A provision of the Bankruptcy Reform Act of 1978, 11 U.S.C. §
522(f)(2) (1976 ed., Supp. V), permits individual debtors in
bankruptcy proceedings to avoid nonpossessory, nonpurchase-money
liens on certain property, including household furnishings and
appliances. Appellees loaned individual debtors money and obtained
and perfected such liens on the debtors' household furnishings and
appliances before the 1978 Act was enacted. Subsequently, these
debtors instituted separate bankruptcy proceedings under the 1978
Act. Sections 522(b) and (d) exempt household items from the
property included within debtors' estates. The debtors claimed
these exemptions, relying on § 522(f)(2) to avoid the liens. The
Bankruptcy Courts refused to apply § 522(f)(2) retroactively to
abrogate the liens. The Court of Appeals, in consolidated appeals,
affirmed, holding that, although the 1978 Act was intended to apply
retrospectively, and thus was designed to invalidate liens acquired
before the enactment date, such an application violates the Takings
Clause of the Fifth Amendment.
Held: Section 522(f)(2) was not intended to be applied
retrospectively to destroy preenactment property rights. Pp.
459 U. S.
74-82.
(a) Where there is substantial doubt whether retroactive
destruction of appellees' liens would comport with the Fifth
Amendment, the cardinal principle that this Court will first
determine whether a construction of a statute is fairly possible by
which the constitutional question may be avoided warrants a
consideration of whether, as a matter of statutory construction, §
522(f)(2) must necessarily be applied retroactively. Pp.
459 U. S.
74-78.
(b) No bankruptcy law shall be construed to eliminate property
rights that existed before the law was enacted in the absence of an
explicit command from Congress. In light of this principle, in the
absence of a clear expression of Congress' intent to apply §
522(f)(2) to property rights established before the enactment date,
the statute will not be construed in a manner that could call upon
this Court to resolve difficult and sensitive
Page 459 U. S. 71
questions arising out of the guarantees of the Takings Clause.
Pp.
459 U. S.
81-82.
642 F.2d 1193, affirmed.
REHNQUIST, J., delivered the opinion of the Court, in which
BURGER, C.J., and WHITE, POWELL, STEVENS, and O'CONNOR, JJ.,
joined. BLACKMUN, J., filed an opinion concurring in the judgment,
in which BRENNAN and MARSHALL, JJ., joined,
post, p.
459 U.S. 82.
JUSTICE REHNQUIST delivered the opinion of the Court.
This case concerns the effect of 11 U.S.C. § 522(f)(2) (1976
ed., Supp. V), which permits individual debtors in bankruptcy
proceedings to avoid liens on certain property. The Court of
Appeals consolidated seven appeals from the Bankruptcy Courts for
the Districts of Kansas and Colorado. In each case, the debtor was
an individual who instituted bankruptcy proceedings after the
Bankruptcy Reform Act of 1978, Pub.L. 95-598, 92 Stat. 2549 (1978
Act), became effective on October 1, 1979. In each case, one of the
appellees had loaned the debtor money and obtained and perfected a
lien on the debtor's household furnishings and appliances before
the 1978 Act was enacted on November 6, 1978. None of these liens
was possessory, and none secured purchase-money obligations.
Included within the personal property subject to the appellees'
liens were household items that are exempt from the property
included within the debtors' estates by virtue of
Page 459 U. S. 72
subsections (b) and (d) of § 522. [
Footnote 1] The debtors claimed these exemptions in their
respective bankruptcy proceedings, relying on § 522(f)(2) to avoid
the liens. That section provides:
"Notwithstanding any waiver of exemptions, the debtor may avoid
the fixing of a lien on an interest of the debtor in property to
the extent such lien impairs an exemption to which the debtor would
have been entitled under subsection (b) of this section, if such
lien is --"
* * * *
"(2) a nonpossessory, nonpurchase-money security interest in any
-- "
"(A) household furnishings, household goods, wearing apparel,
appliances, books, animals, crops, musical instruments,
Page 459 U. S. 73
or jewelry that are held primarily for the personal, family, or
household use of the debtor or a dependent of the debtor;"
"(B) implements, professional books, or tools, of the trade of
the debtor or the trade of a dependent of the debtor; or"
"(C) professionally prescribed health aids for the debtor or a
dependent of the debtor."
