In Re Murray
MEMORANDUM
The question presented is whether the mother of a seven year old debtor has capacity to file a Chapter 13 petition as “next friend” for her daughter. The petition is proper under Rule 17(c) of the Federal Rules of Civil Procedure. The following are findings of fact and conclusions of law. Fed.R.Bankr.P. 7052.
I
This Chapter 13 debtor was seven years old at the petition on October 6, 1995. The petition was signed “Brittany Gricheny Murray by Dorcas Renee Murray, mother.” Below the debtor’s name, the petition states “by next friend and mother Dorcas Renee Murray.” In a similar fashion, the debtor’s mother executed the acknowledgment of a consumer debtor, the application and affidavit to pay filing fees in installments and the declaration concerning the debtor’s schedules.
The debtor owns a house that passed to her before the petition at the death of her natural father. The house was mortgaged by the father to Boatman’s National Mortgage, Inc. Boatman’s is the only creditor in this Chapter 13 case.
The debtor receives social security surviv- or’s benefits of $908 per month. The Social Security Administration recognizes the debt- or’s mother as custodian and guardian of the debtor. No court has authorized the dеbt- or’s mother (or anyone else) to represent the debtor.
The debtor’s proposed plan would cure defaults and maintain payments on the home mortgage using the debtor’s social security benefits. Boatman’s did not object to confirmation. The essence of the Chapter 13 trustee’s objection to confirmation is that this debtor is not eligible for Chapter 13 relief because, absent state court approval, a parent lacks authority to file a Chapter 13 petition for a minor. 1
II ELIGIBILITY
No provision of the Bankruptcy Code requires that a Chapter 13 debtor be an adult. A voluntary bankruptcy case is commenced by the filing of a petition “by an
entity
that may be a debtor under such chapter.” 11 U.S.C. § 301 (emphasis added).
Eligibility of an individual for Chapter 13 relief is not limited by reference to state law. Contrast 11 U.S.C. § 109(c) which limits the eligibility of an entity to be a debtor under Chapter 9 “if and only if such entity ... is specifically authorized, ... to be a debtor ... by State law, or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor under such chapter.”
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 carе 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.
Cases decided under the Bankruptcy Code support or at least assume that infants and other incompetents are eligible for voluntary bankruptcy relief.
3
Cases decided under the former Bankruptcy Acts split on the question whether a minor or incompetent was eligible for bankruptcy relief; the better reasoned view supported eligibility especially where the minor or incompetent owed debts that
There is no legislative history to the 1978 Code indicating Congressional intent to es
Involuntary petitions have been sustained against individuals suffering an incapacity. 5 There is no obvious statutory or historical imperative for a rule permitting involuntary petitions against some incompetent individuals but excluding other incompetent individuals (minors) from voluntary bankruptcy relief.
The Federal Rules of Bankruptcy Procedure do not directly address the eligibility of minors. Bankruptcy Rule 1016 authorizes the continuation of a bankruptcy case when a debtor becomes incompetent during administration of the case.
6
It is not clearly infera-ble that the Rules Drafters intended any opinion with respect to the eligibility of an incompetent to file bankruptcy in the first
The plain language of the Code is outcome determinative. This seven year old debtor is an “individual with regular income” eligible for Chapter 13.
Ill CAPACITY
Capacity means the personal right of a party to come into court.
Johnson v. Helicopter & Airplane Services Corp.,
For civil actions in the United States district courts, Rule 17 of the Federal Rules of Civil Procedure fully circumscribes the capacity of parties. 8 Unfortunately, the historical development of the bankruptcy courts and the evolution of terms of art in the Bankruptcy Code and Rules conspire to complicate application of Rule 17 to determine capacity to file a bankruptcy petition.
Rule 81(a)(1) of the Federal Rules of Civil Procedure states that the civil rules “do not apply to proceedings
9
in bankruptcy ... except insofar as they may be made applicable thereto by rules promulgated by the Supreme Court of the United States.” Fed.
