1The Honorable Pasco M. Bowman stepped down as Chief Judge of the United

States Court of Appeals for the Eighth Circuit at the end of the day on April 23, 1999.

He has been succeeded by the Honorable Roger L. Wollman.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 97-3859

___________

In re: Hen House Interstate, Inc., *

*

Debtor. *

---------------------------------- *

Hartford Underwriters Insurance *

Company, *

* Appeal from the United States

Movant - Appellee, * District Court for the

* Eastern District of Missouri.

v. *

*

Magna Bank, N.A., formerly known as *

Magna Bank of Illinois, N.A., *

*

Respondent - Appellant. *

___________

Submitted: October 22, 1998

Filed: June 7, 1999

___________

Before BOWMAN,1 Chief Judge, HEANEY, McMILLIAN, RICHARD S. ARNOLD,

FAGG, WOLLMAN, BEAM, LOKEN, HANSEN, MORRIS SHEPPARD

ARNOLD, and MURPHY, Circuit Judges, en banc.

___________

BOWMAN, Chief Judge.
2Magna is the successor in interest to Landmark Bank of Illinois. We refer to

Magna herein notwithstanding that some of the facts pertain to Landmark Bank prior

to its acquisition by Magna, and notwithstanding that on October 9, 1998 Magna was

absorbed by merger into Union Planters National Bank. 

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Magna Bank, N.A., appeals the judgment of the District Court affirming the

judgment of the Bankruptcy Court in favor of Hartford Underwriters Insurance

Company. The sole question presented for review by the Court en banc is the

threshold question of whether Hartford has statutory standing to surcharge Magna's

collateral under 11 U.S.C. § 506(c) (1994). We reverse.

I.

Magna2 made various loans to Hen House Interstate, Inc. (Debtor), which

owned and operated a number of restaurants, service stations, gift stores, and an

outdoor advertising firm. To secure the loans, Magna took a security interest in

essentially all of the Debtor's real and personal property. On September 5, 1991, the

Debtor filed a petition for relief under Chapter 11 of the Bankruptcy Code in the

United States Bankruptcy Court for the Eastern District of Missouri. When the

Debtor filed its petition, it was indebted to Magna in the amount of approximately

$4.1 million. The Debtor retained possession of its assets and continued operation

of its businesses after commencing the Chapter 11 proceedings.

The day after the Debtor filed its Chapter 11 petition, Magna agreed to lend the

Debtor an additional $300,000 to help finance the Debtor's post-petition

reorganization efforts. The Bankruptcy Court approved the loan agreement in its

final financing order and authorized the Debtor to use the proceeds of the postpetition loan and the cash collateral that was subject to Magna's security interest to

pay expenses set forth in an appended budget. The budget allowed for workers'

compensation expenses in the amount of approximately $8600 per month. Upon
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approval of the loan agreement, Magna disbursed the entire $300,000 of loan

proceeds to the Debtor.

Despite the additional financing provided under the post-petition loan

agreement, the Debtor's attempts at reorganization failed. In January 1993, the

Bankruptcy Court converted the Debtor's Chapter 11 case into a Chapter 7 liquidation

proceeding and appointed a trustee of the Chapter 7 estate.

During the Debtor's attempted Chapter 11 reorganization, Hartford provided

workers' compensation insurance coverage to the Debtor. The terms of the insurance

policy required the Debtor to pay a premium to Hartford each month. The Debtor

made an initial premium deposit and a subsequent premium payment, but otherwise

failed to pay the monthly premium required by the policy. The unpaid premiums

amount to $51,871.40.

When the Chapter 11 reorganization failed and the Debtor's case was converted

to a Chapter 7 proceeding, Hartford brought an action pursuant to Bankruptcy Code

§ 503 seeking the allowance of its claim as an administrative expense and Bankruptcy

Code § 506(c) seeking to recover the unpaid premiums by surcharging Magna's

collateral. The Bankruptcy Court, following the holding of a three-judge panel of our

Court in United States, Internal Revenue Service v. Boatmen's First National Bank,

5 F.3d 1157, 1159 (8th Cir. 1993), that non-trustees have standing under § 506(c) to

surcharge a secured creditor's collateral, determined that Hartford had standing to

seek recovery pursuant to § 506(c) and ordered the surcharge of Magna's collateral.

