Lead Opinion
Magna Bank, N.A., appeals the judgment of the District Court affirming the judgment of the Bankruptcy Court in favor of Hartford Underwriters Insurance Company. The sole question presented for review by the Court en banc is the threshold question of whether Hartford has statutory standing to surcharge Magna’s collateral under 11 U.S.C. § 506(c) (1994). We reverse.
I.
Magna
Despite the additional financing provided under the post-petition loan agreement, the Debtor’s attempts at reorganization failed. In January 1993, the Bankruptcy Court converted the Debtor’s Chapter 11 case into a Chapter 7 liquidation proceeding and appointed a trustee of the Chapter 7 estate.
During the Debtor’s attempted Chapter 11 reorganization, Hartford provided workers’ compensation insurance coverage to the Debtor. The terms of the insurance policy required the Debtor to pay a premium to Hartford each month. The Debtor made an initial premium deposit and a subsequent premium payment, but otherwise failed to pay the monthly premium required by the policy. The unpaid premiums amount to $51,871.40.
When the Chapter 11 reorganization failed and the Debtor’s case was converted to a Chapter 7 proceeding, Hartford brought an action pursuant to Bankruptcy Code § 503 seeking the allowance of its claim as an administrative expense and Bankruptcy Code § 506(c) seeking to recover the unpaid premiums by surcharging Magna’s collateral. The Bankruptcy Court, following the holding of a three-judge panel of our Court in United States, Internal Revenue Service v. Boatmen’s First National Bank,
A three-judge panel of this Court affirmed the judgment of the District Court, holding, among other things, that Boatmen’s was controlling and that Hartford therefore had standing to seek recovery under § 506(c). But two members of the panel expressed their belief that Boatmen’s had been wrongly decided and should be reconsidered by the Court en banc. See Hartford Underwriters Ins. Co. v. Magna Bank, N.A. (In re Hen House Interstate, Inc.),
II.
As the second reviewing court, we apply the same standard as that applied by the District Court; we review de novo the Bankruptcy Court’s determination of the single issue of law presented here. See Halverson v. Estate of Cameron (In re Mathiason),
Initially, we note that Hartford asserts no claim against Magna or its collateral outside of the Hen House bankruptcy proceeding. The nature and extent of the potential liability of Magna, as an al
Section 506(c) clearly states, “The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.” 11 U.S.C. § 506(c) (1994) (emphasis added). The proper construction of any statute, the Bankruptcy Code included, begins with the language of the statute itself. See United States v. Ron Pair Enters., Inc.,
Hartford correctly points out that our conclusion here is not the consensus of the circuits that have considered the issue. A majority of those circuits has held that § 506(c) grants standing to non-trustees to pursue surcharge claims under that section. See Loudoun Leasing Dev. Co. v. Ford Motor Credit Co. (In re K & L Lakeland, Inc.),
More persuasive is the determination of the Court of Appeals for the Fourth Circuit that “[t]he language of § 506(c) is clear and unambiguous. It grants only trustees the authority to seek recovery of postpetition costs and expenses from the collateral of a secured creditor.” Ford Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ Chevrolet, Inc.),
Moreover, although we base our holding on the plain language of § 506(c), we note that the position espoused by Hartford would undermine the carefully crafted equality-of-distribution scheme fundamental to the operation of the Bankruptcy Code. See Begier v. IRS,
Finally, for the first time in this litigation Hartford asserts standing under Federal Rule of Bankruptcy Procedure 7071 to enforce the terms of the final financing order of the Bankruptcy Court. See Fed.R.Bankr.P. 7071 (incorporating Fed.R.Civ.P. 71) (“When an order is made in favor of a person who is not a party to the action, that person may enforce obedience to the order by the same process as if a party....”). The final financing order directs the Debtor to pay expenses out of cash collateral covered by Magna’s security interest. See In re Hen House Interstate, Inc., No. 91-45623-293, para. 24, at 17 (Final Order of Bankruptcy Court). Rule 7071, however, was not the basis of the claim asserted by Hartford in its application to the Bankruptcy Court, in which Hartford sought to surcharge Magna’s collateral pursuant to Bankruptcy Code § 506(c). Having stated only a § 506(c) surcharge claim in its complaint and throughout this litigation, Hartford cannot now, after the case has come to the rehearing en banc stage in this Court, embark upon a different claim never pleaded to the Bankruptcy Court and assert that any standing to bring that claim is a ground for standing in the § 506(c) claim it actually brought. That Hartford might or might not have standing to bring a Rule 7071 claim is beside the point, for that is a new claim that cannot initially be brought forward at the appellate level.
The single issue for determination by this Court en banc remains the issue stated at the outset: whether Hartford as standing under § 506(c). We hold that § 506(c) permits only the trustee to proceed under that section. Hartford therefore lacks standing to surcharge Magna’s collateral under § 506(c).
