South Atlantic Financial Corp., In re

• Decision Date: 05 August 1985
• Docket Number: No. 84-5165,84-5165
• Citation: 767 F.2d 814
• Parties: , Bankr. L. Rep. P 70,680 In re SOUTH ATLANTIC FINANCIAL CORP., etc., Debtors. BISCAYNE 21 CONDOMINIUM ASSOCIATION, INC., Plaintiff-Appellant, v. SOUTH ATLANTIC FINANCIAL CORP., etc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 814

767 F.2d 814

13 Bankr.Ct.Dec. 752, Bankr. L. Rep. P 70,680

In re SOUTH ATLANTIC FINANCIAL CORP., etc., Debtors BISCAYNE 21 CONDOMINIUM ASSOCIATION, INC., Plaintiff-Appellant, v. SOUTH ATLANTIC FINANCIAL CORP., etc., Defendant-Appellee.

No. 84-5165.

United States Court of Appeals Eleventh Circuit.

Aug. 5, 1985.

Chaykin, Karlan & Jacobs, Sharon B. Jacobs, Sandy Karlan, Coral Gables, Fla., for plaintiff-appellant.

Weil, Gotshal & Manges, Jeffrey L. Tanenbaum, New York City, Phillips & Phillips, Louis Phillips, Miami, Fla., for defendant-appellee.

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

Before RONEY and TJOFLAT, Circuit Judges, and BROWN ^*, Senior Circuit Judge.

TJOFLAT, Circuit Judge:

This is an appeal by a creditor in a Chapter 11 bankruptcy proceeding challenging an order of the bankruptcy court, affirmed by the district court, precluding it from filing a proof of claim after the time fixed for the filing of proofs of claims had passed. We find no error and affirm.

I.

In 1979, the creditor, Biscayne 21 Condominium, Inc. (Biscayne), a condominium association, purchased a residential condominium, known as Biscayne 21, from the debtor, South Atlantic Financial Corporation (SAFCO), a Florida corporation engaged in real estate development. In 1981, Biscayne filed suit against SAFCO in the Florida circuit court alleging that SAFCO had breached its sales agreement with Biscayne by misrepresenting the condition of the condominium and by failing to make certain repairs to it. This litigation was pending when SAFCO filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Reform Act of 1978 (the Bankruptcy Code) in the Southern District of Florida and was stayed on October 13, 1982.

In December of 1982, SAFCO filed a schedule of claims and statement of financial affairs in the bankruptcy court, pursuant to Interim Bankruptcy Rule 1007(b). ¹ In that schedule, SAFCO listed Biscayne as a "disputed" creditor. On June 22, 1983, the bankruptcy court set August 4, 1983, as the last day ("bar date") for creditors whom SAFCO had listed in its schedule as disputed, contingent, or unliquidated to file proofs of claim. Biscayne received a copy of this order but did not file a proof of claim before the bar date. Biscayne's attorney did, however, file a notice of appearance on July 1, 1983, in which she requested the court to forward her copies of all future pleadings and orders filed in the case.

On August 18, 1983, SAFCO requested the bankruptcy court to estimate certain contingent or unliquidated claims pursuant to section 502(c) of the Bankruptcy Code. 11 U.S.C. Sec. 502(c) (1982). ² Because Biscayne had not submitted a proof of claim by the bar date, SAFCO did not request the court to estimate its claim. Upon receiving a copy of SAFCO's pleading, Biscayne's counsel apparently became aware that Biscayne had failed to submit a proof of claim, and, on August 22, counsel requested the bankruptcy court to allow Biscayne to file an untimely proof of claim.

The court heard Biscayne's request on August 31. At that hearing, Biscayne's counsel readily admitted that her client had failed to submit a timely proof of claim solely because of her error: she explained that Biscayne had employed her after the Chapter 11 proceeding began and it was her impression that its previous attorney had filed a proof of claim. ³ The court concluded that counsel's error in assuming that her predecessor had filed a proof of claim in behalf of Biscayne did not constitute "excusable neglect," and it denied Biscayne's request to file an untimely proof. The court, however, explored the possibility of whether Biscayne had done anything in the reorganization proceeding that could be treated as the filing of an informal proof of claim; if so, the court could consider Biscayne's request as a motion to amend such proof of claim. After entertaining argument of counsel on this point, the court concluded that Biscayne's only prior activity in the case, the appearance of its attorney, could not be considered an informal proof of claim and that Biscayne's claim had been foreclosed. On September 21, Biscayne moved the court to reconsider its ruling and to stay the Chapter 11 proceeding in the interim. This motion was denied on October 18.

On October 26, Biscayne appealed the bankruptcy court's September 1 and October 18 orders. ⁴ Thereafter, it moved the district court to stay the Chapter 11 proceeding in the bankruptcy court pending its disposition of Biscayne's appeal. Following a hearing, the district court entered an order, dated February 8, 1984, affirming the bankruptcy court's orders and denying Biscayne's requested stay. This appeal followed.