Magna appealed to the District Court claiming, inter alia, that § 506(c) did not accord

Hartford standing to assert its claim. The District Court, also relying on Boatmen's,

affirmed the judgment of the Bankruptcy Court, and Magna appealed to this Court.

A three-judge panel of this Court affirmed the judgment of the District Court,

holding, among other things, that Boatmen's was controlling and that Hartford
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therefore had standing to seek recovery under § 506(c). But two members of the

panel expressed their belief that Boatmen's had been wrongly decided and should be

reconsidered by the Court en banc. See Hartford Underwriters Ins. Co. v. Magna

Bank, N.A. (In re Hen House Interstate, Inc.), 150 F.3d 868, 871 n.4 (8th Cir. 1998);

id. at 873 (Hansen, J., concurring). We granted Magna's suggestion for rehearing en

banc on the issue of Hartford's standing to seek recovery and vacated the panel

opinion. We now overrule Boatmen's to the extent it construes § 506(c) to empower

a non-trustee to surcharge an allowed secured creditor's collateral under that section

and hold that Hartford, a non-trustee claimant, lacks standing to assert a § 506(c)

claim.

II.

As the second reviewing court, we apply the same standard as that applied by

the District Court; we review de novo the Bankruptcy Court's determination of the

single issue of law presented here. See Halverson v. Estate of Cameron (In re

Mathiason), 16 F.3d 234, 235 (8th Cir. 1994).

Initially, we note that Hartford asserts no claim against Magna or its collateral

outside of the Hen House bankruptcy proceeding. The nature and extent of the

potential liability of Magna, as an allowed secured creditor in that bankruptcy

proceeding, is established by the Bankruptcy Code; more particularly, it is established

for purposes of this case by § 506(c). Despite arguments made by Hartford asserting

its § 506(c) standing to surcharge property securing Magna's claim based on other

provisions of the Bankruptcy Code, the fact is that § 506(c) is the only provision of

the Code that directly addresses the issue of standing that is before us. Moreover,

§ 506(c) is the only provision of the Code that authorizes any party to a bankruptcy

proceeding to recover from property securing the claim of an allowed secured creditor

such as Magna. It would be extremely odd were Congress to have expanded the

potential § 506(c) liability of allowed secured creditors by means of the other Code
3The general rule is that administrative expenses cannot be charged against

secured collateral and are chargeable against only the unsecured collateral of the

estate pursuant to Bankruptcy Code § 503. See 11 U.S.C. § 503(a) (1994); Precision

Steel Shearing, Inc. v. Fremont Fin. Corp. (In re Visual Indus., Inc.), 57 F.3d 321, 324

(3d Cir. 1995); In re Swann, 149 B.R. 137, 143 (Bankr. D.S.D. 1993). Therefore,

Hartford, despite its argument to the contrary, may not seek to surcharge Magna's

collateral under § 503 and may look only to § 506(c) for that purpose.

Hartford seeks standing under Bankruptcy Code § 1109(b) as well, see 11

U.S.C. § 1109(b) (1994) ("A party in interest, including . . . a creditor . . . may raise

and may appear and be heard on any issue in a case under this chapter."), but

§ 1109(b) is not the correct avenue for recovery for the reason that § 1109(b) is

inapplicable to the Chapter 7 proceeding which underlies this case. See In re Taylor

& Assocs., L.P., 191 B.R. 374, 381-82 n.5 (Bankr. E.D. Tenn. 1996) ("Section[] 1109

. . . [is] applicable exclusively to Chapter 11 cases and ha[s] no application to Chapter

7."); cf. In re Polo Club Apartments Assocs. L.P., 150 B.R. 840, 856-57 (Bankr. N.D.

