St. Angelo v. Victoria Farms, Inc.
| Decision Date | 01 November 1994 |
| Docket Number | No. 93-15254,93-15254 |
| Citation | 38 F.3d 1525 |
| Parties | , 31 Collier Bankr.Cas.2d 1166, 26 Bankr.Ct.Dec. 247, Bankr. L. Rep. P 76,190 Mark St. ANGELO, Acting U.S. Trustee for Region 17, Plaintiff-Appellant, v. VICTORIA FARMS, INC., Defendant-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
T. Patrick Tinker, Executive Office for the U.S. Trustee, Washington, DC, for plaintiff-appellant.
Riley C. Walter & Gordon R. Ladwig, McCormick, Barstow, Sheppard, Wayte & Carruth, Fresno, CA, for defendant-appellee.
Appeal from the United States District Court for the Eastern District of California.
Before CHOY, POOLE, and REINHARDT, Circuit Judges.
Opinion by Judge REINHARDT; Partial Concurrence and Partial Dissent by Judge POOLE.
I. Facts
In 1979, debtor Victoria Farms, Inc. ("Victoria Farms") mortgaged its farm to Equitable Life Assurance Society of the United States ("Equitable"). See S.E.R. tab 1, Ex. A, at 7. The mortgage took the form of a "deed of trust," which simply granted Equitable a lien on the property. In return, Victoria Farms received $350,000.00.
In 1988, Victoria Farms mortgaged its farm to a second creditor, Visalia Production Credit Association ("Visalia"). See id. at 9. This second mortgage also took the form of a "deed of trust." In return, Victoria Farms received $376,720.00 from Visalia.
II. Prior Proceedings
A. Bankruptcy Court. In 1990, Victoria Farms voluntarily filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Pursuant to the bankruptcy court's approval, Victoria Farms sold the farm in the fourth quarter of 1991 for $594,804.60. Of this amount, $421,447.57 was paid to the first mortgagee (Equitable) by the escrow agent, and $37,150.05 was paid for various closing costs.
The remainder ($136,206.98) was placed in an impound account, which was administered by Victoria Farm's lawyer. The lawyer distributed $130,434.98 in the first quarter of 1992 to the second mortgagee (Visalia). Although Victoria Farms still owed Visalia $52,051.64, Visalia accepted the disbursement as payment in full. Victoria Farms kept the remaining $5,772.00. 1
In 1992, the bankruptcy court dismissed the case. The court held that Victoria Farms was required to pay St. Angelo, the regional United States trustee, only $400.00 in fees under 28 U.S.C. Sec. 1930(a)(6). 2 In calculating the fees, the court excluded the sale proceeds from the farm because it had been "indirectly" distributed by others (i.e., the escrow agent and the lawyer). Thus, it concluded that the trustee was only entitled to the minimum amount under the bankruptcy statute. 3
B. District Court. St. Angelo appealed the bankruptcy court's judgment to the district court, claiming that under 28 U.S.C. Sec. 1930(a)(6) he was in fact entitled to $4,250.00 in fees. St. Angelo argued that, under the terms of the statute, he was entitled to (i) $3,750.00 for the $594,804.60 disbursement to the first creditor, and (ii) $500.00 for the $130,434.98 disbursement to the second creditor. See id. Without providing any explanation, the district court rejected St. Angelo's argument and held that the term "disbursement" in 28 U.S.C. Sec. 1930(a)(6) excludes all payments made to a secured creditor from the sale proceeds of the secured property. St. Angelo timely appeals.
III. St. Angelo's Appeal
Before reaching the merits of St. Angelo's claim, we must address two issues raised by Victoria Farms on appeal. First, Victoria Farms claims that 28 U.S.C. Sec. 1930 is constitutionally invalid and therefore we may not reach the issue of the fee payments. Second, Victoria Farms claims that it lacks funds to pay St. Angelo should he succeed on this appeal and that St. Angelo's claim is therefore moot.
