Petition for Writ of Certiorari — Stahn v. Haeckel

_—

} Supreme Court, us. |

90-1549 | FIRE

MAR 7 1991

OFFICE OF THE CLERK

CASE NO.

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1991

GORDON R. STAHN,

Petitioner,

V.

RAY HAECKEL,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

Richard Hopewell

423 South Phiilips Avenue

Sioux Falls, South Dakota 57102

[605] 334-0982

Counsel for Petitioner

i

QUESTION PRESENTED

HAVE LOWER COURTS DEPRIVED PETITIONER OF

PROPERTY RIGHTS WITHOUT DUE PROCESS AND

EQUAL PROTECTION OF 11 U.S.C. §1226 BY OR-

DERING PETITIONER TO MAKE CHAPTER 12 DEB-

TOR PLAN PAYMENTS TO TRUSTEE PRIOR TO CON-

FIRMATION OF PETITIONER'S TIMELY FILED

FARM REORGANIZATION PLAN?

ii

TABLE OF CONTENTS

Page

QUESTION PRESENTED i

TABLE OF AUTHORITIES iii

REPORTED LOWER COURT OPINIONS l

JURISDICTION l

CONSTITUTIONAL PROVISIONS

AND STATUTES l

STATEMENT OF CASE 4

ARGUMENT 13

APPENDIXES : <

A. Opinion by U.S. Circuit Court

of Appeals (8th Cir.) 29

B. Judgment by U.S. District Court

of South Dakota 39

C. Order by U.S. District Court of |

South Dakota 40)

D. Transcript of hearing before

U.S. District Court of South ;

Dakota 42

E. Order by U.S. Bankruptcy Court

of South Dakota 45

iii

TABLE OF AUTHORITIES

Pa

In re NWFX, 864 F.2d 593 (8th Cir.

In re Ozark Restaurant Equip. Co.,

B16 F.2d 1222 (8th Cir. 1987)

In re Pirsig Farms, Inc., 46 B.R.

237 (D. enn 1985)

Johnson v. First Nat'l Bank of Mon-

tevideo, 719 F.2d 270, 273 (8th

Cir. 1983)

Mus coat S55, patton Sas

Norwest Bank of Worthington v.

Ahlers, 485 U.S. 19/7 (1989)

Russello v. U.S., 444 U.S. 16 (1983)

U.S. Marshals Serv. v. Means, 7/741

t ir. 1984)

Fifth and Fourteenth Amendments to

U.S. Constitution bs

11 U.S.C. § 105(a) 2, 13, 16-18, 19,

ll U.S.C. § 1208(c) (i)

11 U.S.C. § 1208(c) (3)

11 U.S.C. § 1208(c) (4) Z.

it U.S.C. § t22i

a te... § eee

18

19

17

iv

TABLE OF AUTHORITIES (Cont.)

Joint Explanatory Statement of the

Committee of Conference for the

1986 Act, H.R. Rep. No. 958,

99th Cong., 2d Sess., 48 ( 1986 ) 14-15

REPORTED LOWER COURT OPINIONS

The Judgment and Opinion of the U.S.

Circuit Court of Appeals (Appendix A) at

bar is reported at 920 F.2d 555 (8th Cir.

1990).

JURISDICTION

The Opinion (Appendix A) herein sought

by Petitioner to be reviewed by this Court

was entered by the U.S. Court of Appeals

for the Eighth Circuit on December 7,

1999. The jurisdiction of this Court is

invoked pursuant to 28 U.S.C. § 1254(1).

CONSTITUTIONAL PROVISIONS

AND STATUTES

The herein applicable Fifth and Four-

teenth Amendments to the U.S. Constitution

respectively in part provide:

". . . mor shall any person be. .

deprived of . . . property, without

due process of law .. ."; and

Fe . nor shall any State ... de-

ny to any person .. . equal pro-

tection of the laws."

an

ee

ll U.S.C. § 105(a) provides:

“The Dankruptcy court may issue any

order, process, or judgment that is

necessary or appropriate to carry

out the provisions of this title."

11 U.S.C. § 1208(c) in part provides:

"On request of a party in interest,

and after notice and a hearing, the

court may dismiss a case under this

chapter for cause, including

(4) failure to commence making

timely payments required by a

confirmed plan

Ll U.S.C. § 1226 provides:

(a) Payments and funds received by

the trustee shall be retained by the

trustee until confirmation or denial

of confirmation of a plan. If a

plan is confirmed, the trustee shall

distribute any such payment in accor-

dance with the plan. If a plan is

not confirmed, the trustee shall re-

turn any such payments to the debtor,

after deductings—

(1) any unpaid claim allowed

under section 503(¢b) of this

title; and

(2) if a standing trustee is

serving in the case, the per-

centage fee fixed for such

standing trustee.

(b) Before or at the time of each pay-

ment to creditors under the plan,

there shall be paid--

(1) any unpaid claim of the

kind specified in section

507(a)(1) of this title; and

(2) if a standing trustee ap-

pointed-under section 1202(d)

of this title is serving in

the case, the percentage fee

fixed for such standing trus-

tee under section 1202(e) of

this title.

(c) Except as otherwise provided in

the plan or in the order confirming

the plan, the trustee shall make

payments to creditors uncer the

plan."

11 U.S.C. § 1326 provides:

"(a) (1) Unless the court orders ot-

herwise, the debtor shall commence

making the payments proposed by a

plan within 30 days after the plan

is filed.

