In re Polly

• Citation: 392 B.R. 236
• Decision Date: 08 August 2008
• Docket Number: No. 08-41506-DML-7.,08-41506-DML-7.
• Parties: In re Michael S. POLLY, Debtor.
• Court: United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas

392 B.R. 236

In re Michael S. POLLY, Debtor.

No. 08-41506-DML-7.

United States Bankruptcy Court, N.D. Texas, Fort Worth Division.

August 8, 2008.

Patrick David West, Fort Worth, TX, for Debtor.

Stephanie D. Curtis, Mark A. Castillo, Melanie Goolsby, The Curtis Law Firm, P.C., Dallas, TX, for Creditor RealPage, Inc.

Tim Truman, Fort Worth, TX, Chapter 13 Trustee.

MEMORANDUM OPINION

DENNIS MICHAEL LYNN, Bankruptcy Judge.

Before the court is RealPage, Inc.'s Motion to Reconsider (the "Motion to Reconsider") filed by RealPage, Inc. ("RealPage"), a party in interest. Upon the request of the court, RealPage and Debtor provided authorities respecting the Motion to Reconsider. On July 28, 2008, the court held a hearing (the "Hearing") on the Motion to Reconsider. At the Hearing the court heard arguments from RealPage and Debtor¹.

This matter is subject to the court's core jurisdiction. See 28 U.S.C. §§ 1334 and 157(b). This memorandum opinion embodies the court's findings of fact and conclusions of law. See FED. R. BANKR.P. 9014 and 7052.

I. Background

On April 1, 2008, Debtor Michael Polly filed a petition under chapter 13 of the Bankruptcy Code (the "Code").² RealPage filed its Motion to Convert Debtor's Chapter 13 Case to Chapter 7 (the "Motion to Convert") on June 9, 2008. RealPage asserts in the Motion to Convert that Debtor should be subject conversion to chapter 7 pursuant to Code section 1307(c) due to alleged acts of bad faith and for failure to file tax returns (see Code § 1308). On July 9, 2008 Debtor filed a Motion to Continue RealPage Inc.'s Motion to Convert (the "Motion to Continue"), and RealPage responded with an objection to the Motion to Continue. At a hearing on July 10, 2008, the court denied the Motion to Continue.

Following the denial of the Motion to Continue, the court took up the Motion to Convert. At that point, Debtor orally moved for dismissal of the case pursuant to section 1307(b) of the Code.³ The court granted the dismissal and signed an order dismissing the case with prejudice to refiling for 180 days. On July 17, 2008, RealPage filed the Motion to Reconsider alleging the court erred in granting the order dismissing the case.⁴ After the court set the Motion to Reconsider for hearing, Debtor filed Michael S. Polly's Response Opposed to RealPage, Inc.'s Motion to Reconsider (the "Response") on July 24, 2008.

II. Issue

The issue before the court is whether, once a motion to convert a case from chapter 13 to chapter 7 has been filed under section 1307(c)⁵ of the Code, the debtor has an absolute right to dismiss the chapter 13 case under section 1307(b) of the Code. While this court does not find in the interaction of these subsections of section 1307 an issue unresolvable through application of the central, plain meaning rule of statutory construction, a substantial minority of courts have found the issue more complex and have insisted that reconciling the subparts requires more than simply responding to the apparently mandatory language of section 1307(b).

III. Discussion

A. The Plain Meaning Doctrine

When addressing the language of the Code, the Supreme Court has opined that the "plain meaning of [the] legislation should be conclusive, except in the `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.'" See United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242, 109 S.Ct. 1026, 103 L.Ed.2d 290 (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 73 L.Ed.2d 973 (1982)); see also In re Reed, 405 F.3d 338, 343 (5th Cir.2005).

Similarly the Supreme Court in Lamie v. United States Trustee reasoned: "We should prefer the plain meaning [of the statute] since that approach respects the words of Congress. In this manner we avoid the pitfalls that plague too quick a turn to the more controversial realm of legislative history." Lamie v. U.S. Trustee, 540 U.S. 526, 536, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004). In Lamie, the Court set a high standard for all claims of ambiguity regarding a statute and further reasoned that although a sentence may be awkward, it still must be interpreted in accordance with its plain meaning so long as its meaning is straight forward and adopting the plain meaning does not lead to an absurd result. Id. at 534-35, 124 S.Ct. 1023.

Debtor maintains that the plain meaning of section 1307(b) of the Code is that a debtor has an absolute right to dismiss his or her chapter 13 proceeding. Debtor avers in the Response that "[t]he statutes' [sic] language unequivocally and unconditionally demonstrates that Mr. Polly has an absolute right to dismissal." Response ¶ 12(a).