A. Uniformity Clause Challenge. Victoria Farms asserts that 28 U.S.C. Sec. 1930 is invalid under the Uniformity Clause, which empowers Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States." U.S. Const. art. I, Sec. 8. It claims that, because the U.S. Trustee program--and the fee system which supports it--has not been implemented in Alabama and North Carolina, the law governing the fee system is not uniform and therefore must be struck down in its entirety. Accordingly, it asserts that St. Angelo has no standing to bring this appeal and is not entitled to any fees. Although Victoria Farms did not raise this issue in the proceedings below, it is purely a question of law and, accordingly, we have discretion to address it. Bolker v. Commissioner, 760 F.2d 1039, 1042 (9th Cir.1985).
Under the Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, 95th Cong., 2d Sess. (1978), Congress established the U.S. Trustee program for an experimental period in 18 judicial districts. The program was intended to alleviate some of the administrative burdens faced by bankruptcy judges, to eliminate the appearance of favoritism arising from the close relationship that existed between judges and trustees, and to address the problem of "cronyism that exists in many parts of the county in the appointment of trustees by bankruptcy judges." H.Rep. No. 595, 95th Cong., 2d Sess. 108 (1978), reprinted in 1978 U.S.C.C.A.N. pp. 5787, 5963, 6069. The success of the program prompted Congress to replace the pilot program with a permanent national program through the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986, Pub.L. No. 99-554, 99th Cong.2d Sess. (1986). Congress chose to phase the program in over a two-year period for every state except North Carolina and Alabama. In contrast to the other 48 states, North Carolina and Alabama had the option of voting in the U.S. Trustee program; they were required, however, to implement the program by October 1, 1992. Bankruptcy Act of 1986, Pub.L. No. 99-554, 99th Cong., 2d Sess. Sec. 302 (1986). Although Congress provided an explanation for its decision to phase in the program over a two-year period for the other 48 states in a report accompanying the Act, it made no mention of the separate provisions governing North Carolina and Alabama. See H.Rep. No. 764, 99th Cong., 2d Sess. 29-30 (1986), reprinted in 1986 U.S.C.C.A.N. 5227, 5241-42.
Several years later, in section 317 of the Judicial Improvements Act of 1990, Congress extended the deadline for North Carolina and Alabama to implement the U.S. Trustee program to October 1, 2002. Pub.L. No. 101-650, 101st Cong., 2d Sess. Sec. 317(a) (1990). Again, Congress failed to provide an explanation for this extension, despite the fact that the ten-year extension was considerably longer than the original extension outlined in the Bankruptcy Act of 1986.
St. Angelo asserts that, despite the absence of any congressional statement, Congress intended to create two parallel programs in order to study the effect of the U.S. Trustee system upon the administration of bankruptcy proceedings. The sole justification he provides for his assertion is a 1992 GAO report. See GAO, Bankruptcy Administration: Justification Lacking for Continuing Two Parallel Programs (Sept.1992).
The GAO report, however, does not provide any information about Congress' intent in providing separate treatment for North Carolina and Alabama. Indeed, it significantly undermines St. Angelo's claim. First, the report makes clear that Congress provided no justification for either of its decisions to delay the implementation of the program in North Carolina and Alabama. Indeed, the authors of the report were compelled to rely upon their own discussions with bankruptcy judges and officials in the affected states to discover any possible explanation for the implementation period. Id. at 14. Clearly, the statements made by affected parties to GAO officials after Congress' enactment of section 317 do not represent a reliable indicator of congressional intent.
