Law v. Siegel , 134 S. Ct. 1188 ( 2014 )


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  • (Slip Opinion)              OCTOBER TERM, 2013                                       1
    Syllabus
    NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
    being done in connection with this case, at the time the opinion is issued.
    The syllabus constitutes no part of the opinion of the Court but has been
    prepared by the Reporter of Decisions for the convenience of the reader.
    See United States v. Detroit Timber & Lumber Co., 
    200 U. S. 321
    , 337.
    SUPREME COURT OF THE UNITED STATES
    Syllabus
    LAW v. SIEGEL, CHAPTER 7 TRUSTEE
    CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
    THE NINTH CIRCUIT
    No. 12–5196. Argued January 13, 2014—Decided March 4, 2014
    Petitioner Law filed for Chapter 7 bankruptcy. He valued his Califor-
    nia home at $363,348, claiming that $75,000 of that value was cov-
    ered by California’s homestead exemption and thus was exempt from
    the bankruptcy estate. See 
    11 U. S. C. §522
    (b)(3)(A). He also
    claimed that the sum of two voluntary liens—one of which was in fa-
    vor of “Lin’s Mortgage & Associates”—exceeded the home’s nonex-
    empt value, leaving no equity recoverable for his other creditors. Re-
    spondent Siegel, the bankruptcy estate trustee, challenged the “Lin”
    lien in an adversary proceeding, but protracted and expensive litiga-
    tion ensued when a supposed “Lili Lin” in China claimed to be the
    beneficiary of Law’s deed of trust. Ultimately, the Bankruptcy Court
    concluded that the loan was a fiction created by Law to preserve his
    equity in the house. It thus granted Siegel’s motion to “surcharge”
    Law’s $75,000 homestead exemption, making those funds available to
    defray attorney’s fees incurred by Siegel in overcoming Law’s fraudu-
    lent misrepresentations. The Ninth Circuit Bankruptcy Appellate
    Panel and the Ninth Circuit affirmed.
    Held: The Bankruptcy Court exceeded the limits of its authority when
    it ordered that the $75,000 protected by Law’s homestead exemption
    be made available to pay Siegel’s attorney’s fees. Pp. 5–12.
    (a) A bankruptcy court may not exercise its authority to “carry out”
    the provisions of the Code, 
    11 U. S. C. §105
    (a), or its “inherent power
    . . . to sanction ‘abusive litigation practices,’ ” Marrama v. Citizens
    Bank of Mass., 
    549 U. S. 365
    , 375–376, by taking action prohibited
    elsewhere in the Code. Here, the Bankruptcy Court’s “surcharge”
    contravened §522, which (by reference to California law) entitled Law
    to exempt $75,000 of equity in his home from the bankruptcy estate,
    §522(b)(3)(A), and which made that $75,000 “not liable for payment of
    2                              LAW v. SIEGEL
    Syllabus
    any administrative expense,” §522(k), including attorney’s fees, see
    §503(b)(2). The surcharge thus exceeded the limits of both the court’s
    authority under §105(a) and its inherent powers. Pp. 5–7.
    (b) Siegel argues that an equitable power to deny an exemption by
    “surcharging” exempt property in response to a debtor’s misconduct
    can coexist with §522. But insofar as that argument equates the sur-
    charge with an outright denial of Law’s homestead exemption, it
    founders on this case’s procedural history. The Bankruptcy Appellate
    Panel recognized that because no one timely objected to the home-
    stead exemption, it became final before the surcharge was imposed.
    And a trustee who fails to make a timely objection cannot challenge
    an exemption. Taylor v. Freeland & Kronz, 
    503 U. S. 638
    , 643–644.
    Assuming the Bankruptcy Court could have revisited Law’s entitle-
    ment to the exemption, §522 specifies the criteria that render proper-
    ty exempt, and a court may not refuse to honor a debtor’s invocation
    of an exemption without a valid statutory basis. Federal courts may
    apply state law to disallow state-created exemptions, but federal law
    itself provides no authority for bankruptcy courts to deny an exemp-
    tion on a ground not specified in the Code. Pp. 7–10.
    (c) Neither the holding of Marrama v. Citizens Bank nor its dictum
    points toward a different result. There, the debtor’s bad faith kept
    him from converting his bankruptcy from a Chapter 7 liquidation to a
    Chapter 13 reorganization as permitted by §706(a). But that was be-
    cause his conduct prevented him from qualifying under Chapter 13,
    and thus he could not satisfy §706(d), which expressly conditions
    conversion on the debtor’s ability to qualify under Chapter 13.
    Pp. 10–11.
    (d) This ruling forces Siegel to shoulder a heavy financial burden
    due to Law’s egregious misconduct and may produce inequitable re-
    sults for other trustees and creditors, but it is not for courts to alter
    the balance that Congress struck in crafting §522. Cf. Guidry v.
    Sheet Metal Workers National Pension Fund, 
    493 U. S. 365
    , 376–377.
    P. 11.
    (e) Ample authority remains to address debtor misconduct, includ-
    ing denial of discharge, see §727(a)(2)–(6); sanctions for bad-faith liti-
    gation conduct under the Bankruptcy Rules, §105(a), or a bankruptcy
    court’s inherent powers; enforcement of monetary sanctions through
    the normal procedures for collecting money judgments, see §727(b); or
    possible prosecution under 
    18 U. S. C. §152
    . Pp. 11–12.
    
