In re CHARLES C. GARDENHIRE; OPAL GARDENHIRE,Debtors.CHARLES C. GARDENHIRE; OPAL GARDENHIRE,OPINION Appellants,
v.
UNITED STATES INTERNAL REVENUE SERVICE; EDWINA DOWELL, Chapter 13 Trustee, Appellees.
No. 98-55876
UNITED STATES COURT OF APPEAL FOR THE NINTH CIRCUIT
Argued and Submitted November 3, 1999
Filed April 17, 2000
COUNSEL: Kneave Riggall, South Pasadena, California, for the appellants.
Loretta C. Argrett, Bruce R. Ellisen, Tamara W. Ashford (argued), UnitedStates Department of Justice, Washington, D.C., for appellee Internal Revenue Service.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel; Klein, Jones, and Hagan, Bankruptcy Judges, Presiding. BAP No. CC-97-01470-KJH
Before: Harry Pregerson, John T. Noonan, and Diarmuid F. O'Scannlain, Circuit Judges.
O'SCANNLAIN, Circuit Judge:
We must decide whether the doctrine of equitable tolling can be appliеd to the 180-day deadline for the Internal Revenue Service to file a proof of claim against a taxpayer in bankruptcy proceedings.
* On September 10, 1996 (day 0),1 Charles and Opal Gardenhire ("the Gardenhires") filed in the Bankruptcy Court for the Central District of California a petition for relief under Chapter 13 of the Bankruptcy Code. On September 24, 1996, the Gardenhires filed a Chapter 13 plan proposing to make payments of $1,333.33 per month for 36 months ($47,999.88), for ultimate disbursement to the Internal Revenue Service (IRS), their primary creditor. Only one other creditor, a credit card issuer, filed a proof of claim in the Gardenhires' case, an unsecured claim for $2,281.90.
Due to a clerical error by the office of the Chapter 13 trustee (relating to miscalendaring), a hearing to confirm the Gardenhires' plan was held on November 21, 1996, even though the Gardenhires had not been given notice to appear on that date. Because neither the Gardenhires nor their counsel appeared at the hearing, their case was dismissed on December 2, 1996 (day 83). Notice of the order of dismissаl was sent to all parties, including the IRS, on December 5, 1996 (day 85).
When the Chapter 13 trustee received notice of the dismissal order, she moved to vacate the order of dismissal and reinstate the case, explaining to the court the clerical error committed by her office. The motion was granted by order entered February 19, 1997 (day 162), 79 days after dismissal of the case. Notice of the order was mailed on February 22, 1997, and the IRS received notice of the reinstatement on February 24, 1997 (day 167). The IRS's proof of claim in the Gardenhires' cаse was executed on March 12, 1997 (day 183). On March 20, 1997 (day 191), the IRS proof of claim was filed.2 It consisted of a general, unsecured claim in the amount of $50,225.19, for unpaid federal income taxes assessed against the Gardenhires in 1991 for the calendar years 1981 through 1984.
On March 19, 1997, after the IRS proof of claim was executed but before it was filed, the Gardenhires objected to the IRS claim as untimely.3 The IRS argued that its proof of claim was timely on the theory that the 180-day filing period was suspended for 79 days, the amount of time that elapsed between the erroneous dismissal and subsequent reinstatement of the Gardenhires' case.
The bankruptcy court overruled the Gardenhires' objection to the claim without explanation. The Bankruptcy Appellate Panel (BAP) affirmed in a published opinion, holding that the 180-day period that the IRS had under 11 U.S.C.S 502(b)(9) for filing its proof of claim was "equitably tolled" for 11 days -the amount of time between expiration of the 180-day period on March 9, 1997, and filing of the IRS's proof of claim on March 20, 1997. In re Gardenhire,
The Gardenhires timely appeal the BAP decision.4
II
The issue presented by this case is whether the doctrine of equitable tolling doctrine can be applied to Bankruptcy Code S 502(b)(9)'s 180-day period for governmental units to file proofs of claim, even though the statutory framework explicitly provides for a 180-day filing period and forbids retroactive enlargement of that time.
