Lead Opinion
We must decide whether the statute of limitations under the pre-1994 version of the Bankruptcy Code begins running from the date of appointment of the interim trustee or from the date of qualification of the permanent trustee.
I.
The relevant dates in this case are as follows:
1) On April 19, 1993, Parmetex, Inc. (“Parmetex”) filed a Chapter 7 bankruptcy petition.
2) On May 4, 1993, Charles Daff (“Daff’) accepted his appointment as interim trustee under 11 U.S.C. § 701.
3) The meeting of creditors held pursuant to 11 U.S.C. § 341(a) was set for May 25, 1993, but did not actually occur until June 22, 1993, at which time Daff became the permanent trustee.
4) On May 25, 1995 unsecured creditors Avalanche Maritime, Ltd. and Mountain Peak Maritime, Ltd. (the “Creditors”), filed an adversary complaint in bankruptcy court to avoid allegedly fraudulent, preferential and post-petition transfers by Par-metex. The Complaint was filed against a number of parties, including Sunil Parekh, Jr., Sevanti Parekh, Reshma Parekh, Jit-endra Kapadia, Bank of Baroda and Cali-par Trading, Inc., Shustak, Jalil, Sanders & Heller (a law firm), and Erwin Shustak' (collectively, “Defendants”).
5) On July 27, 1995 Daff executed a stipulation that authorized the Creditors to pursue the claims in his stead and to amend the original complaint to add Daff as a plaintiff.
6) On August 3, 1995, the Bankruptcy Court entered an order granting the stipulation.
7)On September 25, 1995, the Creditors and Daff filed an amended complaint with the same allegations.
Defendants have argued below and to this Court that the Creditors do not have standing to bring this suit and that in the alternative the Creditors are barred from bringing the suit by the applicable statute of limitations — 11 U.S.C. § 546(a). The district court, after reviewing an appeal from the bankruptcy court, held that the two-year statute of limitations began to accrue when Daff was appointed as interim trustee and therefore dismissed the avoidance action as untimely. Neither the bankruptcy court nor the district court addressed the issue of standing.
We conclude herein that the Creditors had standing but that they were barred from bringing the suit by the statute of limitations.
II.
Defendants argue that the Creditors have no standing to sue because only the Chapter 7 trustee has authority to bring adversary proceedings under 11 U.S.C. §§ 544(b), 547, 548 and 549(a). The district court did not address the issue of standing because the statute of limitations issue was the only one certified by the bankruptcy court for appeal. Even so, we must address the issue of standing because “Article III standing is a jurisdictional prerequisite.” Maricopa-Stanfield Irrigation and Drainage District v. United States,
Daff stipulated on July 27, 1995 that the Creditors were authorized to pursue their claims in his stead. In relevant part, the stipulation states: “It is hereby stipulated and agreed ... that [the Creditors] are and were authorized to file an adversary complaint in the above referenced action on or about May 25, 1995.” The stipulation further provides: “[t]he complaint ... is acknowledged and agreed to have been
Although Defendants are correct that a trustee must generally file an avoidance action under Chapter 7, we hold that under these particular circumstances — where the trustee stipulated that the Creditors could sue on his behalf and the bankruptcy court approved that stipulation — the Creditors had standing to bring the suit. See In re Curry and Sorensen,
III.
Defendants argue that the Creditors were barred from bringing a lawsuit because the applicable statute of limitations — 11 U.S.C. § 546(a)
11 U.S.C. § 546(a), entitled “Limitations on Avoiding Powers”, provides in relevant part:
(a) an action or proceeding under section 544, 545, 547, 548 or 553 of this title may not be commenced after the earlier of—
(1) two years after the appointment of a trustee under section 702, 1104, 1163, 1302 or 1202 of this title; or
(2) the time the case is closed or dismissed.
11 U.S.C. § 546(a) (1994 ed.) (emphasis added).
The parties in this case have argued over whether the phrase “appointment of a trustee” refers to an interim trustee or a permanent trustee. The Defendants contend that the “appointment of a trustee” language refers to the “appointment” of an interim trustee under 11 U.S.C. § 701. See 11 U.S.C. § 701(a)(1) (“[t]he United States trustee shall appoint one disinterested person ... to serve as interim trust
In San Joaquin Roast Beef, debtor San Joaquin Roast Beef filed for Chapter 11 bankruptcy and the bankruptcy court appointed a Chapter 11 trustee. Approximately one year later, the bankruptcy court converted the Chapter 11 to Chapter 7 and appointed a Chapter 7 trustee. Approximately one year after that, the Chapter 7 trustee filed suit to recover allegedly preferential transfers. The bankruptcy court dismissed the proceeding on the ground that it was barred by § 546(a)’s two-year statute of limitations. San Joaquin Roast Beef
We disagreed with the trustee’s argument, and held that “the most logical interpretation of section 546(a) is that the statute of limitations begins running from the date the first trustee is appointed and that all subsequent trustees are subject to the same statute of limitations.” Id. at 1415 (emphasis added). We therefore concluded that “[t]he statute of limitations began running on the date the Chapter 11 trustee was appointed.” Id. at 1416.
