Source: http://openjurist.org/501/us/157
Timestamp: 2016-02-08 23:51:32
Document Index: 660341734

Matched Legal Cases: ['§ 1101', '§ 701', '§ 109', '§ 101', '§ 109', '§ 1102', '§ 1104', '§ 109', '§ 303', '§ 701', '§ 1301', '§ 1101', '§ 109', '§ 581']

501 US 157 Toibb v. J Radloff | OpenJurist
501 U.S. 157 - Toibb v. J Radloff Homethe United States Reports501 U.S.
501 US 157 Toibb v. J Radloff 501 U.S. 157
111 S.Ct. 2197
115 L.Ed.2d 145
Sheldon Baruch TOIBB, Petitionerv.Stuart J. RADLOFF.
In this case we must decide whether an individual debtor not engaged in business is eligible to reorganize under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq.
On November 18, 1986, petitioner filed in the United States Bankruptcy Court for the Eastern District of Missouri a voluntary petition for relief under Chapter 7 of the Code, 11 U.S.C. § 701 et seq. The Schedule of Assets and Liabilities accompanying petitioner's filing disclosed no secured debts, a disputed federal tax priority claim of $11,000, and unsecured debts of $170,605.1 Petitioner listed as nonexempt assets his IEC shares and a possible claim against his former business associates. He stated that the market value of each of these assets was unknown.
On March 8, 1988, the Bankruptcy Court on its own motion ordered petitioner to show cause why his petition should not be dismissed because petitioner was not engaged in business and, therefore, did not qualify as a Chapter 11 debtor. App. 121. At the ensuing hearing, petitioner unsuccessfully attempted to demonstrate that he had a business to reorganize.2 Petitioner also argued that Chapter 11 should be available to an individual debtor not engaged in an ongoing business. On August 1, the Bankruptcy Court ruled that, under the authority of Wamsganz v. Boatmen's Bank of De Soto, 804 F.2d 503 (CA8 1986), petitioner failed to qualify for relief under Chapter 11. App. to Pet. for Cert. A-17 and A-19.
The United States District Court for the Eastern District of Missouri, also relying on Wamsganz, upheld the Bankruptcy Court's dismissal of petitioner's Chapter 11 case. App. to Pet. for Cert. A-8 and A-9. The United States Court of Appeals for the Eighth Circuit affirmed, holding that the Bankruptcy Court had the authority to dismiss the proceeding sua sponte, and that the Circuit's earlier Wamsganz decision was controlling. In re Toibb, 902 F.2d 14 (1990).3 Because the Court of Appeals' ruling that an individual nonbusiness debtor may not reorganize under Chapter 11 clearly conflicted with the holding of the Court of Appeals for the Eleventh Circuit in In re Moog, 774 F.2d 1073 (CA11 1985), we granted certiorari to resolve the conflict.4 --- U.S. ----, 111 S.Ct. 775, 112 L.Ed.2d 838 (1991).
In our view, the plain language of the Bankruptcy Code disposes of the question before us. Section 109, 11 U.S.C. § 109, defines who may be a debtor under the various chapters of the Code. Section 109(d) provides: "Only a person that may be a debtor under chapter 7 of this title, except a stockbroker or a commodity broker, and a railroad may be a debtor under chapter 11 of this title." Section 109(b) states: "A person may be a debtor under chapter 7 of this title only if such person is not—(1) a railroad; (2) a domestic insurance company, bank, . . .; or (3) a foreign insurance company, bank, . . . engaged in such business in the United States." The Code defines "person" as used in Title 11 to "includ[e] [an] individual." § 101(35). Under the express terms of the Code, therefore, petitioner is "a person who may be a debtor under chapter 7" and satisfies the statutory requirements for a Chapter 11 debtor.
Second, even were we to consider the sundry legislative comments urged in support of a congressional intent to exclude a nonbusiness debtor from Chapter 11, the scant history on this precise issue does not suggest a "clearly expressed legislative inten[t] . . . contrary . . ." to the plain language of § 109(d). See Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). The Amicus does point to the following statement in a House report:
Finally, we are not persuaded by the contention that Chapter 11 is unavailable to a debtor without an ongoing business because many of the Chapter's provisions do not apply to a nonbusiness debtor. There is no doubt that Congress intended that a business debtor be among those who might use Chapter 11. Code provisions like the ones authorizing the appointment of an equity security holders' committee, § 1102, and the appointment of a trustee "for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management . . .," § 1104(a)(1), certainly are designed to aid in the rehabilitation of a business. It does not follow, however, that a debtor whose affairs do not warrant recourse to these provisions is ineligible for Chapter 11 relief. Instead, these provisions like the references to debtor businesses in the Chapter's legislative history—reflect an understandable expectation that Chapter 11 would be used primarily by debtors with ongoing businesses; they do not constitute an additional prerequisite for Chapter 11 eligibility beyond those established in § 109(d).
