In Re: Terry Alan Tennyson

• Decision Date: 16 July 2010
• Docket Number: No. 09-14628.,09-14628.
• Citation: 611 F.3d 873
• Parties: In re: Terry Alan TENNYSON, Debtor.Nancy J. Whaley, Trustee, Plaintiff-Appellant,v.Terry Alan Tennyson, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

611 F.3d 873

In re: Terry Alan TENNYSON, Debtor.

Nancy J. Whaley, Trustee, Plaintiff-Appellant,

v.Terry Alan Tennyson, Defendant-Appellee.

No. 09-14628.

United States Court of Appeals, Eleventh Circuit.

July 16, 2010.

Eric W. Roach, Atlanta, GA, for Plaintiff-Appellant.

Alex J. Dolhancyk, Dolhancyk Law Firm, Jonesboro, GA, for Defendant-Appellee.

Albert C. Guthrie, Atlanta, GA, Tara A. Twomey, Carmel by the Sea, CA, K. Edward Safir, Atlanta, GA, for Amicus Curiae.

Appeal from the United States District Court for the Northern District of Georgia.

Before TJOFLAT, WILSON and EBEL,^* Circuit Judges.

WILSON, Circuit Judge:

This appeal presents us with a question arising from amendments to Chapter 13 of the United States Bankruptcy Code by the Bankruptcy Abuse Prevention Consumer Protection Act of 2005 (“BAPCPA”). Pub.L. No. 109-8, 119 Stat. 23. Specifically, we are asked to determine whether an above median income debtor, with negative disposable income, may obtain confirmation of a Chapter 13 bankruptcy plan to last for less than five years when the debtor's unsecured creditors have not been paid in full. The answer to this question rests on our interpretation of the term “applicable commitment period.” We find that a plain reading of 11 U.S.C. § 1325, a recent United States Supreme Court ruling, and the Congressional intent behind BAPCPA mandate that an above median income debtor remain in bankruptcy for a minimum of five years, unless all unsecured creditor's claims are paid in full.

I. BACKGROUND

Terry Alan Tennyson, the debtor, filed for Chapter 13 bankruptcy on November 10, 2007. Nancy Whaley, the Trustee, was assigned as the standing Chapter 13 Trustee. Section 1325 of Title 11 of the United States Code details the requirements for confirmation of a Chapter 13 bankruptcy. The debtor is required by 11 U.S.C. § 1325(b)(2) to calculate his disposable income according to the formula on Form 22C. Tennyson's current monthly income was $3,229.37 and his annual income was $38,752.44, which was above the median family income for a household of one in his home state of Georgia. Thus, according to 11 U.S.C. § 1325(b)(4)(A)(ii)(I), Tennyson was an above median income debtor.¹ Since Tennyson was an above median income debtor, 11 U.S.C. § 1325(b)(3)(A) requires that a predetermined set of expenses, listed in 11 U.S.C. § 707(b)(2)(A) & (B), be subtracted from his current monthly income. This yields the disposable income for an above median income debtor, which in Tennyson's case was negative $349.30.

Tennyson proposed a plan to last for three years, without providing for full repayment of his unsecured creditors. Whaley objected on the basis that 11 U.S.C. § 1325(b)(4) requires above median income debtors to remain in bankruptcy for at least five years, unless unsecured claims are paid in full. The bankruptcy court confirmed Tennyson's three year plan and the district court affirmed.

II. JURISDICTION

The bankruptcy court's confirmation of Tennyson's Chapter 13 plan is a final order. See Catlin v. United States, 324 U.S. 229, 234, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945) (“A ‘final decision’ generally is one which ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” (citation omitted)). The district court has jurisdiction to hear appeals from all final orders of the bankruptcy court. 28 U.S.C. § 158(a)(1). This Court has jurisdiction over final orders from the district court when acting in an appellate capacity over a bankruptcy court's order. 28 U.S.C. § 158(d)(1).

III. STANDARD OF REVIEW

Conclusions of law reached by a “bankruptcy court or by the district court are reviewed de novo.” In re Bateman, 331 F.3d 821, 825 (11th Cir.2003) (alteration omitted) (quotation omitted).

IV. DISCUSSION

“Applicable commitment period” is a term that appears in § 1325 of the Chapter 13 bankruptcy code. The definition of “applicable commitment period” is found in § 1325(b)(4):

(4) For purposes of this subsection, the “applicable commitment period”-

(A) subject to subparagraph (B), shall be-

(i) 3 years; or

(ii) not less than 5 years, if the current monthly income of the debtor and the debtor's spouse combined, when multiplied by 12, is not less than- (I) in the case of a debtor in a household of 1 person, the median family income of the applicable State for 1 earner;

....