Ga. 1993) (noting that subchapter I of Bankruptcy Code Chapter 11 applies only in

cases under Chapter 11, and does not apply to a case converted from Chapter 11 to

Chapter 7).

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provisions put forward by Hartford, which in one way or another deal with the

assertion of claims against the bankruptcy estate, as distinguished from claims against

the property of allowed secured creditors.3 We do not believe Congress intended to

do any such thing and, therefore, we focus on § 506(c).

Section 506(c) clearly states, "The trustee may recover from property securing

an allowed secured claim the reasonable, necessary costs and expenses of preserving,

or disposing of, such property to the extent of any benefit to the holder of such

claim." 11 U.S.C. § 506(c) (1994) (emphasis added). The proper construction of any

statute, the Bankruptcy Code included, begins with the language of the statute itself.

See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989) (construing

Bankruptcy Code § 506(b) according to its plain language); Harmon v. United States,

101 F.3d 574, 583 (8th Cir. 1996). The natural reading of § 506(c) entitles only the
4Hartford has made an issue of Bankruptcy Code § 1107(a), which provides

that Chapter 11 debtors in possession shall, with some exceptions, have "all the rights

. . . and powers, and shall perform all the functions and duties," of trustees. 11

U.S.C. § 1107(a) (1994). The express language of § 1107(a) therefore compels the

unremarkable conclusion that Chapter 11 debtors in possession may do most of the

things trustees may do. In this case, Hartford is neither a Chapter 11 debtor in

possession nor a bankruptcy trustee.

Likewise, though Bankruptcy Code §§ 901, 902 and 1203 explicitly grant

municipalities in Chapter 9 cases and family farmers in Chapter 12 cases some of the

rights, powers, functions and duties of trustees serving in cases under Chapter 11, see

11 U.S.C. §§ 901(a), 902(5), 1203 (1994), this is not a Chapter 9 or 12 case and

Hartford is not a municipality or a family farmer seeking to reorganize. That

Congress chose to expressly grant the enumerated parties carefully circumscribed

trustee status in limited circumstances demonstrates only that, had Congress intended

a claimant such as Hartford to have § 506(c) standing in the present circumstance, it

would have said so. Particularly appropriate here is the ancient canon stating that

expressio unius est exclusio alterius. 

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trustee to seek to surcharge property securing the claim of an allowed secured creditor

under that section.4 When the language of the Bankruptcy Code is clear and

unambiguous, "our sole function . . . is to enforce it according to its terms." Rake v.

Wade, 508 U.S. 464, 471 (1993) (internal quotations and citations omitted)

(interpreting "unqualified terms" of Bankruptcy Code § 506(b)); see also Patterson

v. Shumate, 504 U.S. 753, 761 (1992) (stating clarity of § 541(c)(2) of Bankruptcy

Code obviates need for inquiry beyond language of statute).

Hartford correctly points out that our conclusion here is not the consensus of

the circuits that have considered the issue. A majority of those circuits has held that

§ 506(c) grants standing to non-trustees to pursue surcharge claims under that section.

See Loudoun Leasing Dev. Co. v. Ford Motor Credit Co. (In re K & L Lakeland,

Inc.), 128 F.3d 203, 206 (4th Cir. 1997) (listing cases). But each of the circuits

arriving at a conclusion contrary to the one we reach today has done so by
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circumventing the plain language of the statute and resting its determination instead

upon policy considerations and equitable concerns. See In re Parque Forestal, Inc.,

949 F.2d 504, 511-12 (1st Cir. 1991) ("[The] courts of appeals which have considered

the question have permitted recovery by third parties who equitably come to stand in

the trustee's shoes."); Precision Steel Shearing, Inc. v. Fremont Fin. Corp. (In re

