Petition for Writ of Certiorari — Landwehr v. United States

Supreme Court brief1974

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. IN THE

‘SUPREME COURT OF THE UNITED STATES

November Term, 1973

No.

In The Matter Of: RAYMOND CHESTER MILLER,

Bankrupt,

MERRILL T. LANDWEHR, Petitioner

UNITED STATES OF AMERICA, Respondent

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES CIRCUIT COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Merrill T. Landwehr

Counsel for Petitioner

225 Baronne Street, Suite 2313

New Orleans, Louisiana 70112

Telephone: 1-504-529-1232

INDEX

Opinions MORON cestehedatuasdsabedbcnsolnécle. =

roupriicain ising OCT EE COO Te 5

Question Pn 64 56h6 Lb eebeneebidinntenecan Se

ONES SOUUINIG oc secisnnendsdadedseddéaecobienss &

POS adbaennesnduveéeadebesdceccewitieccciac. 5

Reasons for pranting the writ....ccccccccccccccce 13

nce marten EE POTEET ETOP E RE EO ene 31

Appendix A oT or ccatiaacisanntadsaccecs« 26

B - Opinions and judgment below.....ee. 34

CITATIONS

Cases:

In Re Aero Bulk Manufacturing Company

22% Fr. Supp. (1963) se eeeeeecccccccesccceececs 19

Avidon v. Halpert, 145 F. 2d 884 (1944)...... 21

Bank of Marin v. England, 385 U.S. 99 (1966)

COC CCC OCC EEO OC CCC COE EOL COCO OCC OCC COCO O CCC 26, 27; 29

Burton Coal Company v. Franklin Coal Company,

67 F, 2d 796 Peewee Chee secesawbadeddeedeke. A. 29

In Re Chemo Puro Manufacturing Corp., 202 F.

5 Supp. 140 Ge nc budebcedecaeunetadseccic.. 28

In Re Ebeling, 123 F. 2d 520 RPE sitaceacscs 3S

First National Bank of Fort Worth v. Virginia

Oil and Refining Company, 86 F. 2d 770 (1936) 30

: In Re Harmack Produce Co., Inc., 44 F. Supp.

1 SOPNED iskednssdindccnccdsvecaccaneed MS: pO 29

In Re. 74 Knowles Street Corporation, 52 F,

Supp. 715 Pend Kebedinnsedsuiccnsesceneiecs: 18

In Re. Kornblum, 22 F. Supp. 245 (1938)...... 29

OE NES CNTR ls A) NEIL.

L. 0. Koven & Brother, Inc. v. Local Union

_ No. 5767 United Steelworkers of America, 250

F. Supp. 810 Gee biea sdaadaudekaiwsencca 20, 31

r PSL CS ee RY z LPNS ENE PI OR oe Ree ete eee

a or

ALAR geal NRE NORE

beat OORT ot.

CAS DED CIS Gt 0 nt, A ETN

i ichaiitieataancapmtiantane inti ela Ne 99 niece

SEE err RNR PR Tt

In Re Lewis J. Glayer, 95 F. Supp. 472 (1951)..

* In Re Martin Edsel, Inc., 228 Fr. Supp. 538

(1968) oo eccaveccccccvcecsees 2l, 22,° 23, 25, 26,

Mellen Manufacturing Co., 287 F. 2d 37 (1961)..

Milando v. Perrone, 157 F. Supp. 1002 (1946)...

In Re Miracle Mart, Inc., 396 F. 2d 62 (1968)..

Pepper v. Litton, 308 U.S. 295 (1939)

CC COCHCH CEH COCO O ESOL OLE LEE OOS COCO COC CS an, po 256

’ Pusey and Jones Corporation, 192 F. Supp. 233

CHOOED OA Nhe cnaS UN SdaRRAES Ekin eehcb hbo Laeednke

Phillips v. Tarrier Company of Delaware, 93 F,

2d 674 CRP 0b 5054Cbsendnes bd4deshbade cacaca

In Re Quine, 30 F. Supp. 871 oo)

In Re R. B. Rose Co. 43°F. 2d 446 3. ae

In Re Romanac, 245 F. Supp. 882 i) ren

Securities Exchange Commission v. U. S. Realty

and Imp. Company, 310 U.S. 434 SINE actudecees

Tarbell v. Crex Carpet Co., 90 F. 2d 683 (1937)

In Re Vandergift, 232 F. Supp. 857 CREA) cv kcivcc

In the Matter of Vega Baja Lumber Yard, Inc.,

285 F, Supp. 143 [a dsb bdbedenedeeencedecs

In Re W. Il. Calder Company, 146 F. Supp. 389

PPnstVbNdiencebeLenhKnNeedeieeededsaes aces

Wheeling Valley Coal Corporation v. Mead, 171

F. 2d 916 (1949)

Williams v. Rice 30 F. 2d 814 FS. | re

LL IR OE SELLE DIE LIE OLS ON ee nee

ne 5s ie 2 *

IN THE

SUPREME COURT OF THE UNITED STATES

November Term, 1973

In The Matter Of: RAYMOND CHESTER MILLER,

Bankrupt, |

MERRILL T. LANDWEHR, Petitioner

UNITED STATES OF AMERICA, Respondent

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES CIRCUIT COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioner prays that a writ of certiorari

issue to review the judgment of the United States

Court of Appeals for the Fifth Circuit, entered in

‘the above-entitled case on September 17, 1973.

OPINIONS BELOW

The opinion of the referee in bankruptcy

is unreported and is printed in Appendix B attached

hereto, infra, p. - The opinion of the District

Court is unreported and is printed in Appendix B

attached hereto, infra, p. - The opinion of the

Circuit Court of Appeals is unreported and is

printed in Appendix B attached hereto, infra, p. °

JURISDICTION

The judgment of the Circuit Court of

Appeals was entered on September 17, 1973, p.

infra. The jurisdiction of this Court is invoked__.

under 28 U.S.C. “Section 1254(i).

QUESTION PRESENTED

May the IRS file an initial proof of claim

in a bankruptcy proceeding when the time for filing

said claim provided for under 11 U.S.C.A. § 93 sub n

has expired and the IRS has not, pursuant to the

requirement of said provision, applied for an

extension of the filing date.

STATUTE INVOLVED

The statutory provision involved is 11

U.S.C. § 93 sub n. ;

STATEMENT

The facts which give rise to this controversy

are not in dispute. The Bankrupt, Raymond C. Miller,

a/k/a Raymond Chester Miller, filed a voluntary

petition in Bankruptcy in the United States District

Court for the Southern District of Florida, Miami

Division, on January 31, 1968. Schedule A-1 of the

Bankrupt's petition did not list the United States

as a creditor of the Bankrupt estate,

On March 19, 1968, notice was mailed to all

creditors of the Bankrupt informing them of the fact

that the first meeting of creditors was to be held

in Miami, Florida, on April 4, 1968, and further

informing said creditors that the last. day for filipe _.

proofs of claim against the Bankrupt estate would

be October 4, 1968. Copies of said notice were mailed

to all appropriate governmental agencies, including

the Internal Revenue Service, as was evidenced by

the "Certificate of Notice" of said Court dated March

19, 1968.

Pursuant to the aforementioned notice,

the first meeting of creditors was duly and properly

convened and held in Miami, Florida, on April 4 and

5, 1968, at which meeting it was determined by United

States Referee in Bankruptcy, James E. Yacos of the

Southern District of Florida, Miami Division, that

Nath REA AMI Nols Red ARNDT Ut AON! LN ORM A NON RIA AO AACR eG AO Ao 2 eta awa

this proceeding should be transferred to the United

WW 0 8 Sanden arrow

States District Court for the Eastern District of

Louisiana, New Orleans Division, pursuant to Sec-

A abi i Ae: Pit aA

tion 32 of the Bankruptcy Act (11 USC 55), for the

convenience of all parties at interest. The Honorable

Emett Choate, District Judge, accepted Referee Yacos'

Ae ei nihe Se BAF. UA Perrine

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order transferring this proceeding fron the Southern

Niicceies of Florida to the Eastern District of Louisiana.

After said transfer had been completed,

the Clerk of the Bankruptcy Court in New Orleans, on

July 18, 1968, mailed notices to ali creditors of

the Bankrupt and to all appropriate governmental

agencies, including the Internal Revenue Service,

informing said recipients of the fact that a meeting

of the creditors was to be held in New Orleans on

August 6, 1968, Said notice indicated that this

proceeding in Bankruptcy was the same proceeding

as was transferred to the Eastern District of Louisiana

from the Southern District of Florida. However,

through inadvertent error, said notice to creditors

was sent in the form of a notice of the first meeting

of creditors and failed to inform the recipients

penne that the August 6th New Orleans meeting was

to be a continuation of the previously convened April

4th meeting of the creditors in Miami. Through

further inadvertent error, said notice incorrectly

Stated that the last day for filing proofs of clain

against the Bankrupt estate would be February 6,

ajo

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determination and on May 6, 1968, rendered an appropriate

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1969, rather than repeating the originally established

October 4, 1968 bar date, as had been set by Referee

Yacos in Miami.

Three proofs of claim were filed against

the Bapkrupt estate sith the. United-Seater District -~~

Court for the Southern District of Florida in Miami,

and four additional proofs of claim were filed with

the United States District Court for the Eastern

District of Louisiana in-New Orleans on or before

October 4, 1968 bar date. These alleged claims

totaled $206,946.47.

On January 27, 1969, or approximately four

months after the expiration of the October 4, 1968

bar date, the Internal Revenue Service filed a proof

of claim in this proceeding on behalf of the United

States in the amount of $208,850.70, which sum allegedly

represented the Bankrupt's Federal income tax liability

for years 1966 and 1967. On July 24, 1969, the

Internal Revenue Service filed an amended proof of

claim in this proceeding asserting a tax liability

on the part of the Bankrupt in the amount of $90,664.82

for 1967 taxes alone. On July 6, 1970, said amended

proof of claim was again amended to reflect a tax

liability of $90,492.98 solely for 1967 taxes.

