Pugh, In re, No. 96-3790

CourtUnited States Courts of Appeals. United States Court of Appeals (11th Circuit)
Writing for the CourtBefore TJOFLAT, DUBINA and BARKETT; TJOFLAT
Citation158 F.3d 530
Docket NumberNo. 96-3790
Decision Date21 October 1998
Parties40 Collier Bankr.Cas.2d 1369, 33 Bankr.Ct.Dec. 471, Bankr. L. Rep. P 77,828, 12 Fla. L. Weekly Fed. C 174 In re: William D. PUGH and Elizabeth Pugh, Debtors. William D. PUGH and Elizabeth Pugh, Plaintiffs-Appellants, v. V. John BROOK, Jr., Trustee, Defendant-Appellee. Non-Argument Calendar.

Page 530

158 F.3d 530
40 Collier Bankr.Cas.2d 1369, 33 Bankr.Ct.Dec. 471,
Bankr. L. Rep. P 77,828,
12 Fla. L. Weekly Fed. C 174
In re: William D. PUGH and Elizabeth Pugh, Debtors.
William D. PUGH and Elizabeth Pugh, Plaintiffs-Appellants,
v.
V. John BROOK, Jr., Trustee, Defendant-Appellee.
No. 96-3790
Non-Argument Calendar.
United States Court of Appeals,
Eleventh Circuit.
Oct. 21, 1998.

Joel S. Treuhaft, Palm Harbor, FL, for Plaintiffs-Appellants.

Allan C. Watkins, Tampa, FL, for Defendant-Appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before TJOFLAT, DUBINA and BARKETT, Circuit Judges.

TJOFLAT, Circuit Judge.

This appeal presents the following question: Do the limitations periods prescribed in 11 U.S.C. §§ 546(a) and 549(d) operate to divest a bankruptcy court of subject matter jurisdiction once they have elapsed, or do these periods constitute statutes of limitations that can be waived? We adopt the latter characterization as the law of this circuit, and therefore affirm.

I.

This appeal involves an adversary proceeding brought in bankruptcy court by the appellee, bankruptcy trustee V. John Brook, Jr., against the appellants, debtors William D. Pugh and Elizabeth Pugh. The bankruptcy from which this proceeding arose began on September 27, 1991. On that date, the debtors filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in order to prevent an impending foreclosure sale of their chicken ranch in Plant City, Florida. The debtors also filed schedules of assets and liabilities that did not make adequate disclosure with respect to two of their pre-petition assets. First, the debtors did

Page 531

not disclose that, shortly before filing for bankruptcy, Mr. Pugh received $75,000 (net of fees and costs) as a settlement for injuries sustained in an auto accident. The debtors used the proceeds from this settlement to purchase two annuity contracts on September 13, 1991. In their schedules of assets, the debtors claimed these annuities as exempt assets with a value of $501 per month. Second, the debtors did not disclose an unliquidated breach of contract claim that they had against Zephyr Egg Co.

On November 4, 1991, Sun Bank of Pasco County, Florida, sought relief from the automatic stay in order to complete its foreclosure on the debtors' ranch. The bankruptcy court entered an order on January 15, 1992, that denied Sun Bank's motion for relief and approved a settlement under which the debtors would pay Sun Bank $50,000 in satisfaction of the bank's pre-petition judgment. Without obtaining bankruptcy court authorization under 11 U.S.C. § 364, the debtors then borrowed $50,000 from their annuities in order to pay Sun Bank.

On February 5, 1992, the debtors filed a notice of voluntary conversion to Chapter 7. One week later, the bankruptcy court entered an order converting the case and appointing Mr. Brook as interim trustee. Mr. Brook then became the permanent trustee at the 11 U.S.C. § 341 meeting of creditors on April 16, 1992.

On April 3, 1992, the debtors filed amended schedules of assets and liabilities that listed the Zephyr Egg claim on Schedule C as exempt property of undetermined value. After negotiating with the debtors' counsel, the trustee filed a notice of intention to sell property of the estate. This notice, which was filed on September 10, 1992, stated that the estate would receive 70% of the proceeds (after expenses) of any settlement of the debtors' claim against Zephyr Egg, and that the debtors would receive the remaining 30%. In January 1993, the debtors settled their suit against Zephyr Egg without bankruptcy court approval and received $63,310.80 (net of costs and fees). On March 19, 1993, the trustee filed a motion seeking bankruptcy court approval of the settlement of the Zephyr Egg claim under the 70%-30% split outlined in the September 1992 notice; the court denied the motion on grounds of improper service on May 17, 1993.