    435 Fed. Appx. 697
    , reversed and remanded.
    SCALIA, J., delivered the opinion for a unanimous Court.
    Cite as: 571 U. S. ____ (2014)                              1
    Opinion of the Court
    NOTICE: This opinion is subject to formal revision before publication in the
    preliminary print of the United States Reports. Readers are requested to
    notify the Reporter of Decisions, Supreme Court of the United States, Wash­
    ington, D. C. 20543, of any typographical or other formal errors, in order
    that corrections may be made before the preliminary print goes to press.
    SUPREME COURT OF THE UNITED STATES
    _________________
    No. 12–5196
    _________________
    STEPHEN LAW, PETITIONER v. ALFRED H. SIEGEL,
    CHAPTER 7 TRUSTEE
    ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
    APPEALS FOR THE NINTH CIRCUIT
    [March 4, 2014]
    JUSTICE SCALIA delivered the opinion of the Court.
    The Bankruptcy Code provides that a debtor may ex­
    empt certain assets from the bankruptcy estate. It further
    provides that exempt assets generally are not liable for
    any expenses associated with administering the estate. In
    this case, we consider whether a bankruptcy court none­
    theless may order that a debtor’s exempt assets be used to
    pay administrative expenses incurred as a result of the
    debtor’s misconduct.
    I. Background
    A
    Chapter 7 of the Bankruptcy Code gives an insolvent
    debtor the opportunity to discharge his debts by liquidat­
    ing his assets to pay his creditors. 
    11 U. S. C. §§704
    (a)(1),
    726, 727. The filing of a bankruptcy petition under Chap­
    ter 7 creates a bankruptcy “estate” generally comprising
    all of the debtor’s property. §541(a)(1). The estate is
    placed under the control of a trustee, who is responsible
    for managing liquidation of the estate’s assets and distri­
    bution of the proceeds. §704(a)(1). The Code authorizes
    2                      LAW v. SIEGEL
    Opinion of the Court
    the debtor to “exempt,” however, certain kinds of property
    from the estate, enabling him to retain those assets post­
    bankruptcy. §522(b)(1). Except in particular situations
    specified in the Code, exempt property “is not liable” for
    the payment of “any [prepetition] debt” or “any adminis­
    trative expense.” §522(c), (k).
    Section 522(d) of the Code provides a number of exemp­
    tions unless they are specifically prohibited by state law.
    §522(b)(2), (d). One, commonly known as the “homestead
    exemption,” protects up to $22,975 in equity in the debt­
    or’s residence. §522(d)(1) and note following §522; see
    Owen v. Owen, 
    500 U. S. 305
    , 310 (1991). The debtor may
    elect, however, to forgo the §522(d) exemptions and in­
    stead claim whatever exemptions are available under
    applicable state or local law. §522(b)(3)(A). Some States
    provide homestead exemptions that are more generous
    than the federal exemption; some provide less generous
    versions; but nearly every State provides some type of
    homestead exemption. See López, State Homestead Ex­
    emptions and Bankruptcy Law: Is It Time for Congress To
    Close the Loophole? 7 Rutgers Bus. L. J. 143, 149–165
    (2010) (listing state exemptions).
    B
    Petitioner, Stephen Law, filed for Chapter 7 bankruptcy
    in 2004, and respondent, Alfred H. Siegel, was appointed
    to serve as trustee. The estate’s only significant asset was
    Law’s house in Hacienda Heights, California. On a sched­
    ule filed with the Bankruptcy Court, Law valued the
    house at $363,348 and claimed that $75,000 of its value
    was covered by California’s homestead exemption. See
    Cal. Civ. Proc. Code Ann. §704.730(a)(1) (West Supp.
    2014). He also reported that the house was subject to two
    voluntary liens: a note and deed of trust for $147,156.52 in
    favor of Washington Mutual Bank, and a second note and
    deed of trust for $156,929.04 in favor of “Lin’s Mortgage &
    Cite as: 571 U. S. ____ (2014)           3
    Opinion of the Court
    Associates.” Law thus represented that there was no
    equity in the house that could be recovered for his other
    creditors, because the sum of the two liens exceeded the
    house’s nonexempt value.
    If Law’s representations had been accurate, he presum­
    ably would have been able to retain the house, since Siegel
    would have had no reason to pursue its sale. Instead, a
    few months after Law’s petition was filed, Siegel initiated
    an adversary proceeding alleging that the lien in favor of
    “Lin’s Mortgage & Associates” was fraudulent. The deed
    of trust supporting that lien had been recorded by Law in
    1999 and reflected a debt to someone named “Lili Lin.”
    Not one but two individuals claiming to be Lili Lin ulti­
    mately responded to Siegel’s complaint. One, Lili Lin of
    Artesia, California, was a former acquaintance of Law’s
    who denied ever having loaned him money and described
    his repeated efforts to involve her in various sham trans­
    actions relating to the disputed deed of trust. That Lili
    Lin promptly entered into a stipulated judgment disclaim­
    ing any interest in the house. But that was not the end of
    the matter, because the second “Lili Lin” claimed to be the
    true beneficiary of the disputed deed of trust. Over the
    next five years, this “Lili Lin” managed—despite suppos­
    edly living in China and speaking no English—to engage
    in extensive and costly litigation, including several ap­
    peals, contesting the avoidance of the deed of trust and
    Siegel’s subsequent sale of the house.
    Finally, in 2009, the Bankruptcy Court entered an order
    concluding that “no person named Lili Lin ever made a
    loan to [Law] in exchange for the disputed deed of trust.”
    In re Law, 
    401 B. R. 447
    , 453 (Bkrtcy. Ct. CD Cal.). The
    court found that “the loan was a fiction, meant to preserve
    [Law’s] equity in his residence beyond what he was enti­
    tled to exempt” by perpetrating “a fraud on his creditors
    and the court.” 
    Ibid.
     With regard to the second “Lili Lin,”
    the court declared itself “unpersuaded that Lili Lin of
    4                     LAW v. SIEGEL
    Opinion of the Court
    China signed or approved any declaration or pleading
    purporting to come from her.” 
    Ibid.
     Rather, it said, the
    “most plausible conclusion” was that Law himself had
    “authored, signed, and filed some or all of these papers.”
    
