THOMAS B. BENNETT, Bankruptcy Judge.
Amasa Coleman Lee, the father of Harper Lee, is famous for being the inspiration behind Atticus Finch in To Kill a Mockingbird, but he should also be remembered for his work in the Alabama Legislature. Although a newly elected member of the Alabama Legislature, A.C. Lee chaired the Recess Bond Law's Committee
The eligibility of Jefferson County, Alabama (hereinafter sometimes the "County") as a municipality that may adjust its debts under chapter 9 of the Bankruptcy Code, 11 U.S.C. §§ 901 et seq. is being challenged by The Bank of New York Mellon, as the Indenture Trustee for holders of warrants ("Indenture Trustee") issued by Jefferson County to pay for remediation, improvements, and expansion of its sewer system. The Indenture Trustee has been joined by The Bank of Novia Scotia; Société Générale, New York Branch; State Street Bank and Trust Company; Lloyds TSB Bank PLC; The Bank of New York Mellon; Assured Guaranty Municipal Corp.; Bank of America, N.A.; Financial Guaranty Insurance Company; JP Morgan Chase Bank, N.A.; Blue Ridge Investments, LLC; and Jeffrey Weissman D.D.S., Jeffrey Weissman D.D.S., P.C. and Keith Shannon (hereinafter Indenture Trustee and all of the other objecting parties are collectively referred to as the "Objectors") which/who are also asserting that Jefferson County does not meet the requisites of 11 U.S.C. § 109(c) setting forth when an entity may be a debtor under chapter 9.
At a hearing on December 15, 2011, the County presented evidence to establish that it met the requirements of 11 U.S.C. § 109(c)(1)-(5). At the conclusion of the hearing, this Court orally ruled that Jefferson County met four of the five requirements for being a debtor under chapter 9. Hr'g Tr. 202 Dec. 15, 2011. These four requirements are that it is a municipality for purposes of 11 U.S.C. § 109(c)(1), is insolvent as determined for 11 U.S.C. § 109(c)(3), desires to effect a plan to adjust its debts consistent with 11 U.S.C. § 109(c)(4), and had negotiated in good faith with creditors and failed to obtain an agreement with the necessary majority of creditors by class of claims intended to be impaired under a plan of adjustment before filing bankruptcy as required by 11 U.S.C. § 109(c)(5)(B). With respect to each of these four portions of § 109(c), the evidence overwhelmingly demonstrated the County's qualification and no meaningful challenge was made to these aspects of its eligibility.
The focus of the Objectors' assault on the County's eligibility is the requirement of 11 U.S.C. § 109(c)(2), which contains the following:
Since the July 17, 1935, effective date of Acts of Alabama 1935-197, and Acts of Alabama 1935-198, 1935 Ala. Acts 586, which were codified in § 2294(1) & (2) of the 1936 Cumulative Supplement to the Code of Alabama 1928, various Alabama municipal entities, including counties, cities, and towns have utilized the grant of authority and assent given by Alabama to municipal entities to initiate and prosecute a bankruptcy case. This authority and assent are now set forth in Ala.Code § 11-81-3 (2008). Until August 31, 2010, no court had restricted the application of Ala. Code § 11-81-3 (2008) to only municipal entities that had bond indebtedness outstanding as of the date of the filling of a bankruptcy case.
On August 31, 2010, in the case captioned In re City of Prichard, Alabama, case number 09-15000-WSS, the United States Bankruptcy Court for the Southern District of Alabama, dismissed the City of Prichard's chapter 9 case based on its determination that the city had no outstanding bond debt and that Ala.Code § 11-81-3 (2008) required outstanding bond indebtedness as a precondition to Alabama's grant of authority and assent to its municipalities' commencement of a bankruptcy case under the laws of the United States. This ruling was appealed to the United States District Court for the Southern District of Alabama. The District Court certified to the Supreme Court of Alabama the issue of whether bond indebtedness is a requisite for Alabama's municipalities to avail themselves of the bankruptcy authorization of Ala.Code § 11-81-3 (2008). This certification is currently under consideration by the Supreme Court of Alabama.
As one may have surmised by now, the over $4,000,000,000.00 indebtedness of Jefferson County does not include bonds. The vast majority is in the form of warrants.
Despite these earlier bond issues and as of the filing of Jefferson County's bankruptcy case, the undisputed evidence is that the County had no outstanding bond debt. Possibly as a backstop to anticipated arguments on eligibility, the Jefferson County Commission authorized by its July 26, 2011, resolution the "issuance of bonds or further warrants when, as and if necessary or desirable to restructure its long-term debts." Resolution Jul-26-2011-580. Some of the Objectors challenge the effectiveness of this resolution. In light of this Court's determinations, the effect and necessity of the July 26th resolution need not be addressed.
These are the facts directly relevant to § 109(c)(2)'s eligibility requirement for Jefferson County to be a municipal debtor under chapter 9 of the Bankruptcy Code, 11 U.S.C. §§ 901 et seq. A more comprehensive fact presentation is set forth in this Court's Memorandum Opinion dated January 19, 2012, Docketed Number 554. The fact portion of the January 19, 2012, Memorandum Opinion is incorporated herein by reference.
