In re Hausladen

Decision Date24 September 1992
Docket NumberBankruptcy No. 4-91-6571,4-91-6398,3-91-6802,3-90-4460 and 3-91-1964.
PartiesIn re Gary HAUSLADEN and Kristi Hausladen, Debtors. In re Jeffrey TIEDENS and Amy Tiedens, Debtors. In re Virgil M. FLYNN, Debtor. In re Robert M. BEAUTO, Debtor. In re Harold M. MICHAUD and Jacqueline M. Michaud, Debtors.
CourtUnited States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — District of Minnesota

Stephen J. Creasey, Minneapolis, Minn., for trustee.

Richard L. Kelso, Crystal, Minn., for debtors Jeffrey and Amy Tiedens.

Thomas E. Hoffman, Norwest Corp., Minneapolis, Minn., for Norwest Bank.

Linda Jeanne Jungers, Minneapolis, Minn., for Minneapolis Collection Bureau and Reliance Recoveries.

John P. Gustaphson, Roseville, Minn., for John's Hillcrest Pharmacy.

Before KRESSEL, Chief Judge, O'BRIEN, KISHEL, and DREHER, Bankruptcy Judges.

ORDER ALLOWING CLAIMS

ROBERT J. KRESSEL, Chief Judge.

These Chapter 13 cases came on for hearing on objections by the trustee to several claims. Because the trustee's objections raise the identical issue1 in each case and because of the importance of the issue, the court is deciding the objections en banc. See Local Rule 109. This court has jurisdiction under 28 U.S.C. §§ 1334 and 157(a) and Local Rule 201. These are core proceedings under 28 U.S.C. § 157(b)(2)(B).

FACTS

The debtors all filed petitions under Chapter 13. Meetings of creditors were scheduled pursuant to 11 U.S.C. § 341 and Rule 2003 of the Federal Rules of Bankruptcy Procedure. Pursuant to Rule 3002 of the Federal Rules of Bankruptcy Procedure, timely filed claims were to be filed by creditors within 90 days after the meeting of creditors. Pursuant to Rule 3004 of the Federal Rules of Bankruptcy Procedure, the debtors have an additional 30 days to file a proof of claim on behalf of a creditor who fails to do so. After the 90-day period had run, Norwest Bank Minnesota, N.A., Minneapolis Collection, Reliance Recoveries and John's Hillcrest Pharmacy filed proofs of claim. After both the 90-day period and the additional 30-day period had run, proofs of claim were filed on behalf of North Memorial Medical Center and Student Loan Servicing Center by the Tiedens. The trustee objected to allowance of all claims on the basis of their late filing.

ISSUE

The issue before us is whether a claim filed in a Chapter 13 case after the 90-day deadline set by Rule 3002(c) of the Federal Rules of Bankruptcy Procedure should be disallowed?

DISCUSSION

The resolution of this question requires an examination of several provisions of the Bankruptcy Code and Rules. Although "canons of construction are no more than rules of thumb that help courts determine the meaning of legislation," Connecticut Nat'l Bank v. Germain, ___ U.S. ___, ___, 112 S.Ct. 1146, 1149, 117 L.Ed.2d 391 (1992), the examination commences with the language of the statutes itself. Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 552, 557, 110 S.Ct. 2126, 2130, 109 L.Ed.2d 588 (1990) ("the fundamental canon of statutory interpretation begins with the language of the statute itself."); U.S. v. Ron Pair Enter., Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). "The sole function of the court is to enforce the statute according to its terms." Id. 489 U.S. at 241, 109 S.Ct. at 1030 (citing Caminetti v. U.S., 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442 (1917)). Defining the terms of the statute, we must "presume that a legislature says in a statute what it means and means in a statute what it says there." Germain, ___ U.S. at ___, 112 S.Ct. at 1149. When the language before the court expresses Congress' intent with precision, as it does here, reference to legislative history and to pre-Code practice is not necessary. Ron Pair Enter., Inc., 489 U.S. at 241, 109 S.Ct. at 1030.2

Section 501 is our starting point. Simply, section 501 tells us who can file a claim; it does not set out the time limits for filing. Legislative history tells us that "the Rules of Bankruptcy Procedure will set the time limits, the form, and the procedure for filing, which will determine whether claims are timely or tardily filed." H.R.Rep. No. 595, 95th Cong., 1st Sess., 351 (1977); S.Rep. No. 989, 95th Cong., 2d Sess. 61 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 5847, 6307 (emphasis added). Rule 3002 of the Federal Rules of Bankruptcy Procedure addresses these issues:

(a) Necessity for Filing. An unsecured creditor or an equity security holder must file a proof of claim or interest in accordance with this rule for the claim or interest to be allowed,. . . .
(c)3 Time for Filing. In a chapter 7 liquidation or chapter 13 individuals debt adjustment case, 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, . . .

