€the€Court."€€òòCaloreÐ Ð  ÐExpressóó,€199€Ô_ÔB.R.Ô_Ô€at€430.€€The€government€and€the€counsel€concernedÐ ˜è Ðpetitioned€the€district€court€for€a€writ€of€mandamus€on€the€groundsÐ ` ° Ðthat€the€bankruptcy€court€had€reprimanded€counsel€for€professionalÐ ( x Ðmisconduct€without€notice€or€a€hearing.€€The€district€court€issuedÐ ð @ Ðthe€writ,€directing€the€bankruptcy€court€to€clarify€what€finding€itÐ ¸   Ðhad€intended€to€make€regarding€counsel.€€òòIn€re€Calore€Express€Co.óó,Ð € Ð  Ð226€Ô_ÔB.R.Ô_Ô€727,€733€(D.€Mass.€1998).€€Judges€Ô_ÔFeeneyÔ_Ô€and€Ô_ÔHillmanÔ_Ô€thenÐ H ˜  Ðissued€separate€memoranda,€each€of€which€stated€that€the€author€hadÐ `  Ðnot€intended€to€impose€sanctions€on€the€attorney€concerned€or€toÐ Ø(  Ðfind€him€guilty€of€professional€misconduct.€€òòIn€re€Calore€ExpressÐ  ð  ÐCo.óó,€228€Ô_ÔB.R.Ô_Ô€338€(Ô_ÔBankrÔ_Ô.€D.€Mass.€1998)€(Ô_ÔFeeneyÔ_Ô,€J.);€òòIn€re€CaloreÐ h¸  ÐExpress€Co.óó,€228€Ô_ÔB.R.Ô_Ô€338€(Ô_ÔBankrÔ_Ô.€D.€Mass.€1998)€(Ô_ÔHillmanÔ_Ô,€J.).€Ð 0€  ÐBoth€judges€also€stated€that€nothing€in€the€memoranda€was€to€affectÐ øH  Ðthe€August€21€order. ªÔ_ÔÓ=€Ò‡ÐXdÐd=ÓÝ ƒØtÿÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÓ  ÓÔ€XÒ‡XXXÒ‡Ôà  àòòÚ  Ú7Ú  ÚóóÝ  Ýà ` àHere€the€rule€may€differ€for€the€government.€€The€SupremeÐ ° ÐCourt€has€held€that€courts€may€rarely,€if€ever,€apply€the€doctrineÐ xÈ Ðof€equitable€estoppel€against€the€government€„„€and€never€toÐ @ Ðrequire€the€government€to€pay€public€funds€contrary€to€a€statutoryÐ X Ðappropriation.€€òòOffice€of€Pers.€Mgmt.óó€v.€òòRichmondóó,€496€U.S.€414,Ð Ð  Ð419„24€(1990).€€This€circuit€has€held€that,€in€the€context€ofÐ ˜è Ðprocedural€requirements€in€a€bankruptcy€proceeding,€òòRichmondóó€doesÐ ` ° Ðnot€permit€estoppel€against€the€government€except€possibly€afterÐ ( x Ðgovernment€agents€commit€affirmative€misconduct.€€òòÔ_ÔNoonanÔ_Ôóó€v.€òòÔ_ÔSec'yÔ_ÔÐ ð @ Ðof€Health€&€Human€Ô_ÔServsÔ_Ô.óó€(òòIn€re€Ô_ÔLudlowÔ_Ô€Hosp.€Ô_ÔSoc'yÔ_Ô,€Inc.óó),€124€F.3dÐ ¸   Ð22,€25„26€(1st€Cir.€1997).€€The€government€has€not€argued€to€us€anyÐ € Ð  Ðtheory€based€on€òòRichmondóó,€òòÔ_ÔNoonanÔ_Ôóó,€or€similar€cases,€and€so€we€doÐ H ˜  Ðnot€base€our€holding€on€them.€€If€and€when€a€court€finally€resolvesÐ `  Ðthe€government's€claim€against€Fleet,€however,€it€should€considerÐ Ø(  Ðthe€question.Ý ƒ`­!ÝÔ€XÒ‡XXXÔÔ€XÒ‡XXXÒ‡ÔÝ  ÝÔ_ÔÓ=‡Ò‡ÐXdÐd=ÓØØÓ?+Ü Ü4Œ ä <”ìDœôL¤ü!°œX?ÓÓ°` ÜÜŒXÓÑ€ÑÓ  ÓÑ8€Ò‡XXdÈdÈ8ÑÔ‡XÒ‡XXXÒ‡Ôà@k k ìàò òÔ‡L‰»JXXÒ‡ÔÔ#†L‰»JJL‰»d#ÔÔ‡L#PJJL‰»ÔUnited€States€Court€of€AppealsÔ#†X8ƒXJL#P˜#ԈР° ÐÔ  Ôà@ ìàÔ‡R~± QXX8ƒÔFor€the€First€Circuitó óÔ#†X8ƒX QR~±m#ÔÔ#†XÒ‡XXX8ƒÚ#ÔÔ‡XÒ‡XXX҇ԈР^® Ðà@<< ìà____________________ˆÐ ªú ÐÌNo.€01„1464Ð : Š Ðà@| | ìàIN€RE:€CALORE€EXPRESS€COMPANY,€INC.,ˆÐ  R ÐÌà@HH'ìàDebtor.ˆÐ ’ â ÐÌà@<< ìà____________________ˆÐ " r  ÐÔ#†XÒ‡XXXÒ‡ê#ÔÔ‡XÒ‡XXXÒ‡ÔÌÌà@¤¤#ìàUNITED€STATES,ˆÐ zÊ  ÐÌà@””%ìàAppellant,ˆÐ  Z  ÐÌà@tt)ìàv.ˆÐ šê  ÐÌà@ ìàFLEET€BANK€OF€MASSACHUSETTS,€ˆÐ *z ÐÌà@ÐÐ&ìàAppellee.ˆÐ º  Ðà@ìì*ìàˆÌà@<< ìà____________________ˆÐ Jš ÐÌÓ ÓÓ  Óà@@` ` ìàAPPEAL€FROM€THE€UNITED€STATES€à@@¬¬ìàDISTRICT€COURT€Ð Ú* ÐÌFOR€THE€DISTRICT€OF€MASSACHUSETTSÐ jº ÐÓæÓÓÓÌÓŸÓÓ  Ó[Hon.€Nancy€Gertner,€òòU.S.€District€Judgeóó]Ð úJ ÐÌà@@<< ìà____________________Ð ŠÚ ÐÌà@@„„'ìàBeforeÐ j  ÐÌLynch,€òòCircuit€Judgeóó,Ð ª ú" ÐCampbell,€òòSenior€Circuit€Judgeóó,Ð r!Â# Ðand€Lipez,€òòCircuit€Judgeóó.Ð :"Š$ ÐÔ#†XÒ‡XXXÒ‡X#ÔÔ‡XÒ‡XXXÒ‡ÔÌ____________________Ð Ê#& ÐòòÌÓ  Óà ` àPeter€Ô_ÔSklarewÔ_Ôóó,€Attorney,€Tax€Division,€Department€ofÐ Z%ª ( ÐJustice,€with€whom€òòClaire€Fallonóó,€Acting€Assistant€AttorneyÐ "&r!) ÐGeneral,€and€òòD.€Patrick€Ô_ÔMullarkeyÔ_Ôóó,€Acting€Deputy€Assistant€AttorneyÐ ê&:"* ÐGeneral,€were€on€brief€for€appellant.Ð ²'#+ Ðòòà ` àDebra€K.€Ô_ÔMayfieldÔ_Ôóó€with€whomòòóó€òòDeborah€J.€Hart„Kleinóó€andÐ z(Ê#, ÐòòRuberto,€Israel€&€Weiner,€P.C.óó€were€on€brief€for€appellee.Ð B)’$- ЀÌÓ  Ó____________________Ð Ò*"&/ ÐÌMay€2,€2002Ð b,²'1 Ð____________________Ô#†XÒ‡XXXÒ‡<#ÔÐ  *-z(2 ÐÜÜÑ8€Ò‡XXdÈXXdÈ8ÑÓÓÓ  ÓÑ€ ïO'Ñà ` àò òLYNCH,€òòCircuit€Judgeó óóó.€€This€is€a€bankruptcy€case€in€whichÐ ° Ðthe€federal€government€asserts€a€right€to€set€off€the€claims€of€twoÐ à Ðagencies,€the€Internal€Revenue€Service€and€the€General€ServicesÐ  p ÐAdministration,€against€contract€claims€of€the€debtor€as€to€theÐ °  ÐGeneral€Services€Administration.€€If€the€government€is€correct,Ð @  ÐFleet€Bank€of€Massachusetts€owes€it€several€hundred€thousandÐ Ð   Ðdollars,€almost€all€from€unpaid€tax€claims€against€the€now„defunctÐ `°  Ðdebtor.€ò ò€ó óProceedings€before€the€bankruptcy€court€did€not€goÐ ð@  Ðsmoothly,€primarily€because€the€government€did€not€keep€the€courtÐ Ð  Ðor€the€other€parties€informed€of€its€intent€to€assert€its€setoffÐ `° Ðrights€or€of€the€steps€it€took€to€do€so.€€As€a€result€we€face,€someÐ ð@ Ðseven€years€into€the€life€of€the€case,€the€government's€appeal€ofÐ €Ð Ðthe€bankruptcy€court's€ruling€in€a€summary€hearing€that€theÐ ` Ðgovernment€either€waived€its€setoff€rights€or€had€no€rights€toÐ  ð Ðassert.€€The€debtor€by€now€is€long€gone,€and€the€government€wishesÐ 0€ Ðto€seek€restitution€from€Fleet,€the€debtor's€primary€creditor,Ð À Ðwhich€the€bankruptcy€court€permitted€to€sell€the€debtor's€assets.€Ð P   Ðà ` àWe€reverse€the€entry€of€judgment€against€the€government,Ð à0" Ðbecause€the€bankruptcy€court€could€not€draw€the€legal€conclusionsÐ p!À$ Ðit€did€without€developing€facts€to€support€them€and€because€weÐ #P& Ðdisagree€with€its€conclusions€about€the€priority€of€theÐ $à( Ðgovernment's€setoff€rights€under€the€Uniform€Commercial€Code€asÐ  &p!* Ðinterpreted€by€the€Massachusetts€courts.€€Our€decision€today€doesÐ °'#, Ðnot€guarantee€the€government€success€on€its€restitution€claim€ifÐ @)$. Ðand€when€a€court€better€develops€the€facts€involved€in€this€case.€Ð Ð* &0 ÐWe€then€remand€the€case€to€the€district€court€for€appropriateÐ `,°'2 Ðdisposition.Ð ° Ðò òó óà ` àThe€decision€does€resolve€some€important€questions.€€TheÐ @ Ðfollowing€aspects€of€this€opinion€either€decide€new€issues€orÐ Ð  Ðclarify€areas€of€the€law:Ð ` ° ÐÓ ÜÜŒX°` öÓÓâ ÓÓ °` ÜÜŒXÓÓ Ó1.à0  àWe€hold€that€this€court€has€jurisdiction€to€review€an€order€ofÐ ð @ Ðthe€bankruptcy€court€refusing€to€lift€the€automatic€stay€whenÐ ¸   Ðthe€order€resolves€all€issues€between€the€parties.Ѐ Ð (#(# ÐÓ ÓÓ °` °XÓÓ Ó2.à0  àWe€further€define€the€scope€of€a€hearing€on€a€motion€forÐ `  Ðrelief€from€the€automatic€stay€before€the€bankruptcy€courtÐ Ø(  Ðunder€the€Federal€Rules€of€Bankruptcy€Procedure€and€òòÔ_ÔGrellaÔ_Ôóó€v.Ð  ð  ÐòòSalem€Five€Cent€Savings€Bankóó,€42€F.3d€26€(1st€Cir.€1994)òòóóÔ‡XÒ‡XXXÒ‡Ô.€€WeÐ h¸  Ðconclude€that€the€question€of€waiver€by€a€party€of€its€rightsÐ 0€  Ðis€not€outside€the€permissible€scope€of€such€a€hearing.ÐøH (#(# Ð3.à0  àWe€set€forth€principles€for€determining€whether€a€creditor€hasÐ ˆØ Ðwaived€the€right€of€setoff€in€a€bankruptcy€proceeding.€€WeÐ P  Ðhold€that€a€creditor€in€bankruptcy€proceedings€may€expresslyÐ h Ðwaive€a€right€of€setoff;€that€a€court€may€imply€a€waiver€of€aÐ à0 Ðright€of€setoff€from€the€creditor's€conduct€if€that€conductÐ ¨ø Ðfairly€demonstrates€the€creditor's€intent;€and€that€a€waiverÐ pÀ Ðof€setoff€rights,€whether€express€or€implied,€is€notÐ 8ˆ Ðnecessarily€irrevocable€unless€the€case€is€a€proper€one€for€aÐ P Ðcourt€to€apply€estoppel.€€Ô#†XÒ‡XXXÒ‡Ý#ÔÔ‡XÒ‡XXXÒ‡ÔÐÈ(#(# Ð4.à0  àWe€hold€that€although€priority€of€the€federal€government'sÐ X¨ Ðrights€to€set€off€claims€against€debts€is€a€matter€of€federalÐ  p Ðcommon€law,€federal€common€law€for€present€purposesÐ è8 Ðincorporates€state€law,€in€this€case€section€318€of€pre„Ð °  Ðrevision€Article€Nine€of€the€Uniform€Commercial€Code.ÐxÈ!(#(# ÐÓ cÓÓÓWe€also€reject€the€argument€of€the€IRS€that€it€should€be€excusedÐ  X# Ðfrom€an€error€it€made€in€filling€out€a€government€form.Ð ˜!è% ÐÓ" °X°XE"ÓÓzÓÓÓÓÓÓ °` ¹°XÓI.Ð (#x' ÐÓeÓÓÓà ` àThe€legal€questions€presented€by€this€case€turn€largelyÐ ¸$ ) Ðon€its€history.€€That€history€is€complex,€and€we€recount€it€in€someÐ H&˜!+ Ðdetail.€€Calore€Express€Company€filed€a€bankruptcy€petition€underÐ Ø'(#- ÐChapter€11€of€the€Bankruptcy€Code€on€May€5,€1995,€in€the€DistrictÐ h)¸$/ Ðof€Massachusetts.€€Calore€had€done€business€as€a€freightÐ ø*H&1 Ðtransportation€company€since€its€founding€in€the€late€1940s,€itsÐ ˆ,Ø'3 Ðoperations€diversifying€over€time.€€ò òó óIn€the€mid„1990s,€however,Ð ° ÐCalore's€business€suffered€from€increased€competition€and€a€seriesÐ @ Ðof€mishaps,€until€a€threat€by€one€of€Calore's€lenders€to€forecloseÐ Ð  Ðliens€on€some€of€its€equipment€led€to€the€1995€Chapter€11€filing.ò òÐ ` ° Ðó óà ` àAmong€Calore's€largest€creditors€at€the€time€was€ShawmutÐ ð @ ÐNational€Bank.׃$×Ý ƒ#ÃÝòòÚ  Ú1Ú  ÚóóÝ  Ý×  ×€€ò òó óBefore€the€petition,€Calore€owed€ShawmutÐ € Ð  Ðapproximately€$2.8€million,€and€Shawmut€had€a€security€interest€inÐ `  Ðmany€of€Calore's€assets,€including€its€accounts€receivable.€€ò òó óAfterÐ  ð  Ðthe€petition,€Calore€remained€debtor„in„possession€and€asked€theÐ 0€  Ðbankruptcy€court€to€permit€it€to€reach€an€emergency€financingÐ À Ðagreement€with€Shawmut.€€Shawmut€agreed€to€continue€lending,€withÐ P  Ðthe€amount€of€the€loans€determined€partly€by€Calore's€postpetitionÐ à0 Ðaccounts€receivable,€and€partly€by€the€amount€of€those€accountsÐ pÀ Ðcollected.€€ò òó óTo€secure€this€new€credit,€Calore€asked€the€court€toÐ P Ðgive€Shawmut€a€Ô_ÔsuperpriorityÔ_Ô€claim€and€a€security€interest€in€allÐ à Ðits€assets€under€11€U.S.C.€ðð364(c),€including€assets€acquiredÐ  p Ðpostpetition€and€both€pre„€and€postpetition€accounts€receivable.€Ð °  Ðò òó óThe€bankruptcy€court€approved€this€arrangement€in€an€interim€orderÐ @" Ðon€May€17€and€in€numerous€subsequent€periodic€orders€beginning€onÐ Ð $ ÐJune€28,€1995.€€The€June€28€order€read€in€relevant€part:€Ð `"°& ÐÓuÓà0 ` àÓ Óà0@` ƒàLender€shall€have€a€super„priority€claim€.€.€.€withÐ ð#@( Ðrespect€to€obligations€incurred€pursuant€to€the€[loan]Ð ¸$ ) Ðover€any€and€all€administrative€expenses€[with€exceptionsÐ €%Ð * Ðnot€relevant€here].ÐH&˜!+` (#` (# Ðà0 ` àThe€Debtor€is€hereby€authorized€to€grant€and€by€entry€ofÐ Ø'(#- Ðthis€Order€does€grant€a€security€interest€in€all€post„Ð  (ð#. Ðpetition€assets€to€the€Lender€and€valid,€binding,Ð h)¸$/ Ðenforceable€and€perfected€Liens€in€and€to€all€collateralÐ 0*€%0 Ðsecurity€.€.€.€including,€without€limitation,а` (#` (# ÐÓ °Óà0  àà0@ƒàà0@ƒàà0@ƒàà0@ƒàAll€.€.€.€accounts€.€.€.€now€owned€or€in€whichÐ @ Ðthe€Debtor€has€any€interest€including€all€pre„Ð X Ðpetition€collateral€.€.€.€or€hereafterÐ Ð  Ðacquired€or€in€which€the€Debtor€obtains€anÐ ˜è Ðinterest€.€.€.€.ò òó óÐ` °(#(# ÐÓ °û+ÓÓ =)ÓÓÍÓò òó óEventually€the€court€permitted€Calore€and€the€Bank€to€renew€theÐ ð @ Ðarrangement€by€simple€stipulation.€€ò òó óThe€court€held€hearings€duringÐ € Ð  Ðthis€time€to€monitor€Calore's€borrowing.ò òÐ `  Ðó óà ` àCalore€had€done€business€with€the€General€ServicesÐ  ð  ÐAdministration,€and€forthcoming€payments€from€the€GSA€made€up€partÐ 0€  Ðof€the€accounts€receivable€on€which€Calore€was€borrowing.€€CaloreÐ À Ðalso€owed€money€to€the€Small€Business€Administration€and€theÐ P  ÐInternal€Revenue€Service.€€At€the€beginning€of€the€case,€therefore,Ð à0 Ðthere€existed€at€least€the€possibility€that€the€government€mightÐ pÀ Ðattempt€to€set€off€the€GSA's€debts€to€Calore€against€Calore's€debtsÐ P Ðto€the€government.