Section 109(c)'s eligibility requirements were made part of the current bankruptcy statute as the outcome of the Supreme Court of the United States' decision in Ashton v. Cameron Cnty. Water Improvement District No. 1, 298 U.S. 513, 56 S.Ct. 892, 80 L.Ed. 1309 (1936). Ashton upheld a challenge to the 1934 act captioned "Provisions for the Emergency Temporary Aid of Insolvent Public Debtors and to Preserve the Assets Thereof and for other Related Purposes," which amended the Bankruptcy Act of 1898 by adding three sections, §§ 78, 79 & 80, constituting a new chapter 9. The Ashton court struck down this amendment, in part, as constituting a violation of the sovereignty of states protected under the Tenth Amendment to the United States Constitution. In response to Ashton, Congress passed another amendment to the Bankruptcy Act of 1898, captioned "The Municipal Corporation Bankruptcy Act," 28 U.S.C.A. §§ 401-404, that incorporated what Justice Cardozo articulated in his dissent in Ashton for why the Constitution's grant of authority for uniform laws on bankruptcy to the federal government, see U.S. Const. Art. 1, § 8, cl. 4, permits it to adopt municipal bankruptcy laws without violating the Tenth Amendment. The Supreme Court upheld this amendment in United States v. Bekins, 304 U.S. 27, 58 S.Ct. 811, 82 L.Ed. 1137 (1938), premised on the absence of impairment of state sovereignty when a state authorizes its municipal subdivisions to file bankruptcy in a manner evidencing the State's consent and the filing is voluntary. These were requirements embodied in this 1937 amendment to the Bankruptcy Act of 1898, id. at 47-54, 58 S.Ct. 811, which have been carried forward into the Bankruptcy Code, 11 U.S.C. §§ 101 et seq. Thus, the specific authorization necessity of § 109(c)(2) of the Bankruptcy Code.
The burden of proof for § 109(c) eligibility purposes is on the debtor municipal entity. In re Cnty. of Orange, 183 B.R. 594, 599 (Bankr.C.D.Cal.1995). Because the interpretation of Ala.Code § 11-81-3
Statutes are often the subject of legal battles. Their purposes and meanings are also instances where numerous, sometimes arcane, and other times inscrutable and conflicting, rules of construction are proffered to courts in support of arguments over what a statute does and does not allow. The issues in this fight over Jefferson County's qualification as an entity eligible to be a debtor under chapter 9 of the Bankruptcy Code, 11 U.S.C. §§ 901 et seq., entail arguments by the opposing parties over the wording of one of Alabama's statutes by employing these rules.
What makes this Court's consideration of the arguments more involved are three statutes that are somewhat singular, but not unique.
Analyzing the impact of these three portions of the Code of Alabama 1975 along with the historical evolution of Alabama's county and municipal entity bankruptcy authorization assists in knowing the scope of grants of Ala.Code § 11-81-3 (2008) for settlement and readjustment of indebtedness including bankruptcy. Also, understanding the effect of the repeal of an Alabama Code section, Art. 9, § 235 of the Code of Alabama 1923, in conjunction with the 1927 enactment of "The Municipal Bond Code" set forth in Article 40A, § 2294(1)-(70) of the Code of Alabama 1928 reveals some of why words in Ala. Code § 11-81-3 (2008) are not to be interpreted in the way suggested by some of the parties. Essentially, the repeal of this section caused counties to lose powers they had for resolving bond indebtedness.
It is indisputable that Alabama has authorized its counties, cities, towns, and municipal authorities to initiate a bankruptcy case under the provisions of the bankruptcy laws of the United States. It is equally certain that the State of Alabama has explicitly consented to such filings. The statute containing this authority and consent is currently located in the Code of Alabama 1975 at Ala.Code § 11-81-3 (2008). The contest is the scope of application of the authority granted for and consent to filing bankruptcy. Part of the Objectors' arguments are founded on where the bankruptcy authority and consent are found in the Code of Alabama and part are premised on the language of the statute. The contentions of the parties premised on the locus of the statute and its words are offered to this Court using various rules for statutory interpretation. At least one is based on the tense of the phrase "which shall authorize" as it is used in Ala.Code § 11-81-3 (2008).
The location of the settlement and readjustment of indebtedness authority for counties, cities, towns, and municipal authorities is in Title 11 of the Code of Alabama 1975, which sets forth various provisions dealing with counties and municipal corporations. Title 11 is captioned "Counties and Municipal Corporations." Ala.Code §§ 11-1-1 et seq. (2008). The chapter within which the bankruptcy filing authorization may be found is Chapter 81, which is captioned "Municipal Bonds" and the article is Article 1 for "General Provisions." The section focused on by the parties is captioned and its language is:
Ala.Code § 11-81-3 (2008). Another section of the Code of Alabama 1975 not given sufficient attention is Ala.Code § 11-81-4 (2008). Its caption and language are:
Ala.Code § 11-81-4 (2008). It is part of the enhanced refinancing and restructuring of debt authority first enacted in 1935. Compare Act 1935-198, with Act 1935-197.
Part of the error in many of the interpretations pushed by various parties is that they either explicitly assume or implicitly rely on the placement of Ala.Code 11-81-3 (2008) and/or the descriptive headings developed by the codification process. Why this is inappropriate under Alabama's laws involves knowing its statutes directing how its laws are to be read.
Initially and during the approximate forty-two year span from their 1935 date of incorporation into the Code of Alabama 1928 until the 1977 effective date of the Code of Alabama 1975, the prior versions of what are now Ala.Code §§ 11-81-3 & 4 (2008) were one section in the various Codes of Alabama, not as they appear now in separate sections. See Ala.Code § 37-253 (1958); Ala.Code § 37-253 (1940); Ala.
This section of the Code of Alabama 1975 reads:
Id. (emphasis added). Without § 1-1-14, one may intuit that the location and caption of a statute is relevant to its meaning. However, Ala.Code § 1-1-14 (1999) demonstrates why intuition without sufficient legal research is wrong when it comes to ascertaining the purpose and scope of Alabama's laws including Ala.Code § 11-81-3 (2008)'s readjustment of indebtedness and bankruptcy authority.
The Supreme Court of Alabama has recognized the importance of Ala.Code § 1-1-14 (1999) when determining the meaning of a statute. In Ex parte McLeod, 841 So.2d 260 (2001), it was dealing with the interpretation of a portion of the Fair Dismissal Act, Ala.Code § 36-26-100, Code of Alabama 1975, delineating full time employees as those whose duties require twenty hours or more of work in each workweek. In rejecting the use of a section's heading to interpret a statute, the Alabama Court noted:
Id. at 264-65 (emphasis added).
