Peaje Investments LLC v. PR Highways and Transportation, et al

Filing

OPINION issued by Jeffrey R. Howard, Chief Appellate Judge; William J. Kayatta, Jr., Appellate Judge and Nancy Torresen,* Chief U.S. District Judge. Published. *Of the District of Maine, sitting by designation. [17-2165, 17-2166, 17-2167]

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Date Filed: 08/08/2018

Entry ID: 6189344

United States Court of Appeals
For the First Circuit
Nos. 17-2165, 17-2166, 17-2167
IN RE: THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO
RICO, as representative for the Commonwealth of Puerto Rico; THE
FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as
representative for the Puerto Rico Highways & Transportation
Authority,
Debtors.

PEAJE INVESTMENTS LLC,
Plaintiff, Appellant,
v.
THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as
representative for the Puerto Rico Highways & Transportation
Authority; HON. CARLOS CONTRERAS-APONTE, in his official
capacity as Executive Director of Puerto Rico Highways &
Transportation Authority; THE FINANCIAL OVERSIGHT AND MANAGEMENT
BOARD FOR PUERTO RICO, as representative for the Commonwealth of
Puerto Rico; HON. RICARDO ROSSELLO NEVARES, in his official
capacity as Governor of the Commonwealth of Puerto Rico; HON.
RAUL MALDONADO GAUTIER, in his official capacity as Secretary of
Treasury of the Commonwealth of Puerto Rico; HON. JOSE IVAN
MARRERO ROSADO, in his official capacity as Executive Director
of the Office of Management & Budget; PUERTO RICO FISCAL AGENCY
AND FINANCIAL ADVISORY AUTHORITY; HON. GERARDO JOSE PORTELA
FRANCO, in his official capacity as Executive Director of the
Puerto Rico Fiscal Agency and Financial Advisory Authority,
Defendants, Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

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[Hon. Laura Taylor Swain, U.S. District Judge]

Before
Howard, Chief Judge,
Kayatta, Circuit Judge,
and Torresen, Chief U.S. District Judge.

G. Eric Brunstad, Jr., with whom Allan S. Brilliant, Robert
J. Jossen, Andrew C. Harmeyer, Dechert LLP, Dora L. Monserrate
Peñagarícano, and Monserrate Simonet & Gierbolini, LLC were on
brief, for appellant.
Jeffrey W. Levitan, with whom Timothy W. Mungovan, Martin J.
Bienenstock, Stephen L. Ratner, Mark D. Harris, Michael A.
Firestein, Lary A. Rappaport, John E. Roberts, Proskauer Rose LLP,
Hermann D. Bauer, and O'Neill & Borges LLC were on brief, for
appellees The Financial Oversight and Management Board for Puerto
Rico, as representative of the Commonwealth of Puerto Rico and the
Puerto Rico Highways and Transportation Authority.
John J. Rapisardi, Peter Friedman, Elizabeth L. McKeen, and
O'Melveney & Myers LLP, on brief for appellees Puerto Rico Fiscal
Agency and Financial Advisory Authority and Hon. Gerardo Jose
Portela Franco.
Raul Castellanos and Development & Construction Law Group LLC
on brief for appellee Hon. Carlos Contreras Aponte.
Wanda Vázquez Garced, Secretary of Justice, Luis R. Román
Negrón, Solicitor General of Puerto Rico, Department of Justice,
on brief for appellees Hon. Ricardo Antonio Roselló Nevares, Hon.
Raúl Maldonado Gautier, and Hon. José Iván Marrero Rosado.

August 8, 2018



Of the Southern District of New York, sitting by designation.
Of the District of Maine, sitting by designation.



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KAYATTA, Circuit Judge.

Date Filed: 08/08/2018

Entry ID: 6189344

We are asked for the second

time to weigh in on Peaje Investments LLC's claim that what it
characterizes as its "collateral" is being permanently impaired.
Peaje is the beneficial owner of $65 million of uninsured bonds
issued by the Puerto Rico Highways and Transportation Authority
("Authority").

Peaje alleges that its bonds are secured by a lien

on certain toll revenues of the Authority and that, in response to
Puerto Rico's financial crisis, the Authority and the Commonwealth
of Puerto Rico ("Commonwealth") are diverting funds to which Peaje
believes it is entitled under the lien and using them for purposes
other than paying the bonds.