The appellees asserted that application of § 522(f)(2) to liens
acquired before the enactment date would violate the Fifth
Amendment. The United States intervened in each case to defend the
constitutionality of the federal statute, [
Footnote 2] but the Bankruptcy Courts in each case
refused to apply § 522(f)(2) to abrogate liens acquired before the
enactment date. [
Footnote
3]
The Court of Appeals consolidated the cases and affirmed the
judgments of the Bankruptcy Courts. 642 F.2d 1193 (CA10 1981). It
held that the 1978 Act was intended to apply retrospectively, and
thus was designed to invalidate liens acquired before the enactment
date. It also held, however, that such an application violates the
Fifth Amendment. The court stated that § 522(f)(2) effects a
"complete taking of the secured creditors' property interests," and
is thus invalid under
Louisville Joint Stock Land
Bank v. Radford, 295
Page 459 U. S. 74
U.S. 555 (1935). [
Footnote
4] The United States appealed, and we noted probable
jurisdiction. 454 U.S. 1122 (1981).
The appellees, of course, defend the judgment of the Court of
Appeals. [
Footnote 5] The
Government argues at some length that retrospective application of
§ 522(f)(2) to these liens would not violate the Fifth Amendment.
It contends that the enactment is a "rational" exercise of
Congress' bankruptcy power, that, for "bankruptcy purposes,"
property interests are all but indistinguishable from contractual
interests, and that these particular interests were
"insubstantial," and therefore their destruction does not amount to
a "taking" of property requiring compensation. We do not decide the
constitutional question reached by the Court of Appeals. We address
it only to determine whether the attack on the retrospective
application of the statute raises substantial enough constitutional
doubts to warrant the employment of the canon of statutory
construction referred to
infra at
459 U. S.
78-81.
It may be readily agreed that § 522(f)(2) is a rational exercise
of Congress' authority under Art. I, § 8, cl. 4, and that this
authority has been regularly construed to authorize the
retrospective impairment of contractual obligations.
Hanover
Page 459 U. S. 75
National Bank v. Moyses, 186 U.
S. 181,
186 U. S. 188
(1902). Such agreement does not, however, obviate the additional
difficulty that arises when that power is sought to be used to
defeat traditional property interests. The bankruptcy power is
subject to the Fifth Amendment's prohibition against taking private
property without compensation.
Louisville Joint Stock Land Bank
v. Radford, supra. Thus, however "rational" the exercise of
the bankruptcy power may be, that inquiry is quite separate from
the question whether the enactment takes property within the
prohibition of the Fifth Amendment.
The Government apparently contends (Brief for United States
30-32) that, because cases such as
Arnett v. Kennedy,
416 U. S. 134
(1974), and
Goldberg v. Kelly, 397 U.
S. 254 (1970), defined "property" for purposes of the
Due Process Clause sufficiently broadly to include rights which at
common law would have been deemed contractual, traditional property
rights are entitled to no greater protection under the Takings
Clause than traditional contract rights. It argues that "bankruptcy
principles do not support a sharp distinction between the rights of
secured and unsecured creditors." Brief for United States 31.
However "bankruptcy principles" may speak to this question, our
cases recognize, as did the common law, that the contractual right
of a secured creditor to obtain repayment of his debt may be quite
different in legal contemplation from the property right of the
same creditor in the collateral.
Compare Hanover National Bank
v. Moyses, supra, with Louisville Joint Stock Land Bank v. Radford,
supra, and Kaiser Aetna v. United States, 444 U.
S. 164 (1979).
Since the governmental action here would result in a complete
destruction of the property right of the secured party, the case
fits but awkwardly into the analytic framework employed in
Penn
Central Transportation Co. v. New York City, 438 U.