In Chrysler Motor Corp. v. Cole, 563 So.2d 1040 (Ala.Civ.App.1990), the Alabama Court of Civil Appeals dealt with
Added to these points are the facts of McLeod, Chrysler Motor Corp., and Reed. Each involved statutes imprecisely located and/or having texts different from the headings, captions, and catchlines of the Code of Alabama.
This is precisely the case for Ala.Code § 11-81-3 (2008). Its Alabama Code caption is "Powers of counties and municipalities authorizing issuance" as part of the general provisions of Article 1 of Chapter 81 regarding "Municipal and County Bonds." The wording of its content is quite different from what the location and headings denote. The text of the section delineates the authority to enter into and fulfill a plan or agreement for the settlement, adjustment, refunding, and funding of indebtedness, which by the literal language is not limited to bonded indebtedness and by the same language is either within or outside the context of a bankruptcy case. See Ala.Code § 11-81-3 (2008). One ramification of Ala.Code § 1-1-14 (1999) is the arguments premised on the location of Ala.Code § 11-81-3 (2008) and the descriptive headings are, as a matter of Alabama law, incorrect.
Alabama has Ala.Code § 1-1-14 (1999) because its Code Commissioner has a role in the placement of Alabama's laws into its Code. Currently, Ala.Code § 29-7-6(a)(6) (2003) makes the Director of the Legislative Reference Service of Alabama its Code Commissioner for the Code of Alabama 1975. In the latter capacity, this person is responsible for incorporating into the Alabama Code all laws and changes in laws resulting from the enactments of the Alabama Legislature. This statute unequivocally provides that the role of the Code Commissioner is not a delegation of the Legislature's policymaking powers. Section 29-7-8(a) (2003) sets forth that, while the Code Commissioner is empowered to place legislative enactments into what the Code Commissioner determines is the appropriate location and to perform editorial functions that include adding and deleting words, these actions "may not alter the sense, meaning or effect of any act." Id.
The scope of the Code Commissioner's designated duties includes changing the wording of descriptive headings and catchlines, changing and substituting hierarchy
While the statutory creation of a permanent Code Commissioner occurred in 1993 by Act 1993-618, ad hoc Code Commissioners or the equivalent were created who/which compiled all of the iterations of the Alabama Code dating back to at least the Alabama Code of 1852. 1969 Ala. Acts 2169; 1939 Ala. Acts 462; 1923 Ala. Acts 128; 1907 Ala. Acts 499; 1903 Ala. Acts 298; 1896-97 Ala. Acts 1089; 1894-95 Ala. Acts 1001; 1886-87 Ala. Acts 43; 1875-76 Ala. Acts 160; 1859-60 Ala. Acts 88; 1849-50 Ala. Acts 43. In the past, the Code Commissioner was sometimes one of the publishers of the Code of Alabama working in concert with a joint legislative committee formed for purposes of compiling a Code. Other times, the position was filled by one or more individuals appointed either by an act of Alabama's Legislature or by its Governor. During some compilations of a Code of Alabama, the duties of the Code Commissioner were performed by a Code Commission or a Code Committee. Regardless of the title, be it Code Commissioner, Code Commission, or Code Committee, the functions performed were virtually the same and the process utilized had few, if any, significant differences from how the Code of Alabama 1975 was put together. Compare Act of Ala. 93-618, with 1969 Ala. Acts 2169, 1939 Ala. Acts 462, 1923 Ala. Acts 128, 1907 Ala. Acts 499, 1903 Ala. Acts 298, 1896-97 Ala. Acts 1089, 1894-95 Ala. Acts 1001, 1886-87 Ala. Acts 43, 1875-76 Ala. Acts 160, 1859-60 Ala. Acts 88, and 1849-50 Ala. Acts 43.
For the compilation of the Code of Alabama 1975, The Michie Company and the Bobbs-Merrill Company were collectively the Code Commissioner and collaborated with the Alabama Legislature through the Joint Legislative Subcommittee on Code Revision of the Alabama Senate and the House of Representatives (the Joint Committee). As part of this process, The Michie Company and Bobbs-Merrill Company solicited the views of the Alabama State Bar, the Legislative Reference Service, other groups and associations, and attorneys throughout Alabama. The Joint Committee and the Code Commissioner communicated via a series of memoranda dedicated to each title of the draft compilation of the 1975 Code. These communications include the recommendation by the Code Commissioner to the Joint Committee and its responses, which sometimes include agreeing with what the Code Commissioner proposed and other times disagreeing and providing edited or alternative language.
The Alabama Department of Archives and History and the University of Alabama School of Law have retained the
These communications show that the cleavage of the single section dealing with settlement and readjustment of debts of counties and other municipalities in former § 37-253 was at the recommendation of the Code Commissioner, and agreed to by the Joint Committee. See Exhibit 2. It was not the result of a specific enactment of the Alabama Legislature for purposes of amending or altering the scope of what its counties and other municipal entities had been and continue to be authorized to do for the settlement and readjustment of their indebtedness including the authorization for a municipal bankruptcy under federal law. Rather, it is the result of the vagaries of codification, as was its original placement in one section.
One of the best ways to see why location and captions are not to be used for statutory interpretation is to expand on the locations and captions of Act 1935-197, Act 1935-198, 1935 Ala. Acts 586, and their successor provisions over the last seventy-seven years. Following each statute's enactment, both Act 1935-197 and Act 1935-198 were located in the 1936 Cumulative Supplement to the Code of Alabama 1928's Chapter 42A titled "Municipal Corporations" under Article 40 captioned "Bonded Indebtedness; Refunding; Subrogation to Rights of Stockholders." At the time of placement of Act 1935-197 & 198 into Article 40, all of the sections that previously had been in Article 40 had been repealed. Ala.Code § 2294(70) (Supp.1936). Strikingly and despite the repeal of all of Article 40, the Code Commissioner codification process reused the caption for the repealed article and its article number for placement and captioning of Act 1935-197 and Act 1935-198. Instead of this placement and captioning, locating these Acts in chapter and/or article more properly associated with their purposes under more accurate captions would have potentially avoided the very interpretation arguments this Court now has to resolve.