(2) A payment made under this sub-

section shall be retained by the

trustee until confirmation or de-

nial of confirmation of a plan. If

a plan is confirmed, the trustee

shall distribute any such payment

in accordance with the plan. If a

plan is not confirmed, the trustee

shall return any such payment to

the debtor, after deducting any un-

paid claim allowed under section

503(b) of this title.

x — ; XT ne , > c DYrT ~h y

er filed (Case No. 88-49335-PKE) for ch:

'.7 le, « le 995 —T T 1 «, ) ] 22 = }

tweive Dankruptcy on July 25, 1988 with

hoe TT Cc R- lew) y 7X, et + For th > S sth _y?

t i= WJ « G2 eo DankKt uptc y UC ure Vs Lille YUU nexrn

Division of South Dakota, hereinafter re

(b)

payment to creditors under the plan,

the

(c)

the

the

men

TY

be oe

. \W

ferred

25,

ment

ttn Le wae .t, r ve Dy, —*% >

to as HDankrupctcy Ourt . rursuant

y . a 9 1 D ~ 2 - }

1 U.S.C. § 1221, Petitioner on Octobe

198

O f

Before or at the time of each

re shall be paid--

(1) any unpaid claim of the

kind specified in section

907(a)(1) of this title; and

(2) if a standing trustee ap-

pointed under section 586(b)

of title 28 is serving in the

case, the percentage fee fixed

for such standing trustee under

section 586(e)(1)(b) of title

28.

Except as otherwise provided in

plan or in the order confirming

plan, the trustee shall make pay

?

ts to creditors under the plan.

STATEMENT OF CASE

. 7 ;? on) + ,oO nF ry 2 °

rsuant to ll U.S.C. § 1201. Petit

bs

8 timely filed h

Respondent, among his other credi

D7 £ ‘Ory OCF

S Fian [or repay-

ee

-_

tors. At all material times herein, the

Bankruptcy Court neither confirmed nor de-

nied Petitioner's Plan at a hearing pursu-

ant to ll U.S.C. § 1225.

The Plan confirmation hearing was origi-

nally scheduled to be held on November 17,

1988, but because Petitioner had previous-

ly filed objections to creditor proofs of

claim and the Bankruptcy Trustee therewith

decided that it would be impossible to de-

termine the feasibility of Petitioner's

Plan until after these objections were ad-

judicated, the Plan confirmation hearing

was continued to January 12, 1989. Prior

to the hearing scheduled for December 21,

1988 to adjudicate Petitioner's objections

to crediter proofs of claim, two credi-

tors, Fairmont National Bank and Todd

Boyd, motioned the Bankruptcy Court to ab-

stain from hearing these objections. The

Bankruptcy Court granted relief from stay

to Todd Boyd and Fairmont National Bank to

wie

proceed to judgment in state court. The

Bankruptcy Court has subsequently approved

a settlement between Petitioner and Todd

Boyd. The case between Fairmont National

Bank and Petitioner to determine if said

bank is entitled to a deficiency judgment

in the amount of its claim remains pending

in the Minnesota state courts due to an ex-

cessively crowded docket and the unavail-

ability of a judge to try this case. Fair-

mont National Bank sought this Minnesota

forum rather than having this case decided

in Bankruptcy Court, which transfer Peti-

tioner resisted in Bankruptcy Court.

On motion by Fairmont National Bank to

continue the January 12, 1989 hearing pre-

viously scheduled for confirmation of Pe-

titioner's Plan so as to allow Fairmont

National Bank to proceed to deficiency

judgment in a Minnesota state court in ad-

vance of the Plan confirmation hearing to

be held by the Bankruptcy Court; the Bank-

~

ruptcy Court continued the plan confirma-

tion hearing to February 15, 1989. To

further accomodate the Fairmont National

Bank's continued effort to litigate for

deficiency judgment against Petitioner in

a “finnesota state court, the Bankruptcy

Court granted Fairmont National Bank's re-

newed motion that the Petitioner's Plan

confirmation hearing not be held on Febru-

ary 15, 1989 as previously scheduled, and

the Bankruptcy Court rescheduled the plan

confirmation hearing to be held on March

15, 1989.

At the plan confirmation hearing on

March 15, 1989, counsel for Fairmont Na-

tional Bank motioned the Bankruptcy Court

to indefinitely continue the Petitioner's

farm reorganization and creditor payment

plan confirmation hearing until said Bank

had an opportunity to exhaust its remedies

in Minnesota state court in its filed and

m

pending action to take deficiency judgment

against Petitioner. From the bench on

March 15, 1989, the Bankruptcy Court

granted this motion in favor of the Fair-

mont National Bank, and ordered that the

plan confirmation hearing be continued in-

definitely until the Fairmont Bank claim

is adjudicated in the Minnesota District

Court.

That there has been no confirmation

hearing on Petitioner's farm reorganiza-

tion and creditor payment plan solely at-

tributes to the Bankruptcy Court's deci-

sion to allow the Fairmont National Bank

to litigate its creditor claim against

Petitioner in yet to be litigated pro-

ceedings in the Minnesota District Court;

where this Bank claim could have other-

wise been adjudicated by the Bankruptcy

Court in a Petitioner-noticed hearing

scheduled for that purpose on December 21,

- 2

'

19388. This December 21, 1988 hearing was

not held as scheduled and noticed by Pe-

titioner because the Bankruptcy Court by

order of December 7, 1988, transferred,

on motion by Fairmont National Bank, said

Bank's creditor claim to the Minnesota

District Court for adjudication.

