In Re: Parmetex, Inc.

• Decision Date: 01 February 1999
• Docket Number: No. 97-55671,97-55671
• Citation: 199 F.3d 1029
• Parties: (9th Cir. 1999) In re PARMETEX, INC., d/b/a/ TRADE VENTURES, Debtor. AVALANCHE MARITIME, LTD. and MOUNTAIN PEAK MARITIME, LTD., Plaintiffs-Appellants, and SEAPLACE SHIPPING LTD., Plaintiff, v. SUNIL PAREKH, JR.; SEVANTI PAREKH, a/k/a SUNIL PAREKH, SR.; RESHMA PAREKH; JITENDRA KAPADIA; FORENTAB INVESTMENT, LTD.; BANK OF BARODA; CALIPAR TRADING, INC.; MERPLEX, INC.; ERWIN SHUSTAK; SHUSTAK, JALIL, SANDERS & HELLER, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1029

199 F.3d 1029 (9th Cir. 1999)

In re PARMETEX, INC., d/b/a/ TRADE VENTURES, Debtor.

AVALANCHE MARITIME, LTD. and MOUNTAIN PEAK MARITIME, LTD., Plaintiffs-Appellants and SEAPLACE SHIPPING LTD., Plaintiff, v. SUNIL PAREKH, JR.; SEVANTI PAREKH, a/k/a SUNIL PAREKH, SR.; RESHMA PAREKH; JITENDRA KAPADIA; FORENTAB INVESTMENT, LTD.; BANK OF BARODA; CALIPAR TRADING, INC.; MERPLEX, INC.; ERWIN SHUSTAK; SHUSTAK, JALIL, SANDERS & HELLER, Defendants-Appellees.

No. 97-55671

U.S. Court of Appeals for the Ninth Circuit

Argued and Submitted February 1, 1999--Pasadena, California

Filed December 21, 1999

Jeremy O. Harwood, Healy & Baillie, New York, New York, for the plaintiffs-appellants.

Bradley E. Brook, Los Angeles, California; and Rebecca J. Winthrop, Kelley, Drye & Warren, Los Angeles, California; Jon M. Kasimov, Haight, Brown & Bonesteel, Santa Monica, California, for the defendants-appellees.

Appeal from the United States District Court for the Central District of California; Terry J. Hatter, District Judge, Presiding. D.C. No. CV-96-01752-TJH

Before: Melvin Brunetti, Frank J. Magill, ¹ and M. Margaret McKeown, Circuit Judges.

Opinion by Judge BRUNETTI; Partial Dissent by Judge McKeown.

BRUNETTI, Circuit Judge:

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. S 701.

3) The meeting of creditors held pursuant to 11 U.S.C. S 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 Parmetex. The Complaint was filed against a number of parties, including Sunil Parekh, Jr., Sevanti Parekh, Reshma Parekh, Jitendra Kapadia, Bank of Baroda and Calipar 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.S 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. SS 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, 158 F.3d 428, 433 (9th Cir. 1998).

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 brought on behalf of the estate although nominally on behalf of the named plaintiffs in lieu of the trustee. The Trustee authorizes the complaint to be amended if necessary to have the Trustee as a named party-plaintiff if procedurally required." On August 3, 1995, the bankruptcy court entered an order granting the stipulation. On September 25, 1995, the Creditors and Daff filed an amended complaint that added Daff as a plaintiff but stated the same claims.

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, 57 B.R. 824, 828 (B.A.P. 9th Cir. 1986) ("[t]he exclusive power to commence avoidance actions vested in trustees and debtors-in possession is permissive rather than mandatory . . . [T]he creditor may move to . . . gain court permission to institute the action itself."). See also In re Enserv Co., Inc., 64 B.R. 519 (B.A.P. 9th Cir. 1986) (following In re Curry), aff'd by mem., 813 F.2d 1230 (9th Cir. 1987); In re The Gibson Group, Inc., 66 F.3d 1436, 1442 (6th Cir. 1995) ("a creditor may have standing to file an avoidance action if the bankruptcy court determines that certain conditions exist and certain prerequisites are met"); In re Natchez Corp. of West Virginia, 953 F.2d 184, 187 (5th Cir. 1992) ("A creditor may [institute an action under section 549] on behalf of the trustee or debtor-in-possession if it has moved the bankruptcy court for authorization to do so"); In re Xonics Photochemical, Inc., 841 F.2d 198, 203 (7th Cir. 1988) (creditor could have asked the bankruptcy court to allow it to bring a form of derivative suit in the name of the debtor); In re Vogel Van & Storage, Inc., 210 B.R. 27 (N.D. N.Y. 1997) (upholding bankruptcy court's authorization of suit by creditor because "nothing in the Bankruptcy Code indicates that a trustee cannot authorize a creditor to litigate an avoidance action on the trustee's behalf").

III.

Defendants argue that the Creditors were barred from bringing a lawsuit because the applicable statute of limitations -11 U.S.C. S 546(a)² -had run. Specifically, Creditors contend that the S 546 statute begins to run on the date of qualification of the permanent trustee under 11 U.S.C. S 702, not from the date of appointment of the interim trustee under 11 U.S.C. S 701. We disagree with Creditors' argument and hold that the S 546(a) statute of limitations begins to run on the date the interim trustee is appointed pursuant to S 701 of the Bankruptcy Code.

11 U.S.C. S 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. S 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. S 701. See 11 U.S.C. S 701(a)(1) ("[t]he United States trustee shall appoint one disinterested person . . . to serve as interim trustee in the case."). If this is the case, the Complaint was not timely filed because the interim trustee was appointed on May 4, 1993, which is more than two years before the Creditors filed suit.³ The Creditors counter that "appointment of a trustee" refers to the "election" of a permanent trustee under 11 U.S.C. S 702(b). See 11 U.S.C. S 702(b) ("[c]reditors may elect one person to serve as trustee in the case"). According to the Creditors [and according to the dissent],S 546 must refer to the qualification of a permanent trustee under S 702 because the statute explicitly references S 702. Also, argue the Creditors, a large number of lower court opinions support such an interpretation of S 546(a). Despite lower court opinions that employ such reasoning, we hold today that the S 546(a) statute of limitations begins to run upon the appointment of the interim trustee under S 701, not upon the election of a permanent trustee under S 702. Such a result is dictated by two prior decisions of this court -In re. San Joaquin Roast Beef, 7 F.3d 1413 (9th Cir. 1993); and In re. Softwaire Centre International, Inc., 994 F.2d 682 (9th Cir. 1993).

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 S 546(a)'s twoyear statute of limitations. San Joaquin Roast Beef, 7 F.3d at 1414-1415. The trustee contended on appeal that he was not barred by the statute of limitations because the two-year period began to run anew after the conversion of the case from a chapter 11 bankruptcy proceeding to a Chapter 7 proceeding.

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