III.
United States, Internal Revenue Service v. Boatmen’s First National Bank, 5 F.Sd 1157 (8th Cir.1993), which held that parties other than the trustee have standing to surcharge property securing the claim of an allowed secured creditor under § 506(c), is overruled. The decision of the District Court is reversed. The case is remanded to the District Court with instructions that the Bankruptcy Court be directed to vacate its judgment and dismiss Hartford’s § 506(c) claim for lack of standing.
Notes
. Magna is the successor in interest to Landmark Bank of Illinois. We refer to Magna herein in notwithstanding that some of the facts pertain to Landmark Bank prior to its acquisition by Magna, and notwithstanding that on October 9, 1998 Magna was absorbed by merger into Union Planters National Bank.
. The general rule is that administrative expenses cannot be charged against secured collateral and are chargeable against only the unsecured collateral of the estate pursuant to Bankruptcy Code § 503. See 1 U.S.C. § 503(a) (1994); Precision Steel Shearing, Inc. v. Fremont Fin. Corp. (In re Visual Indus., Inc.),
. Hartford has made an issue of Bankruptcy Code § 1107(a), which provides that Chapter 11 debtors in possession shall, with some exceptions, have "all the rights ... and powers, and shall perform all the functions and duties,” of trustees. 11 U.S.C. § 1107(a) (1994). The express language of § 1107(a) therefore compels the unremarkable conclusion that Chapter 11 debtors in possession may do most of the things trustees may do. In this case, Hartford is neither a Chapter 11 debtor in possession nor a bankruptcy trustee.
Likewise, though Bankruptcy Code §§ 901, 902 and 1203 explicitly grant municipalities in Chapter 9 cases and family farmers in Chapter 12 cases some of the rights, powers, functions and duties of trustees serving in cases under Chapter 11, see 11 U.S.C. §§ 901(a), 902(5), 1203 (1994), this is not a Chapter 9 or 12 case and Hartford is not a municipality or a family farmer seeking to reorganize. That Congress chose to expressly grant the enumerated parties carefully circumscribed trustee status in limited circumstances demonstrates only that, had Congress intended a claimant such as Hartford to have § 506(c) standing in the present circumstance, it would have said so. Particularly appropriate here is the ancient canon stating that expressio unius est exclusio alterius.
. Moreover, the Rule 7071 claim is not within the scope of our order granting "rehearing en banc ... limited to the issue of standing.” Hartford Underwriters Ins. Co. v. Magna bank, N.A. (In re Hen House Interstate, Inc.), No. 97-3859EMSL (8th Cir. Sept. 22, 1998) (Order Granting Rehearing En Banc). Although our order (the purpose of which, after all, was to limit rehearing to a single issue, not to invite new claims) refers generally to "the issue of standing,” we could only have intended that phrase to mean the issue of § 506(c) standing. In its motion to file a supplemental brief after rehearing en banc had been granted, Hartford made no reference to Rule 7071. Instead, Hartford emphasized that ”[t]he question of standing under section 506(c) is one of great importance to administrative claimants such as Hartford, and the Court’s en banc resolution of this issue will affect many such claimants in innumerable bankruptcy cases.” Appellee’s Motion to File Supplemental Brief at 2-3 (Sept. 22, 1998). Likewise, Magna, in its suggestion for rehearing en banc, limited discussion to § 506(c). For these reasons, it strains credulity to think that our order granting rehearing en banc invited Hartford to assert a Rule 7071 claim at this late stage. We are thoroughly satisfied that our review is limited to the issue of Hartford's standing to bring a § 506(c) claim, the claim that Hartford in fact asserted.
Dissenting Opinion
dissenting, with whom McMILLIAN, RICHARD S. ARNOLD, BEAM, and MURPHY, Circuit Judges, join.
Today this court rejects the view of four other circuits, ignores the teaching of the leading bankruptcy treatise, and departs from the well-established view that administrative claimants have § 506(c) standing to enforce administrative claims against secured creditors who have benefitted by the goods or services provided by an administrative claimant. Because the prudential standing doctrine requires this court to confer § 506(c) standing to Hartford, I respectfully dissent.
An administrative expense may be surcharged against a secured creditor’s collateral if the expense was necessary, reasonable, and directly benefitted the secured creditor, Brookfield Prod. Credit Ass’n v. Borron,
Magna agreed to the continued operation of the Debtor’s businesses in the hopes of receiving a greater return through reorganization rather than through liquidation. Magna thereby “agreed to accept the expenses and risks associated with [the] anticipated benefit.” One such expense is workers’ compensation insurance. Under Missouri law, an operating business is obligated to maintain workers’ compensation insurance unless it can demonstrate that it has the ability to self-insure. See Mo. Rev.Stat. § 287, 280 (Supp.1998).
