PERRY v. COMMERCE LOAN CO.
No. 694
Supreme Court of the United States
Argued January 26, 1966. Decided March 7, 1966.
383 U.S. 392
R. Howard Smith argued the cause and filed a brief for respondent.
Perry, a furnace operator employed by Moore Lead Company, filed a petition in the District Court under Chapter XIII of the Bankruptcy Act, 52 Stat. 930 (1938), as amended,
the provisions of § 14 (c) (5) of the Act.2 On review the District Court upheld the dismissal. The Court of Appeals affirmed. 340 F. 2d 588. We granted certiorari, 382 U. S. 889, in view of a conflict on the point among the courts of appeals.3 We conclude that confirmations of wage-earner plans by way of extensions are not affected by § 14 (c) (5), and, therefore, reverse the judgment below.
Although statutory relief for the financially distressed wage earner had been available to some extent as early as the Bankruptcy Act of 1867, 14 Stat. 517, Congress found in its study prior to the 1938 revision of the bankruptcy laws that there were no effective provisions for the complete repayment of the wage earner‘s debts suited to his problems. H. R. Rep. No. 1409, 75th Cong., 1st Sess., 53 (1937). For example, compositions under § 12 of the 1898 Act, 30 Stat. 549, were available to the wage earner, but the relief afforded was unsatisfactory. Section 12 proceedings, which were primarily adaptable for use by business entities, were disproportionately expensive in view of the small sums ordinarily involved in wage-earner cases; they lacked flexibility;
History demonstrates that extension plans under Chapter XIII are fulfilling the purposes intended. The records of the Administrative Office of the United States Courts show that over the past 20 years more than 20% of all proceedings filed under the Bankruptcy Act by wage earners have been for plans under Chapter XIII, the overwhelming majority of these being for extension plans.4 Since many wage earners who go into bank-
In light of the proven advantages of extension plans, the Congress has re-expressed its legislative purpose in amendments to Chapter XIII adopted since the original enactment. A report to the House of Representatives expresses it in these words:
“[C]hapter XIII provides a highly desirable method for dealing with the financial difficulties of individuals. It creates an equitable and feasible way for the honest and conscientious debtor to pay off his debts rather than having them discharged in bankruptcy. The power of the court to change the amount and maturity of installment payments without affecting the aggregate amount of such pay-
ments makes chapter XIII particularly applicable to the present-day financial problems generated by heavy installment buying.” H. R. Rep. No. 193, 86th Cong., 1st Sess., 2 (1959).
And similarly, the Senate report states:
“We think there can be no doubt . . . that a procedure by which a debtor who is financially involved and unable to meet his debts as they mature, over a period of time, works out of his involvement and pays his debts in full is good for his creditors and good for him.” S. Rep. No. 179, 86th Cong., 1st Sess., 2 (1959).
It is with this underlying policy in mind that we turn to a consideration of the problem posed here, i. e., whether confirmation of an extension plan is barred by a discharge in bankruptcy obtained within the previous six years.
II.