The debtors used $50,000 from the Zephyr Egg settlement to replace the amount they had taken from their annuities to pay Sun Bank, and tendered $13,400 to the trustee under the mistaken belief that this amount would be sufficient to satisfy the remaining claims against the bankruptcy estate. On August 4, 1993, the bankruptcy court granted the trustee's amended motion for an order to show cause why the debtors should not be held in contempt for failing to turn over 70% of the Zephyr Egg settlement proceeds to the trustee. The court subsequently discharged its August order to show cause on March 24, 1994. In its March discharge order, the bankruptcy court ruled that the debtors had a conclusive right to the Zephyr Egg settlement proceeds because no objection was interposed within 30 days after the debtors filed their amended Schedule C in April 1992.

The trustee later discovered, however, that the debtors had never served the parties in interest with the April 1992 version of Schedule C. He therefore filed a motion to strike the amended Schedule C, which the bankruptcy court granted on July 26, 1994. The debtors filed a second amended Schedule C on August 30, 1994, in which they claimed that the full amount of the Zephyr Egg claim was exempt. After several creditors objected to this claimed exemption, the bankruptcy court entered an order on January 17, 1995, that disallowed the exemption and declared that the proceeds of the Zephyr claim were the property of the bankruptcy estate.

On July 21, 1995, the trustee initiated the adversary proceeding at issue. The trustee's complaint sought: an accounting of the proceeds of the Zephyr Egg settlement (Count I); the turnover of those proceeds pursuant to 11 U.S.C. § 542(b) (Count II); and the imposition of an equitable lien on the debtors' annuities (Count III). On September 18, 1995, the debtors filed their answer and affirmative defenses; this filing did not raise a statute of limitations defense. The bankruptcy court entered a final judgment in favor of the trustee as to Count II, and in

Page 532

favor of the debtors as to Counts I and III, on March 6, 1996. This judgment required the debtors to turn over $44,317.56 to the trustee, and provided that the trustee could impose a constructive trust on the annuities if the debtors failed to pay. See Brook v. Pugh (In re Pugh ), 195 B.R. 787 (Bankr.M.D.Fla.1996). On March 18, 1996, the debtors appealed this judgment to the district court pursuant to 28 U.S.C. § 158.

The debtors raised two issues before the district court. First, they claimed that the bankruptcy court did not have subject matter jurisdiction to consider the trustee's adversary proceeding. The district court, noting that the debtors presented no argument on this point, found that their contention was without merit. See Pugh v. Brook (In re Pugh ), 202 B.R. 792, 795 (M.D.Fla.1996).

Second, the debtors claimed that the trustee was barred by 11 U.S.C. § 546 from commencing or maintaining the adversary proceeding. In response, the trustee argued that because the debtors failed to raise the statute of limitations found in either 11 U.S.C. §§ 546(a) or 549(d) as an affirmative defense in their September 1995 filing, they had waived that defense. The district court, agreeing with the trustee, concluded that these two sections of the bankruptcy code constituted waivable statutes of limitations rather than non-waivable jurisdictional bars. Because the debtors had waived their statute of limitations defense by failing to include it in their answer, as required by Fed.R.Civ.P. 8(c), the district court held that they could not raise it on appeal. Accordingly, the district court entered an order affirming the judgment of the bankruptcy court on November 18, 1996. See Pugh, 202 B.R. at 795-96. This appeal followed.

II.

This court has jurisdiction over all final orders of a district court exercising appellate jurisdiction over bankruptcy court orders. See 28 U.S.C. § 158(d) (1994). In exercising such jurisdiction, we review conclusions of law made by the district and bankruptcy courts de novo. See Hardy v. United States (In re Hardy ), 97 F.3d 1384, 1388 (11th Cir.1996).

A.

The sole issue of law raised by the debtors on appeal is whether the limitations periods in 11 U.S.C. §§ 546(a) and 549(d) (hereinafter "code provisions") constitute bars to subject matter jurisdiction rather than waivable statutes of limitations. At the time that the debtors commenced their bankruptcy case, 1 11 U.S.C. § 546(a) (1988) provided:

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 ... or (2) the time the case is closed or dismissed.

11 U.S.C. § 549(d) (1994) provides:

An action or proceeding under [section 549] may not be commenced after the earlier of--(1) two years after the date of the transfer sought to be avoided; or (2) the time the case is closed or dismissed.