The piecemeal incorporation of the Civil Rules into the Bankruptcy Rules has collided with historical differences in practice between the bankruptcy and district courts. In the United States district courts, there is a single form of action known as a “civil action.” Fed.R.Civ.P. 2. In the bankruptcy courts there are “cases” and “proceedings.” A bankruptcy “case” is commenced by filing a petition under title 11. 11 U.S.C. § 801. “Proceedings” are discrete events which require judicial action in a bankruptcy court, including adversary proceedings and contested matters. 11
Rule 17 of the Federal Rules of Civil Procedure has not been fully activated in bankruptcy cases and proceedings. Rule 7017 of the Federal Rules of Bankruptcy Procedure states: “Rule 17 Fed.R.Civ.P. applies in adversary proceedings....” 12 “Adversary proceeding” is a term of art defined in Rule 7001 of the Federal Rules of Bankruptcy Procedure. “Adversary proceeding” does not include a voluntary bankruptcy case.
If directed by the bankruptcy court, Rule 17 of the Federal Rules of Civil Procedure can be applied to contested matters, proceedings related to contested involuntary petitions, contested petitions commencing a case ancillary to a foreign proceeding, or proceedings to vacate an order for relief. See Fed.R.Bankr.P. 9014 and 1018. Also, Civil Rule 17 applies to depositions of minors or incompetents before an adversary proceeding is filed or pending an appeal. See Fed.R.Bankr.P. 7027.
Thus, the Supreme Court has empowered the bankruptcy court to use Rule 17 of the Civil Rules to evaluate the capacity of this debtor’s mother to represent the debtor in the contested matter commеnced when the Chapter 13 trustee objected to confirmation; yet, Rule 17 is not obviously applicable to determine whether the debtor’s mother had capacity to file this Chapter 13 case in the first instance. This is an odd outcome. 13
Though not expressly applicable, Rule 17 of the Civil Rules has been considered by some courts to determine capacity to file a
Rule 9029(b) of the Federal Rules of Bankruptcy Procedure states: “Procedure When There is No Controlling Law. A judge may regulate practice in any manner consistent with federal law, these rules, Official Forms, and local rules of the district.” The Advisory Committee Note to the 1995 version of Fed.R.Bankr.P. 9029(b) states:
This rule provides flexibility to the court in regulating practice when there is no controlling law. Specifically, it permits the court to regulate practice in any manner consistent with federal law, with rules adopted under 28 U.S.C. § 2075, with Official Forms, and with the district’s local rules.
The “gap filling” function of Bankruptcy Rule 9029(b) is aligned with Rule 83 of the Federal Rules of Civil Procedure which
‘closes all gaps in the rules. It ... permits judges to decide the unusual or minor procedural problems that arise in any system of jurisprudence in thе light of the circumstances that surround them and of the justice of the case without the complications and injustice that must attend attempts to forecast the situations and to regulate them in advance either by general or by local rule.’
12 Wright & Miller, Federal Practice and Procedure § 3155 at 242 (1973), quoting statement of Edgar Tolman (Advisory Committee member), Proceedings, Washington Institute on the Federal Rules, 1938, p. 129. “Gap filling” by bankruptcy courts in matters of procedure is recognized in the legislative history of the Bankruptcy Reform Act of 1978:
The elimination of most procedure from the ... [1978 Act] will give the Supreme Court optimal flexibility to treat with matters of procedure, or if no rule is made, for the courts to fashion procedure on a case-by-case basis.
H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 293 (1977) (emphasis added).
Pursuant to Fed.R.Bankr.P. 9029(b) it is appropriate to apply Rule 17 of the Civil Rules to determine capacity to file a Chapter 13 petition.
The capacity of Dorcas Renee Murray to file this Chapter 13 petition as “next friend” for her daughter is sustained by Rule 17(c) of the Federal Rules of Civil Procedure. This debtor is an infant. This debtor does not have a “duly appointed representative.” Under the second sentence of Rule 17(с), “if an infant ... does not have a duly appointed representative [she] may sue by a next fiiend or by a guardian ad litem.”
The second sentence of Rule 17(c) fixes a
federal
rule for capacity of a “next friend” for an (unrepresented) infant. As explained by the Fifth Circuit in
Travelers Indemnity Co. v. Bengtson,
is unconditional, in no way dependent upon the capacity, under the law of the domicile for a party, or under the law of the state in which the district court is held for parties acting in a representative capacity as is expressed in FRCP 17(b), or a similar limitation implied under the first sentence of 17(c) where the аction is brought by an appointed guardian, conservator, or similar fiduciary. 15
Notes
. Feasibility and "good faith” issues raised in the trustee's objection to confirmation were not earnestly contested and are resolved in favor of the debtor. This minor has “regular income” sufficient to fund the proposed plan. There is no evidence of bad faith in this effort to save the home acquired at the death of the debtor’s father.
