Matter of Flamini
| Decision Date | 01 April 1982 |
| Docket Number | Bankruptcy No. 81-1879-B. |
| Parties | In the Matter of Keith FLAMINI, Debtor. |
| Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan |
Professional Legal Centers, Professional Corp. by Patrick Conway, Detroit, Mich., for debtor.
Harry J. Fleming, Sp. Asst. Pros. Atty., St. Claire Shores, Mich., Wayne County Friend of the Court, for defendant.
This action involves the question of whether the August 13, 1981 amendment to section 523(a)(5) of the Bankruptcy Code applies to cases filed before August 13, 1981.
Keith Flamini (debtor) filed a voluntary Chapter 7 bankruptcy petition on June 29, 1981, and was granted a discharge on August 27, 1981. The debtor's spouse had obtained a judgment of divorce on January 14, 1981, and pursuant to that judgment the debtor was obligated to make support payments to his spouse. The debtor failed to make the payments, and his wife applied for support payments from the State of Michigan from the Aid to Families with Dependent Children fund (AFDC). Section 402(a)(26) of the Social Security Act requires that as a condition of eligibility for AFDC payments, the claim of the wife for the payments that the husband is required to make be assigned to the State. The debtor's spouse applied for AFDC benefits and accordingly assigned her claims against the debtor to the state. In his petition, the debtor listed a support obligation to the Friend of the Court in the amount of $6,004.1 This debt represents funds paid by the State of Michigan Department of Social Services to the debtor's former spouse for support payments. On or about November 10, 1981, the debtor was ordered by the Wayne County Friend of the Court's office to show cause in State District Court as to why he should not be held in contempt for the failure to pay the support obligation he had incurred prior to the filing of the petition in bankruptcy.2 Upon application by the debtor, this court issued a temporary restraining order. The Friend of the Court moved to dismiss, contending that the debt which it was attempting to collect was nondischargeable and, therefore, it could pursue collection of the debt.
Whether the debt is or is not dischargeable depends upon whether the law to be applied is the law in effect on the date that the debtor filed his petition in bankruptcy or the law in effect as of the date that the dischargeability case is decided. Section 523(a)(5) of the Bankruptcy Code as originally enacted provided as follows:
On August 13, 1981, section 523(a)(5) was amended by section 2334 of the Omnibus Budget Reconciliation Act of 1981, P.L. 97-35. The amendment reads in pertinent part as follows:
Thus, on the date that the debtor filed his petition in bankruptcy, his obligation to the State was dischargeable; but as of the date of the hearing on the issuance of the restraining order, the debt was not dischargeable. The State contends that since there has been no court determination of the dischargeability status of the support obligation, the debt is now non-dischargeable by virtue of the August 13th amendment to Section 523(a)(5), and it may, therefore, proceed to attempt to collect the debt.
Except for actions involving student loans,3 the cases have consistently held that the law to be applied in a non-dischargeability action is the law in effect at the time that the judge decides the case. In re Spell, 650 F.2d 375 (2d Cir. 1981); In re Carter, 32 F.2d 186 (2d Cir. 1929); Royal Indemnity Co. v. Cooper, 26 F.2d 585 (4th Cir. 1928); Matter of Sloss, 192 F.Supp. 136 (S.D.N.Y. 1961); In re Johnson, 5 B.C.D. 532 (E.D.Pa. B.J.1979); In re Leach, 15 B.R. 1005, 8 B.C.D. 587 (Bkrtcy.D.Conn.B.J.1981). However, these holdings ignore traditional principles of statutory construction and do violence to the concepts of discharge and dischargeability.
