Hartford Underwriters Co. v. Union Planters Bank, N.A.

• Citation: 120 S. Ct. 1942,530 U.S. 1,147 L. Ed. 2d 1 1
• Decision Date: 30 May 2000
• Docket Number: 99409
• Parties: HARTFORD UNDERWRITERS INSURANCE CO. v. UNION PLANTERS BANK, N. A.SUPREME COURT OF THE UNITED STATES
• Court: United States Supreme Court

530 U.S. 1

120 S. Ct. 1942

147 L. Ed. 2d 1

HARTFORD UNDERWRITERS INSURANCE COMPANY v. UNION PLANTERS BANK, N. A.

No. 99-409

SUPREME COURT OF THE UNITED STATES

March 20, 2000, Argued

May 30, 2000, Decided

Syllabus

During attempted reorganization under Chapter 11 of the Bankruptcy Code, debtor Hen House Interstate, Inc., obtained workers' compensation insurance from petitioner Hartford Underwriters. Although Hen House repeatedly failed to make the monthly premium payments required by the policy, Hartford continued to provide insurance. The reorganization ultimately failed, and the court converted the case to a Chapter 7 liquidation proceeding and appointed a trustee. Learning of the bankruptcy proceedings after the conversion, and recognizing that the estate lacked unencumbered funds to pay the premiums owed, Hartford attempted to charge the premiums to respondent bank, a secured creditor, pursuant to 11 U.S.C. § 506(c). The Bankruptcy Court ruled for Hartford, and the District Court affirmed, but the en banc Eighth Circuit reversed, concluding that § 506(c) could not be invoked by an administrative claimant.

Held: Section 506(c) does not provide an administrative claimant of a bankruptcy estate an independent right to seek payment of its claim from property encumbered by a secured creditor's lien. Pp. 3-12.

(a) As an administrative claimant, petitioner is not a proper party to seek recovery under § 506(c), which provides: "The trustee may recover from property securing an allowed secured claim the . . . costs and expenses of preserving, or disposing of, such property . . . ." The statute appears quite plain in specifying who may use § 506(c) -- "the trustee." Although the statutory text does not actually say that persons other than the trustee may not seek recovery under § 506(c), several contextual features support that conclusion. First, a situation in which a statute authorizes specific action and designates a particular party empowered to take it is surely among the least appropriate in which to presume nonexclusivity. Second, the fact that the sole party named -- the trustee -- has a unique role in bankruptcy proceedings makes it entirely plausible that Congress would provide a power to him and not to others. Further, had Congress intended the provision to be broadly available, it could simply have said so, as it has in describing the parties who could act under other sections of the Code. The Court rejects as unpersuasive petitioner's arguments from § 506(c)'s text: that the use in other Code provisions of "only" or other expressly restrictive language in specifying the parties at issue means that no party in interest is excluded from § 506(c), and that the right of a nontrustee to recover under § 506(c) is evidenced by § 1109. Pp. 3-7.

(b) The Court also rejects arguments based on pre-Code practice and policy considerations that petitioner advances in support of its assertion that § 506(c) is available to parties other than the trustee. It is questionable whether the pre-Code precedents relied on by petitioner establish a bankruptcy practice sufficiently widespread and well recognized to justify the conclusion of implicit adoption by Congress in enacting the Code. In any event, where, as here, the meaning of the Code's text is itself clear, its operation is unimpeded by contrary prior practice. Also unavailing is petitioner's argument that its reading is necessary as a matter of policy, since in some cases the trustee may lack an incentive to pursue payment. It is far from clear that the relevant policy implications favor petitioner's position, and, in any event, achieving a better policy outcome -- if what petitioner urges is that -- is a task for Congress, not the courts. Pp. 7-12.

177 F.3d 719, affirmed.

G. Eric Brunstad, Jr. argued the cause for petitioner.

Robert H. Brownlee argued the cause for respondent.

SCALIA, J., delivered the opinion for a unanimous Court.

SCALIA

JUSTICE SCALIA delivered the opinion of the Court.

In this case, we consider whether 11 U.S.C. § 506(c) allows an administrative claimant of a bankruptcy estate to seek payment of its claim from property encumbered by a secured creditor's lien.

I

This case arises out of the bankruptcy proceedings of Hen House Interstate, Inc., which at one time owned or operated several restaurants and service stations, as well as an outdoor-advertising firm. On September 5, 1991, Hen House filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Missouri. As a Chapter 11 debtor-in-possession, Hen House retained possession of its assets and continued operating its business.

