In re Corporacion De Servicios Medico
| Decision Date | 06 January 1993 |
| Docket Number | Bankruptcy No. 85-00553. |
| Citation | 149 BR 746 |
| Parties | In re CORPORACION DE SERVICIOS MEDICO-HOSPITALARIOS DE FAJARDO, INC., Debtor. Carlos J. LASTRA, Trustee, Movant, v. BLOOD SERVICES PROGRAM OF the AMERICAN RED CROSS, Respondent/Claimant. Carlos J. LASTRA, Trustee, Movant, v. ORGANON TEKNIKA CORP., Respondent/Claimant. Carlos J. LASTRA, Trustee, Movant, v. RIMACO, INC., Respondent/Claimant. Carlos J. LASTRA, Trustee, Movant, v. UMECO, INC., Respondent/Claimant. Carlos J. LASTRA, Trustee, Movant, v. CESAR CASTILLO, INC., Respondent/Claimant. Carlos J. LASTRA, Trustee, Movant, v. CENTRAL MEDICAL WASTE SERVICE, Respondent/Claimant. |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
Richard A. Lee, San Juan, PR, for Trustee.
Steven Yova, Durham, NC, for Organon Teknika Corp.
Ramon A. Alfaro, San Juan, PR, for UMECO, Inc. and Cesar Castillo, Inc.
Rafael J. Vazquez Gonzalez, Vazquez Colon, Guzman Geigel & Alfaro, San Juan, PR, for Blood Services Program of the American Red Cross.
Pedro J. Diaz Garcia, Moreda & Moreda, San Juan, PR, for Rimaco, Inc.
Gilberto Rivera Arreaga, Bayamon, PR, for Central Medical Waste Service.
DECISION AND ORDER
On November 12, 1992, this Court held a hearing on the Chapter 7 Trustee's objections to claims, and the responses of the interested creditors. We took under advisement six1 of the disputed claims which were objected to on the basis that proofs of claim were not timely filed under Fed. R.Bankr.P. 3002(c). The claims here at issue are those of: (1) Organon Teknika Corp. (claim no. 149); (2) Blood Services Program of the American Red Cross (claim no. 143); (3) Central Medical Waste Service (claim no. 167); (4) Umeco, Inc. (claim no. 163); (5) Cesar Castillo, Inc. (claim no. 164); and (6) Rimaco, Inc. (claim no. 155), collectively "the Creditors." Each of these Creditors, together with the Trustee, submitted pretrial orders containing agreed statements of fact which, for the purposes of this decision, contain the following similar facts:
1. Pursuant to Fed.R.Bankr.P. 3002(c), the last day for filing proofs of claim in this Chapter 7 case was May 28, 1991.
2. The amount claimed by the Creditors correctly reflects Debtor's indebtedness to them.
3. Notice of the conversion of the case from Chapter 11 to Chapter 7, the first meeting of creditors under Chapter 7 and the bar date for filing proofs of claim was given on January 31, 1991, one day after the conversion was ordered.
4. None of the within Creditors were included on the list of creditors to whom the notice described in paragraph 3 above was given.
5. The within Creditors were first included on the list to whom notice of the continuation of the § 341 meeting was given, on July 19, 1991.
6. None of these Creditors were ever given written notice of the bar date for filing proofs of claim, until the Trustee's objection to such claims was filed on September 18, 1992.
7. At the time the within Creditors filed their proofs of claim, no disbursement had been made by the Chapter 7 Trustee to any preconversion unsecured creditors. Organon Teknika filed its proof of claim in the amount of $4,902.25 on August 7, 1991; the American Red Cross filed its proof of claim in the amount of $19,037.83 on or about June 26, 1991; Central Medical Waste filed its proof of claim in the amount of $15,601.97 on June 12, 1992; Umeco filed its proof of claim in the amount of $16,897.36 on June 2, 1992; Cesar Castillo filed its proof of claim in the amount of $10,374.50 on June 2, 1992; and Rimaco filed its proof of claim in the amount of $10,736.40 on November 13, 1991.
Other than Rimaco's, none of the other pretrial orders contain any statement as to when the particular creditors first became aware of the bankruptcy proceedings. As to Rimaco, the parties stipulate that Rimaco became aware of the bankruptcy in February, 1991.
In order to gain some perspective regarding the activity of this particular Debtor while under the protection of the bankruptcy court, we note that the petition was originally filed in 1985 as a Chapter 11 case, operating as a debtor-in-possession. After years of acrimony and litigation with the Department of Health and other governmental agencies, the Chapter 11 Debtor,2 with the consent of the unsecured creditors' committee, finally obtained a confirmed plan of reorganization on February 2, 1990. Less than one year later however, under the direction of Max Oliveras, and with the Debtor unable or unwilling to carry out the terms of the plan, on January 30, 1991 the case was converted to Chapter 7, a Trustee was appointed, and the case has remained in Chapter 7 since that time.
