Source: https://openjurist.org/454/us/354
Timestamp: 2017-08-23 03:07:24
Document Index: 260150769

Matched Legal Cases: ['§ 101', '§ 101', '§ 403', '§ 403', '§ 405', '§ 403', '§ 403', '§ 101', '§ 403', '§ 403', '§ 403', '§ 403', '§ 1471', '§ 101']

454 US 354 Central Trust Company Rochester v. Officials' Committee of Geiger Enterprises Inc | OpenJurist
454 U.S. 354 - Central Trust Company Rochester v. Officials' Committee of Geiger Enterprises Inc
454 US 354 Central Trust Company Rochester v. Officials' Committee of Geiger Enterprises Inc
102 S.Ct. 695
70 L.Ed.2d 542
CENTRAL TRUST COMPANY, ROCHESTER, N. Y.
OFFICIAL CREDITORS' COMMITTEE OF GEIGER ENTERPRISES, INC., et al.
On October 1, 1979, the Bankruptcy Reform Act of 1978, Pub.L. 95-598, 92 Stat. 2549, 11 U.S.C. § 101 et seq. (1976 ed., Supp.IV) (New Code), became effective. Thereafter, several of Geiger's wholly owned subsidiaries and affiliate corporations filed petitions for relief under Chapter 11 of the New Code. On January 9, 1980, Geiger moved to dismiss its Chapter XI petition on the representation that if dismissal were granted it too would immediately file a petition under Chapter 11 of the New Code and would seek substantive consolidation of its proceedings with the proceedings of its subsidiary and affiliate corporations.
"A case commenced under the Bankruptcy Act, and all matters and proceedings in or relating to any such case, shall be conducted and determined under such Act as if [the New Code] had not been enacted, and the substantive rights of parties in connection with any such bankruptcy case, matter, or proceeding shall continue to be governed by the law applicable to such case, matter, or proceeding as if the [New Code] had not been enacted." 92 Stat. 2683, note preceding 11 U.S.C. § 101 (1976 ed., Supp.IV).
On appeal, the District Court's decision was in turn reversed by the United States Court of Appeals for the Second Circuit. In re Geiger Enterprises, Inc., 635 F.2d 106 (1980). The Court of Appeals held "that Rule 11-42(a) must be read in conjunction with section 403(a)" to permit dismissal and refiling in certain cases, and that "[t]he operative test is whether the estate's best interest will be served by" such procedure. The Court of Appeals qualified this test by holding that dismissal and refiling would be improper if they prejudiced the claims of the creditors, and remanded the case so that the Bankruptcy Court and District Court could consider the existence of actual prejudice.
The language of § 403(a) is unequivocal. It provides that cases filed under the Bankruptcy Act "shall be conducted and determined under such Act as if [the New Code] had not been enacted." It makes no exception for petitions to be refiled under the New Code; indeed, it expressly provides that petitions such as Geiger's "shall continue to be governed" by the Bankruptcy Act. Any exception to this mandate recognized by the Court of Appeals is of wholly judicial creation, supported by neither the language of the New Code nor its legislative history.1
Nor does Rule 11-42(a) provide authority for the procedure. The language of the Rule clearly contemplates a voluntary dismissal which results in an adjudication of the debtor's bankruptcy or one which revests title of all property in the debtor and removes from it the protection of the bankruptcy laws. It does not contemplate a dismissal, such as the one in this case, which neither declares the debtor bankrupt nor restores the creditors' rights against the debtor's property, but simply holds matters in abeyance while the debtor files its petition under a new law.2 Even if it were possible to so interpret Rule 11-42(a), the Rule would not modify the clear command of § 403(a). The Rules of Bankruptcy Procedure are applicable under the New Code only "to the extent not inconsistent with the amendments made by [the New Code]."3 Transitional Rules § 405(d), 92 Stat. 2685. As interpreted by the Court of Appeals, Rule 11-42(a) clearly conflicts with § 403(a).
