In Re Pigott, James P., T/d/b/a James P. Pigott Building Materials. Appeal of Conestoga Ceramic Tile Distributors, Inc, 684 F.2d 239, 3rd Cir. (1982)
In Re Pigott, James P., T/d/b/a James P. Pigott Building Materials. Appeal of Conestoga Ceramic Tile Distributors, Inc, 684 F.2d 239, 3rd Cir. (1982)
In Re Pigott, James P., T/d/b/a James P. Pigott Building Materials. Appeal of Conestoga Ceramic Tile Distributors, Inc, 684 F.2d 239, 3rd Cir. (1982)
2d 239
Frances H. Del Duca, Faller & Del Duca, Carlisle, Pa., for James P. Pigott.
This appeal raises the issue of whether a bankruptcy judge has the equitable
power to allow proofs of claim filed by creditors after expiration of the
statutory six month period for filing such proofs set out in Section 57(n) of the
Bankruptcy Act, 11 U.S.C. 93(n). The bankruptcy judge permitted two
creditors to file untimely proofs of claim over the objections of another
creditor, Conestoga Ceramic Tile Distributors, Inc., ("Conestoga") the
On March 28, 1979, an accident at the Three Mile Island Nuclear Reactor
occurred, discharging low level radiation. A mass evacuation of the area was
under consideration by the governor of the state. The uncertainty and anxiety
created by the crisis allegedly disrupted business in the area. Around March 30,
1979, Landis' counsel telephoned the Trustee to explain that their office was
being evacuated by choice and that as a result, formal filing of the Proof of
Claim would be delayed beyond the due date of April 5, 1979. The Trustee
stated that he had no objection to the late filing.
10
Subsequently, Landis' Proof of Claim was sent to the Trustee on April 11,
1979. The Trustee received it on April 13 and it was filed with the Bankruptcy
Court on April 24, 1979.
11
The Commonwealth of Pennsylvania filed its Proof of Claim on June 30, 1979.
The late filing was apparently the result of bureaucratic inertia.
12
Conestoga filed timely objections to the Proofs of Claim of both Landis and the
Commonwealth. The Trustee objected only to the Commonwealth's claim.
13
The bankruptcy court, relying primarily on Pepper v. Litton, 308 U.S. 295, 60
S.Ct. 238, 84 L.Ed. 281 (1939), decided in the exercise of discretion to allow
the claims of both Landis and the Commonwealth. On appeal, the district court
affirmed summarily in an order dated April 23, 1981.
ANALYSIS
14
15
18
n. Except as otherwise provided in this Act, all claims provable under this Act,
including all claims of the United States and of any State or any subdivision
thereof, shall be proved and filed in the manner provided in this section. Claims
which are not filed within six months after the first date set for the first meeting
of creditors shall not be allowed : Provided, however, that the court may, upon
application before the expiration of such period and for cause shown, grant a
reasonable fixed extension of time for the filing of claims by the United States
or any State or any subdivision thereof: Provided further, that the right of
infants and insane persons without guardians, without notice of the bankruptcy
proceedings, may continue six months longer: And provided further, that a
claim arising in favor of a person by reason of the recovery by the trustee from
such person of money or property, or the avoidance by the trustee of a lien held
by such person, may be filed within thirty days from the date of such recovery
or avoidance, but if the recovery is by way of a proceeding in which a final
judgment has been entered against such person, the claim shall not be allowed
if the money is not paid or the property is not delivered to the trustee within
thirty days from the date of the rendering of such final judgment, or within such
further time as the court may allow. When in any case all claims which have
been duly allowed have been paid in full, claims not filed within the time herein
above prescribed may nevertheless be filed within such time as the court may
fix or for cause shown extend and, if duly proved, shall be allowed against any
surplus remaining in such case. (Emphasis supplied).
19
It is clear from the plain language of 57(n) that the key requirements for the
presentation of the claims at issue are 1) a writing and 2) filing within six
months of the first creditors' meeting. None of the exceptions listed in the
statute applies to the claims of the appellees, Landis and the Commonwealth.1
20
Landis argues that under the bankruptcy court's equitable powers its claim
should be allowed. In its favor it points out that its claim was listed by the
bankrupt on the schedule of creditors, that there was an extreme emergency,
that it communicated with the Trustee prior to the filing deadline, and that the
claim was filed only a few days out of time.
21
The law is settled in the Third Circuit that 57(n), 11 U.S.C. 93(n), is to be
strictly construed. See In re Mellen Manufacturing Co., 287 F.2d 37 (3d Cir.
1961).2 In Mellen, Judge Goodrich speaking for the court stated,
22is pointed out that "expeditious administration was a prime objective of the 1938
It
amendments" (186 F.2d 132) and that this Court found indications that the
Congressional intent was that the periods of limitation set up were to be strictly
enforced. "Modern administration requires a definitive cut-off date past which
claims may not be filed," said the Court. 186 F.2d 133.