€€Nothing€in€the€record€reveals€the€scope€of€theÐ à ÐGSA's€contractual€obligations€at€that€time,€or€whether€it€wasÐ  p Ðpredictable€that€the€GSA€would€continue€to€make€postpetitionÐ °  Ðpayments€to€Calore.Ð @" Ðà ` àCalore's€debts€to€the€IRS€arose€from€its€failures€to€payÐ Ð $ Ðvarious€payroll€taxes€withheld€from€its€employees'€wages.€€Some€ofÐ `"°& Ðthese€failures€were€prepetition,€some€postpetition.€€On€December€7,Ð ð#@( Ð1995,€ò òó óand€January€25,€1996,€ò òó óthe€IRS€through€its€own€counsel€filedÐ €%Ð * Ðproofs€of€claims€for€prepetition€taxes.€€The€second€proof€claimedÐ '`", Ðdramatically€more€than€had€the€first€because€the€IRS€then€took€theÐ  (ð#. Ðposition€that€Calore€was€liable€for€certain€taxes€incurred€byÐ 0*€%0 Ðanother€corporation,€CFS€Air€Cargo,€a€corporation€nominallyÐ À+'2 Ðseparate€from€Calore€but€which€the€IRS€considered€Calore's€alterÐ ° Ðego.€€ò òó óAs€of€January€25,€1996,€the€IRS€amended€its€proof€to€claim€aÐ @ Ðtotal€of€$3,105,612.90€in€prepetition€taxes,€including€penaltiesÐ Ð  Ðand€interest.Ô#†XÒ‡XXXÒ‡Š#ÔÔ‡XÒ‡XXXÒ‡ÔÐ ` ° Ðà ` àAs€to€postpetition€debts,€on€November€20€and€December€5,Ð ð @ Ð1995,€ò òó óon€February€28€and€ò òó óJune€6,€ò òó ó1996,€and€on€September€23,€1997,Ð € Ð  Ðò òó óthe€IRS€filed€requests€for€payment€of€the€postpetition€payrollÐ `  Ðtaxes€as€administrative€expenses€under€11€U.S.C.€ðð503(b).€ò òó ó€As€ofÐ  ð  ÐSeptember€23,€1997,€the€IRS€claimed€a€total€of€$479,134.77€inÐ 0€  Ðpostpetition€taxes,€including€penalties€and€interest.€€CaloreÐ À Ðdisputed€the€exact€amounts€of€the€pre„€and€postpetition€tax€debts,Ð P  Ðand€these€amounts€have€not€yet€been€established€by€any€court.€€TheÐ à0 ÐGSA€through€its€own€counsel€also€filed€a€proof€of€claim€on€FebruaryÐ pÀ Ð1,€1996,€claiming€that€Calore€owed€it€$6,734.24€in€overcharges.€€Ô#†XÒ‡XXXÒ‡>6#ÔÔ‡XÒ‡XXXÒ‡ÔÐ P Ðà ` àNone€of€these€filings€informed€the€court€or€the€otherÐ à Ðparties€of€any€specific€intention€by€the€government€to€set€off€Ô#†XÒ‡XXXÒ‡ù9#ÔÔ‡XÒ‡XXXÒ‡ÔtheÐ  p ÐGSA's€debts€to€Calore€against€Calore's€tax€debts,€or€of€whether€theÐ °  ÐGSA€would€continue€to€incur€debts€to€Calore.€€Some€containedÐ @" Ðlanguage€disclaiming€setoffs.€€For€example,€the€IRS€filed€itsÐ Ð $ Ðprepetition€proofs€of€claim€on€then„current€copies€of€OfficialÐ `"°& ÐBankruptcy€Form€10.€€Form€10€then€stated€that€"[Ô_Ôi]nÔ_Ô€filing€thisÐ ð#@( Ðclaim,€claimant€has€deducted€all€amounts€that€claimant€owes€toÐ €%Ð * Ðdebtor";׃3×Ý ƒ#ÃÝòòÚ  Ú2Ú  ÚóóÝ  Ý×  ×Ô#†XÒ‡XXXÒ‡å:#ÔÔ‡XÒ‡XXXÒ‡Ô€an€attachment,€entitled€"Proof€of€Claim€for€InternalÐ '`", ÐRevenue€Taxes,"€stated€that€"[Ô_Ôt]hisÔ_Ô€claim€is€not€subject€to€anyÐ ° Ðsetoff€or€counterclaim."€€ò òó óMoreover,€although€a€setoff€claimÐ @ Ðqualifies€as€a€secured€claim€under€11€U.S.C.€ðð€506(a),€in€itsÐ Ð  ÐDecember€7€filing,€the€IRS€identified€its€entire€prepetition€claim,Ð ` ° Ðthen€amounting€to€$146,609.36,€as€unsecured,€although€it€specifiedÐ ð @ Ðthat€$133,281.24€of€the€claim€should€receive€priority€status€underÐ € Ð  Ð11€U.S.C.€ðð507(a)(8).€€ò òó óIn€its€later€January€25€filing,€the€IRSÐ `  Ðidentified€$2,448,520.69€of€its€$3,105,612.90€claim€as€secured,Ð  ð  Ð$572,683.35€as€priority€unsecured,€and€$84,408.86€as€generalÐ 0€  Ðunsecured.€€The€security€interest€it€identified€was€a€tax€lienÐ À Ðagainst€CFS.€€It€left€unchanged€the€language€of€Form€10€concerningÐ P  Ðthe€deduction€of€amounts€owed€and€the€language€in€the€attachmentÐ à0 Ðconcerning€the€absence€of€setoffs€and€counterclaims.€€There€is€noÐ pÀ Ðdeterminative€evidence€as€to€whether€IRS€employees€actually€knewÐ P Ðthat€the€GSA€owed€Calore€money€at€the€time€of€any€of€these€filings.Ð à Ðà ` àThe€GSA's€proof€of€claim€was€also€filed€on€Form€10,€butÐ  p Ðincluded€next€to€the€language€concerning€the€deduction€of€amountsÐ °  Ðowed€a€notation€referring€to€an€attached€affidavit.€€That€affidavitÐ @" Ðstated€that€the€government€intended€to€assert€its€right€of€setoffÐ Ð $ Ðand€that€the€government€was€holding€receivables€to€do€so.ò òÐ `"°& Ðó óà ` àAt€no€timeò ò€ó óbefore€or€after€any€of€these€various€proofs€ofÐ ð#@( Ðclaim€did€the€bankruptcy€court€fix€a€bar€date,€after€which€newÐ Ð% !* Ðproofs€of€claim€or€amendments€would€be€untimely.€€òòSeeóó€Fed.€R.Ð `'°", ÐÔ_ÔBankrÔ_Ô.€P.€3003(c)(3).ò òÐ ð(@$. Ðó óà ` àCalore€proposed€its€final€plan€of€reorganization,€afterÐ €*Ð%0 Ðtwo€earlier€attempts,€on€March€8,€1996.€€ò òó óThe€March€8€plan€providedÐ ,`'2 Ðfor€the€payment€of€$131,810.00€in€prepetition€taxes€over€time€andÐ ° Ð$129,243.79€in€postpetition€taxes€immediately.€€The€governmentÐ @ Ðobjected€to€the€plan€on€April€1,€arguing€that€Calore€had€vastlyÐ Ð  Ðunderstated€the€amount€it€owed€in€both€pre„€and€postpetition€unpaidÐ ` ° Ðpayroll€taxesÔ#†XÒ‡XXXÒ‡¯=#ÔÔ‡XÒ‡XXXÒ‡Ô,€and€that€a€valid€plan€would€need€to€account€for€theÐ ð @ Ðhigher€amounts€reflected€in€the€IRS's€proofs€of€claim€and€requestsÐ € Ð  Ðfor€payment.€€The€dispute€between€the€government€and€Calore€at€thatÐ `  Ðtime€revolved€primarily€around€whether€Calore€was€liable€for€theÐ  ð  Ðtax€debts€of€CFS€Air€Cargo.€€The€IRS's€April€1€objection€includedÐ 0€  Ðan€assertion€of€the€government's€general€right€to€set€prepetitionÐ À Ðdebts€off€against€prepetition€claims,€stating€that€"[t]heÐ P  ÐBankruptcy€Code€specifically€preserves€the€United€States'€right€toÐ à0 Ðoffset€any€pre„petition€claims€of€the€United€States€against€anyÐ pÀ Ðpre„petition€claims€of€the€Debtor."€€It€did€not€specificallyÐ P Ðmention€the€setoff€of€the€GSA's€debts.€€On€April€24,€the€IRS€andÐ à ÐCalore€stipulated€that€Calore€owed€approximately€$1,685,886.74€inÐ  p Ðprepetition€taxes.€€ò òó óThis€admission€doomed€the€reorganization€plan,Ð °  Ðas€the€amount€admitted€was€too€great€for€Calore€to€repay.€€The€IRSÐ @" Ðand€Calore€moved€on€the€same€day€to€continue€the€trial,€with€CaloreÐ Ð $ Ðstating€that€it€intended€to€propose€a€sale€of€assets€under€11Ð `"°& ÐU.S.C.€ðð363.ò òÐ ð#@( Ðó óà ` àCalore€moved€for€that€sale€on€May€31.ò òó ó€€The€proposed€buyerÐ €%Ð * Ðwas€JSC€Investments,€a€corporation€owned€by€the€wife€of€Calore'sÐ '`", Ðpresident.€€Calore's€plan€for€the€sale€involved€paying€$137,000€toÐ  (ð#. Ðthe€IRS.€€The€court€set€a€hearing€for€June€10,€and€also€orderedÐ 0*€%0 ÐCalore€to€show€cause€at€that€time€why€the€court€should€not€dismissÐ À+'2 Ðthe€case,€or€convert€it€to€Chapter€7,€or€appoint€a€Chapter€11Ð ° Ðtrustee.€€The€court€held€the€hearing€and€denied€the€motion€forÐ @ Ðsale,€reasoning€that€the€sale€of€assets€as€described€would€amountÐ Ð  Ðto€a€plan€of€reorganization€and€therefore€needed€to€satisfy€theÐ ` ° ÐCode's€various€requirements€for€such€a€plan€„„€including€fullÐ ð @ Ðdisclosure€to€creditors,€a€vote€of€creditors,€and€adherence€to€theÐ € Ð  Ðabsolute€priority€rule€and€the€best€interests€of€the€creditorsÐ `  Ðtest.€€The€court€placed€particular€emphasis€on€the€motion's€failureÐ  ð  Ðto€address€the€claims€of€the€IRS.€€It€continued€the€show€causeÐ 0€  Ðhearing€until€June€17.€€Three€days€later,€on€June€13,€Fleet,€whichÐ À Ðhad€by€then€acquired€Shawmut,€moved€to€lift€the€automatic€stay€onÐ P  Ðcollection€of€debts€against€Calore€that€the€bankruptcy€court€hadÐ à0 Ðimposed€under€11€U.S.C.€ðð362(a)(4)€at€the€beginning€of€the€case,Ð pÀ Ðso€that€Fleet€could€seize€Calore's€assets.€€The€court€set€a€hearingÐ P Ðfor€June€17,€at€which€several€of€the€other€creditors€who€had€movedÐ à Ðfor€relief€from€the€stay€much€earlier€in€the€case€were€also€to€beÐ  p Ðheard.ò òÐ °  Ðó óà ` àThat€same€day,€June€13,€the€Assistant€Attorney€GeneralÐ @" Ðfor€the€Tax€Division€of€the€Department€of€Justice€sent€a€letter€toÐ Ð $ Ðthe€Chief€of€the€Collections€Branch€of€the€GSA.€€The€letterÐ `"°& Ðdescribed€and€confirmed€a€phone€conversation€earlier€that€dayÐ ð#@( Ðinvolving€counsel€for€the€IRS€in€this€case,׃×Ý ƒ#ÃÝòòÚ  Ú3Ú  ÚóóÝ  Ý×  ×€an€attorney€from€theÐ €%Ð * ÐU.S.€Attorney's€Office€for€the€District€of€Massachusetts,€and€theÐ '`", Ðrecipient.€€ò òó óThe€letter€instructed€the€GSA€to€freeze€all€furtherÐ  (ð#. ÐÔ_Ôpayments€to€Calore€on€postpetition€accounts,€and€to€contact€IRSÐ ° Ðcounsel€before€making€any€payments€to€Calore€or€CFS€on€prepetitionÐ @ Ðaccounts.€€ò òó óThe€letter€also€instructed€the€GSA€not€ò òó óactually€Ô#†XÒ‡XXXÒ‡†H#ÔÔ‡XÒ‡XXXÒ‡Ôò òó óto€setÐ Ð  Ðoff€any€of€the€disputed€funds€until€the€government€had€receivedÐ ` ° Ðpermission€to€do€so€from€the€bankruptcy€court.€€ò òó óThe€government€didÐ ð @ Ðnot€then€notify€the€bankruptcy€court€or€any€other€party€of€the€JuneÐ € Ð  Ð13€letter.€€ò òó óThe€government€says€that€at€the€time€of€the€letter,Ð `  Ðcounsel€for€the€GSA€had€erroneously€informed€counsel€for€the€IRSÐ  ð  Ðthat€the€GSA€had€no€current€receivables€due€to€Calore,€and€thatÐ 0€  Ðthis€explains€IRS€counsel's€failure€to€notify€the€court€or€otherÐ À Ðparties.€€The€government€also€says€that€the€letter€was€intended€asÐ P  Ða€mere€precaution€in€case€counsel€for€the€GSA€was€wrong€or€in€caseÐ à0 Ðnew€receivables€did€accrue.€€Ô#†XÒ‡XXXÒ‡Y#ÔÔ‡XÒ‡XXXÒ‡ÔIn€any€event,€the€parties€do€notÐ pÀ Ðdispute€that€the€GSA€in€fact€owed€Calore€substantial€funds€and€thatÐ P Ðafter€June€13€the€GSA€ceased€to€pay.ò òÐ à Ðó óà ` àThe€court€held€a€hearing€on€June€17€in€which€it€grantedÐ  p ÐFleet's€motion€but€postponed€deciding€those€of€the€other€creditorsÐ °  Ðso€that€Fleet€could€attempt€to€sell€the€assets€all€at€once,€on€theÐ @" Ðbasis€that€such€a€sale€would€yield€the€best€value€for€the€assets.€Ð Ð $ Ðò òó óCalore€and€Fleet€intended€to€make€much€the€same€sale,€to€the€sameÐ `"°& Ðbuyer,€as€they€had€earlier€proposed€through€ðð363.€€Counsel€for€theÐ ð#@( ÐIRS€„„€the€same€who€had€made€the€June€13€phone€call€„„€was€presentÐ €%Ð * Ðat€that€hearing,€but€did€not€speak.€€ò òó óAccording€to€Calore,€itÐ '`", Ðdiscovered€the€IRS's€freeze€on€payments€from€the€GSA€on€June€27Ð  (ð#. Ðwhen€one€of€Calore's€drivers€attempted€to€pick€up€a€payment€fromÐ 0*€%0 Ðthe€GSA€but€received€instead€a€copy€of€the€June€13€letter.€€One€dayÐ À+'2 Ðlater,€Fleet€(notified€in€the€interim€by€Calore)€sent€a€letter€toÐ ° Ðthe€bankruptcy€court€enclosing€a€copy€of€the€June€13€IRS€letter€andÐ @ Ðrequesting€an€emergency€hearing.€€Calore€joined€in€the€motion,Ð Ð  Ðtaking€the€position€that€the€IRS's€action€violated€the€automaticÐ ` ° Ðstay.ò òÐ ð @ Ðó óà ` àJudge€Ô_ÔFeeneyÔ_Ô,€who€handled€all€other€parts€of€this€case,Ð € Ð  Ðwas€then€unavailable.€€On€July€2,€Judge€Ô_ÔHillmanÔ_Ô€convened€theÐ `  Ðemergency€hearing€requested€by€Calore€and€Fleet.€€Calore€and€FleetÐ  ð  Ðargued€vehemently€that€the€government€should€at€the€very€least€haveÐ 0€  Ðmentioned€the€June€13€letter€at€the€June€17€hearing,€and€that€itsÐ À Ðundisclosed€actions€violated€the€automatic€stay.€€Tempers€ran€high;Ð P  Ðcounsel€for€Calore€called€the€government's€actions€"fraud,"Ð à0 Ð"perhaps€larceny,"€and€"twisted."€€ò òó óThe€government€argued€that€itsÐ pÀ Ðactions€were€permitted€by€the€rule€of€òòCitizens€Bank€of€Marylandóó€v.Ð P ÐòòÔ_ÔStrumpfÔ_Ôóó,€516€U.S.€16€(1995).€€The€court€agreed€with€Calore€andÐ à ÐFleet,€said€that€the€government€had€attempted€to€"sandbag"€Calore,€Ð  p Ðstated€that€the€government's€actions€had€exceeded€what€òòÔ_ÔStrumpfÔ_ÔóóÐ °  Ðpermitted,€ò òó óand€ordered€the€government€to€lift€the€freeze.