Toibb v. Radloff
| Decision Date | 13 June 1991 |
| Docket Number | No. 90-368,90-368 |
| Citation | 111 S.Ct. 2197,115 L.Ed.2d 145,501 U.S. 157 |
| Parties | Sheldon Baruch TOIBB, Petitioner v. Stuart J. RADLOFF |
| Court | U.S. Supreme Court |
Petitioner Toibb filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code, disclosing, inter alia, assets that included stock in an electric power company. When he discovered that the stock had substantial value, he decided to avoid its liquidation by moving to convert his Chapter 7 case to one under Chapter 11's reorganization provisions. After the Bankruptcy Court granted his motion, and he filed his reorganization plan, that court dismissed his petition, finding that he did not qualify for relief under Chapter 11 because he was not engaged in an ongoing business. The District Court and the Court of Appeals affirmed.
Held: The Bankruptcy Code's plain language permits individual debtors not engaged in business to file for relief under Chapter 11. Toibb is a debtor within the meaning of § 109(d), which provides that "a person who may be a debtor under chapter 7 . . . except a stockbroker or a commodity broker, and a railroad may be a debtor under chapter 11." He is a person who may be a Chapter 7 debtor, since only railroads and various financial and insurance institutions are excluded from Chapter 7's coverage, and § 109(d) makes Chapter 11 available to all entities eligible for Chapter 7 protection, other than stockbrokers and commodities brokers. Although Chapter 11's structure and legislative history indicate that it was intended primarily for the use of business debtors, the Code contains no ongoing business requirement for Chapter 11 reorganization; and there is no basis, including underlying policy considerations, for imposing one. Pp. 160-166.
902 F.2d 14 (CA 8 1990), reversed.
Peter M. Lieb for petitioner.
Stephen J. Marzen, for the respondent United States supporting petitioner.
James Hamilton by invitation of the Court as amicus curiae in support of the judgment below.
In this case we must decide whether an individual debtor not engaged in business is eligible to reorganize under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101 et seq.
From March 1983 until April 1985, petitioner Sheldon Baruch Toibb, a former staff attorney with the Federal Energy Regulatory Commission, was employed as a consultant by Independence Electric Corporation (IEC), a company he and two others organized to produce and market electric power. Petitioner owns 24 percent of the company's shares. After IEC terminated his employment, petitioner was unable to find work as a consultant in the energy field; he has been largely supported by his family and friends since that time.
On November 18, 1986, petitioner filed in the United States Bankruptcy Court for the Eastern District of Missouri a voluntary petition for relief under Chapter 7 of the Code, 11 U.S.C. § 701 et seq. The Schedule of Assets and Liabilities accompanying petitioner's filing disclosed no secured debts, a disputed federal tax priority claim of $11,000, and unsecured debts of $170,605.1 Petitioner listed as nonexempt assets his IEC shares and a possible claim against his former business associates. He stated that the market value of each of these assets was unknown.
On August 6, 1987, the Chapter 7 Trustee appointed to administer petitioner's estate notified the creditors that the Board of Directors of IEC had offered to purchase petitioner's IEC shares for $25,000. When petitioner became aware that this stock had such value, he decided to avoid its liquidation by moving to convert his Chapter 7 case to one under the reorganization provisions of Chapter 11.
The Bankruptcy Court granted petitioner's conversion motion, App. 21, and on February 1, 1988, petitioner filed a plan of reorganization. Id., at 70. Under the plan, petitioner proposed to pay his unsecured creditors $25,000 less administrative expenses and priority tax claims, a proposal that would result in a payment of approximately 11 cents on the dollar. He further proposed to pay the unsecured creditors, for a period of six years, 50 percent of any dividends from IEC or of any proceeds from the sale of the IEC stock, up to full payment of the debts.
On March 8, 1988, the Bankruptcy Court on its own motion ordered petitioner to show cause why his petition should not be dismissed because petitioner was not engaged in business and, therefore, did not qualify as a Chapter 11 debtor. App. 121. At the ensuing hearing, petitioner unsuccessfully attempted to demonstrate that he had a business to reorganize.2 Petitioner also argued that Chapter 11 should be available to an individual debtor not engaged in an ongoing business. On August 1, the Bankruptcy Court ruled that, under the authority of Wamsganz v. Boatmen's Bank of De Soto, 804 F.2d 503 (CA8 1986), petitioner failed to qualify for relief under Chapter 11. App. to Pet. for Cert. A-17 and A-19.
