Adamo, In re, 813
| Decision Date | 16 April 1980 |
| Docket Number | D,No. 813,813 |
| Citation | 619 F.2d 216 |
| Parties | 1 Collier Bankr.Cas.2d 866, 6 Bankr.Ct.Dec. 313, Bankr. L. Rep. P 67,412 In re Paul R. ADAMO, Barbara Ann Barrington, Raymond A. Brimacomb, Michael S. Dempsey, Paul M. Gagnon, Eloise Hymes, Pamela R. Jurich, Leomia Linton, Kenneth W. Locey, Jr., Deborah Peters Mancuso, Diane K. Mayo, Denise K. Munnings, Karen Nielsen, Chandos C. Williams, Joan L. Williams, Raymond T. Wright, Jr., Marcia Lee Christopher, Phillip Lee Norton, Donald J. Salamone, Karen Stanley, William M. Edwards. NEW YORK STATE HIGHER EDUCATION SERVICES CORPORATION, Appellant, v. Paul R. ADAMO et al., Appellees. ocket 79-5059. |
| Court | U.S. Court of Appeals — Second Circuit |
Lawrence W. O'Toole, Albany, N. Y., for appellant.
Before LUMBARD and MANSFIELD, Circuit Judges, and BARTELS, District Judge. *
This is an appeal from a judgment of the United States District Court for the Western District of New York, Burke, J., affirming the discharge by the Bankruptcy Court of certain student loan obligations in proceedings brought on by twenty-one voluntary petitions in bankruptcy. 1 The sole question for review is the effect of the repeal by Congress of Section 439A of the Higher Education Act of 1965, as amended, 20 U.S.C. § 1087-3, pertaining to dischargeability of student loans, on petitions in bankruptcy commenced but not disposed of prior to the date of such repeal.
The pertinent facts are undisputed. Each of the loans here involved is either owed to or guaranteed by appellant New York State Higher Education Services Corporation ("NYSHESC"), and each was reinsured to appellant by the United States Office of Education by agreements entered into pursuant to the Higher Education Act of 1965, as amended, 20 U.S.C. §§ 1071 et seq. At the time the twenty-one voluntary petitions in bankruptcy were filed, § 1087-3 of Title 20 provided, in part, as follows:
(a) A debt which is a loan insured or guaranteed under the authority of this part may be released by a discharge in bankruptcy under the Bankruptcy Act only if such discharge is granted after the five-year period . . . beginning on the date of commencement of the repayment period of such loan, except that prior to the expiration of that five-year period, such loan may be released only if the court in which the proceeding is pending determines that payment from future income or other wealth will impose an undue hardship on the debtor or his dependents.
(b) Subsection (a) of this section shall be effective with respect to any proceedings begun under the Bankruptcy Act on or after September 30, 1977.
This provision was subsequently repealed effective November 6, 1978, however, by Section 317 of the Bankruptcy Reform Act of 1978 ("BRA"), Pub.L.95-598, 2 and was replaced by an analogous section, 11 U.S.C. § 523(a)(8). Broader in scope than 20 U.S.C. § 1087-3, section 523(a)(8), Pub.L.96-56, provides:
(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt
(8) for an educational loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or a nonprofit institution of higher education, unless
(A) such loan first became due before five years . . . before the date of the filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose an undue hardship on the debtor and the debtor's dependents; . . .
Under section 402(a) of the BRA, this replacement provision did not become effective until October 1, 1979, approximately eleven months after the effective date of the repeal of its predecessor, 20 U.S.C. § 1087-3. 3 According to appellant, this interruption in the rule of nondischargeability of student loans constitutes a loophole through which certain student loan debtors now attempt to escape their repayment obligations.
The Bankruptcy Court disposed of all of the twenty-one petitions by two identical memorandum decisions and orders dated March 16 and April 5, 1979, respectively, holding that because the petitions were considered and resolved after the repeal of 20 U.S.C. § 1087-3 but before the effective date of 11 U.S.C. § 523(a)(8), the Bankruptcy Court no longer had jurisdiction "to determine that the subject bankrupts are not entitled to a discharge, since the law which exists at the time of this decision has no provision for the denial of the discharge of student loans." Accordingly, Bankruptcy Judge Hayes ordered that the student loan debts in question be discharged. His decision was affirmed by the district court in a brief order on September 27, 1979, and this appeal followed.