ò òÐ @" Ðó óà ` àThe€government€then€moved€to€lift€the€stay€so€that€itÐ Ð $ Ðcould€replace€the€freeze€and€impose€an€actual€setoff,€or,€in€theÐ `"°& Ðalternative,€for€adequate€protection€of€its€interest€in€theÐ ð#@( Ðaccounts€receivable.€€This€motion,€filed€on€July€15,€asserted€theÐ €%Ð * Ðgovernment's€right€to€set€off€all€of€its€prepetition€claims,Ð '`", Ðincluding€the€tax€debts€and€the€GSA€overcharges,€against€itsÐ  (ð#. Ðprepetition€debts,€which€comprised€part€of€the€GSA€receivables.€€ò òó óItÐ 0*€%0 Ðalso€asserted€the€government's€right€to€set€off€its€postpetitionÐ À+'2 Ðclaims,€which€were€entirely€tax€debts,€against€its€postpetitionÐ ° Ðdebts,€the€remainder€of€the€GSA€receivables.€€Fleet€objected,Ð @ Ðclaiming€that€its€security€interest€and€Ô_ÔsuperpriorityÔ_Ô€status,€bothÐ Ð  Ðcreated€by€the€bankruptcy€court's€borrowing€order,€took€priorityÐ ` ° Ðover€the€government's€setoff€rights.€€Fleet€also€urged€the€court€toÐ ð @ Ðdeny€the€government's€motion€on€the€grounds€of€estoppel,€laches,Ð € Ð  Ðand€inequitable€conduct€on€the€government's€part.€€ò òó óCalore€objectedÐ `  Ðon€similar€grounds,€adding€that€to€grant€the€government's€motionÐ  ð  Ðwould€destroy€the€going€concern€value€of€Calore's€business.ò òÐ 0€  Ðó óà ` àOn€July€30,€Judge€Ô_ÔFeeneyÔ_Ô€held€a€hearing€on€theÐ À Ðgovernment's€motion€to€lift€the€stay.€€At€that€hearing,€theÐ P  Ðgovernment€asked€to€impose€the€freeze€once€again€Ô#†XÒ‡XXXÒ‡§\#ÔÔ‡XÒ‡XXXÒ‡Ôat€least€until€theÐ à0 Ðcourt€ruled€on€the€motion.€€In€response,€counsel€for€Fleet€statedÐ pÀ Ðthat€if€the€court€ruled€for€the€government€after€the€receivablesÐ P Ðwere€paid,€Fleet€would€"disgorge"€the€money€owed€to€the€government;Ð à Ðthe€court€and€the€government€agreed€that€this€suggestion€wasÐ  p Ðreasonable.€€ò òó óOn€August€8Ô#†XÒ‡XXXÒ‡žn#ÔÔ‡XÒ‡XXXÒ‡Ô,€before€the€court€issued€its€decision,Ð °  ÐFleet€filed€a€supplemental€submission€informing€the€court€and€theÐ @" Ðparties€of€its€private€sale€of€Calore's€assets.€€At€that€sale,Ð Ð $ ÐFleet€received€the€total€amount€of€$2,343,812.84,€primarily€in€newÐ `"°& Ðpromises€to€pay.€€Some€of€that€amount€„„€we€cannot€say€exactly€howÐ ð#@( Ðmuch€from€the€record€„„€presumably€went€to€pay€other€securedÐ €%Ð * Ðcreditors.€€Fleet€claimed€that€as€of€August€1,€Calore€owed€itÐ '`", Ð$2,925,986.05,€plus€additional€unpaid€interest€and€legal€fees.€Ð  (ð#. ÐUnder€an€agreement€with€the€buyer,€the€same€Ô_ÔJSCÔ_Ô€Investments€to€whomÐ 0*€%0 ÐCalore€and€Fleet€had€proposed€a€ðð363€sale,€Fleet€took€anÐ À+'2 Ðassignment€of€the€accounts€receivable,€the€collection€of€whichÐ ° Ðwould€go€to€satisfy€the€new€promissory€notes.ò òó ó€€Ô_ÔJSCÔ_Ô€received€aÐ @ Ðportion€of€the€accounts€as€costs€of€collection.Ð Ð  Ðà ` àOn€August€21,€the€court€denied€the€government's€motion€toÐ ` ° Ðlift€the€stay€and€its€alternative€request€for€adequate€protectionÐ ð @ Ðin€a€published€opinion.€€òòIn€re€Calore€Express€Co.óó,€199€Ô_ÔB.R.Ô_Ô€424Ð € Ð  Ð(Ô_ÔBankrÔ_Ô.€D.€Mass.€1996).€€The€court€concluded€that€the€governmentÐ `  Ðhad€no€right€of€setoff€in€this€case€because,€first,€the€governmentÐ  ð  Ðhad€waived€any€such€right€on€several€distinct€grounds,€includingÐ 0€  Ðits€failure€to€object€to€the€original€borrowing€order,€its€failureÐ À Ðto€object€to€Fleet's€June€13€motion,Ô_Ô׃M×Ý ƒ#ÃÝòòÚ  Ú4Ú  ÚóóÝ  Ý×  ×Ô_ÔÔ#†XÒ‡XXXÒ‡yp#ÔÔ‡XÒ‡XXXÒ‡Ô€its€statements€in€its€proofsÐ P  Ðof€prepetition€claims,€and€its€silence€in€its€requests€for€paymentÐ à0 Ðof€postpetition€expenses,€òòid.óó€at€432;€second,€allowing€the€exerciseÐ pÀ Ðof€such€a€right€would€be€inequitable,€òòid.óó€at€433;€and€third,Ð P ÐFleet's€security€interest€created€by€the€borrowing€orders€tookÐ à Ðpriority€over€any€right€of€setoff€even€had€the€government€notÐ  p Ðwaived€it,€òòid.óó€at€433„34.€€The€court€declined,€however,€to€reachÐ ° ÐFleet's€arguments€based€on€equitable€subordination,€noting€that€theÐ @ ÐFederal€Rules€of€Bankruptcy€Procedure€require€an€adversaryÐ Ð  Ðproceeding€for€such€claims.€€òòId.óó€at€434.€€The€government€appealedÐ ` ° Ðto€the€district€court.€€On€October€31,€2000,€the€district€courtÐ ð @ Ðaffirmed€in€an€unpublished€opinion€relying€solely€on€theÐ € Ð  Ðgovernment's€waiver€of€its€right€of€setoff,€without€reaching€theÐ `  Ðquestion€of€that€right's€relative€priority.€€After€the€districtÐ  ð  Ðcourt€denied€rehearing,€the€government€took€this€appeal.Ð 0€  ÐÓÑÓÓ  ÓII.Ð À ÐÓ]}ÓÓÓà ` àThe€parties'€arguments€cover€a€broad€range€of€proceduralÐ P  Ðand€substantive€questions.€€The€government's€primary€request€isÐ à0 Ðthat€we€reverse€the€order€of€the€bankruptcy€court€denying€theÐ pÀ Ðgovernment's€motion€to€lift€the€automatic€stay.€€The€stay€itself€isÐ P Ðnow€irrelevant.€€Fleet€has€long€since€sold€Calore's€assets€andÐ à Ðcollected€Calore's€receivables€from€the€government.€€Indeed,Ð  p Ðaccording€to€the€government€at€oral€argument,€a€subsequentÐ °  Ðarbitration€award€has€added€substantial€additional€funds€to€theÐ @" Ðamount€the€government€owed€Calore,€and€the€government€has€paid€thatÐ Ð $ Ðmoney€in€compliance€with€the€bankruptcy€court's€order.€€TheÐ `"°& Ðgovernment€wishes€to€bring€an€action€against€Fleet€for€restitutionÐ ð#@( Ðof€the€amount€that€the€government€would€have€retained€had€it€beenÐ €%Ð * Ðable€to€exercise€its€setoff€right€in€June€1996.€€It€takes€theÐ '`", Ðposition€that€the€August€1996€order€of€the€bankruptcy€court€wouldÐ  (ð#. Ðpresently€preclude€its€suit,€but€that€it€can€sue€Fleet€if€theÐ 0*€%0 Ðbankruptcy€court's€order€is€reversed.€€The€district€court's€rulingÐ À+'2 Ðwould€arguably€(although€not€certainly)€otherwise€bar€theÐ ° Ðgovernment's€restitution€action€under€the€doctrines€of€claim€andÐ @ Ðissue€preclusion.€Ð Ð  Ðà ` àThe€government€argues:€first,€that€a€hearing€on€a€motionÐ ` ° Ðto€lift€the€automatic€stay€is€a€summary€proceeding€in€which€noÐ ð @ Ðfinal€adjudication€of€parties'€claims€should€be€made,€and€so€theÐ € Ð  Ðbankruptcy€court€erred€in€ruling€finally€that€the€government€had€noÐ `  Ðright€of€setoffò òó ó;€second,€that€the€automatic€stay€does€not€apply€toÐ  ð  Ðpostpetition€setoffs,€and€so€the€bankruptcy€court€erred€in€makingÐ 0€  Ðany€ruling€whatsoever€regarding€postpetition€setoffs€following€aÐ À Ðhearing€related€to€the€automatic€stayò òó ó;€third,€that€its€conduct€inÐ P  Ðthis€litigation€did€not€amount€to€waiver€of€its€setoff€rightsò òó ó;€andÐ à0 Ðfourth,€that€Fleet's€security€interest€was€not€prior€to€theÐ pÀ Ðgovernment's€setoff€rightsò òó ó.Ð P Ðà ` àFleet,€defending€the€bankruptcy€court's€order,€suggestsÐ à Ðthat€this€court€lacks€appellate€jurisdiction.€€ò òó óIt€cites€the€recentÐ  p Ðcase€of€òòCaterpillar€Financial€Services€Corp.óó€v.€òòÔ_ÔBraunsteinÔ_Ôóó€(òòIn€reÐ °  ÐÔ_ÔHenriquezÔ_Ôóó),€261€Ô_ÔB.R.Ô_Ô€67€(Ô_ÔB.A.P.Ô_Ô€1st€Cir.€2001),€in€which€theÐ @" ÐBankruptcy€Appellate€Panel€for€this€circuit€held€that€an€orderÐ Ð $ Ðdenying€a€motion€to€lift€the€stay€is€not€subject€to€appeal€unlessÐ `"°& Ðit€finally€resolves€the€issues€between€the€parties.€€òòId.óó€at€70„71.Ô#†XÒ‡XXXÒ‡Vx#ÔÔ‡XÒ‡XXX҇ԀРð#@( ÐAssuming,€though,€that€this€court€exercises€jurisdiction,€FleetÐ €%Ð * Ðalso€argues:€first,€that€the€bankruptcy€court€correctly€concludedÐ '`", Ðthat€the€government€waived€its€right€of€setoffò òó ó;€second,€that€theÐ  (ð#. Ðbankruptcy€court€was€within€its€authority€to€deny€the€governmentÐ 0*€%0 Ðsetoff,€whether€or€not€that€denial€took€place€in€the€context€of€aÐ À+'2 Ðhearing€on€a€motion€to€lift€the€stay,€and€whether€the€setoffÐ ° Ðrelated€to€pre„€or€postpetition€claims€and€debtsò òó ó;€third,€andÐ @ Ðfinally,€that€regardless€of€waiver€or€inequitable€conduct,€itsÐ Ð  Ðsecurity€interest€does€indeed€take€priority€over€the€government'sÐ ` ° Ðsetoff€rightsò òó ó.Ð ð @ ÐÓ‘}ÓÓ  ÓIII.Ð € Ð  ÐÓÀÓÓ^ÓA.€€òòAppellate€jurisdictionóóÐ `  Ðà ` àWe€begin€by€considering€whether€we€have€jurisdiction€toÐ  ð  Ðhear€this€appeal.€€Fleet€has€suggested€that€we€lack€appellateÐ 0€  Ðjurisdiction,€citing€òòÔ_ÔHenriquezÔ_Ôóó.€€ò òó óThat€case€held€that€a€bankruptcyÐ À Ðcourt's€denial€of€a€motion€for€relief€from€an€automatic€stay€is€notÐ P  Ðfinal€unless€it€determines€all€the€rights€of€a€party,€and€so€is€notÐ à0 Ðsubject€to€an€appeal€as€of€right€under€28€U.S.C.€ðð158(a)(1)€unlessÐ pÀ Ðit€completely€resolves€all€issues€between€the€parties€with€respectÐ P Ðto€the€discrete€dispute€at€stake€in€the€ruling.€€261€Ô_ÔB.R.Ô_Ô€at€70.€Ð à ÐòòÔ_ÔHenriquezÔ_Ôóó€acknowledged€that€this€circuit€has€held€that€grants€of€aÐ  p Ðmotion€for€relief€from€an€automatic€stay€are€final€within€theÐ °  Ðmeaning€of€ðð158(a)(1),€òòid.óó€at€70€n.5€(citing€òòÔ_ÔTringaliÔ_Ôóó€v.€òòHathawayÐ @" ÐMachinery€Co.óó,€796€F.2d€553,€558€(1st€Cir.€1986)),€butÐ Ð $ Ðdistinguished€denials€of€such€motions,€stating€that€the€latter,€inÐ `"°& Ðat€least€some€cases,€leave€unresolved€issues€between€the€parties€toÐ ð#@( Ðbe€resolved€by€the€bankruptcy€court,€òòid.óó€at€70„71.€€For€thatÐ €%Ð * Ðproposition€it€cited€òòÔ_ÔGrellaÔ_Ôóó€v.€òòSalem€Five€Cent€Savings€Bankóó,€42Ð '`", ÐF.3d€26€(1st€Cir.€1994),€in€which€this€circuit€described€the€scopeÐ  (ð#. Ðof€a€hearing€on€a€motion€to€lift€the€stay€as€circumscribed€andÐ 0*€%0 Ðsummary.€€òòSeeóó€òòÔ_ÔHenriquezÔ_Ôóó,€261€Ô_ÔB.R.Ô_Ô€at70-71.Ð À+'2 Ðà ` àWe€do€not€reach€the€question€whether€a€bankruptcy€court'sÐ ° Ðrefusal€to€lift€the€automatic€stay€may€ever€lack€finality€underÐ @ Ððð158(a)(1),€as€òòÔ_ÔHenriquezÔ_Ôóó€held.€€Numerous€circuits€have€held€thatÐ Ð  Ða€district€court's€affirmance€or€reversal€of€the€bankruptcy€court'sÐ ` ° Ðdecision€whether€to€lift€the€automatic€stay€is€final,€often€withoutÐ ð @ Ðqualifying€that€holding.€€òòSeeóó€òòBarclays„Am./Bus.€Credit,€Inc.óó€v.Ð € Ð  ÐòòRadio€Ô_ÔWBHPÔ_Ô,€Inc.óó€(òòIn€re€Dixie€Broad.,€Inc.óó),€871€F.2d€1023,€1026Ð `  Ð(11th€Cir.€1989)€(collecting€cases).€€In€the€present€case,€theÐ  ð  Ðbankruptcy€court's€order€clearly€did€decide€the€relevant€disputeÐ 0€  Ðbetween€the€parties.€€Acting€under€the€June€17€order,€Fleet€hasÐ À Ðseized€the€relevant€assets€and€sold€them.€€The€government€may€nowÐ P  Ðrecover€its€money€only€from€Fleet€and€only€on€the€theory€that€itÐ à0 Ðshould€have€been€able€to€exercise€its€setoff€rights€as€of€June€13,Ð pÀ Ðand€that€it€is€now€entitled€to€be€made€whole€for€its€losses€becauseÐ P Ðit€was€foreclosed€from€exercising€those€rights.€€Calore€has€noÐ à Ðmoney€left€to€pay€either€pre„€or€postpetition€claims,€and€Fleet€hasÐ  p Ðno€obligation€to€pay€the€government€unless€the€government€can€makeÐ °  Ðout€a€restitution€claim,€which€depends€on€its€right€of€setoff.€€TheÐ @" Ðquestion€presented€by€this€appeal€is€therefore€whether€theÐ Ð $ Ðbankruptcy€court€correctly€ruled€on€August€21€that€the€governmentÐ `"°& Ðhad€no€remaining€setoff€rights,€or€that€Fleet's€rights€were€senior.€Ð ð#@( ÐWe€have€jurisdiction€to€hear€this€appeal€and€decide€that€question.Ð €%Ð * ÐB.€€òòScope€of€the€hearingóóÐ '`", Ðà ` àThe€government's€first€argument€is€that€the€bankruptcyÐ  (ð#. Ðcourt€exceeded€the€scope€of€a€hearing€on€a€motion€to€lift€theÐ 0*€%0 Ðautomatic€stay€by€permanently€foreclosing€the€government's€right€ofÐ À+'2 Ðsetoff.€€Section€362(d)(1)€provides€that€the€bankruptcy€court€shallÐ ° Ðgrant€relief€from€the€stay€"for€cause,€including€the€lack€ofÐ @ Ðadequate€protection€of€an€interest€in€property€of€such€party€inÐ Ð  Ðinterest."€€11€U.S.C.€ðð362(d)(1)€(2000).