The failure to date for the Bankruptcy

Court to hold a hearing on Petitioner's

tinely filed farm reorganization and credi-

tor payment plan attributes solely to the

Fairmont National Bank's inability to have

its claim against Petitioner brought on

for trial in the Minnesota District Court

in a timely manner, and has not been the

fault of Petitioner as, however immaterial

herein, has been hereinbefore erroneously

but sucessfully alleged by Respondent to

the District Court and Court of Appeals.

On July 26, 1989, Respondent filed a

meritless, prima facie frivolous and

9.

vexatious on the record herein, motion to

dismiss Petitioner's Chapter 12 case on

the misalleged 11 U.S.C. § 1208(c) grounds

that:

"

the court may dismiss a case

under this chapter for cause includ-

ing—

(1) unreasonable delay, or

gross mismanagement by the

debtor that is prejudicial

to creditors

(3) failure to file a plan

timely under section 1221

Of tmie ti€ie .. .”.

Pursuant to the September 6, 1989 hearing

on the foregoing motion, the Bankruptcy

Court on November 6, 1989 herein made and

entered an order (Appendix E) that Peti-

tioner “commence making payments" to Re-

spondent notwithstanding the above de-

tailed fact that the Court had yet to hold

a confirmation hearing on Petitioner's

creditor payment plan which had been time-

ly filed by Petitioner on October 25, 1988.

ahi.

ee a

Qn December 22, 1989 Petitioner appeal-

ed (Case CIV89-4158) the Bankruptcy

Court's aforesaid November 6, 1989 order,

to the Southern Division of the U.S. Dis-

trict Court of the District of South Dak-

ota, hereinafter referred to as "District

Court". At the March 12, 1990 hearing of

this appeal before the District Court, the

Court from the bench held:

"It is the view of the Court that

the Judgment and Decision of the

Bankruptcy Court should be affirm-

ed. It is the view of the Court

that, notwithstanding the lack of

an expressed provision in Chapter

12 authorizing pre-confirmation pay-

ment by the debtor, there is on the

other hand no provision that pro-

hibits it and it is the Court's view

that under the general provisions of

Chapter 12 the Court has the equit-

able power to do what it did and,

therefore, the decision will be

affirmed." (Appendix D - p.43)

Pursuant to. the foregoing holding, the Dis-

trict Court on March 13, 1990 made and en-

tered a Judgment (Appendix B) affirming

the November 6, 1989 order directing pay-

ments by debtor and dismissing the appeal

pe,

thereof by Petitioner to the District

Court.

On April 10, 1990, Petitioner appealed

(Case No. 90-5195) the March 13, 1990

Judgment of the U.S. District Court to the

United States Court of Appeals for the

Eighth Circuit (hereinafter referred to as

“Court of Appeals"); in which court juris-

diction to hear the case at bar is vested

pursuant to 28 U.S.C. § 158(d).

On December 7, 1990, the Court of Ap-

peals made and entered a decision (Appendix

A) affirming the decision of the Bankruptcy

Court and the District Court by finding and

holding at pages 4-6 thereof as follows:

"According to the debtor, he is con-

testing the bankruptcy court's crea-

tion, by its drafting of the order,

of mandatory pre-confirmation plan

payments. Joint App. at 24. The

language of section 1226(a), although

not requiring pre-confirmation pay-

ments, does not state that a bank-

ruptcy court is powerless to order

such payments. In light of the facts

of this case, in that the parties

wanted to pay the taxes and pre-

confirmation plan payments were a

-1?.

|

—

way to achieve that goal, the bank-

ruptcy court had the power, pursu-

ant to 11 U.S.C. § 105(a) (1989), te

order pre-confirmation plan payments."

© cection 105(a) states that:

The court may issue any order, pro-

cess, or judgment that is necessary

or appropriate to carry out the pro-

visions of this title. No provisions

of this title providing for the

raising of an issue by a party in

interest shall be construed to pre-

clude the court from, sua sponte,

taking any action or making any

determination necessary or appro-

priate to enforce or implement court

orders or rules, or to prevent an

abuse of process."

As Rule 10(c) justification for this Court's

review of the above-quoted opinion of the

Court of Appeals, the Court of- Appeals has

therewith "decided an important question

of federal law which has not been, but

should be, settled by this Court .. .".

This is a case of first impression.

ARGUMENT

BANKRUPTCY COURT ERRED IN ORDERING PE-

TITIONER TO MAKE CHAPTER 12 PAYMENTS TO

nite

TRUSTEE PRIOR TO CONFIRMATION OF PETITION-

ER'S TIMELY FILED FARM REORGANIZATION

PLAN, AND THEREBY DEPRIVED PETITIONER OF

PROPERTY RIGHTS WITHOUT DUE PROCESS AND

EQUAL PROTECTION OF 110U.S.C. § 1226.