S. 104 (1978), and
PruneYard Shopping Center v.
Robins, 447 U. S. 74
(1980), where governmental action
Page 459 U. S. 76
affected some, but not all, of the "bundle of rights" which
constitute the "property" in question. The Government argues that
the interest of a secured party such as was involved here is
"insubstantial," apparently in part because it is a
nonpurchase-money, nonpossessory interest in personal property. The
"bundle of rights" which accrues to a secured party is obviously
smaller than that which accrues to an owner in fee simple, but the
Government cites no cases supporting the proposition that
differences such as these relegate the secured party's interest to
something less than property. [
Footnote 6] And our decisions in
Radford, supra,
and
Armstrong v. United States, 364 U. S.
40 (1960), militate against such a proposition.
In
Radford, we held that the Frazier-Lemke Act, 48
Stat. 1289, violated the Takings Clause. The bank held a
nonpurchase-money mortgage on Radford's farm. Radford defaulted and
instituted bankruptcy proceedings. The Frazier-Lemke Act, which by
its terms applied only retrospectively, permitted the debtor to
purchase the property for less than its fair market value.
[
Footnote 7] We held the
statute was
Page 459 U. S. 77
void because it effected a "taking of substantive rights in
specific property acquired by the Bank prior to" its enactment. 295
U.S. at
295 U. S. 590.
In his opinion for the Court, Justice Brandeis stated:
"[T]he Fifth Amendment commands that, however great the Nation's
need, private property shall not be thus taken even for a wholly
public use without just compensation. If the public interest
requires, and permits, the taking of property of individual
mortgagees in order to relieve the necessities of individual
mortgagors, resort must be had to proceedings by eminent domain; so
that, through taxation, the burden of the relief afforded in the
public interest may be borne by the public."
Id. at 602.
In
Armstrong, materialmen delivered materials to a
prime contractor for use in constructing Navy personnel boats.
Under state law, they obtained liens in the vessels. [
Footnote 8] The prime contractor defaulted on
his obligations to the United States, and the Government took title
to and possession of the uncompleted hulls and unused materials,
thus making it impossible for the materialmen to enforce their
liens. We held that this constituted a taking:
"The total destruction by the Government of all value of these
liens, which constitute compensable property, has every possible
element of a Fifth Amendment 'taking,' and is not a mere
'consequential incidence' of a valid regulatory measure."
364 U.S. at
364 U. S.
48.
The Government seeks to distinguish
Armstrong on the
ground that it was a classical "taking" in the sense that the
Government acquired for itself the property in question,
Page 459 U. S. 78
while, in the instant case, the Government has simply imposed a
general economic regulation which, in effect, transfers the
property interest from a private creditor to a private debtor.
While the classical taking is of the sort that the Government
describes, our cases show that takings analysis is not necessarily
limited to outright acquisitions by the government for itself.
See Loretto v. Teleprompter Manhattan CATV Corp.,
458 U. S. 419
(1982);
PruneYard Shopping Center v. Robins, 447 U. S.
74 (1980);
Pennsylvania Coal Co. v. Mahon,
260 U. S. 393,
260 U. S. 415
(1922).
The Government finally contends that, because the resale value
of household goods is generally low, and because creditors
therefore view the principal value of their security as a lever to
negotiate for reaffirmation of the debt, rather than as a vehicle
for foreclosure, the property interests involved here do not merit
protection under the Takings Clause. While this contention cannot
be dismissed out of hand, it seems to run counter to the State's
characterization of the interest as property,
see n 6,
supra, to our reliance in
other "takings" cases on state law characterizations,
see,
e.g., Kaiser-Aetna v. United States, 444 U.S. at
444 U. S. 179,
and also to at least some of the implications of
Radford,
supra, and
Armstrong, supra.
