Pigott, In re

• Decision Date: 23 March 1982
• Docket Number: Nos. 81-2044,81-2045,s. 81-2044
• Parties: In re PIGOTT, James P., t/d/b/a James P. Pigott Building Materials. Appeal of CONESTOGA CERAMIC TILE DISTRIBUTORS, INC.
• Court: U.S. Court of Appeals — Third Circuit

Page 239

684 F.2d 239

In re PIGOTT, James P., t/d/b/a James P. Pigott Building Materials Appeal of CONESTOGA CERAMIC TILE DISTRIBUTORS, INC.

Nos. 81-2044, 81-2045.

United States Court of Appeals Third Circuit.

Argued Jan. 12, 1982.

Decided March 23, 1982.

Jacques H. Geisenberger, Jr. (argued), Geisenberger, Zimmerman, Pfannebecker & Atlee, Lancaster, Pa., for appellant.

Richard A. Umbenhauer (argued), Weglarz, Tryon & Friedman, Lancaster, Pa., for Landis & Co., appellee in 81-2044.

Walter T. Grabowski (argued), Asst. Counsel, Com. of Pennsylvania, Dept. of Revenue, Pittsburgh, Pa., for Com. of Pennsylvania, Dept. of Revenue, appellee in 81-2045.

Frances H. Del Duca, Faller & Del Duca, Carlisle, Pa., for James P. Pigott.

Before HUNTER and HIGGINBOTHAM, Circuit Judges, and ACKERMAN, ^* District Judge.

OPINION OF THE COURT

HAROLD A. ACKERMAN, District Judge:

This appeal raises the issue of whether a bankruptcy judge has the equitable power

to allow proofs of claim filed by creditors after expiration of the statutory six month period for filing such proofs set out in Section 57(n) of the Bankruptcy Act, 11 U.S.C. § 93(n). The bankruptcy judge permitted two creditors to file untimely proofs of claim over the objections of another creditor, Conestoga Ceramic Tile Distributors, Inc., ("Conestoga") the appellant. On appeal, the district court affirmed summarily. For reasons expressed herein, we reverse the district court and remand for proceedings in accordance with this opinion.

FACTS

On September 19, 1978, James P. Pigott, doing business as James P. Pigott Building Materials, filed a voluntary petition in bankruptcy. He listed the Commonwealth of Pennsylvania, Department of Revenue as a priority tax creditor. On October 5, 1978, the first meeting of creditors was held. The six month statutory period for filing claims runs from this date. At this meeting, Landis & Co. ("Landis") was listed as a creditor claiming $1,885.00.

Landis completed a Proof of Claim and forwarded it to its attorney in late January, 1979. Upon receipt of the Proof of Claim form, Landis' counsel contacted the Trustee, Edward Harker, Esquire, to ascertain the procedure for filing and completing a valid proof of claim.

On March 28, 1979, an accident at the Three Mile Island Nuclear Reactor occurred, discharging low level radiation. A mass evacuation of the area was under consideration by the governor of the state. The uncertainty and anxiety created by the crisis allegedly disrupted business in the area. Around March 30, 1979, Landis' counsel telephoned the Trustee to explain that their office was being evacuated by choice and that as a result, formal filing of the Proof of Claim would be delayed beyond the due date of April 5, 1979. The Trustee stated that he had no objection to the late filing.

Subsequently, Landis' Proof of Claim was sent to the Trustee on April 11, 1979. The Trustee received it on April 13 and it was filed with the Bankruptcy Court on April 24, 1979.

The Commonwealth of Pennsylvania filed its Proof of Claim on June 30, 1979. The late filing was apparently the result of bureaucratic inertia.

Conestoga filed timely objections to the Proofs of Claim of both Landis and the Commonwealth. The Trustee objected only to the Commonwealth's claim.

The bankruptcy court, relying primarily on Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939), decided in the exercise of discretion to allow the claims of both Landis and the Commonwealth. On appeal, the district court affirmed summarily in an order dated April 23, 1981.

ANALYSIS

As a threshold matter, the parties disagree as to the correct standard of review applicable to this appeal. The appellant, Conestoga, contends that the appropriate standard is the "clearly erroneous or contrary to law" standard. The appellees argue that review should be limited to determining whether there was an abuse of discretion. In our judgment, Conestoga's view is correct. The abuse of discretion standard is only relevant if under applicable law the issue is left to the discretion of the court below. In this case, we have concluded that under the applicable law the bankruptcy judge had no discretion to allow untimely claims.