(B) may be less than 3 or 5 years, whichever is applicable under subparagraph (A), but only if the plan provides for payment in full of all allowed unsecured claims over a shorter period.

Whaley objected to Tennyson's plan because she interpreted the “applicable commitment period” to be the minimum required duration of a debtor's Chapter 13 bankruptcy plan. However, the district court adopted the bankruptcy court's ruling that the “applicable commitment period” “does not stand alone and provide for a strict five year minimum plan duration for all above-median income debtors.” Doc. 24 at 6. Rather, the “applicable commitment period” is a multiplier in the § 1325(b)(1)(B) formula, whereby projected disposable income equals disposable income times the “applicable commitment period.”

The bankruptcy court pointed to the opening clause of § 1325(b)(4), “For the purposes of this subsection ...,” for support of this argument. If “applicable commitment period” exists only for the purposes of the subsection, then, the bankruptcy court argued, we must look to see where the term “applicable commitment period” is used in § 1325 and constrain its application to the purposes of that subpart. The only other place that “applicable commitment period” appears is in § 1325(b)(1)(B). Section 1325(b)(1) reads:

(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-

(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or

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

According to this interpretation of “applicable commitment period,” it exists solely for its function within the confines of § 1325(b)(1)(B). See In re Kagenveama, 541 F.3d 868, 876 (9th Cir.2008) (“Subsections (b)(2) ( ‘disposable income’) and (b)(3) (‘amounts reasonably necessary to be expended’) exist only to define terms relevant to the subsection (b)(1)(B) calculation. Subsection (b)(4), which defines ‘applicable commitment period,’ is no different.”). Thus, when disposable income is negative, projected disposable income will always be negative, regardless of the length of the “applicable commitment period,” and unsecured creditors will not recover any of their unsecured claims. Therefore, if disposable income is negative the “applicable commitment period” is inconsequential. As a result, Tennyson was free to enter a bankruptcy plan of less than five years even though his unsecured debts had not been paid in full.

Whaley argues that “applicable commitment period” is a fixed five year term, for above median income debtors, that can only be shortened if all unsecured debts are paid in full in the shorter time period.

A. A Plain Reading of Section 1325(b) Requires a Finding That “Applicable Commitment Period” is a Temporal Term

This case is one of statutory interpretation. Specifically, we are asked to define the term “applicable commitment period.” To do so, we are guided by the traditional standards of statutory construction:

The starting point for all statutory interpretation is the language of the statute itself. We assume that Congress used the words in a statute as they are commonly and ordinarily understood, and we read the statute to give full effect to each of its provisions. We do not look at one word or term in isolation, but instead we look to the entire statutory context. We will only look beyond the plain language of a statute at extrinsic materials to determine the congressional intent if: (1) the statute's language is ambiguous; (2) applying it according to its plain meaning would lead to an absurd result; or (3) there is clear evidence of contrary legislative intent.

United States v. DBB, Inc., 180 F.3d 1277, 1281 (11th Cir.1999) (internal citations omitted).

Applying these principles, we first look at the term “applicable commitment period” and note that “applicable” and “commitment” are modifiers of the noun, the core substance of the term, “period.” The plain meaning of “period” denotes a period of time or duration. Merriam Webster's Collegiate Dictionary 864 (10th ed.1996). “Applicable commitment period” at its simplest is a term that relates to a certain duration, and based on its presence in § 1325, it is a duration relevant to Chapter 13 bankruptcy. The modifier “commitment” then reveals that “applicable commitment period” is a duration to which the debtor is obligated to serve. See Merriam Webster's Collegiate Dictionary 231 (10th ed.1996). Finally, the meaning of “applicable” reflects the fact that there are alternate “commitment periods” depending on the debtor's classification as an above median income debtor or a below median income debtor.

Section 1325(b)(4) clearly says that the “applicable commitment period” shall be five years for an above median income debtor, such as Tennyson. “The word ‘shall’ is ordinarily the language of command.” Alabama v. Bozeman, 533 U.S. 146, 153, 121 S.Ct. 2079, 2085, 150 L.Ed.2d 188 (2001) (quotation omitted). The use of the word “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, 962, 140 L.Ed.2d 62 (1998) (citation omitted). The plain reading of § 1325(b)(4) indicates that an above median income...