Even more notable is that Act 1935-197 and Act 1935-198 were not initially located in The Municipal Bond Code or another article with language authorizing and setting the conditions upon which bonds could be issued and refunded. The heading for subsection 2293(1) where Act 1935-197 was located was "Refinancing indebtedness; procedure according to act of congress." Ala.Code § 2293(1) (Supp.1936). Act 1935-198 was located in subsection 2293(2) bearing the descriptive caption "Issuance as refunding certificates, etc." Ala.Code § 2293(2) (Supp.1936). In the Code of Alabama 1940, their location was as one section with no subsections in Chapter 6, which bore the heading "Municipal Bonds." This single section was § 37-253 Code of Alabama 1940 bearing the heading
In the Code of Alabama 1975 as originally codified, the settlement, adjustment, refunding and funding authority, and the bankruptcy authority were separated from the funding and refunding grant for certificates of indebtedness, warrants, and notes as part of the codification process—not by an amendatory act of Alabama's Legislature
By 2008 and even though Ala.Code § 11-81-3 (2008) and Ala.Code § 11-81-4 (2008) remained in the same Title, Subtitle, and Chapter, the section headings had once more been altered. Section 3's heading now reads "Powers of counties and municipalities authorizing issuance." That for section 4 reads "Municipal refunding certificates of indebtedness, notes or warrants." Ala.Code §§ 11-81-3 & 4 (2008).
Over the course of approximately forty years from the enactment of Alabama's granting of authority to all of its counties to settle, adjust, fund and refund indebtedness, and to utilize any statute of the United States to readjust their debts, the code codifying processes moved these grants of authority from outside The Municipal Bond Code to a place within the statutes regulating the issuance of bonds and their refunding. Similarly, the descriptive headings in the various Codes of Alabama went from indicating authority to refinance indebtedness and readjustment of debts under laws of the United States to being limited in scope to the issuance of what appears without analysis to be only bonds. Failing to learn and understand that the Code Commissioner codification process made Ala.Code § 11-81-3 (2008)'s intent by appearance different from what it is, results in not knowing that the edicts of Ala.Code §§ 1-1-14 (1999) & 29-7-8 (2003) proscribe any transformation of the substance and intent of the law as enacted.
This discussion demonstrates one of the types of events for which Alabama's Legislature included Ala.Code § 29-7-8(a) (2003)'s directive that such changes or edits "may not alter the sense, meaning or effect of any act." It also illustrates one of the codification problems that caused Alabama's Legislature to enact clear and unambiguous language that the location selected in a Code's compilation shall not dictate or drive a statute's purpose and meaning and that the various captions, headings, and catchlines shall not be used to interpret the purpose and meaning of a statute. Not following Alabama courts' holdings and its statutes in this respect would not comport with the purposes of Ala.Code § 1-1-14(a) & (b) (1999)'s expression that the classification, organization, and headings of the current Alabama Code "are made for the purpose of convenient reference and orderly arrangement, and no implication, inference or presumption of a legislative construction shall be drawn therefrom."
Determining the purpose of what is now in Ala.Code § 11-81-3 (2008) also highlights the wisdom embedded in Ala.Code §§ 1-1-14 (1999) & 29-7-8 (2003) and that these two sections are complementary and supplemental to each other. Because of their importance in consideration of what has occurred over more than a seven decade span to the refinancing, settlement, and adjustment of municipal indebtedness authority and assent, it bears repetition that locations of acts and their captions and other descriptive headings are not to be utilized to alter, in whole or in part, what the acts of Alabama's Legislature implemented. Unfortunately, these statutes have been overlooked by the Objectors and others in the process of constructing their arguments interpreting Ala.Code § 11-81-3 (2008).
Prior to a more detailed look into Ala.Code §§ 11-81-3 & 4 (2008), one group of arguments used by some of the Objectors based on the tense of words in one sentence of Ala.Code § 11-81-3 (2008) must be parsed. It is premised on the first sentence of § 11-81-3 which reads in relevant part:
Ala.Code § 11-81-3 (2008) (emphasis added). Based on the "which shall authorize" verbiage, the Indenture Trustee and some of the other Objectors argue that this sentence requires Alabama counties to have already outstanding bonds. First, this interpretation is contrary to the plain, natural, and unambiguous language. It overlooks that the sentence is for the settlement, adjustment, refunding or funding of indebtedness, not just bond indebtedness. Furthermore, it disregards that the sentence is not limited to refunding of bonds. Refunding of bonds is coupled with funding of bonds for, among other purposes, the restructuring of non-bond indebtedness by funding it with bonds. In other words, it clearly encompasses the contemporaneous and future issuance of bonds. Under Alabama's case law, words of a statute "must be given their natural, plain, ordinary, and commonly understood meaning" and when "plain language is used" courts are required to interpret the language to mean what it says. DeKalb Cnty. LP Gas Co. v. Suburban Gas, Inc., 729 So.2d 270, 275-76 (Ala.1998); Blue Cross & Blue Shield of Ala., Inc. v. Nielsen, 714 So.2d 293, 296 (Ala.1998); IMED Corp. v. Sys. Eng'g Assocs., 602 So.2d 344, 346 (Ala.1992). The interpretation posited by the Objectors is contrary to this principle of Alabama's statutory construction case law.
