In Re Daniel C. Hanna, Debtor. John Mitchell, Inc., Trustee v. John Steinbrugge

72 F.3d 114, 96 Daily Journal DAR 25, 96 Cal. Daily Op. Serv. 12, 1995 U.S. App. LEXIS 37138, 28 Bankr. Ct. Dec. (CRR) 415, 1995 WL 764258
CourtCourt of Appeals for the Ninth Circuit
DecidedDecember 29, 1995
Docket94-35681
StatusPublished
Cited by15 cases

This text of 72 F.3d 114 (In Re Daniel C. Hanna, Debtor. John Mitchell, Inc., Trustee v. John Steinbrugge) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Daniel C. Hanna, Debtor. John Mitchell, Inc., Trustee v. John Steinbrugge, 72 F.3d 114, 96 Daily Journal DAR 25, 96 Cal. Daily Op. Serv. 12, 1995 U.S. App. LEXIS 37138, 28 Bankr. Ct. Dec. (CRR) 415, 1995 WL 764258 (9th Cir. 1995).

Opinion

WALLACE, Chief Judge:

John Steinbrugge appeals from a district court judgment in favor of John Mitchell, Inc. (Mitchell), a Chapter 11 bankruptcy trustee. Steinbrugge contends that Mitchell’s action was time barred under 11 U.S.C. § 546(a) because it was brought more than two years after the debtor’s Chapter 11 bankruptcy petition was filed. The district court had jurisdiction pursuant to 28 U.S.C. § 158(a). We have jurisdiction over this timely appeal pursuant to 28 U.S.C. § 158(d). We affirm.

I

On July 27, 1990, Daniel C. Hanna filed a petition for relief under Chapter 11 of the Bankruptcy Act. Three days later, on July 30, Mitchell was appointed as Trustee. Pursuant to 11 U.S.C. § 547(b), Mitchell filed on July 28, 1992, an action to recover some pre-petition transfers made by Hanna to Stein-brugge.

After a trial, the bankruptcy court entered judgment in favor of Mitchell. Steinbrugge appealed to the district court, arguing that the limitations period for Mitchell’s action commenced on the date the bankruptcy petition was filed and therefore barred Mitchell’s suit. As all parties agree, the district court misapplied the mechanical rule for calculating the expiration date of the statute of limitations and affirmed the bankruptcy court. If the limitations period began when the Chapter 11 petition was filed, Mitchell’s action was filed one day late. If the limitations period commenced when Mitchell was appointed, then the action was timely. Stein-brugge argues that our recent decisions interpreting 11 U.S.C. § 546, the relevant statute of limitations provision, command us to hold that the period began upon filing.

II

When section 546’s statute of limitations begins to run is a question we review de novo. Ford v. Union Bank (In re San Joaquin Roast Beef), 7 F.3d 1413, 1414 (9th Cir.1993) (San Joaquin Roast Beef). Interpretation of a statute must begin with the statute’s language. United States v. Ron Pair Enterprises, 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). We consider the language of a statute to be conclusive of its meaning except in the most extraordinary circumstances. Cowart v. Nielelos Drilling Co., 505 U.S. 469, 475, 112 S.Ct. 2589, 2594, 120 L.Ed.2d 379 (1992).

Although Congress recently amended section 546 of the Bankruptcy Code, the new provision was not in effect during the relevant events. The pre-amended version controls this case, and provides in part:

An action or proceeding under [section 547] of this title may not be commenced after the earlier of—
(1) two years after the appointment of a trustee under section [1104] of this title; or
(2) the time the case is closed or dismissed.

If the statute’s language were our only guide, the case would be straightforward: Mitchell, a trustee appointed under section 1104 of the Bankruptcy Code, would have two years from its appointment in which to file a complaint to recover preferences. However, we are bound not only by the plain language of the statute, but by three prior decisions that together complicate matters somewhat.

In Upgrade Corp. v. Government Technology Services (In re Softwaire Centre International), 994 F.2d 682 (9th Cir.1993) (Softwaire Centre), we held that the limitations period in section 546(a) applies to a debtor in possession who attempts to bring an avoidance action more than two years after filing a bankruptcy petition. Id. at 682-83. Softwaire Centre, relying on the Tenth Circuit’s decision in Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523-24 (10th Cir.1990) (Zilkha), held that a debtor in possession is the “functional equivalent of an appointed trust *116 ee,” and is therefore subject to a two-year limitations period, commencing at the time the petition is filed. Softwaire Centre, 994 F.2d at 683, quoting Zilkha, 920 F.2d at 1524. In neither Sojtwaire Centre nor Zilkha was a Chapter 11 trustee actually appointed. Notably, Zilkha took “no position on whether a subsequent appointment of a trustee in a chapter 11 case would change the analysis.” Zilkha, 920 F.2d at 1524 n. 11 (citation omitted). We face the precise question left open in Zilkha.

In San Joaquin Roast Beef, a Chapter 11 trustee was appointed on May 2, 1988, over nine months after the debtor in possession filed its bankruptcy petition. On May 30, 1989, the bankruptcy judge converted the proceeding from Chapter 11 to Chapter 7 and later appointed a Chapter 7 trustee. On May 3, 1990, the Chapter 7 trustee filed an adversary proceeding that was subject to the section 546(a) limitations period. We held that the limitations period begins running “from the date the first trustee is appointed and that all subsequent trustees are subject to the same statute of limitations.” 7 F.3d at 1415. Without mentioning Sojtwaire Centre or its implications, we held that the limitations period began on May 2, 1988, when the Chapter 11 trustee was appointed. Because the trustee’s action would have been barred regardless of whether we began counting on the date the Chapter 11 petition was filed or the date the Chapter 11 trustee was appointed, we had no reason in San Joaquin Roast Beef to resolve the issue left open in Zilkha and did not even cite Sojtwaire Centre. Mitchell argues that because it was the first appointed trustee, the limitations period commenced when it was appointed. Steinbrugge argues that Sojtwaire Centre makes the debtor in possession the first trustee, rendering Mitchell’s suit time barred.

Steinbrugge further argues that his interpretation of San Joaquin Roast Beef and Softwaire Centre was adopted in Mosier v. Kroger Co. (In re IRFM, Inc.), 65 F.3d 778 (9th Cir.1995) (IRFM). In IRFM, a Chapter 11 petition was filed on July 22,1988, and no Chapter 11 trustee was ever appointed. The case was converted to a Chapter 7 proceeding on October 3, 1989, and a Chapter 7 trustee was appointed on October 14, 1989.

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72 F.3d 114, 96 Daily Journal DAR 25, 96 Cal. Daily Op. Serv. 12, 1995 U.S. App. LEXIS 37138, 28 Bankr. Ct. Dec. (CRR) 415, 1995 WL 764258, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-daniel-c-hanna-debtor-john-mitchell-inc-trustee-v-john-ca9-1995.