Visual Indus., Inc.), 57 F.3d 321, 325 (3d Cir. 1995) ("Although § 506(c) in terms

refers only to recovery by the trustee, we . . . have held that administrative claimants

other than trustees have standing to recover under § 506(c), particularly when no

other party has an economic incentive to seek recovery on the claimant's behalf.");

New Orleans Pub. Serv., Inc. v. First Fed. Sav. & Loan Ass'n (In re Delta Towers,

Ltd.), 924 F.2d 74, 76-77 (5th Cir. 1991) ("Despite the seemingly unambiguous

language, courts have allowed a [non-trustee] claimant to use § 506(c) . . . ."); North

County Jeep & Renault, Inc. v. General Elec. Capital Corp. (In re Palomar Truck

Corp.), 951 F.2d 229, 232 (9th Cir. 1991) ("No compelling policies are served by a

restrictive reading of § 506(c) . . . ."), cert. denied, 506 U.S. 821 (1992). Policy

considerations and equitable concerns, however, are impermissible bases for statutory

interpretation when, as here, the language of the statute is clear and unambiguous.

See BFP v. Resolution Trust Corp., 511 U.S. 531, 540 (1994) (eschewing policy

determinations for which Bankruptcy Code gives no authority); McCuskey v. Central

Trailer Servs., Ltd., 37 F.3d 1329, 1332 (8th Cir. 1994) (declining trustee's invitation

to turn to bankruptcy policy considerations to guide interpretation of plain language

of Bankruptcy Code § 546(a)(1)). "[W]hatever equitable powers remain in the

bankruptcy courts must and can only be exercised within the confines of the

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

We therefore respectfully disagree with those circuits holding that § 506(c) grants

non-trustees standing to seek recovery under that section.

More persuasive is the determination of the Court of Appeals for the Fourth

Circuit that "[t]he language of § 506(c) is clear and unambiguous. It grants only

trustees the authority to seek recovery of postpetition costs and expenses from the
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collateral of a secured creditor." Ford Motor Credit Co. v. Reynolds & Reynolds Co.

(In re JKJ Chevrolet, Inc.), 26 F.3d 481, 484 (4th Cir. 1994);see also K & L Lakeland,

128 F.3d at 206-07.

Moreover, although we base our holding on the plain language of § 506(c), we

note that the position espoused by Hartford would undermine the carefully crafted

equality-of-distribution scheme fundamental to the operation of the Bankruptcy Code.

See Begier v. IRS, 496 U.S. 53, 58 (1990) ("Equality of distribution among creditors

is a central policy of the Bankruptcy Code."). Entirely consistent with this scheme

is § 506(c)'s grant of standing to a bankruptcy trustee to recover administrative

expenses from the property securing the claim of an allowed secured creditor, the

proceeds of which recovery become a portion of the bankruptcy estate and are

distributed pro rata among creditors according to their relative priorities. In contrast,

the result of the position urged by Hartford would be that the administrative expenses

recovered by a non-trustee claimant would not be incorporated into the bankruptcy

estate or otherwise contributed to appropriate distribution of the debtor's property

among its creditors. Such a result would be incompatible with the fundamental equal

distribution goals of the Bankruptcy Code. In addition, as the Fourth Circuit

suggested in JKJ Chevrolet, to allow non-trustee claimants (other than the debtor)

to bring § 506(c) claims is to invite "a flood of satellite litigation by those seeking to

avoid a pro rata division of the estate." 26 F.3d at 484 n.6 (citing Boyd v. Dock's

Corner Assocs. (In re Great N. Forest Prods., Inc.), 135 B.R. 46, 69 (Bankr. W.D.

Mich. 1991)). 

Finally, for the first time in this litigation Hartford asserts standing under

Federal Rule of Bankruptcy Procedure 7071 to enforce the terms of the final

financing order of the Bankruptcy Court. See Fed. R. Bankr. P. 7071 (incorporating

Fed. R. Civ. P. 71) ("When an order is made in favor of a person who is not a party

to the action, that person may enforce obedience to the order by the same process as

if a party . . . ."). The final financing order directs the Debtor to pay expenses out of
5Moreover, the Rule 7071 claim is not within the scope of our order granting

"rehearing en banc . . . limited to the issue of standing." Hartford Underwriters Ins.

