Hudson, In re, 87-3913

• Decision Date: 27 October 1988
• Docket Number: No. 87-3913,87-3913
• Citation: 859 F.2d 1418
• Parties: , 19 Collier Bankr.Cas.2d 1185, 18 Bankr.Ct.Dec. 952, Bankr. L. Rep. P 72,472 In re David Rock HUDSON, Debtor. Gregory STACKHOUSE and Esther Stackhouse, Appellants, v. David Rock HUDSON, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1418

859 F.2d 1418

57 USLW 2283, 19 Collier Bankr.Cas.2d 1185,

18 Bankr.Ct.Dec. 952, Bankr. L. Rep. P 72,472

In re David Rock HUDSON, Debtor Gregory STACKHOUSE and Esther Stackhouse, Appellants, v. David Rock HUDSON, Appellee.

No. 87-3913.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 4, 1988.

Decided Oct. 27, 1988.

John J. Dorman, Tacoma, Wash., for appellants.

Charles A. Schaaf, Forks, Wash., for appellee.

Appeal from the United States Bankruptcy Appellate Panel of the Ninth Circuit.

Before FLETCHER and WIGGINS, ^* Circuit Judges, and CARROLL, District Judge. ^**

FLETCHER, Circuit Judge:

Gregory and Esther Stackhouse appeal from the Ninth Circuit bankruptcy appellate panel (BAP) decision affirming the bankruptcy court's grant of summary judgment

in favor of David Rock Hudson (debtor) holding that any judgment debt that might be entered in a pending suit for damages arising from drunk driving would be dischargeable. The dispositive issue on appeal is whether 11 U.S.C. Sec. 523(a)(9), requires that a creditor obtain judgment for damages against a debtor prior to the debtor's filing for bankruptcy as a prerequisite to having declared nondischargeable a debt arising from damages caused by drunk driving. We hold that a prepetition judgment is not required, and reverse the decision of the BAP.

FACTS

The facts are not in dispute. On March 28, 1982, Gregory Stackhouse was seriously injured in an automobile-motorcycle collision with Hudson. Immediately after the collision, a Washington state trooper administered a breathalyzer test to Hudson. He was cited for and later convicted of driving while intoxicated.

Stackhouse and his wife filed suit against Hudson in state court for injuries sustained in the accident. On December 12, 1985, the day before trial was to begin, Hudson filed a Chapter 7 petition in bankruptcy. The state court action was stayed.

The United States Bankruptcy Court for the District of Western Washington set April 7, 1986 as the last day for filing complaints to determine dischargeability under Sec. 523(c). On March 24, 1986, Hudson filed a complaint to determine the dischargeability under Sec. 523(a)(9) of the Stackhouses' state tort claim against him. The Stackhouses had until April 28, 1986, to respond. On April 24, 1986, the Stackhouses filed an answer to the complaint, with counterclaims against Hudson. ¹ The response was timely under Sec. 523(a)(9), but was filed after the deadline for filing Sec. 523(c) nondischargeability complaints.

On April 23, 1986, the bankruptcy judge granted a discharge to Hudson on the ground that no complaint objecting to discharge had been filed within the allowed time. Hudson then filed a motion for summary judgment on his complaint, based on the discharge already granted. Hudson also argued that the Stackhouses could not recover under Sec. 523(a)(9) because they did not have a judgment or consent decree as required by the statute.

On September 9, 1986, the bankruptcy court ordered that judgment be entered in favor of Hudson. The court found the Stackhouses' claim against Hudson dischargeable because 11 U.S.C. Sec. 523(a)(9), by its literal terms, exempts from discharge only those drunk-driving claims that have been reduced to judgment before the filing of bankruptcy. The court further found that Sec. 523(a)(6) was equally unavailing because the Stackhouses had not requested relief under that subsection pursuant to 11 U.S.C. Sec. 523(c), and that even if such relief could be found in the counterclaim, it was untimely pursuant to Bankr.R. 4007(c).

The BAP affirmed the bankruptcy court's decision. In re Hudson, 73 B.R. 649 (9th Cir. BAP 1987). The Stackhouses timely appeal to this court.

JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction over appeals from the BAP under 28 U.S.C. Sec. 158(d). The BAP's conclusions of law are subject to de novo review. In re American Mariner Ind., 734 F.2d 426, 429 (9th Cir.1984).

