In re Griffin

• Decision Date: 21 September 2006
• Docket Number: No. 06-6025EM.,06-6025EM.
• Citation: 352 B.R. 475
• Parties: In re Keith N. GRIFFIN, Sr., Debtor. Kimberly E. Banks, et al., Plaintiffs-Appellees, v. Keith E. Griffin, Sr., Defendant-Appellant.
• Court: U.S. Bankruptcy Appellate Panel, Eighth Circuit

352 B.R. 475

In re Keith N. GRIFFIN, Sr., Debtor.

Kimberly E. Banks, et al., Plaintiffs-Appellees, v. Keith E. Griffin, Sr., Defendant-Appellant.

No. 06-6025EM.

United States Bankruptcy Appellate Panel of the Eighth Circuit.

Submitted: July 26, 2006.

Filed: September 21, 2006.

Bonnie L. Clair, Brian J. LaFlamme, Summers & Compton, St. Louis, MO, for Appellee.

Christi Fingal Griffin, St. Louis, MO, for Appellant.

Before KRESSEL, Chief Judge, MAHONEY, and VENTERS, Bankruptcy Judges.

MAHONEY, Bankruptcy Judge.

This is an appeal from a decision of the bankruptcy court which denied the debtor, Keith N. Griffin, Sr. ("Griffin"), a discharge in his Chapter 7 case under 11 U.S.C. § 727(a)(9). Griffin filed the Chapter 7 case within six years of the petition date of a Chapter 13 case in which he received a discharge. The bankruptcy court found, on a motion for summary judgment, that Griffin did not pay at least 70% of the allowed unsecured claims in the Chapter 13 case. Interpreting 11 U.S.C. § 727(a)(9) to require such amount of payments in a Chapter 13 case filed within six years of the Chapter 7 petition date to be eligible for a Chapter 7 discharge, the court denied the discharge. The issue on appeal concerns the meaning of the statutory language used in 11 U.S.C. § 727(a)(9).

We reverse the decision of the bankruptcy court

STANDARD OF REVIEW

The interpretation of a statute is a question of law. Daley v. Marriott Int'l, Inc., 415 F.3d 889, 894 (8th Cir.2005). Legal conclusions are reviewed de novo. DeBold v. Case, 452 F.3d 756, 761 (8th Cir. 2006). Appellate review of a grant of summary judgment is de novo. U.S. Bank v. Young (In re Young), 336 B.R. 775, 778 (8th Cir. BAP 2006).

DISCUSSION

The debtor filed a voluntary petition for relief under Chapter 13 of the United States Bankruptcy Code on July 8, 1999. He obtained confirmation of a plan, completed payments under the plan, and received a discharge in the Chapter 13 case. Allowed priority and general unsecured claims amounted to $20,101.10 in the aggregate. Actual distribution to unsecured claimants under the plan totaled $6,780.06. Secured claimants were paid $16,669.41, plus interest of $1,885.06. Attorney fees and trustee commissions amounted to $3,449.81 and were paid in full. The Chapter 13 trustee distributed $28,784.34 to the various parties. The Chapter 7 petition was filed on June 4, 2005, less than six years after the Chapter 13 petition date.

The Bankruptcy Code at 11 U.S.C. § 727(a)(9) provides, in relevant part:

The court shall grant the debtor a discharge, unless —

. . . .

the debtor has been granted a discharge under section 1228 or 1328 of this title ... in a case commenced within six years before the date of the filing of the petition, unless payments under the plan in such case totaled at least —

(A) 100 percent of the allowed unsecured claims in such case; or

(3) (i) 70 percent of such claims; and

(ii) the plan was proposed by the debtor in good faith, and was the debtor's best effort.

The bankruptcy court's interpretation of the statute is consistent with every report ed opinion which has commented upon or mentioned the statute. See, e.g., In re Hiatt, 312 B.R. 150, 152 n. 2 (Bankr. S.D.Ohio 2004); In re McMeekan, No. 96-82757, 1997 WL 33475211 at *4 (Bankr. C.D.Ill. Jan.30, 1997); In re Messenger, 178 B.R. 145, 149 (Bankr.N.D.Ohio 1995); In re Karayan, 82 B.R. 541 (Bankr. C.D.Cal.1988); In re Pierce, 82 B.R. 874 (Bankr.S.D.Ohio 1987); In re Greer, 60 B.R. 547 (Bankr.C.D.Cal.1986); In re Raines, 33 B.R. 379, 381 (M.D.Tenn.1983); In re Price, 20 B.R. 253 (Bankr.W.D.Ky. 1981); Triplett v. Arndt (In re Aalto), 8 B.R. 157 (Bankr.M.D.Fla.1981); In re McClaflin, 13 B.R. 530 (Bankr.N.D.Ill. 1981); In re Poff, 7 B.R. 15 (Bankr. S.D.Ohio 1980). However, none of these courts was actually interpreting the section in a Chapter 7 case in which this issue had arisen.