Sse eat tae)

Sas R TNE ED HE HAA EER Ie OIE a4

On August 27, 1970, Merrill 7. Landwehr,

the duly qualificd and appointed Trustee in this

procecding in Bankruptcy filed a "Petition for an

Order to Show Cause Why Claims Should Not Be Expunged

or “Otherwise Reduced™ asserting that the proof of _

claim submitted on behalf of the United States through

the Internal Revenue Service was not timely filed

of record in this proceeding; and, in the alternative,

asserting that said proof of claim, if timely filed,

was not sufficient to establish a prima facie case

for the allowance of the Government's tax claim with

priority. |

The United States, in opposing the Trustee's

position, took the pusition that its tax claim was

timely filed in this proceeding before the purported

February 6, 1969 bar date as disclosed in the Bankruptcy

Court's notice of July 18, 1968. In the alternative,

the United States asserted that should original

October 4, 1968 bar date control, the Government

was entitled to the equitable relief as provided

for under the proviso of Section 57(n) of the Bankruptcy

Act (11 us USC 93n), under which the Government is granted

the right to seek an extension of the tine period

9— PERS CEE LEE REA RLS PMN ROE RSS

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within which it may file a tax claim in a proceeding

in Bankruptcy. The United States further asserted

in the alternative, that ite actions prior to the

expiration of said October 4, 1968 bar date constituted

the filing of an, informal pranf of.clain dn-this--- -

proceeding, and that, accordingly, the filing of

its formal tax claim after the effective bar date

should be considered as an amendment to that informal

clain.

the setter was submitted for determination

before United States Referee in Bankruptcy P, M.

Flanagan of the Eastern District of Louisiana, who,

in his "Findings of Fact and Conclusions of Law and

Order" rendered on June 21, 1971, held that the

original bar date of October 4, 1968, as established

by Referee Yacos in Miami, was controlling over the

inadvertently disclosed February 6, 1969 bar date.

In so holding, Referee Flanagan dismissed the tax

claim of the United States as untimely, further

holding that the Government was not entitled to the

equitable relief prayed for and that the Government's

actions prior to October 4, 1968, did not amount

to nor constitute the filing of an informal proof

of claim in this proceeding. Referee Flanagan did

10 AIM Ae OMRON PRT 22 1 et attics Awe te SLIM : EIR MY AE peo ai,

PAIS NONI A Rat

not address himself to the issue of whether the Covern=-

ment's prouf of claia was sufficient to establish

Swe AS NS

a prima facie case for allowance, as that particular

question was moot in light of his disallowance of

—— ow ho c= o2id clsim,. ..- ie 5k. 6 a0 aes oe e.-e3e ee er -

- “ « -—- - _ «

In response: to said order, the United States

| filed a "Petition for Review" before the United States

District Court for the Eastern District of Louisiana, |

Section "A", seeking to have said order reversed.

The Honorable Herbert W. Christenberry, District

Judge, addressing the issues presented, held that

the Referee was in error in finding the October 4,

1968 bar date to be controlling. Judge Christenberry,

in effect, held that the Florida referee's order

was nugatory and that Referee P. M. Flanagan purposefully)

set a new bar date at February 6, 1969, The District

Court further allowed the Government's tax claim

against the Bankrupt estate, and held that said proof

of claim constituted sufficient prima facie evidence

of indebtedness.

On October 28, 1972, Trustee in bankruptcy

filed a "Notice of Appeal" of the District Judge's

ruiing in this proceeding before the Honorable

Resse spe ner een EY ELE SI I ILO EHO,

5th Circuit Court of Appeal pursuant to Section 4(a)

of the Federal Rules of Appellate Procedure (23 USC).

On September 17, 1973, the Honorable 5th Circuit

rendered its decision in the matter and found as

follows.

The Honorable Court of Appeals overruled

the District Court's finding that referee Yacos'

order was nugatory, holding instead that “orders

issued prior the oe continued as though the

case were still pending in the original district".

With this finding, Appellant is in agreement. The

Honorable Sth Circuit also recognized that the appearanc

of a new bar date in the notices mailed from "eferee

Flanagan's Court were due to a clerical error and furthe

found that the IRS did not apply to either Bankrup-

tey Court for an extension of time within which to

file their claim prior to the expiration of the six

(6) month period provided by 11 USC n.93 sub n.

Appellant is also in agreement with these findings.

However, the Honorable Court of Appeals

found that since the Bankruptcy Court had the power

to grant an extension to the IRS, had the IRS filed

-12—

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ceils ied Nae eae tae Deih'Dectiiharines ai 2. drench weastinat niall

for said extension within the 6 month period of

limitations and had shown cause for the granting

thevent the IRS believed that such an extension

had been granted when it received the notice from

Referee Flanagan's Court and was thereby misled to

the time limit for filing its claim. The Court

determined that on the basis of the preceding facts

and the cases of In re Miracle Mart, Inc., 396 F.2d

62, 64 (2d Cir. 1968); In re Martin Edsel, Inc.,

228 F. Supp. 538, 540-541 (D.C.N.H. 1968); and Pepper

v. Litton, 308 U.S. 295, 305 n.11 (1939), it would

be “unfair” to bar the claim of the IRS and therefor

allowed it to be filed, it is with this result that

Appellant disagrees, |

REASONS FOR GRANTING THE WRIT

The decision of the Court below in the

instant case is in direct conflict with several other

circuits and presents a question of great importance

in the administration of the federal bankruptcy laws.

In Mellen Manufacturing Co., 287, F.2d

37, 38 (1961), cert denied 366 U.S. 962, the Honor-

able Court of Appeals for the Third Circuit, in

addressing itself to 11 USCA 93 sub n. and the question

of whether claims could be initially filed _—_

SAREE i) i a Te Li a

ins Cant std AE te by

= hi i sill ARs

expiration of the 6 month period provided therein, stated

"We do not regard the question as an open

one in this Circuit. In the case of In re

Supernit, Tue., 3 Cir., 1950, 186 F.2d 130,

‘Lhe question ef timeliness in filing proofs

of clain was discussed by the Court through

an opinion by Chief Judge Biggs. It was

pointed out that the rule in this Circuit

even prior to the 1938 amendments has been

stricter than that in other circuits. It

was also stated that the statute of limitations

was the result of abuses which "Congress

has continuously sought to avoid * * x"

186 F.2d 132. It is pointed out that "Expedi-

tious 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. It is true that this decision had to

do with a filing of claims ina reorganization

proceeding but everything said is applicable

here also. See, likewise, In re Super Electric

Products Corp., 3 Cir., 1953, 200 F.2d 790.

Unless we are to overrule thoughtfully considered

precedents in this Circuit the decision wust

Stand. We have no inclination to overrule

what we have thus thoughtfully considered."

In Wheeling Valley Coal Corporation v. Mead,

171 F.2d 916, 920 (1949) the Honorable Court of Appeals

for the Fourth Circuit adopted the following position:

"The courts have manifested a positive tendency to

strictly enforce the limitation provision

of the Bankruptcy Act, 11 U.S.C.A. § 93,

sub. n, even to the point of holding that

the statutory period is mandatory and

that the courts have no power either to

permit a late filing of claims or to extend

the time set ovt in the statute."

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The Seventh Circuit Court of Appeals

in, In Ke Ebeling, 123 F 2d 520, 521 (1941) made the

following statement regarding the 6 month limitation:

"To be sure, the statute does provide that claims

_Shall not be proved against a bankrupt estate

subsequent to six months after the adjudication,

Bankruptcy Act, as amended § 57, sub. n, ll

U.S.C.A. § 93, sub. n, and gives the court

no discretionary power to extend the time..."

The United States District Court for the

Southern District of New York in In Re Harmnack Produce

Co., Inc., 44 F.Supp. 1,°2 and 4 (1942) offered the

following analysis of the background of 11 U.S.C.A.

§ 93 sub. n as well as certain appropriate comments

and conclusions to be drawn therefrom:

"Despite the apparently explicit language

of the 1898 and 1926 statutes the courts have

from time to time debated whether they had

the power to receive and allow tardy claims;

and some courts resolved the debate in favor

of such power...The majority of the decisions

held that the statutes were an absolute bar

to a tardy claimant. See list of authorities

collated in 3 Collier on Bankruptcy, 14th

Edition, page 320, note 6." ;

"The Court of Appeals for the Second Circuit

took its position with the majority..."

"Assuming that a bankruptcy court does

possess equity powers which may be exercised

in appropriate circumstances, I do not think

that such power should be exercised when

Congress has by express legislation given

special recognition to the problem of claims

by governmental bodies and has delimited by

precise language the extent to which they

may be favored. Expecially is this true when

the legislation exhibits a manifest awareness

of the conflicting decisions and a determination

to resolve the conflict. Specifically, the

presert statute mvekes the tire limitation

expressly applicable -to the claims of the

United States, of any State and of any subdivision

thereof;...it confers a favorable exception

upon goverimaental claims by permitting the

court to grant an application, made within

the specified time limit, for a "reasonable —

fixed extension"; it permits all tardy claimants

to prove against a surplus...To read this

statute as if it contained an additional exception,

to wit, that at any time the court may permit

the filing and allowance of a tardy claim by a

municipality, is to convict Congress of a self-

contradiction which the careful wording of

the law does not warrant. The intention of

Congress...is quoted in 3 Collier on Bankruptcy,

14th Ldition, 116, footnote 35, as follows:

"In the Senate Report No. 1916 on H.R.

8046, 75th Cong. 3rd Sess. (1938) 5,

it was said: "The House bill includes

within the bar time for the proving

of clains, all claims of the United

States and of any State or subdivision

thereof, The committee has both strengthened

and extended this proposed amendment

by providing, first, that such clains

must actually be filed within the bar

time, and, second, by permitting additional

time for the filing of such clains

upon application for cause shown,

The committee agrees with the proposal

that governmental claims should be

subjected to the same requirements

as other claims but is of the opin-

ion that the limitation should be

tempered by the provision for extension

for the reason that it is sometines

difficult for the Government to prepare

and present its claims within a fixed

time. The limitation will speed up

the closing of estates, and the extension

will provide a reasonable flexibility."