DISCUSSION

This is the first time a federal appeals court has been called upon to interpret the dischargeability provision of 11 U.S.C. Sec. 523(a)(9). Our objective when interpreting a federal statute "is to ascertain the intent of Congress and to give effect to legislative will." United States v. Taylor, 802 F.2d 1108, 1113 (9th Cir.1986), cert. denied, 479 U.S. 1094, 107 S.Ct. 1309, 94 L.Ed.2d 164 (1987). "The most persuasive evidence of ... [congressional] intent is the words selected by Congress." Foxgord v. Hischemoeller, 820 F.2d 1030, 1032 (9th Cir.1987) (quoting Director, Office of Workers' Compensation Programs v. Forsyth Energy, Inc., 666 F.2d 1104, 1107 (7th Cir.1981)). We thus begin with the language of the statute itself, Blum v. Stenson, 465 U.S. 886, 896, 104 S.Ct. 1541, 1548, 79 L.Ed.2d 891 (1984); United States v. Turkette, 452 U.S. 576, 580, 101 S.Ct. 2524, 2527, 69 L.Ed.2d 246 (1981), and "[a]bsent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive." 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); see also INS v. Cardoza-Fonseca, 480 U.S. 421, 107 S.Ct. 1207, 1212-14, 94 L.Ed.2d 434 (1987).

A. Current Interpretation of 11 U.S.C. Sec. 523(a)(9)

The language of Sec. 523(a)(9) reads as follows:

A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt--

(9) to any entity, to the extent that such debt arises from a judgment or consent decree entered in a court of record against the debtor wherein liability was incurred by such debtor as a result of the debtor's operation of a motor vehicle while legally intoxicated under the laws or regulations of any jurisdiction within the United States or its territories wherein such motor vehicle was operated and within which such liability was incurred[.]

11 U.S.C. Sec. 523(a)(9) (Supp.1986) (emphasis added). Although the code section describes the subject debt as one which arises from a judgment or consent decree, the statute does not specifically address whether a claim must be reduced to judgment or consent decree before the debtor files for bankruptcy. This had encouraged debtor parties to argue that the statute requires reduction of the claim to judgment or consent decree prior to bankruptcy. However, the bankruptcy courts addressing this issue have, until this case, unanimously concluded that the language of Sec. 523(a)(9) does not require that a claim be reduced to judgment or consent decree prior to the offender's bankruptcy. ²

These courts have reasoned that, given the clear intent of Congress to prevent drunken drivers from escaping liability by discharging debts in bankruptcy, adherence to a requirement that a creditor first obtain a "judgment or consent decree" would effectively nullify the statute. Such an interpretation would merely encourage drunk drivers to file preemptively for bankruptcy once it became clear that they would be held civilly accountable for their actions. As the court observed in In re Thomas, 51 B.R. 187 (Bkrtcy.E.D.Va.1985), "[a]s worded, the legislation gives quick-thinking drunks or their attorneys an out. If they can race to the U.S. Bankruptcy Court before the injured can obtain a state court judgment, the intoxicated debtor can still prevail." Id. at 188-89. The court went on to note that such a "race" would give the debtor a clear advantage since it takes "considerably longer to obtain a judgment than it does to file bankruptcy." Id. at 189. Concluding that Congress could not have intended this result, the court gave "[a] creditor who has not had reasonable time to seek a judgment in state court ... leave of this court to diligently prosecute his claim in state court." Id. at 189.

The same conclusion was reached in In re Ganzer. Likewise acknowledging that a statute requires a judgment or consent decree, the Ganzer court expressed even stronger condemnation of reading it to require that the creditor obtain judgment before the bankruptcy petition is filed:

Presumably, Congressional intent in enacting 11 U.S.C. Sec. 523(a)(9) was to preclude a debtor's discharge from liability on a claim arising out of the operation of a motor vehicle while under the influence of alcohol. If a prepetition judgment determining liability to have been incurred by the debtor under such circumstances, be required, the statute is practically useless. Only in cases of legal malpractice will prepetition judgments ever be entered. This Court will not presume Congress to have intended to sabotage its legislation and create such an absurdity.

54 B.R. at 76-77 (emphasis in original).

Rather than endorse an absurd result clearly contrary to expressed legislative intent, bankruptcy courts have uniformly followed Thomas and Ganzer. See, e.g., In re Leach, 63 B.R. at 727 ("The appellant has not cited case authority, nor is this court aware of any, which supports the proposition that Sec. 523(a)(9) is only available to claimants who reduce their claims to judgment or consent decree before the debtor files in bankruptcy"); In re Carney, 68 B.R. at 656 ("The absence of a judgment prior to bankruptcy has been deemed immaterial under Sec. 523(a)(9) of the Code").

B. Legislative History of 11 U.S.C. Sec. 523(a)(9)

We are mindful of the principle that where a statute is clear on its face, it is unnecessary to look to its legislative history to discern its meaning and scope. Tennessee Valley Authority v. Hill, 437 U.S. 153, 184 n. 29, 98 S.Ct. 2279, 2296 n. 29, 57 L.Ed.2d 117 (1978). "Unless exceptional circumstances dictate otherwise, '[w]hen we find the terms of a statute unambiguous, judicial inquiry is complete.' " Burlington Northern R.R. Co. v. Oklahoma Tax Com'n, 481 U.S. 454, 107 S.Ct. 1855, 1860, 95 L.Ed.2d 404 (1987) (quoting Rubin v. United States, 449 U.S. 424, 430, 101 S.Ct. 698, 701, 66 L.Ed.2d 633 (1981)). See also Blum v. Stenson, ...