Hartford Underwriters Ins. Co. v. Magna Bank (In re: Hen House Interstate, Inc.),
I agree with the court that the sole issue before us is whether Hartford has standing to surcharge Magna’s collateral. I believe it has. Four circuits have adopted this view. See e.g. North County Jeep & Renault, Inc. v. General Elec. Capital Corp. (In re Palomar Truck Corp.),
The reasoning behind the approach which extends standing to creditors and other claimants is that a secured creditor who received a direct benefit from the rendition of services or provision of goods by an administrative claimant ... should have the collateral charged for that benefit, regardless of whether the proceeds of the charge are paid to the trustee in reimbursement for the trustee’s prior payment to the claimant, or are paid to the claimant directly. Otherwise, if the trustee does not have available funds to pay the claimant, the trustee has no. economic incentive to seek a recovery under section 506(c) with respect to amounts that will be paid over to the claimant. As a result, the secured creditor may obtain a windfall at the expense of the unpaid claimant.
4 Collier on Bankruptcy ¶ 506.05[8] at 506-142-^43 (Lawrence P. King ed., 15th ed.1998). The majority view has been in effect since 1986, and I believe that Congress has acquiesced to the majority resolution of the conflict. See Johnson v. Transportation Agency,
Had Congress intended to limit § 506(c) standing to trustees, it could have included the word “only” in the statute. Because it failed to do so and because Congress did not expressly deny § 506(c) standing to administrative claimants, the prudential standing doctrine dictates that this court confer § 506(c) standing on Hartford.
Any determination of standing “involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise.” Warth v. Seldin,
There can be no doubt that Hartford has Article III standing, and because Congress has not expressly negated the prudential standing doctrine in § 506(e), Hartford also has § 506(c) standing. To satisfy Article III standing, a plaintiff must allege that (1) he or she suffered or imminently will suffer an injury in fact; (2) the injury is fairly traceable to the defendant’s conduct; and (3) a favorable court decision is likely to redress the injury. See Florida Gen. Contractors v. Jacksonville,
Having satisfied the general requirements for Article III standing, “the applicable prudential standing requirement [is] ‘whether the interest sought to be protected by [Hartford] is arguably within the zone of interests to be protected or regulated by the statute.’ ” Bennett,
The court joins the Fourth Circuit
Allowing a claimant to proceed directly against a secured creditor would circumvent this distribution scheme, potentially causing an inequitable division of the estate. For example, if an estate has no unencumbered assets, an administrative claimant recovering directly from a secured creditor might receive full reimbursement while other administrative claimants, whose services were also necessary to the preservation of the estate, would receive nothing. An administrative claimant proceeding against a secured creditor in effect would be granted priority over the other claimants in its same class. We are of the opinion that if Congress had intended to alter so fundamentally the structure and principles underlying bankruptcy proceedings, it would have done so expressly.
Ford Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ Chevrolet, Inc.),
Finally, I believe that Hartford’s claim that Federal Rule of Bankruptcy Procedure 7071 provides an independent basis for recovery may properly be considered by this court. The court argues that because Hartford did not raise this claim before the original panel in this case and raised it in the first instance before this court en banc, we should not consider the claim. In my view, Hartford may be excused from failing to raise the claim before the original panel because the facts of this case fall squarely within the law established in our Boatmen’s opinion; and as Chief Judge Bowman correctly noted in our original panel opinion, “ ‘[o]nly the court en banc can overrule another panel’s decision.’ ” Hartford,
Federal Rule of Bankruptcy Procedure 7071 incorporates Rule 71 of the Federal Rules of Civil Procedure, which provides: “When an order is made in favor of a person who is not a party to the action, that person may enforce obedience to the order by the same process as if he were a party....” Fed.R.Civ.P. 71. Hartford argues that the bankruptcy court, with Mag-na’s express consent, directed the debtor to pay the premiums for the workers’ compensation insurance that Hartford provided. Because it was the intended beneficiary of the order, Hartford argues that it may recover from Magna under Rule 7071. In the interests of judicial economy, I would hold that, even if Hartford does not have standing under § 506(c), it should recover under Rule 7071.
Today this court overrules six years of Eighth Circuit law, rejects the views of four other circuits, and ignores the teaching of the leading bankruptcy treatise. It does this in disregard of the prudential standing doctrine. For the reasons stated above, I respectfully dissent.
. While the court relies heavily on the reasoning of the Fourth Circuit, even that court has recognized the fact that a secured creditor should not be able to immunize its windfall under the theory that administrative claimants lack § 506(c) standing. See Ford Motor Credit Co. v. Reynolds & Reynolds Co. (In re JKJ Chevrolet, Inc.),