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Typical of the strictness with which the

6 month limitation was applied prior to the 1938

ameadwent are the cases of Tarbell v. Crex Carpet

Co., 90 F.2d 633, 684 (C.A. Sth Cir. 1937):

"This provision is a statute of limitations

and is mandatory... The fact that the claim

was sent to a firm of attorneys who neglected

to file-it and who informed the claimant that

it had been filed, does not empower the court

to order the claim filed and allowed after the

expiration of the statutory period..."

and In Re R. B. Rose Co. 43 F.2d 446, 447 (U.S. District

Court S.D. N.Y. 1930);

",.-This section is in the nature of a statute

of limitation, and unless the claim be proved

within the said six months or the claim is within

the exceptions, namely, is in process of litigation,

or relates to an infant or insane persons, it .

is too late and the court is without power to

extend the time."

Similar positions have been adopted in Federal District

Courts throughout the United States since 1933: In

Re Quine , 30 F. Supp. 871, 872 (1941) (U. S. District

Court, E.D. Louisiana 1941)

see The statute specifying the time for filing

claims in bankruptcy is prohibitive, and gives

the Court no discretionary power to extend the

"Even though a creditor had no notice or

knowledge of the proceedings during the time

allowed by law for the proving of claims,

and the estate is still undistributed, he

may not prove his debt after the lapse of

such period...'' SEE EGR APO LL UTA RATER NY HAS OO OE Oe ae eg ee

Pe ee ee

Se 8 hc At REE Ran SetlE is tart Sint els tM i ita dstva tin, talib

a i lla aie ina asd ids i

In Re 74 Knowles Street Corporation, 52 F. Supp. 715,

716, 717 (U. S. District Court, E.D., NY 1943):

"Prior to the Amendment of 1938 there were

some decisions to the effect that the court

‘was vested with equitzble powers to extend

the time and there were other decisions to

the contrary. The six nonths provision is

in the nature of a statute of limitations.

The court is bound by the statute limiting

the time to six months; it cannot enlarge

the time. This has been the uniforn holding

in this district."

In ke Levis J. Clayer, 95 I. Supp. 472, 473 (U. S.

"The Chandler Act of 1938, § 57, sub. n, recast

subdivision n to include claims of the United

States and also provided that the court could

grant further fixed tine to the United States

upon application prior to the six months"

period. Prior te 1938 it was held that the

time limit was not binding on the sovereign

and it is evident that Congress included the

provision with respect to governnent clains

in order to avoid this latter interpretation

and the provision for an extension of time

was added in order to provide reasonable

flexibility while at the same tine naintaining

the bar time. It is apparent that Conyress

in the 1935 Act was considering specifically

gfovernment clains and there is little justification

for assuming that a bankruptcy court has any

power to alter or circumvent the express

provision of the section as rewritten by

reading into it further exceptions in the

light of the special attention "to government

claims" by Congress. Whatever rights existed

before this revision were withdrawn by Con-

gress in this specific legislation,"

. Rg LE PALE LD LO TFC NOMEN IO BL A

. eee Fit

"The view expressed here is the same as that

which is so well stated by the court in the

case of In Re Harmack Produce Co. Inc., D.C.,

44 Y'.Supp. 1, at page 2, wiere the legislative

history of § 57, sub. n is set forth. It

is plain from the latter that governmental

claims should be subjected to the’ same requirenents

as other claims with an added provision for

an extension of time for the proof of government

claims to obviate the difficulty of the

govermient in preparing and presenting its

claims, Cf. 3 Collier on Bankruptcy, 14th

Ed., Pe 322,*

In Re W. H, Calder Company, 146 F, Supp. 389, 391

(U. S. District Court E.D. North Carolina 1956).

"It appears from the decisions that ‘with few

exceptions the time requirement for the filing

of claims is regarded as more than a mere

limitation. It is held to be a prohibition

upon the right to file after the expiration

of the period. The result is that failure to

file within the period defeats the right to

file, although the failure was attended with

such circumstances as would prevent the

running of an ordinary statute of limitations,

or would ordinarily constitute an excuse for

noncompliance with the time limitations'." 6

Am. Jr., Bankruptcy, Section 458.

In Re Aero Bulk Manufacturing Company, 221 F. Supp. 627,

633 (U. S. District Court W.D. Missouri 1963).

"If the statute is a statute of limitations, then

the equity jurisdiction of the court may not

disregard its limitations and allow the filing

of a claim specifically prohibited by the statute.

The text books on the subject seem to be uniform

in holding that it is a statute of limitations."

ee a IN ALA IS

na Stee

In Re Vanderpift, 232 F. Supp. 857 (U.S. District Court

WoD. Pennsylvanta 1964), affiraed 341 F. 921.

"In 1938, under Section 57 of the Bankruptey Act,

a creditor had six months from the date of the

adjudication in which to file a claim. The time

limit is now fixed at six months from the date

of the first mecting of creditors. Several

decisions in this circuit have laid down the

rule that the time in which to file a claim is

not to be extended except as provided in the

Statute, ,...On the merits of the controversy,

this Court's sympathy lies with Mrs. Vandergift.

However, no escape is provided her in the statute."

L. 0. Koven & Brother, Inc. v. Local Union No. 5767

United Steelworkers of America, 250 F. Supp. 810, 816

(District Court N.Y. 1966).

"The time limitation*of 11 U.S.C.A. Sec. 96(n)

must be strictly observed and under no circun<-

stances...may the court admit a claim to untimely

proof, but...-is under a duty to disallow it,

with no power to substitute cquitable considerations

for the manifest intent of Congress."

In the matter of Vega baja Lumber Yard, Inc., 285 F. Supp.

143, 144 (U.S. District Court D. Puerto Rico, 1968).

"I am well aware that the weight of authority

considers the six month period of Section 57(n)

of the bankruptcy Act 11 U.S.C.A. Sec. 93(n)

as peremptory and immutable. ...The cases are

decidedly in favor of an ‘equity-proof' application

of the statutory period."

"Thus it has been finaly established that the

court has no discretion to accept untimely filing

of a clain."

BR ir EET AKRON ae

Offered by the Fifth Circuit as justification

for their decision are three cases: In re Miracle

Mart, Inc., 396 F. 2d 62, 64 (2d Cir. 1968); In re

Martin fdsel, Inc., 228 F. Supp. 538, 450-541 (U.S.

District Court Nev Uanpshire 1968)3 and Pepper ve. Litton,

303 U.S. 295, 305 n.11 (1939).

The first of these, In Ke Miracle Mart,

Inc., 396 TF. 2d 62, 64 (2d Cir. 1968), does not in

any way support the decision of the Fifth Circuit

in the instant case.. In the Miracle Mart case, the

court was dealing with Section 355 of the Bankruptcy

Act and more specifically the provisions appearing

thereunder, prior to the 1967 amendments, dealing

with rejection of executory contracts. The court

found itself confronted with an irreconcible statutory

conflict:

"...we have a series of inconsistent sections

which create a fundamental ambiguity. We

are required therefore to construe the Bankruptcy

Act as best we can. We believe that in such

circumstances resort to the equity powers

of a bankruptcy court to fashion a remedy

for this aberrant situation is justified."

396 F. 2d 62,64.

In rendering said decision the court

distinguished the situation before it from that of

11 U.S.C.A. 93(n) where no ambiguity exists. Indeed,

in distinguishing “cases holding that the Bankruptcy

Court cannot extend the time for filing clains" (all

of said cases dealing with 1] U.S.C.A. Sec. 93(n)),

the court stated:

"More important, in none of then was the court faced,

as we are here, with inconsistent portions of

; the same statutory scheme dealing with executory

contracts". 396 F. 2d 62, 65

One of the cases so distinguished, Avidon v. Halpert,

145 F. 2d 884 (1944), arose in the Second Circuit,

and the decision therein adds the Second Circuit to

the list of Courts of Appeal which are in conflict

with the 5th Circuit's judgment in the instant suit.

In Avidon, the Second Circuit, in making reference to

SSS SFE QS SRP Ay Sa ea be . FLEET a

the six month limitation of 11 U.S.CG.A. Sec. 93(n),

stated:

"As we read the cases, there must be a tinely

assertion however informal by the crediter

of his claim ewzainst the debtor estate."

145 PF. 2d 884, 885,

The second case offered by the Fifth Circuit

is Pepper v. Litton, 308 U.S. 295, (1939) and more

specifically footnote 11 appearing therein at page

305. If this citation were acceptable authority for

the Fifth Circuit's position, the question of conflict

between Circuits would seem to be moct, However,

the Pepper case is not such authority.

As pointed out in In Re Martin Edsel, Inc., -

228 F. Supp. 538 (United-States District Court New

Hampshire 1968):

"The footnoie in Pepper v. Litton has, in turn,

been subjected to criticism, 1 Collier on Bankruptcy,

par. 2.09 n. 9, and has been variously characterized

as dictum, Arnold v. Phillips, 117 F. 2d 497,

902 (Sth Cir. 1941), as applying to the Bankruptcy

Act prior to the 1938 amendments, In re Paragon

Novelty Bag Co., supra; as misleading, 3 Collier

on Bankruptcy, par. 57.27 n. 14; and as unnecessary

and dubious commentary on the state of the law,

Milando v. Perrone, 157 F. 2d 1002, 1004 (2nd

Cir. 1946)."

The most devastating of these well founded criticisns,

insofar as the Fifth Circvit's citation of the case as

authority is concerned, is the characterization of -

the comment as dictum. In In re Narmack Product

Company, Ince, 44 F. Supp. 1, 2 (U. S. District Court,

S.D. New York, 1942) the court made reference to seid

footnote as follows:

"The language is used, it should be noted, not to

express the court's decision on the matter pending

before it but to illustrate the generalization

that the Bankruptcy Courts have exercised these

equitable powers in passing on a wide range of

problems arising out of the administration of

bankrupt estates."

As dictum, the stature which the footnote retains as

authority for future decisions was well stated in Milando

v. Perrone, 157 F. Supp. 1002, 1004 (2nd Cir. 1946):

"The statement of the Supreme Court is a dictum

which should not be taken as placing a final

stamp of approval. on propositions not necessary

to the court's emaeaaall

Therefore, ‘it would appear that the Pepper

case in no way mollifies or resolves the presently

existing conflicts between the decision in the

instant suit and those of the previously listed

circuits.

The third and last case cited by the Fifth

Circuit was In Re Martin’Edsel, Inc., 228 F. Supp.

