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US Court of Appeals
FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re PARMETEX, INC., d/b/a/TRADE
VENTURES,
Debtor.


AVALANCHE MARITIME, LTD. and
MOUNTAIN PEAK MARITIME, LTD.,
Plaintiffs-Appellants,


and
                                                     No. 97-55671
SEAPLACE SHIPPING LTD.,
                                                     D.C. No.
Plaintiff,
                                                     CV-96-01752-TJH
v.
                                                     OPINION
SUNIL PAREKH, JR.; SEVANTI
PAREKH, a/k/a SUNIL PAREKH, SR.;
RESHMA PAREKH; JITENDRA
KAPADIA; FORENTAB INVESTMENT,
LTD.; BANK OF BARODA; CALIPAR
TRADING, INC.; MERPLEX, INC.;
ERWIN SHUSTAK; SHUSTAK, JALIL,
SANDERS & HELLER,
Defendants-Appellees.


Appeal from the United States District Court
for the Central District of California
Terry J. Hatter, District Judge, Presiding


Argued and Submitted

February 1, 1999--Pasadena, California

Filed December 21, 1999

                               14775


Before: Melvin Brunetti, Frank J. Magill, 1 and
M. Margaret McKeown, Circuit Judges.


Opinion by Judge Brunetti; Partial Concurrence and
Partial Dissent by Judge McKeown


_________________________________________________________________



SUMMARY

The summary, which does not constitute a part of the opinion of the court,
is copyrighted C 1999 by West Group.
_________________________________________________________________


Bankruptcy/Litigation and Procedure

The court of appeals affirmed a judgment of the district
court. The court held that the statute of limitations under the
pre-1994 version of the Bankruptcy Code begins running
from the date of the appointment of an interim trustee.


On April 19, 1993, Parametex, Inc. filed a Chapter 7 bank-
ruptcy petition; on May 4, Charles Daff accepted his appoint-
ment as interim trustee. Daff became permanent trustee when
the meeting of creditors took place on June 22.


On May 25, 1995, appellants Avalanche Maritime, Ltd. and
Mountain Peak Maritime, Ltd., who were unsecured creditors,
brought an adversary action to avoid allegedly fraudulent,
preferential, and post-petition transfers by Parametex.


Daff executed a stipulation on July 27, 1995 authorizing the
creditors to pursue their claims in his stead, and to amend the
complaint to name him as a defendant. On August 3, the
bankruptcy court entered an order approving the stipulation.
The creditors and Daff filed an amended complaint with the
same allegations on September 25.


Appellee Sunil Parekh and the other defendants contended
_________________________________________________________________
1 Hon. Frank J. Magill, United States Circuit Judge for the Eighth Cir-
cuit, sitting by designation.


                               14776


that the creditors did not have standing, and that their claims
were barred by the two-year statute of limitations set forth in
S 546(a) of the pre-1995 version of the Bankruptcy Code.
They argued that the S 546 statute began to run when Daff
received his appointment as interim trustee underS 701. The
creditors asserted that the date of Daff's appointment as per-
manent trustee under S 702 controlled.


The bankruptcy court ruled that the creditors' claims were
time-barred by S 546(a). The district court affirmed. The cred-
itors appealed.


[1] Although a trustee must generally file an avoidance
under Chapter 7, under these particular circumstances, where
the trustee stipulated that creditors could sue on his behalf and
the bankruptcy court approved that stipulation, the creditors
had standing to bring the suit. The exclusive power to com-
mence avoidance actions vested in trustees is permissive
rather than mandatory. Creditors may move to gain court per-
mission to institute the action.


[2] The S 546(a) statute of limitations begins to run on the
appointment of the interim trustee under S 701, not on the
election of a permanent trustee under S 702. [3] An interim
trustee appointed under S 701 is the functional equivalent of
a permanent trustee elected under S 702. This is so because
the Bankruptcy Code does not require the permanent trustee
to do anything different than he had already done as interim
trustee. Because Daff was appointed as interim trustee on
May 4, 1993, the creditors' suit was barred by the statute of
limitations.