Respondent had been Hen House's primary lender. ¹ At the time the Chapter 11 petition was filed, it held a security interest in essentially all of Hen House's real and personal property, securing an indebtedness of over $ 4 million. After the Chapter 11 proceedings were commenced, it agreed to lend Hen House an additional $ 300,000 to help finance the reorganization. The Bankruptcy Court entered a financing order approving the loan agreement and authorizing Hen House to use loan proceeds and cash collateral to pay expenses, including workers' compensation expenses.

During the attempted reorganization, Hen House obtained workers' compensation insurance from petitioner Hartford Underwriters (which was unaware of the bankruptcy proceedings). Although the policy required monthly premium payments, Hen House repeatedly failed to make them; Hartford continued to provide insurance nonetheless. The reorganization ultimately failed, and on January 20, 1993, the Bankruptcy Court converted the case to a liquidation proceeding under Chapter 7 and appointed a trustee. At the time of the conversion, Hen House owed Hartford more than $ 50,000 in unpaid premiums. Hartford learned of Hen House's bankruptcy proceedings after the conversion, in March 1993.

Recognizing that the estate lacked unencumbered funds to pay the premiums, Hartford attempted to charge the premiums to respondent, the secured creditor, by filing with the Bankruptcy Court an "Application for Allowance of Administrative Expense, Pursuant to 11 U.S.C. § 503 and Charge Against Collateral, Pursuant to 11 U.S.C. § 506(c)." The Bankruptcy Court ruled in favor of Hartford, and the District Court and an Eighth Circuit panel affirmed, In re Hen House Interstate Inc., 150 F.3d 868 (CA8 1998). The Eighth Circuit subsequently granted en banc review, however, and reversed, concluding that § 506(c) could not be invoked by an administrative claimant. In re Hen House Interstate Inc., 177 F.3d 719 (1999). We granted certiorari. 528 U.S. 985 (2000).

II

Petitioner's effort to recover the unpaid premiums involves two provisions, 11 U.S.C. §§ 503(b) and 506(c). Section 503(b) provides that "the actual, necessary costs and expenses of preserving the estate, including wages, salaries, or commissions for services rendered after the commencement of the case" are treated as administrative expenses, which are, as a rule, entitled to priority over prepetition unsecured claims, see §§ 507(a)(1), 726(a)(1), 1129(a)(9)(A). Respondent does not dispute that the cost of the workers' compensation insurance Hen House purchased from petitioner is an administrative expense within the meaning of this provision. Administrative expenses, however, do not have priority over secured claims, see §§ 506, 725-726, 1129(b)(2)(A); United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 378-379, 98 L. Ed. 2d 740, 108 S. Ct. 626 (1988), and because respondent held a security interest in essentially all of the estate's assets, there were no unencumbered funds available to pay even administrative claimants.

Petitioner therefore looked to § 506(c), which constitutes an important exception to the rule that secured claims are superior to administrative claims. That section provides as follows:

"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." § 506(c).

Petitioner argued that this provision entitled it to recover from the property subject to respondent's security interest the unpaid premiums owed by Hen House, since its furnishing of workers' compensation insurance benefited respondent by allowing continued operation of Hen House's business, thereby preserving the value of respondent's collateral; or alternatively, that such benefit could be presumed from respondent's consent to the postpetition financing order. Although it was contested below whether, under either theory, the workers' compensation insurance constituted a "benefit to the holder" within the meaning of § 506(c), that issue is not before us here; we assume for purposes of this decision that it did, and consider only whether petitioner -- an administrative claimant -- is a proper party to seek recovery under § 506(c). ²

In answering this question, we begin with the understanding that Congress "says in a statute what it means and means in a statute what it says there," Connecticut Nat. Bank v. Germain, 503 U.S. 249, 254, 117 L. Ed. 2d 391, 112 S. Ct. 1146 (1992). As we have previously noted in construing another provision of § 506, when "the statute's language is plain, 'the sole function of the courts'" -- at least where the disposition required by the text is not absurd -- "'is to enforce it according to its terms.'" United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 103 L. Ed. 2d 290, 109 S. Ct. 1026 (1989) (quoting Caminetti v. United States, 242 U.S. 470, 485, 61 L. Ed. 442, 37 S. Ct. 192 (1917)). Here, the statute appears quite plain in specifying who may use § 506(c) -- "the trustee." It is true, however, as petitioner notes, that all this actually "says" is that the trustee may seek recovery under the section, not that...