The foregoing discussion satisfies us that there is substantial
doubt whether the retroactive destruction of the appellees' liens
in this case comports with the Fifth Amendment. We now consider
whether, as a matter of statutory construction, § 522(f)(2) must
necessarily be applied in that manner. We consider the statutory
question because of the
"'cardinal principle that this Court will first ascertain
whether a construction of the statute is fairly possible by which
the constitutional question may be avoided.'"
Lorillard v. Pons, 434 U. S. 575,
434 U. S. 577
(1978), quoting
Crowell v. Benson, 285 U. S.
22,
285 U. S. 62
(1932).
The Court of Appeals thought § 522(f)(2) must apply
retroactively, that is, to liens which attached before the
enactment date, because "there would be no bankruptcy law
applicable to cases [involving such liens if it did not]." 642 F.2d
at
Page 459 U. S. 79
1197. The court apparently thought that, if § 522(f)(2) does not
apply to liens which came into existence before the enactment date,
then no part of the 1978 Act could apply to cases involving such
liens. This is not necessarily the case. The liens, of course,
exist under state law independently of the 1978 Act. Although the
1978 Act, in general, is effective for all cases commenced after
its effective date, Congress might have intended that provisions
that destroy previously vested property rights apply only to
interests that came into effect after the enactment date. If §
522(f)(2) is such a provision, the remainder of the 1978 Act would
not affect the enforceability of these liens, but would still apply
to these liens and these cases. We think that the analysis of the
Court of Appeals did not adequately dispose of the question as to
the retrospective effect of § 522(f), and we therefore pursue the
inquiry further.
The principle that statutes operate only prospectively, while
judicial decisions operate retrospectively, is familiar to every
law student.
Compare 1 C. Sands, Sutherland on Statutory
Construction § 1.06 (4th ed.1972),
with Linkletter v.
Walker, 381 U. S. 618,
381 U. S.
622-625 (1965). This Court has often pointed out:
"[T]he first rule of construction is that legislation must be
considered as addressed to the future, not to the past. . . . The
rule has been expressed in varying degrees of strength but always
of one import, that a retrospective operation will not be given to
a statute which interferes with antecedent rights . . . unless such
be 'the unequivocal and inflexible import of the terms, and the
manifest intention of the legislature.'"
Union Pacific R. Co. v. Laramie Stock Yards Co.,
231 U. S. 190,
231 U. S. 199
(1913) (citations omitted).
See, e.g., United States Fidelity
& Guaranty Co. v. United States ex rel. Struthers Wells
Co., 209 U. S. 306,
209 U. S. 314
(1908) ("The presumption is very strong that a statute was not
meant to act retrospectively, and it ought never to receive
Page 459 U. S. 80
such a construction if it is susceptible of any other");
United States v. Schooner
Peggy, 1 Cranch 103,
5
U. S. 110 (1801).
This principle has been repeatedly applied to bankruptcy
statutes affecting property rights. In
Holt v. Henley,
232 U. S. 637
(1914), the Court had before it a new statute granting bankruptcy
trustees the position of a lienholder with priority over sellers on
conditional sales contracts. Act of June 25, 1910, ch. 412, § 8, 36
Stat. 840. This provision, like § 522(f)(2), could be read
literally to divest property interests which had been created
before it was enacted. The 1910 statute, like the 1978 Act, applied
to all bankruptcy cases instituted after it became effective.
[
Footnote 9] Nonetheless, the
Court followed the lead of the lower courts in refusing to infer
retroactivity absent an explicitly "expressed intent of Congress."
Arctic Ice Machine Co. v. Armstrong County Trust Co., 192
F. 114, 116 (CA3 1911).
See also In re Schneider, 203 F.
589, 590 (ED Pa.1913). In his opinion for the unanimous Court,
Justice Holmes stated that
"the reasonable and usual interpretation of [bankruptcy]
statutes is to confine their effect, so far as may be, to property
rights established after they were passed."
232 U.S. at
232 U. S. 639.
See Auffm'ordt v. Rasin, 102 U. S. 620,
102 U. S. 622
(1881).