Judge McKeown concurred in part and dissented in part,
concluding that the clear language of S 546(a) mandates that
the statute of limitations begins to run with the appointment
of the permanent trustee.


_________________________________________________________________

                               14777


COUNSEL

Jeremy O. Harwood, Healy & Baillie, New York, New York,
for the plaintiffs-appellants.


Bradley E. Brook, Los Angeles, California; and Rebecca J.
Winthrop, Kelley, Drye & Warren, Los Angeles, California;
Jon M. Kasimov, Haight, Brown & Bonesteel, Santa Monica,
California, for the defendants-appellees.


_________________________________________________________________

OPINION

BRUNETTI, Circuit Judge:

We must decide whether the statute of limitations under the
pre-1994 version of the Bankruptcy Code begins running
from the date of appointment of the interim trustee or from
the date of qualification of the permanent trustee.


I.

The relevant dates in this case are as follows:

1) On April 19, 1993, Parmetex, Inc. ("Parmetex") filed a
Chapter 7 bankruptcy petition.


2) On May 4, 1993, Charles Daff ("Daff") accepted his
appointment as interim trustee under 11 U.S.C. S 701.


3) The meeting of creditors held pursuant to 11 U.S.C.
S 341(a) was set for May 25, 1993, but did not actually occur
until June 22, 1993, at which time Daff became the permanent
trustee.


4) On May 25, 1995 unsecured creditors Avalanche Mari-
time, Ltd. and Mountain Peak Maritime, Ltd. (the


                               14778


"Creditors"), filed an adversary complaint in bankruptcy court
to avoid allegedly fraudulent, preferential and post-petition
transfers by Parmetex. The Complaint was filed against a
number of parties, including Sunil Parekh, Jr., Sevanti Parekh,
Reshma Parekh, Jitendra Kapadia, Bank of Baroda and Cali-
par Trading, Inc., Shustak, Jalil, Sanders & Heller (a law
firm), and Erwin Shustak (collectively, "Defendants").


5) On July 27, 1995 Daff executed a stipulation that autho-
rized the Creditors to pursue the claims in his stead and to
amend the original complaint to add Daff as a plaintiff.


6) On August 3, 1995, the Bankruptcy Court entered an
order granting the stipulation.


7) On September 25, 1995, the Creditors and Daff filed an
amended complaint with the same allegations.


Defendants have argued below and to this Court that the
Creditors do not have standing to bring this suit and that in the
alternative the Creditors are barred from bringing the suit by
the applicable statute of limitations -- 11 U.S.C.S 546(a).
The district court, after reviewing an appeal from the bank-
ruptcy court, held that the two-year statute of limitations
began to accrue when Daff was appointed as interim trustee
and therefore dismissed the avoidance action as untimely.
Neither the bankruptcy court nor the district court addressed
the issue of standing.


We conclude herein that the Creditors had standing but that
they were barred from bringing the suit by the statute of limi-
tations.


II.

Defendants argue that the Creditors have no standing to sue
because only the Chapter 7 trustee has authority to bring
adversary proceedings under 11 U.S.C. SS 544(b), 547, 548


                               14779


and 549(a). The district court did not address the issue of
standing because the statute of limitations issue was the only
one certified by the bankruptcy court for appeal. Even so, we
must address the issue of standing because "Article III stand-
ing is a jurisdictional prerequisite." Maricopa-Stanfield Irri-
gation and Drainage District v. United States, 158 F.3d 428,
433 (9th Cir. 1998).


Daff stipulated on July 27, 1995 that the Creditors were
authorized to pursue their claims in his stead. In relevant part,
the stipulation states: "It is hereby stipulated and agreed . . .
that [the Creditors] are and were authorized to file an adver-
sary complaint in the above referenced action on or about
May 25, 1995." The stipulation further provides: "[t]he com-
plaint . . . is acknowledged and agreed to have been brought
on behalf of the estate although nominally on behalf of the
named plaintiffs in lieu of the trustee. The Trustee authorizes
the complaint to be amended if necessary to have the Trustee
as a named party-plaintiff if procedurally required." On
August 3, 1995, the bankruptcy court entered an order grant-
ing the stipulation. On September 25, 1995, the Creditors and
Daff filed an amended complaint that added Daff as a plaintiff
but stated the same claims.