€€The€government€citesÐ ` ° ÐòòÔ_ÔGrellaÔ_Ôóó,€in€which€this€court€held€that€the€grant€of€a€motion€to€liftÐ ð @ Ðthe€stay€did€not€preclude€the€trustee€in€that€case€from€laterÐ € Ð  Ðcontesting€the€validity€of€the€claim€or€asserting€a€counterclaim.€Ð `  Ð42€F.3d€at€32„33.€€ò òó óThe€government€also€argues€that€at€least€some€ofÐ  ð  Ðthe€issues€decided€by€the€bankruptcy€court€required€it€to€makeÐ 0€  Ðfindings€of€fact,€and€that€the€court€erred€by€deciding€those€issuesÐ À Ðafter€a€Ô_ÔnonevidentiaryÔ_Ô€hearing.€€The€government€maintains€that,Ð P  Ðgiven€an€opportunity,€it€could€present€evidence€that€wouldÐ à0 Ðundermine€the€bankruptcy€court's€reasoning€„„€for€example,€theÐ pÀ Ðcourt's€conclusion€that€Fleet€in€fact€relied€to€its€detriment€onÐ P Ðthe€government's€failure€to€assert€its€setoff€right.׃×Ý ƒ#ÃÝòòÚ  Ú5Ú  ÚóóÝ  Ý×  ×ò òó óÐ à Ðà ` àThe€government€is€generally€correct€that€a€hearing€on€aÐ  p Ðmotion€to€lift€the€stay€is€not€the€proper€time€or€place€for€theÐ °  Ðdetermination€of€many€substantive€rights.€€As€this€court€said€inÐ @" ÐòòÔ_ÔGrellaÔ_Ôóó,€the€question€for€the€bankruptcy€court€at€such€a€hearing€isÐ Ð $ Ðgenerally€whether€the€creditor's€claim€to€the€estate's€property€isÐ `"°& ÐÔ_ÔcolorableÔ_Ô,€not€whether€the€creditor€can€ultimately€recover€in€lightÐ ° Ðof€all€relevant€legal€issues.€€42€F.3d€at€32„34.€€Ð @ Ðà ` àThat€does€not€mean,€however,€that€such€a€hearing€isÐ Ð  Ðnecessarily€an€inappropriate€time€to€consider€issues€of€waiver.€€AÐ ` ° Ðclaim€that€has€clearly€been€waived€is€no€longer€Ô_ÔcolorableÔ_Ô.€€òòSeeóó€òòid.óóÐ ð @ Ðat€35€("[Ô_ÔT]heÔ_Ô€court€may€consider€any€defenses€or€counterclaims€thatÐ € Ð  Ðbear€on€whether€[a€Ô_ÔcolorableÔ_Ô€claim]€exists.").€€Further,€in€someÐ `  Ðcases€the€question€of€waiver€will€be€clear€from€the€record€as€aÐ  ð  Ðmatter€of€law€or€from€undisputed€facts.€€In€other€cases,€thatÐ 0€  Ðquestion€will€require€the€bankruptcy€court€to€take€evidence,€whichÐ À Ðit€did€not€do€in€this€case.€€We€consider€the€bankruptcy€court'sÐ P  Ðruling€here€from€that€perspective:€if€the€government€has€clearly,Ð à0 Ðon€the€record€or€on€undisputed€facts,€waived€its€setoff€rights€asÐ pÀ Ða€matter€of€law€so€as€to€deprive€it€of€even€a€Ô_ÔcolorableÔ_Ô€claim€toÐ P Ðsetoff,€then€the€bankruptcy€court€was€correct€to€conclude€thatÐ à Ðthose€rights€no€longer€entitled€the€government€to€move€for€a€liftÐ  p Ðof€the€stay.€€But€if€waiver€was€unclear€from€the€record,€or€if€aÐ °  Ðdisputed€fact€could€possibly€make€a€difference,€then€the€bankruptcyÐ @" Ðcourt€erred.Ð Ð $ Ðà ` àWe€apply€a€similar€analysis€to€the€question€of€priority.€Ð `"°& ÐIn€order€to€obtain€relief€from€the€stay,€the€government€wasÐ ð#@( Ðrequired€to€show€cause€for€relief,€in€addition€to€its€Ô_ÔcolorableÔ_ÔÐ €%Ð * Ðclaim€on€property€of€the€estate.€€The€cause€the€government€invokedÐ '`", Ðwas€"the€lack€of€adequate€protection€of€an€interest€in€property"Ð  (ð#. Ðunder€ðð362(d)(1).€€If€as€of€the€time€of€the€hearing€FleetÐ 0*€%0 Ðindisputably€had€rights€senior€to€the€government's€in€the€contestedÐ À+'2 Ðreceivables,€and€if€Calore's€debt€to€Fleet€equaled€or€exceeded€theÐ ° Ðvalue€of€those€receivables,€then€the€bankruptcy€court€correctlyÐ @ Ðdenied€the€motion€to€lift€the€stay.€€This€would€be€so€not€becauseÐ Ð  Ðthe€government€lacked€a€Ô_ÔcolorableÔ_Ô€claim€but€because€theÐ ` ° Ðgovernment's€security€interest€would€have€no€value€and€theÐ ð @ Ðgovernment€would€be€entitled€to€no€protection€of€that€interest.€Ð € Ð  ÐòòSeeóó€òòSuperior€Paint€Mfg.€Co.óó€v.€òòLopez„Sotoóó€(òòIn€re€Lopez„Sotoóó),€764Ð `  ÐF.2d€23,€26€(1st€Cir.€1985)€("[Ô_ÔV]aluelessÔ_Ô€junior€secured€positionsÐ  ð  Ðor€unsecured€deficiency€claims€will€not€be€entitled€to€adequateÐ 0€  Ðprotection."€(quoting€2€òòCollier€on€Bankruptcyóó€òòóóðð€362.07,€at€362„53Ð À Ð(L.€King€et€al.€Ô_ÔedsÔ_Ô.Ô#†XÒ‡XXXÒ‡QŠ#ÔÔ‡XÒ‡XXXÒ‡Ô,€15th€ed.€1985))€(internal€quotation€marksÐ P  Ðomitted)).€€If€we€reject€the€bankruptcy€court's€grounds€for€findingÐ à0 Ðwaiver,€then€we€must€consider€whether€the€bankruptcy€court€wasÐ pÀ Ðcorrect€when€it€concluded€that,€as€a€matter€of€law,€Fleet'sÐ P Ðinterest€took€priority€over€the€government's.€€This€question€isÐ à Ðdistinct€from€the€question€whether€a€court€might€rearrange€theÐ  p Ðpriorities€of€the€interests€under,€for€example,€the€doctrine€ofÐ °  Ðequitable€subordination,€which€the€bankruptcy€court€acknowledgedÐ @" Ðrequired€a€full€adversary€proceeding.€€òòCalore€Expressóó,€199€Ô_ÔB.R.Ô_ÔÐ Ð $ ÐÔ_Ôat434.Ô_ÔÐ `"°& Ðà ` àò òó óThere€is,€however,€another€ground€on€which€the€bankruptcyÐ ð#@( Ðcourt€rested€its€judgment,€and€which€Fleet€has€argued€to€us.€€ThatÐ €%Ð * Ðground€is€the€discretion€of€the€bankruptcy€court€to€grant€or€denyÐ '`", Ðsetoff.€€òòSeeóó€òòCumberland€Glass€Mfg.€Co.óó€v.€òòDe€Ô_ÔWittÔ_Ôóó,€237€U.S.€447,Ð  (ð#. Ð455€(1915)€("The€matter€[of€setoff]€is€placed€within€the€control€ofÐ 0*€%0 Ðthe€bankruptcy€court,€which€exercises€its€discretion€in€these€casesÐ À+'2 Ðon€the€general€principles€of€equity.").€€Ô#†XÒ‡XXXÒ‡;³#ÔÔ‡XÒ‡XXXÒ‡ÔIn€exercising€thatÐ ° Ðdiscretion,€the€bankruptcy€court€wrote:€Ð @ ÐÓÆ-ÓÓ °X°` ‹ÓÓ °ÓÓ ÓÓ ` h°XÓÓ XÓAllowing€the€United€States€to€benefit€from€a€setoffÐ Ð  Ðin€the€instant€case€would€constitute€an€abuse€of€thisÐ ˜è ÐCourt's€discretion€and€a€perversion€of€its€equitableÐ ` ° Ðpowers.€€The€United€States's€attempt€at€ambush€by€silenceÐ ( x Ðis€unconscionable€and€will€not€be€permitted.€€TheÐ ð @ Ðvenerable€maxim,€"he€who€seeks€equity€must€do€equity,"Ð ¸   Ðprecludes€the€relief€the€United€States€requests.Ð € Ð  ÐÓ ñ¹ÓÓ" °X` Xº"ÓÓ X#ºÓÓ °ÓòòÓÓÓ °` ÷°XÓCalore€Expressóó,€199€Ô_ÔB.R.Ô_Ô€at€433€(footnote€omitted).Ô#†XÒ‡XXXÒ‡+¹#ÔÔ‡XÒ‡XXXÒ‡ÔÐ `  Ѐ€à ` àIt€is€not€clear€that€the€bankruptcy€court€had€theÐ  ð  Ðequitable€discretion€it€purported€to€exercise.€€The€government€hasÐ 0€  Ðargued€to€us€that€setoff€is€in€fact€a€legal€rather€than€equitableÐ À Ðdoctrine€and€that€the€bankruptcy€court€exceeded€whatever€narrowÐ P  Ðdiscretion€it€might€have€possessed.€€òòSeeóó€òòN.J.€Ô_ÔNat'lÔ_Ô€Bankóó€v.Ð à0 ÐòòÔ_ÔGuttermanÔ_Ôóó€(òòIn€re€Applied€Logic€Corp.óó),€576€F.2d€952,€957„58€(2dÐ pÀ ÐCir.€1978)€(Friendly,€J.)€("The€rule€allowing€setoff,€both€beforeÐ P Ðand€after€bankruptcy,€is€not€one€that€courts€are€free€to€ignoreÐ à Ðwhen€they€think€application€would€be€'unjust.'");€òòseeóó€òòalsoóóÐ  p ÐòòCumberland€Glassóó,€237€U.S.€at€455€("While€the€operation€of€thisÐ °  Ðprivilege€of€set„off€has€the€effect€to€pay€one€creditor€more€thanÐ @" Ðanother,€it€is€a€provision€based€upon€the€generally€recognizedÐ Ð $ Ðright€of€mutual€debtors,€which€has€been€enacted€as€part€of€theÐ `"°& Ðbankruptcy€act,€and€when€relied€upon€should€be€enforced€by€theÐ ð#@( Ðcourt.").Ô#†XÒ‡XXXÒ‡9½#ÔÔ‡XÒ‡XXXÒ‡Ô€€Ð €%Ð * ÐÓ¼ÓÓZ˜Óà ` àThe€Supreme€Court€has€recently€reminded€the€federalÐ '`", Ðcourts€that€the€discretion€of€a€bankruptcy€judge€is€circumscribedÐ  (ð#. Ðby€the€Bankruptcy€Code€and€by€the€underlying€substantive€law.€€òòSeeóóÐ 0*€%0 ÐòòRaleighóó€v.€òòIll.€Ô_ÔDep'tÔ_Ô€of€Revenueóó,€530€U.S.€15,€24„25€(2000)Ð À+'2 Ð("Bankruptcy€courts€are€not€authorized€in€the€name€of€equity€toÐ ° Ðmake€wholesale€substitution€of€underlying€law€controlling€theÐ @ Ðvalidity€of€creditors'€entitlements,€but€are€limited€to€what€theÐ Ð  ÐBankruptcy€Code€itself€provides.Ô#†XÒ‡XXXÒ‡˜Â#ÔÔ‡XÒ‡XXXÒ‡Ô");€òòid.óó€at€25€(citing€òòUnited€StatesóóÐ ` ° Ðv.€òòReorganized€CF€&€I€Fabricators€of€Utah,€Inc.óó,€518€U.S.€213,€228„Ð ð @ Ð229€(1996),€and€òòUnited€Statesóó€v.€òòÔ_ÔNolandÔ_Ôóó,€517€U.S.€535,€543€(1996)).€Ð € Ð  ÐOf€course,€to€the€extent€that€Fleet€argues€that€the€underlying€lawÐ `  Ðof€setoff€is€discretionary,€these€recent€cases€do€not€control€theÐ  ð  Ðoutcome€here.€€These€cases€may,€however,€represent€a€relevant€shiftÐ 0€  Ðfrom€the€easy€appellate€acceptance€of€broad€discretion€exercised€byÐ À Ðbankruptcy€judges€reflected€in€the€language€from€òòCumberland€GlassóóÐ P  Ðon€which€Fleet€relies.Ð à0 Ðà ` àAssuming€in€Fleet's€favor€that€a€bankruptcy€court€mayÐ pÀ Ðproperly€exercise€some€discretion€over€whether€to€permit€setoff,€itÐ P Ðmust€make€that€decision€on€all€the€facts€of€the€case.Ô#†XÒ‡XXXÒ‡»Å#ÔÔ‡XÒ‡XXXÒ‡Ô€€TheÐ à Ðbankruptcy€court's€irritation€with€the€government's€attorney€isÐ  p Ðunderstandable;€nonetheless,€its€approach€is€difficult€to€reconcileÐ °  Ðwith€a€summary€hearing€and€impossible€to€reconcile€with€aÐ @" ÐÔ_ÔnonevidentiaryÔ_Ô€one.€€In€this€case,€the€government€plausibly€arguesÐ Ð $ Ðthat€its€attorney€did€not€act€in€bad€faith€by€remaining€silent€onÐ `"°& ÐJune€17€and€that€Fleet€did€not€actually€rely€on€the€government'sÐ ð#@( Ðsilence€at€any€time€in€the€proceedings,€whether€on€June€17€orÐ €%Ð * Ðearlier.Ô_Ô׃!×Ý ƒ#ÃÝòòÚ  Ú6Ú  ÚóóÝ  Ý×  ×Ô_Ô€€Both€questions€are€relevant€to€the€equities€of€thisÐ '`", Ðcase,€and€both€depend€on€disputed€factual€questions€such€as€theÐ ° Ðactual€knowledge€and€motives€of€individuals,€rather€than€onÐ @ Ðundisputed€facts€or€on€the€record.€€The€bankruptcy€court€tookÐ Ð  Ðevidence€on€neither.€€Its€decision€to€deny€setoff€as€a€matter€ofÐ ` ° Ðequity€is€not€sustainable€on€the€current€record.ò òó óÐ ð @ ÐÓäÂÓÓŸÓà ` àThus,€the€remainder€of€our€analysis€focuses€on€two€narrowÐ € Ð  Ðquestions:€whether,€on€the€record€and€on€the€undisputed€facts,€theÐ `  Ðgovernment€waived€its€right€of€setoff€in€this€case€as€a€matter€ofÐ  ð  Ðlaw;€and€whether,€within€the€same€framework,€Fleet's€lien€takesÐ 0€  Ðpriority€over€the€government's€setoff€rights.Ð À ÐC.€€òòWaiveróóÐ P  Ðà ` àThe€bankruptcy€court€and€the€district€court€agreed€thatÐ à0 Ðthe€government€had€waived€any€claim€to€setoff.€€The€bankruptcyÐ pÀ Ðcourt€wrote:Ð P ÐÓÏÓÓ °ÓÓ ÓThe€Court€finds€that€the€United€States€unequivocallyÐ à Ðwaived€its€right€to€assert€a€setoff€by€1)€failing€toÐ X¨ Ðobject€to€the€numerous€requests€for€orders€authorizingÐ  p Ðthe€Debtor€to€borrow€from€the€Bank€against€its€accountsÐ è8 Ðreceivable,€including€those€due€from€the€United€States,Ð °  Ðon€a€secured€and€Ô_ÔsuperpriorityÔ_Ô€basis;€2)€failing€toÐ xÈ! Ðobject€to€the€Bank's€Lift€Stay€Motion€in€which€the€BankÐ @" Ðexpressly€stated€its€intention€to€liquidate€itsÐ  X# Ðcollateral,€including€the€accounts€receivable;Ð Ð $ Ð3)expressly€stating€in€its€Second€Proof€of€Claim€datedÐ ˜!è% ÐJanuary€25,€1996€and€the€attachment€that€its€claim€forÐ `"°& Ðprepetition€taxes€was€not€subject€to€setoff;€andÐ (#x' Ð4)Ô#†XÒ‡XXXÒ‡ëÉ#ÔÔ‡XÒ‡XXXÒ‡Ôfailing€to€assert€a€right€to€setoff€in€any€of€itsÐ ð#@( ÐRequests€for€Payment€of€Postpetition€Taxes,Ð ¸$ ) Ðnotwithstanding€the€existence€of€a€right€to€setoff€thatÐ €%Ð * Ðwould€have€been€available€to€the€United€States€because€ofÐ H&˜!+ Ðthe€Debtor's€failure€to€pay€postpetition€taxes€and€theÐ '`", ÐDebtor's€sizeable€business€relationship€with€GSA.Ð Ø'(#- ÐÓ ËÑÓÓ °ÓòòÓhšÓCalore€Expressóó,€199€Ô_ÔB.R.Ô_Ô€at€432.€€The€court€also€found€significantÐ h)¸$/ Ðthe€silence€of€counsel€for€the€government€at€the€June€17€hearing:Ð ° ÐÓŒ×ÓÓ °ÓÓ ÓAt€the€June€17,€1996€hearing,€the€United€States,€throughÐ @ Ðits€attorney,€remained€silent,€despite€its€knowledge€thatÐ X Ð1)€the€Bank,€which€had€just€been€granted€relief€from€stayÐ Ð  Ðto€foreclose€on€its€collateral,€had€agreed€to€makeÐ ˜è Ðadditional€loans€to€the€Debtor€to€be€secured€by€accountsÐ ` ° Ðreceivable;€2)€the€Tax€Division€had€directed€GSA€toÐ ( x Ðfreeze€its€payments€to€the€Debtor;€and€3)€it€would€beÐ ð @ Ðclaiming€that€it€had€a€right€to€setoff€its€claim€for€pre„Ð ¸   Ðand€postpetition€taxes€against€the€Debtor's€accountÐ € Ð  Ðreceivable€from€GSA.