II.

A.

Under Chapter 11 of the Bankruptcy Code only certain claimants are required to file proofs of claim in order to participate in a reorganization. Section 1111(a) of the Code, 11 U.S.C. Sec. 1111(a) (1982), provides that all claims listed by a debtor in its schedule of claims are deemed to be filed unless the debtor lists a claim as "disputed, contingent, or unliquidated." Because SAFCO listed Biscayne's claim as disputed, Biscayne was required to file a proof of claim by the bar date; otherwise, it would be forever foreclosed from participating in SAFCO's reorganization.

Although the Bankruptcy Code informs us as to which creditors must file proofs of claim in order to participate in a reorganization, it is silent as to the time within which claims must be filed. This subject is covered by the Bankruptcy Rules. ⁵ Rule 3003(c)(3), which governs the time for filing claims in Chapters 9 and 11 cases, provides that "[t]he court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed." The bankruptcy court here fixed August 4, 1983, as the time by which proofs of claim were required to be filed in SAFCO's reorganization. Because Biscayne failed to file a proof of claim by that time, it was barred from participating in SAFCO's reorganization unless it could establish sufficient grounds for the filing of a late proof of claim.

Rule 3003(c)(3) authorizes the court to extend the time for the filing of a proof of claim for "cause shown." This rule must be read, however, in conjunction with Rule 9006(b). See In re O.P.M. Leasing Services, Inc., 35 B.R. 854, 864 (Bankr.S.D.N.Y.1983); cf. In re Magouirk, 693 F.2d 948, 950 (9th Cir.1982). Rule 9006(b) provides:

when an act is required or allowed to be done at or within a specified period by these rules or by a notice given thereunder or by order of court, the court for cause shown may at any time in its discretion (1) with or without motion or notice order the period enlarged if the request therefor is made before the expiration of the period originally prescribed or as extended by a previous order or (2) on motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect.

(Emphasis added.) Rule 9006(b) makes it clear that, when a party moves for an extension of time after the expiration of the time period, it must show that its failure to act before the court's deadline was the result of excusable neglect.

Courts have interpreted "excusable neglect" under Rule 9006(b) and its identically worded predecessor, Rule 906(b), as requiring the movant to show that " 'the failure to timely perform a duty was due to circumstances which were beyond the reasonable control of the person whose duty it was to perform.' " In re Gem Rail Corp., 12 B.R. 929, 931 (Bankr.E.D.Pa.1981) (quoting In re Manning, 4 B.C.D. 304, 305 (D.Conn.1978)). Thus, in In re Underground Utility Construction Co., 35 B.R. 588 (Bankr.S.D.Fla.1983), the court held that a creditor had failed to show "excusable neglect" for filing his claim three days after the bar date where the untimely filing was the result of his failure to mail his claim to the proper address. Similarly, in In re Oakton Beach & Tennis Club Real Estate Limited Partnership, 9 B.R. 201 (Bankr.E.D.Wisc.1981), the court held that counsel's reliance on misinformation from a bankruptcy court clerk regarding his duty to file a proof of claim did not amount to excusable neglect; see also In re Horn Construction & Maintenance, Inc., 32 B.R. 87 (Bankr.S.D.Ala.1983), ("misunderstanding" between a creditor and its lawyers which caused its late filing of a proof of claim did not amount to "excusable neglect."); In re Gem Rail Corp., 12 B.R. 929, 931 (Bankr.E.D.Pa.1981) (creditor's failure to obtain records with which to file timely proof of claim was not excusable neglect where there was no showing by creditor that records could not easily have been obtained). Courts have been most willing to find excusable neglect where the movant failed to comply with the bar date because, through no fault of its own, it had no notice of that date. See, e.g., In re Loveridge, 2 B.C.D. 1597 (Bankr.D.Conn.1977).

Although this circuit has not had occasion to construe excusable neglect under either Rule 9006(b)(1) or Rule 906(b), the definition of excusable neglect employed by the courts cited above comports with this circuit's construction of excusable neglect under Fed.R.Civ.P. 6(b)(2), from which Rule 9006(b) and Rule 906(b) are derived. See Fed.R.Bankr.P. 9006 advisory committee note. For instance, in McLaughlin v. City of LaGrange, 662 F.2d 1385, 1387-88 (11th Cir.1981), cert. denied, 456 U.S. 979, 102 S.Ct. 2249, 72 L.Ed.2d 856 (1982), we held that the appellant had not demonstrated "excusable neglect" for failing to respond in a timely manner to a summary judgment motion when his only excuse for failing to do so was that his attorney was a solo practitioner with a busy schedule. See also Beaufort Concrete Co. v. Atlantic States Construction Co., 352 F.2d 460, 463 (5th Cir.1965) ⁶ (district court did not abuse its discretion in finding no excusable neglect...