When attempting to determine the meaning of a statute, one must begin with the language of the statute itself. Landreth Timber Co. v. Landreth, 471 U.S. 681, 685, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985). If the statute's language is plain, "the sole function of the courts is to enforce it according to its terms." Caminetti v. United States, 242 U.S. 470, 485, 37 S.Ct. 192, 61 L.Ed. 442 (1917), quoted in United States v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989). See also Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). Accord Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000).

The debtor suggests that each of the cases discussing § 727(a)(9), and the bankruptcy court in this case, have misread the statute. The debtor points out that the statutory language does not discuss payments to unsecured creditors. Instead, the language used is "payments under the plan." The debtor argues that the phrase "payments under the plan" includes payments for attorney fees and trustee's fees, payments on secured debts, and payments on priority claims, in addition to payments on general unsecured claims.

The debtor also points out that subdivision (A) of the exception to denial of the discharge requires that payments under the plan in the earlier case totaled "at least" 100% of the allowed unsecured claims in such case. If Congress meant the language to be interpreted as payment of all unsecured claims, there would be no reason to use the words "at least" preceding the words "100% of the allowed unsecured claims," because no debtor in a Chapter 13 case would, or could, pay more than 100% of the unsecured claims. Congress could have said — but did not — "unless payments under the plan to unsecured creditors totaled 100% of the allowed unsecured claims, or at least 70% of such claims...."

The debtor is correct that the language of the statute does not include any reference to payments or distributions to unsecured creditors or on unsecured claims. Instead, the language used is "payments under the plan ... totaled at least ... 100 percent of the allowed unsecured claims in such case; or 70 percent of such claims; and the plan was proposed by the debtor in good faith, and was the debtor's best effort."

Interpretations of the language "payments under the plan" generally focus on discharge under § 1328. Some courts interpret this language to mean completion of payments due to the trustee or all payments referred to in the plan, whether paid through the trustee or paid directly. See In re Smith, 237 B.R. 621, 626 (Bankr. E.D.Tex.1999) (§ 1328(a) compels the issuance of a discharge upon completion by the debtor of all amounts due under the plan); In re Perez, 339 B.R. 385, 390 n. 4 (Bankr. S.D.Tex.2006) (in requiring all debtors to make mortgage payments through the Chapter 13 trustee, the court discussed the terminology regarding "payments under the plan" and stated, "[t]he term `under the plan' properly refers to any payment made pursuant to the provisions of a Chapter 13 plan, regardless of whether such payment is made through the trustee or by a debtor directly to a creditor.").

Other courts emphasize the payments of dividends. In the case of In re Rivera, 177 B.R. 332, 335 (Bankr.C.D.Cal.1995), although the debtors had paid to the trustee all of the required monthly payments identified in the plan, allowed claims exceeded what the debtors had scheduled so the payments to the trustee did not provide unsecured creditors with a 65% dividend, which was required in the plan. Because the creditors had not received the payout stated in the plan, the debtors had not completed their payments under the plan.

Whichever way a court looks at the language, the cases are consistent that the phrase "payments under the plan" means either payments required by the confirmed plan to be paid to the trustee for distribution as described in the plan, or, as in Rivera, payments required to be made because of a defined percentage dividend to unsecured creditors in the specific language of the plan.

No case has been found that interprets the phrase "payments under the plan" in the context of the Chapter 13 confirmation or discharge as being limited to payments on unsecured claims. It is only in the cases discussing potential issues arising in a hypothetical case under 11 U.S.C. § 727(a)(9) that the courts have suggested that the phrase "payments under the plan" means "payments on unsecured claims."

The phrase "payment under the plan" is used in several other places in the Bankruptcy Code. In the confirmation standards of 11 § 1325(b)(1)(B), as that provision read prior to the 2005 amendments, the phrase is used as follows:

(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan —

. . . .

(B) the plan provides that all of the debtor's projected disposable income to be received in the three-year period beginning on the date that the first payment is due under the plan will be applied to make payments under the plan.

11 U.S.C. § 1325(b)(1)(3) (emphasis added).

That language does not state that the disposable income needs to be applied only to unsecured claims. In contrast, the language of the same section as amended in 2005 does state that such disposable income "will be applied to make payments to unsecured creditors under the plan."¹ Congress apparently knows how to write clear language with regard to payments to unsecured creditors when it believes such language is appropriate.

Similarly, in the hardship discharge section of Chapter 13, at 11 U.S.C. § 1328(b), Congress made specific reference to payment of unsecured claims as follows:

(b) [A]t any time after the confirmation of the plan and after notice and a hearing, the court may grant a discharge to a debtor that has not completed payments under the plan only if —

. . . .

(2) the...