Because both the Authority and the

Commonwealth have commenced bankruptcy cases under Title III of
the Puerto Rico Oversight, Management, and Economic Stability Act
("PROMESA"),

48

U.S.C.

§§ 2101–2241,

Peaje

instituted

the

adversary proceedings now on consolidated appeal to challenge this
diversion.

Despite the novelty and complexity of the bankruptcies

from which this case arose, three narrow rulings dispose of the
appeal now before us:

First, the district court did not abuse its

discretion in limiting Peaje to its argument that it holds a
statutory lien on certain toll revenues of the Authority.
Peaje does not hold such a lien.

Second,

And third, we vacate the district

court's alternative reasons for denying relief so that they may be
reconsidered de novo on a comprehensive, updated record now that
it is clear that Peaje has no statutory lien.

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I.
The Authority was formed in 1965 as a public corporation
and instrumentality of the Commonwealth.

Pursuant to its enabling

act ("Act" or "Enabling Act"), it may borrow money, issue bonds,
and secure those bonds with pledges of revenues.
tit. 9 § 2004(l).

P.R. Laws Ann.

In 1968, the Authority adopted Resolution

No. 68-18 (the "1968 Resolution" or the "Resolution").
Rico

Highway

Authority,

Resolution

No.

68-18,

See Puerto

available

at

http://gdb.pr.gov/investors_resources/documents/FIRMDM-12808969v1-PRHTA1968Resolution.pdf.

In order to provide additional funds

for the construction of roads, bridges, and other facilities, the
1968 Resolution provided for the issuance of bonds.

Id. Art. II,

§ 201.
The

Resolution

guaranteed

that

the

Authority

would

"promptly pay the principal of and the interest on every bond
issued," but that it would do so "solely from Revenues and from
any funds received by the Authority for that purpose from the
Commonwealth which Revenues and funds are hereby pledged to the
payment thereof in the manner and to the extent" provided by the
Resolution.

Id. Art. VI, § 601.

The Resolution established a

special account called the "Sinking Fund," which itself contains
three separate accounts:

the Bond Service Account, the Redemption

Account, and the Reserve Account.

Id. Art. IV, § 401.

The

revenues (and any other pledged funds) deposited in these accounts

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were to be held in trust by the "Fiscal Agent," a bank or trust
company appointed by the Authority, until, in the case of the Bond
Service Account, they were applied to the principal and interest
due on the bonds.

Id. Art. IV, § 402.

Pending the application of

these funds, the Resolution provided that the money "shall be
subject to a lien and charge in favor of the holders of the
bonds . . . and for the further security of such holders until
paid out or transferred."

Id. Art. IV, § 401.

Peaje is the

beneficial owner of various bonds issued pursuant to the 1968
Resolution, with maturity dates ranging from 2023 to 2036. Peaje's
basic position is that it holds, as security for its bonds, a lien
on toll revenues generated from three specific highways maintained
by the Authority.

It further contends that its lien extends not

just to toll revenues currently held by the Fiscal Agent, but also
to the Authority's toll revenues before they are deposited with
the agent.1
In April 2016, in response to growing economic problems
in Puerto Rico, the Commonwealth enacted the Puerto Rico Emergency
Moratorium and Financial Rehabilitation Act, pursuant to which
then-Governor Alejandro García-Padilla issued several executive
orders that suspended the Authority's obligation to deposit toll

1

Peaje contends that its lien also extends to certain tax
revenues of the Authority.
However, this portion of Peaje's
purported lien is not at issue in this appeal.

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revenues with the Fiscal Agent.

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Peaje contends that, as a result,

the Authority and the Commonwealth began using the toll revenues
for purposes other than those allowed by the Resolution, including
to pay operating expenses.

In July 2016, Peaje filed suit in

district court to challenge this diversion of funds.

But Congress

had just enacted PROMESA, instituting a temporary stay of all
proceedings against the Commonwealth and its instrumentalities.
See 48 U.S.C. § 2194(b).

Peaje therefore requested relief from

the temporary stay, pursuant to PROMESA section 405(e)(2), 48
U.S.C.

§ 2194(e)(2),

patterned

after

section

bankruptcy code ("Code"), 11 U.S.C. § 362(d).