€Indeed,€the€United€States€waitedÐ H ˜  Ðapproximately€one€month€after€the€June€17,€1996€hearingÐ `  Ðbefore€it€even€filed€its€own€Motion€for€Relief€from€StayÐ Ø(  Ðseeking€permission€to€setoff.€The€Bank€and€the€otherÐ  ð  Ðparties€attempting€to€maximize€the€amount€realized€fromÐ h¸  Ðthe€sale€of€the€Debtor's€collateral€by€preserving€theÐ 0€  Ðgoing€concern€value€of€the€Debtor's€business€relied€uponÐ øH  Ðthe€government's€silence€to€their€detriment.Ð À ÐÓ –ØÓÓ °ÓòòÓ+ªÓId.óó€at€433.Ð P  Ðà ` àCourts€use€the€word€"waiver"€to€mean€different€things€inÐ à0 Ðdifferent€contexts.€€òòSeeóó€òògenerallyóó€òòIronsóó€v.€òòFBIóó,€880€F.2d€1446,Ð pÀ Ð1452„53€(1st€Cir.€1989)€(en€banc)€(discussing€the€differentÐ P Ðmeanings€of€"waiver").€€In€the€context€of€bankruptcy€proceedings,Ð à Ðsome€courts€have€said€that€a€waiver€of€setoff€must€be€theÐ  p Ðintentional€relinquishment€of€a€known€right.€€òòÔ_ÔMcCartyÔ_Ô€v.€Ô_ÔNat'lÔ_Ô€BankÐ °  Ðof€Alaska,€N.A.óó€(òòIn€re€United€Marine€Shipbuilding,€Inc.óó),€158€F.3dÐ @" Ð997,€1001€(9th€Cir.€1998)€(requiring€"a€voluntary€or€intentionalÐ Ð $ Ðrelinquishment"€of€setoff€for€waiver);€òòseeóó€òòalsoóó€òòÔ_ÔChassenÔ_Ôóó€v.€òòUnitedÐ `"°& ÐStatesóó,€207€F.2d€83,€84€n.3€(2d€Cir.€1953).€€Other€courts€have€saidÐ ð#@( Ðthat€a€party€may€waive€setoff€rights€by€failing€to€assert€them€inÐ €%Ð * Ða€timely€fashion.€€òòUnited€Statesóó€v.€òòÔ_ÔCont'lÔ_Ô€Airlinesóó€(òòIn€re€Ô_ÔCont'lÔ_ÔÐ '`", ÐAirlinesóó),€134€F.3d€536,€541€(3d€Cir.€1998)€("We€recognize€that€aÐ  (ð#. Ðright€of€setoff€is€preserved€under€ðð553€in€a€bankruptcy€proceedingÐ 0*€%0 Ðbut€we€believe€that€the€right€must€be€exercised€by€the€creditor€inÐ À+'2 Ðtimely€fashion€and€appropriately€asserted€in€accordance€with€otherÐ ° Ðprovisions€of€the€Bankruptcy€Code.").€€These€cases€are€in€tension,Ð @ Ðas€a€party's€delay€in€asserting€its€right€of€setoff€will€in€someÐ Ð  Ðcases€be€unintentional.Ð ` ° Ðà ` àThe€present€case€requires€no€general€theory€of€setoffÐ ð @ Ðwaiver.€€We€do,€however,€recognize€the€following€principles.€Ð € Ð  ÐFirst,€a€creditor€in€bankruptcy€proceedings€may€expressly€waive€aÐ `  Ðright€of€setoff€„„€as,€for€example,€by€a€written€statement€that€theÐ  ð  Ðcreditor€will€not€assert€that€right.€€5€òòCollieróó,€òòsupraóó,€Ô#†XÒ‡XXXÒ‡‘Õ#ÔÔ‡XÒ‡XXXÒ‡Ôðð€553.07,Ð 0€  Ðat€553„78€&€n.2€(15th€ed.€2001)€(citing€òòÔ_ÔBlantonÔ_Ôóó€v.€òòPrudential„BacheÐ À ÐSecurities,€Inc.óó€(òòIn€re€Ô_ÔBlantonÔ_Ôóó),€105€Ô_ÔB.R.Ô_Ô€321,€335€(Ô_ÔBankrÔ_Ô.€E.D.Ð P  ÐVa.€1989));€òòseeóó€òòalsoóó€òòIn€re€Metro.€Int'l,€Inc.óó,€616€F.2d€83,€86€(3dÐ à0 ÐCir.€1980)€(holding€that€a€creditor€had€expressly€waived€its€rightÐ pÀ Ðas€a€matter€of€law€by€oral€statements€on€the€record).Ô#†XÒ‡XXXÒ‡äæ#ÔÔ‡XÒ‡XXXÒ‡Ô€€Second,€aÐ P Ðcourt€may€imply€a€waiver€of€a€right€of€setoff€from€the€creditor'sÐ à Ðconduct.€€òòHoffmanóó€v.€òòÔ_ÔGleasonÔ_Ôóó€(òòIn€re€Capital€Ô_ÔNat'lÔ_Ô€Bank€of€Lansingóó),Ð  p Ð107€F.2d€101,€104€(6th€Cir.€1940)€(citing€òòCumberland€Glassóó,€237Ð °  ÐU.S.€at€459).€€That€conduct,€however,€must€fairly€demonstrate€theÐ @" Ðcreditor's€intent.€€For€example,€the€voluntary€payment€by€theÐ Ð $ Ðcreditor€of€its€debt€to€the€debtor,€without€any€reservation€of€aÐ `"°& Ðright€of€setoff,€waives€that€right.€€òòIn€re€Ô_ÔMauchÔ_Ô€Chunk€Brewing€Co.óó,Ð ð#@( Ð131€F.2d€48€(3d€Cir.€1942)€(so€holding€with€regard€to€a€bank'sÐ €%Ð * Ðpayment€of€an€account€to€a€trustee€in€bankruptcy).€€This€circuitÐ '`", Ðhas€held€that€payment€in€obedience€to€a€court's€judgment,€which€isÐ  (ð#. Ðnot€voluntary,€is€therefore€not€waiver,€even€though€the€creditorÐ 0*€%0 Ðhad€the€opportunity€to€seek€a€stay€of€the€judgment€and€chose€not€toÐ À+'2 Ðdo€so.€€òòPub.€Serv.€Co.€of€N.H.óó€v.€òòN.H.€Elec.€Coop.,€Inc.óó,€884€F.2dÐ ° Ð11,€13€(1st€Cir.€1989).€€Other€courts€have€held€that€inadvertentÐ @ Ðpayment€due€to€an€administrative€error€also€does€not€waive€theÐ Ð  Ðright.€€òòÔ_ÔMcCartyÔ_Ôóó,€158€F.3d€at€1001€(so€holding€and€collectingÐ ` ° Ðcases).€€Third,€a€waiver€of€setoff€rights,€whether€express€orÐ ð @ Ðimplied,€is€not€necessarily€irrevocable;€instead,€the€creditor€mayÐ € Ð  Ðgenerally€rescind€the€waiver.€€òòóóWhen,€however,€another€party€to€theÐ `  Ðproceedings€has€relied€on€the€waiver€to€its€detriment,€the€courtÐ  ð  Ðmay€invoke€estoppel€and€rule€that€the€waiver€has€becomeÐ 0€  Ðirrevocable.€€òòSeeóó€òòMetro.€Int'lóó,€616€F.2d€at€86;€òòÔ_ÔChassenÔ_Ôóó,€207€F.2dÐ À Ðat€83.Ô#†XÒ‡XXXÒ‡{é#ÔÔ‡XÒ‡XXXÒ‡Ô׃u×Ý ƒ#ÃÝòòÚ  Ú7Ú  ÚóóÝ  Ý×  ×Ô#†XÒ‡XXXÒ‡ò#ÔÔ‡XÒ‡XXXÒ‡Ô€€It€is€not€clear€whether€the€waiver€could€apply€even€inÐ P  Ðsuch€a€case€to€a€creditor's€claims€that€accrued€after€the€attemptedÐ à0 Ðrecission.€€€€òòóóÐ pÀ Ðà ` àOur€holding€that€a€waiver€of€setoff€implied€from€theÐ P Ðconduct€of€the€creditor€must€rest€on€conduct€that€demonstratesÐ à Ðintent€will€seldom,€if€ever,€permit€the€courts€of€this€circuit€toÐ  p Ðimply€waiver€from€mere€silence.€€This€result€is€consistent€with€theÐ °  ÐBankruptcy€Code,€which€provides€that€with€limited€exceptions€theÐ @" ÐCode€"does€not€affect€any€right€of€a€creditor€to€offset€a€mutualÐ ° Ðdebt€owing€by€such€creditor€to€the€debtor€that€arose€before€theÐ @ Ðcommencement€of€the€case€under€this€title€against€a€claim€of€suchÐ Ð  Ðcreditor€against€the€debtor€that€arose€before€the€commencement€ofÐ ` ° Ðthe€case."€€11€U.S.C.€ðð553(a)€(2000).€€Those€exceptions€includeÐ ð @ Ðthe€automatic€stay,€so€that€a€creditor€may€not€exercise€aÐ € Ð  Ðprepetition€right€of€setoff€during€bankruptcy€proceedings€withoutÐ `  Ðfirst€obtaining€the€permission€of€the€court.€€òòSeeóó€òòid.óó€ðð362(a)(7).€Ð  ð  ÐNevertheless,€there€is€authority€that€ðð553€may€allow€a€creditorÐ 0€  Ðeven€to€wait€out€the€bankruptcy€proceedings€and€then,€afterwards,Ð À Ðexercise€a€prepetition€right€of€setoff€unimpaired€by€the€actions€ofÐ P  Ðthe€bankruptcy€court,€although€the€court€has€meanwhile€granted€aÐ à0 Ðdischarge€or€confirmed€a€plan€of€reorganization.€€òòÔ_ÔDavidovichÔ_Ôóó€v.Ð pÀ ÐòòÔ_ÔWeltonÔ_Ôóó€(òòIn€re€Ô_ÔDavidovichÔ_Ôóó),€901€F.2d€1533,€1539€(10th€Cir.€1990)Ð P Ð("[Ô_ÔT]heÔ_Ô€right€to€assert€a€setoff€against€a€mutual,€prepetition€debtÐ à Ðowed€the€bankrupt€estate€survives€even€the€Bankruptcy€Court'sÐ  p Ðdischarge€of€the€bankrupt's€debts.");€òòseeóó€òòalsoóó€òòCitizens€Bank€of€Md.óóÐ °  Ðv.€òòÔ_ÔStrumpfÔ_Ôóó,€516€U.S.€16,€21€n.*€(1995)€(declining€to€answer€theÐ @" Ðquestion€whether€that€right€survives€the€confirmation€of€a€plan€ofÐ Ð $ Ðreorganization€in€a€Chapter€13€case).Ð `"°& Ðà ` àWhether€that€is€so€we€need€not€decide€today,€nor€whetherÐ ð#@( Ðto€treat€waiver€of€postpetition€rights€of€setoff€any€differently.€Ð €%Ð * ÐThat€the€question€is€even€in€issue€indicates€that€the€Code€grantsÐ '`", Ðconsiderable€protection€to€setoff€rights€even€though€the€creditorsÐ  (ð#. Ðholding€those€rights€remain€inactive€in€the€bankruptcy€proceeding.€Ð 0*€%0 ÐThus,€as€a€general€matter,€a€creditor's€silence€in€the€early€stagesÐ À+'2 Ðof€bankruptcy€proceedings,€such€as€the€filing€of€a€proof€of€claim,Ð ° Ðdoes€not€waive€the€right€of€setoff.€€On€the€facts€of€a€specificÐ @ Ðcase,€however,€silence€at€a€specific€time€may€be€unequivocallyÐ Ð  Ðinconsistent€with€the€assertion€of€the€setoff€right.€€We€addressÐ ` ° Ðthe€conclusion€of€the€bankruptcy€and€district€courts€that€this€isÐ ð @ Ðsuch€a€case€below.Ð € Ð  Ðà ` àWe€consider€the€bankruptcy€court's€four€grounds€of€waiverÐ `  Ðin€this€light.Ð  ð  Ð1.€€Failure€to€object€to€the€borrowing€orderÐ 0€  Ðà ` àThe€bankruptcy€court€held€that€the€government€had€waivedÐ À Ðits€right€of€setoff€by€"failing€to€object€to€the€numerous€requestsÐ P  Ðfor€orders€authorizing€the€Debtor€to€borrow€from€the€Bank€againstÐ à0 Ðits€accounts€receivable,€including€those€due€from€the€UnitedÐ pÀ ÐStates,€on€a€secured€and€Ô_ÔsuperpriorityÔ_Ô€basis."€€òòCalore€Expressóó,€199Ð P ÐÔ_ÔB.R.Ô_Ô€at€432.€€We€disagree.€€If€the€orders€authorizing€the€borrowingÐ à Ðhad€set€a€date€by€which€to€assert€setoff,€the€government's€failureÐ  p Ðto€object€to€the€June€28,€1995,€order,€or€to€the€orders€andÐ °  Ðstipulations€that€followed,€could€conceivably€have€beenÐ @" Ðinconsistent€with€an€intent€to€assert€any€existing€right€of€setoff.€Ð Ð $ ÐThe€orders€did€not€do€so;€instead,€they€granted€certain€securityÐ `"°& Ðinterests€and€priority€rights€to€Fleet.€€Even€if€those€new€rightsÐ ð#@( Ðwere€senior€to€the€government's€right€of€setoff,€the€orders€wouldÐ €%Ð * Ðnot€have€eliminated€the€right€of€setoff€itself.€€They€would€merelyÐ '`", Ðhave€rendered€that€right€junior€to€Fleet's€new€rights.€€We€discussÐ  (ð#. Ðbelow€the€bankruptcy€court's€conclusion€as€to€seniority€ofÐ 0*€%0 Ðinterests.€€Regardless,€the€government's€acquiescence€in€the€orderÐ À+'2 Ðwithout€objection€did€not€waive€its€right€of€setoff.Ð ° Ð2.€€Failure€to€object€to€Fleet's€June€13€motionÐ @ Ðà ` àThe€bankruptcy€court€held€that€the€government€had€waivedÐ Ð  Ðits€right€of€setoff€by€"failing€to€object€to€the€Bank's€Lift€StayÐ ` ° ÐMotion€in€which€the€Bank€expressly€stated€its€intention€toÐ ð @ Ðliquidate€its€collateral,€including€the€accounts€receivable."€€òòId.óó€Ð € Ð  ÐThis€ground€apparently€encompasses€the€silence€of€counsel€for€theÐ `  ÐIRS€at€the€June€17€hearing€as€well€as€the€absence€of€writtenÐ  ð  Ðfilings.€€As€a€matter€of€logic,€waiver€does€not€follow€from€thisÐ 0€  Ðsilence€for€the€same€reason€that€it€does€not€follow€from€theÐ À Ðgovernment's€acquiescence€in€the€borrowing€orders:€lifting€theÐ P  Ðorder€as€to€Fleet€affected€Fleet's€rights€against€Calore,€but€hadÐ à0 Ðno€effect€on€Fleet's€or€Calore's€rights€against€the€government,€andÐ pÀ Ðtherefore€acquiescence€in€the€lifting€was€not€inconsistent€with€theÐ P Ðgovernment's€intention€to€assert€its€setoff€rights.Ð à Ðà ` àTo€treat€the€bankruptcy€court's€opinion€fairly,€however,Ð  p Ðwe€take€a€broader€view€of€the€significance€of€the€court's€actionsÐ °  Ðat€the€June€17€hearing.€€By€granting€Fleet€permission€to€sellÐ @" ÐCalore's€assets,€while€at€the€same€time€postponing€the€requests€ofÐ Ð $ Ðall€other€creditors,€the€court€intended€to€allow€Fleet€to€sell€theÐ `"°& Ðassets€as€a€group€and€therefore€to€preserve€Calore's€value€as€aÐ ð#@( Ðgoing€concern.€€In€effect,€the€court€was€allowing€Fleet€to€pursueÐ €%Ð * Ða€course€of€action€quite€similar€to€the€earlier€motion€for€a€saleÐ '`", Ðof€assets€under€11€U.S.C.€ðð363,€which€the€court€had€denied€on€JuneÐ  (ð#. Ð10€primarily€because€of€its€effect€on€the€government's€rights.€Ð 0*€%0 ÐFrom€the€court's€perspective,€it€had€scrupulously€protected€theÐ À+'2 Ðgovernment's€rights€on€June€10,€despite€the€accusations€of€FleetÐ ° Ðand€other€creditors€at€the€time€that€the€government's€position€wasÐ @ Ðunreasonable.€€A€mere€week€later,€the€government€felt€once€moreÐ Ð  Ðthat€its€rights€were€threatened;€but€counsel,€rather€than€raisingÐ ` ° Ða€setoff€argument€to€the€court,€sat€by€in€silence€and€allowedÐ ð @ Ðevents€he€had€already€set€in€motion€to€frustrate€the€purpose,€ifÐ € Ð  Ðnot€the€literal€language,€of€the€court's€order.