Aboody v. United States (In Re Aboody)Aboody v. United States (In Re Aboody)
Thе debtor, Grace Aboody, appeals from' an order of the United States Bankruptcy Court for the District of Massachusetts, granting a motion by the United States of America, on behalf of its agency, Small Business Administration (hereinafter “SBA”), to file a late proof of claim. The facts are not disрuted.
I. Background
The debtor filed a petition under Chapter 13 of the Bankruptcy Code on November 13, 1996. The debtor scheduled SBA in Schedule F, as an unsecured creditor in the amount of $68,417.70. The Clerk of the Court, by notice dated December 24, 1996, established May-12, 1997, as the deadline for the filing of proofs of claim by gоvernmental units. SBA did not file a timely proof of claim. On June 11,1997, SBA filed a motion to file a late proof of claim. The debtor
II. Standard of Review
Whether the “excusable neglect” standard is applicable in Chapter 13 cases is a question of law.
In re Smartt Const. Co.,
II. Discussion
The Bankruptcy Reform Act of 1994 amended 11 U.S.C. § 502 to provide that a proof of claim is not timely filed unless it is permitted under specified conditions in Chapter 7 or under the Federal Rulеs of Bankruptcy Procedure. 11 U.S.C. § 502(b)(9). This section also provides that “a claim of a governmental unit shall be timely filed if it is filed before 180 days after the date of the order for relief or such later time as the Federal Rules of Bankruptcy Procedure may provide.” Id.
Thus, under 11 U.S.C. § 502, the Federal Rules of Bankruptcy Procedure govern the filing of a proof of claim. Rule 3002 provides:
(a) Necessity for Filing. An unsecured creditor or an equity security holder must file a proof of claim or interest for the claim or interest to be allowed, except as provided in Rules 1019(3), 3003, 3004, and 3005.
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(c) Time for Filing. In a chapter 7 liquidation, chapter 12 family farmer’s debt adjustment, or chapter 13 individual’s debt adjustment case, a proof of claim is timely filed if it is filed not later than 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the Code, except as follows:
(1) A proof of claim filed by a governmental unit is timely filed if it is filed not later than 180 days after the date of the order for relief. On motion of a governmental unit before the expiration of such period and for cause shown, the court may extend the time for filing of a claim by the governmental unit.
Fed.R.Bankr.P. 3002. Although there аre four other exceptions to the 90 day time limit of Fed.R.Bankr.P. 3002(c), none are applicable here. Accordingly, pursuant to Fed.R.Bankr.P. 3002, SBA, as a governmental unit had 180 days to file a proof of claim or seek an extension of time for the filing of the claim.
Federal Rule of Bankruptcy Prоcedure 9006 governs requests for extensions of time. Rule 9006 provides:
(b) Enlargement
(1) In General. Except as provided in paragraphs (2) and (3) of this subdivision, when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after thе expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect.
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(3) Enlargement Limited. The court may enlarge the time for taking action under Rules 1006(b)(2), 1017(e), 3002(c) [governing the time for filing proofs of claim and requests for extension], 4003(b), 4004(a), 4007(c), 8002, and 9033, only to the extent and under the conditions stated in those rules.
Fed.R.Bankr.P. 9006(b). This Rule governs the Court’s discretion to extend the time for a party to act. Although the Court can generally permit actions based on excusable neglect under Fed.R.Bankr.P. 9006(b)(1), pursuant to Fed.R.Bankr.P. 9006(b)(3), the
The Bankruptcy Court relied on the Supreme Court’s decision in
Pioneer Investment Services Company v. Brunswick
Associates,
The time-computation and time-extension provisions of Rule 9006, like those of Federal Rule of Civil Procedure 6, are generally applicable to any time requirement found еlsewhere in the rules unless expressly excepted. Subsections (b)(2) and (b)(3) of Rule 9006 enumerate those time requirements excluded from the operation of the “excusable neglect” standard. One of the time requirements listed as excepted in Rule 9006(b)(3) is that governing the filing of proofs of claim in Chаpter 7 cases. Such filings are governed exclusively by Rule 3002(c). See Rule 9006(b)(3); In re Coastal Alaska Lines, Inc.,920 F.2d 1428 , 1432 (C.A.9 1990). By contrast, Rule 9006(b)(1) does not make a similar exception for Rule 3003(c), which, as noted earlier, establishes the time requirements for proofs of claim in Chapter 11 cases. Consequently, Rule 9006(b)(1) must be construed to govern the permissibility of late filings in Chapter 11 bankruptcies. See Advisory Committee’s Note accompanying Rule 9006(b)(1).
