GardenHire v. IRS
| Decision Date | 17 April 2000 |
| Docket Number | No. 98-55876,98-55876 |
| Citation | 209 F.3d 1145 |
| Parties | (9th Cir. 2000) In re CHARLES C. GARDENHIRE; OPAL GARDENHIRE,Debtors.CHARLES C. GARDENHIRE; OPAL GARDENHIRE,OPINION Appellants, v. UNITED STATES INTERNAL REVENUE SERVICE; EDWINA DOWELL, Chapter 13 Trustee, Appellees |
| Court | U.S. Court of Appeals — Ninth Circuit |
COUNSEL: Kneave Riggall, South Pasadena, California, for the appellants.
Loretta C. Argrett, Bruce R. Ellisen, Tamara W. Ashford (argued), United States Department of Justice, Washington, D.C., for appellee Internal Revenue Service.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel; Klein, Jones, and Hagan, Bankruptcy Judges, Presiding. BAP No. CC-97-01470-KJH
Before: Harry Pregerson, John T. Noonan, and Diarmuid F. O'Scannlain, Circuit Judges.
We must decide whether the doctrine of equitable tolling can be applied to the 180-day deadline for the Internal Revenue Service to file a proof of claim against a taxpayer in bankruptcy proceedings.
On September 10, 1996 (day 0),1 Charles and Opal Gardenhire ("the Gardenhires") filed in the Bankruptcy Court for the Central District of California a petition for relief under Chapter 13 of the Bankruptcy Code. On September 24, 1996, the Gardenhires filed a Chapter 13 plan proposing to make payments of $1,333.33 per month for 36 months ($47,999.88), for ultimate disbursement to the Internal Revenue Service (IRS), their primary creditor. Only one other creditor, a credit card issuer, filed a proof of claim in the Gardenhires' case, an unsecured claim for $2,281.90.
Due to a clerical error by the office of the Chapter 13 trustee (relating to miscalendaring), a hearing to confirm the Gardenhires' plan was held on November 21, 1996, even though the Gardenhires had not been given notice to appear on that date. Because neither the Gardenhires nor their counsel appeared at the hearing, their case was dismissed on December 2, 1996 (day 83). Notice of the order of dismissal was sent to all parties, including the IRS, on December 5, 1996 (day 85).
When the Chapter 13 trustee received notice of the dismissal order, she moved to vacate the order of dismissal and reinstate the case, explaining to the court the clerical error committed by her office. The motion was granted by order entered February 19, 1997 (day 162), 79 days after dismissal of the case. Notice of the order was mailed on February 22, 1997, and the IRS received notice of the reinstatement on February 24, 1997 (day 167). The IRS's proof of claim in the Gardenhires' case was executed on March 12, 1997 (day 183). On March 20, 1997 (day 191), the IRS proof of claim was filed.2 It consisted of a general, unsecured claim in the amount of $50,225.19, for unpaid federal income taxes assessed against the Gardenhires in 1991 for the calendar years 1981 through 1984.
On March 19, 1997, after the IRS proof of claim was executed but before it was filed, the Gardenhires objected to the IRS claim as untimely.3 The IRS argued that its proof of claim was timely on the theory that the 180-day filing period was suspended for 79 days, the amount of time that elapsed between the erroneous dismissal and subsequent reinstatement of the Gardenhires' case.
The bankruptcy court overruled the Gardenhires' objection to the claim without explanation. The Bankruptcy Appellate Panel (BAP) affirmed in a published opinion, holding that the 180-day period that the IRS had under 11 U.S.C.S 502(b)(9) for filing its proof of claim was "equitably tolled" for 11 days -the amount of time between expiration of the 180-day period on March 9, 1997, and filing of the IRS's proof of claim on March 20, 1997. In re Gardenhire, 220 B.R. 376, 385 (B.A.P. 9th Cir. 1998). Under this analysis, proof of the IRS claim was timely filed even though it was not filed until 191 days after filing of the Gardenhires' petition.
The Gardenhires timely appeal the BAP decision. 4
The issue presented by this case is whether the doctrine of equitable tolling doctrine can be applied to Bankruptcy Code S 502(b)(9)'s 180-day period for governmental units to file proofs of claim, even though the statutory framework explicitly provides for a 180-day filing period and forbids retroactive enlargement of that time.
Our analysis begins, as it must, with a survey of the framework established by the Bankruptcy Code and Rules. One Bankruptcy Code provision, 11 U.S.C. S 502(b)(9), and two Bankruptcy Rules, Rules 3002(c)(1) and 9006(b)(3), lie at the heart of this case.5 Under S 502(b)(9), a government agency's proof of claim is timely filed if it is filed within 180 days of the filing of the bankruptcy petition "or such later time as the Federal Rules of Bankruptcy Procedure may provide. " Timely filing of a proof of claim is important because under S 502, a creditor's claim will be disallowed if an objection to the claim is made and if proof of the claim is not timely filed.6 As the BAP correctly observed, disallowance of a claim can have serious consequences. "In Chapter 13 cases, disallowance under S 502(b)(9) is often fatal to the claim because (with stated exceptions) the primary Chapter 13 discharge encompasses all debts disallowed under S 502." 220 B.R. at 381.
