In re Kiriluk

• Decision Date: 04 September 1987
• Docket Number: Adv. No. 86-1021F.,Bankruptcy No. 86-04030F
• Parties: In re Kiku KIRILUK, Debtor. Kiku KIRILUK, Plaintiff, v. The CHESTER WATER AUTHORITY and Delcora, Defendants.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

76 B.R. 979 (1987)

In re Kiku KIRILUK, Debtor.

Kiku KIRILUK, Plaintiff, v. The CHESTER WATER AUTHORITY and Delcora, Defendants.

Bankruptcy No. 86-04030F, Adv. No. 86-1021F.

United States Bankruptcy Court, E.D. Pennsylvania.

September 4, 1987.

Jeffrey M. Edelson, Delaware County Legal Assistance Ass'n, Chester, Pa., for debtor/plaintiff, Kiku Kiriluk.

Gregg A. Parker, Blank, Rome, Comisky & McCauley, Philadelphia, Pa., for the defendant, Delcora.

Joseph Finlay, Philadelphia, Pa., Trustee.

OPINION

BRUCE FOX, Bankruptcy Judge:

The debtor has initiated an adversary proceeding against the Delaware County Regional Water Control Authority, known as Delcora, for allegedly violating 11 U.S.C. § 362(a) and 11 U.S.C. § 366. The debtor maintains that Delcora refused to restore utility service to the debtor, postpetition, solely because of a prepetition obligation owing to Delcora. Delcora contends that it, and not the debtor, complied fully with the provisions of § 366. The debtor has moved for partial summary judgment pursuant to Bankr.Rule 7056 on the issue of Delcora's liability, reserving the issue of damages. Delcora has filed a cross motion for complete summary judgment. Since I find that material facts are in dispute, I shall deny both motions.

I.

Bankr.Rule 7056 incorporates Fed.R. Civ.P. 56 which permits the entry of summary judgment or partial summary judgment when appropriate. As the Third Circuit Court of Appeals has noted, summary judgment "may be granted only if, as a matter of law, viewing all the evidence which has been tendered and should have been admitted in the light most favorable to the party opposing the motion, no jury could decide in that party's favor." Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir.1987); accord, Goodman v. Johnson and Co., 534 F.2d 566 (3d Cir. 1976), cert. denied, 429 U.S. 1038, 97 S.Ct. 732, 50 L.Ed.2d 748 (1977); In re Paolino, 75 B.R. 641, 644 (Bankr.E.D.Pa., 1987).

Certain of the facts in this case do not appear to be disputed.

Water service in the City of Chester is provided by the Chester Water Authority (CWA) and sewer service is provided by Delcora. While each utility bills separately for its services, an arrangement apparently exists by which CWA will discontinue water service in order to aid Delcora in the collection of Delcora's delinquent accounts.

On July 22, 1986, Delcora notified the debtor that he was $766.24 delinquent in his payments and that Delcora intended to seek a termination of water service through CWA on or after August 1, 1986 unless measures were taken to bring the account current within a short period of time. On August 15, 1986, Delcora made a written request of CWA to discontinue water service to the debtor's home and CWA complied with this request on August 27, 1986. One day later, August 28, 1986, the debtor filed a voluntary petition under chapter 13 of the Bankruptcy Code.

On the same day that the debtor's bankruptcy petition was filed, the debtor through his counsel, notified Delcora and CWA of the filing. By way of affidavit in support of the motion for partial summary judgment, debtor's counsel asserts that he spoke personally with one employee of Delcora and with Delcora's counsel on August 28 and August 29, 1986, informing them of the debtor's bankruptcy filing and requesting immediate restoration of service.

When service was not restored, debtor filed the instant proceeding on September 2, 1986. At the same time, he sought an expedited hearing on a motion for a preliminary injunction against CWA and Delcora, which was granted the same day and an order was entered requiring restoration of service. Service was restored on September 2, 1986.

CWA was acting at all times at the request of Delcora. Thus, the debtor agreed to dismiss his action against CWA and to proceed solely against Delcora for permanent injunctive relief and for damages.