Second, the report directly contradicts St. Angelo's assertion that Congress twice extended the implementation period for North Carolina and Alabama for the purpose of studying the differences between the two systems. In fact, the report offers an entirely different reason for the original extension. The report notes that "our discussion with bankruptcy judges and BA program officials [for the system currently in effect] in North Carolina and Alabama indicated that the impetus for having the BA program in the two states was their extreme dissatisfaction with the operation of the [U.S. Trustee] pilot program in the Northern District of Alabama." Id. at 14. Having cited that justification for the initial extension, the report finds absolutely no justification for Congress' subsequent decision in 1990 to extend the implementation period for an additional ten years. With respect to the extension contained in section 317 of the Judicial Improvements Act of 1990, the report explicitly notes, "[w]e could not find any justification for continuing two separate programs." Id. at 16 (emphasis added). Indeed, because the problems in the Northern District of Alabama had been resolved, the report harshly criticizes section 317 for "giv[ing] the BA program the appearance of permanence." Id. 4
St. Angelo also argues that the U.S. Trustee program serves a purely administrative function and therefore is not constrained by the requirements of the Uniformity Clause. We disagree.
For the purpose of the Uniformity Clause, the Supreme Court has defined bankruptcy as the " 'subject of the relations between an insolvent or nonpaying or fraudulent debtor and his creditors, extending to his and their relief.' " Railway Labor Executives Ass'n v. Gibbons, 455 U.S. 457, 466, 102 S.Ct. 1169, 1175, 71 L.Ed.2d 335 (1982) (citing Wright v. Union Central Life Ins. Co., 304 U.S. 502, 513-14, 58 S.Ct. 1025, 1031-32, 82 L.Ed. 1490 (1938)).
The statute clearly governs the relationship between creditor and debtor and, accordingly, falls within the scope of the...
To continue reading
Request your trial
-
In re Technologies
...violated the uniformity requirement when it exempted Alabama and North Carolina from the UST Program. St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1531-32 (9th Cir. 1994). The debtor in that case had argued, as Exide does, that the quarterly fees imposed in UST districts were unconstit......
-
Clinton Nurseries, Inc. v. Harrington (In re Clinton Nurseries, Inc.)
...Chapter 11 debtors in BA districts did not have to pay any quarterly fees. In 1994, the Ninth Circuit, in St. Angelo v. Victoria Farms, Inc. , 38 F.3d 1525, 1531 (9th Cir. 1994), as amended by 46 F.3d 969 (9th Cir. 1995), found this arrangement unconstitutional because Congress "provided no......
-
U.S. Sales, Inc. v. Office of the U.S. Tr.
...were. This disparity resulted in a challenge to the constitutionality of the quarterly fee statute. In St. Angelo v. Victoria Farms, Inc. , 38 F.3d 1525 (9th Cir. 1994), amended by 46 F.3d 969 (9th Cir. 1995) , the Ninth Circuit held that Congress' decision to impose quarterly fees in UST ......
-
In re Bernier
...in different States shall come out with the same result because they passed through a bankruptcy court."); St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1531 (9th Cir. 1994). For example, the fact that Congress permits state law exemptions to be applicable in bankruptcy, with the result......
-
U.S. Supreme Court Bankruptcy Roundup
...structure violated the Constitution's requirement that bankruptcy laws be geographically uniform. See St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525 (9th Cir. 1994), amended, 46 F.3d 969 (9th Cir. 1995); U.S. Const., art. I, ' 8, cl. 4. The Ninth Circuit noted that a bankruptcy law "may h......
-
Siegel v. Fitzgerald – How to Remedy the Impacts of an Unconstitutional Law
...§302(d)(3), 100 Stat. 3121-3123. [10] See Siegel, 596 U.S. at 3; see also 28 U.S.C. § 589a(b)(5); [11] St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1532-1533 (1994), as amended, 46 F.3d 969 (1995). [12] 2000 Act § 105, 114 Stat. 2412 (enacting 28 U.S.C. § 1930(a)(7)). [13] See Report o......
-
Bankruptcy
...2421-22.18. Siegel, 142 S. Ct. at 1776.19. 28 U.S.C. § 1930(a)(6); see 28 U.S.C. § 589a(b)(5).20. St. Angelo v. Victoria Farms, Inc., 38 F.3d 1525, 1532-33 (9th Cir. 1994).21. 28 U.S.C. § 1930(a)(7).22. Pub. L. No. 106-518 at § 105, 114 Stat. at 2412.23. Report of the Proceedings of the Jud......