23
24
Even where the equities have weighed strongly in favor of extending the time
period, we have upheld the strict six month time limit. See In re Vandergrift,
341 F.2d 921 (3d Cir. 1965) (per curiam ), affirming 232 F.Supp. 857
(W.D.Pa.1964).3 Thus, under Third Circuit law the bankruptcy court did not
have the equitable power to extend the filing date for Landis, even a few days.
25
The bankruptcy court cited Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84
L.Ed. 281 (1939) in support of its decision, but its reliance on Pepper is
misplaced. Pepper involved a fraudulent claim which had been reduced to
judgment. In Pepper, the United States Supreme Court held that the bankruptcy
court, in the exercise of its equitable powers, could look behind an apparently
valid state court judgment and deny the judgment holder priority over other
creditors where the judgment was fraudulently obtained. The Supreme Court
spoke broadly in Pepper about the equitable powers of the bankruptcy court,
but it was not considering a timeliness problem. Pepper is inapposite to the
issues in this case. In the face of binding precedent, the bankruptcy court's
reliance on Pepper was erroneous, and its decision was contrary to Third Circuit
law.
26
Landis argues, however, that the extraordinary nature of the crisis engendered
by the nuclear accident distinguishes this case from prior Third Circuit cases on
the issue. Because there was no evidence in the record of the extent of
disruption to business activity caused by the emergency, this court requested
additional documentation. Landis submitted several newspaper clippings, all
but one dated March 30, 1979. These clippings indicate that a general
evacuation of the four county area around the nuclear plant was considered, but
not implemented. Pregnant women and pre-school children within a five-mile
radius of the plant were advised to leave the area. Although the clippings
substantiate the fact that there was considerable concern and anxiety created by
the emergency, they do not indicate the extent of disruption. Certainly a serious
nuclear accident is a rare occurrence, but we are not inclined to create an
exception to long-standing Third Circuit precedent on the basis of such an
inadequate record.
27
28
In summary, the district court's order affirming the bankruptcy court's decision
to allow Landis' untimely claim, either in the exercise of equitable powers or as
an amendment to an oral filing, must be reversed on the basis of Mellen and
Supernit.
29
31a creditor having a provable claim for taxes or wages fails to file his claim on or
If
before the first meeting of creditors, the bankrupt may execute and file a proof of
such claim in the name of the creditor.
32
The debtor in this case did not avail himself of Rule 303. The bankruptcy court
in its opinion states that the debtor did not know he had the right to file the
claim for the Commonwealth. It is not clear from the record whether the debtor
was represented at the relevant time by counsel or not. The certificate of service
in the appendix lists an attorney for the bankrupt. Certainly, if the debtor had
an attorney, he cannot claim to be ignorant of the Bankruptcy Rules.
Nevertheless, while the absence of an attorney would weigh in favor of
allowing the untimely claim on equitable grounds, as previously noted 57(n)
as interpreted by the Third Circuit does not give the bankruptcy court the
discretion to weigh equitable considerations and allow untimely claims.
33
The Commonwealth further argues that the listing of its claim in the schedule
of creditors should be construed as an initial filing. Then the actual filing of its
claim on June 20, 1979 would be a valid amendment. However, listing a claim
in the schedule of creditors is not the equivalent of filing a proof of claim. We
rejected this argument in In re Supernit, 186 F.2d 130 (3d Cir. 1950) stating:
34 permit the filing of a proof of claim under the guise of an amendment months out
To
of time on the theory that a creditor who has a scheduled claim has taken an active
part in the proceeding through an attorney would militate against the efficient
administration of bankruptcy proceedings.
35
36
In the instant case, the attorney for the Commonwealth did not even take an
active part in the proceedings. It is clear, then, that mere listing in the schedule
of creditors is not sufficient to constitute a filing of a claim to which the actual
filing can be considered an amendment. Accordingly, the bankruptcy court's
allowance of this claim and the district court's subsequent affirmance are
contrary to Third Circuit law.
CONCLUSION
37
Under applicable Third Circuit law, the bankruptcy court had no discretion to
allow the untimely filed proofs of claim for equitable reasons. The district
court's order of affirmance is reversed and the case will be remanded for further
proceedings in accordance with this opinion.
Honorable Harold A. Ackerman, United States District Judge for the District of
New Jersey, sitting by designation
Although 57(n) does give a bankruptcy court the power to grant an extension
of time to states, application for that extension must be made prior to expiration
of the six month filing period. Since the Commonwealth failed to apply for
such an extension and filed its claim more than two months after the statutory
deadline had passed, this exception does not apply to the Commonwealth's
claims
"It is to be noted that because the bankruptcy proceedings herein commenced
prior to October 1, 1979, the provisions of the Bankruptcy Reform Act of 1978,
Pub.L. No. 95-598, 92 Stat. 2549, are not applicable. See Pub.L. No. 95-598,
tit. IV, 403(a), 92 Stat. 2683."
802, 923, and 924, except to the extent and under the conditions stated in them.
(Emphasis supplied)
Accordingly, the implementing rules indicate that the time period in 57(n) is
not to be expanded at the discretion of the bankruptcy court, but only as
expressly provided.
3