Certain factual matters were not agreed upon by the parties. First, in both his complaint and motion for injunctive relief, the debtor alleges that he is "ready willing and able to post adequate assurance." Delcora denies this allegation. Second, the debtor maintains that Delcora has no policy of demanding a security deposit from its customers. Delcora denies this and points to a document attached to its response to the debtor's second set of interrogatories. This document, which is unsigned, carries the heading "Resolution." The "resolution" states that it is a "draft" and was "adopted July 28, 1987"—well after the case commenced. By its terms, the "resolution" declares that Delcora will request a security deposit "equivalent to one cycle of sewer charge or such other amount as may be ordered or approved by a court of competent jurisdiction." The request is to be made of new utility users whose credit rating is "unknown" or "unsatisfactory." Debtors in bankruptcy with delinquent prepetition accounts are to be considered new users and a deposit may be requested of them if their credit rating is either unknown or unsatisfactory. The third fact not agreed upon is the debtor's assertion that his request for restoration of service was denied solely because Delcora maintained that it was not a utility service governed by section 366 of the Bankruptcy Code and therefore had no obligation to restore any service postpetition.

Because I find the record unclear regarding the conduct of the parties postpetition, as well as the policy of Delcora concerning security deposits, I will deny the various motions and set this case down for trial.

II.

11 U.S.C. § 366 reflects a Congressional policy decision regarding the importance of utility services to debtors. By its terms, the statute states:

(a) Except as provided in subsection (b) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due.

(b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.

The purpose of the section is to permit a debtor to continue to receive postpetition utility service that may be monopolistic, (e.g., only one electric company services an area), and are essential to a minimum standard of living.

This section gives debtors protection from a cut-off of service by a utility because of the filing of a bankruptcy case. This section is intended to cover utilities that have some special position with respect to the debtor, such as an electric company, gas supplier, or telephone company that is a monopoly in the area so that the debtor cannot easily obtain comparable service from another utility. The utility may not alter, refuse, or discontinue service because of the nonpayment of a bill that would be discharged in the bankruptcy case. Subsection (b) protects the utility company by requiring the trustee or the debtor to provide, within ten days, adequate assurance of payment for service provided after the date of the petition.

S.Rep. No. 95-989, 95th Cong., 2d Sess. 60 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5846;¹ accord, In re Hobbs, 20 B.R. 488 (Bankr.E.D.Pa.1984).

As the Third Circuit Court of Appeals has explained:

The inclusion of these provisions in the Bankruptcy Code was designed to clarify the bankruptcy court\'s power to prevent a utility from using its termination power to enforce payment of pre-petition debts, as long a adequate security for payment of future bills is provided to the utility. . . . By the terms of section 366, a utility may not terminate the debtor\'s service for failure to pay prepetition arrearages, but may terminate the debtor\'s account if the debtor fails, within twenty days, to post adequate assurance of payment for post-petition services.

In re Begley, 760 F.2d 46, 48-49 (3d Cir. 1985) (citation omitted).

From a debtor's standpoint, the significance of § 366 when compared with the provisions of § 365 is striking. While a cure or assurance of a prompt cure of a prepetition default is required in order for a debtor to assume an executory contract, see 11 U.S.C. § 365(b)(1), a debtor need not cure a prepetition default to a utility company in order to maintain utility services. See In re Gehrke, 57 B.R. 97 (Bankr.D.Or. 1985). Thus, by virtue of § 362(a)(6), a utility cannot attempt to collect upon its prepetition debt, yet it must continue to provide service to the debtor, subject only to § 366(b).

In support of his motion for partial summary judgment, the debtor argues that § 366(b) must be applied literally. He contends that upon notice of a bankruptcy filing, a utility must restore service to a debtor whose service was terminated prepetition, for an initial period of twenty days. If the debtor does not provide adequate assurance of payment for postpetition services during that twenty day period, then the utility may again terminate services. This very argument was rejected by our district court in In re Roberts, 29 B.R. 808 (E.D.Pa.1983). And to the extent I have the authority to revaluate the Roberts holding, compare In re Windsor Communications Corp., 67 B.R. 692, 698-699 (Bankr.E.D.Pa.1986) with In re Arnold Print Works, Inc., 54 B.R. 562, 567 (Bankr. D.Mass.1985), aff'd in part and rev'd in part on other grounds, 61 B.R. 520 (D.Mass.1986), vacated, 815 F.2d 165 (1st Cir.1987), I believe that Roberts was correctly decided. However, the Roberts analysis is double edged when applied to this...