At the November 1992 hearing, it was represented that the within Creditors are all post-confirmation, pre-conversion creditors, who provided goods and/or services to the Debtor during its brief post-confirmation Chapter 11 lifetime. Thus, when the Court gave notice of the conversion of the case to Chapter 7, of the first § 341 meeting of creditors, and of the bar date for the timely filing of proofs of claim, said Creditors were not then included on the Court's matrix, as the Chapter 7 Trustee had not updated it from its Chapter 11 record.
The narrow legal issue presented is whether, on the facts presented above, the within Creditors' claims should be: (1) disallowed as untimely filed under Fed. R.Bankr.P. 3002(c); (2) allowed, but only as claims against the surplus remaining after payment of all allowed and timely filed claims and administrative expenses as provided by 11 U.S.C. § 726(a)(3) and Fed. R.Bankr.P. 1019(7); or (3) whether such claims should be allowed in pari passu with all other unsecured claims, including those timely filed, pursuant to § 726(a)(2)(C).
While the problem in addressing late filed claims is not novel to bankruptcy courts nationally, this is by no means a settled area of the law,3 having received mixed treatment throughout the bankruptcy court system.4 Moreover, neither this Court nor any of its appellate authorities have previously addressed the matter at hand.5
The starting point for examining the issue is Fed.R.Bankr.P. 3002, entitled "Filing Proof of Claims or Interest." Specifically, Rule 3002(c) provides in pertinent part:
(c) Time for Filing. In a chapter 7 liquidation, . . . a proof of claim shall be filed within 90 days after the first date set for the meeting of creditors called pursuant to § 341(a) of the Code.
There are six exceptions to this 90 day deadline, none of which apply in this instance. Moreover, the rule contains no provision for the situation at hand, i.e. where a creditor does not receive notice of the first § 341 meeting or of the bar date for the timely filing of claims.6
Fed.R.Bankr.P. 2002(f) contains the notice requirements upon the conversion of a case. In relevant part it provides: "the clerk, or some other person as the court may direct, shall give the debtor, all creditors, and indenture trustees notice by mail of, . . ., (2) the dismissal or the conversion of the case to another chapter; (3) the time allowed for filing claims pursuant to Rule 3002." There is no question here that the within Creditors were not on the list of creditors who received the required notice under Rule 2002(f).
Finding no exception for no-notice, late-filed claims in Rule 3002(c), the Trustee next refers us to Fed.R.Bankr.P. 9006(b)(3) which provides that "the court may enlarge the time for taking action under Rules . . . 3002(c) . . . only to the extent and under the conditions stated in those rules." Thus, the Trustee argues, and we agree, that the "excusable neglect" standard contained in Rule 9006(b)(1) is not available to the within Creditors in the context of a Chapter 7 case.
However, the bankruptcy rules are but one source of authority governing the filing of claims in Chapter 7 cases and, for the most part, they concern procedural as opposed to substantive rights.
The bankruptcy court in In re Columbia Ribbon & Carbon Mfg. Co., Inc., 54 B.R. 714 (Bankr.S.D.N.Y.1985) said, in reconciling Bankruptcy Rule 3002 with the pertinent code section, that:
On the basis of this reference the reference contained in the Advisory Committee Note to § 726(a)(2)(C) discussed in footnote 6 above, the absence of any provision in Rule 3002(c) governing no-notice claims, and the placement of the no-notice creditor provision in a section of the Code providing for distribution, that the omission of a rule must be viewed as intentional. It is an expression of opinion by the Advisory Committee on the Bankruptcy Rules that no rule was appropriate, apparently because Code § 726(a)(2)(C) was either viewed as a statute of limitation or as a matter of substantive law. Id. at 718. See also In re Rago, 149 B.R. 882, 1992 WL 410281 1992 Bankr. LEXIS 1855, No. 90 B 2284 (Bankr.N.D.Ill., November 23, 1992) .
11 U.S.C. § 726 delineates the priority of distribution of property of the estate in a chapter 7 liquidation. Significantly, § 726(a)(2)(C) authorizes the payment of tardily filed unsecured claims on the same tier as timely filed unsecured claims, where such delay is a result of: "(i) the creditor . . . not having notice or actual knowledge of the case in time for timely filing of a proof of claim; and (ii) proof of such claim is filed in time to permit payment of such claim."
Thus, to interpret Rule 3002(c) as setting an absolute deadline for the filing of claims in a Chapter 7 case in order for them to qualify otherwise as allowable, would render Code § 726(a)(2)(C) meaningless. See U.S. v. Cardinal Mine Supply, Inc., 916 F.2d 1087, 1089 (6th Cir.1990) ...
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