The United States District Court for the Eastern District of Missouri, also relying on Wamsganz, upheld the Bankruptcy Court's dismissal of petitioner's Chapter 11 case. App. to Pet. for Cert. A-8 and A-9. The United States Court of Appeals for the Eighth Circuit affirmed, holding that the Bankruptcy Court had the authority to dismiss the proceeding sua sponte, and that the Circuit's earlier Wamsganz decision was controlling. In re Toibb, 902 F.2d 14 (1990).3 Because the Court of Appeals' ruling that an individual nonbusiness debtor may not reorganize under Chapter 11 clearly conflicted with the holding of the Court of Appeals for the Eleventh Circuit in In re Moog, 774 F.2d 1073 (CA11 1985), we granted certiorari to resolve the conflict.4 --- U.S. ----, 111 S.Ct. 775, 112 L.Ed.2d 838 (1991).
In our view, the plain language of the Bankruptcy Code disposes of the question before us. Section 109, 11 U.S.C. § 109, defines who may be a debtor under the various chapters of the Code. Section 109(d) provides: "Only a person that may be a debtor under chapter 7 of this title, except a stockbroker or a commodity broker, and a railroad may be a debtor under chapter 11 of this title." Section 109(b) states: "A person may be a debtor under chapter 7 of this title only if such person is not—(1) a railroad; (2) a domestic insurance company, bank, . . .; or (3) a foreign insurance company, bank, . . . engaged in such business in the United States." The Code defines "person" as used in Title 11 to "includ[e] [an] individual." § 101(35). Under the express terms of the Code, therefore, petitioner is "a person who may be a debtor under chapter 7" and satisfies the statutory requirements for a Chapter 11 debtor.
The Code contains no ongoing business requirement for reorganization under Chapter 11, and we are loath to infer the exclusion of certain classes of debtors from the protections of Chapter 11, because Congress took care in § 109 to specify who qualifies-and who does not qualify-as a debtor under the various chapters of the Code. Section 109(b) expressly excludes from the coverage of Chapter 7 railroads and various financial and insurance institutions. Only municipalities are eligible for the protection of Chapter 9. § 109(c). Most significantly, § 109(d) makes stockbrokers and commodities brokers ineligible for Chapter 11 relief, but otherwise leaves that Chapter available to any other entity eligible for the protection of Chapter 7. Congress knew how to restrict recourse to the avenues of bankruptcy relief; it did not place Chapter 11 reorganization beyond the reach of a nonbusiness individual debtor.
The Amicus Curiae in support of the Court of Appeals' judgment acknowledges that Chapter 11 does not expressly exclude an individual nonbusiness debtor from its reach. He echoes the reasoning of those courts that have engrafted an ongoing-business requirement onto the plain language of § 109(a) and argues that the statute's legislative history and structure make clear that Chapter 11 was intended for business debtors alone. See, e.g., Wamsganz v. Boatmen's Bank of De Soto, 804 F.2d, at 505 (). We find these arguments unpersuasive for several reasons.
First, this Court has repeated with some frequency: "Where, as here, the resolution of a question of federal law turns on a statute and the intention of Congress, we look first to the statutory language and then to the legislative history if the statutory language is unclear." Blum v. Stenson, 465 U.S. 886, 896, 104 S.Ct. 1541, 1548, 79 L.Ed.2d 891 (1984). The language of § 109 is not unclear. Thus, although a court appropriately may refer to a statute's legislative history to resolve statutory ambiguity, there is no need to do so here.
Second, even were we to consider the sundry legislative comments urged in support of a congressional intent to exclude a nonbusiness debtor from Chapter 11, the scant history on this precise issue does not suggest a "clearly expressed legislative inten[t] . . . contrary . . ." to the plain language of § 109(d). See Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). The Amicus does point to the following statement in a House report:
H.R.Rep. No. 95-595, p. 125, U.S.Code Cong. & Admin.News 1978, p. 5787 (1977).
Petitioner responds with the...
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