    Ibid.
     It also found that Law had submitted false evidence
    “in an effort to persuade the court that Lili Lin of China—
    rather than Lili Lin of Artesia—was the true holder of the
    lien on his residence.” 
    Id., at 452
    . The court determined
    that Siegel had incurred more than $500,000 in attorney’s
    fees overcoming Law’s fraudulent misrepresentations. It
    therefore granted Siegel’s motion to “surcharge” the en­
    tirety of Law’s $75,000 homestead exemption, making
    those funds available to defray Siegel’s attorney’s fees.
    The Ninth Circuit Bankruptcy Appellate Panel affirmed.
    BAP No. CC–09–1077–PaMkH, 
    2009 WL 7751415
     (Oct.
    22, 2009) ( per curiam). It held that the Bankruptcy
    Court’s factual findings regarding Law’s fraud were not
    clearly erroneous and that the court had not abused its
    discretion by surcharging Law’s exempt assets. It ex­
    plained that in Latman v. Burdette, 
    366 F. 3d 774
     (2004),
    the Ninth Circuit had recognized a bankruptcy court’s
    power to “equitably surcharge a debtor’s statutory ex­
    emptions” in exceptional circumstances, such as “when a
    debtor engages in inequitable or fraudulent conduct.” 
    2009 WL 7751415
    , *5, *7. The Bankruptcy Appellate Panel
    acknowledged that the Tenth Circuit had disagreed with
    Latman, see In re Scrivner, 
    535 F. 3d 1258
    , 1263–1265
    (2008), but the panel affirmed that Latman was correct.
    