Section 1307(b) of the Code states that:

On the request of the debtor at any time, if the case has not been converted under section 706, 1112, or 1208 of this title, the court shall dismiss a case under this chapter. Any waiver of the right to dismiss under this subsection is unenforceable.

11 U.S.C. § 1307(b) (emphasis added).

The court does not find any ambiguity in the instruction given to it by Congress in section 1307(b). As the Supreme Court has stated, "the mandatory `shall'... normally creates an obligation impervious to judicial discretion." Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 35, 118 S.Ct. 956, 140 L.Ed.2d 62 (1998) (cited in Miller v. French, 530 U.S. 327, 337, 120 S.Ct. 2246, 147 L.Ed.2d 326 (2000)). Black's Law Dictionary defines "shall" to mean "[h]as a duty to; more broadly, is required to." BLACK'S LAW DICTIONARY 1379 (7th ed.1999). Thus, the word "shall" is used in section 1307(b) to require action by the court, or in this case to mean that the court has a duty to dismiss a chapter 13 case upon the request of the Debtor.

The court similarly sees no ambiguity in the words "at any time." There is no question that Congress knew how to regulate the timing of when a debtor or another party has a right to act. The Code is replete with provisions like section 1121(b), giving a chapter 11 debtor a limited exclusive right to file a plan, which condition a party's right to act upon the timing of the action. In a number of contexts Congress has imposed timing restraints based on the absence of intervening conduct of other parties. Under section 366(b) and (c) a utility may freely terminate services to a debtor (or trustee) after the initial waiting period unless during that period the debtor (or trustee) has provided the utility with adequate assurance of future payment. In a construct suggestive of what Congress might have provided had it intended in section 1307(b) what RealPage argues, Federal Rule of Bankruptcy Procedure 3006 provides that a creditor may withdraw a proof of claim as a matter of right unless the claim has been objected to, or the creditor has been subjected to an adversary complaint. Analogously, had Congress wished to limit a debtor's right to dismiss under section 1307(b) if a motion to convert intervened, it would have said so, conditioning the words "at any time" on no such motion having been filed.⁶ Absent such language, the court finds no warrant for restricting the plain meaning of "at any time."

Likewise, application of section 1307(b) in accordance with its plain meaning does not lead to an absurd result or one "demonstrably at odds" with congressional intent. Chapters 12 and 13 were intended by Congress to be purely voluntary. See, e.g., Tidewater Fin. Co. v. Williams, 498 F.3d 249, 252 (4th Cir.2007); In re Barbieri, 199 F.3d at 620 (citing In re Harper-Elder, 184 B.R. 403, 408 (Bankr.D.D.C. 1995)). Many sections of the Code reflect this intent. See, e.g., 11 U.S.C. §§ 303(a), 706(c)⁷ and 1112(d). Notably, chapters 7 and 11, not meant by Congress to be limited to the volunteer debtor, contain no provision similar to section 1307(b). See Code §§ 707 and 1112. It is entirely consistent with congressional purpose, and not the least absurd, to construe section 1307(b) to give a chapter 13 debtor the right to dismiss his or her case at any time and regardless of what other parties elect to do.⁸

It is clear that the language used in section 1307(b) of the Code cannot be considered ambiguous or "demonstrably at odds" with the legislative intent of section 1307(b). Applying the section literally does not lead to an absurd result. Following the Supreme Court's directions respecting the reading of statutory provisions, it is consequently appropriate to adopt the plain meaning of section 1307(b) of the Code, which requires this court to dismiss the chapter 13 case at the request of Debtor.

B. Legislative History

Besides the plain meaning of section 1307(b) of the Code being clear enough to be dispositive, looking to the legislative history of the provision also supports the court's reading of the statute. Thus, the legislative history indicates Congress intended a debtor to retain an absolute right to dismiss under section 1307(b) of the Code. As stated in the relevant House Report, "[s]ubsection (b) requires the court, on request of the Debtor, to dismiss the case if the case has not already been converted from Chapter 7 or 11." H.R. REP. No. 95-595, at 428 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5963, 6384. The Senate Report is the same: section 1307(b) confirms "without qualification, the rights of a Chapter 13 debtor to ... have the Chapter 13 case dismissed." S. REP. No. 95-989, at 141 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5927. The latter language — that a debtor's right to dismiss is "without qualification" — is a forceful indicator of the congressional purpose that chapter 13 be purely voluntary.

C. Case Law and Commentary

1. Majority View

Most courts that have considered the question have adopted the same plain meaning approach as this court and concluded that section 1307(b) (and its identical cognate, section 1208(b)⁹) provide a debtor with an absolute right to dismiss his...