H.R. Rep. No. 958, 99th Cong., 2nd

Sess. 48 (1986), The Joint Exploratory

Statement of the Committee of Conference

for the 1986 U.S. Bankruptcy Act, in part

provides:

“OVERVIEW OF THE FAMILY FARM SUB-

TITLE OF THE CONFERENCE REPORT

Under current law, family farm-

ers in need of financial rehabil-

itation may proceed under either

Chapter 11 or Chapter 13 of the

Bankruptcy Code. Most family

farmers have too much debt to

qualify as debtors under Chapter

13 and are thus limited to relief

under Chapter 1l. Unfortunately,

many family farmers have found

Chapter 11 needlessly complicated,

unduly time-consuming, inordina-

tely expensive and, in too many

cases, unworkable.

Accordingly, this subtitle cre-

ates a new chapter of the Code—

Chapter 12—tto be used only by

family farmers. It is designed

to give family farmers facing

bankruptcy a fighting chance to

reorganize their debts and keep

their land. It offers family

-14-

farmers the important protection

from creditors that bankruptcy

provides while, at the same time,

preventing abuse of the system and

ensuring that farm lenders receive

a fair repayment.

This new chapter is closely mod-

eled after existing Chapter 13.

At the same time, however, the new

chapter alters those provisions

that are inappropriate for family

farmers — the requirement that

the plan be filed within 15 days

of the petition; the requirement

that plan payments start within 30

days of the plan confirmation; and

the Low debt limits found in Chap-

ter 13.

Under this new chapter, it will

be easier for a family farmer to

confirm a plan of reorganization."

(Emphasis added.)

Pursuant to its above unequivocably stated

intention in its enactment of ll U.S.C.

§ 1226, where 11 U.S.C. § 1326(a)(1) pro-

vides:

"Tu]nless the court orders otherwise,

the debtor shall commence making the

payments proposed by a plan within 30

days after the pian is filed";

this provision was intentionally deleted

from 11 U.S.C. § 1226 so as to avoid the

result herein erroneously effected by the

lower courts in ordering the Petitioner to

_

make farm reorganization plan payments to

creditors in advance of confirmation or de-

nial of Petitioner's plan which was timely

filed by Petitioner on October 25, 1988.

In writing the Family Farmer Bankruptcy

Act of 1986, Congress eliminated the re-

quirement of § 1326(a) of the Bankruptcy

Code which stated that the debtor shall

make mandatory pre-confirmation plan pay-

ments within 30 days of the filing of the

bankruptcy plan. Congress wanted Chapter

12 to become more in line with Chapter 11,

where payments begin after confirmation,

than with Chapter 13, where payments begin

before confirmation.

The lower courts err in invoking 1]

U.S.C. § 105(a), which in part provides

that the Bankruptcy Court:

may issue any order, pro-

cess or judgment that is necessary

Or appropriate to carry out the

provisions of this title",

to circumvent the ll U.S.C. § 1226 prohi-

bition against pre-confirmation plan

-16-

payments in Chapter 12 cases.

Both the Eighth Circuit Court of Appeals

and the United States Supreme Court have had

occasion to pass on 11 U.S.C. § 105(a). This

Court has stated "that whatever equitable

powers remain in the bankruptcy courts must

and can only be exercised within the con-

fines of the Bankruptcy Code."" Norwest Bank

of Worthington v. Ahlers, 485 U.S. 197, 206

(1988). The Bankruptcy Court is attempting

to use its equitable powers to order pre-

confirmation plan payments when these provi-

sions have been specifically eliminated by

Congress, and therefore the Bankruptcy Court's

November 6, 1989 Order Directing Payments by

Debtor (Appendix E) is not constant with the

Bankruptcy Code.

The Eighth Circuit has stated that the

Bankruptcy Court's “equitable powers may only

be exercised in a manner which is consistent

with the provisions of the Code". Johnson v.

First National Bank of Montevideo, 710 F.2d

ite

270, 273 (8th Cir. 1983). The equitable

powers necessary to carry out particular

code provisions do not include the ability

to award equitable relief pursuant to 11

U.S.C. § 105 (a) where such relief is not

available under any other section of the

Bankruptcy Code. In re Ozark Restaurant

Equipment Co., Inc., 816 F.2d 1222 (8th Cir.

1987). Similarly, 11 U.S.C. § 105(a) does

not authorize the Court to create new sub-

Stantive rights. In re NWFX, 846 F.2d 593,

595 (8th Cir. 1989).

The thrust of the Eighth Circuit's an-

alysis is that the Bankruptcy Court cannot

enter orders under ll U.S.C. § 105(¢a)

which are not consistent with or are not

authorized by the Bankruptcy Code. In this

case, the Bankruptcy Court has ordered pre-

confirmation plan payments which are not

authorized by the Bankruptcy Code. The

Court has recreated a provision (ll U.S.C.

§ 1326) of the Bankruptey Code which Congress

-18-

has specifically eliminated in 11 U.S.C.

§ 1226, with stated legislative intent to

this end. A Minnesota Federal District

Court has stated that 11 U.S.C. § 105(a)

does not give Bankruptcy Court the auth-

ority to contravene specific provisions

of the Bankruptcy Code. In re Pirsig Farms,

Inc., 46 B.R. 237 (D. Minn. 1985). The

Petitioner submits that by using 11 U.S.C.

§ 105(a) to reinsert required pre-confirma-

tion plan payments, the Bankruptcy Court

has contravened the specific elimination

of this requirement by Congress in writing

the Farmily Farmer Bankruptcy Act of 1986.