538, 540, 541 (U.S. District Court New Hampshire,

1933). In this case the court made the following

observation:

"The provisions of Section 93, sub. n. are not

to be disregarded lightly.... The six months’

period of limitation is not the product of

Congressional whimsy, but reflects careful

consideration of the economic and financial

realities of bankruptcy.... Apart from the

specific exceptions enumerated in Section 93,

sub. n., the six months’ bar is mandatory and

can be lifted neither in the discretion of the

court nor upon the general consideration that

some inequitable result would follow."

The court eventually determined that said statutory

-bar could be lifted:

",.eonly in the extraordinary case where some

element of fraud or injustice has prevented a

creditor from filing his claim in timely fashion...."

The court ruled that no such situation existed in the

suit before them.

YS a ete Res 2 as ents aga Re roa eee senescent aOeane aa St EATS RS LA yey ER ae

oe oH a Sr be aire ea

It can be readily ascertained, after a review

of the foregoing, that the Fifth Circuit rested its

decision, for all practical purposes, on but one District

Court decision, In Re Martin Edsel, Inc., supra, and

thereby reached a conclusion in direct conflict with

at least four Circuits.

However, not only is the present decision

in direct conflict with four other Circuit Courts,

it is in direct conflict with the principle announced

in the Martin Edsel case upon which the Fifth Circuit

relies in rendering its judgment.

In prefacing its "equity" decision, the Fifth

Circuit stated that the general equity power of Bankruptcy

Courts is well established and cited as authority Bank

of Marin v. England, 385 U. S. 99 (1966).

In the Marin case this Honorable Court considered

the question of whether a bank which honored checks

of a depositor drawn before its bankruptcy but presented

after it had filed a voluntary petition in bankruptcy

is liable to the Trustee for amounts paid where the

bank had no knowledge or notice of the proceeding.

This Honorable Court found that:

“Absent revocation by the drawer or his trustee

or absent knowledge or notice of the bankruptcy

by the bank, the contract between the bank and

the drawer remains unaffected by the bankruptcy

and the right and duty to pay duly presented checks

remains as before. In such circumstances, the

Trustee acquires no rights in the checking account

greater than the bankrupt itself."

Counsel had argued that the payment by the

bank was a prohibited transfer within the meaning of

Section 70d(5) and 18 (f£) of the Bankruptcy Act. This

Honorable Court responded as follows:

"Yet we do not read these statutory words with

the ease of a computer. There is an overriding

consideration that equity principles govern the

exercise of bankruptcy jurisdiction....

Sag Atl Sp el MOR an RR ee aera ase SD A a ec EN a

RMR Ree? RX aTe atk ey Si PTI PS

"The force of Section 70d(5) and 18f£ can be

maintained by imposing liability on the payee

of the checks if he has recéived a voidable

preference or other voidable transfer. The

payee is a creditor of the bankrupt and to make

him reimburse the trustee is only to deprive

him of preferential ‘treatment and to restore

him to the category of a general creditor, .

To permit the trustee under these circumstances

to obtain recovery only against the party that

benefits from the transaction is to do equity."

The two cases cited by this Honorable Court

as proof that equity principles govern the exercise

of bankruptcy jurisdiction were Securities Exchange

Commission v. U. S. Realty and Imp. Compan » 310 U.S.

434 (1940) and the Pepper case, supra. In the Securities

& Exchange Company case this Honorable Court held:

"A bankruptcy court is a court of equity...and

is guided by equity doctrines and principles

except insofar as they are inconsistent with

the Act", 310 U.S. 434, 455.

In the Pepper case, supra, this Honorable

Court found that:

"eA bankruptcy court is a court of equity

at least in the sense that in the exercise of

its jurisdiction conferred upon it by the Act,

it applies the principles and rules of equity

jurisprudence." 308 U.S. 238, 244.

The principle announced by these three preceding

cases is quite clear. Once it is established that ‘

a bankruptcy court has authority to do something, it

may accomplish said result on the basis of equity

principles as long as said principles do not contravene

the provisions of the Bankruptcy Act, i.e., in the 3

Bank of Marin case, supra, this Honorable Court concluded ‘

that under the circumstances the transfer of funds ‘

by way of cashing of a check was a violation of provisions

to the Bankruptcy Act. However, as the Act was not

clear as to the particular method of accomplishing

its command under the existent circumstances, this

Honorable Court resorted to general equity principles

“_— a — ——- pies DUP: APE KG Seat POET E RTT ats "aR gis ho stars

SIE RG ORG HO RG eps 9 co RIN TS A a RE NA ETI R Te

to resolve the matter. Based on the finding that the

trustee had no greater rights than the bankrupt under

the bankrupt's contract with the-bank, and that said

contract had not been effectively cancelled, and upon

further finding that the payee of the check had received

preferential treatment to which he was not entitled, ~-

this Honorable Court determined that the payee be held

liable to the Trustee. It was only after this Honorable

Court had determined (i) that the Bankruptcy Court

had authority under the Bankruptcy Act to void the

transfer and (ii) that the Act was not explicit, under

the facts before the Court, as to the methods to be

used to accomplish said purpose, did this Honorable

Court decide that general equity powers could be exercise

without conflicting with the Act itself.

The purported procedure for applying equity

principles in situations ‘involving 11 U.S.C.A. Sec.

93(n) is quite different. It is uniformly recognized

by bankruptcy courts that the application of equity

principles may not conflict with express statutory

provisions of the Bankruptcy Act.

"The general equity power of federal courts

is clearly superseded by and must be confined

within the Bankruptcy Act and related statutes."

In Re Chemo Puro Manufacturing Corp. (U.S.

District Court S.D. New York, 1962), affirmed

309 F. 2d 65. See also, In Re Pusey and Jones

Corporation, 192 F. Supp. 233, 236 (U.S. District

Court D. Delaware, 1961) (Affirmed) 295 F.

2d 479 (1961); In Re Romanac, 245 F. Supp.

882, 886 (U.S. District Court W.D. Virginia

1965), affirmed 386 F. 2d 225,

As previously pointed out, the vast majority of

courts, have, based on this principle, found that

the provisions of 11 U.S.C.A. Section 93 (n) are

clear, specific and immutable and that the application

thereof is “equity-proof"—especially where, as

under Section 93(n):

++-Congress has by express legislation given

special recognition to the problem of claims

by government bodies and has delimited by

precise language the extent. to which they

may be favored." In re Hammack Produce a...

44 F. Supp. 1, 2 (U. S. District Court $B.

New York, 1942),

However, the Martin Edsel case has seen fit to pierce

this “equity-proof" appl ication:

"...Only in the extraordinary case where some

element of fraud and injustice has prevented a

creditor from filing his claim in timely fashion."

228 F. Supp. 538, 540.

This does not mean that an application of

general equity powers without restraint is authorized

under this principle, the explicit nature of 11 U.S.C.A.

93(n) leaving no room for such application. Rather,

the court is merely stating that where there is the

extraordinary situation of fraud or injustice the explicit

provisions of 11 U.S.C.A. Section 93(n) will be ignored

and a late filing allowed. Thus we have not the traditionz

application of broad equity powers within the framework

of the Bankruptcy Act in order to fill gaps or voids

therein (i.e. the Bank of Marin case), rather we have

a calculated failure to observe the clear mandate of

the law in two extreme situations.

An attempt at drawing this distinction was

made in Burton Coal Company v. Franklin Coal Com .

67 F. 2d 796, 797 (8th Cir., 1933) wherein the Court

stated:

"The plain mandate of the law cannot be set aside

because of considerations which may appeal to referee

or judge as falling within general principles of

equity jurisprudence...

"It thus appears that the great weight of authority

and reason is to the effect that, absent exceptional

cases of the nature of those to which reference

has been made (fraud and injustice) claims not

proved within six months after adjudication

cannot be proved against and paid out of a bankrupt

estate." (Parenthetical statement added) 67

F. Supp. 796, 797, 801. See also In re Kornblum,

“REPRE SAAT C9 25, ON UND EIEIO

22 F. Supp. 245, 247 (U.S. District Court D.

Minnesota 1938): "Section 93(n) eliminates

any common-law equity power of the court to

extend the time." : ,

That the Courts are well aware of the exteme

measures they take in overriding the clear and compre=

hensive provisions of the Act are manifest by the emphasis

on the requirement that the occasion of such action

be an extraordinary situation, i.e., fraud and injustice.

The Fifth Circuit, in a much earlier case, set forth

said emphasis in addition to the proposition that the

application of equity in such situations is not one

of general equity application within the framework of

the Act but rather disregard of its plain provisions:

"Though it has been.decided that the section may

not be invoked by the bankrupt where to permit

' him to do so will be to permit him to take advantage

of acts of fraud or concealment...such exceptional

circumstances must be made plainly to appear before

its imperative provisions may be disregarded."

First National Bank of Fort Worth v. Virginia

Oil and Refining Company, 86 F. 2d 770, 771 (5th

Cir., 1936). Writ denied, 300 U.S. 676.

It is clear from a reading of the judgment

in the instant suit that the Fifth Circuit seized upon

the Bank of Marin case and the relatively unrestrained

equity application announced therein and transposed

said theory into its cited cases dealing with 11 U.S.C.A.

Section 93(n) in order to avoid what it termed an "unfair"

result, i.e., the court stated that this equity power

(referring to the equity power announced in the Bank

of Marin case, to supplement the Bankruptcy Act) has

been employed to prevent an unfair result occasioned

by the six month limitation period of Section 93(n).

The court thereby disregarded said provisions not on

a finding of fraud or injustice but rather on the prenise

that bankruptcy courts may, without restraint, apply

equity rather than the Bankruptcy Act in any situation

where the court believes the result called for under

explicit peremptory provisions of the Act is unfair.

The result created thereby is a broader power than that

-28-

existing where the Act is without provision. The Fifth

Circuit has taken a theory of broad application of equity

used to achieve a judicial sense of fairness in situations

where the Act is silent or vague and by applying it

to six month limitation cases where there are explicit

mandatory provisions, has created a theory of unrestrained

invasion of equity not in aid of the Bankruptcy Act but

in contravention of it, i.e., under the ‘Sth Circuit's

decision, the court may decide cases according to its

sense of equity (not limited to situations of fraud

or injustice) not only where the Act is silent or vague,

but where the result occasioned by the application of

mandatory provisions of the Act offends the court's

sense of fairness. Such is not the law under any case

in the United States including those cited by the Fifth

Circuit in the instant suit. In fact, in the Martin

Edsel case, supra, the court expressly found that the

six months’ bar can be lifted ",..neither in the discretion

of the court nor upon the general consideration that

some inequitable result would follow" but ‘..eonly in

the extraordinary case where some element of fraud or

injustice...has prevented filing...in timely fashion."