€€It€may€be,€asÐ `  Ðcounsel€said€in€a€later€affidavit€to€the€court,€that€he€did€notÐ  ð  Ðknow€for€sure€that€the€GSA€still€owed€Calore€money€and€so€that€aÐ 0€  Ðsubstantial€setoff€remained€possible.€€Even€so,€he€had€an€inklingÐ À Ðthat€this€might€be€so,€and€should€have€shown€greater€candor.Ð P  Ðà ` àThe€subsequent€history€of€this€case€has€shown€thatÐ à0 Ðcounsel's€silence,€whether€or€not€it€was€waiver€or€inequitableÐ pÀ Ðconduct,€was€certainly€unwise.€€We€discourage€similar€conduct€byÐ P Ðbankruptcy€litigants,€including€the€government,€in€the€future.€Ð à ÐNevertheless,€the€question€whether€silence€constitutes€waiverÐ  p Ðrequires€an€inquiry,€as€we€have€discussed€above,€on€all€the€factsÐ °  Ðof€the€case.€€òòSeeóó€5€òòCollieróó,€òòsupraóó,€Ô#†XÒ‡XXXÒ‡ªò#ÔÔ‡XÒ‡XXXÒ‡Ôðð€553.07[2].€€It€is€unsuitableÐ @" Ðfor€resolution€in€a€Ô_ÔnonevidentiaryÔ_Ô€hearing.€€Ô#†XÒ‡XXXÒ‡°#ÔÔ‡XÒ‡XXXÒ‡ÔThe€concerns€raised€byÐ Ð $ Ðthe€bankruptcy€court,€although€significant,€did€not€give€itÐ `"°& Ðsufficient€grounds€to€conclude€as€a€matter€of€law€that€theÐ ð#@( Ðgovernment€had€so€clearly€waived€its€right€of€setoff€as€to€lackÐ €%Ð * Ðeven€a€Ô_ÔcolorableÔ_Ô€claim.€€Therefore,€counsel's€silence€at€the€JuneÐ '`", Ð17€hearing€does€not€support€the€bankruptcy€court's€finding€ofÐ  (ð#. Ðwaiver.€€If€and€when€a€court€more€fully€develops€the€facts€of€thisÐ 0*€%0 Ðcase,€our€holding€today€will€not€preclude€Fleet€from€arguing€thatÐ À+'2 Ðon€those€facts€the€government's€silence€amounted€to€waiver.Ð ° Ð3.€€Statements€made€in€proofs€of€claimÐ @ Ðà ` àThe€bankruptcy€court€held€that€the€government€had€waivedÐ Ð  Ðits€right€of€setoff€by€"expressly€stating€in€its€Second€Proof€ofÐ ` ° ÐClaim€dated€January€25,€1996€and€the€attachment€that€its€claim€forÐ ð @ Ðprepetition€taxes€was€not€subject€to€setoff."€€òòCalore€Expressóó,€199Ð € Ð  ÐÔ_ÔB.R.Ô_Ô€at€432.€€This€reasoning€can€apply,€of€course,€only€to€theÐ `  ÐIRS's€prepetition€claims,€which€are€the€only€ones€described€in€theÐ  ð  ÐJanuary€25€proof€of€claim.€€We€agree€that€as€to€these€claims€theÐ 0€  Ðgovernment's€filing€contained€a€waiver€(which€may€later€have€beenÐ À Ðrescinded,€as€discussed€below).€€The€proof€of€claim€itself€statedÐ P  Ðthat€"[Ô_Ôi]nÔ_Ô€filing€this€claim,€claimant€has€deducted€all€amountsÐ à0 Ðthat€claimant€owes€to€debtor";€the€attachment€to€the€proof€statedÐ pÀ Ðthat€"[Ô_Ôt]hisÔ_Ô€claim€is€not€subject€to€any€setoff€or€counterclaim."€Ð P ÐThe€government€argues€that€this€should€be€discounted€as€preprintedÐ à Ðform€language,€an€argument€we€consider€irrelevant.€€The€IRS,€of€allÐ  p Ðlitigants,€can€hardly€complain€to€the€courts€when€it€errs€inÐ °  Ðfilling€out€a€form.€€Ð @" Ðà ` àThe€government€also€points€out€that€the€language€of€theÐ Ð $ Ðform€contemplates€that€a€creditor€will€exercise€setoff€rightsÐ `"°& Ðbefore€even€filing€a€proof€of€claim.€€That€language€seemsÐ ð#@( Ðinconsistent€with€11€U.S.C.€ðð362(a)(7),€which€subjects€prepetitionÐ €%Ð * Ðrights€of€setoff€to€the€automatic€stay.€€It€also€seems€inconsistentÐ '`", Ðwith€the€broader€policy€of€the€Bankruptcy€Code€regarding€setoff,Ð  (ð#. Ðwhich€is€„„€particularly€in€Chapter€11€reorganization€cases€„„€toÐ 0*€%0 Ðencourage€creditors€to€forbear€at€least€temporarily€from€exercisingÐ À+'2 Ðsetoff€rights€that,€if€exercised,€would€put€debtors€immediately€outÐ ° Ðof€business.€€òòSeeóó€òòPub.€Serv.€Co.óó,€884€F.2d€at€13€("To€implement€theÐ @ Ðcongressional€purpose,€courts€should€attempt€to€minimize€theÐ Ð  Ðdislocations€attendant€to€setoffs.").€Nonetheless,€the€IRS€couldÐ ` ° Ðhave€easily€fixed€any€inconsistency€by€striking€the€offendingÐ ð @ Ðlanguage€or€attaching€an€explanation,€as€the€GSA€did€to€itsÐ € Ð  ÐFebruary€1€proof€of€claim.Ð `  Ðà ` àStronger,€and€possibly€correct,€is€the€government'sÐ  ð  Ðargument€that€it€sufficiently€preserved€its€rights€as€to€the€setoffÐ 0€  Ðof€the€GSA's€debt€against€Calore's€overcharges€by€asserting€them€inÐ À Ðthe€GSA's€February€1€proof€of€claim,€and€as€to€the€setoff€of€theÐ P  ÐGSA's€debt€against€Calore's€tax€debt€by€asserting€them€in€theÐ à0 Ðgovernment's€April€1€objection€to€Calore's€third€amendedÐ pÀ Ðreorganization€plan.€€As€to€the€February€1€proof€of€claim,€this€isÐ P Ðunquestionably€correct,€as€no€prior€statement€of€waiver€applies€toÐ à Ðthe€GSA's€claim€for€overcharges.€€That€claim,€however,€amounts€toÐ  p Ðonly€$6,734.24.€€ò òó óAs€to€the€April€1€objection€to€Calore's€plan,€itÐ °  Ðstated:€€"The€Bankruptcy€Code€specifically€preserves€the€UnitedÐ @" ÐStates'€right€to€offset€any€pre„petition€claims€of€the€UnitedÐ Ð $ ÐStates€against€any€pre„petition€claims€of€the€Debtor."€€ThatÐ `"°& Ðstatement€expresses€the€Government's€intent,€as€of€April€1,€toÐ ð#@( Ðassert€its€setoff€rights€on€its€prepetition€claims€„„€that€is,€itÐ €%Ð * Ðrescinds€any€prior€waiver€of€setoff.€€òòSeeóó€òòÔ_ÔChassenÔ_Ôóó,€207€F.2d€at€83Ð '`", Ðâ â(holding€that€a€clarification€by€the€government€was€"the€equivalentÐ  (ð#. Ðof€an€amendment€of€[the€government's]€proof€of€claim").׃×Ý ƒ#ÃÝòòÚ  Ú8Ú  ÚóóÝ  Ý×  ×Ð ° Ðâ âà ` àThat€recission€came€too€late,€however,€if€Fleet€had€inÐ @ Ðfact€previously€relied€to€its€detriment€on€the€IRS's€waiver€ofÐ Ð  ÐJanuary€25.€€The€bankruptcy€court€stated€that€Fleet's€continuedÐ ` ° Ðlending€to€Calore€demonstrated€both€reliance€and€detriment,€aÐ ð @ Ðstatement€that€suggests€the€application€of€estoppel,€although€theÐ € Ð  Ðcourt€did€not€use€that€term.€€Fleet€reasserts€this€theory€onÐ `  Ðappeal.€€The€government€responds€that:€first,€it€is€not€clear€whenÐ  ð  ÐFleet€learned€of€the€statement€on€the€government's€proof€of€claim,Ð 0€  Ðas€shown€by€a€statement€by€Fleet's€counsel€that€he€did€not€"reviewÐ À Ðproofs€of€claim€.Ô#†XÒ‡XXXÒ‡u#ÔÔ‡XÒ‡XXXÒ‡Ô.Ô#†XÒ‡XXXÒ‡á-#ÔÔ‡XÒ‡XXXÒ‡Ô.€at€that€stage€in€the€case";€second,€Fleet'sÐ P  Ðactual€lending€exposure€was€approximately€the€same€in€August€1996Ð à0 Ðas€it€had€been€in€May€1995,€so€that€it€is€unclear€that€Fleet€tookÐ pÀ Ðany€knowledge€about€the€government's€intent€as€to€setoff€intoÐ P Ðconsideration;€third,€no€deadline€for€the€filing€and€amendment€ofÐ à Ðclaims€had€passed€before€April€1,€which€appears€to€amount€to€anÐ  p Ðargument€that€Fleet€could€not€have€reasonably€relied€on€theÐ °  Ðoriginal€waiver.€€Whether€Fleet€actually€relied€on€the€government'sÐ @" Ðwaiver€is€a€question€of€fact€that€the€parties€dispute,€and€cannotÐ Ð $ Ðbe€determined€purely€from€the€record.€€òòSeeóó€òòMetro.€Int'lóó,€616€F.2dÐ `"°& Ðat€86„87€(holding€that€the€undisputed€facts€of€that€caseÐ ð#@( Ðestablished€waiver€but€remanding€for€a€hearing€to€establish€theÐ €%Ð * Ðquestion€of€detrimental€reliance).€€On€the€facts€of€this€case,€theÐ '`", Ðgovernment's€possibly„rescinded€waiver€therefore€did€not€depriveÐ ° Ðthe€government€of€a€Ô_ÔcolorableÔ_Ô€claim€based€on€its€right€of€setoff,Ð @ Ðand€does€not€support€the€bankruptcy€court's€finding€of€waiver€as€aÐ Ð  Ðmatter€of€law.ò òó óÐ ` ° Ð4.€€Silence€in€requests€for€paymentÐ ð @ Ðà ` àThe€bankruptcy€court€held€that€the€government€had€waivedÐ € Ð  Ðits€right€of€setoff€by€"failing€to€assert€a€right€to€setoff€in€anyÐ `  Ðof€its€Requests€for€Payment€of€Postpetition€Taxes."€€òòCaloreÐ  ð  ÐExpressóó,€199€Ô_ÔB.R.Ô_Ô€at€432.€€We€disagree.€€Unlike€the€third€findingÐ 0€  Ðof€waiver,€which€was€based€on€definite€statements€in€the€IRS'sÐ À Ðproofs€of€claim,€this€finding€relies€simply€on€the€government'sÐ P  Ðfailure€to€mention€setoff€in€its€various€requests€for€payment,€whenÐ à0 Ðthere€was€no€rule€or€court€order€requiring€it€to€do€so.€€As€ourÐ pÀ Ðdiscussion€above€makes€clear,€that€silence€is€insufficient€toÐ P Ðsupport€a€conclusion€of€waiver€as€a€matter€of€law.Ð à Ð5.€€SummaryÐ  p Ðà ` àFor€the€reasons€we€have€discussed,€only€two€possibleÐ °  Ðgrounds€of€waiver€survive€our€decision€in€this€appeal.€€One€is€theÐ @" Ðstatement€in€the€IRS's€January€25€proof€of€claim,€which€is€a€clearÐ Ð $ Ðwaiver€but€which€applies€only€to€prepetition€claims€and€which€inÐ `"°& Ðany€event€the€government€may€have€properly€rescinded€on€April€1.€Ð ð#@( ÐWhether€that€recission€took€effect€depends€on€an€inquiry€intoÐ €%Ð * Ðestoppel,€which€should€take€into€account€all€the€facts€of€the€case.Ô#†XÒ‡XXXÒ‡%.#ÔÔ‡XÒ‡XXXÒ‡ÔÐ '`", ÐThe€other€is€the€government's€silence€at€the€June€13€hearing,€whichÐ  (ð#. Ðmay€constitute€waiver€and€may€potentially€apply€to€either€pre„€orÐ 0*€%0 Ðpostpetition€claims.Ô#†XÒ‡XXXÒ‡÷9#ÔÔ‡XÒ‡XXXÒ‡Ô€€That€inquiry,€too,€requires€consideration€ofÐ À+'2 Ðall€the€facts€of€the€case.Ô_Ô׃×Ý ƒ#ÃÝòòÚ  Ú9Ú  ÚóóÝ  Ý×  ×Ô_ÔÔ#†XÒ‡XXXÒ‡;#ÔÔ‡XÒ‡XXX҇ԀР° ÐD.€€òòPriority€of€Fleet's€lienóóÐ @ Ðà ` àThe€bankruptcy€court€reasoned€that€the€government's€rightÐ Ð  Ðof€setoff€was€junior€to€Fleet's€lien€as€a€matter€of€law€becauseÐ ` ° Ðthat€court€had€authorized€on€June€28,€1995,€and€periodicallyÐ ð @ Ðrenewed€a€borrowing€order€under€the€three€subsections€of€11€U.S.C.Ð € Ð  Ððð364(c).€€The€order€granted€a€secured€lien€on€all€of€Calore's€pre„Ð `  Ðand€postpetition€assets,€including€accounts€receivable,€to€Fleet'sÐ  ð  Ðpredecessor€Shawmut.€€It€also€granted€priority€over€all€otherÐ 0€  Ðadministrative€claims.€€The€district€court€did€not€reach€thisÐ À Ðground€of€the€bankruptcy€court's€judgment.Ô#†XÒ‡XXXÒ‡"<#ÔÔ‡XÒ‡XXXÒ‡ÔÐ P  Ðà ` àOnly€one€of€the€bankruptcy€court's€three€sources€ofÐ à0 Ðstatutory€authority,€11€U.S.C.€ðð364(c)(2)Ô#†XÒ‡XXXÒ‡‡?#ÔÔ‡XÒ‡XXXÒ‡Ô,€provides€Fleet€with€a€Ð pÀ ÐÔ_ÔcolorableÔ_Ô€claim€to€priority.€€The€borrowing€order€gave€Shawmut€aÐ P Ðsenior€lien€on€Calore's€previously€unencumbered€assets€underÐ à Ððð364(c)(2).€€It€also€gave€Shawmut€Ô#†XÒ‡XXXÒ‡_@#ÔÔ‡XÒ‡XXXÒ‡Ôa€junior€lien€on€Calore'sÐ  p Ðpreviously€encumbered€assets,€certain€vehicles€and€equipment,€underÐ °  Ððð364(c)(3)Ô#†XÒ‡XXXÒ‡ºA#ÔÔ‡XÒ‡XXXÒ‡Ô.€€Because€accounts€receivable€were€not€in€thisÐ @" Ðcategory,€the€ðð364(c)(3)Ô#†XÒ‡XXXÒ‡B#ÔÔ‡XÒ‡XXXÒ‡Ô€lien€is€not€relevant€here.€€In€caseÐ Ð $ ÐShawmut's€claim€turned€out€to€be€Ô_ÔundersecuredÔ_Ô€by€the€assets€subjectÐ `"°& Ðto€lien,€the€court€gave€Shawmut€a€Ô_ÔsuperpriorityÔ_Ô€administrativeÐ ð#@( Ðclaim€under€ðð364(c)(1)Ô#†XÒ‡XXXÒ‡2C#ÔÔ‡XÒ‡XXXÒ‡Ô.€€That€Ô_ÔsuperpriorityÔ_Ô€is€also€irrelevantÐ €%Ð * Ðhere€because€any€unsecured€claim,€even€an€administrative€one,€isÐ '`", ÐÔ#†XÒ‡XXXÒ‡²D#ÔÔ‡XÒ‡XXXÒ‡Ôjunior€to€a€secured€claim;€and€the€government's€setoff€claimÐ ° Ðqualifies€as€a€secured€claim€under€11€U.S.C.€ðð506(a).Ô#†XÒ‡XXXÒ‡¦E#ÔÔ‡XÒ‡XXXÒ‡Ô€€Therefore,Ð @ ÐFleet's€sole€possible€argument€for€priority€rests€on€theÐ Ð  Ððð364(c)(2)Ô#†XÒ‡XXXÒ‡rF#ÔÔ‡XÒ‡XXXÒ‡Ô€lien.Ð ` ° Ð1.€€Choice€of€lawÐ ð @ Ðà ` àThe€bankruptcy€court€applied€Article€Nine€of€the€UniformÐ € Ð  ÐCommercial€Code€to€determine€the€relative€priority€of€Fleet's€lienÐ `  Ðand€the€government's€setoff€rights.€€We€initially€determine€theÐ  ð  Ðproper€source€of€law€for€the€priority€dispute€in€this€case.€€As€aÐ 0€  Ðgeneral€matter,€11€U.S.C.€Ô#†XÒ‡XXXÒ‡0G#ÔÔ‡XÒ‡XXXÒ‡Ôðð553€does€not€create€a€scheme€ofÐ À Ðpriority€for€the€setoff€rights€it€preserves,€any€more€than€itÐ P  Ðcreates€those€rights€themselves,€òòseeóó€òòÔ_ÔSiskÔ_Ôóó€v.€òòÔ_ÔSaugusÔ_Ô€Bank€&€TrustÐ à0 ÐCo.óó€(òòIn€re€Ô_ÔSaugusÔ_Ô€Gen.€Hosp.,€Inc.óó),€698€F.2d€42,€44€(1st€Cir.Ð pÀ Ð1983)Ô#†XÒ‡XXXÒ‡'I#ÔÔ‡XÒ‡XXXÒ‡Ô.€€Setoff€is€a€creature€of€the€common€law,€and€therefore€inÐ P Ðmost€cases€a€question€of€state€law€under€òòErie€Railroad€Co.óó€v.Ð à ÐòòÔ_ÔTompkinsÔ_Ôóó,€304€U.S.