. The analogous exception to eligibility in Chapter 11 cases in 11 U.S.C. § 109(d) was cited by the Supreme Court as evidence that Congress carefully crafted the eligibility rules in § 109 and the courts should not cаsually infer uncodified exceptions.
See Toibb v. Radloff,
.
See Wieczorek v. Woldt (In re Kjellsen),
. Under the Bankruptcy Act of 1841, it was held that infants were entitled to the benefits of bankruptcy and could file without appointment of a next friend.
See
Note 1 (annotation found at footnote to
In re Dunnigan Bros.,
2 Am.Bankr.Rep. 628 n. 1 (D.Mass.1899)), 2 Am.Bankr.Rep. 628 n. 1,
citing, In re Book,
Under the Bankruptcy Act of 1867, courts held infants were not subject to voluntary or involuntary bankruptcy with respect to their general contracts.
See In re Weitzel,
Several cases decided under the Bankruptcy Act of 1898 support eligibility of infants and other incompetents:
Hilliard v. McCrory,
The following cases held or stated in
dicta
that infants or other incompetents could not be bankrupts under the Bankruptcy Act of 1898:
In re Eisenberg,
See also
Annotation,
Voluntary or involuntary bankruptcy proceedings in case of incompetent or infant,
. No Code case has been found directly addressing whether an involuntary petition may be maintained against an infant. The availability of involuntary relief against an incompetent adult is recognized in
dicta
in
In re Kjellsen,
155 B.R. at
1018
and
In re Zawisza,
The eligibility of incompetents in pre-Code involuntary cases often turned on whether the bankrupt committed an “act of bankruptcy” while sane because several of the then applicable acts of bankruptcy had an element of intent.
See In re Evanishyn,
. Fed.R.Bankr.P. 1016 provides;
Death or incompetency of the debtor shall not abate a liquidation case under chapter 7 of the Code. In such event the estate shall be administered and the case concluded in the same manner, so far as possible, as though the death or incompetency had not occurred. If a reorganization, family farmer’s debt adjustment, or individual’s debt adjustment case is pending under chapter 11, chapter 12, or chapter 13, the case may be dismissed; or if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though the death or incompetency had not occurrеd.
The origin of Rule 1016 is section 8 of the Bankruptcy Act of 1898. Prior to enactment of that section, courts had held death or insanity abated a bankruptcy proceeding if the bankrupt had not yet taken the oath required for a dis
. See also Comment 6, Comments and Instructions to Procedural Bankruptcy Form B 224B (Order Dismissing Chapter 13 Case), Bankruptcy Forms Manual, Vol. II, "Forms and Instructions for the Public,” Administrative Office of the United States Courts (September, 1988) ("The notice [of a motion to dismiss] may be served in a variety of ways which are set forth in Bankruptcy Rule 7004 and Rule 4 of the Federal Rules of Civil Procedure [including a procedure for service on an infant]. When the debtor is an individual, other than an infant or incompetent person, perhaps the easiest method is for the notice to be mailed by first class mail.”).
. Rule 17 of the Federal Rules of Civil Procedure provides in part:
(b) Capacity to Sue or be Sued. The capacity of an individual, other than one acting in a representative capacity, to sue or be sued shall be determined by the law of the individual's domicile. The capacity of a corporation to sue or be sued shall be determined by the law under which it was organized. In all other cases capacity to sue or be suеd shall be determined by the law of the state in which the district court is held, except
(1) that a partnership or other unincorporated association, which has no such capacity by the law of such state, may sue or be sued in its common name for the purpose of enforcing for or against it a substantive right existing under the Constitution or laws of the United States, and
(2) that the capacity of a receiver appointed by a court of the United States to sue or be sued in a court of the United States is governed by Tide 28, U.S.C. Sections 754 and 959(a).