(emphasis added) 228 F, Supp. 538.

That the premise of the Fifth Circuit is in

direct conflict with the cases it cited as support for

its decision can be further illustrated by the fact

that the situation before the court in the instant suit

did not indicate the extraordinary conditions of fraud

or injustice (which, incidentally the court never mentioned

as existing) because said situation did not even indicate

"unfairness" to the IRS.

The Court found that the IRS made no application

for an extension but that the IRS was well aware that

such an extension could be granted by the court. If

it can be presumed that the IRS was aware of such authority,

and appellant believes that it can, it must also logically

be assumed that the IRS was equally aware of the conditions

precedent to the exercise of said authority (although .

the Fifth Circuit would chose to circumscribe the IRS's

appreciation of the authority so as to exclude knowledge

of the said conditions and the absurdity which said

knowledge would impute to the IRS's position). These

conditions are as follows: (1) it must have been applied

for by the IRS, (a blanket extension for all governmental

SPOR spre near seotee 20 o fa ae ARPES LPL YT OR

bodies and claims, state and federal, not being allowed

under the Act), (2) within the six month limitation;

and (3) show good cause for the granting thereof,

Furthemore, it is clear from the transcript

of the testimony taken in the New Orleans Bankruptcy

Court on June 4, 1969 concerning a hearing on petitioner's

objection to allowance of the IRS's claim that the field

auditor for the IRS, Marvin R. Brown, did, after learning

of the conflicting bar dates, examine the records of

the proceedings in the Clerk's office in the New Orleans

Bankruptcy Court. An examination, even of a cursory

nature, would give the IRS not only constructive but

actual notice that no extension had been filed by them

in the proceedings. If Mr. Brown did not observe this,

or, if observing it, he did not obtain competent legal

advice from the vast staff of the IRS, his actions can

be deemed nothing short of gross negligence.

However, even absent actual knowledge, the IRS

must be charged with constructive knowledge that no

extension had been filed by them lest a government

agency be allowed to trade upon its inefficiency to

the detriment of conscientious and alert creditors and

in derogation of a clear and mandatory law meticulously

enacted. e :

Therefore, as the IRS did not apply for an

extension and since it knew that without such application

it could not be granted an extension to file its claim,

the IRS could not be misled into thinking it had extra

time in which to file,

Said inaction, as the product of the IRS's

inefficiency and negligence, fall far short of not only

fraud and injustice but unfairness as well:

"That case (Williams v. Rice, 30 F. 2d 814

(Sth Cir. 1929)) was one in which, because

of exceptional circumstances of fraud on the

part of the bankrupt, the estate was reopened,

to administer concealed assets, and therefore

=3-

proof of claim was allowed.. No exceptional

circumstances whatever is presented here.

There is merely a case of negligence and

inattention in the matter of preparing and

filing schedules, and...an effort to invoke

a jurisdiction with which, if it exists, is

greatly exception." Phillips v. Tarrier Company

of Delaware, 93 F, 2d 674, 675 (5th Cir., 1938).

Writ denied 303 U.S. 655.

"If a creditor is negligent, he may not file

his claim after the limitation of the statute

has run...". Williams v. Rice, 30 F. 2d 814,

815 (5th Cir., 1929).

“Where there is no question as to the good faith,

but mere negligence and inattention to the matter

of preparing and filing schedules, the court is

not empowered to permit the filing of claims

after the six-month period...". In re Kornblum,

22 F. Supp. 245, 247 (U.S. District Court D.

Minnesota 1938). .

CONCLUSION

For the foregoing reasons, this petition for

a writ of certiorari should be granted.

Respectfully submitted,

DU, Mi gL

Merrill T. Landwehr

Colinsel for Petitioner

225 Baronne Street, Suite 2313

New Orleans, Louisiana 70112

Telephone: 1-504-529-1332

November 30, 1973

SSP ee

1 hereby certify that copies of the above

and foregoing Petition for Writs of Certiorari have

been served upon Scott P. Crampton and Meyer Rathwacks,

of the United States Department of Justice, Tax

‘Division, Washington, D.C. and the Solicitor Ceneral

of the Department of Justice, Washington, D.C. 20530

by depositing one copy of the sane to each of the afore-

said addresses in the United States Mail, postage

prepaid, air mail. °

New Orleans, Louisiana, this fa; day

of | ~_, 1973.

nt te ee eee ene

f 4

MERRILL T. LANDWEHR

2313, 225 Baronne Strect

New Orleans, Louisiana 70112

Telephone: 529-1232

tha tt

11 USC SiCTION $3 Sub.

"(n) Except as otherwise provided in this title,

all claims provable under this title, includiny all

clains of the United States and of any State or any

Subdivision theres Shall be proved and filed in the

manner provided in this section. Clains which are not

filed within six months after the first date set for

the first meeting ef creditors shall not be allowed:

Provided, however, That the court hay, upon application

before the expiration of such period and for cause

Shown, grant.a reasonable fixed extension of time for

the filing ef claims by the United States or any State

or any Subdivision thereof: Provided further, That

the right of infants and insane persons without fuar=-

dians, without notice of the bank iptey proceedings

may continue six moatas lontzer: And providec further,

That a claim wrising in favor of a person by reason

of the recovery by the trustee frou Such person of

money or property, or the avoidance by the trustee of

a lien held by such person, may be filed within thir-

ys from the date of such recovery or avoidence,

recovery is | vay a procecding in which

a final judgaent has be ed against such pers ily

the claim shall not be jowed if the money is not

paid or the property is not delivered to the trustce

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 hercinabove prescribed may

nevertiieless be filed within such tine as the court

may fix or for cause shown extend and, if duly proved,

Shail be allowed against any surplus remaining in such

case.

OPINICSS AND JUDCMENT BELOW

IN THE

United States Court of Appeals —

FOR THE FIFTH CIRCUIT |

No. 72-3469

In The Matter Of: RAYMOND CHESTER MILLER,

Bankrupt,

MERRILL T. LANDWEHR,

' Appellant,

versus

UNITED STATES OF AMERICA,

, ; Appellee.

Appeal from the United States District Court for the

Eastern District of Louisiana

: (September 17, 1973) .

Before GOLDBERG, CLARK and RONEY,

. Circuit Judges.

RONEY, Circuit Judge: The Trustee in Bankruptcy

for Raymond C. Miller appeals from a decree of the

District Court ordering the Referee to allow the filing

of a tax claim by the United States against the Bank-

rupt estate. The Referee had denied the claim as being

2 In The Mat. Of: RAYMOND CHESTER MILLER

untimely filed. The case involves the effect of a Ref-

eree’s second notice of the first meeting of creditors

which apparently inadvertently set a deadline for filing

claims different from that established by the first no-

tice. We affirm the decision of the District Court that

the Government’s claim filed prior to the second date

should be allowed, but on a different ground than that

asserted by the District Court. We hold that the Ref-

eree had the power to extend the time for filing a Gov-

ernment claim, and that, having received a notice in

the apparent exercise of that power, the Government

was entitled to rely thereon. ©

The petition for bankruptcy was originally filed on

January 31, 1968, in the United States District Court for

the Southern District of Florida. On March 19 of that .

year the Referee in Bankruptcy mailed a notice to all

creditors, including the Internal Revenue Service, in-

forming them that the first meeting of creditors would

be held April 5, 1968, and that the last day for filing

proofs of claim against the Bankrupt estate would be

October 4, 1968. At the meeting of creditors on the

designated date fhe Referee determined that the pro-

ceeding should be transferred to the United States Dis-

trict Court for the Eastern District of Louisiana for

‘the convenience of all parties in interest, pursuant to

Section 32 of the Bankruptcy Act, 11 U.S.C.A. 55. On

May 6, 1968, the proceedings were transferred. Subse-

quently, on July 18, 1968, the Louisiana Referee in

Bankruptcy mailed notices to all creditors, including

the IRS, which stated that a “first meeting of credi-

tors” was to be held on August 6, 1968, and that the

final date for filing proofs of claim against the bank-

“In The Mat. Of: RAYMOND CHESTER MILLER 3

rupt estate would be February 6, 1969. On January 27,

1969, prior to this Louisiana “last day” for filing proofs

of claim but after the bar date set by the Florida Ref-

eree, the IRS filed the contested proof of claim in this

proceeding. |

The Referee dismissed this claim as untimely, hold-

ing that the original bar date of October 4, 1968, was

controlling and that the later bar date inadvertently

established by his court’s-notice was ineffective. In re-

versing the Referee’s determination, the District Judge

held that the Florida court’s notice was rendered nuga-

tory by the transfer of the matter to Louisiana, and

that the later bar date established by the Louisiana

court order was controllirig. The IRS was allowed to

file its claim.

We first examine the continuing effect, if any, of the

notice issued by the Florida court prior to the transfer

of the case to Louisiana. There is a paucity of relevant

authority interpreting the change of venue statute un-

der the Bankruptcy Act. The analogy provided by deci-

sions applying the general change of venue provision,

. 28 U.S.C.A. 1404(a), is helpful. In Magnetic Engineer-

ing & Manufacturing Co. v. Dings Manufacturing Co.,

178 F.2d 866 (2d Cir. 1950), the court reaffirmed the

proposition that when an action is transferred through

a change of venue, it remains what it was: “all further

proceedings in it are merely referred to another tribu-

nal, leaving untouched whatever has already been

done.” Id. at 868.

4 In The Mat. Of: RAYMOND CHESTER MILLER

. The District Court in Florida relinquished jurisdic-'

tion over the case when it transferred the matter to

the Louisiana District Court. But the orders issued

prior to the transfer continued as though the case were

still pending in the original district.1 The transfer for

the convenience of the parties simply brought the

cause as it was to the transferee jurisdiction. |

Since the October 4 bar date was still in effect at the

time of the transfer, the question becomes whether

the Louisiana District Court could, through its exclu-

sive jurisdiction, alter that date by a subsequent order.

