JAMES S. STARZYNSKI, Bankruptcy Judge.
This matter is before the Court on Defendant Century Bank's ("Bank") Motion to Dismiss ("Motion") (doc 4). Plaintiff is represented by his attorney Gerald R. Velarde. Bank is represented by its attorney Scheuer, Yost & Patterson, PC (Christopher M. Grimmer). This adversary proceeding is a complaint by the Debtor to recover an exempted preferential transfer under section 547
The parties filed the following stipulated facts in connection with Bank's Motion (doc 8):
1. Defendant Century Bank ("Century Bank") caused Writs of Garnishment of Debtor/Plaintiff Magdaleno M. Sandoval's ("Sandoval") bank account(s) with First National Bank of Santa [Fe] to be issued in the following New Mexico State District Court cases: Century Bank v. Magdaleno Sandoval, Cause No. D0101-CV-200902742; Century Bank v. Magdaleno Sandoval, Cause No. D-0101-CV-200903095; and Century Bank v. Magdaleno Sandoval, Cause No. D-0101-CV-200903162.
2. The Writs of Garnishment were served on First National Bank of Santa Fe on October 14, 2010.
3. Pursuant to the December 7, 2010, Judgments on Writ of Garnishment, Claim of Exemption and Order to Pay entered in the State District Court cases, the sum of $13,596.03 was paid to Century Bank by First National Bank of Santa Fe on or about December 10, 2010 (the "Garnished Funds"). The payments were made from the bank accounts in the name of Sandoval.
4. Sandoval filed a voluntary Petition under Chapter 7 of Title 11 of the United States Code on January 11, 2011. (Doc. 1).
5. In Schedule C filed January 25, 2011, Sandoval claimed that the Garnished Funds were exempt property. (Doc. 9). No objection was filed to the exemption claim.
6. On February 11, 2011, the Chapter 7 Trustee filed her Report of No Distribution in Sandoval's bankruptcy. (Doc. 14).
7. The Trustee did not attempt to pursue a preference action against Century Bank or otherwise attempt to avoid the transfer of the Garnished Funds to Century Bank.
8. Sandoval did not object to the Chapter 7 Trustee's Report of No Distribution.
10. On August 25, 2011, Sandoval filed a Complaint to Avoid and to Recover Preferential Transfer against Century Bank (the "Adversary Proceeding"). The Adversary Proceeding is numbered and styled as follows: Magdaleno M. Sandoval v. Century Bank, Adversary No. 11-1137s.
11. On September 14, 2011, Century Bank filed its Motion to Dismiss Sandoval's Complaint to Avoid and to Recover Preferential Transfer in the Adversary Proceeding. (Doc. 4).
12. On October 11, 2011, Sandoval filed his Motion to Reopen Case in the bankruptcy case. (Doc. 20).
13. On October 14, 2011, an Order Authorizing Reopening of Case was filed in the bankruptcy case. (Doc. 21).
The only issue before the Court is whether the adversary proceeding is subject to dismissal by virtue of the statute of limitations.
First, the Court will set out the statutory and bankruptcy rule framework that governs this adversary proceeding.
Bankruptcy Code section 522(l) provides:
11 U.S.C. § 522(l). The time to object is fixed by Bankruptcy Rule 4003, which provides in part:
Fed.R.Bankr.P. 4003(b)(1).
Bankruptcy Code section 522(h) provides:
11 U.S.C. § 522(h). Subsection (g)(1) in turn provides:
11 U.S.C. § 522(g)(1). Section 522(i) makes it clear that when a debtor uses an avoidance power under section 522, he is subject to all limitations imposed on a trustee in using that power:
11 U.S.C. § 522(i)(1).
Section 546(a), Limitations on avoiding powers, states, in relevant part:
11 U.S.C. § 546(a) (Emphasis added). Section 550, Liability of transferee of avoided transfer, provides, in relevant part:
11 U.S.C. § 550 (Emphasis added). Therefore, the issue can be rephrased as whether either section 546(a)(2) or section 550(f)(2) are defenses to Debtor's recovery. The Court views this as a statutory construction case.
The well known starting place in statutory interpretation cases are the statutes themselves:
Connecticut Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S.Ct. 1146, 117 L.Ed.2d 391 (1992) (Citations and internal quotation marks omitted.) And "when the statute's language is plain, the sole function of the courts'—at least where the disposition required by the text is not absurd—is to enforce it according to its terms." Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 6, 120 S.Ct. 1942, 147 L.Ed.2d 1 (2000) (citing United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989)). See also 62 Cases, More or Less, Each Containing Six Jars of Jam v. United States, 340 U.S. 593, 596, 71 S.Ct. 515, 95 L.Ed. 566 (1951)(Congress expresses its purpose through words. The Court's task is to construe what Congress has written and not add to it or subtract from it or to delete or to distort.); Burlington Northern, Santa Fe Railway Co. v. Lohman, 193 F.3d 984, 985 (8th Cir.1999), cert. denied, 529 U.S. 1098, 120 S.Ct. 1832, 146 L.Ed.2d 776 (2000)("The rules of statutory construction dictate that words should not be supplied to a statute when the words are purposefully omitted or when adding words would defeat the purpose of the statute.")
Therefore, the first step in this adversary proceeding is to determine whether the language at issue is plain and unambiguous. Robinson v. Shell Oil Co., 519 U.S. 337, 340, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997). The plainness or ambiguity of a statute can be determined by reference to the language itself, the specific context in which the language is used, and the broader context of the statute as a whole. Id. (citing Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 477, 112 S.Ct. 2589, 120 L.Ed.2d 379 (1992) and McCarthy v. Bronson, 500 U.S. 136, 111 S.Ct. 1737, 114 L.Ed.2d 194 (1991)). The Court finds that sections 546(a)(2) and 550(f)(2) are plain and unambiguous.
