Certiorari To The United States Court Of Appeals For The Seventh Circuit
No. 11–166. Argued April 23, 2012—Decided May 29, 2012
To finance the purchase of a commercial property and associated renovation and construction costs, petitioners (debtors) obtained a secured loan from an investment fund, for which respondent (Bank) serves as trustee. The debtors ultimately became insolvent, and sought relief under Chapter 11 of the Bankruptcy Code. Pursuant to 11 U. S. C. §1129(b)(2)(A), the debtors sought to confirm a “cramdown” bankruptcy plan over the Bank’s objection. That plan proposed selling substantially all of the debtors’ property at an auction, and using the sale proceeds to repay the Bank. Under the debtors’ proposed auction procedures, the Bank would not be permitted to bid for the property using the debt it is owed to offset the purchase price, a practice known as “credit-bidding.” The Bankruptcy Court denied the debtors’ request, concluding that the auction procedures did not comply with §1129(b)(2)(A)’s requirements for cramdown plans. The Seventh Circuit affirmed, holding that §1129(b)(2)(A) does not permit debtors to sell an encumbered asset free and clear of a lien without permitting the lienholder to credit-bid.
Held: The debtors may not obtain confirmation of a Chapter 11 cramdown plan that provides for the sale of collateral free and clear of the Bank’s lien, but does not permit the Bank to credit-bid at the sale. Pp. 3–10.
(a) A Chapter 11 plan proposed over the objection of a “class of secured claims” must meet one of three requirements in order to be deemed “fair and equitable,” and therefore confirmable. The secured creditor may retain its lien on the property and receive deferred cash payments, §1129(b)(2)(A)(i); the debtors may sell the property free and clear of the lien, “subject to section 363(k)”—which permits the creditor to credit-bid at the sale—and provide the creditor with a lien on the sale proceeds, §1129(b)(2)(A)(ii); or the plan may provide the secured creditor with the “indubitable equivalent” of its claim, §1129(b)(2)(A)(iii).
Here, the debtors proposed to sell their property free and clear of the Bank’s liens and repay the Bank with the sale proceeds, as contemplated by clause (ii). Because the debtors’ auction procedures do not permit the Bank to credit-bid, however, the proposed sale cannot satisfy the requirements of clause (ii). The debtors claim their plan can instead satisfy clause (iii) by providing the Bank with the “indubitable equivalent” of its secured claim, in the form of cash generated by the auction.
The debtors’ reading of §1129(b)(2)(A), under which clause (iii) permits precisely what clause (ii) proscribes, is hyperliteral and contrary to common sense. “[I]t is a commonplace of statutory construction that the specific governs the general.” Morales v. Trans World Airlines, Inc., 504 U. S. 374. Here, where general and specific authorizations exist side-by-side, the general/specific canon avoids rendering superfluous a specific provision that is swallowed by the general one. See D. Ginsberg & Sons, Inc. v. Popkin, 285 U. S. 204. As applied to §1129(b)(2)(A), the canon provides that the “general language” of clause (iii), “although broad enough to include it, will not be held to apply to a matter specifically dealt with” in clause (ii). 285 U. S., at 208. Although the canon can be overcome by other textual indications of statutory meaning, the debtors point to none here. Pp. 3–8.
(b) None of the debtors’ objections to this approach is valid. Pp. 8–9.
651 F. 3d 642, affirmed.
Scalia, J., delivered the opinion of the Court, in which all other Members joined, except Kennedy, J., who took no part in the decision of the case.