* Our analysis begins, as it must, with a survey of the framework established by the Bankruptcy Code and Rules. One Bankruptcy Code provision, 11 U.S.C. S 502(b)(9), and two Bankruptcy Rules, Rules 3002(c)(1) and 9006(b)(3), lie at the heart of this case.5 Under S 502(b)(9), a government agency's proof of claim is timely filed if it is filed within 180 days of the filing of the bankruptcy petition "or such later time as the Federal Rules of Bankruptcy Procedure may provide. " Timely filing of a proof of claim is important because under S 502, a creditor's claim will be disallowed if an objection to the claim is made and if proof of the claim is not timely filed.6 As the BAP correctly observed, disallowance of a claim can have serious consequences. "In Chapter 13 cases, disallowance under S 502(b)(9) is often fatal to the claim because (with stated exceptions) the primary Chapter 13 discharge encompasses all debts disallowed under S 502."
Section 502(b)(9), in providing that the time for a governmental unit to file its proof of claim shall be either 180 days "or such later time as the Federal Rules of Bankruptcy Procedure may provide," requires reference to the Bankruptcy Rules. Bankruptcy Rule 3002(c)(1) implements S 502(b)(9), providing that in cases under Chapter 7, 12, and 13 of the Bankruptcy Code, the government's proof of clаim must be filed "no later than 180 days after the date of the order for relief" in order to be deemed timely. Rule 3002(c)(1) thus reinforces the 180-day period provided for by the statute. Rule 3002(c)(1) also implements the "such later time " language of S 502(b)(9), however, by allowing the bankruptcy court to extend the time for filing a proof of claim if three specific conditions are met: (1) the government moves for an extension, (2) the motion itself is filed before expiration of the 180day period, and (3) cause for extension is shown.
Finally, Rule 9006(b)(3) provides additional reinforcement for the 180-day period established by S 502(b)(9) and Rule 3002(c)(1). Rule 9006(b) effectively prohibits retroactive enlargement of the 180-day period for filing proofs of claim prescribed by Rule 3002(c)(1), providing that the bankruptcy court "may enlarge the time for taking action under [Rule 3002(c)] only to the extent and under the conditions stated in [that rule]." Fed. R. Bankr. P. 9006(b)(3) (emphases added). Thus, under the Bankruptcy Code and Rules, (1) the government has a 180-day period in which to file its proof of claim and (2) this period can be expanded prospectively only, thrоugh a motion made prior to expiration of the period. As the BAP noted in this case, "Rules 3002(c) and 9006(b) make the statutory minimum of 180 days into a rigid deadline in cases under chapters 7, 12, and 13 unless an extension is requested before the deadline expires."
In sum, the framework created by the interrelationship between S 502(b)(9) and Rules 3002(c)(1) and 9006(b)(3) clearly provides for a 180-day period in which a proof of claim by a governmental unit such as the IRS must be filed in order to be timely. This period is capable of expansion "only" upon motion by the government made prior to expiration of the 180-day period and accompanied by a showing of cause. Fed. R. Bankr. P. 3002(c)(1); Fed. R. Bankr. P. 9006(b)(3).
The Gardenhires argue that the plain meaning of these interrelated provisions must be enforced, and their straightforward, text-based argument possesses considerable force. Close adherence to the text of the relevant statutory provisions and rules is especially appropriate in a highly statutory area such as bankruptcy. As the Supreme Court explained in Rake v. Wade,
B
Having examined the text and structure of the Bankruptcy Code and Rules, we now turn to analysis of applicable case law. We have on several occasions interpreted the controlling provisions at issue in this case quite strictly, enforcing them "according to [their] terms," as instructed by the Supreme Court in Rake. Our precedents support the conclusion that a bankruptcy court lacks equitable discretion to enlarge the time to file proofs of claim; rather, it may only enlarge the filing time pursuant to the exceptions set forth in the Bankruptcy Code and Rules.