Chapter XIII requires the confirmation of a wage-earner extension plan if “the debtor has not been guilty of any of the acts or failed to perform any of the duties which would be a bar to the discharge of the bankrupt . . . .” § 656 (a) (3). And Chapter III commands that a discharge of a bankrupt shall be granted unless the court is satisfied that the bankrupt has “within six years prior to the date of the filing of the petition in bankruptcy been granted a discharge, or had a composition or an arrangement by way of composition or a wage earner‘s plan by way of composition confirmed under this Act . . . .” § 14 (c) (5). The “discharge” of a debtor under a wage-earner plan shall issue after compliance with the provisions of the confirmed plan, § 660, c. XIII,
We should note at the outset that in his present application for relief Perry did not file a straight, voluntary bankruptcy action in the District Court, nor “a composition or an arrangement by way of composition or a wage earner‘s plan by way of composition.” He proposed to pay all his debts, secured and unsecured, and sought only an extension of time—28 months—in which to pay them in equal installments from his future wages. Ordinarily, a wage earner seeking to obtain the benefits of extension proceedings under Chapter XIII need only file a plan that meets the approval of the majority of his creditors, § 652,
In view of these considerations and the purposes of Chapter XIII as outlined above, we do not believe that the Congress intended to apply the six-year bar of § 14 (c) (5) to the confirmation of wage-earner extension plans. The six-year bar was enacted 35 years prior to the adoption of Chapter XIII, 32 Stat. 797 (1903), at a time when no relief corresponding to extension plans existed under the Bankruptcy Act. The unmistakable purpose of the six-year provision was to prevent the creation of a class of habitual bankrupts—debtors who might repeatedly escape their obligations as frequently as they chose by going through repeated bankruptcy. See H. R. Rep. No. 1698, 57th Cong., 1st Sess., 2 (1902); In re Thompson, 51 F. Supp. 12, 13 (1943). But an extension plan has no escape hatch for debtors, it is “a method by which, without resorting to bankruptcy proceedings in the usual sense, a wage earner may meet the claims of creditors.” S. Rep. No. 179, 86th Cong., 1st Sess., 2 (1959). To apply the six-year bar at the time of ruling on the confirmation of an extension plan would be both illogical and in head-on collision with the congressional purpose as announced in the adoption and design of extension plans under Chapter XIII.6 Even if a literal reading of these provisions suggested the application of § 14 (c) (5) to extension plans, we would have little hesitation in construing the Act to give effect to the clear
“There is, of course, no more persuasive evidence of the purpose of a statute than the words by which the legislature undertook to give expression to its wishes. Often these words are sufficient in and of themselves to determine the purpose of the legislation. In such cases we have followed their plain meaning. When that meaning has led to absurd or futile results, however, this Court has looked beyond the words to the purpose of the act. Frequently, however, even when the plain meaning did not produce absurd results but merely an unreasonable one ‘plainly at variance with the policy of the legislation as a whole’ this Court has followed that purpose, rather than the literal words.”
But such a literal reading is not apparent in this case. Section 656 (a) (3) does not, on its face, state that a court may confirm an extension plan only if the debtor is eligible for a discharge in bankruptcy. Rather, the language of the section speaks, ambiguously, of “guilty” acts and unfulfilled duties. There is, of course, no unfulfilled duty involved in § 14 (c) (5). Moreover, a prior bankruptcy is hardly a “guilty” act within the usual meaning of that word, and its use as a reference to § 14 (c) (5) is strained indeed. In fact, the legislative history of § 14 (c) lends some support to a view that a prior discharge is not a “guilty” act. In 1903, when the forerunners of subdivisions (3) through (6) were originally added to § 14 (c), the House report stated:
“This amendment also provides four additional grounds for refusing a discharge in bankruptcy: (1) Obtaining property on credit on materially false statements; (2) making a fraudulent transfer of
property; (3) having been granted or denied a discharge in bankruptcy within six years, and (4) having refused to obey the lawful orders of the court or having refused to answer material questions approved by the court. No person who has been guilty of any of these fraudulent acts should be discharged, and a person who has refused to obey the order of the court ought not to be discharged, and it is quite clear that no person should have the benefit of the act as a voluntary bankrupt oftener than once in six years.” H. R. Rep. No. 1698, 57th Cong., 1st Sess., 2 (1902). (Italics added.)
This language might be construed to set apart acts which are criminal or reprehensible in nature and to consider a prior bankruptcy to be something other than a “guilty” act. But we need not, and do not, go so far as to place this interpretation on the words “guilty acts.” It suffices that we find in them sufficient ambiguity to impel recourse to the legislative purposes, outlined above, underlying § 14 (c) (5). And while the identical language of § 656 (a) (3) has been a part of the Bankruptcy Act since 1898, as a restriction to confirmation of compositions under what is now § 366 (3), 52 Stat. 911, as amended,
This oversight is, of course, cured by the provisions of § 602, which further buttress our conclusion. That section directs that the provisions of Chapters I through VII, which include § 14 (c) (5), are incorporated into Chapter XIII only “insofar as they are not inconsistent or in conflict with the provisions of this chapter.” The rationale of § 14 (c) (5)—the prevention of recurrent avoidance of debts—is so inconsistent with the aims of extension plans as to fall squarely within the exception of § 602.
