Matter of Christian, Bankruptcy No. 84-06172.

Decision Date15 July 1985
Docket NumberBankruptcy No. 84-06172.
Citation51 BR 118
PartiesIn the Matter of Edward & Diane CHRISTIAN, Debtors.
CourtU.S. Bankruptcy Court — District of New Jersey

Crummy, Del Deo, Dolan, Griffinger & Vecchione by Frank J. Vecchione, Newark, N.J., for Union Chelsea Bank.

Sills, Beck, Cummis, Zuckerman, Radin, Tischman & Epstein by Robert A. Baime, Newark, N.J., for debtors.

Wolff & Samson by William S. Katchen, Roseland, N.J., for Bankers Trust.

Beggans & Kellogg by James P. Beggans, Jr., Newark, N.J., for The First Women's Bank.

William F. Tuohey, Hawthorne, N.J., for trustee.

Joseph DiPasquale, trustee.

OPINION

WILLIAM H. GINDIN, Bankruptcy Judge.

This matter comes before the Court on a motion by Union Chelsea Bank to request that the Court hold a hearing in order to determine whether or not this matter should be dismissed for the substantial abuse of the Bankruptcy Code, pursuant to § 707(b).

Factually, the parties have deferred the discussion of the fact pattern of this case, and this Court is not called upon to determine whether the conduct of the debtors constitutes a substantial abuse, but only to deal with the threshold question of whether or not the Court can respond to the suggestion of, or the request of, Chelsea Bank to hold the hearing required by that section of the Code in order to make such determination.

The case is very slightly broadened by the urging of the moving party, as well as the United States Trustee, to have the designated trustee or the U.S. Trustee himself, pursue this motion.

The debtors assert that Union Chelsea has no standing to proceed, and also asserts that the trustee has no standing.

This case arises under 11 U.S.C. § 707(b) which states:

After notice and a hearing, the Court, on its own motion and not at the request or suggestion of any party in interest, may dismiss a case filed by an individual debtor under this Chapter whose debts are primarily consumer debts if it finds that the granting of relief would be a substantial abuse of the provisions of this chapter. There shall be a presumption in favor of granting the relief requested by the debtor.

In all statutory interpretation, the law requires an explanation of the plain language of the statute. The United States Supreme Court has stated that that has always been the law and continues to be the law. Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 100 S.Ct. 2051, 64 L.Ed.2d 766 (1980); United States v. Troxler Hosiery Company, Inc., 41 B.R. 457 (Bankr.D.C.N.C.1984).

I.

We must first, then, ask who is a party in interest, and all concede that Union Chelsea is a party in interest. Part of the argument before this Court is whether or not the trustee is a party in interest. This question can be answered in many different ways and has been answered in many different ways within the Bankruptcy Code itself. The role and capacity of a trustee "is the representative of the estate." 11 U.S.C. § 323(a). The trustee as a representative of the estate is a party in interest. He or she must be a party in interest in that circumstance.

Bankruptcy Rule 2001 concerns notice to creditors, equity security holders, and the United States. The rule goes on to specifically indicate that notice to parties in interest includes the debtor, the trustee, all creditors, and the indenture trustee. (emphasis added) They are parties in interest there.

Bankruptcy Rule 6009 says:

"With or without Court approval, trustee or debtor in possession may prosecute or enter an appearance and defend any pending action or proceeding in behalf of the estate before any tribunal."

In order to be authorized to proceed to prosecute or enter an appearance and one must be considered a party in interest. For many purposes, therefore, the trustee is a party in interest. For other purposes, the trustee is neutral. This does not mean that calling someone a trustee is to be taken as the use of a perjorative term. A trustee is one who has a specific role to play in any given proceeding. The trustee appeared at the 341 meeting for the United States Trustee and at that meeting conducted an examination of the debtor. Whose side was the trustee on?

