22 F.3d 37 (2nd Cir. 1994), 900, In re Century Brass Products
| Citation | 22 F.3d 37 |
| Party Name | In Re CENTURY BRASS PRODUCTS, INC., Debtor. U.S. BRASS & COPPER COMPANY, Appellant, v. Jerome E. CAPLAN, Appellee. |
| Case Date | April 13, 1994 |
| Court | United States Courts of Appeals, U.S. Court of Appeals — Second Circuit |
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Argued Jan. 3, 1994.
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Robert C. Reichert, Hartford, CT (Robert U. Sattin, Reid & Riege, on the brief), for appellant.
Lissa J. Paris, Hartford, CT (Everett E. Newton, Frank A. Appicelli, Murtha, Cullina, Richter & Pinney, on the brief), for appellee.
Before MESKILL, KEARSE and LEVAL, Circuit Judges.
KEARSE, Circuit Judge:
United States Brass & Copper Company ("U.S. Brass") appeals from a judgment of the United States District Court for the District of Connecticut, Alan H. Nevas, Judge, affirming a judgment of the bankruptcy court, Robert L. Krechevsky, Chief Judge, in favor of appellee Jerome Caplan, administrator of a bankruptcy liquidation plan for debtor-in-possession Century Brass Products, Inc. ("Century"), for $11,845.56 against U.S. Brass on the ground that Century, just prior to filing for bankruptcy, had made a preferential payment to U.S. Brass. The district and bankruptcy courts rejected U.S. Brass's contention that the complaint should be dismissed in light of the two-year statute of limitations provided by 11 U.S.C. Sec. 546(a) (1988), ruling that that section, which states the time within which a bankruptcy trustee must bring suit to set aside a preference, is not applicable to such suits when brought instead by debtors in possession. U.S. Brass contends that these rulings are erroneous. We agree and reverse.
I. BACKGROUND
For purposes of the present appeal, the relevant facts are not in dispute. On March 15, 1985, Century filed a petition for reorganization pursuant to Chapter 11 of the United States Bankruptcy Code ("Code"), 11 U.S.C. Sec. 1101 et seq. (1988). No bankruptcy trustee, see 11 U.S.C. Sec. 1104, was ever appointed, and Century continued in control of the company as a debtor in possession ("DIP") pursuant to 11 U.S.C. Sec. 1101.
During the 90-day period before filing its petition for reorganization, Century had made a payment of $11,845.56 to U.S. Brass for an antecedent debt; because the payment was made during that period and while Century was insolvent, it constituted an avoidable preference under 11 U.S.C. Sec. 547. Century made no attempt to avoid the preference for more than four years. It first wrote U.S. Brass demanding repayment in June 1989. Its demand was ignored.
In September 1989, the bankruptcy court confirmed a Chapter 11 liquidating plan for Century and appointed Jerome E. Caplan as plan administrator (the "administrator"). In June 1990, the administrator made another demand on U.S. Brass for repayment of the preference. That demand was likewise ignored.
On September 12, 1990, the administrator filed the present complaint under 11 U.S.C. Sec. 547, seeking to avoid the preference. U.S. Brass moved for summary judgment dismissing the complaint, arguing that Sec. 546, which
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provides that a bankruptcy trustee must bring any Sec. 547 action within two years of the date of his appointment or before the case is closed or dismissed, whichever is earlier, barred Century's claim. U.S. Brass argued that, though Sec. 546(a) speaks in terms of trustees, a Chapter 11 DIP is the functional equivalent of a trustee and thus must likewise bring any preference-avoidance action within the period specified in that section.
The bankruptcy court, relying principally on In re Korvettes, Inc., 67 B.R. 730 (S.D.N.Y.1986), denied the motion for summary judgment, ruling that a DIP may bring an action to set aside a preference at any time before the reorganization proceeding is closed or dismissed, see 11 U.S.C. Sec. 546(a)(2) 127 B.R. 720. The court noted that DIPs had been allowed that freedom in early cases under the Bankruptcy Code and that Congress had not introduced any greater restriction when it amended the Code after those cases were decided. The court also reasoned that imposing a statute of limitations on a DIP would impede the DIP's efforts at reorganization.
Following the bankruptcy court's denial of the statute-of-limitations motion, the parties stipulated to the entry of judgment against U.S. Brass for $11,845.56 plus interest and costs, and U.S. Brass appealed to the district court. The district court found the bankruptcy court's rationale persuasive and affirmed. The present appeal followed.
II. DISCUSSION
On appeal, U.S. Brass pursues its statute-of-limitations contention. In opposition, Century argues principally that because the "plain language" of Sec. 546(a)(1) dates the running of the limitations period from "the appointment of a trustee," and a DIP is not a trustee, Sec. 546(a)(1) cannot apply to a DIP. We conclude that, in light of the statutory scheme as a whole, Sec. 546(a) applies to preference-avoidance actions brought by DIPs as well as to those brought by trustees.
Section 546(a) provides, in pertinent part, as follows:
(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...
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