In some instances, this case law based interpretation rule would be sufficient to dispatch the argument that pre-existing bond indebtedness is required by the language of the first sentence of Ala.Code § 11-81-3 (2008). However, another aspect of Alabama's laws is a statute of superceding importance to this case law. It has been in all of Alabama's Codes from at least the Code of Alabama 1907. It eliminates all of the Indenture Trustee's and other Objectors' arguments structured on their version of the tense of the language of the first sentence of Ala.Code 11-81-3 (2008). These Objectors urge a past tense meaning for the phrase "which shall authorize." Jefferson County argues that its meaning is not in the past tense. Various dictionaries delineate that "shall" as used in this section of the Code is present tense. See Merriam-Webster's Collegiate Dictionary 1075 (10th ed. 1999); The Oxford English Dictionary 607-13 (1st ed. 1933); Webster's Third New International Dictionary 2085-86 (1993).
Should the Objectors be correct in their past tense classification of "which shall authorize," they lose their argument that the first sentence of Ala.Code 11-81-3 (2008) requires pre-existing outstanding bonds. Likewise and if it is a present tense usage, the Objectors fail in their contended interpretation for this sentence. This result is demanded by a section of the Code of Alabama 1975 set forth in "Title 1 General Provisions," "Chapter 1 Construction of Code and Statutes." The wording of the pertinent sentence in this section, the first sentence of Ala.Code § 1-1-2 (1999) under the caption "Tense—Gender—Number" is: "Words used in this code in the past or present tense include the future, as well as the past and present (emphasis added)." In addition to having been in the Codes of Alabama for over a century, the words in this section have remained identical in all versions of the Codes of Alabama from at least the 1907 Code to today's. See Ala.Code § 1-1-2 (1999); Ala.Code § 1-1 (1958); Ala.Code § 1-1 (1940); Ala.Code § 1 (1928); Ala. Code § 1 (1923); Ala.Code § 1 (1907).
Thus, the "which shall authorize" language is not restricted to having outstanding
Learning why the first sentence of Ala. Code § 11-81-3 (2008) was made part of Act 1935-197 facilitates knowing the purpose, meaning, and consequentially, the scope of applicability of this bankruptcy authorization and assent. To accomplish this, one must examine the contents of Alabama's statutes in existence before the 1935 enactment of what is now Ala.Code § 11-81-3 (2008). In particular, Chapter 16, Article 9, § 235 of the Code of Alabama 1923 is of moment in any analysis of the competing interpretations over Jefferson County's qualification to file a municipal bankruptcy case.
Article 9 of the Code of Alabama 1923 dealt exclusively with the grant of authority and the terms under which counties were permitted to settle, adjust, and refund bond indebtedness. It contained four sections, §§ 235 through 238. The grant of authority to settle, adjust, and refund bonds that was set forth in § 235 read:
Because counties are subdivisions of the State of Alabama, the powers and authorities each possesses are obtained by express grants of powers by the State. Without such grants, its counties and other political subdivisions do not have the ability to perform functions that they might desire or need to undertake. Trailway Oil Co. v. City of Mobile, 271 Ala. 218, 122 So.2d 757, 760 (1960) (citing Yeilding v. State ex rel. Wilkinson, 232 Ala. 292, 167 So. 580, 583-84 (1936)); State ex rel. Chilton Cnty. v. Butler, 225 Ala. 191, 142 So. 531, 532 (1932). In terms of the legal capability of Alabama's counties to settle, adjust, and refund outstanding bond indebtedness, § 235 of the Code of Alabama 1923 was the grant of authority to counties that allowed them to undertake such a settlement, adjustment, or refunding. Absent this section or another one giving the same authority, counties would not have had the power to settle, adjust, or refund outstanding bonds. See Trailway Oil Co., 122 So.2d at 760; Butler, 142 So. at 532.
During the later part of the 1920s as lead by A.C. Lee, the Alabama Legislature enacted Article 40A of Chapter 43 governing municipal corporations. All of the subsections, those from § 2294(1) through 2294(70), of Article 40A Code of Alabama 1928 constituted the "The Municipal Bond Code," which controlled every aspect of the authority for and conditions under which counties, among other municipalities, could thereafter issue bonds. Ala. Code 1923 § 2294(1). The Municipal Bond
Contemporaneous with the enactment of The Municipal Bond Code, §§ 235-238 of Article 9 of the Code of Alabama 1923 were repealed. Ala.Code § 2294(70) (1928).
Ala.Code § 2294(35) (1928) (emphasis added). The authority for counties to settle and adjust bond indebtedness was left out of this statute. From this point of time in 1927 until 1935, no other statute existed that granted Alabama's counties the authority to settle and adjust bond debt issued under The Municipal Bond Code. All that was allowed for counties under The Municipal Bond Code was refunding of such bonds without an election which could not exceed the outstanding, unpaid principal amount of the bonds to be refunded. Ala.Code § 2294(35) (1928).
Furthermore and for bonds in default, this statute excluded the use of refunding bonds for payment of accrued, unpaid interest. For bonds in default and those not, this subsection of The Municipal Bond Code also prevented the use of refunding bonds for all other sums required to be paid above the unpaid principal such as early redemption premiums. Conceptually, the result was that the many bond issues could not be fully refunded without an election other than those for which no default in interest payments had occurred and those for which there was no early redemption premium or like other sums.
In times of difficult financial problems for counties that had defaulted or would in the future default on bond indebtedness, § 2294(35) of the Code of Alabama 1923 and 1928 left Alabama's counties with limited options when dealing with restructuring bonds subject to The Municipal Bond Code. One option might have been to have
Approximately two years after the repeal of the settlement and adjustment authority for bond indebtedness, the Great Depression commenced. By 1935, Alabama and the rest of the United States were fully enveloped by the financial distresses of the Great Depression including county governments being unable to pay their obligations as and when they came due. This included both bonds and other debts along with operating expenses. This was part of the impetus for Congress to amend the Bankruptcy Code of 1898 to add specific provisions for municipal bankruptcies. See United States v. Bekins, 304 U.S. 27, 48-49, 58 S.Ct. 811, 82 L.Ed. 1137 (1938); Ashton v. Cameron Cnty. Water Improvement Dist. No. 1, 298 U.S. 513, 533-34, 56 S.Ct. 892, 80 L.Ed. 1309 (1936) (Cardozo, J., dissenting).