€64€(1938).€€Federal€law,€however,€determines€theÐ  p Ðrights€and€liabilities€of€the€United€States,€as€the€Supreme€CourtÐ °  Ðheld€in€òòÔ_ÔClearfieldÔ_Ô€Trust€Co.óó€v.€òòUnited€Statesóó,€318€U.S.€363€(1943).€Ð @" ÐIf€Congress€enacts€a€statute,€that€statute€governs.€€If€CongressÐ Ð $ Ðdoes€not,€the€federal€courts€apply€federal€common€law.€€The€UnitedÐ `"°& ÐStates's€general€right€of€setoff,€like€its€other€rights€inÐ ð#@( Ðcommercial€disputes,€is€a€matter€of€federal€common€law,€as€is€theÐ €%Ð * Ðpriority€of€that€right€as€against€the€rights€of€other€creditors.Ð '`", Ðà ` àWe€address€first,€if€briefly,€the€government's€contentionÐ  (ð#. Ðthat€this€case€falls€within€a€federal€statute.€€The€governmentÐ 0*€%0 Ðinvokes€the€Assignment€of€Claims€Act,€31€U.S.C.€ðð3727€(1994),Ð À+'2 Ðwhich€provides€certain€requirements€for€the€assignment€of€claimsÐ ° Ðagainst€the€federal€government,€none€of€which€Fleet€has€met.€€FleetÐ @ Ðresponds€correctly€that€the€Act€applies€only€to€the€voluntaryÐ Ð  Ðassignment€of€claims,€and€not€to€assignments€by€operation€of€law,Ð ` ° Ðincluding€those€in€the€context€of€bankruptcy.€€òòUnited€Statesóó€v.Ð ð @ ÐòòAetna€Ô_ÔCasÔ_Ô.€&€Sur.€Co.óó,€338€U.S.€366,€373„74€(1949).€€The€governmentÐ € Ð  Ðalso€makes€some€passing€references€to€the€Judgment€Setoff€Act,€31Ð `  ÐU.S.C.€ðð3728€(1994€&€Supp.€II€1996),€but€does€not€press€the€point;Ð  ð  Ðthere€is€no€judgment€at€stake€in€this€case€and€so€the€Act€by€itsÐ 0€  Ðterms€does€not€apply.€€Therefore,€the€question€of€the€priority€ofÐ À Ðthe€government's€setoff€rights€is€a€question€of€federal€common€law.Ð P  Ðà ` àThat€said,€a€federal€court€applying€federal€common€lawÐ à0 Ðwill€often€simply€incorporate€the€law€of€the€appropriate€state€ifÐ pÀ Ðthere€is€no€relevant€federal€interest€to€justify€a€distinct€federalÐ P Ðrule.€€In€òòUnited€Statesóó€v.€òòÔ_ÔKimbellÔ_Ô€Foods,€Inc.óó,€440€U.S.€715Ð à Ð(1979),€the€Supreme€Court€considered€whether€to€rely€on€any€federalÐ  p Ðinterest€in€generating€federal€common€law€to€determine€the€priorityÐ °  Ðof€a€lien€that€the€government€acquired€as€a€party€to€a€contract.€Ð @" ÐThe€Court€held€that€state€law€should€apply,€and€reasoned€that€thereÐ Ð $ Ðwas€no€sufficiently€compelling€federal€interest€at€stake.€€òòId.óó€atÐ `"°& Ð740.€€It€noted€that€the€expectations€of€parties€to€commercialÐ ð#@( Ðtransactions€tend€to€be€based€on€state€law,€and€that€the€federalÐ €%Ð * Ðcourts€should€not€disrupt€those€expectations€without€good€reason.€Ð '`", ÐòòId.óó€at€739„40.€€The€Court€distinguished€the€problem€of€commercialÐ  (ð#. Ðliens€held€by€the€federal€government€from€that€of€federal€taxÐ 0*€%0 Ðliens.€Tax€collection€is€uniquely€important€to€the€properÐ À+'2 Ðfunctioning€of€the€government,€and€in€tax€cases€the€government€isÐ ° Ðan€involuntary€creditor.€€òòId.óó€at€734„36.Ð @ Ðà ` àThe€present€case€involves€both€of€the€situations€theÐ Ð  ÐCourt€discussed€in€òòÔ_ÔKimbellÔ_Ô€Foodsóó.€€As€to€Calore's€unpaid€taxes,€theÐ ` ° Ðgovernment€is€an€involuntary€creditor€facing€the€problem€ofÐ ð @ Ðenforcement:€if€the€government's€allegations€are€true,€Calore€wasÐ € Ð  Ðengaged€in€a€continuing€process€of€misappropriating€fundsÐ `  Ðsupposedly€held€in€trust€for€employee€taxes€both€before€and€afterÐ  ð  Ðfiling€its€Chapter€11€petition.€€As€to€the€GSA's€contract€debts,€byÐ 0€  Ðcontrast,€the€government€was€purchasing€services€on€the€market€andÐ À Ðshould€not€necessarily€expect€treatment€different€from€that€of€anyÐ P  Ðother€participant€in€commerce.Ð à0 Ðà ` àWhen€the€federal€courts€make€new€federal€common€law,€itÐ pÀ Ðis€to€protect€strong€federal€interests€„„€for€example,€the€interestÐ P Ðof€the€government€as€tax€creditor.€€Happily€for€federalismÐ à Ðpurposes,ò òó ó€state€law€adequately€protects€that€interest€here.€€WeÐ  p Ðread€the€Uniform€Commercial€Code,€at€least€as€interpreted€byÐ °  ÐMassachusetts,׃×Ý ƒ#ÃÝòòÚ  Ú10Ú  ÚóóÝ  Ý×  ×€differently€than€did€the€bankruptcy€court,€and€forÐ @" Ðpresent€purposes€we€incorporate€state€law€into€federal.׃è×Ý ƒ#ÃÝòòÚ  Ú11Ú  ÚóóÝ  Ý×  ×€€OurÐ Ð $ Ðanalysis€of€the€Code€follows.Ð `"°& ÐÐ  ð#@( Ð2.€€Article€Nine€and€setoff€priorityÐ ° Ðò òó óà ` àInitially,€we€note€that€the€bankruptcy€court€correctlyÐ @ Ðconcluded€that€Article€Nine€of€the€Uniform€Commercial€Code€appliedÐ Ð  Ðto€the€relative€priority€of€setoffs€and€security€interests€despiteÐ ` ° Ðthe€language€of€section€9„104(i),€which€states€that€the€ArticleÐ ð @ Ðdoes€not€apply€to€"any€right€of€set„off."€€Mass.€Gen.€Laws€ch.€106,Ð € Ð  Ððð9„104(i)€(2000)€(repealed€2001);€òòseeóó€5€òòCollieróó,€òòsupraóó,€ððÐ `  Ð533.12[1]€("The€majority€of€jurisdictions€construe€section€9„104(i)Ð  ð  Ðto€mean€that,€although€a€creditor€may€claim€and€enforce€a€right€ofÐ 0€  Ðsetoff€without€complying€with€the€requirements€of€Article€Nine,Ð À Ðnevertheless€Article€Nine€governs€the€priority€of€any€setoff€rightÐ P  Ðin€conflict€with€an€Article€Nine€security€interest.").€€The€Ð à0 ÐSupreme€Judicial€Court€of€Massachusetts€has€applied€Article€Nine€toÐ pÀ Ðdetermine€the€validity€of€a€setoff€right€after€an€assignment€ofÐ P Ðaccounts€receivable€as€security.€€òòSeeóó€òòGraves€Equip.,€Inc.óó€v.€òòM.Ð à ÐÔ_ÔDeMatteoÔ_Ô€Constr.€Co.óó,€397€Mass.€110,€489€N.E.2d€1010,€1011€(1986);Ð  p ÐòòFall€River€Trust€Co.óó€v.€òòB.G.€Ô_ÔBrowdyÔ_Ô,€Inc.óó,€346€Mass.€614,€195Ð °  ÐN.E.2d€63,€64€(1964).Ð @" ÐÓÊÝÓÓÓà ` àThe€bankruptcy€court€then€proceeded€to€apply€sectionÐ Ð $ Ð9-312(5)€of€that€Article.Ó °X°` ¡¼ÓÓ °` ¸ °XÓ€€Section€9-312(5)€accords€priorityÐ `"°& Ð"between€conflicting€security€interests€in€the€same€collateral"€toÐ ð#@( Ðthat€secured€party€who€first€files€or€perfects€according€to€theÐ €%Ð * Ðrequirements€of€Article€Nine;€or,€if€neither€of€the€contestingÐ '`", Ðparties€has€filed€or€perfected,€to€that€party€whose€interest€firstÐ  (ð#. Ðattached.׃×Ý ƒ#ÃÝòòÚ  Ú12Ú  ÚóóÝ  Ý×  ×€€ÓqfÓÔ#†XÒ‡XXXÒ‡K#ÔÔ‡XÒ‡XXXÒ‡ÔÓ" °X°` Xg"ÓÓüÓÓ °` ”°XÓFleet€defends€the€bankruptcy€court's€choice€of€thatÐ 0*€%0 Ðprovision.€€The€government€argues€that,€instead,€the€court€shouldÐ ° Ðhave€applied€section€Ô#†XÒ‡XXXÒ‡Si#ÔÔ‡XÒ‡XXXÒ‡Ô9-318,€which€applies€to€the€assignment€ofÐ @ Ðaccounts€receivable.€€Under€section€9-318,€an€account€debtor€ò òó ómayÐ Ð  Ðassert€against€an€assignee€any€"defense€or€claim"€that€eitherÐ ` ° Ðarises€from€the€terms€of€the€assigned€contract€or€accrued€beforeÐ ð @ Ðthe€account€debtor€had€notice€of€the€assignment.Ô_Ô׃` ×Ý ƒ#ÃÝòòÚ  Ú13Ú  ÚóóÝ  Ý×  ×Ô_ÔÐ € Ð  ÐÓ”iÓÓÓÓ °ÓÓ °Óà ` àFor€three€reasons,€we€hold€that€section€9-318€applies€toÐ `  Ðthis€case€and€section€9-312(5)€does€not.€€First,€the€government'sÐ  ð  Ðright€of€setoff€fits€within€subsection€9-318(1)(b)'s€description€ofÐ 0€  Ð"a€defense€or€claim€of€the€account€debtor€against€the€assignor."€Ð À ÐIn€two€cases€we€cited€earlier,€òòGraves€Equipmentóó€and€òòFall€RiverÐ P  ÐTrustóó,€Massachusetts's€highest€court€applied€section€9-318€to€aÐ à0 Ðright€of€setoff€asserted€by€an€account€debtor€against€an€assigneeÐ pÀ Ðof€accounts€receivable.€€òòGraves€Equip.óó,€489€N.E.2d€at€1011„12;€òòFallÐ P ÐÑ ïO)Ñâ  âÑe°Ñâ  âÑ  ÑRiveróó,€195€N.E.2d€at€64.€€The€only€possible€way€to€distinguish€thisÐ e Ðcase€from€òòGraves€Equipmentóó€and€òòFall€River€Trustóó€would€rely€on€theÐ õ Ðfact€that€in€this€case,€Fleet's€predecessor€Shawmut€first€took€aÐ …  Ðlien€on€Calore's€accounts,€by€a€prepetition€security€agreement€andÐ  ° Ðthen€by€the€June€1995€borrowing€order;€only€later,€with€the€JulyÐ ¥ @ Ð1996€sale€of€assets,€did€Fleet€obtain€permission€to€lift€theÐ 5 Ð  Ðautomatic€stay€and€to€exercise€its€right€to€take€an€assignment€ofÐ Å `  Ðthe€accounts.€€The€application€of€section€9-312(5)€must€thereforeÐ Uð  Ðrest€on€the€premise€that€in€this€context€the€rights€of€a€creditorÐ å€  Ðwho€holds€a€perfected€lien€on€accounts€receivable€and€subsequentlyÐ u Ðbecomes€an€assignee€exceed€those€of€one€who€becomes€an€assigneeÐ   Ðdirectly.Ð •0 Ðà ` àNeither€Fleet€nor€the€bankruptcy€court,€however,€offerÐ %À Ðany€reason€grounded€in€policy€to€reach€a€different€result€in€thisÐ µP Ðcase,€which€features€an€assignment€through€a€lien,€from€that€weÐ Eà Ðwould€reach€in€a€case€of€a€direct€assignment.€€It€would€be€an€oddÐ Õp Ðresult€if€parties€whose€agreement€to€assign€accounts€would€remainÐ e  Ðsubject€to€an€account€debtor's€existing€defenses€and€claims€couldÐ õ" Ðbypass€those€defenses€and€claims€with€the€device€of€a€lien.€Ð … $ ÐMoreover,€there€is€authority€in€other€jurisdictions€to€theÐ "°& Ðcontrary.€€òòSeeóó€òòMe.€Farmers€Exch.óó€v.€òòFarm€Credit€of€Me.óó,€2002€ME€18Ô#†XÒ‡XXXÒ‡Ÿj#ÔÔ‡XÒ‡XXXÒ‡Ô,Ð ¥#@( Ððð€13Ô#†XÒ‡XXXÒ‡ûv#ÔÔ‡XÒ‡XXXÒ‡Ô€(stating€that€section€9„318€"provides€a€limited€right€to€aÐ 5%Ð * Ðsetoff€for€[an€account€debtor],€a€right€that€can€be€superior€to€theÐ Å&`", Ðsecurity€interest€of€a€secured€party,"€and€then€applying€sectionÐ U(ð#. Ð9-318(1)(a)€because€the€account€debtor€had€noticeÔ#†XÒ‡XXXÒ‡Zw#ÔÔ‡XÒ‡XXXÒ‡Ô);€òòCommerce€Bank,Ð å)€%0 ÐN.A.óó€v.€òòChrysler€Realty€Corp.óó,€244€F.3d€777,€783€(10th€Cir.€2001)Ð u+'2 Ð(applying€Kansas€law)€("The€fact€that€[the€secured€party]€had€aÐ e Ðperfected€security€interest,€and€[the€account€debtor]€did€not,Ð õ Ðmakes€no€difference€because€[the€secured€party]'s€secured€statusÐ …  Ðcomes€into€play€only€after€it€is€shown€that€[the€assignor]€wasÐ  ° Ðentitled€to€payment€of€the€funds.Ô#†XÒ‡XXXÒ‡Êx#ÔÔ‡XÒ‡XXXÒ‡Ô");€òòseeóó€òòalsoóó€òòChase€Manhattan€BankÐ ¥ @ Ð(N.A.)óó€v.€òòStateóóÔ#†XÒ‡XXXÒ‡{#ÔÔ‡XÒ‡XXXÒ‡Ô,€357€N.E.2d€366,€369Ô#†XÒ‡XXXÒ‡£{#ÔÔ‡XÒ‡XXXÒ‡Ô€(N.Y.€1976)Ô#†XÒ‡XXXÒ‡ú{#ÔÔ‡XÒ‡XXXÒ‡Ô€("[Ô_ÔT]heÔ_Ô€'first€toÐ 5 Ð  Ðfile'€rule€[referring€to€section€9-312(5)],€designed€to€resolveÐ Å `  Ðsituations€where€secured€parties€are€competing€in€assertingÐ Uð  Ðsuperior€rights,€should€not€be€controlling€when€the€dispute€isÐ å€  Ðbetween€a€secured€party€and€an€account€debtor.Ô#†XÒ‡XXXÒ‡H|#ÔÔ‡XÒ‡XXXÒ‡Ô").€€In€addition,€inÐ u ÐòòUnited€California€Bankóó€v.€òòEastern€Mountain€Sports,€Inc.óó,€546€F.Ð   ÐSupp.€945€(D.€Mass.€1982),€òòcitedóó€òòinóó€òòGraves€Equipmentóó,€489€N.E.2d€atÐ •0 Ð1012Ô#†XÒ‡XXXÒ‡ö}#ÔÔ‡XÒ‡XXXÒ‡Ô,€a€case€decided€under€Massachusetts€law,€the€District€ofÐ %À ÐMassachusetts€applied€section€9-318€to€an€assignment€following€theÐ µP Ðconveyance€of€a€security€interest.€€òòId.óó€at€950,€963„64.Ð Eà Ðò òó óà ` àÔ#†XÒ‡XXXÒ‡/#ÔÔ‡XÒ‡XXXÒ‡ÔFleet€relies€for€its€contrary€argument€on€òòÔ_ÔMNCÔ_Ô€CommercialÐ Õp ÐCorp.óó€v.€òòJoseph€T.€Ô_ÔRyersonÔ_Ô€&€Son,€Inc.óó,€882€F.2d€615€(2d€Cir.Ð e  Ð1989)Ô#†XÒ‡XXXÒ‡z€#ÔÔ‡XÒ‡XXXÒ‡Ô,€in€which€the€Second€Circuit€applied€section€9-312€to€aÐ õ" Ðdispute€between€an€account€debtor€and€the€assignee€of€accountsÐ … $ Ðreceivable.€€òòId.óó€at€620.€€In€that€case,€however,€the€account€debtorÐ "°& Ðdid€not€actually€own€the€claim€against€the€assignor€that€it€soughtÐ ¥#@( Ðto€assert€against€the€assignee,€and€the€court€stated€that€New€YorkÐ 5%Ð * Ðlaw€left€open€the€question€what€would€occur€if€the€account€debtorÐ Å&`", Ðâ âdid€own€the€asserted€claim.€€òòId.óó€€In€this€case,€Fleet€cannot€argueÐ U(ð#. Ðthat€the€government€does€not€own€the€IRS's€claim€against€Calore.׃×Ý ƒ#ÃÝòòÚ  Ú14Ú  ÚóóÝ  Ý×  ×Ô#†XÒ‡XXXÒ‡¬#ÔÔ‡XÒ‡XXXÒ‡ÔÐ e Ðâ âÔ#†XÒ‡XXXÒ‡ë„#ÔÔ‡XÒ‡XXXÒ‡Ôà ` àSecond,€the€government's€right€of€setoff€is€not€clearlyÐ õ Ða€"security€interest"€within€the€meaning€of€section€9-312(5).