362(d)

of

the

The district court

denied relief, Peaje Invs. LLC v. Garcia-Padilla, Nos. 16-2365FAB, 16-2384-FAB, 16-2696-FAB, 2016 WL 6562426, at *6 (D.P.R. Nov.
2, 2016), and we affirmed in relevant part, Peaje Invs. LLC v.
García-Padilla, 845 F.3d 505, 514, 516 (1st Cir. 2017) (Peaje I).
After PROMESA's temporary stay expired, Peaje filed a
second action in district court in May 2017 seeking similar relief.
But soon afterward, the Authority, acting through the Financial
Oversight and Management Board, filed a bankruptcy petition under
Title III of PROMESA.
Title III petition.)

(The Commonwealth had already filed its
This petition triggered an automatic stay

(this time for the pendency of the bankruptcy case) of all actions
against the Authority, including Peaje's second suit.
U.S.C.

§§ 362(a), 922(a);

see

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also

48

U.S.C.

See 11
§ 2161(a)

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(incorporating 11 U.S.C. §§ 362(a) and 922(a) into PROMESA).2
Peaje

then

proceeding

timely
seeking

exercised

its

declaratory

right

and

to

file

injunctive

an

adversary

relief

in

the

jointly administered bankruptcy cases of the Authority and the
Commonwealth.3
Specifically, Peaje asserted the following claims in two
identical verified complaints, filed in the respective Title III
cases of the Authority and the Commonwealth:

(1) a declaration

that the Authority's toll revenues qualify as "pledged special
revenues" under Code section 922(d); (2) adequate protection or,
in the alternative, relief from the stay; (3) a declaration that
Code section 922(d) preempts fiscal plan implementation; (4) a
declaration that Code section 922(d) requires the Authority to
deposit toll revenues with the Fiscal Agent; (5) a declaration
that neither Code section 552 nor 928(b) apply to its bonds; (6) a
declaration that to the extent Code section 928(b) applies to its
bonds, netting out "necessary operating expenses" would constitute

2

Although neither party addresses this point, the automatic
stay under Code section 362 applies to proceedings against the
debtor, while the automatic stay under Code section 922 applies to
proceedings against officers or inhabitants of the debtor. See 11
U.S.C. §§ 362(a), 922(a); see also In re Jefferson Cty., 474 B.R.
228, 248 (Bankr. N.D. Ala. 2012). Both provisions are implicated
here because Peaje has sued the Authority and the Commonwealth, as
well as individual officers in the government of Puerto Rico.
3

In the time since Peaje filed the adversary proceedings now
on appeal, the Authority has defaulted on its bond payments.

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a taking in violation of the Constitution; (7) relief from the
stay so that it can challenge, on constitutional grounds, the
diversion of toll revenues; and (8) injunctive relief requiring
the Authority to resume depositing the toll revenues with the
Fiscal Agent.
Along with its complaints, Peaje filed a motion for a
temporary restraining order ("TRO") enjoining the Authority from
continuing to divert the toll revenues.4

The motion also sought

relief from the automatic bankruptcy stay or, in the alternative,
adequate protection.

As we discuss more fully below, Peaje argued

in its request for a TRO that it was entitled to relief because it
holds a statutory lien on the Authority's toll revenues.

The

district court, to which we will hereinafter refer as the Title III
court, held a preliminary hearing on Peaje's motion and defendants
then filed an opposition brief in which they challenged Peaje's
assertion of a statutory lien on the merits.5

4

This application was later converted into a motion for a
preliminary injunction.
5

Defendants also raised PROMESA section 305, 48 U.S.C.
§ 2165, as a bar to the relief sought by Peaje. This issue seems
to have fallen by the wayside, garnering no mention in the district
court's opinion and no further advocacy by defendants on appeal.
Our opinion issued today in Financial Oversight and Management
Board for Puerto Rico v. Ad Hoc Group of PREPA Bondholders (In re
Financial Oversight and Management Board for Puerto Rico), No. 172079 does address the meaning and effect of section 305.

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After Peaje filed its Reply in the Title III court,
defendants moved, on waiver grounds, to strike from that brief all
assertions related to Peaje's alternative argument that it holds
a non-statutory lien.

The Title III court, relying on Local Civil

Rule 7(c), granted the motion to strike on the grounds that Peaje
had failed to argue, prior to its Reply, that it holds a nonstatutory lien.

See P.R.L.Cv.R. 7(c) (a reply memorandum "shall

be strictly confined to replying to new matters raised in the
objection or opposing memorandum"); see also P.R. LBR 1001-1(b)
(incorporating local rules of the District of Puerto Rico into the
local

bankruptcy

rules).