[1] Although Defendants are correct that a trustee must
generally file an avoidance action under Chapter 7, we hold
that under these particular circumstances -- where the trustee
stipulated that the Creditors could sue on his behalf and the
bankruptcy court approved that stipulation -- the Creditors
had standing to bring the suit. See In re Curry and Sorensen,
57 B.R. 824, 828 (B.A.P. 9th Cir. 1986) ("[t]he exclusive
power to commence avoidance actions vested in trustees and
debtors-in possession is permissive rather than mandatory . . .
[T]he creditor may move to . . . gain court permission to insti-
tute the action itself."). See also In re Enserv Co., Inc., 64
B.R. 519 (B.A.P. 9th Cir. 1986) (following In re Curry), aff'd
by mem., 813 F.2d 1230 (9th Cir. 1987); In re The Gibson
Group, Inc., 66 F.3d 1436, 1442 (6th Cir. 1995) ("a creditor


                               14780


may have standing to file an avoidance action if the bank-
ruptcy court determines that certain conditions exist and cer-
tain prerequisites are met"); In re Natchez Corp. of West
Virginia, 953 F.2d 184, 187 (5th Cir. 1992) ("A creditor may
[institute an action under section 549] on behalf of the trustee
or debtor-in-possession if it has moved the bankruptcy court
for authorization to do so"); In re Xonics Photochemical, Inc.,
841 F.2d 198, 203 (7th Cir. 1988) (creditor could have asked
the bankruptcy court to allow it to bring a form of derivative
suit in the name of the debtor); In re Vogel Van & Storage,
Inc., 210 B.R. 27 (N.D. N.Y. 1997) (upholding bankruptcy
court's authorization of suit by creditor because "nothing in
the Bankruptcy Code indicates that a trustee cannot authorize
a creditor to litigate an avoidance action on the trustee's
behalf").


III.

Defendants argue that the Creditors were barred from
bringing a lawsuit because the applicable statute of limitations
-- 11 U.S.C. S 546(a)2 -- had run. Specifically, Creditors
contend that the S 546 statute begins to run on the date of
qualification of the permanent trustee under 11 U.S.C. S 702,
not from the date of appointment of the interim trustee under
11 U.S.C. S 701. We disagree with Creditors' argument and
hold that the S 546(a) statute of limitations begins to run on
the date the interim trustee is appointed pursuant to S 701 of
the Bankruptcy Code.


11 U.S.C. S 546(a), entitled "Limitations on Avoiding
Powers", provides in relevant part:


      (a) an action or proceeding under section 544, 545,
_________________________________________________________________
2 Because Parmetex's petition for relief was filed before the 1994
amendments to the Bankruptcy Code, 11 U.S.C. S 546(a) (1994 ed.)
applies to this appeal. Unless otherwise noted, all references herein are to
the pre-1994 version of the statute.


                               14781


      547, 548 or 553 of this title may not be commenced
      after the earlier of --


      (1) two years after the appointment of a
      trustee under section 702, 1104, 1163, 1302
      or 1202 of this title; or


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

11 U.S.C. S 546(a) (1994 ed.) (emphasis added).

[2] The parties in this case have argued over whether the
phrase "appointment of a trustee" refers to an interim trustee
or a permanent trustee. The Defendants contend that the
"appointment of a trustee" language refers to the
"appointment" of an interim trustee under 11 U.S.C. S 701.
See 11 U.S.C. S 701(a)(1) ("[t]he United States trustee shall
appoint one disinterested person . . . to serve as interim trustee
in the case."). If this is the case, the Complaint was not timely
filed because the interim trustee was appointed on May 4,
1993, which is more than two years before the Creditors filed
suit.3 The Creditors counter that "appointment of a trustee"
refers to the "election" of a permanent trustee under 11 U.S.C.
S 702(b). See 11 U.S.C. S 702(b) ("[c]reditors may elect one
person to serve as trustee in the case"). According to the
Creditors [and according to the dissent],S 546 must refer to
the qualification of a permanent trustee under S 702 because
the statute explicitly references S 702. Also, argue the Credi-