The District Court concluded:

= . notwithstanding the lack of

an expressed provision in Chapter 12

authorizing pre-confirmation pay-

ment by the debtor, there is on the

other hand no provision that pro-

hibits it . . ." (Appendix D, p. 43),

and that it was therefore in the Bankruptcy

Court's equitable power to order such a pay-

ment. This holding is clearly erroneous.

=19-

The Bankruptcy Court's Order required

payment of what amounts to plan payments.

This Chapter 12 Order, in error, incorpor-

ates 11 U.S.C. § 1326(a)(1) procedure to

require payments which are ordered pending

confirmation of the plan unter Chapter 13.

Congress specifically eliminated the re-

quirement of pre-confirmation payments.

The truncated portion of § 1226 merely re-

peats what § 1326 stated about what a trus-

tee was to do with funds received pending

confirmation of the plan. However, the

requirement of 'pre-confirmation payment was

eliminated in 11 U.S.C. § 1226. This Bank-

ruptcy Court Order seeks to reimpose that

provision which was specifically elimin-

ated by Congress.

The United States Supreme Court has

spcken out on this matter. It has stated

that ‘'[W]here Congress includes partic-

ular language in one section of a statute

but omits it in another section of the same

Act, it is generally presumed that Congress

-20-

acts intentionally in the disparate in-

”. ‘Ruaselis wv. U.S...

clusion or exclusion'

464 U.S. 16, 23 (1983).

Congress eliminated the mandatory lan-

guage of § 1326(a) when it enacted § 1226.

It specifically mentioned the exclusion in

the legislative history. The lower courts,

however, would have-us infer that since

Congress has not prohibited pre-confirmation

plan payments that they are permitted. This

lozic is contrary to the general rules of

statutory construction.

The Court of Appeals has stated that

"[g]lenerally speaking, a legislative affirm-

ative description implies denial of the non-

described powers". U.S. Marshals Serv. v.

Means, 741 F.2d 1053, 1056 (8th Cir. 1984).

Congress acted affirmatively in eliminating

mandatory pre-confirmation plan payments

from Chapter 12. This elimination implies

a denial of non-described power, i.e. the

power of the Court to order pre-confirmation

-

plan payments.

Chapter 13 plan payments under 11 U.S.C.

§ 1326(a) start 30 days after the plan is

filed. This provision was eliminated by

Congress in creating Chapter 12. ° The ob-

vious inference is that Congress intended

to eliminate pre-confirmation plan pay-

ments. This interpretation is supported

by a case from the Court of Appeals for the

District of Columbia. That Court stated

that when "words of a later statute differ

from those of a previous one on the same

or related subject, the Congress must have

intended them to have a different meaning".

Muscogee (Creek) Nation v. Hodel, 851 F.2d

1439, 1444 (C.A. D.C. 1988).

Respondent and the lower courts have

focused on the equitable authority of the

Bankruptcy Court to enter the November 6,

1989 Order Directing Payments by Debtor

(Appendix E), given the facts of this case.

Even if the Petitioner conceded, which he

«29.

does not, that the facts of this case war-

ranted such an Order, the Petitioner con-

tends that the Bankruptcy Court had no

authority to enter such an order. No

statutory or case authority to enter sch

an order has been cited by the Respondent

or by the lower courts. The lower courts

relied on the absence of prohibition of

such an order. This reliance is insuf-

ficient and clearly erroneous.

The rules of statutory construction as

applied to § 1226 clearly state that in

eliminatins the mandatory pre-confirmation

plan payments, Congress acted intentional-

ly and purposefully to exclude these pay-

ments. This legislative action in elim-

inating mandatory pre-confirmation plan

payments implies a denial of the power to

impose mandatory pre-confirmation plan

payments. The words of § 1226 differ from

§ 1326 on the same sub‘ect, i.e. payments

to trustee, and Congress must have intended

<shs

that § 1226 mean something different from

§ 1326. A vital portion of § 1326 was e-

liminated. This was the requirement that

the debtor make pre-confirmation plan pay-

ments. Congress specifically mentioned

this elimination in its reports of the

1986 bill.

The Bankruptcy Court has attempted to

revive this portion of § 1326 by requiring

pre-confirmation plan payments by the Fe-

titioner. This Order specifically vio-

lates the Congressional intent to elimin-

ate pre-confirmation plan payments when it

enacted § 1226 of the Bankruptcy Code.

Where subsection (4) of 11 U.S.C. § 1208

(c) expressly provides that:

"Failure to commence making timely

payments required by a confirmed

plan",

is a ground for the Bankruptcy Court to

dismiss a case under this chapter for

cause", there is no provision in ll U.S.C.

§ 1208(c) that the failure of a Chapter

-2%4 -

12 debtor to make payments in advance of

confirmation of his plan constitutes a

ground for dismissal of a Chapter 12 case.

This lack of express provision that non-

payment of a debt in advance of plan con-

firmation constitutes a ground for Chapter

12 case dismissal is, by conclusive impli-

cation, further evidence of legislative

intent not to require Chapter 12 debtor

payments to creditors in advance of plan

confirmation.

CONCLUSION

The Bankruptcy Code contains no pro-

visions allowing the Bankruptcy Court to

require pre-confirmation plan payments to

the Chapter 12 trustee by the Petitioner.

The Bankruptcy Court erred in entering

such an order. It had no authority to do

so under § 1226(a) of the Bankruptcy Code.