After

an

evidentiary

hearing,

the

Title III court issued a second order denying both Peaje's request
for

a

preliminary

injunction

and

its

request

for

protection or, alternatively, relief from the stay.

adequate
See Peaje

Invs. LLC v. P.R. Highways & Transp. Auth., 301 F. Supp. 3d 290,
293 (D.P.R. 2017).

Peaje appeals from both orders.
II.

We turn first to the Title III court's decision to grant
defendants' motion to strike.

We have previously reviewed similar

orders for abuse of discretion.

See Amoah v. McKinney, 875 F.3d

60, 62 (1st Cir. 2017); Turner v. Hubbard Sys., Inc., 855 F.3d 10,
12 (1st Cir. 2017).

Presented with no argument to the contrary,

we assume that the same standard applies here.

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Some

statutory

Peaje's potential waiver.

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context

is

necessary

to

Entry ID: 6189344

understand

As we explain more fully in the next

section of this opinion, the Code divides liens into three mutually
exclusive categories, two of which are relevant here:
liens

and

security

interests.6

Two

provisions

of

statutory
the

Code,

incorporated into PROMESA, see 48 U.S.C. § 2161(a), single out
certain types of liens (specifically, security interests) for
special

treatment.

First,

Code

section 552(a)

establishes

a

general rule, subject to several exceptions not relevant here, see
11 U.S.C. § 552(b), that property acquired by the debtor after the
commencement of the bankruptcy case "is not subject to any lien
resulting from any security agreement entered into by the debtor
before the commencement of the case."

11 U.S.C. § 552(a); see

also Assured Guar. Corp. v. Commonwealth of Puerto Rico (In re
Fin. Oversight and Mgmt. Bd. of P.R.), 582 B.R. 579, 593 (D.P.R.
2018).

Second, Code section 928(a) provides an exception to

section 552(a)'s general rule for "special revenues acquired by
the

debtor

§ 928(a).

after
Such

the

commencement

revenues

"shall

of

the

remain

case."

subject

11
to

U.S.C.

any

lien

resulting from any security agreement entered into by the debtor

6

Defendants have consistently referred to Peaje's alternative
position as a consensual lien. But the Code's definitions section
does not use this language, instead identifying a lien arising out
of a contractual arrangement as a security interest. We use the
latter term.

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before the commencement of the case."
allows

debtors

to

offset

Id.

"necessary

Code section 928(b)

operating

"[a]ny such lien on special revenues."

Entry ID: 6189344

expenses"

Id. § 928(b).

from

As the text

of both provisions makes clear, the general rule of section 552(a)
and its exception in section 928(a) apply only to a "lien resulting
from [a] security agreement."7

Id. §§ 552(a), 928(a).

provision applies to statutory liens.

See 5 Collier on Bankruptcy

¶ 552.01[2] (16th ed.); 6 id. ¶ 928.02[2].
in

the

Title III

proceeding

Neither

differ

Thus, Peaje's rights

considerably

depending

on

whether it possesses a statutory lien or a lien resulting from a
security agreement (i.e., a security interest).
With this framework in mind, we find that the district
court did not abuse its discretion in granting the motion to
strike.

We begin where these adversary proceedings began, with

the filing of the verified complaints.

In its complaints, Peaje

alleged, among other things:
[T]he 1968 Bondholders' lien results from both
the Enabling Act that created HTA and the
binding
municipal
resolution
governing
Plaintiff's Bonds.
Thus, that lien is a
"statutory lien" within the meaning of
Section 101(53) of the Bankruptcy Code, 11
U.S.C. § 101(53).

7

"The term 'security agreement' means [an] agreement that
creates or provides for a security interest." 11 U.S.C. § 101(50).
Because the definition of "security agreement" incorporates the
concept of a security interest, we, like the parties, use the two
terms interchangeably.