It is claimed, however, that § 686 (5) of Chapter XIII,
We emphasize that our construction of the Act does not preclude application of § 14 (c) (5) to confirmations
It has been argued that extension plans do not completely avoid the possibility of adjusting the wage earner‘s debts. It is true that § 660 provides for discharge after compliance with the provisions of a Chapter XIII plan. While this section applies to wage-earner compositions as well as to extensions, a “discharge” thereunder has a wholly different impact where an extension is involved. In the latter case a discharge is little more than a mere formality. It is also claimed that § 661 presents a somewhat more troublesome objection. That section as we have noted may allow a wage earner to obtain a release from all dischargeable debts if, after notice and hearing, the court is satisfied that the failure
For the foregoing reasons, we conclude that petitioner‘s plan should have been confirmed.
Reversed and remanded.
MR. JUSTICE HARLAN, dissenting.
The result reached by the Court may well be desirable, but in my opinion it is one that cannot be attained under
Chapter XIII of the Bankruptcy Act establishes procedures for the relief of wage earners who are unable to meet their debts as they mature. Two types of procedures are made available: extension plans under which the wage earner‘s debts are intended to be paid off in full over a period of time, and composition plans under which only a percentage of debts are recoverable. Referring to both types of plans, § 656 of the Bankruptcy Act,
The process by which the Court has undertaken to release the debtor from the impact of these straightforward statutory provisions seems to me wholly unavailing. The Court‘s major argument is built upon its reading of the word “guilty” in § 656 (a) (3). As already noted that section denies confirmation to an extension plan if the debtor has been “guilty” of any act that would bar a discharge in bankruptcy. The argument is that since receiving a prior discharge is neither unlawful nor morally reprehensible one cannot be “guilty” of it, and hence that the six-year “discharge” provision cannot be a bar to a Chapter XIII extension plan.
This history and this parallelism indubitably demonstrate two things: first, that the Congress did not devise
In short, construing “guilty” to refer only to “reprehensible” aspects of § 14 (c) has no basis in legislative history, and requires a strained attempt to distinguish other applications of the identical section and of parallel sections which concededly are applied more generally. Because of its ramifications, this construction may do serious harm to the administration of Chapter XIII compositions, Chapter XII real property arrangements, and Chapter XI arrangements.
The Court also advances another argument in support of its conclusion that confirmation of this extension plan was not barred by virtue of §§ 656 and 14 (c). This argument rests essentially on § 602 of the Bankruptcy
This argument likewise does not withstand analysis. To be sure the six-year bar makes it impossible for certain wage earners to get relief by way of extension plans, but so do all the other restrictions on this form of relief. Nobody would suggest that it is “inconsistent” with Chapter XIII to withhold extension-plan relief from those who engage in fraud on the ground that such a restriction cuts down the number of people who can take advantage of Chapter XIII. Section 656 clearly does establish restrictions on the class of people to whom relief is available; the question before us is whether the six-year bar is such a limitation; citation of § 602 is conclusory only, and makes no positive contribution to a meaningful analysis.
My conclusion that the statute should be read literally to preclude the confirmation of an extension plan if the applicant has been granted a discharge within the previous six years is reinforced by § 686 (5) of Chapter XIII,
The short of the matter is that the Court‘s arguments do not support the conclusion it reaches. The conclusion is of course supportable as a legislative judgment, even though arguments can be made for both sides. Thus, it might be argued for the six-year bar in a Chapter XIII context somewhat as follows: the wage-earner extension plan is a new and very advantageous procedure for the debtor, but it is a burden on the courts. It is also a constraint on creditors who will be delayed in collecting, will be precluded from garnishing, and may not receive full repayment if the debtor obtains a discharge under § 661 of the Act,
I venture considerations such as these not as overcoming the countervailing ones relied on by the Court, and heretofore espoused by others,2 but simply to point up the fact that this is not one of those cases where seemingly straightforward statutory language must yield its literal meaning to a contrary congressional intent. What we have here are but two contrasting legislative policies, wherein the Court‘s duty is to take the statute as it is presently plainly written.
I would affirm the judgment of the Court of Appeals.