Co. v. Magna Bank, N.A. (In re Hen House Interstate, Inc.), No. 97-3859EMSL (8th

Cir. Sept. 22, 1998) (Order Granting Rehearing En Banc). Although our order (the

purpose of which, after all, was to limit rehearing to a single issue, not to invite new

claims) refers generically to "the issue of standing," we could only have intended that

phrase to mean the issue of § 506(c) standing. In its motion to file a supplemental

brief after rehearing en banc had been granted, Hartford made no reference to Rule

7071. Instead, Hartford emphasized that "[t]he question of standing under section

506(c) is one of great importance to administrative claimants such as Hartford, and

the Court's en banc resolution of this issue will affect many such claimants in

innumerable bankruptcy cases." Appellee's Motion to File Supplemental Brief at 2-3

(Sept. 22, 1998). Likewise, Magna, in its suggestion for rehearing en banc, limited

discussion to § 506(c). For these reasons, it strains credulity to think that our order

granting rehearing en banc invited Hartford to assert a Rule 7071 claim at this late

stage. We are thoroughly satisfied that our review is limited to the issue of Hartford's

standing to bring a § 506(c) claim, the claim that Hartford in fact asserted. 

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cash collateral covered by Magna's security interest. See In re Hen House Interstate,

Inc., No. 91-45623-293, para. 24, at 17 (Final Order of Bankruptcy Court). Rule

7071, however, was not the basis of the claim asserted by Hartford in its application

to the Bankruptcy Court, in which Hartford sought to surcharge Magna's collateral

pursuant to Bankruptcy Code § 506(c). Having stated only a § 506(c) surcharge

claim in its complaint and throughout this litigation, Hartford cannot now, after the

case has come to the rehearing en banc stage in this Court, embark upon a different

claim never pleaded to the Bankruptcy Court and assert that any standing to bring that

claim is a ground for standing in the § 506(c) claim it actually brought. That Hartford

might or might not have standing to bring a Rule 7071 claim is beside the point, for

that is a new claim that cannot initially be brought forward at the appellate level.5 We

therefore do not reach the issue of Hartford's standing to bring a Rule 7071 claim. Cf.

Stupak-Thrall v. United States, 89 F.3d 1269, 1275 n.4 (6th Cir. 1996) (declining to

hear issue urged for first time to panel in reply brief and reasserted in supplementary

brief to court en banc; otherwise party raising argument on en banc rehearing would
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"be allowed to deprive the panel of the ability to address the issue first"), cert. denied,

117 S.Ct. 764 (1997); Anderson v. Beatrice Foods Co., 900 F.2d 388, 397 (1st Cir.)

(order denying rehearing) (holding party who failed to assert argument in district

court, and in supplemental briefing and oral argument before panel, "cannot be

permitted to raise a new issue for the first time on petition for rehearing in the court

of appeals"), cert. denied, 498 U.S. 891 (1990).

The single issue for determination by this Court en banc remains the issue

stated at the outset: whether Hartford has standing under § 506(c). We hold that §

506(c) permits only the trustee to proceed under that section. Hartford therefore lacks

standing to surcharge Magna's collateral under § 506(c).

III.

United States, Internal Revenue Service v. Boatmen's First National Bank, 5

F.3d 1157 (8th Cir. 1993), which held that parties other than the trustee have standing

to surcharge property securing the claim of an allowed secured creditor under

§ 506(c), is overruled. The decision of the District Court is reversed. The case is

remanded to the District Court with instructions that the Bankruptcy Court be directed

to vacate its judgment and dismiss Hartford's § 506(c) claim for lack of standing.

HEANEY, Circuit Judge, dissenting, with whom MCMILLIAN, RICHARD S.

ARNOLD, BEAM, and MURPHY, Circuit Judges, join.

