In Re Rossman

70 B.R. 985, 1987 Bankr. LEXIS 354
CourtUnited States Bankruptcy Court, W.D. Michigan
DecidedMarch 17, 1987
Docket19-03812
StatusPublished
Cited by10 cases

This text of 70 B.R. 985 (In Re Rossman) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Rossman, 70 B.R. 985, 1987 Bankr. LEXIS 354 (Mich. 1987).

Opinion

MEMORANDUM ON CHAPTER 12 CONVERSION MOTIONS

DAVID E. NIMS, Jr. and LAWRENCE E. HOWARD, Bankruptcy Judges.

The issue in these cases is whether this court may convert a bankruptcy case pending on November 26, 1986, the effective date of the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986, to a case under the newly enacted Chapter 12 of the Bankruptcy Code.

BACKGROUND

The above-encaptioned family farm cases were filed under either Chapter 7, 11, or 13 of the Bankruptcy Code between February 12, 1986, and November 19, 1986. 1 Thus, all cases were pending on November 26, 1986, the effective date of the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986, Pub.L. No. 99-554,100 Stat. 3088 (hereinafter “the Family Farmer Act”). Recently, each debt- or has moved independently for conversion of its case to Chapter 12 under the Family Farmer Act. The Court has consolidated these motions 2 because they all present a common question of law.

The issue in these cases is whether we may convert a bankruptcy case pending on November 26, 1986, the effective date of the Family Farmer Act, to a case under the recently enacted Chapter 12 of the Bankruptcy Code. 3 The various facts of the cases before us have not been presented nor considered here because they are relevant only if the court finds conversion is permissible. The issue, submitted on briefs only, was considered en banc by both bankruptcy judges for this district in order to provide a definitive ruling for this jurisdiction. 4 Many briefs were filed, including an amicus curae, and we deeply appreciate the insight they provided us. 5

DISCUSSION

Origin of the Issue

The movants claim that in spite of certain prohibitory language in the Family Farmer Act, Congress intended that conversion be granted. While our duty is not to make the law, we must certainly determine the intent of Congress’ laws. To best *987 determine the intent of Congress, we must first analyze the portions of the statute in question.

The organization of the Family Farmer Act is significant and merits a brief presentation here. Title II of the Family Farmer Act is entitled: “Amendments to Title 11 of the United States Code.” Subtitle B of title II is encaptioned: “Debtors Who Are Family Farmers.” Section 255 of subtitle B amends title 11 by inserting Chapter 12. Various other sections of subtitle B amend 11 U.S.C. §§ 706(a), 1112(d), 1307(d), and 1307(e) so as to permit eligible debtors to voluntarily convert from Chapters 7, 11, and 13 to Chapter 12.

Title III of the Family Farmer Act is entitled “Transition and Administrative Provisions.” Section 302 under this title is encaptioned: “Effective Dates; Application of Amendments.” This section is divided into six subsections designated by the letters (a) through (f). We are concerned primarily with subsections (a) and (c). Subsection (a) of § 302 provides:

(a) General Effective Date. — Except as provided in subsections (b), (c), (d), (e), and (f), this Act and the amendments made by this Act shall take effect 30 days after the date of the enactment of this Act.

President Reagan signed the Family Farmer Act into law on October 27, 1986, thereby making most of the amendments effective on November 26, 1986. Subsection (c)(1) of § 302 provides:

(c) Amendments Relating to Family Farmers. — (1) The amendments made by subtitle B of title II shall not apply with respect to cases commenced under title 11 of the United States Code before the effective date of this Act.

Substituting specific references for their respective antecedents, § 302(c)(1) reads as follows:

The amendments [permitting eligible debtors to voluntarily convert from Chapter 7,11, and 13 to Chapter 12] shall not apply with respect to cases commenced under [the Bankruptcy Code] before [November 26, 1986].

Thus, on its face, § 302(c)(1) prohibits the conversion to Chapter 12 of any case filed before implementation of the Family Farmer Act. Apparently, none of the movants is eligible for conversion.

The movants, however, allege that a statutory construction problem arises not by the statute itself, but by language found in the Joint Explanatory Statement of the Committee of Conference, H.R.Conf.Rep. No. 958, 99th Cong., 2d Sess, U.S.Code Cong. & Admin.News 1986, p. 5246 (hereinafter “Explanatory Statement” and “Conference Committee,” respectively). The conflicting commentary in the Explanatory Statement follows the heading “Applicability of Chapter 12 to Pending Chapter 11 and 13 Cases” and reads:

It is not intended that there be routine conversion of Chapter 11 and 13 cases, pending at the time of enactment, to Chapter 12. Instead, it is expected that courts will exercise their sound discretion in each case, in allowing conversions only where it is equitable to do so.
Chief among the factors the court should consider is whether there is a substantial likelihood of successful reorganization under Chapter 12.
Courts should also carefully scrutinize the actions already taken in pending eases in deciding whether, in their equitable discretion, to allow conversion. For example, the court may consider whether the petition was recently filed in another chapter with no further action taken. Such a case may warrant conversion to the new chapter. On the other hand, there may be cases where a reorganization plan has already been filed or confirmed. In cases where the parties have substantially relied on current law, availability to convert to the new chapter should be limited.

Id. The Explanatory Statement does indeed create confusion and merits further discussion.

Legislative History

In the spring of 1986, the U.S. Senate was considering S. 1923, 99th Cong. 2d *988 Sess. (1986), a bill to provide for additional bankruptcy judges. An amendment to create the new Chapter 12 was added to this bill. At that time § (5) of this amendment included the changes to 11 U.S.C. §§ 706, 1112, and 1307

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Bluebook (online)
70 B.R. 985, 1987 Bankr. LEXIS 354, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-rossman-miwb-1987.