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Peaje then went on to explicitly disclaim that Code sections 928
and 552(a) applied to its lien:
As a result, Section 552 of the Bankruptcy
Code does not apply to Plaintiff's Bonds, as
the application of that provision is limited
to "lien[s] resulting from any security
agreement . . .
[,]"
see
11
U.S.C.
§ 552(a). . . . Nor does Section 928(b) of the
Bankruptcy Code apply to those Bonds.
That
provision in some instances subordinates a
bondholder's lien on "special revenues" to the
"necessary operating expenses" of the "project
or system" that generates those revenues, but
is also limited in application to "lien[s]
resulting
from
any
security
agreement["] . . . .
Later in its complaints, Peaje reaffirmed that its lien was
"unaffected by Section 928(b) because that lien does not result
from a security agreement within the meaning of that provision."
Peaje made similar statements regarding section 552.
Next, in its application for a TRO, filed the same day
as the verified complaints, Peaje again argued that its "lien on
the Toll Revenues [was] unaffected by Section 928(b) because that
lien does not result from a security agreement within the meaning
of that provision."
Then in the initial hearing on Peaje's request for a
TRO, held on June 5, 2017, Peaje's attorney stated:
There is not a security interest here. There
is not a voluntary security agreement like you
would see under Article 9. . . . This is not
a security agreement or security interest
under Article 9.
This is a lien that is
established pursuant to a municipal ordinance.

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So, in three separate contexts prior to filing its Reply, Peaje
explicitly denied that it held a security interest.
And yet, as Peaje points out, the comments quoted above
from the June 5 hearing were sandwiched between two statements
suggesting a broader assertion of lien rights.
stated:

First, Peaje

"We don't say in our papers that we have a statutory lien

or nothing.

We say that we have a lien.

arises from a municipal ordinance."

We say that this lien

And later, it continued:

"We

say this is a lien, first and foremost."
On the other hand, had Peaje been proceeding on the
alternative theory that it should be granted relief to protect its
interests secured by a security agreement rather than a statutory
lien, one would have expected to see an explanation for how to
accommodate

the

effects

of

Code

section 928(b),

including

analysis of what constituted necessary operating expenses.

an
And

while Peaje's attorney asserted in the June 5 hearing that to the
extent the Authority could surcharge its lien, it could do so only
to a limited extent to account for the expenses necessary for
generating the revenue stream, this argument was absent from
Peaje's actual filing.

In its motion for a TRO, Peaje rested

primarily on its position that Code sections 552 and 928(b) left
its lien "unaffected" because it is a statutory lien.

To the

extent it offered any alternative argument, it argued only that

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unconstitutional

because it would convert Peaje's gross lien into a net lien.

The

constitutional argument, whether correct or not, is hardly so selfevident as to have avoided any need to engage more seriously with
the potential application of section 928(b) in order to advance
the alternative argument that Peaje held a security interest.
Peaje

also

did

not

explain

why

the

sources

that

allegedly

established its lien (the Enabling Act and the 1968 Resolution)
supported the contention that Peaje's lien should be categorized
alternatively as a security interest.

All of this puts Peaje's

claim of preservation on precarious grounds.
clearly

understood

how

to

adequately

preserve

Moreover, Peaje
an

alternative

argument, as evidenced by its very different approach on another
issue:

the application of the automatic stay to its claims, a

question we need not reach today.

In its motion for TRO, Peaje

explicitly and repeatedly argued that the automatic stay did not
apply to its case.

But it also argued that, to the extent the

stay did apply, it sought "out of an abundance of caution" relief
from that stay.
Peaje argues that defendants conceded, both in this case
and in related proceedings, that Peaje holds a lien of some type.
There are, indeed, documents in the record, including bond offering
statements from the Authority, reflecting that bonds issued under
the 1968 Resolution are secured by a pledge of certain revenues of

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But even assuming that defendants to some extent

have conceded the existence of a lien, Peaje does not argue, nor
could it, that defendants have conceded that Peaje holds a lien on
the post-petition revenues it now seeks to obtain.

Cf. Peaje I,

845 F.3d at 514 ("While Peaje may have had a contractual right to
monthly deposits with the fiscal agent and the maintenance of the
accounts at particular levels, its protected interest for purposes
of the lift-stay motion was limited to its interest in repayment
of the debt owed.").

Nor does Peaje contend that defendants

conceded the existence of a particular type of lien, which, as
noted, has important consequences for the issues in this case.
In sum, whether Peaje waived its non-statutory lien
argument is admittedly a close call.

One can easily see why the

statements to which the Title III court pointed made it appear
that Peaje was limiting itself to asserting a statutory lien.

At

the same time, however, the mutually exclusive nature of a security
interest and a statutory lien under the Code invited Peaje's
counsel

to

characterize

its

lien

as

statutory

(and

thus

by

definition not a security interest), without intending to waive
the

logically

alternative

argument,

which

defendants'

prior

statements in Peaje I had not made an obvious subject of dispute.
See Peaje I, 845 F.3d at 510 (observing without deciding that
Peaje's bonds are secured by a lien on toll revenues without
specifying the nature of the lien).