It has been stated that "there are few principles of our law more ancient, and none more respected, than the canon which holds that laws are enacted for the future." South East Chicago Comm'n v. Dept. of H.U.D., 488 F.2d 1119, 1122 (7th Cir. 1973). A primary rule of statutory construction is "that legislation must be considered as addressed to the future, not to the past . . . and a retrospective operation will not be given to a statute which interferes with antecedent rights . . . unless such be the `unequivocal and inflexible import of the terms, and the manifest intention of the legislature'." Greene v. United States, 376 U.S. 149, 160, 84 S.Ct. 615, 621, 11 L.Ed.2d 576 (1964), citing Union Pacific Ry. Co. v. Laramie Stockyards Co., 231 U.S. 190, 34 S.Ct. 101, 58 L.Ed. 179 (1913). This rule commands universal acceptance. United States v. Estate of Donnelly, 397 U.S. 286, 90 S.Ct. 1033, 25 L.Ed.2d 312 (1970); Puget Sound Power & Light Co. v. Federal Power Comm'n, 557 F.2d 1311 (9th Cir. 1977); N.L.R.B. v. St. Luke's Hosp. Center, 551 F.2d 476 (2d Cir. 1976); United States v. Richardson, 512 F.2d 105 (3d Cir. 1975); Edgar v. Fred Jones Lincoln-Mercury, Inc., 524 F.2d 162 (10th Cir. 1975); Place v. Weinberger, 497 F.2d 412 (6th Cir. 1974); DeRodulfa v. United States, 461 F.2d 1240 (D.C.Cir.1972); Taliaferro v. Stafseth, 455 F.2d 207 (6th Cir. 1972); Weldon v. Bd. of Ed. of City of Detroit, 403 F.Supp. 436 (E.D.Mich.1975); Placek v. Sterling Heights, 405 Mich. 638, 275 N.W.2d 511 (1979); Detroit Trust Co. v. City of Detroit, 269 Mich. 81, 256 N.W. 811 (1934). This canon, moreover, "responds to a special call when the legislation under consideration is antithetical to previously arising economic expectancies." DeRodulfa v. United States, supra, at 1247. The fact that the change in the law was made by amendment makes no difference in the application of this basic rule of construction. "Amendatory statutes generally operate prospectively only absent a strong indication of legislative intent to the contrary, . . . especially when they disturb `matured' or `unconditional' rights or impose `unanticipated obligations.'" Hosp. Emp. Labor Program, Chicago v. Ridgeway Hosp., 570 F.2d 167, 170 (7th Cir. 1978). Accord, In re Reilly, 442 F.2d 26 (7th Cir. 1971); Koster v. Warren, 297 F.2d 418 (9th Cir. 1961); Addison v. Bulk Food Carriers, Inc., 363 F.Supp. 1016 (D.Mass.1973), aff'd 489 F.2d 1041 (1st Cir. 1974); In re Semel & Co., 285 F.Supp. 536 (D.N.J.1968). This rule holds true particularly where, as here, the amendments "reflect a change in knowledge or societal attitudes." Marshall v. Baltimore & O. Ry., 461 F.Supp. 362, 382 (D.Md.1978).4
The presumption against retroactivity is overcome where the amendment can be classified as "curative." Bell v. Ithsmian Lines, Inc., 363 F.Supp. 156 (M.D.Fla.1973).
"Curative" legislation, however, does not include any law which happens to have as its purpose the rectification of a previously existing inequity. Rather, it is limited to laws which are intended to permit the accomplishment of a previously enacted design, which has failed to achieve its expected legal consequences by reason of some statutory inadequacy or irregularity.
Silverlight v. Huggins, 347 F.Supp. 895, 898 (D.V.I.1972). Prior to 1975, it was disputed whether an assigned support debt could be excepted from discharge under section 17a(7). Some courts held that a State could not bootstrap itself into protected status. In re Kiluk, CCH Bankr.L.Rep. ¶ 65,681 (D.Conn.1975); In re Shreve, CCH Bankr.L. Rep. ¶ 65,757 (W.D.Mich.B.J.1975); In re Ashby, CCH Bankr.L.Rep. ¶ 65,100 (W.D. Mich.B.J.1973); Hilliard v. DeCiuceis, 202 Misc. 197, 115 N.Y.S.2d 5 (Sup.Ct.1952); Lasher v. McIntyre, 62 Misc.2d 662, 309 N.Y.S.2d 960 (Fam.Ct.1970). Others found non-dischargeability based on the nature of the underlying debt. In re Williams, 529 F.2d 1264, 7 C.B.C. 274 (9th Cir. 1976); In re Rivard, CCH Bankr.L.Rep. ¶ 65,647 (D.Mass.1974). Congress resolved this controversy by amending the Social Security Act to provide that a support debt assigned to a State as a condition of AFDC eligibility was not dischargeable in bankruptcy. P.L. 93-647, 88 Stat. 2337, 43 U.S.C. § 656(b) (1974). Deciding that the result of this legislation was too harsh, Congress explicitly repealed section 656(b) in section 328 of the Bankruptcy Reform Act of 1978, P.L. 95-598, and drafted section 523(a)(5) to apply only to liabilities owed directly to a spouse. In re Spell, supra, at 379. States faced with a tremendous loss of revenue exerted pressure on Congress to reinstate what had been the law prior to November 6, 1978. The amendment of August 13, 1981 reflects a change in policy. It does not accomplish a "previously enacted design which has failed to achieve its expected legal consequences." Section 2334 of the Omnibus Budget Reconciliation Act which amended section 523(a)(5) was not curative legislation.
It must be presumed that a decision to begin a bankruptcy proceeding is not made lightly. The decision to file a petition is reached by a debtor after consultation with his attorney as to the advantages and disadvantages of such...
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