IN
RE:
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
LEXINGTON DIVISION
IN
RE:
COMPUTREX, INC. CASE
NO. 01-53755
DEBTOR CHAPTER
7
OPINION AND ORDER
The relevant background of this matter is as
follows. On June 27, 2002 BorgWarner
Diversified Transmission Products, Inc. and BorgWarner Air/Fluid Systems, Inc.
(collectively "BorgWarner")
filed a joint motion to allow late filed claims (Document #258) (the "Motion"). The deadline for BorgWarner to file its
claims was May 28, 2002; however, its claims were filed beyond the
aforementioned deadline. On July 30,
2002 the Trustee filed a response (Document #276) that objected to the
Motion. On August 14, 2002 BorgWarner
filed a reply to the Trustee's response
(Document # 284). On September 5, 2002
the court took this matter under submission for further consideration and
ruling.
Simply stated, the issue before the court presented in
the Motion is whether circumstances of
"excusable
neglect" permit the court to allow proofs of claim that were tardily filed. Resolution of this issue involves navigating
through a labyrinth of Bankruptcy Code (the
"Code" and Bankruptcy Rules (the
"Rules")
provisions. Our journey beings with 11
U.S.C. ' 502, which deals with
"Allowance of claims or interests"
Section 502(a) states in relevant part that
"a
claim . . .proof of which is filed under section 501 (of the Code), is deemed
allowed, unless a party in interest . . . objects."
Under the
scope of his authority set forth in
' 704(5) of the Code the trustee in this case objected
to BorgWarner's proofs of claim (Document #276). Therefore, under
' 502(a) the proof of claim could not be initially
allowed.
Because such objection was made by the trustee, the
court's analysis proceeds to
' 502(b)(9) of the Code, which states in relevant part that
"if such objection to claim is made, the court, after
notice and a hearing . . . shall allow such claim . . . except to the extent
that . . . proof of such claim is not timely filed, except to the extent
tardily filed as permitted under paragraph (1), (2), or (3) of section 726(a)
of this title or under the Federal Rules of Bankruptcy Procedure . . . .
"
Stated more plainly, ' 502(b)(9) contains an exception to an exception to
the general rule, with the general rule being that courts should allow proofs
of claim, an exception being that tardily filed proofs of claims are
disallowed, and the "exception to the exception" being that tardily filed proofs of claim may yet end up being allowed depending on what
' 726(a) of the Code or the Bankruptcy Rules may
say. In the case before the court,
BorgWarner, the creditor who filed the proof of claim at issue, admits that
they did not file its proof of claim in a timely manner as required by FRBP
3002(c) (discussed infra).
Therefore, BorgWarner's situation
falls under the "not timely filed exception" to the general rule on allowance of claims. Consequently, the court must examine the Bankruptcy Rules and section 726 of the
Code to determine whether there is
"an
exception to the exception" that may save
BorgWarner's claim from being disallowed.
The applicable general rule that addresses BorgWarner's request to the court for an extension of time to
file its proofs of claim is FRBP 9006(b)(1), which states in relevant part that
"when an act is required or allowed to be done at or
within a specified period by these rules or by notice of the court given
thereunder or by order of the court, the court for cause shown may at any time
in its discretion . . . 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. However, the
aforementioned general rule is limited by FRBP 9006(b)(3) which states that the
court "may enlarge the time for taking action under . . .
Rule 3002(c) only to the extent and under the conditions stated in (the)
Rule."
(Emphasis
added).
FRBP 3002(c)
states in relevant part that in a chapter 7 case
"a proof of claim is timely filed if it is filed not later than 90 days
after the first date set for the meeting of creditors called under
' 341(a) of the Code . . . . " Rule 3002(c) then proceeds to set forth five
enumerated exceptions to the ninety-day general rule. Neither the
"extent" nor the
"conditions" set forth in all of
Bankruptcy Rule 3002(c), including the five enumerated exceptions
previous mentioned, contain language that would equip this court to enlarge the
time period for the filing of proofs of claim when excusable neglect is
evident. Consequently FRBP 3002(c)
ultimately functions as a statute of limitations that prohibits courts from enlarging
the ninety-day time period for filing a proof of claim when a creditor is
seeking such an enlargement due to his excusable neglect.
BorgWarner cites the case In re Dartmoor Homes,
175 B.R. 659 (Bankr. N.D. Ill. 1994) in opposition to the court's preceding analysis.
However, the rule set forth in Dartmoor Homes is the general rule
for chapter eleven cases. The
rule for chapter seven cases such as this is consistent to the court's analysis, supra. See, e.g.,In re Edelman, 237 B.R. 146 (9th Cir.
BAP (cal.) 1999); In re Armstrong,
238 B.R. 438 (Bankr. E.D. Ark. 1999).
In light of the foregoing, IT IS HEREBY ORDERED that
BorgWarner's Motion is OVERRULED. As a result of the foregoing ruling, THE COURT FINDS that all
claims filed by BorgWarner after May 28, 2002 are disallowed as tardily filed.
Dated:
By the court
B
______________________________
JOSEPH M. SCOTT, JR.
U.S. BANKRUPTCY JUDGE
Copies
to:
James
McArdle, Esq,
James
Lyon, Trustee
John
O. Morgan, Jr., Esq.