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Ultimately, what gives us confidence that the Title III
court did not abuse its discretion in granting the motion to strike
is the fact that any waiver here is not permanent, a point that
the Title III court itself made.

Moreover, even were we to rule

in favor of Peaje on this issue, and thus consider the other issues
on

appeal

based

on

the

premise

that

Peaje

holds

a

security

interest, the most Peaje could realistically expect to gain is a
remand to take a renewed shot at obtaining relief on a supplemented
record that reflects where matters now stand.

For the reasons we

explain in Part IV of this opinion, that is exactly what Peaje
gets.
We therefore affirm the Title III court's holding that,
for purposes of the motion now on review, Peaje has limited itself
to arguments predicated upon its claim that it holds a statutory
lien on the Authority's toll revenues.
III.
We turn now to the pivotal issue that Peaje presented
below and raises on appeal:
property of the Authority?

Does it have a statutory lien on any
The district court resolved this issue

in the context of analyzing Peaje's request for a preliminary
injunction,

a

ruling

discretion.

See Waldron v. George Weston Bakeries Inc., 570 F.3d

5, 8 (1st Cir. 2009).

that

we

review

overall

for

abuse

of

But since the proper classification of

Peaje's purported lien is a legal question, we review it de novo.

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id.

("Within

that

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[abuse

of

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discretion]

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framework,

we

scrutinize the district court's . . . handling of abstract legal
questions de novo.").
The Code defines a lien as a "charge against or interest
in property to secure payment of a debt or performance of an
obligation."

11 U.S.C. § 101(37).

three mutually exclusive categories:
liens, and security interests.

It then divides liens into
judicial liens, statutory

The Code defines a statutory lien

as:
a lien arising solely by force of a statute on
specified circumstances or conditions, or lien
of distress for rent, whether or not
statutory, but does not include security
interest or judicial lien, whether or not such
interest or lien is provided by or is
dependent on a statute and whether or not such
interest or lien is made fully effective by
statute.

Id. § 101(53) (footnote omitted).

Collier on Bankruptcy describes

the "essence" of a statutory lien as "the need, or lack of need,
for an agreement or judgment to create the lien."
supra, ¶ 101.53.

2 Collier,

It goes on:

If the lien arises by force of statute,
without any prior consent between the parties
or judicial action, it will be deemed a
statutory lien. . . . If the creation of the
lien is dependent upon an agreement, it is a
security interest even though there is a
statue which may govern many aspects of the
lien. The fact that a statute describes the

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characteristics and effects of a lien does not
by itself make the lien a statutory lien.
Id.
Peaje argues that it holds a statutory lien by virtue of
the Enabling Act.

See P.R. Laws Ann. tit. 9 §§ 2001–2035.

It

points to various provisions of the Act that it claims "provide[]
for [its] lien on the circumstances and conditions identified in
its provisions."
this assertion.

But none of the provisions Peaje cites supports
Under the Act:

[T]he Authority is hereby empowered to . . .
borrow money for any of its corporate
purposes, and to issue bonds of the Authority
in evidence of such indebtedness and to secure
payment of bonds and interest thereon by
pledge of, or other lien on, all or any of its
properties, revenues or other income . . . .
P.R. Laws Ann. tit. 9 § 2004, (l).

The Act further specifies that

"the Authority may from time to time issue and sell its own bonds,"
id.

§ 2012(a),

and

that

those

bonds

"may

be

authorized

resolution or resolutions of the Authority," id. § 2012(b).
the pledging of revenues, the Act provides:
Any resolution or resolutions authorizing any
bonds may contain provisions, which shall be
a part of the contract with the holders of the
bonds:
(1) As to the disposition of the entire gross
or net revenues and present or future income
or other funds of the Authority, including the
pledging of all or any part thereof to secure
payment of the principal of and interest on
the bonds . . . .

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by

As to

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Id. § 2012(e).

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Finally, section 2015 of the Act provides that,

with some limited exceptions, the bonds issued by the Authority
shall not be a debt of the Commonwealth, "nor shall such bonds or
the interest thereon be payable out of any funds other than those
pledged for the payment of such bonds and interest thereon pursuant
to the provisions of § 2004(l) of this title."

Id. § 2015.

As the Title III court found, these provisions permit
the Authority to secure the payment of bonds by making a pledge of
revenues, but they do not require that it do so.