    2009 WL 7751415
    , *7, n. 10. Judge Markell filed a con­
    curring opinion agreeing with the panel’s application of
    Latman but questioning “whether Latman remains good
    policy.” 
    2009 WL 7751415
    , *10.
    The Ninth Circuit affirmed. In re Law, 
    435 Fed. Appx. 697
     (2011) ( per curiam). It held that the surcharge was
    proper because it was “calculated to compensate the estate
    for the actual monetary costs imposed by the debtor’s
    Cite as: 571 U. S. ____ (2014)                     5
    Opinion of the Court
    misconduct, and was warranted to protect the integrity of
    the bankruptcy process.” 
    Id., at 698
    . We granted certiorari.
    570 U. S. ___ (2013).
    II. Analysis
    A
    A bankruptcy court has statutory authority to “issue
    any order, process, or judgment that is necessary or ap­
    propriate to carry out the provisions of ” the Bankruptcy
    Code. 
    11 U. S. C. §105
    (a). And it may also possess “inher­
    ent power . . . to sanction ‘abusive litigation practices.’ ”
    Marrama v. Citizens Bank of Mass., 
    549 U. S. 365
    , 375–
    376 (2007). But in exercising those statutory and inherent
    powers, a bankruptcy court may not contravene specific
    statutory provisions.
    It is hornbook law that §105(a) “does not allow the
    bankruptcy court to override explicit mandates of other
    sections of the Bankruptcy Code.” 2 Collier on Bankruptcy
    ¶105.01[2], p. 105–6 (16th ed. 2013). Section 105(a) con­
    fers authority to “carry out” the provisions of the Code, but
    it is quite impossible to do that by taking action that the
    Code prohibits. That is simply an application of the axiom
    that a statute’s general permission to take actions of a
    certain type must yield to a specific prohibition found
    elsewhere. See Morton v. Mancari, 
    417 U. S. 535
    , 550–551
    (1974); D. Ginsberg & Sons, Inc. v. Popkin, 
    285 U. S. 204
    ,
    206–208 (1932).1 Courts’ inherent sanctioning powers are
    ——————
    1 The second sentence of §105(a) adds little to the analysis. It states:
    “No provision of this title providing for the raising of an issue by a
    party in interest shall be construed to preclude the court from,
    sua sponte, taking any action or making any determination necessary
    or appropriate to enforce or implement court orders or rules, or to
    prevent an abuse of process.” Even if the “abuse of process” language
    were deemed to confer additional authority beyond that conferred by
    the first sentence (which is doubtful), that general authority would also
    be limited by more specific provisions of the Code.
    6                          LAW v. SIEGEL
    Opinion of the Court
    likewise subordinate to valid statutory directives and
    prohibitions. Degen v. United States, 
    517 U. S. 820
    , 823
    (1996); Chambers v. NASCO, Inc., 
    501 U. S. 32
    , 47 (1991).
    We have long held that “whatever equitable powers
    remain in the bankruptcy courts must and can only be
    exercised within the confines of ” the Bankruptcy Code.
    Norwest Bank Worthington v. Ahlers, 
    485 U. S. 197
    , 206
    (1988); see, e.g., Raleigh v. Illinois Dept. of Revenue, 
    530 U. S. 15
    , 24–25 (2000); United States v. Noland, 
    517 U. S. 535
    , 543 (1996); SEC v. United States Realty & Improve-
    ment Co., 
    310 U. S. 434
    , 455 (1940).
    Thus, the Bankruptcy Court’s “surcharge” was unau­
    thorized if it contravened a specific provision of the Code.
    We conclude that it did. Section 522 (by reference to
    California law) entitled Law to exempt $75,000 of equity
    in his home from the bankruptcy estate. §522(b)(3)(A).
    And it made that $75,000 “not liable for payment of any
    administrative expense.” §522(k).2 The reasonable attor­
    ney’s fees Siegel incurred defeating the “Lili Lin” lien were
    indubitably an administrative expense, as a short march
    through a few statutory cross-references makes plain:
    Section 503(b)(2) provides that administrative expenses
    include “compensation . . . awarded under” §330(a);
    §330(a)(1) authorizes “reasonable compensation for actual,
    necessary services rendered” by a “professional person
    employed under” §327; and §327(a) authorizes the trustee
    to “employ one or more attorneys . . . to represent or assist
    the trustee in carrying out the trustee’s duties under this
    title.” Siegel argues that even though attorney’s fees
    incurred responding to a debtor’s fraud qualify as “admin­
    istrative expenses” for purposes of determining the trus­
    ——————
    2 The statute’s general rule that exempt assets are not liable for
    administrative expenses is subject to two narrow exceptions, both per­
    taining to the use of exempt assets to pay expenses associated with the
    avoidance of certain voidable transfers of exempt property. §522(k)(1)–
    (2). Neither of those exceptions is relevant here.
    Cite as: 571 U. S. ____ (2014)            7
    Opinion of the Court
    tee’s right to reimbursement under §503(b), they do not so
    qualify for purposes of §522(k); but he gives us no reason
    to depart from the “ ‘normal rule of statutory construc­
    tion’ ” that words repeated in different parts of the same
    statute generally have the same meaning. See Depart-
    ment of Revenue of Ore. v. ACF Industries, Inc., 
    510 U. S. 332
    , 342 (1994) (quoting Sorenson v. Secretary of Treasury,
    