The Chapter 7 trustee .had argued that the statute of limitations should run anew upon conversion from Chapter 11 to Chapter 7 because a Chapter 7 trustee has different objectives than a Chapter 11 trustee. As the trustee pointed out, a Chapter 11 trustee has the goal of rehabilitating the debtor business, while the Chapter 7 has the goal of liquidating the business at its maximum value. As a result, argued the trustee, a Chapter 7 trustee could be time-barred from instituting adversary actions due to the inaction of a prior Chapter 11 trustee. Id. at 1415-16. We expressed the view that reaching such an argument would be unwise because “the issue is laden with policy considerations best left to Congress.” Id. at 1416. Instead of delving into policy arguments, we followed “[a] plain reading of § 546(a),” and reiterated that the § 546 statute of limitations begins running from the date the first trustee is appointed. Id.
In Softwaire Centre this court was presented with a slightly different scenario concerning the § 546(a)- — whether or not § 546(a)’s statute of limitations applies to debtors in possession as well as trustees. In Softwaire Centre, a Chapter 11 debtor in possession, Softwaire Centre International (“SCI”), filed an action seeking an avoidance more than two years after the
We rejected SCI’s arguments, and held that § 546(a)’s statute of limitations “was intended to apply to debtors in possession as well as trustees.” Id. at 684. We adopted the reasoning of Zilkha Energy Co. v. Leighton,
The reasoning of San Joaquin Roast Beef and Soflwaire Centre lead us to the conclusion that the statute of limitations began running in this case when Daff was appointed as interim trustee pursuant to § 701, not when he was elected as permanent trustee pursuant to § 702. San Joaquin Roast Beef held that the appointment of the first trustee triggers the statute of limitations. See San Joaquin Roast Beef,
The dissent argues that by so holding we read specific language — “ § 702” — out of the statute. Although § 546(a) does refer to § 702 and not § 701, § 546(a) does specifically refer to the “appointment” of trustees under certain sections of Chapters 7, 11, and 13 of the Bankruptcy Code. See 11 U.S.C. § 546. Section 701 is the only part of Chapter 7 that discusses the “appointment” of Chapter 7 trustees. By adopting the dissent’s interpretation, therefore, we would also be reading specific language — “appointed under” — out of the statute. Given that either interpretation would read language out of this unclear statute, we have simply discerned the most logical reading of § 546(a) that is consistent with our prior decisions in San Joaquin Roast Beef and Soflwaire Centre.
(a) An action or proceeding under section 544, 545, 547, 548, or 533 of this title may not be commenced after the earlier of ...
(1) the later of ...
(A) 2 years after the entry of the order for relief; or
(B) 1 year after the appointment or election of the first trustee under section 702,1104,1163,1202 or 1302 of this title if such election occurs before the expiration of the time specified in subparagraph (A); or
(2) the time the case is closed or dismissed.
11 U.S.C. § 546 (amended) (emphasis added). Although the added phrase “or election,” could suggest that the unamended § 546(a) applies to only the permanent trustee, the statute also now contains the phrase “first trustee.” The added “first trustee” language suggests that the statute of limitations should be applied to the interim trustee because the interim trustee is the “first trustee.” These contradictory changes do not help to clear up the confusion present in the unamended version of § 546(a).
IV.
The most logical interpretation of 11 U.S.C. § 546(a), consistent with this court’s prior decisions, is that the statute of limitations period begins to run when the interim trustee is appointed under 11 U.S.C. § 701. The statute of limitations here, accordingly, began to run on May 4, 1993, the date that Daff was appointed as interim trustee. Because the Creditors’ suit was filed more than two years after this date, it was untimely.
AFFIRMED.
Notes
. Because Parmetex’s petition for relief was filed before the 1994 amendments to the Bankruptcy Code, 11 U.S.C. § 546(a) (1994 ed.) applies to this appeal. Unless otherwise noted, all references herein are to the pre-1994 version of the statute.
. This is so whether or not the action was "commenced” on the date the original complaint was filed — May 25, 1995, or on the date that the bankruptcy court entered the order granting the stipulation to add trustee Daff to the Complaint — August 3, 1995. Because the Creditors filed late measuring from either date, we need not decide the issue of when precisely the action was "commenced.”
Concurrence in Part
concurring in part and dissenting in part:
In this issue of first impression before the Ninth Circuit, the clear language of the statute, 11 U.S.C. § 546(a) (1994),
As the Supreme Court reminded us in interpreting the Bankruptcy Code in United States v. Ron Pair Enterprises, Inc.,
[t]he task of resolving the dispute over the meaning of [the bankruptcy statute] begins where all such inquiries must begin: with the language of the statute itself. In this case it is also where the inquiry should end, for where, as here, the statute’s language is plain, “the sole function of the courts is to enforce it according to its terms.”