Finally, Amicus asserts that extending Chapter 11 to consumer debtors creates the risk that these debtors will be forced into Chapter 11 by their creditors under § 303(a), a result contrary to the intent reflected in Congress' decision to prevent involuntary bankruptcy proceedings under Chapter 13. In particular, he suggests that it would be unwise to force a debtor into a Chapter 11 reorganization, because an involuntary debtor would be unlikely to cooperate in the plan of reorganization—a point that Congress noted in refusing to allow involuntary Chapter 13 proceedings. See H.R.Rep. No. 95-595, at 120.
The Court's reading of the statute is plausible. It is supported by the omission of any prohibition against the use of Chapter 11 by consumer debtors and by the excerpt from the introduction to the Senate Report, quoted ante, at 162. Nevertheless, I am persuaded that the Court's reading is incorrect. Two chapters of the Bankruptcy Code—Chapter 7, entitled "Liquidation," 11 U.S.C. § 701 et seq., and Chapter 13, entitled "Adjustment of Debts of an Individual With Regular Income," § 1301 et seq.—unquestionably and unambiguously authorize relief for individual consumer debtors. Chapter 11, entitled "Reorganization," § 1101 et seq., was primarily designed to provide relief for corporate debtors but also unquestionably authorizes relief for individual proprietors of business enterprises. When the statute is read as a whole, however, it seems quite clear that Congress did not intend to authorize a "reorganization" of the affairs of an individual consumer debtor.
Section 109(d) places a limit on the class of persons who may be a debtor under Chapter 11, but it does not state that all members of that class are eligible for Chapter 11 relief.1 It states that "only a person that may a debtor under Chapter 7 . . . may be a debtor under Chapter 11. . . ." (Emphasis added.) It does not, however, state that every person entitled to relief under Chapter 7 is also entitled to relief under Chapter 11. In my judgment, the word "only" introduces sufficient ambiguity to justify a careful examination of other provisions of the Act, as well as the legislative history.
This examination convinces me that consumer debtors may not avail themselves of Chapter 11. The repeated references to the debtor's "business,"2 "the operation of the debtor's business,"3 and the "current or former management of the debtor"4 make it abundantly clear that the principal focus of the chapter is upon business reorganizations. This conclusion is confirmed by the discussion of Chapter 11 in the Senate Report, which describes the provision as a "chapter for business reorganization" and repeatedly refers to a "business" as the subject of Chapter 11 relief.5 See also 124 Cong.Rec. 34007 (1978) (Chapter 11 is a "consolidated approach to business rehabilitation") (statement of Sen. DeConcini).
The House Report, however, is more significant because it emphasizes the relationship between different chapters of the Code. The Report unambiguously states that a Chapter 7 liquidation is "the only remedy" for "consumer debtors [who] are unable to avail themselves of the relief provided under chapter 13." H.R.Rep. No. 95-595, p. 125 (1977). See also 124 Cong.Rec., at 32392, 32405 (Chapter 11 is "a consolidated approach to business rehabilitation" and a "new commercial reorganization chapter") (statement of Rep. Edwards). The accuracy of the statement in the House Report is confirmed by a comparison of the text of Chapter 11 with the text of Chapter 13.
Above, I noted the striking difference between the chapter titles—"Reorganization" for Chapter 11 as opposed to "Adjustment of Debts of an Individual With Regular Income" for Chapter 13. Also significant is the conspicuous omission from Chapter 11 of both an important limit and an important protection included in Chapter 13. Chapter 13 relief is only available to individuals whose unsecured debts amount to less than $100,000 and whose secured debts are less than $350,000. See 11 U.S.C. § 109(e). Chapter 11 contains no comparable limit. Congress would have accomplished little in imposing this limit on the adjustment of individual consumer debt through Chapter 13 if Congress at the same time allowed the individual to avoid the limitation by filing under Chapter 11.6
The named respondent, Stuart J. Radloff, was dismissed as Chapter 7 Trustee when the Bankruptcy Court converted petitioner's case to one under Chapter 11. Mr. Radloff did not participate in the proceedings before the Court of Appeals and refrained from responding to Mr. Toibb's petition for certiorari filed with this Court. We therefore specifically requested the United States Trustee, see 28 U.S.C. § 581(a)(13), to respond. In doing so, the United States Trustee indicated his agreement with petitioner's position and suggested that, if this Court decided to review the case, it might wish to appoint counsel to defend the Eighth Circuit's judgment. We then invited James Hamilton, Esq., of Washington, D.C., a member of the Bar of this Court, to serve as amicus curiae in support of the judgment of the Court of Appeals. --- U.S. ----, 111 S.Ct. 775, 112 L.Ed.2d 838 (1991). Mr. Hamilton accepted this appointment and has well fulfilled this assigned responsibility.
Homethe United States Reports501 U.S.