*

Honorable Floyd R. Gibson, Senior U.S. Circuit Judge for

the Eighth Circuit, sitting by designation. 

United States Court of Appeals,

Eleventh Circuit.

No. 94-8384.

In re: The GEORGIAN VILLA, INC., Debtor,

The GEORGIAN VILLA, INC., Plaintiff-Appellant,

v.

UNITED STATES of America; Georgia Department of Revenue,

Defendants-Appellees.

June 27, 1995.

Appeal from the United States District Court for the Northern

District of Georgia. (No. 1:93-01787-CV-WCO), William C. O'Kelley,

Judge.

Before CARNES and BARKETT, Circuit Judges, and GIBSON*

, Senior

Circuit Judge.

FLOYD R. GIBSON, Senior Circuit Judge:

Appellant/Debtor The Georgian Villa, Inc. appeals the district

court's judgment affirming the bankruptcy court's order denying

Georgian Villa's motion for payment of unclaimed funds. We have

jurisdiction over this appeal pursuant to 28 U.S.C. § 158(d)

(1988), and we reverse.

I. BACKGROUND

The relevant facts are undisputed. The Georgian Villa, Inc.

("Georgian Villa"), is a not-for-profit Georgia corporation which

built and operated a hospital in Douglas County, Georgia. On

September 29, 1977, Georgian Villa filed a petition for voluntary

Chapter XI bankruptcy. The hospital property was sold at a price

in excess of the corporation's total debt, resulting in a surplus
of over $700,000.00, which was ordered paid into the registry of

the bankruptcy court pursuant to that court's order of March 29,

1989. Following the satisfaction of all administrative costs as

well as several previously undiscovered claims, the surplus was

reduced to its current amount of approximately $300,000.00.

During the pendency of its bankruptcy proceedings, Georgian

Villa remained dormant from the late 1970's until its subsequent

reactivation in 1991. On March 4, 1992, Georgian Villa filed a

motion to reopen the case and for payment of the unclaimed funds to

the debtor pursuant to 28 U.S.C. § 2042 (1988). The bankruptcy

court denied Georgian Villa's motion for payment of the unclaimed

funds on October 7, 1992, and ordered the unclaimed funds to be

paid into the United States treasury. That order reasoned that,

although Georgian Villa remained in good standing as a corporation

with the Georgia Secretary of State, it was no longer a viable

corporation because it had lain dormant until 1991 and had "failed

to put forth any evidence that it has any assets or that it is

operating and conducting itself as a corporation under the laws of

[Georgia]." Because Georgian Villa is a not-for-profit

corporation, the bankruptcy court observed that no shareholders

existed to whom a distribution could be made. As a result, the

bankruptcy court ordered the surplus funds deposited into the

United States treasury, concluding that "to return the surplus to

the debtor would result in a windfall to the parties in control of

the debtor corporation."

Following the bankruptcy court's denial of its subsequent

motion for reconsideration, Georgian Villa appealed to the United
 1

Section 66 (11 U.S.C. § 106):

Unclaimed Moneys. a. Dividends or other moneys which

remain unclaimed for sixty days after the final

dividend has been declared and distributed shall be

paid by the trustee into the court of bankruptcy; and

at the same time the trustee shall file with the clerk

a list of the names and post-office addresses, as far

as known, of the persons entitled thereto, showing the

respective amounts payable to them. Such moneys and

dividends shall be deposited and withdrawn as provided

in title 28, United States Code, section 2042, and

shall not be subject to escheat under the laws of any

State. 

 2

This case was filed on September 29, 1977, and is governed

by the Bankruptcy Act of 1898, which was repealed in 1978 and

replaced by the current Bankruptcy Code. See 11 U.S.C. note

prec. § 101 (1988). 

 328 U.S.C. § 2042. Withdrawal

No money deposited under section 2041 of this title

shall be withdrawn except by order of court.

In every case in which the right to withdraw money

deposited in court under section 2041 has been adjudicated

or is not in dispute and such money has remained so

States District Court for the Northern District of Georgia. After

a non-evidentiary hearing, the district court affirmed the

bankruptcy court's order. This appeal follows.

II. DISCUSSION

 "The whole purpose of the bankruptcy system is to make the

bankrupt's property available to his creditors and to give any

surplus back to him." 3A Collier on Bankruptcy ¶ 66.03 at 2328, n.

8 (14th ed. 1971). Georgian Villa contends that it is entitled to

the unclaimed funds under § 66 of the Bankruptcy Act of 18981 (11

U.S.C. § 106 (1976)).2

 That section directs the bankruptcy court

to distribute any unclaimed funds in accordance with 28 U.S.C. §

2042.3 28 U.S.C. § 2042 provides in relevant part that "[a]ny
deposited for at least five years unclaimed by the person

entitled thereto, such court shall cause such money to be

deposited in the Treasury in the name and to the credit of

the United States. Any claimant entitled to any such money

may, on petition to the court and upon notice to the United

States Attorney and full proof of the right thereto, obtain

an order directing payment to him. 

claimant entitled to any such money may, on petition to the court

and upon notice to the United States attorney and full proof of the

right thereto, obtain an order directing payment to him."

 Georgian Villa argues that it has satisfied the requirements

of 28 U.S.C. § 2042 and is entitled to the unclaimed funds under

the plain language of the statute. The United States, in turn,

argues that payment of the surplus funds into the United States

treasury was an appropriate exercise of the bankruptcy court's

equitable jurisdiction necessary to avoid conferring a windfall on

the persons in control of Georgian Villa. As the second court in

review of the bankruptcy court's judgment, we review the bankruptcy

court's findings of fact under a clearly erroneous standard, and

its legal conclusions de novo. In re Green, 31 F.3d 1098, 1099

(11th Cir.1994).