By ordering the payments pursuant to 11

x

U.S.C. § 105(a), it overstepped its

equitable authority by creating new sub-

stantive rights not within the confines

of the Bankruptcy Code and by acting in

direct contravention of the above quoted,

at page 15, intention by Congress that the

Chapter 13 requirement of payments in ad-

vance of plan confirmation not be required

of Chapter 12 debtors such as Petitioner.

The Bankruptcy Court's Order Directing

Petitioner to make pre-confirmation plan

payments to the Chapter 12 trustee is con-

trary to law and represents an abuse of

discretion.

WHEREFORE, Petitioner prays that this

Court grant this Petition for Writ of

Certiorari to the United States Court of

Appeals for the Eighth Circuit.

-26-

Respectfully submitted this 6th day of

March, 1991.

Richard Hopewell

423 South Phillips Avenue

Sioux Falls, South Dakota 57102

[605] 334-0982

Counsel for Petitioner

APPENDIXES

[APPENDIX A]

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 90-5195

Gordon R. Stahn,

Appeal from the Uni-

ted States District

Court for the Dis-

trict of South Dako-

ta.

Appellant,

Vv.

Ray Haeckel,

+ tt % %

Appellee.

Submitted: September 12, 1990

Filed: December 7, 1990

Before LAY, Chief Judge, HEANEY, Senior

Circuit Judge, and ARNOLD, ircuit Judge.

LAY, Chief Judge.

Gordon Stahn filed for chapter twelve

bankruptcy in South Dakota on July 25,

i988.)

Under 11 U.S.C. § 1224 (1989), a

confirmation hearing on the plan must be

held within forty-five days after the

filing. There had been no confirmation

lin the preceding six years Stahn had

filed for bankruptcy five times in differ-

ent states, all of which were dismissed.

«20~

hearing in this bankruptcy proceeding be-

cause the bankruptcy court granted another

creditor relief from the stay to allow the

creditor to determine a deficiency action

in a Minnesota district court. Ray

Haeckel, a creditor, moved to dismiss the

present proceeding on July 26, 1989, pur-

suant to 11 U.S.C. § 1208 (1989). After

hearing on the motion, the bankruptcy

judge ordered Stahn to make payments to

the trustee until the case was confirmed

or dismissed. Stahn appealed and the dis-

trict court affirmed the order of the

section 1208(c) provides that:

On request of a party in interest,

and after notice anda_ hearing,

the court may dismiss a case under

this chapter for cause, including—

(1) unreasonable delay or

gross mismanagement, by the

debtor that is prejudicial

to creditors;

(3) failure to file a plan

timely under section 1221

of this title

11 U.S.C. § 1208(c)(1), (3) (1989).

-30-

bankruptcy court,

Stahn now argues that the bankruptcy

court erred in ordering him to make pay-

ments to the trustee prior to confirmation

of the plan. See 11 U.S.C. § 1226(a)

(1939). Stahn argues that there is no

express provision authorizing the court to

order payments prior to plan confirmation.

He notes that under chapter thirteen it is

expressly provided that "[u]nless the

court orders otherwise, the debtor shall

commence making the payments proposed by a

plan withing 30 days after the plan is

fiied.” il U.S.C. § 1326(a)(1) (1989).

Stahn argues, however, that Congress chose

to exclude the pre-confirmation payment

requirement of section 1326(a)(1) in sec-

tion 1226{a) and that requiring such pay-

ments has not been authorized by Congress.

The trustee argues that section 1226(a)

provides implied approval for such pay-

«ttn

ments. Section 1226(a) states that:

[p]ayments and funds received by

the trustee shall be retained by

the trustee until confirmation or

denial of confirmation of a plan.

If a plan is confirmed, the trustee

shall distribute any such payment

in accordance with the plan. If a

plan is not confirmed, the trustee

shall return any such payments to

the debtor

11 U.S.C. § 1226(a) (1989).

The Supreme Court has stated that when

"'"Congress includes particular language in

one section of a statute but omits it in

another section of the same Act, it is

generally presumed that Congress acts in-

tentionally and purposeiy in the disparate

inclusion or exclusion.‘ Russello v.

United States, 464 U.S. 16, 23 (1983)

(quoting United States v. Wong Kim Bo, 472

F.2d 720, 722 (Sth Cir. 1972)).2 We find

3The Court sets forth a principle of

statutory construction to be that: ‘“Lang-

uage in one statute usually sheds little

light upon the meaning of different langu-

age in another statute, even when the two

are enacted at or about the same time."

Russello, 464 U.S. at 25.

«32-

little legislative history on this section

and no judicial precedent. Congress did

State that chapter twelve was "designed to

give family farmers facing bankruptcy a

fighting chance to reorganize their debts

and keep their land." 132 Cong. Rec. 28,

144 (1986) (overview of the family farm

subtitle of the conference report). Con-

gress also observed that chapter twelve

was modeled after chapter thirteen. Id.

However, Congress stated that "the new

chapter [twelve] alters those provisions

that are inappropriate for family farmers-

-the requirement that the plan be filed

within 15 days of the petitions; the re-

quirement that plan payments start within

4

30 days of the plan confirmation." Id.