Today this court rejects the view of four other circuits, ignores the teaching of

the leading bankruptcy treatise, and departs from the well-established view that

administrative claimants have § 506(c) standing to enforce administrative claims

against secured creditors who have benefitted by the goods or services provided by

an administrative claimant. Because the prudential standing doctrine requires this

court to confer § 506(c) standing to Hartford, I respectfully dissent.
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An administrative expense may be surcharged against a secured creditor's

collateral if the expense was necessary, reasonable, and directly benefitted the secured

creditor, Brookfield Prod. Credit Ass'n v. Borron, 738 F.2d 951, 952-53 (8th Cir.

1984), or if a secured party either directly or impliedly consented to the expense,

Daniel v. AMCI, Inc. (In re Ferncrest Court Partners), 66 F.3d 778, 782 (6th Cir.

1995). The original panel opinion stated that 

Magna agreed to the continued operation of the Debtor's businesses in

the hopes of receiving a greater return through reorganization rather than

through liquidation. Magna thereby "agreed to accept the expenses and

risks associated with [the] anticipated benefit." One such expense is

workers' compensation insurance. Under Missouri law, an operating

business is obligated to maintain workers' compensation insurance

unless it can demonstrate that it has the ability to self-insure. See Mo.

Rev. Stat. § 287.280 (Supp. 1998).

Hartford Underwriters Ins. Co. v. Magna Bank (In re: Hen House Interstate, Inc.),

150 F.3d 868, 872 (8th Cir. 1998) (quoting IRS v. Boatmen's First National Bank, 5

F.3d 1157, 1160 (8th Cir.1993)). The original panel further held that "Magna

consented to the workers' compensation insurance expenses," and proceeded to the

issue of standing. Hartford, 150 F.3d at 871. The panel concluded that Hartford had

standing under Boatmen's. See id. at 871. This court granted Hartford's petition for

rehearing solely on the issue of standing. 

I agree with the court that the sole issue before us is whether Hartford has

standing to surcharge Magna's collateral. I believe it has. Four circuits have adopted

this view. See e.g. North County Jeep & Renault, Inc. v. General Elec. Capital Corp.

(In re Palomar Truck Corp.), 951 F.2d 229, 232 (9th Cir. 1991), cert. denied, 506 U.S.

821 (1992); In re Parque Forestal, Inc., 949 F.2d 504, 511 (1st Cir. 1991); New

Orleans Pub. Serv., Inc. v. First Fed. Sav. & Loan Ass’n (In re Delta Towers, Ltd.),

924 F.2d 74, 77 (5th Cir. 1991); Equitable Gas Co. v. Equibank N.A. (In re
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McKeesport Steel Castings Co.), 799 F.2d 91, 94 (3d Cir. 1986). The court's view

is also supported by the leading scholarly work on bankruptcy: 

The reasoning behind the approach which extends standing to creditors

and other claimants is that a secured creditor who received a direct

benefit from the rendition of services or provision of goods by an

administrative claimant . . . should have the collateral charged for that

benefit, regardless of whether the proceeds of the charge are paid to the

trustee in reimbursement for the trustee’s prior payment to the claimant,

or are paid to the claimant directly. Otherwise, if the trustee does not

have available funds to pay the claimant, the trustee has no economic

incentive to seek a recovery under section 506(c) with respect to

amounts that will be paid over to the claimant. As a result, the secured

creditor may obtain a windfall at the expense of the unpaid claimant.

4 Collier on Bankruptcy ¶ 506.05[8] at 506-142-43 (Lawrence P. King ed., 15th ed.

1998). The majority view has been in effect since 1986, and I believe that Congress

has acquiesced to the majority’s resolution of the conflict. See Johnson v.

Transportation Agency, 480 U.S. 616, 629 n.7 (1987). 

Had Congress intended to limit § 506(c) standing to trustees, it could have

included the word “only” in the statute. Because it failed to do so and because

Congress did not expressly deny § 506(c) standing to administrative claimants, the

prudential standing doctrine dictates that this court confer § 506(c) standing on

Hartford. 