Pioneer,
The First Circuit Court of Appeals has not expressly decided the issue. However, little more than one month after
Pioneer
was decided, the First Circuit issued a decision in
Juniper Dev. Group v. Kahn (In re Hemingway Transp., Inc.),
In another more recent case,
Mercado-Boneta v. Administracion del Fondo de Compensacion Al Paciente through the Ins. Com’r of Puerto Rico,
What the legislature has done in this case is not unlike the situation in bankruptcy wherein creditors must file their claims against a debtor’s estate within a relatively short time period in order to have their claims recognized. See Rule of Bankr.Proc.3002(e) (in chapter 7 liquidation proof of claims shall be filed within 90 days of creditors’ meeting). The time limitations for filing claims against a bankrupt have been held to create an absolute bar against asserting the claim, rather than merely an issue of priority. See, e.g., Robinson v. Mann,339 F.2d 547 , 549 (5th Cir.1964) (time limitations for filing claims against debtor’s estate “operate аs an absolute bar against creditors who seek to present their claims beyond the [bar date].”); Norris Grain Co. v. United States,81 B.R. 103 , 106 (Bkrtcy.M.D.Fl.1987) (claims bar date is ‘in the nature of a statute of limitations [which] must be strictly observed.’) (quoting In re Kay Homes Inc.,57 B.R. 967 , 971 (Bkrtcy.S.D.Tex.1986) (alterations in original)). The purpose behind the claims bardate in bankruptcy, as in the ease bеfore us, is “to provide the debtor and its creditors with finality” and to “insure the swift distribution” of the liquidated estate. In re Schaffer, 173 B.R. 393 , 398 (Bkrtcy.N.D.Ill.1994) (quoting In re Zimmerman,156 B.R. 192 , 199 (Bkrtcy.W.D.Mich.1993)). See also In re Kolstad,928 F.2d 171 , 173 (5th Cir.1991) (“The deadlines have a purpose: they enable a debtor and his creditors to know, reasonably promptly, what parties are making claims against the estate and in what general amounts.”). “[Although aware that a bar date, like other limitation periods, would inevitably cause hardship on those who failed to act timely, Congress decided that the goal of finality is of greater benefit to the public than any benefit derived from allowing individual exceptions to the bar date.” Norris Grain Co.,81 B.R. at 106 (citing Hoos & Co. v. Dynamics Corporation of America,570 F.2d 433 , 439 (2d Cir.1978)); see also Hoos & Co.,570 F.2d at 439 (nоting that permitting bankruptcy court to consider allowing late claims in individual cases would “put the bankruptcy courts in the unenviable position of indefinitely having to consider claims” and that such a scenario “would destroy the objective of finality which Congress obviously intended to promote.”).
Id. аt 17. Thus, although the First Circuit did not have the issue of bankruptcy claims allowance before it in Mercado-Boneta, it appears likely that the Court would conclude that late filed claims cannot be allowed in Chapter 13, based on both statutory and policy considerations.
There are numerous reportеd bankruptcy decisions on the issue of whether the excusable neglect standard may be applied to allow the late filing of a proof of claim in any case other than Chapter 11. The majority of courts considering the issue have ruled that the excusable neglect standard applies only in Chapter 11. See
Jones v.. Arross,
In its motion to file a late proof of claim, the United States based its request on the assertion thаt “due to the workload and lack of support personnel, as well as illness, the last day for filing a proof of claim was overlooked,” and at the hearing before the Bankruptcy Court, SBA only addressed excusable neglect. The issue on appeal, as phrased by the debtor, оnly relates to whether the Bank
“Governmental entities, of course, do not enjoy the constitutional guarаnty of due process afforded by the Fifth Amendment to the Constitution of the United States. Notwithstanding, governmental entities are entitled to whatever statutory due process a given legislative scheme provides.”
In re Friesenhahn,
Due process requires notice that is “reasonably calculated to reach all interested parties, reasonably conveys all of the required information, and permits a reasonable amount of time for response.”
Oppenheim, Appel, Dixon & Co. v. Bullock (In re Robintech, Inc.),
In the present case, the United States and SBA had actual notice of the claims bar deadline 133 days prior to its expiration, and we conclude that this was adequate notice in that the government had a reasonable amount of time to comply with the fifing deadline or seek an extension of time to do so. SBA’s argument that it was deprived of due process is rejected.
In addition, the bankruptcy court erred as a matter of law in concluding that excusable neglect could justify the untimely fifing of а governmental unit’s proof of claim in a Chapter 13 case. Accordingly, the bankruptcy court’s order, granting the United States of America’s motion to late file a proof of claim on behalf of the Small Business Administration is REVERSED, and the matter is hereby REMANDED to the United States Bankruptcy Court for the District of Massachusetts with directions to disallow the untimely claim of the United States of America.
SO ORDERED.