First, section 546 is entitled "Limitations on avoiding powers" and subsection (a) clearly states that preference actions "may not be commenced after ..." ... (2) "the time the case is closed or dismissed." Neither the statute itself, or any other statute, limit section 546 to actions brought by a trustee; rather, it is a limitation on the avoiding power itself. Therefore, a debtor cannot argue that his or her use of the avoiding power has different limitations on it than would a trustee's use. Nor does the statute itself, or any other statute, revive the statute of limitations if the case is reopened. Section 546(a)(2) is clear and unambiguous: actions to avoid preferences may not be filed after the case is closed.
Second, section 550 is entitled "Liability of transferee of avoided transfer." This section lists the rules that apply when a trustee is successful in avoiding, among other things, a preference. Section 550(a). It describes the liability of initial transferees and their transferees, makes exception for transferees that take for value and in good faith without knowledge, and liability of insiders. Sections 550(a), (b) and (c) and (e). The trustee is entitled to only a single satisfaction. Section 550(d). Most important for this adversary proceeding, however, section 550(f) requires that the action to recover on the avoided preference must be brought before "the time the case is closed or dismissed." Section 550 is worded as applying to "the trustee." Section 522(i), quoted above, makes it clear, however, that the debtor is subject to the same limitations as the trustee when attempting to recover under section 550. Neither the statute itself, or any other statute, revive
See also Mullen v. Kalil (In re Mullen), 337 B.R. 744, 749 (Bankr.D.N.H.2006). The Mullen court noted that there are reported cases that allow actions that would be subject to section 546(a)(2) to be pursued after reopening a case: e.g., Gross v. Petty (In re Petty), 93 B.R. 208, 212 (9th Cir. BAP 1988); White v. Boston (In re White), 104 B.R. 951, 955 (S.D.Ind.1989); Dwyer v. Peebles (In re Peebles), 224 B.R. 519, 520-21 (Bankr.D.Mass.1998); and Decker v. Voisenat (In re Serrato), 214 B.R. 219, 226 (Bankr.N.D.Cal.1997). The Mullen court observed that all of these cases involved undisclosed or concealed assets. Mullen, 337 B.R. at 749. All the cited cases had been based upon a theory that if assets were undisclosed there could never be a proper "closing" of the case that would trigger the statutes of limitations to run. Id. In Mullen, however, the debtor had disclosed the asset and the trustee was aware of it but failed to act. Id. Therefore, the case had been "fully administered" and the case had been properly and finally closed, barring the resurrection of any avoidance actions.
In the case before the Court, the preference action was disclosed and exempted. Closure of the case prevents Debtor from now filing to avoid the preference and filing to recover the preference once it would have been avoided.
Debtor makes several arguments that the Court should address. First, he argues that until the case actually closed the Debtor would be unable to determine if the Trustee had attempted to avoid the transfer. See 11 U.S.C. § 522(h)(2). But, under section 522(l) and Fed.R.Bank.P. 4003(b)(1), one month after the creditors meeting the garnished funds were "exempt." Russell v. Kuhnel (In re Kuhnel), 495 F.3d 1177, 1180 (10th Cir.2007)(Rule 4003(b) prevents objections to exemptions made after time specified in rule, citing Taylor v. Freeland & Kronz, 503 U.S. 638, 642, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992)). At that point, the Trustee had no claim to them, nor could Bank object to the Debtor's standing to recover.
Debtor also argues the "properly closed" cases noted in Mullen. The Court finds that these cases are not persuasive. For one reason, these courts are adding a word to a statute that is not there and that changes the operation of the statute. This
United States v. Kubrick, 444 U.S. 111, 117, 100 S.Ct. 352, 62 L.Ed.2d 259 (1979) (ending string citations omitted). "Statutes of limitations are not simply technicalities. On the contrary, they have long been respected as fundamental to a well-ordered judicial system." Board of Regents of the University of the State of New York v. Tomanio, 446 U.S. 478, 487, 100 S.Ct. 1790, 64 L.Ed.2d 440 (1980). "If Congress explicitly puts a limit upon the time for enforcing a right which it created, there is an end of the matter. The Congressional statute of limitation is definitive." Holmberg v. Armbrecht, 327 U.S. 392, 395, 66 S.Ct. 582, 90 L.Ed. 743 (1946).
Gibbons v. Haddad (In re Haddad), 68 B.R. 944, 953 (Bankr.D.Mass.1987). Sections 546(a)(2) and 550(f)(2) are congressional statutes of limitations that are an integral part of the Bankruptcy Code and should not be ignored to reach a "better" result.
Kubrick, 444 U.S. at 125, 100 S.Ct. 352.
The second reason the Court finds the "properly closed" cases unpersuasive is that the fiction of a "properly closed" case is unnecessary. In all of those cases there was fraud or concealment. Under a long line of Supreme Court cases beginning with Bailey v. Glover, 88 U.S. 342, 348, 21 Wall. 342, 22 L.Ed. 636 (1874) and continuing through Holmberg, 327 U.S. at 397, 66 S.Ct. 582, to the present in Holland v. Florida, ___ U.S. ___, 130 S.Ct. 2549, 2563, 177 L.Ed.2d 130 (2010) the Court has
Finally, the Court finds that Debtor did not allege in the complaint or the response to the Motion any equitable considerations that would have tolled the running of any statutes of limitations. This adversary proceeding must be dismissed.
For the reasons set forth above, the Court finds that the Motion to Dismiss is well taken. A separate order will be entered dismissing this adversary proceeding.
Debtor claimed exemptions under paragraph (2), i.e., the federal exemptions. See Case 7-11-10086, doc. 9, p. 8 (Schedule C).