Fed.R.Bankr.P. 3002. Read together, Rules 3002(a) and 3002(c) do not explicitly say but imply that filing with in the prescribed period is a prerequisite to allowance. This erroneous reading arose when the drafters of the new Rule 3002 hastefully copied the substance of old Rule 302 without paying any attention to the major change in the underlying statute. Under the Bankruptcy Act, late claims were explicitly disallowed. Section 57(n) of the Act provided that . . . "claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed . . ." 11 U.S.C. § 93(n) (repealed Oct. 1, 1979) (emphasis added). The old Bankruptcy Rule implemented this time bar.4 However, a time bar does not expressly exist under the Code or Rules.

All of this has been compounded by attorneys, judges and commentators who have carried forward the old Act habit of referring to the date set for filing claims as the "bar date." Under Section 57(n) of the Act it was a bar date; however under Section 502 of the Code it is not. Continued mischaracterization of the time period has led to reliance on the words themselves without actually understanding them or what the statute actually says.

The language of the official bankruptcy forms further aggravates the problem and confusion. These forms provide that:

claims which are not filed within ninety days following the above date set for the meeting of creditors will not be allowed, except as otherwise provided by law.

Again, reading this clause without actually understanding its significance leads one to believe that tardily filed claims are not allowed. However, the law does in fact "otherwise provide" that tardily filed claims are allowed.

Focusing on the operative language, we find that allowance of claims is specifically governed by Section 502 of the Code. Section 502, in relevant part, provides:

Allowance of claims or interests.
(a) A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest . . . objects.
(b) . . . if such objection to a claim is made, the court, after notice and a hearing . . . shall allow such claim . . . except to the extent that —

11 U.S.C. § 502 (emphasis added). Section 502 then sets out eight specific grounds for disallowing claims. Tardy or late filing is not one of them. The statute says what the statute means: "the court . . . shall allow . . . claims . . . except. . . ." 11 U.S.C. § 502(b) (emphasis added). The words are clear; "lateness is not a ground for disallowance under section 502 of the Code." In re Horner, 1991 WL 353297 (Bankr.N.D.Ill. Sept. 21, 1991) (dicta); J. Keith M. Lundin, Chapter 13 Bankruptcy, § 7.24 at 7-59 (Sept. 1992 galley proof). In fact, in the face of an objection based on lateness, the statute explicitly requires us to allow the claim.

When Congress speaks as clearly as it has done here, the plain meaning of the legislation is conclusive, except in those "rare cases" in which the literal application of a statute will produce a result demonstrably at odds with the intention of its drafters. Ron Pair Enter., Inc., 489 U.S. at 242-43, 109 S.Ct. at 1031 (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982)). Here, however, the exception does not apply. Allowance of tardily filed claims clearly does not contravene the intent of the framers of the Code. Indeed, allowing tardily filed claims does not conflict with any other section of the Code, the legislative history of section 502 or for that matter with any important state or federal interest.5 The trustee has failed to articulate any argument or policy reason why Congress would have intended to disallow late filed claims. The language being clear and in conformity with the intent of Congress, the plain meaning is conclusive; tardily filed claims are allowed.

In fact, while not directly applicable in a Chapter 13 case, § 726 supports our conclusion that tardily filed claims should be allowed. Among the priorities of distribution in section 726(a) are allowed unsecured claims which are "timely filed" and those which are "tardily filed." Thus, absent some other basis of disallowance, tardily filed claims are allowed and entitled to distribution if there is enough money. While we recognize that section 726 applies only to Chapter 7 cases, it is a clear illustration of the principal: while treatment of a claim may be dependent on its timeliness, allowance is not.

Given the clarity of the statutory text, the trustee's burden of persuading us that Congress intended tardily filed claims to be disallowed is exceptionally heavy. Union Bank, ___ U.S. at ___, 112 S.Ct. at 530 (citing U.S. v. Ron Pair Enter., Inc., 489 U.S. 235, 241-42, 109 S.Ct. 1026, 1030-31, 103 L.Ed.2d 290 (1989)). The trustee, reading section 502 and Rule 3002 together, argues that tardily filed claims should not be allowed. Essentially, the trustee asserts that Rule 3002 complements section 502 by not allowing late filed claims. However, the trustee's reading ignores the obvious; section 502 and ...

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