Even the language

of section 2015 of the Act applies only to funds "pledged . . .
pursuant to . . . § 2004(l)," id. § 2015, and such pledges are
voluntary.

See id. § 2004(l) (the Authority is "empowered" to

issue bonds and secure them with pledges of revenues); see also
id.

§ 2012(e)

(a

resolution

authorizing

bonds

provisions" pledging revenues (emphasis added)).

"may

contain

We therefore

agree with the district court that "[n]o lien arises solely by
force of [these] statutory provision[s]."
Peaje
specified

counters

"exclusively

that

and

a

statutory

formally

in

lien

some

need

statutory

not

be

text."

Rather, Peaje argues, the Code provides that a statutory lien can
arise from specified circumstances or conditions and, in its view,
these include "regulatory elaboration and agency action."

Peaje

is correct about the definition but wrong about its application.

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Under the Code, a statutory lien "aris[es] solely by
force of a statute on specified circumstances or conditions."
U.S.C. § 101(53) (emphasis added).

11

In other words, a statute can

create a lien outright or it can establish that a lien will attach
automatically upon an identified triggering event other than an
agreement to grant the lien.

See S. Rep. No. 95-989, at 27 (1978)

("A statutory lien is . . . one that arises automatically, and is
not based on an agreement to give a lien or on judicial action.");
see also Klein v. Civale & Trovato, Inc. (In re Lionel Corp.), 29
F.3d 88, 94 (2d Cir. 1994) (characterizing statutory liens as
"liens that come into being as a result of statutory operation,
without

consent

or

judicial

action").

contractors' liens and tax liens.

Take

two

examples:

See 2 Collier, supra, ¶ 101.53

(identifying contractors' liens and tax liens as "[g]ood examples
of statutory liens"); see also S. Rep. No. 95-989, at 27 (same).
Contractors' liens, also known as mechanics' liens, "are creatures
of statute," in that they "arise and are created by force of
statute."
a

53 Am. Jur. 2d Mechanics' Liens § 3.

mechanics'

lien

law.

Id.

§ 6.

While

Every state has
these

laws

vary

considerably across jurisdictions, id. § 8, and often require
certain procedures for recording and enforcing the lien, the
general

concept

is

that

when

an

individual

supplies

labor,

materials, or services to improve the property of another, his
claim for payment becomes a lien on the owner's property.

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Id.

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§ 12;

see

also

id.

Page: 21

§ 1.

Once

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a

worker

furnishes

Entry ID: 6189344

labor

or

materials, a statutory lien often arises automatically without any
further action.
favor

of

the

See id. § 1.
federal

The same is true of a tax lien in

government.

See

26

U.S.C.

§ 6321

(establishing that when an individual liable for taxes "neglects
or refuses to pay the same after demand, the amount . . . shall be
a lien in favor of the United States upon all property and rights
to property, whether real or personal, belonging to such person").
For both mechanics' liens and tax liens, the relevant statute
specifies a circumstance or condition (the furnishing of labor or
the refusal to pay taxes after demand) and provides (often through
the use of mandatory, "shall" language) that when the specified
circumstance or condition is satisfied, the lien attaches.
The Enabling Act differs from these statutes in an
important

respect:

automatically
bonds.

when

A
the

pledge

of

Authority

revenues

passes

a

does

not

resolution

attach
issuing

Rather, it arises only when the Authority chooses to grant

it.

Because the Act does not automatically trigger a lien upon

the

performance

Authority's

of

decision

a
to

specified
grant

a

condition,
lien,

it

apart

does

not

from

the

create

a

statutory lien.8

8

We are aware of contrary reasoning in Alliance Capital Mgmt.
L.P. v. County of Orange (In re County of Orange), 189 B.R. 499
(C.D. Cal. 1995).
See id. at 503 (finding the existence of a
statutory lien, notwithstanding that the statute at issue "permits
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Perhaps aware that it faces an uphill battle, Peaje's
backup argument is that, even if the Enabling Act does not by
itself create a statutory lien, the Act together with the 1968
Resolution does.
mandatory

Peaje is correct that the Resolution contains

language

suggestive

of

lien

creation.

See

1968

Resolution, Art. IV, § 401 (funds held by the Fiscal Agent "shall
be subject to a lien and charge in favor of the holders of the
bonds issued and outstanding under this Resolution and for the
further security of such holders until paid out or transferred as
herein provided"); id. Art. VI, § 601 (with some exceptions, "the
principal, interest and premiums [of the bonds] are payable solely
from Revenues and from any funds received by the Authority for
that purpose from the Commonwealth which Revenues and funds are
hereby pledged to the payment thereof").