(a) An action or proceeding under section 544, 545, 547, 548, or 553 of this title may not be commenced after the earlier of-
*1035 (1) two years after the appointment of a trustee under section 702, 1104, 1163, 1302 or 1202 of this title; or (2) the time the case is closed or dismissed.
11 U.S.C. § 546(a) (emphasis added).
The majority’s holding ignores the explicit reference to § 702 and instead reads § 701 into the statute. Under the majority’s analysis, the statute would now read:
two years after the appointment of a trustee under 701, 702, 1104, 1163, 1302 or 1202....
This wholesale revision of the statute through insertion of an additional, specific statutory reference runs contrary to basic rules of statutory construction. Expresso unius est exclusio alterius. The statute is unambiguous and needs no judicial flourishes for interpretation.
No other circuit court has directly addressed this issue.
The purpose of a statute of limitations is to cabin the period of time that a party is at risk of suit. On the flip side, the statute defines the period in which a party must commence suit. In the case of a proceeding under Chapter 7, the suit must be commenced no more than “two years after the appointment of a trustee under section 702....” 11 U.S.C. § 546(a). Instead of focusing on the statute’s clear trigger point for initiation of the two-year period, the majority instead engages in a discussion of whether a § 701 interim trustee is the “functional equivalent” of a § 702 permanent trustee. Even if that were the case, which I do not concede, it is irrelevant. The statute says nothing about § 701 and the clear trigger is the qualification, of a permanent trustee under § 702. Functional equivalency analysis has no role in the interpretation of this unambiguous statute.
Not only does the statute dictate this result, it is also a practical outcome. Although interim trustees usually become permanent trustees, it is not true in every case. Either substantive or scheduling
The majority overlooks the importance of the meeting of creditors pursuant to 11 U.S.C. § 841 as a distinguishing factor between § 701 interim trustees and § 702 permanent trustees. At the § 341 meeting, the permanent trustee is determined either through an election by the creditors or, if no election is held, by automatically making the interim trustee the permanent trustee. See 11 U.S.C. § 702(c)-(d). As trustee elections are relatively rare, a key purpose of the meeting is to examine the debtor. See 3 Collier at ¶ 341.01; 5 Collier at ¶ 546.02(2)(a)(i). This examination under oath enables “creditors and the trustee to determine if assets have improperly been disposed [of] or concealed.” In re Conco Bldg. Supplies,
Although the majority claims to discern “the most logical reading of § 546(a) that is consistent” with Ford v. Union Bank (In re San Joaquin Roast Beef),
San Joaquin Roast Beef arose in the context of a conversion from Chapter 11 to Chapter 7, a wholly inapposite circumstance. We considered whether a trustee appointed under § 1104, a section specified in § 546(a), triggered the statute of limitations or whether the statute began to run anew upon conversion to Chapter 7. The majority takes out of context San Joaquin Roast Beef’s statement that the statute of limitations in § 546(a) commences on “the date the first trustee is appointed,” to support its position that the limitations period begins upon appointment of the § 701 trustee as the “first trustee.” San Joaquin Roast Beef did not address the interplay between § 701 and § 702. The majority’s extension of San Joaquin Roast Beef’s language nullifies the express inclusion of § 702 in § 546(a). Every original Chapter 7 case starts with an interim trustee under § 701 who is then succeeded by a § 702 trustee. 11 U.S.C. § 701. If election of a § 701 interim trustee were the trigger, what would be the point of including § 702 in the statute? Just as we professed in San Joaquin Roast Beef to leave policy considerations to Congress and to follow a plain reading of the statute (
The other case relied on by the majority, Softwaire Centre, is neither controlling nor instructive, as it involved a totally different issue-a debtor in possession under Chapter 11. Although the majority attempts to extrapolate Softwaire Centre’s “functional equivalency” approach to this Chapter 7 case, analogy is no substitute for the clear statutory language.
Because the majority’s holding is at odds with a plain reading of § 546(a), I respectfully dissent.
. Congress amended 11 U.S.C. § 546(a) in 1994, but did not add § 701 to the statute. Unless otherwise noted, all statutory references are to the pre-1994 version of Title 11 of the U.S.Code.
. In dicta, the Fourth Circuit stated that, in a Chapter 7 proceeding, the selection of a permanent trustee under § 702 is the starting point for the statute of limitations. See Maurice Sporting Goods, Inc. v. Maxway Corp. (In re Maxway Corp.),
. See, e.g., General Electric Capital Auto Lease, Inc. v. Broach (In re Lucas Dallas, Inc.),
. See, e.g., In re Lucas Dallas,
. Indeed, when Congress amended § 546(a) in 1994, it added the phrase "or election of the first trustee” after the term "appointment,” and maintained the express reference to § 702, while declining to add a reference to the interim trustee under § 701. See 11 U.S.C. § 546(a) (1997). These amendments indicate that Congress intended that the statute of limitations begin running upon designation of the § 702 trustee. See United States v. Monroe,
. See also In re Lucas Dallas,