Section 57n of Bankruptcy Act, 11 U.S.C.A. 97 (n) pro-

vides:

Claims which are not filed within six months

‘after the first date set for the first meeting of

‘creditors shall not be allowed: Provided, how-

ever, That the court may, upon application be-

fore 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. .

Thus, the Court can alter the original bar date by a

“subsequent order at least insofar as it affects the Gov-

ernment. Although the IR® did not apply to the Court

_for an extension of time, the fact remains that the

Court had the power to issue an order extending the

time for filing claims in respect to the Government.

tSee Ginsburg v. Mutual Life Ins. Co. of N.Y., 170 F. Supp. 212

(S.D.N.Y. 1958). See also C. Wright, Federal Courts § 44, at

166 (2d ed., 1970).

In The Mat. Of: RAYMOND CHESTER MILLER 5

When the IRS Agent learned of the “new bar date”

he believed the order was an extension granted by the

Court.*? After a discussion with his supervisor, it was

agreed he should rely on this new date. and conduct

his examination accordingly.* It was because of this

reliance that the tax claim was not submitted until

January 27, 1969.4 The Government did not request an

*The record of Agent Brown's testimony before Referee Flanagan

reveals the following:

By Mr. Schaffer: —

Q Did you take any action to confirm this date

(Feb. 6)? ‘

A Yes, I did. I went to the records here in the build-

Q The offices of the Referee?

. A Correct.

.Q And what did you find there?

AI found the notice issued by, I believe, Judge

Flanagan himself, extending the bar date to Febru-

ary.

3 Q Did you talk this over with any of your peers or

superiors?

A Well, when I received the notice on the exten-

sion of the bar date to February the 6th of 1969,

I discussed this with my group supervisor and

tried to attempt (sic) whether or not this was a

valid extension — should I rely — not whether

it was a valid extension, but should I rely on

this extension in my examination; and discuss-

ing it with him, he and I came to the agreement

that I should rely on this. -

. 4The’ record demonstrates that Agent Brown was acting post

haste to meet the October 4th deadline but relaxed his ef-

forts when he learned of the Court order:

By Mr. Schaffer:

Q When you received the file pertaining to Raymond

C. Miller, may we ask what was your first effort

on behalf of the Service as regards that file?

A When I received the file, I immediately tried to

contact the taxpayer, ...

Q What were you trying to do at this time with

' Fegards to the file on Raymond C. Miller? What

was your primary objective?

6 In The Mat. Of: RAYMOND CHESTER MILLER

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In The Mat. Of: RAYMOND CHESTER MILLER 7

extension since under the new date there was sufficient

time to gather the necessary information to file a

It is now admitted by the parties and the Referee

that the order extending the bar date was an inad-

vertent mistake. Neither the Referee nor the Trustee

detected the difference in dates until after the Govern-

ment had filed its claim. Should the Government be

penalized for the Court’s error? The Trustee argues

that it should because the IRS was dilatory in its in-

vestigation, was put on notice as to the apparent con-

flict in the dates, and has not attempted to collect its

non-dischargeable tax claims by pursuing the Bankrupt

during the five year period this bankruptcy has been

pending.

The record set out in the margin above demon-

strates that Agent Brown pursued the investigation

with necessary speed once his office was apprised of

the action. The fact that the Government was put on

notice of the two dates becomes inconsequential when

it is realized that the Court had the authority to ex-

tend the date and the IRS relied on the apparent exer-

‘cise of this authority. $

Additionally, the Trustee was put on equal notice

with the Government. Since he stands in a fiduciary re-

lationship to all the creditors and has the inherent duty

8 In The Mat. Of: RAYMOND CHESTER MILLER

to keep them informed, the Trustee should have noted

and clarified the discrepancy presented by the second

court order. The Trustee concedes that the Govern-

ment could have probably obtained an extension of

time under Section 57n had it seen the necessity for it

and requested an extension. The Government’s evi-

dence indicates it could have met the October 4 dead-

line, if it knew it was required to do so.

. The contention that the IRS has not independently

attempted to collect the tax claim is of no help to the

Trustee. The Government had a right to present its

tax claim with the other creditors in the bankruptcy

proceeding. It presented that claim relying upon a

court notice which was ostensibly within the Court’s

authority to make.

The general equity power existing in the bankruptcy

courts is well established and has been traditionally

recognized. Bank of Marin v. England, 385 U.S. 99

(1966). Cautiously, this equity power has been em-.

ployed to prevent an unfair result occasioned by the

six-month period provision of Section 57n. In re Mir-

acle Mart, Inc., 396 F.2d 62, 64 (2d Cir. 1968); In re Mar-

tin Edsel, Inc., 228 F.Supp. 538, 540-541 (D.C.N.H. 1968).

See Pepper v. Litton, 308 U.S. 295, 305 n.11 (1939). An

unfair result would obtain in the case at bar if the

Government were not allowed to file its claim after

reliance on the court order apparently extending the

filing-date. The District Court was correct in allowing

the Government to file its claim.

In The Mat. Of: RAYMOND CHESTER MILLER 9

The District Court found that the Government’s .

proof of claim was “amply sufficient prima facie evi-

dence of a valid indebtedness and must be the basis

of allowance of such claim.” The Government’s proof

of claim was filed on IRS Form 2317, the usual form

submitted by the United States for internal revenue

taxes in bankruptcy matters. The sufficiency of filing

through use of IRS Form 2317 has been upheld. In re

Tyner, 301 F.Supp. 1234 (M.D. Ga. 1969). ;

AFFIRMED.

Adm. Office, U.S. Courts—Scofields’ Quality Printers, Inc. N. O., La.

UNITED STATES DISTRIC DUR ae 3 re 1

" EASTLRA DISTRICT OF LOUISIANA SIMI Oh Eo pee

, pr Les:

IN HE MATTER OF ete | SECTION “A* ,

KAYHOND C. MILLER, a/k/a : No. 68-849"

SMOND CHESTER NILLER : ape IH BAUKRUPTCY

BANKRUPT

“Us. pistRict COURT

; PASieal DBWGCT OF LOUISE

eR EET J. : . e é ott 3 1972

; Ae FILED

_ This matter is before the court on a petition bypdssaciind Seaxnurret

States of America, a creditor of the bankrupt herein; a kas serene

C. Miller, for review arnd.reversal of the Referce's order dated

‘dune 21, 1971, upholding the Sieaeute objections and disallowing

,the Governzent's claim. The banb:rupt, Raymond c. Miller, filed

his’ petition in bankruptcy in the United States District Court

for the Southern District of Florida on January 31, 1966. Schedule

A~1 of that petition did not list the United States as a creditor

and there was no indication at-that time that any federal taxes

were due and owing from the bankrupt. ;

‘On March 19, 196@, a notice was mailed to all creditors

notifying them that the first meeting of creditors would be held

in Minnai, Florida on ‘April 4, 1968, and that, pursuant to Section :

57(X) of the Bankruptcy Act, all proofs of claim had to be filed i

on or beford October 4, 1968. The first meeting of creditors was

held April 4th and Apria ra, 1968.. Soon thereafter, the Referec

recommended to the United States District Court for the Southern

District of Florida that proper venue for this matter lay in the.

Eastern District of Louisiana, and on May. 6, 196€, the matter

was transferred to this District. |

On July 18, 1568, the. Referce ‘for this Court sent out another

notice of a first meeting for August 6, 1968, and set February l,

1969 as the last day for filing claims. It is clear that this

notice was not intendcd by the Ref ckbtt to be an extension of the

carlicr bar date of October 4, 1968 set by the Plorida Trustce,

but was an entirely new order. Pursuant to this order setting»

& new bar date 7” rebruary 1, 1969, the Internal Revenue Service

on Junuary 27, 1969 filed proof of claim for $280,650.79_for

incenae taxes oving by the bankrupt for the yeers 1966 and 1967.

Subsequently, the Internal Revenue Service wes advised by. the

bankrupt that ke wos protecting the assesoment against hin and

on April 26, 1969, filed a motion requesting the Bankruptcy

_ Court to adjudicate his incume tax liability. This notion was

“later withdrawn when the Internal Revenue Service agreed to re-

exenlne the Bankrupt‘ ad liability. “Internal Revenue Servico, after

a reexamination, Soni that the clain against the bankrupt should

cover only the incone tax liability for 1967. AngouAing hy. In-

, ternal Revenue Service on July 24, 1969 filed iendment Ho. 1 to

‘dite proof of claim in the total axount of $90,664.82, and suis on.

July 6, 1970, filed a second enendaent alleging that the total

anount due and owing was the sum of $90,492.S8. ..

On August 27, 1970, the Trustee filed a petition for an order

to show cause why’ the Government's claim shoulda not be expunged

or otherwise reduced, on the groungs that the Government's proof

of clain was not timely filed, and alternatively, that the proof of

Clain was not sufficient to establish a prima facie case for ener

ance of the Governnent's claim. To this the United States filed

an opposition. The Referee, by findings of fact and conclusions

of law and order: entéred on Sane 2), ASF, held that «the firhSt bar

date, oat by the. epurt in Florida, was coiitro.2ing, and that thore-

" ,fore;,. ‘the Governnent' 3 proof of. elain filea subsequent to that date

. was untinely. The Referee did hot deal with the ‘sccond issuc, that

is, whether the proof of claim filed by the Internal Revenue Service

was sufficient to establish a prima ‘facie ease for allowance, for

‘in his view that question was moot,

«= This court finds that the Referce’ was in error, the bar date

set by the Florida Referee was not determinative of the timeliness

° es! | .

of proofs of claim filed in the -proceeding before this court, but

that on the contrary, the bar date set. by the Referce of this court

is the data ining pen creettors eppearing in this procecding.

Fass is necessarily s0. The notice of first mecting of exca@itors

and “notice of time limit for Ziling proofs of claim, etc., con~

tained the folloxirg language, "Creditors desiring to participate

in any proceedings or ‘distribution of ‘assets in this case must file

their proofs of claim with the undersigned Referce on or hefore

October 4, 1968." ‘he Referee who signed the notice was Referee

- James E. Yacos, Referce in Bankruptcy, Miami, Florida. Once these

proceedings were transferred to this district, the Plorida Referce

had no jurisdiction in the matter and filing claims with hin after

Buch transfer would have heen vain and useless. That.the Referce

a ‘this court recognized this es being true is evidenced by the

fact that he issued a new notice of first mecting and set a*new bar

Gate. This is the only reasonable ‘explanation of the Referee's '

action, for when the matter was transferred here frox Florida cn

Bay 6, 1968, the bar date set by the Florida Referce was five months

okt; ond ample time remained for creditors to file their claims.