Congress added subsection (a) to section

+ We believe that Congress intended to

State that, under chapter 13, plan _ pay-

ments must start within 30 days of filing,

rather than confirmation, because there is

no requirement that plan payments start

within 30 days of plan confirmation. See

11 U.S.C. § 1326(a)(1) (1989). ce

a Gta

1326, requiring plan payments to. begin

within thirty days after the filing of the

plan, because of the variation among the

bankruptcy courts as to when payments were

to begin, the long delay in distribution

to creditors, and the better plan success

rate when payments began promptly. 5 Col-

Lier on Bankruptcy % 1326.01 (15th ed.

1990).

It is true Congress did not preclude a

court from ordering pre-confirmation pay-

ments under the language of section

1226(a). In addition, as the trustee ar-

gues, the language implies’ that pre-

confirmation payments may be received be-

cause the section prescribes what trustees

are to do with any pre-confirmation pay-

ments they receive. In the event a plan

is not confirmed the trustee is required

to return any pre-confirmation payments to

the debtor. 11 U.S.C. § 1226(a)(1), (2)

(1989).

otha

Stahn asserts that an added detriment

to the court-ordered payment is that the

trustee may deduct any unpaid administra-

tive claim allowed under 1l U.S.C. §

503(b) (1989), and the percentage fee for

a standing trustee. -11U.S.C. § 1225(a)

(1), (2) (1989). Chapter twelve is unique

in that a standing trustee may deduct a

fee. 5 Collier, supra §¥ 1226.01 at 1226-2

n.4. On the other hand, a chapter thir-

teen standing trustee may not deduct a

percentage fee if a plan is not confirmed.

Id. Thus, a debtor ina chapter twelve

proceeding may be subjected to involuntar-

ily paying trustee fees and a commission

if a bankruptcy judge orders preconfirma-

tion payments. See 5 Collier, supra,

1226.01, at 1226-2. <A long delay in con-

firming the plan, such as in this case,

could be punitive to the debtor.

The bankruptcy court's order directed

«35

the trustee to use a portion of the funds

to pay the accrued and accruing real prop-

erty taxes. Joint App. at 1l. The debtor

did not contest that portion of the order

in the district court. Apparently, it was

the debtor's suggestion to pay the taxes.

at the hearing before the district

court, the court inquired whether payment

of the property taxes was a disputed point

in the case. The attorneys responded by

stating that: .

MR. HAYES [creditor's attorney]: My

recollection at the time of the hear-

ing was the fact that the payment of

the property taxes was agreed to at

the request of the debtor. .. .[E]s-

sentially, the parties agreed that it

was in the best interest of everyone

that the property taxes be paid and,

as I say, my recollection is ...

that the debtor's [sic] requested

that be done.

MR. SCHMIDT [ debtor's attorney]:

The problem that comes up in these

cases is that, when you've got pre-

confirmation or pre-petition taxes

a lot of districts won't take them

or they won't take post-petition

taxes until you have paid the pre-

petition taxes and _ so you have

these huge amounts of taxes building

up and the taxing authority's think-

i.

According to the debtor, he is contesting

the bankruptcy court's creation, by its

drafting of the order, cf mandatory pre-

confirmation payments. Joint App. at 24.

The language of section 1226(a), although

not requiring pre-confirmation payments,

does not state that a bankruptcy court is

powerless to order such payments. In

light of the facts of this cse, in that

the parties wanted to pay the taxes. and

pre-confirmation plan payments were a way

to achieve that goal, the bankruptcy court

had the power, pursuant to 11 U.S.C. §

ing they can go ahead and sell prop-

erty, even though they can't. And I

guess, that was at our request.

THE COURT: So you aren't appealing

that portion of the order requiring

the payment of taxes?

MR. SCHMIDT: No. No, we're not

appealing that. We would like to

pay the taxes.

Joint Appendix at 24-25.

mee

105(a) (1989), to order pre-confirmation

plan payments .°

Although there is no express provision

authorizing pre-confirmation payments

there is also no _ provision prohibiting

them. Because the language of the statute

also contains procedures to deal with any

pre-confirmation payments made, we hold

that the bankruptcy court may in its'dis-

cretion require a debtor. to make payments

prior to plan confirmation. Therefore, we

affirm.

Section 105(a) states that:

The court may issue any order, pro-

cess, or judgment that is necessary

or appropriate to carry out’ the pro-

visions of this title. No provision

of this title providing for the rais-

ing of an issue by a party in inter-

est shall be construed to preclude

the court from, sua sponte, taking

any action or making any determina-

tion necessary or appropriate to en-

force or implement court orders or

rules, or to prevent an abuse of

process.

11 U.S.C. § 105(a) (1989).

-38-

[APPENDIX B]

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA

SOUTHERN DIVISION

k * * * * %* « * * *

In re: * CIV89-4158

GORDON R. STAHN, *

Debtor. *

k* * *«* * * ** * * ** * *

GORDON R. STAHN, *

Appellant, *

ial : JUDGMENT

RAY HAECKEL, “i

Appellee. .

a

* * * * * * * *« * *

The above-entitled matter having come

on before the Court on briefs and oral ar-

guments and the Court having entered its

Order, it is hereby

ORDERED, ADJUDGED AND DECREED that the

Judgment of the Bankruptcy Court herein,

dated November 6, 1985, be and hereby is

affirmed and that this appeal is hereby

dismissed.

Dated this 13th day of March, 1990.

