Pliler v. Stearns

• Decision Date: 28 March 2014
• Docket Number: No. 13–1445.,13–1445.
• Citation: 747 F.3d 260
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: Joe Henry PLILER; Katherine Marie Pliler, Debtors–Appellants, v. Richard M. STEARNS, Trustee, Trustee–Appellee. National Association of Consumer Bankruptcy Attorneys, Amicus Supporting Appellants, Ecast Settlement Corporation, Amicus Supporting Appellee.

747 F.3d 260

Joe Henry PLILER; Katherine Marie Pliler, Debtors–Appellants,

v. Richard M. STEARNS, Trustee, Trustee–Appellee.National Association of Consumer Bankruptcy Attorneys, Amicus Supporting Appellants,Ecast Settlement Corporation, Amicus Supporting Appellee.

No. 13–1445.

United States Court of Appeals, Fourth Circuit.

Argued: Dec. 10, 2013.

Decided: March 28, 2014.

ARGUED:Robert Lee Roland, IV, Law Offices of John T. Orcutt, P.C., Raleigh, North Carolina, for Appellants. Christopher Scott Kirk, Office of the Bankruptcy Administrator, Wilson, North Carolina; Isaac Andrew Johnston, Office of the Chapter 13 Trustee, Greenville, North Carolina, for Appellee. ON BRIEF:Norma L. Hammes, National Association of Consumer Bankruptcy Attorneys, San Jose, California; Tara Twomey, National Consumer Bankruptcy Rights Center, San Jose, California, for Amicus National Association of Consumer Bankruptcy Attorneys. William Andrew McNeal, Gilbert B. Weisman, Becket & Lee LLP, Malvern, Pennsylvania, for Amicus eCAST Settlement Corporation.

Before DUNCAN, WYNN, and THACKER, Circuit Judges.

Affirmed and remanded by published opinion. Judge WYNN wrote the opinion, in which Judge DUNCAN and Judge THACKER joined.

WYNN, Circuit Judge:

In this bankruptcy appeal, we must decide whether above-median-income debtors with negative disposable income are obligated to maintain Chapter 13 bankruptcy plans that last for five years when their unsecured creditors have not been paid in full. Our examination of the pertinent bankruptcy code provisions, case law, and legislative intent leads us to conclude that the answer is yes and, accordingly, to affirm the bankruptcy court's order.

I.

Joe Henry Pliler and Katherine Marie Pliler (the “Plilers”) filed a voluntary petition for relief under Chapter 13 of the Bankruptcy Code on August 10, 2012. Although the Plilers calculated their household income to be above North Carolina's median family income for comparably-sized households, they calculated their disposable income to be negative $291.20.

Along with the Chapter 13 petition, the Plilers filed a proposed Chapter 13 plan pursuant to 11 U.S.C. § 1321 (“Plan”). Under the Plan, the Plilers proposed to pay $1,784 for fifteen months, and then $1,547 for forty months. The total of these payments, $88,640, would pay $3,335 in attorneys' fees, $3,988.80 for the Trustee's commission, $78,595 to secured creditors, and nothing to unsecured creditors.

The Plilers' proposed Plan contained early termination language that would have allowed them to complete their Plan within fifty-five months:

This Chapter 13 Plan will be deemed complete and shall cease and a discharge shall be entered, upon payment to the Trustee of a sum sufficient to pay in full: (A) Allowed administrative priority claims, including specifically Trustee's commissions and attorneys' fees and expenses ordered by the Court to be paid to the Debtor's Attorney, (B) allowed secured claims (including but not limited to arrearage claims), excepting those which are scheduled to be paid directly by the Debtor “outside” the plan, (C) Allowed unsecured priority claims, (D) Cosign protect consumer debt claims (only where the Debtor proposes such treatment), (E) Postpetition claims allowed under 11 U.S.C. § 1305, (F) The dividend, if any, required to be paid to non-priority general unsecured creditors (not including priority unsecured creditors) pursuant to 11 U.S.C. § 1325(b)(1)(B), and (G) Any extra amount necessary to satisfy the “liquidation test” as set forth in 11 U.S.C. § 1325(a)(4).

J.A. 65.

In October 2012, the Trustee filed an objection to confirmation of the Plan and a motion to dismiss for failure to file a plan in good faith and failure to pay an amount necessary during the applicable commitment period to comply with Section 1325. Similar motions were filed in other cases pending in the Eastern District of North Carolina, and three different bankruptcy judges in the district chose to conduct a joint hearing to consider the matters.