Although the Referee aid not pass on the sufficiency of the

Government's proof of claim, I find that such proof of claim is

amply sufficient prima facie evidence of a valid indebtedness and * r

must be the basis of allowance of such clain,. Accordingly, the court

revorses the, decision of the referce ani remands the matter to the

Referee Yor allowance of tho Government's claim,

: ‘New Orleans, Louisiana, this 29th day of September, 1972.

yas Shy

~— 2." hoes tas? Ce: > ar ia Ea ae

IN THZ MATTER OF . " . . NUXBER

RAYNOWD C, SILLER, aka =i «68-849

Reymond Chester Miller Lage . :

BANKRUPT tear ones ; IN BANKRUPTCY

FINDINGS OF PACT AND CONCLUSIONS OF LAW AND ORDER

INTRODUCTGRY STATSUNN

The voluntary petition in this matter was filed in the

Southern District of Florida on January 31, 1968, bears

Docket Number 68-40-BK-EC of said Court, and is identificd

as Pleading 1. The notice to creditors fixing April 4, 1963,

as the date of the first mecting of creditors also fixed

the last date for the filing of claims as October 4, 1968,

and June 4, 1968, as the last date for the filing of objections

to the discharge ot te bankrupt,

4 motion to dismiss based on jurisdictional grounds and/

=~ te transfer was filed by the nerchants National Bank of

tobile on march 29, 1968, which motion was denied without

prejudice-to rencw said motion after the first mecting of

creditors, The first mecting of creditors was held on April 4,

1968, and a continued hearing on April 5, 1968, after which

be transferred, under Section 32(c) of the Act, to the United

States District Court in New Orleans, and directed that said

transfer be forthwith set for hearing before the Honorable

Emett C, Choate, United States District Judge,

A petition to amend Schedules A-2 and A-3 was filed on

May 7, 9GS8,-and on that date Referee Yacos deferred ruling

upon petition for aacndwent of debtor's petition, pending

action hy the United States District Judse regarding the 2

transfer of said proceedings, _*

On May-15, 1968, the Clerk.of the United States District

Court for the Southern District of Florida transmitted td the

Clerk of this Court the entire record of the geeededitati,

: which matter was then docketed as No, G8-S49 and the order of

transfer was identified as Pleading No, 1.

Certificate of wailing of the Southern District of

Florida, identified as Pleading Ko. 6 of said Court, certifies

_that the mailing of the notice of first meeting of creditors

and notice of time limits for filing proofs of claim and

objections to discharge was also mailed to governmental

agencics,. ;

Three Clains vere filed in the record in Florida, being

eer 1, 2 and 3. Clains filed in the case in this district

were numbered 1 through 12, -

fhis court on July 48, 1S6S, mailed a notice to creditors,

taxing officials, ctc. fixing August G, 1968, as the date of

the first necting of creditors, This notice also, through

inadvertence, fixed a new daie for the filing of clains as

February 6,°1969, The last day for filing claims should have

been October 4, 1968, as was fixed in the court in the

Southern District of Florida, The notice also contained the

. following paragraph:

"This bankruptcy procceding — originally

in the Scuthern District of Florida, United States

_ District Court, as No, -68-10-Bk,"

Pursuant to notice the first. meeting of creditors in

this District was held in New Orleans on August 6, 1968, and

a continued hearing was held on October 15, 196S.

On April 30, 1969, the benkrupt filed a petition to re-

quest hearing to determine —_r of unpaid taxes, but with-

drew said request on September 8, 1970,

>of.

Nane of clajmint

Amount

Claim No, Date Liled

ae brner’s cCinub, ihe, “S-26-0S ~—- SIT 765.06

“ - -. Grady Hulloway — 4-13-65 275,00

3 City Wide fT. V. Inc, 5-06-68 100,28

New Orleans

la Merchants National / :

os Bark of ‘hMoebile 7-09-68 187 ,000,00

; 2a H, Stern Jewelcrs, eae hs

. Inc, f 7-13-68 . . 109,00

3a Longview Bank & Trust ;

C6, 8-06-GS 17,509,090

4 Texaco, Inc, 8-12-68 176,13

* 5 Parisian Cleaners 10-17-G5 145,60

* 6 United States, 15 1-27-69 280 ,&50,79

62 United Siates, is 7-24-69 $0,664,582 §

** 7 GabJcs Estates Club,

Ine, 2-12-69 * 200,00

.* § Dr. Robert A,NcNaughton 5-01-69 60,60

* 9 Jordan Sarsh Co, 7-07-69 §19,28

* 10 Minni Rerald Pabv.Co, 10-14-G9 23.76

* 12 Floridan Power & Light 7

. Co, 4-30-71 160,91

Gb United States, iks 7-06-70 90 ,492,98

6c United States, 1fS 9-0S-70 90,492.98

* Filed too late

Cinin 7 paid at tine of sale of realty in

¥lorida, as cJairiant had previously filed a

lien on said property, :

On April 30, 1969, the trustce filed objections to.

Claim No. 5 of Parisian Cleaners in the amount of $145,580,

the United States in amount of $280,850.75

and to claim No. 6 of

Nearings were held on June 4, 1969, and on September 24, 1969,

Bricis were alii eanied by counsel‘for the trustce and United

States, Parisian Cleaners did not make an fppearance, nor

Tile any pleadings. .

On August 27, 1870, a petition was filed by trustee for

“the United States to show cause why its clzim should not be

expunged or other

wise reduccd, reserving all of his rights to

his objcction to allowance of claim, A hearing on this petition

was held on September 29, 1979, and bricfs were submitted,

This cuestion is noy moot. in view of ny findings of fact and

conclusjons of Jay, a Des

eS nk Oe cee eee a | ein

In the interim, the funds in the possession of the trustee,

originally in the a:nwunt of $83 ,908,2] lave been invested in

U. Ss. Treasury Lbil3Js or in certificates of deposit, depending

on most advantageous rate of interest,

FINDINGS OF FACT

1) Petition in bankruptcy was filed in Wiami, Florida,

oft January 31, 1968, Schedule A-1 of ened wtttian did not

“Vist the United States as being due any taxes, Photocopy of

bankrupt's 1966 poturn attached to schedules indicated no tax

was due the United States,

2) On March 19, 1938, a notice was ikked to all

ereditors notifying .thea that the first meeting 6f ‘creditors

would be held in Miani, Florida, April 4, 1968, and that

creditors must file their proof of claim on or before October 4

1968, |

3) The Florida certificate of mailing, dated March 19,

1965, shows that governmental agencies were mailed a copy of

said notice‘of first meeting of creditors.

4) First meeting of creditors was held in Miami, Florida,

on April 4th and 5th, 1968,

5) This case was transferred fron Miani, Florida, to

Lastern District of Louisiana, by order of Honorable Emett C,

Choate, United States District Judge dated Nay 6, 1968,

.6) On July 18, 1868, this court mailed a notice to all

creditors, taxing officials, etc, eetityine them that the

first mecting of creditors would be held on August 6, 1968,

and that creditors must file claims on or before February 6,

1969,

7) That three preeene were filed in Florida and four in

Kew Orleans on or before October 4, 1968, totalling $206,946,4

&) Clain No. 5 of Parisian Cleancrs in amount of $145,580

10) Priority Claim No, 6 cf United States was amended

and filed on July 24, 2969,.sbowing income tax due for year of

1967 only in anount of $96, 664,82, and showing date tax lien

aQxyose as enti 15, 1968, |

11) Pricrity Claim No, 6 of United. States, amended on

July 1, 1970, filed on July G, 1970, for $90,492.98 as a

secured claim, shoving dates notice of tax lien filed

April 7, 1269; April 8, 1969 and April 29, 1969,

12) Priority Claim No, 6 of United States for $90,492,98

Was. amended on Septenbor 4, 1970, filed September 8, 1970,

aS a priority clain and showing date tax assessed as October 15,

1968, :

13) The United: States rceeived notice of first mecting

of creditors which was mailed at Miami, Florida,on March 19,196!

14) Income tax return was not assigned to agent until

August 23, 1968,

15) Other pertinent facts are included in introductory _

statenent,

oe COXCLUSIONS OF LAW

Clains not timely filed

Section 57n specifically states:

"Claims which are not filed within six months

after, the first date set for the first neeting

of creditors Shaliet be allowed, (underlining

by court), ~

Claim No, 5 of Parisian Cleaners in amount of $145.80

shall not be allowed, No appearance was made by this creditor

as to the objection by trustee of its allowance,

Claim No, 6, and its anenduents, filed by the United

Staten as a priority claim shall not be allowed, as it was

not tinely filed,

The first date set for the first meeting of eiediiun

at-Minmi, Flovida was April 4, 1968, The first meeting was

actually held on said date and saetanae to the next day,

‘- aA

Anril &. 1968. “ee :

Even though the Sovernrental agencics were notified on

March 19, 1963, of the first date sct for the first meeting

and of the last date, October 4, 1968, for the filing of

clains, no representative of the government was present at

that meeting, ; 7 ,

The case was later transferred to'-New -Prieahs’ and on

July 18, 1968, notice from this court, designating August 6,

1968, us the date set for the first necting of creditors, and

February 6, 1969, as the last date for the filing of claims,

This notice was sent to all creditors and the Interna). Revenue

Service, No* repres sentative of the foverninent saw fit to attend

said neeting, While this fithes was labeled “Notice of first

meeting of creditors", the notice specifically stated:

"This bankruptcy proceeding was filed originally

in the Southern District of Florida, United States

District Court, as No, 68-40 BK."