    475 U. S. 851
    , 860 (1986)).
    The Bankruptcy Court thus violated §522’s express
    terms when it ordered that the $75,000 protected by Law’s
    homestead exemption be made available to pay Siegel’s
    attorney’s fees, an administrative expense. In doing so,
    the court exceeded the limits of its authority under §105(a)
    and its inherent powers.
    B
    Siegel does not dispute the premise that a bankruptcy
    court’s §105(a) and inherent powers may not be exercised
    in contravention of the Code. Instead, his main argument
    is that the Bankruptcy Court’s surcharge did not contra­
    vene §522. That statute, Siegel contends, “establish[es]
    the procedure by which a debtor may seek to claim exemp­
    tions” but “contains no directive requiring [courts] to allow
    [an exemption] regardless of the circumstances.” Brief for
    Respondent 35. Thus, he says, recognition of an equitable
    power in the Bankruptcy Court to deny an exemption by
    “surcharging” the exempt property in response to the
    debtor’s misconduct can coexist comfortably with §522.
    The United States, appearing in support of Siegel, agrees,
    arguing that §522 “neither gives debtors an absolute right
    to retain exempt property nor limits a court’s authority to
    impose an equitable surcharge on such property.” Brief
    for United States as Amicus Curiae 23.
    Insofar as Siegel and the United States equate the
    Bankruptcy Court’s surcharge with an outright denial of
    Law’s homestead exemption, their arguments founder
    8                      LAW v. SIEGEL
    Opinion of the Court
    upon this case’s procedural history. The Bankruptcy
    Appellate Panel stated that because no one “timely op­
    pose[d] [Law]’s homestead exemption claim,” the exemp­
    tion “became final” before the Bankruptcy Court imposed
    the surcharge. 
    2009 WL 7751415
    , at *2. We have held
    that a trustee’s failure to make a timely objection prevents
    him from challenging an exemption. Taylor v. Freeland &
    Kronz, 
    503 U. S. 638
    , 643–644 (1992).
    But even assuming the Bankruptcy Court could have
    revisited Law’s entitlement to the exemption, §522 does
    not give courts discretion to grant or withhold exemptions
    based on whatever considerations they deem appropriate.
    Rather, the statute exhaustively specifies the criteria that
    will render property exempt. See §522(b), (d). Siegel
    insists that because §522(b) says that the debtor “may
    exempt” certain property, rather than that he “shall be
    entitled” to do so, the court retains discretion to grant or
    deny exemptions even when the statutory criteria are met.
    But the subject of “may exempt” in §522(b) is the debtor,
    not the court, so it is the debtor in whom the statute vests
    discretion. A debtor need not invoke an exemption to
    which the statute entitles him; but if he does, the court
    may not refuse to honor the exemption absent a valid
    statutory basis for doing so.
    Moreover, §522 sets forth a number of carefully cali­
    brated exceptions and limitations, some of which relate to
    the debtor’s misconduct. For example, §522(c) makes
    exempt property liable for certain kinds of prepetition
    debts, including debts arising from tax fraud, fraud in
    connection with student loans, and other specified types of
    wrongdoing. Section 522(o) prevents a debtor from claim­
    ing a homestead exemption to the extent he acquired the
    homestead with nonexempt property in the previous 10
    years “with the intent to hinder, delay, or defraud a credi­
    tor.” And §522(q) caps a debtor’s homestead exemption at
    approximately $150,000 (but does not eliminate it en­
    Cite as: 571 U. S. ____ (2014)           9
    Opinion of the Court
    tirely) where the debtor has been convicted of a felony that
    shows “that the filing of the case was an abuse of the
