Hartford Underwriters Ins. Company v. Union Planters Bank, N.A.

PETITIONER: Hartford Underwriters Ins. Company
RESPONDENT: Union Planters Bank, N.A.
LOCATION: US District Court for the Eastern District of Pennsylvania

DOCKET NO.: 99-409
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Eighth Circuit

CITATION: 530 US 1 (2000)
ARGUED: Mar 20, 2000
DECIDED: May 30, 2000

ADVOCATES:
G. Eric Brunstad, Jr. - Argued the cause for the petitioner
Robert H. Brownlee - Argued the cause for the respondent

Facts of the case

Hen House Interstate, Inc. filed for reorganization under Chapter 11 of the Bankruptcy Code. During the reorganization attempt, Hen House obtained workers' compensation insurance from Hartford Underwriters Insurance Company. Hen House repeatedly failed to make the monthly premium payments required by the policy. Ultimately, Hen House's reorganization failed and the court converted the case to a Chapter 7 liquidation proceeding and appointed a trustee. Hartford, learning of the bankruptcy proceedings, sought to recover its premiums as an administrative expense. Recognizing that the estate lacked unencumbered funds to pay the premiums, Hartford attempted to charge the premiums to Union Planters Bank, the secured creditor for all of the property of Hen House, by filing a claim with the Bankruptcy Court under 11 USC Section 506(c). The Bankruptcy Court ruled in favor of Hartford and the ruling was affirmed by the Court of Appeals. However, the Court of Appeals granted a rehearing en banc and reversed, on the ground that an administrative claimant could not invoke section 506(c).

Question

Does 11 USC Section 506(c) allow an administrative claimant in a bankruptcy case to seek payment of its administrative claim from the property of a bankrupt estate encumbered by a secured creditor's lien?

Media for Hartford Underwriters Ins. Company v. Union Planters Bank, N.A.

Audio Transcription for Oral Argument - March 20, 2000 in Hartford Underwriters Ins. Company v. Union Planters Bank, N.A.

Audio Transcription for Opinion Announcement - May 30, 2000 in Hartford Underwriters Ins. Company v. Union Planters Bank, N.A.

William H. Rehnquist:

The opinion of the Court in No. 99-409, Hartford Underwriters Insurance Co. versus Union Planters Bank will be announced by Justice Scalia.

Antonin Scalia:

It’s your lucky day, this is not a bankruptcy case.

It comes to us on certiorari to the United States Court of Appeals for the Eighth Circuit.

It arises out of the bankruptcy proceedings of a company called Hen House Interstate.

During its attempted reorganization pursuant to Chapter 11 of the Bankruptcy Code, Hen House obtained Workers’ Compensation Insurance from petitioner Hartford Underwriters.

Although Hen House repeatedly failed to make the monthly premium payments required by the policy, Hartford continued to provide the insurance.

The reorganization ultimately failed and the court converted the case to a Chapter 7 liquidation proceeding and appointed a Trustee.

Learning of the bankruptcy proceedings after the conversion and recognizing that the estate lacked encumbered funds to pay the premiums, Hartford attempted to charge the past two premiums to respondent Union Planter Bank’s security interest pursuant to 11 U.S.C. Section 506(c).

The Bankruptcy Court ruled for Hartford and the District Court affirmed, but the en banc Eighth Circuit reversed, concluding that Section 506(c) could not be invoked by an administrative claimant such as Hartford.

We affirm.

As an administrative claimant, Hartford is not a proper party to seek recovery under Section 506(c) which provides, “the Trustee may recover from property securing an allowed secured claim, the costs and expenses of preserving or disposing of such property.”

The statute appears quite plain in specifying who may use Section 506(c), namely the Trustee.

Although the statutory text does not explicitly state the persons other than the Trustee may not seek recovery under 506(c), several contextual features support that conclusion.

First, a situation in which a statute authorizes specific action and designates a particular party in power to take that action is surely among the least appropriate in which to presume non-exclusivity.

Second, the fact that the sole party named, the Trustee, has a unique role in bankruptcy proceedings, makes it entirely plausible that Congress would provide a power to him and not to others.

Further, had Congress intended the provision to be broadly available, it could simply have said so as it has done in describing the parties who can act under other Sections of the Code.

Hartford’s argument that Section 506(c) is not exclusive because it does not use the word ‘only’, or rather expressly restrictive language is therefore unpersuasive.

Hartford argues that pre-Code practice supports its reading, but it is questionable whether the pre-Code precedents establish a bankruptcy practice sufficiently widespread and well-recognized to justify the conclusion of implicit adoption by Congress.

In any event, whereas here, the meaning of the Code’s text is itself clear, its operation prevails over contrary prior practice.

The Court’s opinion is again unanimous.