It is to be noted here that court was in error in fixing

a second cate for filing clains, .The ner date should have

remained the same as fixed by the court for the Southern

District of Florida, This error was an inadvertent one and

Was not done to defraud nor mislead any creditor,

It is also a fact thet the notice fron this court was

captioned, "First Meeting of Creditors," rather has informing

creditors that the meeting was actually a continued one,

This also was an administrative error,

Volume 3 of Collier, par. 57.27 (3) page 386 refers to

the date when time limit begins to run, Prior to 1938, the

tinc limit began to run from the date of adjudication, The’ 192

act altered thig so that the six months’ period comuences to

run from "the first date set for the first meetiny of creditors

At page 387 of this volume Colli¢cr says:

“..Morcover, a first mectins called and cormeonced.

may in some cases be postponed or continued until

An carly examination of the record by Internal Revenue

Service would have disclosed that the first date sect fox the

first. neeting of creditors was April 4, 19GS, and that the

last date set for the filing of claims was Outeber 4, 1966,

and would also kave informed Ynternal Revenue Service that the

mecting on August G6, 1968, was in fact a continued first

necting of creditors, for the transcript of the hearing on

August 6, 1968 states: ,

. "Continied hearing of first meeting of creditors

aftcriransfer to the above court from the

Southern District of Florida, resucied at 10:00

ofclock #.1,., on Tucsduy, the 6th day of August,

1968, pursunat to the adjournment cf April 4 -

and 5, 1968 in the Scuthern District of Florida."

The goverment, after -it had knowledge of the two bar

dates, Gid not contact the Referee as to a clarification as

to which Gate governed,nor did it request an extension of

een, prior to October 4, 1968, within which to file iis

Claim, as provided by Section 57n of the Act,

The tax returns were not assigned to tarvin R, Brown, a

field auditor for Internal Revenue Service, until August 23,

1968, forty (40) days prior to October 4, 1968, und more -

than five (5) months after Internal Revenue Seveaee had re-

ceived notice of first ante set for first meeting of creditors,

The Internal Revenue Service did not file its clzim

Within six months after the first date set for the first

meeting of creditors, and there is no dispute as to this fact,

nor can the governnuent contend that there was knowledge on the |

part of the trustee, or of ‘the Referee, that any taxes were

due, which could possibly be a basis for permitting the

Liling of an amended claim, The schedules showed that no

taxes were duc, and photo copy of the 1966 return, appended

to the schedules, nlee shaved that there wore no taxcs due,

It was ah easy matter for-the Internal Revenue. Service

to inspect this record, which was available at all tines,

lt would have weibtied that the first date set for the first

meeting was April 4, 16S, and the last date for the filing

of claims “2s October 4, 1968. It was the duty of the govern-

nent when it received notice of first mecting of creditors

froin this court on or about July 18, 1968, to contact the

court for «a ruling as to which was the correct bar date, This

was net done, and the. Internal Revenue Service décided to

interpret the second notice as an extension of the bar date,

The second notice was dcLfinitely not an extension, for the

court under the law could not extcnd the time limit as set

out in Section 57n of the Act, and the governaent should have

known this. Instead nothing was done until August 23, 1968,

when the tax returns were conten to an agent,

Shortly after the trustce realized that tro claiws had

not been timely filed, he initiated proceedings to disallow

stme on April 30, 1969, This rule against the government

related to the original claim filed on January 27, 1869, for

years 1966 and 1967, At the hearing held on June 4, 1969, to

disallow the clczims, the governnent attempted to justify its

failure to Limely file its claim by the testimony of a

Mir. Marvin R, Brown, a ficld auditor for the Internal Revenue

Service, who testified that the returns were not assigned to

hin until August 23, 1968,

The court was not impressed with the reason given by the

Government for its failure to timely file,as evidenced by

Mr. Brown's testimony. In its brief the Internal Revenue

Service insinuates that they were mislead by the trustee, and

that he had not come into court with "clean hands", The en-

tire record discloses that the blame rests solely with the

fovernnent, as they took no action whalsoover after receiving

two, notices of this Lankruptcy procecding, one from Florida

and one fror this court, - 9 : ‘ 2

esa :

——

_——

The Interna Revenue Service is now attenpting to apply the

{ucts of this case to the Jaw embodied in several decisions

in which the courts held equilable principles should govern,

There is absolutely no fraud involved in this casc,and

no injustice is bein:: done to Internal Revenue Service by

the disallowance by this court of-its claim, The-claiwant ~

was not diligent and slept cn its rights, An assessment of

‘the tax claimed to be duc for 1967 was uot made. until

“October 15, oe, Cleven cays after October 4, 19 88, the

second bar date, The returns were not referred to a field

auditor until August 23, 1968, mere than five (5) months after

it had received notice from Florida, and more than one month

after it had received the notice from this court, The

Governnent had ample time to apply to the‘court for an

‘extension under the proviso of Section 57n of the int It

did not do this, but elected to go on the assunption that an

extension had been granted,

In ‘its bricf the government states it was misled dy the

order seiling a new time limit for the filing of claims, and

that the Revenue Ofiiccr, Mr, Brown, who testificd at the

hearing, wis originally aware ef the first time limit for

filing of clains, but "Jearned indirectly of the later date

for filing". the bricf docs not explain the reuson why

Internal Revenue Service took no action prior to August 23,

19GS, the date the income tax returns were turned over to

Mr. Brown; why it had not attended any of the nectings of

creditors, having had sufficient notion, nor why under all of

the circusstances of the case it had not applicd for an

extcnsion,as heretofore set out,

The Vaited States is relying on the case of Pepper vs,

Litton, 308 UU, S, 295, and other exses cited in its bricf,

we dnanguage used in Pepper vs, Litton, super, which

has prompted certain courts to extend the statutory limits of

Scction £7n of the Act, is:

". . eand cven theugh the Act provides that

Clnins shall nut be proved against a baniirupt

estate subscunucat to six months after the

adjudication, the beitkruptcy court in the

exercise of its equitable jurisdiction has

pover to permit claims to he praved thereafter

in‘ order to prevent a Sxaud or an injustice",

~ In ali 6f the caswes cited, the courts’ have “decided upon*

a factual situation, such as would not adversely affect anyone

by the tardy allowance of a2 claim, The facts in this case do

not justify the applicstion of equitable principles, for the

reasons; first, that the United States was grossly negligent

in not tinmcly processing its claim, and, second, it would

seriously aficct the trustee we veseeunete creditors: who

had timely filed their Claims fer $206,946.47,

The fSucts in Walsh vs. Lockhart Associates, 339 F,2da,.417

(5CCA1964) and Pausett vs Murner, 402 F,2d.961 (5 5CCA1968)

arc distinguishable from the facts in this case. No such

knowledse of an existing claim can be attributed to the

trustec or the court, as previously stated in this opinion,

i.¢, the schedules did not reflect any taxes due the United.

States, nor did the 196G return, attached to schedules, The

facts will further chan thnt no taxes were ultimately due —

for 1966, and the assessacnt for income tax 1967 was not made

until October 15, 1968,

Section 57n should be strictly construed, See Collier

on Eankruptcy, Volume 3, par 57,27, at page 376:

"rhether the court may extend the yr soeica 4

period for filins proofs ol claims is a slightly

nore complex gvuestian, The inherent equity

powers ot the bankruptcy court, so LIrceguently

referred to, are a tempting instrument to mitigate

the harshness involved in any statutory time

‘Vititation, bub undeér-the present Act courts

have senerauld ly withstood the temptation cven

iN Situitions in which the equities of the case;

if they might have been considered, ne

strongly in favor of eguilable relict

PEPER A FEN ROO ERR RN ERM IO PRS SC oh en bok AR ehh ee a

PRT,

LO INT LO TELE PN ERLE EEF

And in the same volume, at page 379, it is stated: .

"The weisht of authority considers the statutory |

Bix months’ period as mandatory and immutable,

This is a statute of limitations,"

The United States also-cites the April, 1969, issue of

-the. Journaz of the National Conference “of Referees in

Bankruptcy, at page 54. This court relics heavily on this

article and agrecs whole-heartedly with the conclusion reached

: by the autbor of said article, Asa S. Herzog, one of our most

prominent and learned referees, The article vas citcd to show

the: lenicncy of the Fifth Circuit, in granting amcndnments,

It must be borne in wind that the clain, as. originally filed

was not an amendment, The clain was filed as being timely,

However, Referee Heirzog does not agree with the Fifth Circuit,

His conclusion at page 58 is: °

“Despite those cases which reason that the time

bar of Sec. 57n ray be extended through the

bankruptcy court's eauitable Power, it would

seem that at least since the 1938 anendments,

the power dovs. not exist, The many amendnents

to Sec, 57n in 1938 were added with full con-

gressional] awareness of the divergent judicial

views, They manifest a determination to resolve

the centjict, and therzfore constitute a direct |

’ reinforcement of the reasoning in favor of strict

enforceneci:t of the statutory time limitation,

It is subaitted that the prevailing view and,

in my opinion, the sounder view, is that the

bankruptcy court is under a duty to @isallow

& claim untimcly filed and has no power to

substitute ecauitable consideration for the

manifest intent of Congress,"

The second argument in the brief of the United States

is:

"This court may consider the new time limit as

an extension under Section 57n",

In its argument, the United States is relying on another

surmise on its part when it states, "The government respect-

fully subaits further that this court may have been considering

There is absolutely no basis for this assumption, Another

bar date wus jnadverteitily set, and the notice did not specify

it ms aAn.oxtousion, -Pho- Uni tod-States erroneous ly: cons trucd:

it as such, even though, with proper diligence, it could have ?

availed itself cf the provisions of Section 57n aud applied

for an extension, particularly in vicw of the circumstances of

this case, The United States should have known that the bar

date is six months after the first date set for the first

mecting of creditors, :

In conclusion, it is the considered opinion of the court

that the claim of the United States was. not timely: filed,

There are no facts to justify the application’ of equitable

principles in this ¢ase, even if this court did have the

equitable power to do sc. To the contrary, to allow the clain

of the United States would impose an injustice on the creditors

who timely filed their claims,

"EQUITY AIPS THU VIGILANT, NOT THOSE Wo SLUMBER ON

TREIR RIGHTS,"

Accordingly, an ordey will be entered disallowing Clain

No, 5 of Parisian Clcaners, and Claim No, 6 of the United

States, as amended,

Merrill T. Landwehr a

Raymond C, Miller

Burton G, Klein

Honorable Gerald S, Gallinghouse

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.