The Government nonetheless contends that bankruptcy statutes are
usually construed to apply to preexisting rights. This statement is
unobjectionable in the context of traditional contract rights,
Hanover National Bank v. Moyses, 186 U.S. at
186 U. S. 188,
but none of the cases cited by the Government extend it to property
rights such as those involved here. [
Footnote 10]
Page 459 U. S. 81
Neither these cases, nor any other that has come to our
attention, casts doubt on the principle of statutory construction
deducible from
Holt and
Auffm'ordt: No bankruptcy
law shall be construed to eliminate property rights which existed
before the law was enacted in the absence of an explicit command
from Congress. In light of this principle, the legislative history
of the 1978 Act suggests that Congress may not have intended that §
522(f) operate to destroy preenactment property rights.
An early version of the 1978 Act contained an explicit
requirement that all its provisions
"shall apply in all cases or proceedings instituted after its
effective date, regardless of the date of occurrence of any of the
operative facts determining legal rights, duties, or liabilities
hereunder."
§ 10103(a), H.R. 31, 94th Cong., 1st Sess. (1975), reprinted in
Bankruptcy Act Revision: Hearings on H.R. 31 and H.R. 32 before the
Subcommittee on Civil and Constitutional Rights of the House
Committee on the Judiciary, 94th Cong., 1st Sess., Appendix 320-321
(1975). This provision may or may not have been deleted directly in
response to the comments of witness William Plumb to the effect
that retroactive invalidation of liens may be an unconstitutional
taking.
Id. at 2066-2067. Nonetheless, Congress'
elimination of an explicit command is some evidence that it did not
intend to depart from the usual principle of construction.
See Bradley
Page 459 U. S. 82
v. Richmond School Board, 416 U.
S. 696,
416 U. S. 716,
n. 23 (1974) ("we are reluctant to read into the statute the very .
. . limitation that Congress eliminated").
"Accordingly, in the absence of a clear expression of Congress'
intent to" apply § 522(f)(2) to property rights established before
the enactment date, [
Footnote
11]
"we decline to construe the Act in a manner that could in turn
call upon the Court to resolve difficult and sensitive questions
arising out of the guarantees of the"
Takings Clause.
NLRB v. Catholic Bishop of Chicago,
440 U. S. 490,
440 U. S. 507
(1979). [
Footnote 12] The
judgment of the Court of Appeals must therefore be
Affirmed.
[
Footnote 1]
The exemptions were designed to permit individual debtors to
retain exempt property so that they will be able to enjoy a "fresh
start" after bankruptcy.
Subsections (b) and (d) of § 522 provide in pertinent part:
"(b) [A]n individual debtor may exempt from property of the
estate . . . -- "
"(1) property that is specified under subsection (d) of this
section. . . ."
* * * *
"(d) The following property may be exempted under subsection
(b)(1) of this section:"
* * * *
"(3) The debtor's interest, not to exceed $200 in value in any
particular item, in household furnishings, household goods, wearing
apparel, appliances, books, animals, crops, or musical instruments,
that are held primarily for the personal, family or household use
of the debtor or a dependent of the debtor."
"(4) The debtor's aggregate interest, not to exceed $500 in
value, in jewelry held primarily for the personal, family, or
household use of the debtor or the dependent of the debtor."
* * * *
"(6) The debtor's aggregate interest, not to exceed $750 in
value, in any implements, professional books, or tools, of the
trade of the debtor or the trade of a dependent of the debtor."
* * * *
"(9) Professionally prescribed health aids for the debtor or a
dependent of the debtor."
[
Footnote 2]
See 28 U.S.C. § 2403(a).
[
Footnote 3]
In
Schulte v. Beneficial Finance of Kansas, Inc., and
Hunter v. Beneficial Finance of Kansas, Inc., 8 B.R. 12
(1980), the Bankruptcy Court for the District of Kansas noted that
retrospective application of § 522(f)(2) creates constitutional
problems, and held that it should be applied only prospectively. In
Jackson v. Security Industrial Bank, and
Stevens v.