Any determination of standing “involves both constitutional limitations on

federal-court jurisdiction and prudential limitations on its exercise.” Warth v. Seldin,

422 U.S. 490, 498 (1975). In addition to the threshold requirements of Article III, the

applicable prudential standing requirement is “whether the interest sought to be

protected by the complainant is arguably within the zone of interests to be protected

or regulated by the statute.” Data Processing Serv. v. Camp, 397 U.S. 150, 153

(1970). While Congress can limit standing beyond that allowed by Article III of the
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United States Constitution, “[w]here statutes are concerned, the trend is toward

enlargement of the class of people who may protest . . . .” Id. at 154. While Data

Processing applied the zone-of-interests test to suits under the Administrative

Procedure Act, the Supreme Court has since listed it among the other generally

applicable prudential standing requirements. SeeBennett v. Spear, 520 U.S. 154, 162

(1997). Where Congress has neither expressly allowed nor denied administrative

claimants § 506(c) standing, the Supreme Court has held that “Congress legislates

against the background of our prudential standing doctrine, which applies unless it

is expressly negated.” Id. at 163 (emphasis added); see also Data Processing, 397

U.S. at 154 (“Congress can, of course, resolve the question one way or another, save

as the requirements of Article III dictate otherwise”).

There can be no doubt that Hartford has Article III standing, and because

Congress has not expressly negated the prudential standing doctrine in § 506(c),

Hartford also has § 506(c) standing. To satisfy Article III standing, a plaintiff must

allege that (1) he or she suffered or imminently will suffer an injury in fact; (2) the

injury is fairly traceable to the defendant’s conduct; and (3) a favorable court decision

is likely to redress the injury. See Florida Gen. Contractors v. Jacksonville, 508 U.S.

656, 663-64 (1993) (citations omitted). Here, Hartford provided statutorily-required

workers' compensation insurance and was not paid. Magna consented to the courtauthorized expenditures and benefitted from them in two ways. First, Magna

benefitted from the heightened possibility it would recoup the full value of its security

interest. Second, it benefitted insofar as liquidating the various businesses as going

concerns optimized its profit from liquidation. Finally, a favorable decision to

Hartford would undoubtedly redress its injury. 

Having satisfied the general requirements for Article III standing, “the

applicable prudential standing requirement [is] ‘whether the interest sought to be

protected by [Hartford] is arguably within the zone of interests to be protected or

regulated by the statute.’” Bennett, 520 U.S. at 162 (citing Data Processing, 393 U.S.
6While the court relies heavily on the reasoning of the Fourth Circuit, even that

court has recognized the fact that a secured creditor should not be able to immunize

its windfall under the theory that administrative claimants lack § 506(c) standing. See

Ford Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ Chevrolet, Inc.), 26

F.3d 481, 485 n.7 (4th Cir. 1994) (recognizing the possibility that “a bankruptcy court

could grant derivative standing to a claimant . . . to prosecute a § 506(c) action.”). 

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at 153) (emphasis added). “The [zone-of-interests] test is not meant to be especially

demanding; in particular, there need be no indication of congressional purpose to

benefit the would-be plaintiff.” Clarke v. Securities Indus. Ass'n, 479 U.S. 388, 399-

400 (1987) (footnote omitted). Section 506(c) provides that "[t]he trustee may

recover from property securing an allowed secured claim the reasonable, necessary

costs and expenses of preserving, or disposing of, such property to the extent of any

benefit to the holder of such claim. 11 U.S.C. § 506(c). Here, it is clear that

Hartford's claim was reasonable and necessary. Indeed, the continuance of workers'

compensation insurance was mandated by law if Hen House was to continue in

business. Additionally, the expenditures benefitted Magna as discussed above.

Finally, Hartford’s § 506(c) standing is consistent with other provisions of the

Bankruptcy Code. See, e.g., 11 U.S.C. §§ 503(a), 1109(b).