If a bankruptcy judge, with the consent of all parties to a proceeding commenced prior to October 1, 1979, correctly concluded that the best interest of the estate and all its creditors and the judiciary would be served by permitting the voluntary dismissal of that proceeding and the immediate commencement of a new proceeding under the New Code, would that action be prohibited by § 403(a) of the Bankruptcy Reform Act of 1978, Pub.L. 95-598, 92 Stat. 2683, note preceding 11 U.S.C. § 101 (1976 ed., Supp.IV)? I think not. Although two creditors objected to the dismissal in this case, the Court today leaves no doubt about its answer to this question. Despite its recognition that "the Court of Appeals may have reached a practical result," ante, at this page, and that "consolidation of Geiger's petition with those of its subsidiaries and affiliates would serve the best interests of the estate [and] would conserve judicial resources," ante, at 359, the Court holds that Congress expressly forbade such a result when it enacted § 403(a).
Moreover, I believe that the Court of Appeals' holding is faithful to the language of § 403(a). That provision contains two commands relating to proceedings commenced prior to the effective date of the New Code; one command is procedural and the other is substantive. The procedural command requires that proceedings commenced prior to October 1, 1979, be conducted under the Bankruptcy Act.1 The substantive command requires that the rights of the parties in such proceedings continue to be governed by that statute.2
The procedural command was followed in this case. The original petition was filed on August 15, 1979, and was dismissed pursuant to Rule 11-42(a) of the Rules applicable to cases commenced under the Bankruptcy Act. That Rule expressly authorizes a voluntary dismissal based upon a finding that such action is "in the best interest of the estate."3 As the Court of Appeals noted, "the best interests of the estate must be interpreted to mean those of the creditors as well as the debtor,"4 and whether dismissal of the original petition and refiling under the New Code is in the best interest of the creditors in this case is not clear from the record. The Court of Appeals instructed the Bankruptcy Court to consider on remand whether a refiling under the New Code and consolidation of the bankruptcy petitions of Geiger and its affiliates and subsidiaries would affect the creditors' substantive rights. If substantive rights of the creditors "are in fact materially prejudiced," In re Geiger Enterprises, Inc., 635 F.2d 106, 109 (CA2 1980), then dismissal of the original petition will not be permitted. If dismissal is determined to be in the best interest of all parties, then such action is permitted by Rule 11-42(a); the procedural command of § 403(a), therefore, will have been satisfied.
Even if I were persuaded that Congress intended to enact the inflexible rule the Court enforces today, I still would not decide that issue in this case. It is probable that the question raised by the certiorari petition would become moot if the Court were to follow its normal practice of declining to review interlocutory orders.5 The United States, which has a $2,075,674.64 tax claim at stake, while agreeing with this Court's reading of § 403(a), recognizes that the question is of "limited administrative importance" and does not merit review by this Court.6 The only practical consequence of the Court's holding is to impose unnecessary work on busy federal judges. The Bankruptcy Court and three Circuit Judges recognized that it would be more efficient to conduct a single consolidated proceeding rather than separate proceedings for a group of affiliated bankruptcy petitioners. Meanwhile, this Court expends its scarce time and energy in a case that at best involves an error that is harmless to the parties and the law.
"The [R]ules [of Bankruptcy Procedure] prescribed under section 2075 of title 28 of the United States Code and in effect on September 30, 1979, shall apply to cases under title 11, to the extent not inconsistent with the amendments made by this Act, or with this Act, until such rules are repealed or superseded by rules prescribed and effective under such section, as amended by section 248 of this Act." 92 Stat. 2685, note preceding 28 U.S.C. § 1471 (1976 ed., Supp.III).
"A case commenced under the Bankruptcy Act, and all matters and proceedings in or relating to any such case, shall be conducted and determined under such Act as if [the New Code] had not been enacted . . . ." 92 Stat. 2683, note preceding 11 U.S.C. § 101 (1976 ed., Supp.IV).