(c) Infants or Incompetent Persons. Whenever an infant or incomрetent person has a representative, such as a general guardian, committee, conservator, or other like fiduciary, the representative may sue or defend on behalf of the infant or incompetent person. An infant or incompetent person who does not have a duly appointed representative may sue by a next friend or by a guardian ad litem. The court shall appoint a guardian ad litem for an infant or incompetent person not otherwise represented in an action or shall make such other order as it deems proper for the protectiоn of the infant or incompetent person.
Fed.R.Civ.P. 17.
."Proceedings” here in Rule 81 of the Federal Rules of Civil Procedure should probably be defined more broadly than "proceedings” in Rule 7017 of the Federal Rules of Bankruptcy Procedure, discussed below. Civil Rule 81(a)(1) does not mention bankruptcy "cases.” When Civil Rule 81 was promulgated, the Bankruptcy Act of 1898 was in effect and bankruptcy "cases” were called "proceedings.”
Windsor Communications Group, Inc. v. Grant,
. The Federal Rules of Bankruptcy Procedure have existed since 1973 when the Bankruptcy Rules replaced General Orders of the U.S. Supreme Court. The incorporation of somе Civil Rules into the Bankruptcy Rules has been a continuous feature of bankruptcy practice since 1938. See General Order 37 (superseded), reprinted in 4B Collier on Bankruptcy at 1542 (14th ed. 1978).
. "Case” and "proceeding" are not interchangeable terms. Under the former Bankruptcy Act, use of the terms was confusing. For example, filing a petition initiated a bankruptcy "proceeding.” 11 U.S.C. § 1(24) (repealed). The former Bankruptcy Rules provided that a petition initiated a “case.” Bankruptcy Rule 101 (1973). The drafters of the 1978 Bankruptcy Code:
more positively established the distinction between the term 'case' initiated by a Title 11 USC petition under Chapter 3 and the term 'proceeding.' A case is сommenced by the filing of a petition ... The Title 11 case is not an action of the same character as the civil action case under the Federal Rules of Civil Procedure.... All disputes and controversies within a Title 11 case, all other matters which require judicial determination by the Bankruptcy Court, and all matters requiring administrative action during the pendency of the Tide 11 case are properly referred to as ‘proceedings’ within the Tide 11 case.
9 Norton Bankruptcy Law and Practice 2d, Introduction at xxiii-xxiv (1995). See also S.Rep. No. 989, 95th Cong., 2d Sess. 153-54 (1978) (emphasis added):
The term ‘proceeding’ is used instead of ‘matters аnd proceedings,' the terminology currently used in the Bankruptcy Act and Rules. As used in this section 'everything that occurs in a bankruptcy case is a proceeding.' Thus, proceeding here is used in its broadest sense and would encompass what are now called contested matters, adversary proceedings, and plenary actions under the current bankruptcy law. It also includes [any] disputes related to administrative matters in a bankruptcy case. Likewise, the term 'proceeding' includes issues which may arise after a case is closed....
. With an exception not relevant.
. Compounding the curiosity, if an involuntary petition had been filed against this debtor, the existing bankruptcy rules would direct this court to Civil Rule 17 to determine whether this minor was adequately represented to contest the petition; no bankruptcy rule applies Civil Rule 17 to determine capacity with respect to a voluntary petition.
. See
Wieczorek v. Woldt (In re Kjellsen),
. Commentators and some cases have discussed a different reading of Fed.R.Civ.P. 17(b) and (c). See 6A Wright, Miller & Kane, Federal Practice & Procedure § 1571 at 508. Wright & Miller states: "A close reading of the first two sentences of Rule 17(c) discloses that although no reference is made to state law, the language is sufficiently permissive to accommodate the application of state law in situations in which that is called for by Rule 17(b). Thus the mere fact that the representative of an infant or incompetent is permitted to sue or defend in federal court under the first sentence of Rule 17(c) does not necessarily preclude the court imposing the additional requirement that the representative have capacity in the forum state in accordance with Rule 17(b)." Id. at 509.
The Fifth Circuit's holding in Bengtson is true to the plain language of the second sentence of Rule 17(c). When an infant does not have a "duly appointed representative,” a next friend may act for the infant in a federal court without reference to state law.
.
Compare Noe v. True,