But the Resolution poses

a new problem for Peaje –- to quote the Title III court, "the 1968
Resolution is not a statute."
Peaje's only response is to point to a case holding that
a regulation adopted by a Commonwealth regulatory agency, the
Department of Natural and Environmental Resources, had "the same
legal status as a law passed by the legislature."
Ramos, 74 F. Supp. 2d 142, 149 (D.P.R. 1999).

Armstrong v.

The Title III court

the County to decide whether to pledge, and what to pledge"
(emphasis in original)). Not bound in any way by that opinion, we
find its reasoning unpersuasive and decline to rely on it.

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was

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unpersuaded

by

the

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force

of

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this

analogy

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between

an

environmental regulation and a bond resolution passed by a public
authority.

The latter regulates no third-party conduct, imposes

no burden on anyone other than the entity that issues it, and need
not satisfy the public notice requirements generally applicable to
agency regulations.

Cf. Int'l Union, United Mine Workers of Am.

v. Mine Safety and Health Admin., 407 F.3d 1250, 1259 (D.C. Cir.
2005) (APA notice and comment requirements serve to, among other
things, "ensure fairness to affected parties" and give them an
opportunity to object to a proposed rule).

A resolution issued by

a public corporation is much more akin to a resolution adopted by
the

board

of

a

private

corporation:

The

state

grants

the

corporation the power to issue bonds and grant security interests,
and the corporation then resolves whether and how to do so.

Peaje

offers no reason to view the origin of its bonds in any materially
different manner.
In sum, Peaje does not hold a statutory lien.

As

anticipated by the parties, this conclusion, together with our
conclusion that the Title III court did not abuse its discretion
in construing the limited nature of Peaje's motion, resolves this
appeal.

With the only asserted lien (a statutory lien) found not

to exist, for purposes of this appeal Peaje claims no relevant
property interest necessary to compel relief from the automatic
stay.

See 11 U.S.C. § 362(d)(1) (requiring the bankruptcy court

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to grant relief from the automatic stay "for cause, including the
lack of adequate protection of an interest in property of [a] party
in

interest"

(emphasis

section 362(d)

into

added));

id.

section 922).

§ 922(b)

(incorporating

Similarly,

Peaje

cannot

establish a likelihood of success on the merits of its claims for
declaratory and injunctive relief without an interest in the
underlying toll revenues and was therefore not entitled to a
preliminary injunction on the basis requested.

See Bruns v.

Mayhew, 750 F.3d 61, 65 (1st Cir. 2014) ("Because we hold that the
appellants cannot succeed on the merits of their claim, we need
not consider the likelihood of irreparable harm.").
IV.
Before concluding, we address the Title III court's
alternative bases for denying relief as set forth briefly in the
court's opinion:

that Peaje failed to establish irreparable harm

and that defendants established adequate protection of Peaje's
interests.

Peaje's contention on appeal that the district court

"inverted" the burden of proof for the adequate protection analysis
is defied by the district court's conclusion "that the Defendants
have

met

their

burden

adequately protected."

of

showing

that

Peaje's

interest

is

Nevertheless, for two reasons, we think it

necessary for the Title III court to revisit these rulings anew
should Peaje on remand renew its requests for relief consistent
with this opinion.

First, we find it difficult to evaluate such

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a brief treatment of two critical issues without understanding, at
least, the Title III court's view as to the precise nature and
extent of Peaje's collateral, its value at the time the Authority
filed the bankruptcy petition, and the percentage of the toll
revenues required in order to allow the toll highways to operate
so as to generate future revenues.

Second, the Title III court's

analysis was necessarily sensitive to its view of how events would
unfold, and much has transpired since September 2017, when it
issued the order.

We therefore vacate these two alternative

findings, solely to make clear that they have no preclusive effect
on remand.

All that being said, nothing in this opinion should be

read as implying any decision not expressly addressed within it.
V.
For the foregoing reasons, we affirm both the Title III
court's order granting defendants' motion to strike and the primary
grounds for its order denying Peaje's request for a preliminary
injunction and relief from the stay.
remand

for

further

proceedings

We otherwise vacate and

consistent

with

this

opinion,

including the resolution of any updated motions for relief Peaje
should choose to file.

No costs are awarded.

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