It is clear that the trustee is a party in interest who is looking for that which will preserve the estate as against the debtor in some situations, in favor of the debtor in other situations. The role may change. The trustee is not guilty of a conflict, but is a party in interest. The distinction sought to be made between the trustee and the moving parties here on the basis of a party in interest, simply does not stand up.

II.

There are no cases on point to the main issue. The 1984 Amendments to the Code went into effect on October 8, 1984, and, there have been no cases that can help. In re Bryant, 12 Bankr.Ct.Dec. (CRR) 565 (Bankr.W.D.N.C.1984) is an interesting case, but in that particular circumstance the Court acted on its own motion. There is no indication in the Bryant case that the Court relied on any information that could be deemed either to be a request or a suggestion of any party. For the narrow issues that concern us here, we cannot rely upon the Bryant case. The same thing is true of the case cited by counsel of In re Wright, 48 B.R. 172 (Bankr.E.D.N.C.1985). Again, it appears from a reading from the Wright matter, that the court acted on its own, sua sponte.

Furthermore, the Supreme Court has yet to promulgate any rules that would offer procedural guidance in implementing this section.

What the statute says specifically is that this type of motion, or this type of action, is not to be brought at the request or suggestion of any party in interest. It would be helpful if we had legislative history, but there is no legislative history for the 1984 amendments. It is interesting to look back at the legislative history of the 1979 Code.

There is extensive legislative history in the form of Committee Reports, and 102 of that history of the Code specifically states:

(T)he phrase `on request of a party in interest\' . . . is used in connection with an action that the court may take in various sections of the Code. This phrase is intended to restrict the court from acting sua sponte. Rules of bankruptcy procedure or court decisions will determine who is a party in interest for the particular purposes of the provisions in question . . . (emphasis added)

H.R.Rep. No. 595, 95th Cong., 1st Sess. 324 (1977), S.Rep. No. 989, 95th Cong., 2d Sess. 35 (1978), U.S.Code Cong. & Admin.News 1978, P. 5787; 124 Cong.Rec. II. 11,090 (Sept. 28, 1978); S. 17.047 (Oct. 6, 1978).

Congress was clear that when it said "on request of a party in interest", it prohibited the court from acting sua sponte. A very simple reversal of that term leads to the conclusion that when it says not at the request of a party in interest, it is specifically directing the Court to act sua sponte. As pointed out above, the moving party is such a party in interest.

III.

Counsel for the debtors suggest that this may even have tainted the entire issue for the future in this case, and suggests that it is an absurd result. It is not an absurd result. The analogy discussed in oral argument, that the fruits of the tree are tainted, is in fact appropriate in this case. Pervasive throughout this entire opinion is the very purpose of the Bankruptcy Code. The very purposes of the bankruptcy courts are to grant relief to the debtors and to give debtors a fresh start.

There are limits to legislative history. Counsel, both in their briefs and their oral arguments, have indicated that this statute was as a result of compromise, or it might as well have been the result of compromise. By way of illustration and not because it is binding on this Court, it is interesting to note the statement on the floor by Senator Howard Metzenbaum, in connection with this particular amendment, wherein he said:

I am extremely pleased that this bill prohibits creditors from filing motions, attempting to deny bankruptcy relief to individuals because of substantial abuse. . . . Only a Bankruptcy Court acting on its own initiative can dismiss a case involving substantial abuse. This will preclude creditors from making bankruptcy too expensive for the debtor, by filing harassing motions alleging abuse.

130 Cong.Rec. H1810-1811 (daily ed. June 19, 1984) (statement of Sen. Metzenbaum).

That Statement by Senator Metzenbaum is not binding on this Court, but it is at least one Senator's view of what he was voting upon.1

Senator Metzenbaum's comments do, however, very specifically suggest what might happen if this creditor were permitted to dismiss a Chapter 7 proceeding. It seems that the flood gates could open every time there is an adversary proceeding concerning the dischargeability of a debt or the granting of a discharge. If the creditor lost...

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