tors, a large number of lower court opinions support such an
interpretation of S 546(a). Despite lower court opinions that
employ such reasoning, we hold today that the S 546(a) stat-
_________________________________________________________________
3 This is so whether or not the action was "commenced" on the date the
original complaint was filed -- May 25, 1995, or on the date that the
bankruptcy court entered the order granting the stipulation to add trustee
Daff to the Complaint -- August 3, 1995. Because the Creditors filed late
measuring from either date, we need not decide the issue of when pre-
cisely the action was "commenced."


                               14782


ute of limitations begins to run upon the appointment of the
interim trustee under S 701, not upon the election of a perma-
nent trustee under S 702. Such a result is dictated by two prior
decisions of this court -- In re. San Joaquin Roast Beef, 7
F.3d 1413 (9th Cir. 1993); and In re. Softwaire Centre Inter-
national, Inc., 994 F.2d 682 (9th Cir. 1993).


In San Joaquin Roast Beef, debtor San Joaquin Roast Beef
filed for Chapter 11 bankruptcy and the bankruptcy court
appointed a Chapter 11 trustee. Approximately one year later,
the bankruptcy court converted the Chapter 11 to Chapter 7
and appointed a Chapter 7 trustee. Approximately one year
after that, the Chapter 7 trustee filed suit to recover allegedly
preferential transfers. The bankruptcy court dismissed the pro-
ceeding on the ground that it was barred by S 546(a)'s two-
year statute of limitations. San Joaquin Roast Beef, 7 F.3d at
1414-1415. The trustee contended on appeal that he was not
barred by the statute of limitations because the two-year
period began to run anew after the conversion of the case
from a chapter 11 bankruptcy proceeding to a Chapter 7 pro-
ceeding.


We disagreed with the trustee's argument, and held that
"the most logical interpretation of section 546(a) is that the
statute of limitations begins running from the date the first
trustee is appointed and that all subsequent trustees are sub-
ject to the same statute of limitations." Id . at 1415 (emphasis
added). We therefore concluded that "[t]he statute of limita-
tions began running on the date the Chapter 11 trustee was
appointed." Id. at 1416.


The Chapter 7 trustee had argued that the statute of limita-
tions should run anew upon conversion from Chapter 11 to
Chapter 7 because a Chapter 7 trustee has different objectives
than a Chapter 11 trustee. As the trustee pointed out, a Chap-
ter 11 trustee has the goal of rehabilitating the debtor busi-
ness, while the Chapter 7 has the goal of liquidating the
business at its maximum value. As a result, argued the trustee,


                               14783


a Chapter 7 trustee could be time-barred from instituting
adversary actions due to the inaction of a prior Chapter 11
trustee. Id. at 1415-1416. We expressed the view that reaching
such an argument would be unwise because "the issue is laden
with policy considerations best left to Congress." Id. at 1416.
Instead of delving into policy arguments, we followed "[a]
plain reading of S 546(a)," and reiterated that the S 546 statute
of limitations begins running from the date the first trustee is
appointed. Id.


In Softwaire Centre this court was presented with a slightly
different scenario concerning the S 546(a) -- whether or not
S 546(a)'s statute of limitations applies to debtors in posses-
sion as well as trustees. In Softwaire Centre , a Chapter 11
debtor in possession, Softwaire Centre International ("SCI"),
filed an action seeking an avoidance more than two years after
the Chapter 11 petition had been filed. Softwaire Centre, 994
F.2d at 683. SCI argued that S 546(a) should not be applied
because on its face that section applies only to trustees, not to
debtors in possession. Moreover, argued SCI, debtors in pos-
session and trustees have different duties under the Bank-
ruptcy Code and are therefore not "functional equivalents" of
trustees. Applying the same statute of limitations to both,
argued SCI, would "ignore[ ] the reality of reorganization."
Id. 683-684.