Liberty Loan Corp., 4 B.R. 293 (1980),
Rodrock v. Security
Industrial Bank, and
Knezel v. Security Industrial
Bank, 3 B.R. 629 (1980), the Bankruptcy Court for the District
of Colorado concluded that § 522(f)(2), as applied retrospectively,
violates the Due Process Clause of the Fifth Amendment. In
Hoops v. Freedom Finance, 3 B.R. 635 (1980), the
Bankruptcy Court for the District of Colorado concluded that §
522(f)(2), as applied retrospectively, violates "substantive due
process."
[
Footnote 4]
In re Gifford, 688 F.2d 447 (CA7 1982) (en banc), holds
that § 522 (n)(2) constitutionally applies to liens created before
the enactment date.
In re Webber, 674 F.2d 796 (CA9 1982),
holds that § 522(f)(2) constitutionally applies to liens created
before the Act became effective, but after the enactment date.
In re Ashe, 669 F.2d 105 (CA3 1982), holds that §
522(f)(1), which permits avoidance of certain judicial liens,
constitutionally applies to a cognovit note created before the
enactment date.
[
Footnote 5]
Appellee Beneficial Finance of Kansas, Inc., asserts that the
judgments should be affirmed because the Act violates Art. III of
the Constitution by granting judicial power to non-Art. III
bankruptcy judges.
See Northern Pipeline Construction Co. v.
Marathon Pipe Line Co., 458 U. S. 50 (1982)
(plurality opinion of BRENNAN, J.);
id. at
458 U. S. 90-91
(REHNQUIST J., concurring in judgment). Because our decision in
Northern Pipeline is prospective only,
id. at
458 U. S. 87-89,
and because we have stayed the issuance of our mandate in that case
to December 24, 1982,
post, p. 813, that decision does not
affect the judgment in this case.
[
Footnote 6]
At oral argument, the Government conceded that the liens at
issue in this case are treated as property under state law. Tr. of
Oral Arg. 21.
Both Kansas and Colorado have adopted the Uniform Commercial
Code. Although, under the Code, the priority among secured parties
is often affected by the purchase-money or possessory character of
security interests,
see, e.g., § 9-312, 3 U.L.A. 531
(1981), these characterizations do not affect the nature of the
security interest.
See § 9-107 (defining "purchase money
security interest"), § 9-305 (providing for perfection of security
interests by possession).
Section 101(28) of the 1978 Act defines a lien as a "charge
against or interest in property to secure payment of a debt or
performance of an obligation." It does not make distinctions based
on the purchase-money or possessory nature of a lien.
[
Footnote 7]
The Frazier-Lemke Act permitted the farmer, if the mortgagee
assented, to purchase the property at its then-appraised value on a
deferred payment plan. If the mortgagee refused to assent, the
court was required to stay all proceedings for five years, during
which time the farmer could retain possession by paying a
reasonable rent. After five years, the property could be
reappraised, but the farmer still had the right to purchase it free
and clear for the appraised value regardless of the amount of the
lien.
See Radford, 295 U.S. at
295 U. S.
597-598. Given the interest rate of 1%, the present
value of the deferred payments was much less than the value of the
property.
Id. at
295 U. S.
591-593.
[
Footnote 8]
Under the Uniform Commercial Code definition, these statutory
liens would be nonpossessory, nonpurchase-money liens in personal
property.
See n.
6
supra.
[
Footnote 9]
The transition provisions of the 1910 statute, § 14, 36 Stat.
842, are, in substance, the same as those of the 1978 Act. Pub.L.
95-598, Title IV, §§ 402, 403(a), 92 Stat. 2682, 2683.
[
Footnote 10]
Claridge Apartments Co. v. Commissioner, 323 U.
S. 141 (1944), involved rights to certain tax benefits,
not to property rights.
Dickinson Industrial Site, Inc. v.