Aside from the fact that they affect different sections of Title 11, the only difference between these two code provisions is the point at which the two-year limitations period begins to run. See McFarland v. Leyh (In the Matter of Tex. Gen. Petroleum Corp.), 52 F.3d 1330, 1338 n. 10 (5th Cir.1995). The observations that follow, therefore, apply to both code provisions.

In assessing the debtors' argument that these code provisions raised a non-waivable jurisdictional bar to the trustee's adversary proceeding, we must first consider whether either section 546(a) or section 549(d) can properly be applied here. Because the trustee's complaint framed the adversary proceeding as a turnover action under 11 U.S.C. § 542, a section to which neither code provision refers, it is not immediately apparent how these code provisions could have any application to the proceeding. The debtors contend, however, that the trustee's proceeding

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actually should be characterized...

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56 practice notes
  • Morton v. Kievit ( In re Vallecito Gas, LLC), CASE NO. 07-35674-BJH-11
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas
    • July 19, 2011
    ...Although several circuits have specifically held that the deadline set forth in § 549(d) may be equitably tolled, see, e.g. Inre Pugh, 158 F.3d 530, 537 (11th Cir. 1998) ("there is a strong consensus among courts that sections 546(a) and 549(d) can be equitably tolled"); In re Olsen, 36 F.3......
  • Morton v. Kievit (In re Vallecito Gas, LLC)
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas
    • July 19, 2011
    ...Although several circuits have specifically held that the deadline set forth in § 549(d) may be equitably tolled, see, e.g. In re Pugh, 158 F.3d 530, 537 (11th Cir.1998) (“there is a strong consensus among courts that sections 546(a) and 549(d) can be equitably tolled”); In re Olsen, 36 F.3......
  • Kipperman v. Onex Corp., Civil Action No. 1:05-CV-1242-JOF.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • August 13, 2009
    ...pled in a defendant's answer. See 11 U.S.C. § 547(g) (placing the burden to prove 547(c) exceptions on defendant); In re Pugh, 158 F.3d 530, 532 (11th Cir.1998) (affirmative defenses not asserted are waived); In re Moltech Power Systems, Inc., 326 B.R. 179, 183 (Bankr.N.D.Fla. 2005) (547(c)......
  • In re Outboard Marine Corp., Bankruptcy No. 00-B-37405.
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
    • September 11, 2003
    ...is a true statute of limitations that can be extended by the parties, waived, or equitably tolled. See, e.g., Pugh v. Brook (In re Pugh), 158 F.3d 530, 538 (11th Cir.1998) (concluding that the limitations periods set forth in sections 546(a) and 549(d) are statutes of limitations that can b......
  • Request a trial to view additional results
56 cases
  • Morton v. Kievit ( In re Vallecito Gas, LLC), CASE NO. 07-35674-BJH-11
    • United States
    • United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Northern District of Texas
    • July 19, 2011
    ...Although several circuits have specifically held that the deadline set forth in § 549(d) may be equitably tolled, see, e.g. Inre Pugh, 158 F.3d 530, 537 (11th Cir. 1998) ("there is a strong consensus among courts that sections 546(a) and 549(d) can be equitably tolled"); In re Olsen, 36 F.3......
  • Morton v. Kievit (In re Vallecito Gas, LLC)
    • United States
    • United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas
    • July 19, 2011
    ...Although several circuits have specifically held that the deadline set forth in § 549(d) may be equitably tolled, see, e.g. In re Pugh, 158 F.3d 530, 537 (11th Cir.1998) (“there is a strong consensus among courts that sections 546(a) and 549(d) can be equitably tolled”); In re Olsen, 36 F.3......
  • Kipperman v. Onex Corp., Civil Action No. 1:05-CV-1242-JOF.
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • August 13, 2009
    ...pled in a defendant's answer. See 11 U.S.C. § 547(g) (placing the burden to prove 547(c) exceptions on defendant); In re Pugh, 158 F.3d 530, 532 (11th Cir.1998) (affirmative defenses not asserted are waived); In re Moltech Power Systems, Inc., 326 B.R. 179, 183 (Bankr.N.D.Fla. 2005) (547(c)......
  • In re Outboard Marine Corp., Bankruptcy No. 00-B-37405.
    • United States
    • United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois
    • September 11, 2003
    ...is a true statute of limitations that can be extended by the parties, waived, or equitably tolled. See, e.g., Pugh v. Brook (In re Pugh), 158 F.3d 530, 538 (11th Cir.1998) (concluding that the limitations periods set forth in sections 546(a) and 549(d) are statutes of limitations that can b......
  • Request a trial to view additional results

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