As has been indicated above and when it came to counties' abilities to settle and adjust outstanding bonds, the authority accorded counties by the Alabama in this 1927 to 1935 time frame only allowed a restricted refunding of bonds. As for certain types of interest bearing warrants, certificates of indebtedness, and notes, refunding authority was wanting as was the ability to use these forms of county indebtedness for funding of other debts including certain judgments. Additionally and as consequential to municipalities, the counties needed the ability to pledge for repayment of interest bearing warrants, certificates of indebtedness, and notes taxes, license fees, or revenues that the municipalities had previously been authorized to pledge for repayment of bond or other debts.
All of this adds up to the reasons for and purposes for, and the goals of Ala.Code §§ 11-81-3 & 4 (2008). They addressed the counties' lack of sufficient authority to deal with their debt problems, including the pre-1927 authority they previously had to settle and adjust bonds. This is the genesis of the first sentence of Act 1935-197, which is now the first sentence of Ala.Code § 11-81-3 (2008), and Act 1935-198, which is currently located in Ala.Code § 11-81-4 (2008).
These Acts became effective in 1935 and remain, as amended, part of the laws of Alabama designed to give all counties and certain other municipal entities the authority and tools necessary to settle, adjust, readjust, fund, and refund various forms of indebtedness. Ala.Code §§ 11-81-3 & 4 (2008). Furthermore, an important point that must not be overlooked is that both the first sentence of Act 1935-197 dealing with plans and agreements for the settlement, adjustment, refunding, or funding of indebtedness, now as amended, Ala.Code § 11-81-3 (2008), and Act 1935-198 dealing with funding and refunding of non-bond indebtedness, now as amended, Ala. Code § 11-81-4 (2008), were and are necessary for the restructuring of county indebtedness outside a bankruptcy case. Without each provision, severe limitations would exist on county and other municipal debt restructuring done outside a bankruptcy case. Likewise and in a bankruptcy case context, having a state's grant of authority to and its assent for filing a bankruptcy case when a municipality has not been granted authority to settle or adjust debts, at a minimum, raises legal issues including one regarding the scope of what such a municipality may do in a bankruptcy case without the delegated authority to settle and adjust debts.
Furthermore, Act 1935-197 & 198 were sequential in order and enacted on
One of the problems encountered in disagreements over the purpose, meaning, and intent of a statute is when opposing parties frequently recite the same rules of statutory construction in support of disparate readings of a law. This is just such a case. When applied properly, those cited resolve the dispute between the County and the Objectors.
Under Alabama's rules of construction, there are two rules that override all others. They are:
BP Exploration & Oil, Inc. v. Hopkins, 678 So.2d 1052, 1054 (Ala.1996); see also Bean Dredging, L.L.C. v. Ala. Dep't of Revenue, 855 So.2d 513, 517 (Ala.2003); IMED Corp., 602 So.2d at 346; Tuscaloosa Cnty. Comm'n v. Deputy Sheriffs' Ass'n of
Initially, this Court looks to the language of the statute. However, looking to the language of Ala.Code § 11-81-3 (2008) requires starting with the wording of the statute as enacted in 1935 in Act 1935-197. This is necessary due to alterations of the statute that were not the actions of Alabama's Legislature directed specifically to amend the law as enacted. Rather, some of the modifications to Ala.Code § 11-81-3 (2008) from its 1935 version are the result of the Code Commissioner codification process.
The wording of Act 1935-197 as codified in § 2293(1) Code of Alabama 1928 is:
The original version has three sentences. As it exists today, Ala.Code § 11-81-3 (2008) has only two. This is the result of the second sentence of the original being joined with the third sentence. This merger is one of the changes to the statute caused solely by the Code Commissioner codification process, and is not an act of Alabama's Legislature to amend the statute's purpose, to alter the necessity for it, or to alter the goals sought to be achieved.
These three sentences remained separate through a 1976 amendment of the Code of 1940 which related to a clarification of the portion of § 37-253 Code of 1940 dealing with funding and refunding of warrants, certificates of indebtedness and notes, not plans or agreements for the restructuring of indebtedness or the bankruptcy authorization. Act No. 107, 1976 Ala. Acts 102. Act 1976-107 is the last amendment to § 37-253 Code of Alabama 1940, the successor location of § 2293(1) & (2) Code of Alabama 1928, before its codification into the Code of 1975. Act 1976-107 has the first sentence of this statute unchanged from its original wording. The second and third sentences in Act 1976-107 are:
After this 1976 amendment, this is exactly how it appeared in § 37-253 Code of Alabama (1940)'s 1958 recompilation. Review of the acts of Alabama's Legislature from Act 1976-107 to the October 31, 1977 effective date of the Code of Alabama 1975 reveals no act of Alabama's Legislature that merged these sentences.
Added to the absence of an act merging these sentences as of the first compilation of the Code of Alabama 1975, an examination of the Legislative Transcript for the Code of Alabama 1975 along with the correspondence between the Code Commissioner and the Joint Committee reveals that this merger was not mentioned in either the Legislative Transcript or the correspondence setting forth changes proposed by the Code Commissioner to the Alabama Legislature's committee overseeing codification of the Code of Alabama 1975. See Exhibit 2.
Regardless of what happened as part of the compilation of the Code of Alabama 1975, one of the purposes of Ala.Code § 29-7-8 (2003) and its precursors is that changes such as the merger of these two sentences does "not alter the sense, meaning, or effect of any act." Ala.Code § 29-7-8 (2003). For Alabama statutory interpretation purposes, this results in the portion of what is the second sentence of Ala.Code § 11-81-3 (2008) before the words "and the state of Alabama" and that part commencing with these words being analyzed as separate sentences just as was the case over the forty-two years prior to October 31, 1977.