Regarding the Plilers' case, on January 15, 2013, Chief Bankruptcy Judge Randy Doub entered an order denying the objection and motion to dismiss and directing the Trustee to file a motion for confirmation of a plan requiring the Plilers to pay $1,784 per month for sixty months with no early termination language. In re Pliler, 487 B.R. 682 (Bankr.E.D.N.C.2013). Under the Plan as revised by Judge Doub, the unsecured creditors would receive an eighty-four-percent dividend, as opposed to the zero-percent dividend in the Plan as proposed by the Plilers. In ordering the revision of the Plan, Judge Doub held, among other things, that 11 U.S.C. § 1325(b)'s “applicable commitment period” is a temporal requirement mandating that an above-median-income debtor commit to a sixty-month plan period irrespective of projected disposable income.

This direct appeal to the Fourth Circuit ensued. We review de novo challenged legal issues, including statutory interpretation questions such as those before us here. Johnson v. Zimmer, 686 F.3d 224, 227 (4th Cir.2012), cert. denied,––– U.S. ––––, 133 S.Ct. 846, 184 L.Ed.2d 655 (2013).

II.

A.

In Chapter 13 reorganization proceedings, debtors commit to a court-approved plan to repay creditors with future income. Hamilton v. Lanning, 560 U.S. 505, 508, 130 S.Ct. 2464, 177 L.Ed.2d 23 (2010). Bankruptcy Code Section 1325 specifies circumstances under which a bankruptcy court “shall” and “may not” confirm a Chapter 13 plan. Id. See also11 U.S.C. § 1325(b).

In cases where the trustee or an unsecured creditor objects to the confirmation of a proposed Chapter 13 plan, the court may not confirm the plan unless one of two conditions is met. The second condition, at the heart of this case, is that “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.” 11 U.S.C. § 1325(b)(1) (emphasis added).¹

The statute defines “applicable commitment period” as:

(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—

* * *

(II) in the case of a debtor in a household of 2, 3, or 4 individuals, the highest median family income of the applicable State for a family of the same number or fewer individuals; or

* * *

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.

11 U.S.C. § 1325(b)(4).

In this case, the Trustee objected to the Plilers' proposed Plan with its early termination provision. Further, it is undisputed that the Plilers' proposed Plan did not “provide[ ] for payment in full of all allowed unsecured claims[,]” 11 U.S.C. § 1325(b)(4); in fact, the Plan provided for no payment to unsecured creditors. Thus, Section 1325(b)(4)'s exception does not apply. At issue, then, is whether the Plilers' Plan may terminate after less than five years.

1.

The Plilers argue that the bankruptcy court “erred in holding that ... the definition of applicable commitment period in 11 U.S.C. § 1325(b)(4) is a freestanding plan length requirement.” Appellants' Br. at 3. We disagree. We, like all the other circuits to have addressed this issue, hold that an “applicable commitment period” is a temporal requirement. See In re Flores, 735 F.3d 855, 856 (9th Cir.2013) (en banc); Baud v. Carroll, 634 F.3d 327, 338 (6th Cir.2011); Whaley v. Tennyson, 611 F.3d 873, 880 (11th Cir.2010); Coop v. Frederickson, 545 F.3d 652, 660 (8th Cir.2008).²

As in all statutory interpretation cases, we “necessarily begin [ ] with an analysis of the language of the statute. And, in analyzing the meaning of a statute, we must first determine whether the language at issue has a plain and unambiguous meaning.” Holland v. Big River Minerals Corp., 181 F.3d 597, 603 (4th Cir.1999) (quotation marks and citation omitted). If it does, we look no further but simply “enforce [the statute] according to its terms.” Id. (quotation marks omitted).

Applying these principles to “applicable commitment period,” we agree with the Eleventh Circuit 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.” In re Tennyson, 611 F.3d at 877 (citation omitted). As for the modifier “commitment,” that signifies that “ ‘applicable commitment period’ is a duration to which the debtor is obligated to serve. 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.” Id. (citation omitted).

Further, the statute defines applicable commitment period in terms of duration: “3 years,” “not less than 5 years,” or “less than 3 or 5 years,” depending on current monthly income and whether unsecured creditors will be paid under the plan. 11 U.S.C. § 1325(b)(4). Putting it all together, then, an “applicable commitment period” is an obligatory period of time that may vary based on the debtor's income and plan provisions. Stated differently, it is a “freestanding plan length requirement.” Appellants' Br. at 3.

While we find a plain reading alone sufficient to conclude that an “applicable commitment period” is a length-of-time requirement for Chapter 13 plans, we nevertheless note that our conclusion harmonizeswith the “core purpose” underpinning the 2005 bankruptcy code revisions from which the “applicable commitment period” provisions hail: “ensuring that debtors devote their full disposable income to repaying creditors.” Ransom v. FIA Card Servs., N.A., ––– U.S. ––––, 131 S.Ct. 716, 729, 178 L.Ed.2d 603 (2011). See also In re Tennyson...