In re Hough
| Decision Date | 10 September 1999 |
| Docket Number | BAP No. ID-99-1092-BRP. Bankruptcy No. 98-01101. Adversary No. 98-6172. |
| Parties | In re William Oren HOUGH, Jr., and Barbara Irene Hough, Debtors. Barbara Irene Hough, Appellant, v. Robert A. Fry and Elizabeth G. Fry, dba Gem Physical Therapy Clinic; and Chip Sands, Appellees. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Jake W. Peterson, Boise, ID, for Barbara Irene Hough.
Cathleen M. Morgan, Quane, Smith, Howard & Hull, Boise, ID, for Robert A. Fry and Elizabeth G. Fry.
Before: BRANDT, RUSSELL, and PERRIS, Bankruptcy Judges.
The bankruptcy court granted appellees' motion for summary judgment, declaring appellant's debt for fees and costs awarded to appellees in state court litigation excepted from discharge under § 523(a)(17)2. This appeal followed. We REVERSE and REMAND.
These facts are taken essentially verbatim from the bankruptcy court's published decision, Fry v. Hough (In re Hough), 228 B.R. 264, 265 (Bankr.D.Idaho 1998).
Appellant Barbara Hough ("Hough") filed a chapter 7 bankruptcy petition with the bankruptcy court on 8 April 1998. Appellees Robert and Elizabeth Fry (d/b/a Gem Physical Therapy Clinic) ("Fry") and Chip Sands ("Sands") are included among her creditors. In June, 1995, Hough sued Fry and Sands in state court, alleging she had retained Chip Sands, a physical therapist employed in a clinic owned and operated by Fry, and that during a treatment session, she was injured as a result of Sands' negligence. The state district court disagreed, granted Fry and Sands summary judgment, and awarded them approximately $1,600 in costs against Hough.
Hough appealed to the Idaho Supreme Court. That court not only affirmed the district court's decision, but also awarded Fry and Sands another $4,600 in attorneys' fees and costs incurred on appeal under Idaho Code § 12-121. The court found that Hough's appeal had been "frivolous, unreasonable and without foundation." Hough v. Fry, 131 Idaho 230, 953 P.2d 980, 984 (1998).
Fry and Sands commenced an adversary proceeding seeking to obtain a declaration from the bankruptcy court that the fee and cost awards were excepted from discharge in bankruptcy by § 523(a)(17). On summary judgment, the bankruptcy court issued its memorandum of decision (cited above), an order granting the motion for summary judgment, and a judgment declaring the debt excepted from discharge under § 523(a)(17). Hough timely appealed; by stipulation, the appeal was submitted without argument.
Whether the bankruptcy court erred in finding fees and costs imposed by a state court in a civil action against one not a prisoner excepted from discharge by § 523(a)(17).
We review summary judgments and issues of statutory interpretation de novo. United States v. Towers (In re Feiler), 230 B.R. 164, 167 (9th Cir. BAP 1999).
Section 523(a)(17) renders nondischargeable any debt:
for a fee imposed by a court for the filing of a case, motion, complaint, or appeal, or for other costs and expenses assessed with respect to such filing, regardless of an assertion of poverty by the debtor under § 1915(b) or (f) of title 28, or the debtor\'s status as a prisoner, as defined in section 1915(h) of title 28.
The section was added to the Bankruptcy Code by the Prison Litigation Reform Act of 1995 ("Act"), Pub.L. No. 104-134, 110 Stat. 1321-66. Subsections 804(a) and (c) of the Act amended the federal in forma pauperis statute, 28 U.S.C. § 1915, to require prisoner-litigants to pay the full amount of court filing fees and costs; at the same time, the amended statute permits payments to be made in installments. See Pub.L. No. 104-134, 110 Stat. XXXX-XX-XX (codified at 28 U.S.C. § 1915(b) and (f)). Subsection 804(b) of the Act added § 523(a)(17) to the Bankruptcy Code. See Pub.L. No. 104-134, 110 Stat. 1321-74.
The in forma pauperis statute ( the Act) provides, in pertinent part:
28 U.S.C. § 1915 (West 1999).
The central, indeed sole, issue in this appeal is the scope of § 523(a)(17); specifically, whether this exception to discharge applies to an award of attorney fees in a civil action under state law against a nonprisoner debtor, when those fees were not assessed pursuant to 28 U.S.C. § 1915(b) or (f).
The "first step in interpreting a statute is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case." Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). The reviewing court's "inquiry must cease if the statutory language is unambiguous and `the statutory scheme is coherent and consistent.'" Id. (quoting United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)). whether a statute is ambiguous is "determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Id. at 341, 117 S.Ct. 843 (citations omitted).
The bankruptcy court, looking for "plain meaning," found § 523(a)(17) unambiguous, and held that the statute "applies, on its face, to any debts imposed by a court for filing fees, or for other expenses associated with respect to a case." Hough, 228 B.R. at 266. As a result, "attorneys fees and costs assessed by a court against a nonprisoner litigant, who later seeks bankruptcy relief, are clearly excepted from bankruptcy discharge." Id. While hinting at legislative malpractice, in that Congress may have used language too broad to accomplish its purpose of deterring frivolous lawsuits by prisoners, the bankruptcy court refrained from judicial amendment of what it found to be a "clearly worded statute," id., rejecting the conclusion reached in the only other reported decisions dealing with § 523(a)(17), Matter of South Bend Community School Corp. v. Eggleston (In re Eggleston), 215 B.R. 1012 (N.D.Ind.1997), and Walker v. Tuttle (In re Tuttle), 224 B.R. 606 (Bankr.W.D.Mich. 1998).
The bankruptcy court here found it "unnecessary to go to the lengths engaged in by the courts in Tuttle and Eggleston to interpret away this straightforward, albeit arguably unintended, meaning of this enactment." Hough, 228 B.R. at 266. While the Eggleston court does not appear to have taken into account the plain meaning of the statute before deciding that legislative history warrants application of the statute only to prisoners, the Tuttle court's analysis is compelling. After considering the plain language of § 523(a)(17), the Tuttle court noted:
The ambiguity in the statute arises principally from the absence of a comma between "debtor" and "under," and from the unfortunate placement of the phrase "under § 1915(b) or (f) of title 28." Because of the proximity of this phrase to the antecedent phrase "regardless of an assertion of poverty by the debtor," a reader may first assume that the reference to 28 U.S.C. § 1915 simply modifies the phrase "assertion of poverty," without limiting other phrases within the paragraph. This reading, though perhaps initially appealing, is erroneous.
Because of the statute's explicit reference to the in forma pauperis statute, 28 U.S.C. § 1915, Judge Gregg concluded that the two statutes must be read in conjunction with one another:
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