/s/ William F. Clayton

Clerk, U.S. District

maeeqn

[APPENDIX C]

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA

SOUTHERN DIVISION

x * *k o* + * o* a te a

In re: * CIV 89-4158

GORDON R. STAHN, *

Debtor. *

* * * * * * * * * * *

GORDON R. STAHN, *

Appellant, *

-Ve- , ORDER DISMISSING

BANKRUPTCY APPEAL

RAY HAECKEL, *

Appellee. *

x*-* + * + * & 2 S22 0e es

Gordon R. Stahn, having appealed the

Judgment of the Bankruptcy Court dated

November 6, 1989, and

The parties having submitted briefs,

and the matter having come on regularly

for oral argument on March 12, 1990, with

the appellant appearing by Wesley D.

Schmidt, the appellee Ray Haeckel appear-

ing by Robert E. Hayes, and

After oral argument and upon the record

herein, the Court having determined that

«hifi.

the judgment of the Bankruptcy Court

should be affirmed and the appeal should

be dismissed.

Now, therefore,

IT IS ORDERED AND ADJUDGED:

(1) That the judgment of the Bankrupt-

cy Court herein, dated November 6, 1989,

be and hereby is affirmed.

(2) That this appeal is hereby dismis-

sed.

Dated this 13th day of March, 1990.

BY THE COURT:

/s/ John B. Jones

United States District

Judge

ATTEST:

WILLIAM F. CLAYTON, CLERK

BY: /s/ Jackie Meisenheimer

Deputy

(SEAL)

ee

[APPENDIX D]

UNITED STATES DISTRICT COURT

DISTRICT OF SOUTH DAKOTA

SOUTHERN DIVISION

* * * * * * * x * *

Gordon R. Stahn, Docket No.

CIV89-4158

Appellant,

Sioux Falls,

-vs- South Dakota

March 12, 1990

Ray Haeckel, 10:20 o'clock a.m.

Appellee.

ee ee a 2

* * * * * * * * * *

[PARTIAL] TRANSCRIPT ON HEARING

ON MOTION BEFORE

THE HONORABLE JOHN B. JONES

: * = * ® * OO *k * * *

[page 9]

THE COURT: . . . The issue then before

the Court on this bankruptcy appeal is

whether or not the Bankruptcy Court had

the power to order that the debtor make

payments to the Trustee to be held by the

Trustee until confirmation or dismissal of

the case and it is clear that the sections

of Chapter 12 do not contain any provisions

ot

for mandatory payments by the debtor prior

to the confirmation of a Plan in Chapter

12, [page 10] unlike Chapter 13.

On the other hand, Section 1226 does

make the provision for the Trustee receiv-

ing funds prior to the confirmation or de-

nail of the Plan and the section provides,

if the Plan is confirmed, the Trustee will

distribute in accordance with the Plan

and, if it is not confirmed, the Trustee

will return the payments to the debtor.

The standard of review in this case as

to legal issues is de novo and as to fac-

tual issues is clearly erroneous. In this

case we have a debtor who has filed a nunm-

ber of bankruptcy petitions, all of which

had been dismissed, except for this one

and it appeared, therefore, that there was

a pattern of delay by the debtor, rather

than an effort to resolve the debtor's

financial problems.

Under these factual circumstances and

~

under the factual circumstance that this

bankruptcy had been filed in 1988, in the

spring of ‘88 and that this hearing was

neld in July of '89, that there had been

obviously, no particular diligence on the

part of the debtor in submitting a Plan

for confirmation.

It is the view of the Court that the

Judgment and Decision of the Bankruptcy

Court should be affirmed. It is the view

of the Court that, notwithstanding the

lack of an expressed provision in Chapter

12 [page ll] authorizing pre-confirmation

payment by the debtor, there is. on the

other hand no provision that prohibits it

and it is the Court's view that under he

general provisions of Chapter 12 the Court

has the equitable power to do what it did,

and, therefore, the decision will be af-

firmed.

ee

[APPENDIX E]

UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF SOUTH DAKOTA

SOUTHERN DIVISION

* * * * * * * &* * * #

*

In re: ad Case No.

* 88-49335-PKE

GORDON R. STAHN, * Chapter 12

*

*

ORDER DIRECTING

PAYMENTS BY DEBTOR

* * * * *

Debtor.

* * * * *

* %

In accordance with this Court's prior

Order of September 14, 1989, and the Court

having been advised by the representative

of the Chapter 12 Trustee of the status of

performance of that Order, and having

heard the argument of the Debtor through

his counsel, andthe argument of counsel

for Raymond Haeckel, and good cause there-

by appearing,

IT IS HEREBY ORDERED that the Debtor

shall forthwith commence making payments

as outlined in correspondence of Wesley D.

Schmidt directed to parties and creditors

herein under date of October 6, 1989,

-45-

pending further proceedings in this case;

and

IT IS FURTHER ORDERED that said funds

shall be received by the Chapter 12 Trus-

tee, placed by him at interest, and re-

tained until confirmation or dismissal of

this case; and

IT IS FURTHER ORDERED that from said

funds, representing the net disposable in-

come of the Debtor herein, the Chapter 12

Trustee shall make payment of accrued and

accruing real property taxes at such time

as he is able.

Dated November 06, 1989.

BY THE COURT:

/s/ Peder K. Ecker

Peder K. Ecker

Judge, U.S. Bankruptcy

Court

ATTEST:

Patricia Merritt, Clerk

By /s/ Christine J. Jackson

Deputy Clerk

(SEAL)

atin