Filing proof of claims is governed by § 57 of the Bankruptcy Act, 11 U.S.C. § 93 which provides in pertinent part:

Sec. 57. (11 U.S.C. § 93.) Proof and Allowance of Claims

a. A proof of claim shall consist of a statement in writing and signed by a creditor, setting forth the claim; the consideration therefor; whether any and, if so, what securities are held therefor; and whether any and, if so, what payments have been made thereon; and that the claim is justly owing from the bankrupt to the creditor. A proof of claim filed in accordance with the requirements of the Bankruptcy Act, the General Orders of the Supreme Court, and the official n. Except as otherwise provided in this Act, all claims provable under this Act, including all claims of the United States and of any State or any subdivision thereof, shall be proved and filed in the manner provided in this section. Claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed : Provided, however, that the court may, upon application before the expiration of such period and for cause shown, grant a reasonable fixed extension of time for the filing of claims by the United States or any State or any subdivision thereof: Provided further, that the right of infants and insane persons without guardians, without notice of the bankruptcy proceedings, may continue six months longer: And provided further, that a claim arising in favor of a person by reason of the recovery by the trustee from such person of money or property, or the avoidance by the trustee of a lien held by such person, may be filed within thirty days from the date of such recovery or avoidance, but if the recovery is by way of a proceeding in which a final judgment has been entered against such person, the claim shall not be allowed if the money is not paid or the property is not delivered to the trustee within thirty days from the date of the rendering of such final judgment, or within such further time as the court may allow. When in any case all claims which have been duly allowed have been paid in full, claims not filed within the time herein above prescribed may nevertheless be filed within such time as the court may fix or for cause shown extend and, if duly proved, shall be allowed against any surplus remaining in such case. (Emphasis supplied).

forms, even though not verified under oath, shall constitute prima facie evidence of the validity and amount of the claim.

It is clear from the plain language of § 57(n) that the key requirements for the presentation of the claims at issue are 1) a writing and 2) filing within six months of the first creditors' meeting. None of the exceptions listed in the statute applies to the claims of the appellees, Landis and the Commonwealth. ¹

Landis argues that under the bankruptcy court's equitable powers its claim should be allowed. In its favor it points out that its claim was listed by the bankrupt on the schedule of creditors, that there was an extreme emergency, that it communicated with the Trustee prior to the filing deadline, and that the claim was filed only a few days out of time.

The law is settled in the Third Circuit that § 57(n), 11 U.S.C. § 93(n), is to be strictly construed. See In re Mellen Manufacturing Co., 287 F.2d 37 (3d Cir. 1961). ² It is pointed out that "expeditious administration was a prime objective of the 1938 amendments" (186 F.2d 132) and that this Court found indications that the Congressional intent was that the periods of limitation set up were to be strictly enforced. "Modern administration requires a definitive cut-off date past which claims may not be filed," said the Court. 186 F.2d 133.

In Mellen, Judge Goodrich speaking for the court stated,

Mellen, supra, at 38.

Even where the equities have weighed strongly in favor of extending the time period, we have upheld the strict six month time limit. See In re Vandergrift, 341 F.2d 921 (3d Cir. 1965) (per curiam ), affirming 232 F.Supp. 857 (W.D.Pa.1964). ³ Thus, under Third Circuit law the bankruptcy court did not have the equitable power to extend the filing date for Landis, even a few days.

The bankruptcy court cited Pepper v. Litton, 308 U.S. 295, 60 S.Ct. 238, 84 L.Ed. 281 (1939) in support of its decision, but its reliance on Pepper is misplaced. Pepper involved a fraudulent claim which had been reduced to judgment. In Pepper, the United States Supreme Court held that the bankruptcy court, in the exercise of its equitable powers, could look behind an apparently valid state court judgment and deny the judgment holder priority over other creditors where the judgment was fraudulently obtained. The Supreme Court spoke broadly in Pepper about the equitable powers of the bankruptcy court, but it was not considering a timeliness problem. Pepper is inapposite to the issues in this case. In the face of binding precedent, the bankruptcy court's reliance on Pepper was erroneous, and its decision was contrary to Third Circuit law.

Landis argues, however, that the extraordinary nature of the crisis engendered by the nuclear accident distinguishes this case from prior Third Circuit cases on the issue. Because there was no evidence in the record of the extent of disruption to As an alternative argument, Landis contends that the telephone call to the Trustee can be viewed as a timely oral filing which was later amended. We disagree. We have implicitly rejected the validity of an amendment to an oral filing in In re Supernit, 186 F.2d 130 (3d Cir. 1950). ⁴ In Supernit, the bankruptcy court allowed an untimely claim dated January 5, 1950 to be filed nunc pro tunc as of May 12, 1949. On May 12, the creditor's attorney had made mention of his client's claim...