    provisions of ” the Code, or where the debtor owes a debt
    arising from specified wrongful acts—such as securities
    fraud, civil violations of the Racketeer Influenced and
    Corrupt Organizations Act, or “any criminal act, inten­
    tional tort, or willful or reckless misconduct that caused
    serious physical injury or death to another individual
    in the preceding 5 years.” §522(q) and note following
    §522. The Code’s meticulous—not to say mind-numbingly
    detailed—enumeration of exemptions and exceptions to
    those exemptions confirms that courts are not authorized
    to create additional exceptions. See Hillman v. Maretta,
    569 U. S. ___, ___ (2013) (slip op., at 12); TRW Inc. v.
    Andrews, 
    534 U. S. 19
    , 28–29 (2001).
    Siegel points out that a handful of courts have claimed
    authority to disallow an exemption (or to bar a debtor from
    amending his schedules to claim an exemption, which is
    much the same thing) based on the debtor’s fraudulent
    concealment of the asset alleged to be exempt. See, e.g.,
    In re Yonikus, 
    996 F. 2d 866
    , 872–873 (CA7 1993); In re
    Doan, 
    672 F. 2d 831
    , 833 (CA11 1982) ( per curiam); Stew-
    art v. Ganey, 
    116 F. 2d 1010
    , 1011 (CA5 1940). He sug­
    gests that those decisions reflect a general, equitable
    power in bankruptcy courts to deny exemptions based on a
    debtor’s bad-faith conduct. For the reasons we have given,
    the Bankruptcy Code admits no such power. It is of course
    true that when a debtor claims a state-created exemption,
    the exemption’s scope is determined by state law, which
    may provide that certain types of debtor misconduct war­
    rant denial of the exemption. E.g., In re Sholdan, 
    217 F. 3d 1006
    , 1008 (CA8 2000); see 4 Collier on Bankruptcy
    ¶522.08[1]–[2], at 522–45 to 522–47. Some of the early
    decisions on which Siegel relies, and which the Fifth Cir­
    cuit cited in Stewart, are instances in which federal courts
    applied state law to disallow state-created exemptions.
    10                     LAW v. SIEGEL
    Opinion of the Court
    See In re Denson, 
    195 F. 857
    , 858 (ND Ala. 1912); Cowan
    v. Burchfield, 
    180 F. 614
    , 619 (ND Ala. 1910); In re Ansley
    Bros., 
    153 F. 983
    , 984 (EDNC 1907). But federal law
    provides no authority for bankruptcy courts to deny an
    exemption on a ground not specified in the Code.
    C
    Our decision in Marrama v. Citizens Bank, on which
    Siegel and the United States heavily rely, does not point
    toward a different result. The question there was whether
    a debtor’s bad-faith conduct was a valid basis for a bank­
    ruptcy court to refuse to convert the debtor’s bankruptcy
    from a liquidation under Chapter 7 to a reorganization
    under Chapter 13. Although §706(a) of the Code gave the
    debtor a right to convert the case, §706(d) “expressly
    conditioned” that right on the debtor’s “ability to qualify as
    a ‘debtor’ under Chapter 13.” 
    549 U. S., at 372
    . And
    §1307(c) provided that a proceeding under Chapter 13
    could be dismissed or converted to a Chapter 7 proceeding
    “for cause,” which the Court interpreted to authorize
    dismissal or conversion for bad-faith conduct. In light of
    §1307(c), the Court held that the debtor’s bad faith could
    stop him from qualifying as a debtor under Chapter 13,
    thus preventing him from satisfying §706(d)’s express
    condition on conversion. Id., at 372–373. That holding
    has no relevance here, since no one suggests that Law
    failed to satisfy any express statutory condition on his
    claiming of the homestead exemption.
    True, the Court in Marrama also opined that the Bank­
    ruptcy Court’s refusal to convert the case was authorized
    under §105(a) and might have been authorized under the
    court’s inherent powers. Id., at 375–376. But even that