Cowan, 309 U. S. 382,
309 U. S. 383
(1940), dealt with the application of new procedural rules to a
bankruptcy proceeding that was pending when the new statute was
enacted. Allowing an appeal to the Circuit Court of Appeals, rather
than the District Court, in that case did not eliminate any
property rights.
Carpenter v. Wabash R. Co., 309 U. S.
23 (1940), involved a provision giving personal injury
judgments the status of operating expenses, and thus priority over
mortgages in ongoing railroad reorganizations. Although that
statute may have disadvantaged the mortgagees by reducing the
amount of cash available to pay their notes, it did not affect
their property right in the collateral securing the mortgages.
McFaddin v. Evans-Snider-Buel Co., 185 U.
S. 505 (1902), considered a curative statute providing
the methods by which valid mortgages could be created in the Indian
Territory.
The Legal Tender
Cases, 12 Wall. 457,
79 U. S.
549-550 (1871), decided only that debts could be paid in
legal tender as defined by Congress at the time of payment without
impairing the obligation of contracts.
[
Footnote 11]
Because all of the liens at issue in this case were established
before the enactment date, we have no occasion to consider whether
622(f)(2) should be applied to liens established after Congress
passed the Act, but before it became effective.
[
Footnote 12]
"When aid to construction of the meaning of words, as used in
the statute, is available, there certainly can be no 'rule of law'
which forbids its use, however clear the words may appear on
'superficial examination.' . . . Obviously there is danger that the
courts' conclusion as to legislative purpose will be unconsciously
influenced by the judges' own views or by factors not considered by
the enacting body. A lively appreciation of the danger is the best
assurance of escape from its threat, but hardly justifies an
acceptance of a literal interpretation dogma which withholds from
the courts available information for reaching a correct conclusion.
. . . A few words of general connotation appearing in the text of
statutes should not be given a wide meaning, contrary to a settled
policy, 'excepting as a different purpose is plainly shown.'"
United State v. American Trucking Assn., Inc.,
310 U. S. 534,
310 U. S.
543-544 (1940) (footnotes omitted).
JUSTICE BLACKMUN, with whom JUSTICE BRENNAN and JUSTICE MARSHALL
join, concurring in the judgment.
This case concerns the Bankruptcy Act of 1978, 11 U.S.C. § 101
et seq. (1976 ed., Supp. V), and, in particular, the
exemption provisions of § 522 of that Act. Specifically at issue is
the effect of certain of these exemption provisions upon
nonpossessory, nonpurchase-money obligations given by debtors to
small loan companies before the enactment of the
Page 459 U. S. 83
Act. The purported liens apply generally, not specifically, to
property of the kind described and, as a practicable matter, there
is nothing to prevent the debtor's selling the property and
replacing it or not replacing it, just as he chooses.
Section 522, for the first time, established a set of federal
exemptions for individual debtors. Concededly, the section, as all
similar statutes, was enacted to protect the debtor's essential
needs and to enable him to have a fresh start economically. Section
522(f)(2) permits the debtor to "avoid the fixing" of a
nonpossessory, nonpurchase-money security interest in certain
property, but the subsection does not extend to all property
otherwise exempt under § 522(d). It is limited to certain personal
items, such as household furnishings, wearing apparel, jewelry,
tools of the debtor's trade, and professionally prescribed health
aids.
The Court naturally struggles with the question of the
application of the new exemption provisions to obligations created
before the new Act. It notes its concern with constitutional
problems, and it also greets with obvious relief the possibility of
construing the Act as being only prospective in its operation. It
then quickly pursues the latter route in order to avoid any
constitutional issue.
I understand and can sympathize with the Court's desire thus to
resolve the case. It is usually much easier to construe a statute
so as to avoid a constitutional issue than it is to resolve the
constitutional issue itself. And, of course, the Court's cases have
announced that, where feasible, this is the preferred method.
See, e.g., Lorillard v. Pons, 434 U.
S. 575,
434 U. S. 577
(1978).