Section 502(b)(9), in providing that the time for a governmental unit to file its proof of claim shall be either 180 days "or such later time as the Federal Rules of Bankruptcy Procedure may provide," requires reference to the Bankruptcy Rules. Bankruptcy Rule 3002(c)(1) implements S 502(b)(9), providing that in cases under Chapter 7, 12, and 13 of the Bankruptcy Code, the government's proof of claim must be filed "no later than 180 days after the date of the order for relief" in order to be deemed timely. Rule 3002(c)(1) thus reinforces the 180-day period provided for by the statute. Rule 3002(c)(1) also implements the "such later time " language of S 502(b)(9), however, by allowing the bankruptcy court to extend the time for filing a proof of claim if three specific conditions are met: (1) the government moves for an extension, (2) the motion itself is filed before expiration of the 180day period, and (3) cause for extension is shown.
Finally, Rule 9006(b)(3) provides additional reinforcement for the 180-day period established by S 502(b)(9) and Rule 3002(c)(1). Rule 9006(b) effectively prohibits retroactive enlargement of the 180-day period for filing proofs of claim prescribed by Rule 3002(c)(1), providing that the bankruptcy court "may enlarge the time for taking action under [Rule 3002(c)] only to the extent and under the conditions stated in [that rule]." Fed. R. Bankr. P. 9006(b)(3) (emphases added). Thus, under the Bankruptcy Code and Rules, (1) the government has a 180-day period in which to file its proof of claim and (2) this period can be expanded prospectively only, through a motion made prior to expiration of the period. As the BAP noted in this case, "Rules 3002(c) and 9006(b) make the statutory minimum of 180 days into a rigid deadline in cases under chapters 7, 12, and 13 unless an extension is requested before the deadline expires." 220 B.R. at 381 (emphases added).
In sum, the framework created by the interrelationship between S 502(b)(9) and Rules 3002(c)(1) and 9006(b)(3) clearly provides for a 180-day period in which a proof of claim by a governmental unit such as the IRS must be filed in order to be timely. This period is capable of expansion "only" upon motion by the government made prior to expiration of the 180-day period and accompanied by a showing of cause. Fed. R. Bankr. P. 3002(c)(1); Fed. R. Bankr. P. 9006(b)(3).
The Gardenhires argue that the plain meaning of these interrelated provisions must be enforced, and their straightforward, text-based argument possesses considerable force. Close adherence to the text of the relevant statutory provisions and rules is especially appropriate in a highly statutory area such as bankruptcy. As the Supreme Court explained in Rake v. Wade, 508 U.S. 464 (1993), also a case involving interpretation of the Bankruptcy Code in a Chapter 13 proceeding: "Where the statutory language is clear, our `sole function . . . is to enforce it according to its terms.' " Id. at 471 (citation omitted).7
Having examined the text and structure of the Bankruptcy Code and Rules, we now turn to analysis of applicable case law. We have on several occasions interpreted the controlling provisions at issue in this case quite strictly, enforcing them "according to [their] terms," as instructed by the Supreme Court in Rake. Our precedents support the conclusion that a bankruptcy court lacks equitable discretion to enlarge the time to file proofs of claim; rather, it may only enlarge the filing time pursuant to the exceptions set forth in the Bankruptcy Code and Rules.
Our first relevant precedent construing Bankruptcy Rule 3002(c) is In re Tomlan, 907 F.2d 114 (9th Cir. 1990) (per curiam), in which we adopted the district court's opinion in In re Tomlan, 102 B.R. 790 (E.D. Wash. 1989). The Tomlan court, in a case presenting facts similar to those presented here, held that the IRS's proof of claim in a Chapter 13 proceeding was untimely because it was filed five days late.8 After examining Rule 3002(c), the court held that"[t]he Bankruptcy Court does not have discretionary authority to enlarge the time after the filing period has expired absent a timely filed motion for such an extension." Id. at 791 n.1; see also id. at 795.
In re Coastal Alaska Lines, Inc., 920 F.2d 1428 (9th Cir. 1990), decided a few months after Tomlan, is perhaps the precedent with the greatest relevance to the issue presented in this case. Creditor Zidell filed a late proof of claim in the Chapter 7 bankruptcy proceeding of Coastal Alaska Airlines, and the trustee objected to the late filing.9 The bankruptcy court sustained the objection, the district court affirmed, and we affirmed. Zidell...
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