Next, this Court examines whether there is any ambiguity in the words of Ala.Code § 11-81-3 (2008). For if there is none, no statutory interpretation is required or allowed under Alabama case law. Ex parte Presse (Presse v. Koenemann), 554 So.2d 406, 411 (Ala.1989).
The first sentence of Ala.Code § 11-81-3 (2008) is clear and unambiguous. It empowers any county to authorize bonds to execute and fulfill any plan or agreement for settlement, adjustment, refunding, or funding of its indebtedness. It embraces using bonds for the refinancing of indebtedness, includes use of bonds for the funding of non-bond indebtedness by new bonds, and the authority to settle and adjust bond indebtedness. Viewed as it was intended to be, it is a grant of power to the counties and other municipal entities to restructure all of their indebtedness involving both outstanding bonds and bonds that may be issued so long as the funding and refunding bonds that may be issued as part of any restructuring comply with what is elsewhere required for bond issuance.
The portion of the second sentence preceding the "and the State of Alabama hereby gives its assent" is equally clear and unambiguous. It is another that is a grant of authority without which the counties, cities, towns, and certain municipal authorities would not have the power to act. It authorizes them to utilize and take the steps necessary to avail themselves of "any act of the Congress of the United States relating to readjustment of municipal
Following the Alabama courts' rule for determining a statute's intent by considering the "natural, plain, ordinary, and commonly understood meaning" of its words, see, e.g. Tuscaloosa Cnty. Comm'n, 589 So.2d at 689, the last portion of the second sentence of Ala.Code § 11-81-3 (2008)— the part that was a separate sentence until the Code Commissioner process merged it into the preceding sentence—is clear and unambiguous. The outcome is that "where plain language is used a court is bound to interpret that language to mean exactly what it says." Id.; Coastal States Gas Transmission Co. v. Ala. Public Serv. Comm'n, 524 So.2d 357, 360 (Ala. 1988). What it says is that the State of Alabama gives its consent to and authorizes "each county, city or town or municipal authority," not just those with outstanding bond debt, to proceed under acts for the readjustment of debts, not just bond debt.
Moreover and assuming solely for argument purposes an ambiguity exists, insertion of the words "having outstanding bonds" or similar wording in the first or second sentence of Ala.Code § 11-81-3 (2008) violates two other rules of statutory construction followed by Alabama courts. These rules provide that a legislature knows the meaning of words used in a law, see, e.g., USX Corp. v. Bradley, 881 So.2d 437, 442 (Ala.2003); Bean Dredging, 855 So.2d at 517, and that courts are not to supply words where the omission is not palpable and the omitted words are not plainly indicated by the
Further support for not reading into either the first or second sentence words to the effect that a county or other municipal entity must have outstanding bonds is that at the time of the 1935 enactment of this law, other subsections of The Municipal Bond Code, in particular § 2294(17) and § 2294(35) Code of Alabama 1928 relating to the requirements for refunding bonds, unequivocally specified the necessity of having outstanding bonds as a condition to issuance of refunding bonds without an election. Subsection 2294(17)'s language is "[t]he governing bodies of any municipality, now having bonds outstanding, may, without an election (emphasis added)," issue refunding bonds. Virtually identical are the words of § 2294(35) Code of Alabama 1928 that "[t]he governing body of any county now having bonds outstanding may without an election (emphasis added)" issue refunding bonds. Alabama's Legislature knew and knows the words of its laws, see, e.g., Blue Cross & Blue Shield, 714 So.2d at 297, and could have included similar restrictive words in Acts 1935-197, but it has never inserted such a restrictive phrase for its grants of power into Ala.Code § 11-81-3 (2008).
Just as portions of the Code of Alabama 1928 explicitly set forth a requirement that a county or other municipality desiring to issue refunding bonds have them outstanding, today's Code of Alabama 1975 contains such a requirement in numerous provisions governing the terms and conditions upon which refunding bonds may be issued. For instance, Ala.Code §§ 11-81-64 & 93 (2008) are the statutory descendants of §§ 2294(17) & (35) Code of Alabama 1928. Each limits issuance of refunding bonds to those "then outstanding" and "having bonds outstanding," respectively. Ala. Code § 11-81-172.1 (2008) gives added authority to counties and municipalities to issue revenue bonds for refunding the principal of "any outstanding general or limited obligation warrants." Likewise, Ala.Code § 11-81-166 (2008) deals with the issuance of revenue bonds and provides for their issuance for refunding of principal and interest on "any bonds ... theretofore issued under this article and then outstanding." These show that Alabama's Legislature knows the meaning of its words, see, e.g., USX Corp., 881 So.2d at 442; Bean Dredging, 855 So.2d at 517, and had it intended to require outstanding bonds for purposes of Ala.Code § 11-81-3 (2008), it knew how to include such wording in this statute. See Blue Cross & Blue Shield, 714 So.2d at 297. Yet, it has never done so.
Additionally, inserting such words or reading them into Ala.Code § 11-81-3 (2008) and the act from which it emanated creates a conflict between the refinancing and restructuring authority granted and the current laws governing bond issuance and the 1935 version of The Municipal Bond Code. The conflict is that The Municipal Bond Code did not, and the current statutes governing issuance of bonds, do
Besides this external conflict, the Objectors' suggested interpretation also makes the first sentence of Ala.Code § 11-81-3 (2008) internally inconsistent by limiting the settlement, adjustment, funding and refunding authority to only those with outstanding bonds when the sentence clearly contemplates all municipal entities having use of funding bonds for refinancing and restructuring all indebtedness. To paraphrase the Supreme Court of Alabama, the Objectors "would have us read a condition into [the statute] that doesn't appear on its face, that is inconsistent with persuasive... legislative history of the statute, and that does not comport with the ordinary function [of the purpose of the statute]. This we refuse to do." Pinigis v. Regions Bank, 977 So.2d 446, 456-57 (Ala.2007). Likewise, so does this Court.