We recognize that "courts of bankruptcy are essentially courts

of equity, and their proceedings inherently proceedings in equity."

Local Loan Co. v. Hunt, 292 U.S. 234, 240, 54 S.Ct. 695, 697, 78

L.Ed. 1230 (1934). Bankruptcy courts have relied on equitable

principles in "those areas falling within the interstices of the

[Bankruptcy] Act; one such area being the proper disposition of

the surplus." Matter of First Colonial Corp. of America, 693 F.2d

447, 450-51 (5th Cir.1983). The Supreme Court has recognized,

however, that "whatever 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, 108 S.Ct. 963, 969, 99 L.Ed.2d 169 (1988).

 In the absence of any express statutory authority governing

the disposition of surplus funds, bankruptcy courts have commonly

recognized the debtor's right to recover surplus bankruptcy funds

under general equitable principles. First Colonial, 693 F.2d at

451; Hendrie v. Lowmaster, 152 F.2d 83, 85 (6th Cir.1945); Berl

v. Crutcher, 60 F.2d 440, 444 (5th Cir.1932), cert. denied, 287

U.S. 670, 53 S.Ct. 314, 77 L.Ed. 578 (1933); Johnson v. Norris,

190 F. 459, 462 (5th Cir.1911). Where the corporate debtor is no

longer in existence, bankruptcy courts have similarly employed

their equitable power to distribute the unclaimed funds to the

shareholders. First Colonial, 693 F.2d 451; Hendrie, 152 F.2d at

85; Berl, 60 F.2d at 444. Where the corporate debtor is still in

existence, however, there is no cause to look past the corporate

entity to the individual shareholders, and the corporate entity is

clearly entitled to the surplus funds. In re Witherbee, 202 F.

896, 899 (1st Cir.1913); see generally, 6 Remington, Bankruptcy

Law, § 2890 (5th ed. 1952) ("If the bankrupt is a corporation,

return should be to the corporation rather than to the

stockholders....").

Based on this line of authority, the bankruptcy court

reasoned, and the district court agreed, that equitable principles

should govern the disbursement of the excess funds, despite

Georgian Villa's satisfaction of 28 U.S.C. § 2042. Georgian

Villa's continuing corporate existence was unchallenged.
Nevertheless, the district court concluded that Georgian Villa was

no longer "a viable ongoing entity" because it had lain dormant

from the late 1970's until its reactivation in September of 1991

and had failed to come forward with any evidence of its ongoing

corporate activity. Because, as a not-for-profit corporation,

Georgian Villa had no shareholders to whom the surplus could be

distributed, the district court concluded that "equity prevents a

distribution of the surplus to the corporation."

 We disagree. The very cases relied upon by the district

court demonstrate that the exercise of the bankruptcy court's

equitable power to disregard the corporate entity is appropriate

only where the corporate debtor is no longer in existence.

Georgian Villa, however, is not defunct. Under Ga.Code Ann. § 14-

3-128 (Michie 1994), Georgian Villa's certificate of existence is

"prima-facie evidence that the ... corporation is in existence...."

The record is utterly devoid of any evidence rebutting the fact of

Georgian Villa's continuing corporate existence. The district

court makes much of the fact that Georgian Villa lay dormant from

the late 1970's until its reactivation in 1991. We do not.

Georgian Villa's dormancy during the pendency of its bankruptcy

proceedings does not mean that it is no longer a viable entity and

as such no longer entitled to its surplus funds. With all of its

assets in the hands of the bankruptcy trustee, Georgian Villa had

little choice but to lay dormant until the resolution of its

Chapter XI proceedings. Once those proceedings were resolved and

its creditors and administrative costs had been paid in full,

Georgian Villa properly reactivated its corporate status in order
to claim its surplus funds and resume operations. We do not

believe this course of action can or should preclude a corporate

debtor from claiming its rightful surplus.

We conclude instead that the plain language of the Bankruptcy

Code compels distribution of the surplus to the debtor. Georgian

Villa, not its shareholders, is the debtor in this case. It has

fully complied with the requirements of 28 U.S.C. § 2042, and is

entitled to the surplus under 11 U.S.C. § 106. As this Court

observed in Matter of Grissom, 955 F.2d 1440, 1449 n. 8 (11th

Cir.1992), "equitable principles are insufficient to trump the

clear remedial provisions of a bankruptcy statute." Requiring

Georgian Villa to come forward with evidence of current corporate

activities and operations is clearly inappropriate where, as here,

it had no available funds with which to operate, and where, as

here, the continued existence of the corporate debtor is

unchallenged. We conclude that the use of the bankruptcy court's

equitable power to order the deposit of the unclaimed funds into

the United States treasury despite Georgian Villa's clear

entitlement to those funds under 28 U.S.C. § 2042 was in direct

contravention of the Bankruptcy Code and erroneous as a matter of

law. Moreover, we are not in accord with the manner in which

equitable principles were employed by the bankruptcy court and

district court, in that the funds clearly belonged to Georgian

Villa, and not to anyone else at that juncture in time. It appears

to us that equitable principles alone, in line with the dictates of

the Bankruptcy Code, would require that funds belonging to the

owner be returned to the owner.
III. CONCLUSION

For the reasons above, we REVERSE the order of the district

court and REMAND this matter to the district court with

instructions to issue an order directing payment of the unclaimed

funds to Georgian Villa.