Pension Benefit Guaranty Corp. v. White Motor Corp.

731 F.2d 372
CourtCourt of Appeals for the Sixth Circuit
DecidedApril 12, 1984
DocketNos. 83-3200, 83-3386
StatusPublished
Cited by2 cases

This text of 731 F.2d 372 (Pension Benefit Guaranty Corp. v. White Motor Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Pension Benefit Guaranty Corp. v. White Motor Corp., 731 F.2d 372 (6th Cir. 1984).

Opinion

BOYCE F. MARTIN, Jr., Circuit Judge.

The Pension Benefit Guaranty Corporation appeals the district court’s determination that it lacks capacity to maintain a proof of claim against the bankrupt White Motor Corporation for unfunded benefits owed to White Motor employees.

White Motor Corporation is a manufacturer of car and truck equipment. Two of its major plants are located in Cleveland, Ohio and Exton, Pennsylvania. Employees at each plant are covered by pension plan programs provided by the company. Beginning in 1967, White Motor entered into separate letter agreements with the United Auto Workers guaranteeing that vested pension benefits for workers with at least ten years seniority would be paid in full in the event of plan termination. The letters provided the company with a choice of three different methods for meeting its guarantee obligations: (1) it could deposit necessary monies into the pension fund; (2) it could purchase annuities; or (3) it could pay benefits directly to employees as they came due.

On September 4, 1980, White Motor filed a petition for reorganization under Chapter 11 of the Bankruptcy Code. Thereafter, the pension plans at issue were terminated and the Pension Benefit Guaranty Corporation, a wholly owned, government entity, was appointed successor trustee for the pension funds. On May 28, 1982, Pension Benefit filed a proof of claim against White Motor for approximately $50.6 million, or the amount owed by White Motor to its employees under the guarantee letters. White Motor, the Creditors’ Committee, and the UAW all filed motions in opposition. On November 7,1982, the UAW filed [374]*374its own claim against White Motor for four million dollars, or the amount of pension benefits owed by White Motor not also guaranteed by Pension Benefit pursuant to 29 U.S.C. § 1322.

On January 28, 1983, the bankruptcy court found that Pension Benefit lacked capacity as trustee for the pension funds to bring this claim. According to the court, Pension Benefit did not have power as a third-party beneficiary to enforce the guarantee letters, both because it was an unintended beneficiary of the agreements (the employees were the intended beneficiaries) and because White Motor could fulfill its obligations under the guarantee letter in three different ways, only one of which would inure to Pension Benefit’s advantage (deposit of monies in the pension funds). The district court affirmed the bankruptcy court’s decision, but without benefit of briefs, argument, and possibly the record. On appeal, we reverse.

We need not decide the difficult issue of whether the Pension Benefit Guaranty Corporation has capacity as a third-party beneficiary to enforce the guarantee letters because we find that Pension Benefit can sue as a co-debtor to White Motor. Interim Bankruptcy Rule 3002 states: “If a creditor has not filed his proof of claim ..., a person who is or may be liable with the debtor to that creditor, or who has secured that creditor, may ... execute and file a proof of claim pursuant to this rule in the name of the creditor.” 1 The purpose of this provision is to protect a co-debtor or surety from creditors who wait until bankruptcy proceedings are finished to recover from the solvent debtor, leaving that debt- or with no recourse against his co-debtor who has been discharged from all obligations by the completed bankruptcy proceedings. See Collier on Bankruptcy 11 502.05 at 502-76 (15th ed. 1981). In our case, Pension Benefit is a co-debtor with White Motor for $46 million in unfunded pension benefits. It does not matter, contrary to White Motor’s assertions, that the source of Pension Benefit’s liability for the pension benefits, 29 U.S.C. § 1322, is different from the source of White Motor’s liability, the guarantee letters. The fact remains that each party is liable to the same White Motor pensioners for the same $46 million worth of pension benefits to be paid out in the same fashion. Hence, they are co-debtors.2 Moreover, Pension Benefit’s liability on the pension debt is clearly secondary to White Motor’s. Pension Benefit is simply the guarantor of White Motor’s obligations. See In re Alan Wood Steel Co., 4 Bankr. Ct.Dec. 921, 922 (Bankr.E.D.Pa.1978). Pension Benefit must pay if and only if White Motor does not.

White Motor could have avoided co-debt- or status with Pension Benefit by limiting its liability to funds already contributed at the time of plan termination. See Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 384-85, 100 S.Ct. 1723, 1737-38, 64 L.Ed.2d 354 (1980); Murphy v. Heppenstall Co., 635 F.2d 233, 239 (3d Cir.1980), cert. denied, 454 U.S. 1142, 102 S.Ct. 999, 71 L.Ed.2d- 293 (1981). In that [375]*375event, Pension Benefit would have become directly responsible for payment of the benefits pursuant to 29 U.S.C. § 1322. Pension Benefit would then be authorized by statute to recover its expenditures from White Motor, but that recovery would be limited to thirty percent of White Motor’s net worth. See 29 U.S.C. § 1362(b). Because White Motor’s current net worth is zero, there would have been no recovery. But that is not what happened in this case. White Motor committed itself to making good on all pension benefits earned by its employees with more than ten years seniority, and that commitment must bé kept.3

White Motor argues that Pension Benefit cannot raise the issue of co-debtor standing on appeal because it did not argue the issue below. The general rule is that appellate courts will not give consideration to issues not raised below. See, e.g., Bannert v. American Can Co., 525 F.2d 104, 111 (6th Cir.1975), cert. denied, 426 U.S. 942, 96 S.Ct. 2662, 49 L.Ed.2d 394 (1976). There is an exception to the rule when a pure question of law is involved and a refusal to consider the issue would result in a miscarriage of justice. Aluminum Co. of America v. Sperry Products, Inc., 285 F.2d 911, 915 (6th Cir.1960), cert. denied, 368 U.S. 890, 82 S.Ct. 142, 7 L.Ed.2d 87 (1961). However, we need not decide whether refusal to consider Pension Benefits’ co-debtor argument would result in manifest injustice because we find that Pension Benefit was denied an adequate opportunity to make its argument below. The district court affirmed the bankruptcy judge’s decision in this case on the same day it was issued. He reaffirmed that initial decision three weeks later, still without benefit of briefs or oral arguments from the parties. This is an abuse of the certification process for bankruptcy cases and provides a basis for remanding this case to the district court for appropriate proceedings.

Section (e)(1) of the Emergency Interim Bankruptcy Rule, approved by this court in White Motor Corp. v. Citibank, N.A.,

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