The court joins the Fourth Circuit6 in its assertion that conferring § 506(c)

standing to administrative claimants circumvents the Bankruptcy Code’s distribution

scheme:

Allowing a claimant to proceed directly against a secured creditor would

circumvent this distribution scheme, potentially causing an inequitable

division of the estate. For example, if an estate has no unencumbered

assets, an administrative claimant recovering directly from a secured

creditor might receive full reimbursement while other administrative

claimants, whose services were also necessary to the preservation of the

estate, would receive nothing. An administrative claimant proceeding

against a secured creditor in effect would be granted priority over the
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other claimants in its same class. We are of the opinion that if Congress

had intended to alter so fundamentally the structure and principles

underlying bankruptcy proceedings, it would have done so expressly. 

Ford Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ Chevrolet, Inc.), 26

F.3d 481, 484 (4th Cir. 1994) (footnotes and citations omitted). In my view,

Congress expressly altered the distribution scheme when it enacted § 506(c). As

noted in our Boatmen’s opinion, administrative expenses are generally paid from the

unencumbered assets of the bankruptcy estate rather than secured collateral. See 5

F.3d at 1159; see also In re JKJ Chevrolet, Inc., 26 F.3d at 483 (recognizing general

rule). Section 506(c) clearly alters the general rule by requiring secured creditors to

pay administrative expenses when, inter alia, the expenditures benefit the secured

creditor. Thus, the obligation created by § 506(c), not the identity of the party

enforcing that obligation, alters the distribution scheme.

The court departs from its view that it will not entertain equitable

considerations and joins the Fourth Circuit in its argument that conferring § 506(c)

standing to administrative claimants will lead to inequitable division of bankruptcy

estates because particular administrative claimants may be compensated while other

administrative claimants, unsecured creditors, or even secured creditors could go

unpaid. Even if this were true, this is a criticism of the obligation created by § 506(c),

not of allowing a particular party to enforce that obligation. Congress, not the courts,

codified an equitable mechanism in § 506(c) by which a secured creditor may be

compelled to reimburse the administrative expenses that preserve or dispose of the

secured property to the extent that those expenditures have increased the property’s

value. 

Finally, I believe that Hartford’s claim that Federal Rule of Bankruptcy

Procedure 7071 provides an independent basis for recovery may properly be
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considered by this court. The court argues that because Hartford did not raise this

claim before the original panel in this case and raised it in the first instance before

this court en banc, we should not consider the claim. In my view, Hartford may be

excused from failing to raise the claim before the original panel because the facts of

this case fall squarely within the law established in our Boatmen’s opinion; and as

Chief Judge Bowman correctly noted in our original panel opinion, “‘[o]nly the court

en banc can overrule another panel’s decision.’” Hartford, 150 F.3d at 871 (quoting

Smith v. Copeland, 87 F.3d 265, 269 (8th Cir. 1996)). Because we are writing on a

clean slate as a court en banc, we may certainly entertain Hartford’s claim now.

Federal Rule of Bankruptcy Procedure 7071 incorporates Rule 71 of the

Federal Rules of Civil Procedure, which provides: “When an order is made in favor

of a person who is not a party to the action, that person may enforce obedience to the

order by the same process as if he were a party . . . .” Fed. R. Civ. P. 71. Hartford

argues that the bankruptcy court, with Magna’s express consent, directed the debtor

to pay the premiums for the workers’ compensation insurance that Hartford provided.

Because it was the intended beneficiary of the order, Hartford argues that it may

recover from Magna under Rule 7071. In the interests of judicial economy, I would

hold that, even if Hartford does not have standing under § 506(c), it should recover

under Rule 7071.

Today this court overrules six years of Eighth Circuit law, rejects the views of

four other circuits, and ignores the teaching of the leading bankruptcy treatise. It

does this in disregard of the prudential standing doctrine. For the reasons stated

above, I respectfully dissent.
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A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.