DeHart v. John (In re John), 5:08–bk–52505–JJT.

479 B.R. 643

In re Michael L. JOHN, Kathy M. John, Debtors.Charles J. DeHart, III, Standing Chapter 13 Trustee, Movant

v.Michael L. John, Kathy M. John, Respondents.

No. 5:08–bk–52505–JJT.

United States Bankruptcy Court, M.D. Pennsylvania.

June 4, 2012.

Michael P. Gregorowicz, Kreisher and Gregorowicz, Bloomsburg, PA, for Debtor.

Charles J. DeHart, III, Hummelstown, PA, Trustee.

OPINION¹

JOHN J. THOMAS, Bankruptcy Judge.

Overshadowing what otherwise is a successful completion of a Chapter 13 Plan leading to a Final Report filed by the Chapter 13 Trustee is an open Trustee's Motion to Dismiss filed several years ago based on Debtors' failure to comply with the credit counseling requirements of 11 U.S.C. § 109(h). The Debtors and Chapter 13 Trustee have framed the issue as to how to compute the relevant time period provided in 11 U.S.C. § 109(h)(1).

Briefly, the facts are as follows. The Debtors filed their voluntary Chapter 13 Petition on September 8, 2008. On the filing date, both individual Debtors filed a Certificate of Counseling indicating they were provided counseling pursuant to the provisions of 11 U.S.C. § 109(h) on March 11, 2008. Simply stated, the Trustee argues that the credit counseling fell outside of the 180–day period ending on the date of the filing of the petition and, therefore, was untimely under the provisions of 11 U.S.C. § 109(h)(1). The Debtors counter-arguing that the credit counseling requirements were met under that Code section because of the application of Federal Rule of Bankruptcy Procedure 9006(a). By applying Federal Rule of Bankruptcy Procedure 9006(a), the credit counseling was timely because the last day of this operable period fell on a weekend, thus extending the time to the next business day ending on September 8, 2008. The fundamental difference in the approach taken by the parties to this issue is whether the applicable time is computed from the date of the filing of the Petition backwards or whether the time is computed forward from the date of the receipt of the credit counseling.

The Trustee argues that the 180–day period begins on the date of the filing of the Petition, September 8, 2008. Counting backwards to the date credit counseling was received on March 11, 2008, is more than 180 days from the filing date and, therefore, the credit counseling is untimely under the statutory framework. On the other hand, the Debtor asserts that the date of focus should be the date of the receipt of the credit counseling and then counting forward 180 days when determining whether the statutory period under Section 109(h)(1) has been satisfied.

11 U.S.C. § 109(h)(1) provides as follows:

(h)(1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section other than paragraph (4) of this subsection, an individual may not be a debtor under this title unless such individual has, during the 180–day period ending on the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.

Section 109(h)(1) does not read the way it did in 2008, when the Debtors filed their Chapter 13 Petition. At the time that the Debtors filed their Chapter 13 Petition, Section 109(h) read as follows:

(h)(1) Subject to paragraphs (2) and (3), and notwithstanding any other provision of this section, an individual may not be a debtor under this title unless such individual has, during the 180–day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111(a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis. (Emphasis ours.)

The Bankruptcy Technical Corrections Act of 2010, Pub. L. No. 111–327 (2010), amended the wording by taking out the word “preceding” and changing it to “ending on.” The Technical Amendment clarified that the credit counseling briefing may occur on the same date that the bankruptcy petition is filed. 2 Collier on Bankruptcy ¶ 109.9[1] at 109–54 n.5 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.), accord; In re Fiorillo, 455 B.R. 297, 301–302 n. 4 (D.Mass.2011).

