Independent Fire Insurance v. Pender

948 F.2d 985, 1991 U.S. App. LEXIS 29567
CourtCourt of Appeals for the Fifth Circuit
DecidedDecember 20, 1991
DocketNo. 91-3081
StatusPublished
Cited by2 cases

This text of 948 F.2d 985 (Independent Fire Insurance v. Pender) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Independent Fire Insurance v. Pender, 948 F.2d 985, 1991 U.S. App. LEXIS 29567 (5th Cir. 1991).

Opinion

KING, Circuit Judge:

Section 108(a) of the Bankruptcy Code, which ensures that a trustee may pursue prepetition claims of the debtor within two years after the filing date or the applicable prescription period, whichever is longer, is the focus of our review of this case. We inquire into whether this provision extends the prescription period for claims arising during the period between the filing of a Chapter 11 .petition and the conversion of the case to a Chapter 7 liquidation. Concluding that the language of the statute, its legislative history, and judicial precedent do not support such an extension, we find that summary judgment was proper because the trustee’s claim was time-barred.

I.

On August 6, 1987, debtor Victor J. Phillip filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code. At the time Phillip filed the petition, he owned a house in Waggaman, Louisiana. On September 3, 1988, more than a year after the Chapter 11 filing, fire destroyed this house. Phillip filed a claim for the damage with his insurance company, the Independent Fire Insurance Company (Independent Fire). Independent Fire denied Phillip’s claim because it concluded that the fire was ignited by or at the direction of Phillip.

On September 30, 1988, Phillip’s Chapter 11 proceeding was involuntarily converted into a Chapter 7 liquidation proceeding. The court appointed John Pender to act as interim trustee. Although the exact date is in dispute, Pender learned of the existence of Phillip’s claim at least six months before the one-year prescription period defined by the insurance policy had run.

Pender filed suit in district court to challenge Independent Fire’s decision on August 16, 1990, almost two years after the date of loss and fifteen months after Independent Fire formally denied Phillip’s claim. By minute entry dated November 20, 1990, the district court granted Independent Fire’s motion to withdraw the reference to the bankruptcy court and assumed direct responsibility for the lawsuit. On December 21, 1990, Independent Fire moved for summary judgment to dismiss the claim because it had not been filed within the one-year prescription period as required under the terms of Phillip’s homeowner’s policy.1 In opposition to Independent Fire’s motion, Pender asserted that the Bankruptcy Code extended the prescription period beyond that contained in the insurance policy. The district court granted summary judgment, holding that Pender’s claim was not timely filed. Pen-der appeals from this judgment.

II.

In reviewing a grant of summary judgment, we ascertain whether the record presents a genuine issue of material fact sufficient to preclude judgment for the movant as a matter of law. See Fed. R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986). Since this case presents solely a question of legal construction, our de novo review of the issue will determine whether the district court properly granted summary judgment in favor of Independent Fire.

Pender argues that 11 U.S.C. § 108(a)2 extends the prescription period for bringing suit against Independent Fire beyond the one-year limit imposed by the fire in[987]*987surance policy and Louisiana law.3 According to its express terms, § 108 lengthens this period only if “such period has not expired before the date of the filing of the [bankruptcy] petition.” We construe the language of § 108 to extend the prescription period for prepetition claims to two years after entry of the order for relief, if prescription otherwise would run before that date. Accord Northern Specialty Sales, Inc. v. INTV Corp. (In re Northern Specialty Sales, Inc.), 57 B.R. 557, 559 (Bankr.D.Or.1986).

This construction emerges not only from the language, but also from the policy reasons underlying the statute. See H.Rep. No. 595, 95th Cong., 1st Sess. 318, reprinted in 1978 U.S.Code Cong. & AdmimNews 5963, 6275 (noting that the section operates to “permit the trustee, when he steps into the shoes of the debtor, an extension of time for filing an action or doing some other act that is required to preserve the debtor’s rights”); S.Rep. No. 989, 95th Cong., 2d Sess. 30 (1978), reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5816 (same). At least in the ordinary case, no compelling reason exists for extending the prescription periods of postpetition claims, since trustees or debtors in possession4 should be aware of them as they arise. See In re Northern Specialty Sales, 57 B.R. at 559.

In this case, the fire occurred more than one year after Phillip filed his Chapter 11 petition. Accordingly, § 108(a) does not operate to extend the one-year prescription period set forth in the insurance policy. Under the policy’s terms, Phillip’s right to pursue the claim expired one year after the date of loss, or September 30,1989. Trustee Pender did not bring suit against Independent Life until August 16, 1990. The district court properly held that the suit was time-barred for this reason.

Alternatively, Pender argues that § 108(a) applies to the claim because it arose preconversion. He contends that the conversion of the case from Chapter 11 to Chapter 7 effectively changed the date of the order for relief from the date of filing to the date of conversion. Case law generally does not support this reasoning. See, e.g., McTevia v. Howell Indus. (In re United Trucking, Inc.), 91 B.R. 30, 31 (Bankr.E.D.Mich.1988); Rock River Prod. Credit Ass’n v. Langholf (In re Langholf), 37 B.R. 414, 419 (Bankr.N.D.Ill.1984); Gennet v. Oriental Rug Agency, Inc. (In re Florida Consumer’s Furniture Warehouse, Inc.), 9 B.R. 7, 9 (Bankr.S.D.Fla.1981). But see M & M Cattle Co. v. Reliable Drywall, Inc. (In re Reliable Drywall, Inc.), 20 B.R. 386, 387 (Bankr.D.Ariz.1982) (in dicta, calculating the limitation period pursuant to § 108(a)(2) from the date of conversion from Chapter 11 to Chapter 7).

The district court relied on United Trucking in concluding that Phillip’s original filing date controlled its application of § 108(a) to this case. The United Trucking court reasoned that 11 U.S.C. § 348 limits the significance of the conversion date to certain contexts only. Section 348(a) specifically provides

Conversion of a case from a case under one chapter of this title to a case under another chapter of this title constitutes an order for relief under the chapter to which the case is converted, but, except as provided in subsections (b) and (c) of this section, does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief.

Subsection (a) controls our analysis because § 108 does not appear as an excep[988]*988tion5 to its general rule. Accord United Trucking, 91 B.R. at 31; see also Stinson v. Williamson, 804 F.2d 1355

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Phillip v. Pender
948 F.2d 985 (Fifth Circuit, 1991)

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