The question presented by this appeal has been considered previously on numerous occasions by many different bankruptcy courts, and at least ten of these have concluded, along with Judge Hayes in this case, that discharge should be ordered. See In re Utterback; Wisconsin Higher Education Aids Board v. Utterback, 5 B.C.D. 1046 (N.D.Tex.1979); In re Sawaya; Massachusetts Higher Education Assistance Corporation v. Sawaya, 5 B.C.D. 1072 (D.Mass.1979); In re King, Jr.; State of Ohio v. King, Jr., 5 B.C.D. 417 (S.D.Ohio 1979); In re Johnson; Pennsylvania Higher Education Assistance Agency v. Johnson, 5 B.C.D. 532 (E.D.Pa.1979); In re Jones; University of Cincinnati v. Jones, No. B-1-1804 (S.D.Ohio 1979); In re Matthews; Matthews v. Connecticut Student Loan Foundation, (1979) Bankr.L.Rep. (C.C.H.) P 67,049 (D.Conn.1979); In re Adams; Connecticut Student Loan Foundation v. Adams, No. H-78-647 (D.Conn.1979); In re Christopher; New York State Higher Education Services Corporation v. Christopher, et al., 5 B.C.D. 214 (W.D.N.Y.1979); In re Espronceda; Coordinating Board, Texas College and University System v. Espronceda, 5 B.C.D. 267 (S.D.Tex.1979); see also In re Amadori; New York State Higher Education Services Corporation v. Amadori, et al., 5 B.C.D. 187 (W.D.N.Y.1979). On the other hand, an equal number of courts have concluded that the repeal of 20 U.S.C. § 1087-3 was of no effect with regard to cases commenced prior to the effective date of the BRA, October 1, 1979, and have denied the petitions for discharge in bankruptcy of otherwise nondischargeable student loan debts on that basis. See In re Henry; New York State Higher Education Services Corporation v. Henry, 5 B.C.D. 1014 (S.D.N.Y.1979); In re Erickson; Wisconsin Higher Educational Aids Board v. Erickson, 5 B.C.D. 734 (E.D.Wis.1979); In re Weinstein; Pennsylvania Higher Education Assistance Agency v. Weinstein, 5 B.C.D. 503 (E.D.Pa.1979); In re Kohn; New York State Higher Education Services Corporation v. Kohn, 5 B.C.D. 419 (S.D.N.Y.1979); In re Edson; Wisconsin Higher Educational Aids Board v. Edson, 4 B.C.D. 1191 (D.Nev.1979); In re Perkins; New York State Higher Education Services Corporation v. Perkins, No. B-78-00749 (D.Utah 1979); see also In re Garetano; New York State Higher Education Services Corporation v. Garetano, 79-C-953, 78-B-780 (E.D.N.Y.1979); In re Markovitz; New York State Higher Education Services Corporation v. Markovitz, CA-79-P-0576-S, B-78-01230 (N.D.Ala.1979); In re Hawes, et al. v. New Jersey Higher Education Assistance Agency, No. B78-28 (D.N.J.1979).
For the reasons hereafter set forth, we believe that the latter decisions have correctly interpreted the relevant provisions of the BRA. We conclude that the hiatus between the repeal of section 1087-3 of Title 20 and the effective date of its successor provision, 11 U.S.C. § 523(a)(8), was purely a manifestation of congressional inadvertence and that to follow blindly the plain meaning of the statute without regard to the obvious intention of Congress would create an absurd result in accord with neither established principles of statutory construction nor common sense. Accordingly, the decisions of the district court and the bankruptcy court below must be reversed.
Analysis of the legislative history of the BRA supports appellant's contention that the failure of the effective dates of the repeal and replacement statutes to coincide resulted from a mistake of Congress. 4 Section 1087-3 of Title 20 of the United States Code was enacted in 1976 to prevent abuse of the bankruptcy laws by students petitioning for bankruptcy immediately upon graduation without attempting to realize the potential increased earning capacity which education may provide. H.Rep.No.94-1232, 94th Cong., 2d Sess., 1 (1976); see also Report of the Commission on the Bankruptcy Laws of the United States, H.R.Doc.No.93-137, 93rd Cong., 1st Sess., 176-77 (1973), reprinted in L. King (ed.), Collier on Bankruptcy, app. v. 2, 176-77 (15th ed. 1979). By creating a special exception from discharge for education loans, Congress hoped to insure a more realistic view of a student's ability to repay the debt.
During the 95th Congress, however, bankruptcy reform legislation was introduced in the House of Representatives which included the repeal of section 1087-3 in order to "restore the law to where it had been before the 1976 amendment . . ." H.Rep.95-595, 95th Cong., 1st Sess., 132, reprinted in (1978) U.S.Code Cong. & Admin.News, pp. 5787, 6093. 5 This repeal provision, which was to take effect on the date of enactment of the legislation, was predicated upon the view that student abuses were not as widespread as had been thought and, therefore, did not warrant special treatment under the bankruptcy laws. This sentiment did not prevail, however, and when the legislation H.R. 8200 was reintroduced for further consideration in early 1978, the House, by amendment to section 523(a)(8) of the bill, adopted a replacement provision making nondischargeable educational loans insured or guaranteed under Part B of Title IV of the Higher Education Act of 1965, supra. 6
Similar bankruptcy reform legislation was introduced in the Senate in October...
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