Neither party has briefed whether the instant issue is resolved by application of the current reading of Section 109(h)(1) or its predecessor. While the Court has previously addressed the retroactive or prospective application of the enactment of a statute on a parties' rights after the filing of the petition, (see Harvey v. Lewandowski (In re Lewandowski), 325 B.R. 700 (Bkrtcy.M.D.Pa.2005)), it has not addressed the effect of a “correction” to an Amendment of the Bankruptcy Code on a case filed prior to the “correction.” The Bankruptcy Technical Corrections Act contains neither an effective date nor does it instruct as to its application. Absent a manifest injustice or an apparent intent to the contrary, courts will generally apply the law as it exists when a decision is made. Bradley v. School Bd. of City of Richmond, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974). As mentioned above, I addressed a like matter earlier in our case of Harvey v. Lewandowski (In re Lewandowski), wherein I wrote the following:

The Supreme Court addressed this issue in Landgraf v. USI Film Prod. with respect to a provision in Title VII of the Civil Rights Act of 1964. See511 U.S. 244, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994). In Landgraf, the Court reconciled two potentially inconsistent rules of statutory construction:

The first is the rule that “a court is to apply the law in effect at the time it renders its decision,” Bradley, 416 U.S. at 711, 94 S.Ct. at 2016. The second is the axiom that “[r]etroactivity is not favored in the law,” and its interpretive corollary that “congressional enactments and administrative rules will not be construed to have retroactive effect unless their language requires this result.” Bowen [ v. Georgetown University Hosp.], 488 U.S. [204] at 208, 109 S.Ct. [468] at 471 [102 L.Ed.2d 493 (1988) ].

Id. at 264, 114 S.Ct. 1483.

The Supreme Court went on to hold that whenever a question concerning the temporal reach of a newly enacted statute in a pending case is raised, courts must engage in a two-step analysis:

When a case implicates a federal statute enacted after the events in suit, the court's first task is to determine whether Congress has expressly prescribed the statute's proper reach. If Congress has done so, of course, there is no need to resort to judicial default rules. When, however, the statute contains no such express command, the court must determine whether the new statute would have retroactive effect, i.e., whether it would impair rights a party possessed when he acted, increased a party's liability for past conduct, or imposed new duties with respect to transactions already completed. If the statute would operate retroactively, our traditional presumption teaches that it does not govern absent clear congressional intent favoring such a result.

Id. at 280, 114 S.Ct. 1483.

The Supreme Court had cause to readdress the Landgraf analysis in Lindh v. Murphy and added an additional step:

In determining whether a statute's terms would produce a retroactive effect, however, and in determining a statute's temporal reach generally, our normal rules of construction apply. Although Landgraf's default rules would deny application when a retroactive effect would otherwise result, other construction rules may apply to remove even the possibility of retroactivity (as by rendering the statutory provision wholly inapplicable to a particular case)....

521 U.S. 320, 326, 117 S.Ct. 2059, 138 L.Ed.2d 481 (1997);see alsoMathews v. Kidder, Peabody & Co., Inc., 161 F.3d 156, 160 (3d Cir.1998). “Thus, the Supreme Court held that if a congressional intent to not apply a statute retrospectively can be discerned, the courts are to follow that intent, without regard to whether the statute has retroactive effect. Underlying this new step in the analysis was the traditional presumption against retroactivity.” Mathews, 161 F.3d at 161. Simply stated, if an intent to apply the statute prospectively can be found, a court need not bother with discerning whether the statute has retroactive effect. See id. at 162.

With regard to the present case, this Court must ascertain under the first step of the Landgraf/Lindh analysis whether Congress expressly prescribed the proper reach of § 523(a)(19). A thorough reading of § 523(a)(19) fails to expose any express congressional directive that its temporal reach is to be measured either retroactively or prospectively.

The second step involves an examination, under normal rules of statutory construction, for evidence of a congressional intent to only apply the statute prospectively. The legislative history associated with this provision lacks any indication that § 523(a)(19) was only to receive prospective treatment. Instead, the Section–by–Section Analysis of the Corporate and Criminal Fraud Accountability Act, which is included in the legislative history of the Sarbanes–Oxley Act, voices a clear congressional intention that § 523(a)(19) should apply “to the maximum extent possible ... to existing bankruptcies.” See 148 Cong. Rec. at S7418.

Lastly, the final step in the Landgraf/Lindh analysis requires consideration of the retroactive effect that application of § 523(a)(19) would have in Mr. Lewandowski's bankruptcy. A statute is deemed retrospective if “it would impair rights a party possessed when he acted, increased a party's liability for...