Were we writing on a "clean slate," however, I would not pursue,
in this case, that principle of construction preference, for I
think that the case would deserve consideration in greater depth. I
see nothing in the statute with which we are concerned that speaks
or hints of only prospective applicability, or that compels it, and
I would find it necessary to reach the constitutional issue. I
would then resolve that
Page 459 U. S. 84
issue in favor of the debtor and against the small loan company
creditor. I would do so because the exemptions in question are
limited as to kinds of property and as to values; because the
amount loaned has little or no relationship to the value of the
property; because these asserted lien interests come close to being
contracts of adhesion; because repossessions by small loan
companies in this kind of situation are rare; because the purpose
of the statute is salutary, and is to give the debtor a fresh start
with a minimum for necessities; because there has been creditor
abuse; because Congress merely has adjusted priorities, and has not
taken for the Government's use or for public use; because the
exemption provisions in question affect the remedy, and not the
debt; because the security interest seems to have little direct
value and weight in its own right, and appears useful mainly as a
convenient tool with which to threaten the debtor to reaffirm the
underlying obligation; because the statute is essentially economic
regulation, and insubstantial at that; and because there is an
element of precedent favorable to the debtor to be found in such
cases as
Penn Central Transp. Co. v. New York City,
438 U. S. 104
(1978), and
PruneYard Shopping Center v. Robins,
447 U. S. 74
(1980).
But we are not writing on a clean slate. It seems to me that the
case of
Holt v. Henley, 232 U. S. 637
(1914), is precisely in point and, unless the Court chooses to
overrule it, must control the present case. There, Holt and the
eventual bankrupt signed an agreement in 1909 for the installation
of an automatic sprinkler system on the property of the eventual
bankrupt. The agreement specified that the system was to remain
Holt's property until paid for, and that he was to have a right to
enter and remove it upon failure to pay as agreed. Thereafter, but
also in 1909, a mortgage deed was executed covering the plant and
what was "acquired and placed upon the said premises during the
continuance of this trust."
Id. at
232 U. S. 639.
Section 8 of the Act of June 25, 1910, ch. 412, 36 Stat. 840,
amended § 47a(2) of the then Bankruptcy
Page 459 U. S. 85
Act to give the trustee in bankruptcy, as to property coming
into the custody of the bankruptcy court, the rights of a creditor
holding a lien. Upon Holt's debtor's bankruptcy, the mortgagees
claimed the sprinkler system.
Justice Holmes, writing for a unanimous Court, observed that,
before the amendment, "Holt had a better title than the trustees
would have got," and that the Court was of the opinion "that the
act should not be construed to impair it." 232 U.S. at
232 U. S. 639.
He went on:
"We do not need to consider whether, or how far, in any event,
the constitutional power of Congress would have been limited. It is
enough that the reasonable and usual interpretation of such
statutes is to confine their effect, so far as may be, to property
rights established after they were passed. . . . That is a familiar
and natural mode of interpretation. . . . We are of opinion that
[Holt's title] was not affected by the enactment of later date than
the conditional sale. The opposite construction would not simply
extend a remedy, but would impute to the act of Congress an intent
to take away rights lawfully retained, and unimpeachable at the
moment when they took their start."
Id. at
232 U. S.
639-640. The Court then ruled against the claim of the
mortgagees because they had made no advance on the faith of the
sprinkler system, and were not purchasers for value as against
Holt, and because removal "would not affect the integrity of the
structure on which the mortgagees advanced."
Id. at
232 U. S.
641.
Holt v. Henley thus also involved a preexisting
agreement, a subsequent change in the then Bankruptcy Act, and the
Court's preservation of the preexisting right. I see no way to
distinguish that case from this one, and I would affirm the
judgment of the Court of Appeals simply on the compelling authority
of
Holt v. Henley. See also Auffm'ordt v. Rasin,
102 U. S. 620,
102 U. S. 622
(1881). I would much prefer to avoid in this way the dicta the
Court enunciates with respect to "takings."