Our first relevant precedent construing Bankruptcy Rule 3002(c) is In re Tomlan,
In re Coastal Alaska Lines, Inc.,
Finally, in the fairly recent case of In re Osborne,
We note, in passing, that other lower courts within this circuit have had little difficulty in following the unbroken line of precedents analyzed above. In In re Robert ,
In a recent case decided after the BAP's decision here, another BAP panel followed Ninth Circuit precedent and held that "no source of discretion [for enlarging the claims filing period оf Rule 3002(c)] exists -neither equitable jurisdiction, nor S 105, nor anything else -and a source is not created even if a good reason is presented for why a source should exist." In re Edelman,
Brushing aside the on-point precedents discussed above in a single footnote in its brief, the IRS relies upon several cases from within the Ninth Circuit applying equitable tolling doctrines to other provisions of the Bankruptcy Code. In In re United Insurance Management, Inc.,
While these cases certainly support equitable tolling as a doctrine, the general support they offer cannot trump the specific difficulties raised for the IRS position by the more relevant precedents of Tomlan, Coastal Alaska, and Osborne. In addition, we note that Olsen and Gurney involved time periods being equitably tolled based on the deliberate and wrongful conduct of an individual who would reap a windfall in the absence of tolling (and United Insurance spoke in terms of applying the doctrine to prevent fraud). The case at bar, in contrast, involves individuals who stand to benefit from literal application of the law but who engaged in no fraud or other wrongful conduct; it is undisputed that the Gardenhires were not responsible for the erroneous dismissal of their case. Thus the precedents relied upon by the IRS and the BAP at best рrovide only limited support for application of equitable tolling here.
Our decision that equitable tolling cannot be used to extend the filing period of 11 U.S.C. S 502(b)(9) is supported by the weight of authority from outside the Ninth Circuit. First, no other court of appeals has applied the doctrine of equitable tolling to 11 U.S.C. S 502(b)(9). Indeed, the Seventh Circuit's recent decision in In re Greenig,
Second, non-circuit courts outside this circuit have generally adopted fairly strict readings of Bankruptcy Code S 502(b)(9) and Rules 3002(c)(1) and 9006(b)(3). See, e.g., In re Armstrong,
C
Even if the Bankruptcy Code and Rules and our precedents did not foreclose application of equitable tolling to S 502(b)(9), we have doubts as to whether application of the doсtrine would have been appropriate under the specific facts of this case.
As noted by the BAP in this case, in order for a party to establish its entitlement to equitable tolling, it must establish that it acted with reasonable diligence in pursuing its claim. See
III
In addition to arguing for equitable tolling, the IRS contends, in the alternative, that "as [a] matter of law, dismissal of the case caused the 180-day period for filing proofs of claim by governmental units . . . to stop running " for the 79 days after the erroneous dismissal and prior to the restatement.
This argument has a certain intuitive appeal, insofar as it may make sense as a matter of policy. The difficulty for the IRS's contention, however, is that it is unsupported by applicable law. As previously discussed, S 502(b)(9) and Rule 3002 provide for a period for filing proofs of claim of "180 days after the date of the order for relief," and this language means just what it says. A 180-day period is a 180-day period. Although the IRS argues that such a "plain meaning" interpretation of S 502(b)(9) could lead to аn "anomalous" result, it cannot be denied that this is an anomalous case with a highly unusual procedural posture.