Again assuming an ambiguity exists for argument purposes, the dual restrictions of Ala.Code § 1-1-14 (1999) and Ala.Code § 29-7-8 (2003) on what may be used to determine the purpose, meaning, and intent of enacted legislation do not constrain the use of an act's title, which is different from a title used in the Alabama Code. The Alabama Constitution of 1901 provides in Article IV, § 45 that:
Id. (emphasis added). This constitutional provision limits an act to one general subject which is to be fairly disclosed in the act's title. See Ala. Educ. Ass'n v. Grayson, 382 So.2d 501, 505 (Ala.1980); Opinion of the Justices, 294 Ala. 571, 319 So.2d 699, 702 (1975); Kendrick v. State, 23 Ala. App. 5, 120 So. 140, 141 (1928). The one general subject requirement of an act appropriately disclosed in its title is why the contents of the title of an act are meaningful for determining the purpose and reason underlying a statute in order to establish the underlying intent. The Supreme Court of Alabama has held that the title, sometimes referenced as a preamble, to an act may serve as an aid to statutory interpretation. DeKalb Cnty. LP Gas Co., 729 So.2d at 276; Jordan v. Reliable Life Ins. Co., 589 So.2d 699, 702 (Ala.1991).
Acts 1935-197 has an exquisitely explicit title:
Id. (emphasis added). It elucidates the reason for and purpose of the Act. The wording is plain and clear: the purpose was to enable "any" county, city or town to be able to restructure its debts and, if necessary, to initiate such a refinancing or restructuring of debts in or out of bankruptcy. The text does not indicate or reference any limitation on the authority conferred for filing bankruptcy. It has no language evidencing a restriction on the types of indebtedness that may be settled, adjusted, refunded, funded, or readjusted. To the contrary, the wording is expansive by its use of "any" for entities that may refinance indebtedness, and is equally broad by the use of "indebtedness," which may be refinanced or readjusted in lieu of more restrictive words such as bonds, warrants, or the like, and is similarly comprehensive when describing those counties, cities, and towns that are being authorized and given the State's assent to file a municipal bankruptcy case. There is no mention of having already outstanding bonds as a precondition to the grants of power in the Act.
Equally pristine in clarity as the title to Act 1935-197 is the title to Act 2001-959, 2001 Ala. Acts 839, which amended Ala. Code § 11-81-3 (2008). It reinforces that the title of Act 1935-197's indicated purpose for the grant of refinancing and restructuring authority to all counties, cities, and towns is not limited to bond debts. The caption to Act 2001-959 reads:
Id. (emphasis added). It is just as clear that it is for the refinancing and restructuring of all indebtedness. There is no wording that indicates it is to be limited to bonds. The language is, as that of Act 1935-197, to give the necessary grant of authority and the enhanced tools needed for financially distressed Alabama municipalities to restructure their debts outside or within a bankruptcy case. Construing Ala.Code § 11-81-3 (2008)'s reach by reference to the titles of these acts reveals just how wrong the Objectors' offered interpretation is while showing that the intent and purpose is to enable all of its counties, among other municipalities, to have the power to refinance and restructure their debts via bankruptcy as one of their debt readjustment tools.
Finding and understanding the significance of three sections of the Code of Alabama 1975, Ala.Code §§ 1-1-2 & 14 (1999) and Ala.Code § 29-7-8 (2003), is the key to knowing that Ala.Code § 11-81-3 (2008) empowers Jefferson County, Alabama to meet the eligibility requirement of
Of critical importance is undoing the yoke perceived as tying an Alabama statute's location with its meaning. Once one dislodges this concept from the tools of statutory interpretation and learns the reasons for and purposes of a law it becomes clear that Alabama's grant of authority and assent to its counties commencing a bankruptcy case applies to all of its counties and is not constrained by the types of debts outstanding on the day a bankruptcy case is initiated.
Some of what is required is knowledge of the evolution of Alabama's laws on refinancing and restructuring municipal debts. Also necessary is knowing what changes to the appearance of a statute caused by Alabama's Code Commissioner codification process have occurred over time and backtracking to see what alterations made to a statute—not the law as enacted—were the result of the codification process. By doing this, this Court has avoided interpretations of a law that "alter the sense, meaning, or effect of [it]," see Ala.Code § 29-7-8 (2003), which have been created by others based on a sequence of Code Commissioner codifications that over time changed the wording and placement of Ala.Code § 11-81-3 (2008), and which are proscribed by Ala.Code § 29-7-8 (2003). It is the transformed appearance of Alabama's law authorizing refinance and restructuring of counties' debts that cannot be undone unless this historical analysis is followed.
As part of this methodology, it is important to understand that the placement in the Codes of Alabama by the Code Commissioner codification process could have been, and originally was, outside The Municipal Bond Code and its successor Alabama Code provisions governing issuing bonds. Although Ala.Code § 11-81-3 (2008)'s placement in the general provisions governing bonds within the Code of Alabama 1975 may or may not have been fortuitous, its location via the Code Commissioner codification process, along with the current captions for it, are meaningless. The meaningless placement and captions are what underpin virtually all of the Objectors' arguments regarding the Act's intent. As a consequence, the Objectors' arguments are unsupportable under any statutory interpretation made consistent with Alabama's case law and statutes governing interpretation.
The benefit of the protracted process undertaken by this Court is that what is a critical issue to Jefferson County and the State of Alabama is given the attention that is mandated by the seriousness of the challenges to the County's eligibility to be a municipal bankruptcy debtor. The crux is that Jefferson County has demonstrated that it has meet all of the requirements of § 109(c)(1)-(5) of the Bankruptcy Code, 11 U.S.C. § 109(c)(1)-(5). Therefore, a separate order incorporating the findings of fact and conclusions of law set forth in this memorandum opinion will be entered overruling all of the objections to Jefferson County's eligibility as a municipal debtor. This order will also constitute an order for relief under chapter 9 of the Bankruptcy Code, 11 U.S.C. §§ 901 et seq.