    dictum does not support Siegel’s position. In Marrama,
    the Court reasoned that if the case had been converted to
    Chapter 13, §1307(c) would have required it to be either
    dismissed or reconverted to Chapter 7 in light of the debt­
    Cite as: 571 U. S. ____ (2014)          11
    Opinion of the Court
    or’s bad faith. Therefore, the Court suggested, even if the
    Bankruptcy Court’s refusal to convert the case had not
    been expressly authorized by §706(d), that action could
    have been justified as a way of providing a “prompt, rather
    than a delayed, ruling on [the debtor’s] unmeritorious at­
    tempt to qualify” under §1307(c). Id., at 376. At most,
    Marrama’s dictum suggests that in some circumstances a
    bankruptcy court may be authorized to dispense with
    futile procedural niceties in order to reach more expedi­
    tiously an end result required by the Code. Marrama
    most certainly did not endorse, even in dictum, the view
    that equitable considerations permit a bankruptcy court to
    contravene express provisions of the Code.
    D
    We acknowledge that our ruling forces Siegel to shoul­
    der a heavy financial burden resulting from Law’s egre­
    gious misconduct, and that it may produce inequitable
    results for trustees and creditors in other cases. We have
    recognized, however, that in crafting the provisions of
    §522, “Congress balanced the difficult choices that exemp­
    tion limits impose on debtors with the economic harm that
    exemptions visit on creditors.” Schwab v. Reilly, 
    560 U. S. 770
    , 791 (2010). The same can be said of the limits im­
    posed on recovery of administrative expenses by trustees.
    For the reasons we have explained, it is not for courts to
    alter the balance struck by the statute. Cf. Guidry v.
    Sheet Metal Workers Nat. Pension Fund, 
    493 U. S. 365
    ,
    376–377 (1990).
    *     *     *
    Our decision today does not denude bankruptcy courts
    of the essential “authority to respond to debtor misconduct
    with meaningful sanctions.” Brief for United States as
    Amicus Curiae 17. There is ample authority to deny the
    dishonest debtor a discharge. See §727(a)(2)–(6). (That
    12                     LAW v. SIEGEL
    Opinion of the Court
    sanction lacks bite here, since by reason of a postpetition
    settlement between Siegel and Law’s major creditor, Law
    has no debts left to discharge; but that will not often be
    the case.) In addition, Federal Rule of Bankruptcy Pro­
    cedure 9011—bankruptcy’s analogue to Civil Rule 11—
    authorizes the court to impose sanctions for bad-faith
    litigation conduct, which may include “an order directing
    payment. . . of some or all of the reasonable attorneys’ fees
    and other expenses incurred as a direct result of the viola­
    tion.” Fed. Rule Bkrtcy. Proc. 9011(c)(2). The court may
    also possess further sanctioning authority under either
    §105(a) or its inherent powers. Cf. Chambers, 
    501 U. S., at
    45–49. And because it arises postpetition, a bankruptcy
    court’s monetary sanction survives the bankruptcy case
    and is thereafter enforceable through the normal proce­
    dures for collecting money judgments. See §727(b). Fraud­
    ulent conduct in a bankruptcy case may also subject a debtor
    to criminal prosecution under 
    18 U. S. C. §152
    , which
    carries a maximum penalty of five years’ imprisonment.
    But whatever other sanctions a bankruptcy court may
    impose on a dishonest debtor, it may not contravene ex­
    press provisions of the Bankruptcy Code by ordering that
    the debtor’s exempt property be used to pay debts and
    expenses for which that property is not liable under the
    Code.
    The judgment of the Court of Appeals is reversed, and
    the case is remanded for further proceedings consistent
    with this opinion.
    It is so ordered.
    

