Court Opinion

ID: 9487841
Source: CourtListenerOpinion
Date Created: 2023-08-05 12:27:45.429646+00
Date Added: 2024-06-11T17:52:30.596464
License: Public Domain

BATCHELDER, Circuit Judge,
concurring.
I write separately only to express my view that 11 U.S.C. § 726(a) is clear and unambiguous and therefore we. have no reason to speculate about the intent of particular legislators or of the Congress as to what was intended by that section. As the majority opinion points out, the Supreme Court has made it clear that we are to look to the language of the statute to determine the statute’s meaning. When the statute speaks with clarity to the issue' we address, our inquiry is, “in all but the most extraordinary circumstances,” over. Estate of Floyd Cowart v. Nicklos Drilling Co., — U.S. —, —, 112 S.Ct. 2589, 2594, 120 L.Ed.2d 379 (1992) (citation omitted), cert. denied sub nom. Barger v. Petroleum Helicopters, Inc., - U.S. -, 112 S.Ct. 3026, 120 L.Ed.2d 897 (1992). There are no such extraordinary circumstances present here.
Section 726(a) says that except as provided in 11 U.S.C. § 510, property of the estate is to be distributed first to pay claims of the kind and in the order specified in 11 U.S.C. § 507. Section 510 permits equitable subordination of claims. Section 507 governs priorities and gives first priority to administrative expenses allowed under § 503. Title 11 U.S.C. § 503 governs allowance of administrative expenses and allows as an administrative expense any tax incurred by the estate and any penalty relating to a tax incurred by the estate. By definition, penalties on taxes incurred by the estate are postpetition penalties. Section 503 does not set any priorities among administrative expenses; it simply identifies what those expenses are. Read together, §§ 726, 507, and 503 require that when property is distributed in a Chapter 7 proceeding, it goes first to pay administrative expenses, which include taxes incurred by the estate and penalties relating to those taxes, and that this entire distribution scheme is subject to the equitable subordination power of the court as set out in § 510.
I have no quarrel with the majority’s exploration of the legislative history behind § 510(c) in order to determine what .the Congress intended by the term “principles of equitable subordination,” which is nowhere defined in the statute. Noting the absénce of case law equitably subordinating tax penalty claims at the time the Bankruptcy Code was adopted, the majority rightly concludes that this absence of case law is explained by the fact that before the Code was enacted, non-pecuniary loss tax penalty claims against the estate were simply not allowed at all. Further, the majority looks to subsequent case law, noting that that body of law permits equitable subordination of prepetition nonpe-cuniary loss tax penalty claims. So far; so good.
Having determined the meaning of “principles of equitable subordination,” however, nothing requires us to delve into the legislative history of § 726. Specifically, nothing in § 726 itself permits, much less requires, a review of the legislative history of that section as part of our analysis of whether post-petition nonpecuniary loss tax penalties are subject to equitable subordination. Section 726(a) explicitly, clearly, and unambiguously makes the distribution of the property of the estate subject to the provisions of § 510. Postpetition nonpecuniary loss tax penalties are therefore subject to equitable subordination. End of story.
Because the unambiguous language of § 726 permits the equitable subordination of postpetition tax penalties, it is not necessary for us to undertake any further analysis. Indeed, it is necessary that we not do so.