The IRS claims that 11 U.S.C. S 349, regarding the effect of dismissals, supports its "time out" argument, insofar as it "restore[s] the parties to their prebankruptcy positions." We do not read S 349 as loosely as the IRS does. Although S 349 generally works to restore the parties to their prebankruptcy positions, it does so in very specific ways. Section 349 refers to the specific Code provisions affected by dismissal, and S 502(b)(9) is not among them. In other words, Congress clearly knew how to provide for the effect of a dismissal, and it did not do so in the S 502(b)(9) context. While tolling in a situation like this one might make sense as a policy matter, this a decision left up to Congress. As judges, of course, we must apply statutes as written, not as they should have been written with the benefit of hindsight. The BAP properly rejected the IRS's argument that the 180-day period was tolled during the period between the dismissal and reinstatement of the Gardenhires' case.
IV
We conclude that application of equitable tolling to the 180-day рeriod for governmental units to file proofs of claim pursuant to S 502(b)(9) of the Bankruptcy Code is inconsistent with the plain meaning of the Bankruptcy Code and Rules, applicable Ninth Circuit precedent, and the weight of authority from other jurisdictions. Equitable tolling cannot be applied to extend the filing period of S 502(b)(9), and it was error for the BAP to hold otherwise.
REVERSED and REMANDED.
Notes:
Notes
The amount of time elapsed since the filing of the Gardenhires' Chapter 13 petition is indicated parenthetically. It is this amount of time that determines whether a proof of clаim has been timely filed. See Fed. R. Bankr. P. 3002(c)(1).
The IRS proof of claim was stamped as filed on March 20, 1997, at 7:50 AM. The Gardenhires argue that the 7:50 AM time on the stamp suggests that the IRS has unrestricted and improper access to the bankruptcy filing room, which is open to the public from 9:00 AM to 4:00 PM daily. This contention lacks relevance; the exact time of day when the IRS proof of claim was filed has no effect upon disposition of this case.
The Gardenhires also objected on other grounds, arguing that (1) the IRS failed to credit prepetition payments made by them and (2) the underlying 1991 tax assessments for back taxes were untimely. The IRS responded by noting that all prepetition payments made by the Gardenhires were taken into account before the filing of the proof of claim and that the Gardenhires offered no evidence establishing that the tax assessments were untimely. The Bankruptcy Appellate Panel (BAP) construed the bankruptcy court's order overruling the Gardenhires' objection as "limited to a rejection that the proof of claim was untimely filed," noting that the othеr two issues raised by the Gardenhires were either not resolved or were resolved without prejudice. We adopt the BAP's construction of the order.
Prior to their appeal to the Ninth Circuit, the Gardenhires' Chapter 13 plan was confirmed, dispelling any doubts regarding finality for purposes of our appellate jurisdiction under 28 U.S.C. S 158(d). We review the BAP's decision de novo. See In re Gergley,
Subsequent references to statutory sections or procedural rules refer to the Bankruptcy Code (11 U.S.C.) and the Federal Rules of Bankruptcy Procеdure, respectively.
In Chapter 7 proceedings, tardy claims may be allowed pursuant to S 726(a). The case at bar, however, involves a proceeding under Chapter 13.
The IRS, recognizing that the clear language of the Code and Rules does not support its position, relies upon case law for the proposition that "plain language" analysis "is not always the final word in construing the Bankruptcy Code." As support for this proposition, the IRS cites a single case, In re West,
When Tomlan was decided, governmental units had only 90 days in which to file their proofs of claim. See
Although Coastal Alaska involved a Chapter 7 proceeding rather than a Chapter 13 proceeding, the Code provisions and Bankruptcy Rules controlling the timeliness of filing proofs of claim are the same under both chapters.
Although several of the cases cited above involved Chapter 7 or 12 proceedings rather than Chapter 13 proceedings, the difference is not significant insofаr as S 502 and Bankruptcy Rules 3002 and 9006 apply to "a chapter 7 liquidation, chapter 12 family farmer's debt adjustment, or chapter 13 individual's debt adjustment case." Fed. R. Bankr. 3002(c).
In addition, we take note of the time-honored maxim that "[h]e who seeks equity must do equity." McQuiddy v. Ware,