€Ð …  ÐAlthough€a€claim€accompanied€by€a€right€of€setoff€is€a€"securedÐ  ° Ðclaim"€within€the€meaning€of€the€Bankruptcy€Code,€11€U.S.C.Ð ¥ @ Ððð506(a),€a€secured€claim€within€the€meaning€of€federal€bankruptcyÐ 5 Ð  Ðlaw€is€not€necessarily€the€same€thing€as€a€security€interest€withinÐ Å `  Ðthe€meaning€of€Article€Nine.€€If€a€right€of€setoff€were€an€ArticleÐ Uð  ÐNine€security€interest,€it€is€difficult€to€see€how€it€would€escapeÐ å€  Ðthe€procedural€requirements€for€priority,€such€as€filing€orÐ u Ðperfection,€imposed€by€that€Article.€€That€result€would€produceÐ   Ðtension€with€the€reading€of€section€9„104(i)€discussed€above,€underÐ •0 Ðwhich€setoffs€are€not€subject€to€Article€Nine's€proceduralÐ %À Ðrequirements.€€Some€courts€have€found€persuasive€in€this€context€aÐ µP Ðcomment€of€Article€Nine's€reporter,€Professor€Grant€Gilmore,€thatÐ Eà Ð"[Ô_Ôo]fÔ_Ô€course€a€right€of€set-off€is€not€a€security€interest€and€hasÐ Õp Ðnever€been€confused€with€one:€the€statute€[referring€to€section€9„Ð e  Ð104(i)]€might€as€appropriately€exclude€fan€dancing."€€I€G.€Gilmore,Ð õ" ÐòòSecurity€Interests€in€Personal€Propertyóó€ðð10.7,€at€315-16€(1965),Ð … $ Ðòòquotedóó€òòinóó€òòÔ_ÔNat'lÔ_Ô€City€Bank,€Ô_ÔN.W.Ô_Ôóó€v.€òòColumbian€Mut.€Life€Ins.€Co.óó,Ð "°& Ð282€F.3d€407,€410€(6th€Cir.€2002).Ô#†XÒ‡XXXÒ‡L…#ÔÔ‡XÒ‡XXXÒ‡ÔÐ ¥#@( Ðà ` àThird,€section€9-312(5)€by€its€terms€applies€"Ô#†XÒ‡XXXÒ‡‰Œ#Ô[Ô_Ôi]nÔ_Ô€allÐ e Ðcases€not€governed€by€other€rules€stated€in€this€section,"€that€is,Ð õ Ðsection€9-312.€€The€first€subsection€of€that€section,€9-312(1),€inÐ …  Ðturn€Ô‡XÒ‡XXXÒ‡Ôstates€that€"[Ô_Ôt]heÔ_Ô€rules€of€priority€stated€in€other€sectionsÐ  ° Ðof€this€Part€and€in€the€following€sections€shall€govern€whenÐ ¥ @ ÐapplicableÔ#†XÒ‡XXXÒ‡ Ž#ÔÔ‡XÒ‡XXXÒ‡Ô."€€The€Part€cited€is€Part€Three€of€Article€Nine,€whichÐ 5 Ð  Ðincludes€section€9-318.€€This€language€indicates€that€sectionÐ Å `  Ð9-312(5)€states€a€default€rule€that€courts€should€apply€only€in€theÐ Uð  Ðabsence€of€other€governing€provisions.€€Thus,€to€the€extent€weÐ å€  Ðcould€properly€view€the€dispute€between€Fleet€and€the€government€asÐ u Ðeither€a€contest€"of€priority€between€conflicting€securityÐ   Ðinterests"€or€a€question€of€the€validity€of€a€"defense€or€claim€ofÐ •0 Ðthe€account€debtor€against€the€assignor,Ô#†XÒ‡XXXÒ‡#ÔÔ‡XÒ‡XXXÒ‡Ô"€we€should€adopt€theÐ %À Ðlatter€perspectiveÔ#†XÒ‡XXX҇ˑ#ÔÔ‡XÒ‡XXXÒ‡Ô.Ð µP ÐÓ °ílÓÓ °Óà ` àAccordingly,€we€next€apply€section€9-318€to€the€facts€ofÐ Eà Ðthis€case.Ô#†XÒ‡XXXÒ‡I’#ÔÐ Õp ÐÓÍlÓÓÓ3.€€Timing€of€notice€and€accrualÐ e  Ðà ` àIn€this€case,€because€Calore's€debt€to€the€IRS€wasÐ õ" Ðunrelated€to€the€terms€of€the€contract€between€Calore€and€the€GSA,Ð … $ Ðsubsection€(1)(b)€of€section€9-318€governs€the€outcome.€€Under€thatÐ "°& Ðprovision,€the€crucial€times€are€when€the€government€receivedÐ ¥#@( Ðnotice€of€the€assignment€of€Calore's€debts€to€Fleet,€and€when€theÐ 5%Ð * ÐIRS's€claim€against€Calore€accrued.Ð Å&`", Ðà ` àThe€parties€contest€exactly€when€the€government€receivedÐ U(ð#. Ðnotice.€The€government€argues€that€it€received€notice€only€whenÐ å)€%0 ÐFleet€informed€the€court€and€the€other€parties€of€the€sale€ofÐ u+'2 ÐCalore's€assets€in€August€1996.€€Because€that€date€is€also€whenÐ e ÐCalore€ceased€doing€business€as€Calore,€the€government's€tax€claimsÐ õ Ðnecessarily€accrued€before€notice,€and€those€claims€take€priority.€Ð …  ÐFleet€argues€that€the€government€received€notice€at€the€time€of€theÐ  ° Ðfirst€borrowing€order,€in€June€1995,€which€gaveFleet'spredecessorÐ ¥ @ ÐShawmut€its€security€interest€in€all€of€Calore's€assets.Ð 5 Ð  Ðà ` àThe€government's€claims€based€on€Calore's€prepetition€taxÐ Å `  Ðdebts€accrued,€by€definition,€before€Calore's€Chapter€11€petitionÐ Uð  Ðand€so€before€the€borrowing€order.€€The€government's€rights€basedÐ å€  Ðon€those€claims€therefore€take€priority€over€Fleet's€securityÐ u Ðinterest€even€on€Fleet's€view€of€timing.€€The€government's€setoffÐ   Ðrights€based€on€postpetition€tax€claims€presumably€accrued,€atÐ •0 Ðleast€in€part,€after€June€1995€but€before€August€1996.€€We€mustÐ %À Ðtherefore€decide€whether€the€borrowing€order€provided€theÐ µP Ðgovernment€with€reasonable€notice€under€section9-318,€so€that€theÐ Eà Ðgovernment€cannot€now€assert€claims€accruing€after€the€borrowingÐ Õp Ðorder€against€FleetÔ‡XÒ‡XXXÒ‡Ô.Ð e  Ðà ` àIt€did€not.€€The€borrowing€order€at€most€informed€theÐ õ" Ðgovernment€not€of€an€assignment€of€Calore's€accounts,€but€only€ofÐ … $ Ða€lien€placed€on€those€accounts€that€could€later€lead€to€anÐ "°& Ðassignment.€€Following€the€borrowing€order,€the€government€andÐ ¥#@( Ðother€Ô_ÔacccountÔ_Ô€debtors€continued€to€do€business€with€and€makeÐ 5%Ð * Ðpayments€to€Calore,€and€not€to€Shawmut,€the€Ô_ÔlienholderÔ_Ô.€€At€leastÐ Å&`", Ðone€court€has€reasoned€in€applying€section€9-318€that€notice€of€anÐ U(ð#. Ðassignment€that€precedes€the€assignment€itself€is€ineffective.€€òòSeeóóÐ å)€%0 ÐòòCitizens€State€Bank€of€Corriganóó€v.€òòÔ_ÔJ.M.Ô_Ô€Jackson€Corp.óó,€537€S.W.2dÐ u+'2 Ð120,€121€(Tex.€Civ.€App.€1976)€("[An€account€debtor€Ô_Ôcan]notÔ_Ô€be€putÐ e Ðon€notice€of€an€assignment€prior€to€the€time€that€Ô_ÔthatÔ_Ô€assignmentÐ õ Ðexisted.")Ô#†XÒ‡XXXÒ‡Ú›#ÔÔ‡XÒ‡XXXÒ‡Ô.€€This€is€not€a€case€in€which€Calore€assigned€accountsÐ …  Ðreceivable€to€serve€as€security,€with€the€assignment€effective€atÐ  ° Ðthe€time€the€debt€was€incurred,€although€such€assignments€do€occurÐ ¥ @ Ðand€are€sometimes€called€"security€interests."€In€this€case,€FleetÐ 5 Ð  Ðacquired€its€right€to€collect€Calore's€receivables€only€later,Ð Å `  Ðafter€the€July€1996€sale€of€assets.Ð Uð  Ðà ` àWe€need€not€rule€out€the€possibility€that€someÐ å€  Ðparticularly€comprehensive€and€express€form€of€notice€couldÐ u Ðpotentially€affect€an€account€debtor's€rights€before€an€actualÐ   Ðassignment,€however.€€On€the€facts€of€this€case,€the€borrowingÐ •0 Ðorder€Ô#†XÒ‡XXXÒ‡— #ÔÔ‡XÒ‡XXXÒ‡Ôlacked€sufficient€detail€to€satisfy€the€requirements€ofÐ %À Ðsection9-318(3),€which€states€that€notice€must€"reasonablyÐ µP Ðidentify€the€rights€assigned."Ô#†XÒ‡XXXÒ‡ÿ£#ÔÔ‡XÒ‡XXXÒ‡Ô€€Mass.€Gen.€Laws€ch.€106,€ðð9-318(3)Ð Eà Ð(2000)€(repealed€2001)Ô#†XÒ‡XXXÒ‡û¤#ÔÔ‡XÒ‡XXXÒ‡Ô.€€As€quoted€earlier,€the€borrowing€orderÐ Õp Ðrefers€generally€to€all€of€Calore's€accounts.€€It€does€not€identifyÐ e  Ðany€debtors,€contracts,€or€amounts.€€Although€there€are€no€relevantÐ õ" Ðcases€under€Massachusetts€law,€courts€applying€section9-318Ô#†XÒ‡XXXÒ‡¥#ÔÔ‡XÒ‡XXXÒ‡Ô(3)Ô#†XÒ‡XXXÒ‡ü¦#ÔÔ‡XÒ‡XXXÒ‡Ô€asÐ … $ Ðpart€of€the€law€of€other€states€have€required€more€detail€inÐ "°& Ðnotices€of€assignmentÔ#†XÒ‡XXXÒ‡A§#ÔÔ‡XÒ‡XXXÒ‡Ô.€€òòSeeóó€òòProgressive€Design,€Inc.óó€v.€òòOlson€Bros.Ð ¥#@( ÐMfg.€Co.óó,€263€N.W.2d€465,€468„69€(Neb.€1978)€(rejecting€asÐ 5%Ð * Ðreasonable€notice€a€letter€that€"did€not€identify€the€contract€byÐ Å&`", Ðdate,€or€by€the€type€or€kind€of€contract,€nor€did€it€refer€to€theÐ U(ð#. Ðproduct€or€services€contracted€for,€nor€even€the€amount€of€moneyÐ å)€%0 Ðinvolved");€òòBank€of€Salt€Lakeóó€v.€òòCorp.€of€the€President€of€theÐ u+'2 ÐChurch€of€Jesus€Christ€of€Latter„Day€Saintsóó,€534€P.2d€887,€891Ð e Ð(Utah€1975)€(dictum)€(stating€that€a€letter€with€incorrect€invoiceÐ õ Ðnumbers€and€amounts€did€not€provide€reasonable€notice).€€Certainly,Ð …  Ðin€order€to€prevent€an€account€debtor€from€raising€against€anÐ  ° Ðassignee€defenses€and€claims€accruing€after€the€notice€but€beforeÐ ¥ @ Ðthe€assignment€itself,€the€notice€given€would€have€to€meet€at€leastÐ 5 Ð  Ðthe€standards€set€forth€in€these€cases.€Ð Å `  Ðà ` àThe€reason€that€the€order€did€not€include€such€specificsÐ Uð  Ðis€probably€that€no€one€involved€„„€Fleet,€Calore,€or€theÐ å€  Ðbankruptcy€court€„„€intended€the€order€to€serve€as€notice€toÐ u ÐCalore's€account€debtors€of€an€assignment€of€Calore's€accountsÐ   Ðreceivable.€€Nor€would€the€attorneys€at€the€U.S.€Attorney's€OfficeÐ •0 Ðfor€the€District€of€Massachusetts,€to€whom€the€order€was€served,Ð %À Ðhave€had€any€reason€to€think€that€the€order€had€such€a€purpose.€€Ð µP ÐNothing€in€the€order€even€mentioned€the€IRS€or€the€GSA,€whoseÐ Eà Ðagents€might€perhaps€have€understood€the€potential€significance€ofÐ Õp Ða€potential€assignment.€€òòCf.óó€òòChase€Manhattan€Bankóó,€357€N.E.2d€atÐ e  Ð369€(holding€that€a€UCC€filing€statement€filed€with€New€York'sÐ õ" ÐSecretary€of€State€did€not€give€reasonable€notice€to€the€state€ofÐ … $ Ðits€contents€under€section€9-318).€€Accordingly,€the€governmentÐ "°& Ðreceived€its€notice€of€assignment€no€earlier€than€the€followingÐ ¥#@( ÐAugust;€because€the€government's€tax€claims€accrued€prior€to€thatÐ 5%Ð * Ðdate,€it€can€exercise€its€right€of€setoff€against€Fleet,€and€theÐ Å&`", Ðbankruptcy€court's€conclusion€was€mistaken.Ð U(ð#. Ðà ` àThe€purpose€of€the€rule€requiring€notice€to€foreclose€anÐ å)€%0 Ðaccount€debtor's€setoff€rights€for€claims€independent€of€theÐ u+'2 Ðcontract€out€of€which€the€account€arises€is€presumably€to€permitÐ e Ðthe€account€debtor€to€protect€its€rights.€€Knowing€that€it€will€noÐ õ Ðlonger€be€able€to€rely€on€the€assigned€accounts€in€disputes€withÐ …  Ðthe€assignor,€the€account€debtor€may€act€differently€in€dealingsÐ  ° Ðwith€the€assignor,€or€even€cease€doing€business€with€the€assignorÐ ¥ @ Ðentirely.€€The€government€in€this€context€is,€of€course,€unable€toÐ 5 Ð  Ðmake€such€choices.€€Calore's€tax€debts€would€continue€to€accrueÐ Å `  Ðregardless€of€the€government's€actions.€€That€distinction€betweenÐ Uð  Ðthe€government€and€an€ordinary€commercial€actor€is€one€of€theÐ å€  Ðreasons€that€the€federal€courts€have€been€particularly€careful€toÐ u Ðguard€the€government's€interest€in€tax€collection.€€òòSeeóó€òòÔ_ÔKimbellÔ_ÔÐ   ÐFoodsóó,€440€U.S.€at€735-36€("The€United€States€is€an€involuntaryÐ •0 Ðcreditor€of€delinquent€taxpayers,€unable€to€control€the€factorsÐ %À Ðthat€make€tax€collection€likely.").€€Nevertheless,€proper€notice€inÐ µP Ðthis€case€might€have€been€helpful€to€the€United€States:Ð Eà Ðspecifically,€it€might€have€alerted€government€attorneys€to€theÐ Õp Ðneed€to€act€quickly€to€protect€the€government's€rights.€€Thus,Ð e  Ðwhile€we€have€treated€the€waiver€and€priority€questions€separatelyÐ õ" Ðin€this€opinion,€the€underlying€theme€remains€that€it€is€not€clearÐ … $ Ðon€the€present€record€that€the€government's€inaction€wasÐ "°& Ðunreasonable€or€inappropriate.Ô#†XÒ‡XXXÒ‡¨#ÔÐ ¥#@( ÐÓõÓÔ‡XÒ‡XXXÒ‡ÔÓ  ÓIV.Ð 5%Ð * ÐÓè¹ÓÓoÓÔ#†XÒ‡XXX҇ɹ#Ôà ` àOn€the€present€record,€the€bankruptcy€court's€decisionÐ Å&`", Ðcan€stand€on€none€of€the€grounds€it€gave:€waiver,€equitableÐ U(ð#. Ðdiscretion€over€setoff,€and€priority€are€all€insufficient.€€As€theÐ å)€%0 Ðgovernment€points€out,€the€remaining€dispute€no€longer€concerns€anÐ u+'2 Ðexisting€bankruptcy€estate;€neither€party€has€briefed€where€anyÐ e Ðfuture€proceedings,€if€any,€should€take€place.€€We€thereforeÐ õ Ðòòreverseóó€the€decision€of€the€district€court€and€òòremandóó€withÐ …  Ðinstructions€to€reverse€the€decision€of€the€bankruptcy€court,€andÐ  ° Ðto€determine,€with€the€assistance€of€the€parties,€the€appropriateÐ ¥ @ Ðdisposition€of€the€case.€€Should€the€government€bring€futureÐ 5 Ð  Ðproceedings€against€Fleet€for€restitution,€this€opinion€willÐ Å `  Ðprovide€guidance€for€that€action.€€No€costs€are€awarded.Ð Uð  ÐÓºÓÓ °X°` ªiÓÓA†XÐXdÐXdiAÓ