Document Info

Docket Number: 12–5196.

Citation Numbers: 188 L. Ed. 2d 146, 134 S. Ct. 1188, 2014 U.S. LEXIS 1784, 571 U.S. 415, 14 Cal. Daily Op. Serv. 2285, 24 Fla. L. Weekly Fed. S 577, 82 U.S.L.W. 4140, 71 Collier Bankr. Cas. 2d 1, 2014 WL 813702, 59 Bankr. Ct. Dec. (CRR) 43

Judges: Scalia

Filed Date: 3/4/2014

Precedential Status: Precedential

Modified Date: 10/19/2024

Authorities (24)

Norwest Bank Worthington v. Ahlers , 108 S. Ct. 963 ( 1988 )

Owen v. Owen , 111 S. Ct. 1833 ( 1991 )

Raleigh v. Illinois Department of Revenue , 120 S. Ct. 1951 ( 2000 )

Schwab v. Reilly , 130 S. Ct. 2652 ( 2010 )

Securities & Exchange Commission v. United States Realty & ... , 60 S. Ct. 1044 ( 1940 )

In the Matter of Daniel J. YONIKUS and Carolyn S. Yonikus, ... , 996 F.2d 866 ( 1993 )

Guidry v. Sheet Metal Workers National Pension Fund , 110 S. Ct. 680 ( 1990 )

Department of Revenue of Ore. v. ACF Industries, Inc. , 114 S. Ct. 843 ( 1994 )

United States v. Noland , 116 S. Ct. 1524 ( 1996 )

In Re Law , 2009 Bankr. LEXIS 309 ( 2009 )

Stewart v. Ganey , 116 F.2d 1010 ( 1940 )

in-the-matter-of-elizabeth-ann-doan-fka-elizabeth-ann-curtiss-and , 672 F.2d 831 ( 1982 )

richard-k-latman-bettina-l-latman-v-virginia-burdette-trustee-and , 366 F.3d 774 ( 2004 )

Morton v. Mancari , 94 S. Ct. 2474 ( 1974 )

Taylor v. Freeland & Kronz , 112 S. Ct. 1644 ( 1992 )

Marrama v. Citizens Bank of Mass. , 127 S. Ct. 1105 ( 2007 )

United States v. Detroit Timber & Lumber Co. , 26 S. Ct. 282 ( 1906 )

in-re-arthur-sholdan-debtor-earl-jensen-the-personal-representative-of , 217 F.3d 1006 ( 2000 )

Sorenson v. Secretary of the Treasury , 106 S. Ct. 1600 ( 1986 )

Scrivner v. Mashburn , 47 A.L.R. Fed. 2d 571 ( 2008 )

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