We rejected SCI's arguments, and held that S 546(a)'s stat-
ute of limitations "was intended to apply to debtors in posses-
sion as well as trustees." Id. at 684. We adopted the reasoning
of Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523-1524,
(10th Cir. 1990), which construed S 546(a) in light of section
1107(a) ("[A] debtor in possession shall have all the rights . . .
and powers, and shall perform all the functions and duties . . .
of a trustee."). In light of this language, we stated that "[w]e
do not believe that Congress intended to limit actions filed by
an appointed trustee to two years without making the same
restriction apply to a debtor in possession who is the
functional equivalent of an appointed trustee. " Softwaire


                               14784


Centre, 994 F.2d at 684 (emphasis added). We concluded that
the statute of limitations began to run "from the date of the fil-
ing of a petition for reorganization under Chapter 11." Id. at
683 (quoting Zilkha, 920 F.2d at 1524).


[3] The reasoning of San Joaquin Roast Beef and Softwaire
Centre lead us to the conclusion that the statute of limitations
began running in this case when Daff was appointed as
interim trustee pursuant to S 701, not when he was elected as
permanent trustee pursuant to S 702. San Joaquin Roast Beef
held that the appointment of the first trustee triggers the stat-
ute of limitations. See San Joaquin Roast Beef , 7 F.3d at
1416. Here, the first trustee appointed was Daff, who was
appointed as interim trustee, on May 4, 1993. Softwaire
Centre held that a debtor in possession is "the functional
equivalent of an appointed trustee" and that, as a result, the
S 546(a) statute of limitations applies to debtors in possession
as well as to trustees. Softwaire Centre, 994 F.2d at 683-684.
Similarly, in the instant case, an interim trustee appointed
under S 701 is the "functional equivalent " of a permanent
trustee elected under S 702. This is so because the Bankruptcy
Code does not require the permanent trustee to do anything

different than that which he had already been doing as the
interim trustee. As one commentator has stated,"[t]he interim
trustee . . . must comply with the same rules and regulations
as a permanent trustee." 4 Collier on BankruptcyP 701.04.
Indeed, all Chapter 7 trustees, including the interim trustee,
have the same rights, powers, and duties, including the power
to assert claims governed by S 546(a)(1). Because Daff was
appointed as the first trustee -- serving in the capacity as
interim trustee -- on May 4, 1993, and because an interim
trustee is the "functional equivalent" of a permanent trustee,
we conclude that the S 546(a) statute of limitations began to
run on May 4, 1993. Accordingly, the Creditors' suit is barred
by the statute of limitations.


The dissent argues that by so holding we read specific lan-
guage -- "S 702" -- out of the statute. Although S 546(a)


                               14785


does refer to S 702 and not S 701, S 546(a) does specifically
refer to the "appointment" of trustees under certain sections
of Chapters 7, 11, and 13 of the Bankruptcy Code. See 11
U.S.C. S 546. Section 701 is the only part of Chapter 7 that
discusses the "appointment" of Chapter 7 trustees. By adopt-
ing the dissent's interpretation, therefore, we would also be
reading specific language -- "appointed under " -- out of the
statute. Given that either interpretation would read language
out of this unclear statute, we have simply discerned the most
logical reading of S 546(a) that is consistent with our prior
decisions in San Joaquin Roast Beef and Softwaire Centre.


The dissent also argues that the 1994 amendments to the
Bankruptcy Code support a contrary interpretation ofS 546
because those amendments add the phrase "or election" to the
statute. The amended statute, however, does not clear up the
prior ambiguity. The amended statute reads, in relevant part:


      (a) An action or proceeding under section 544, 545,
      547, 548, or 533 of this title may not be commenced
      after the earlier of . . .


      (1) the later of . . .

       (A) 2 years after the entry of the order
      for relief; or


       (B) 1 year after the appointment or elec-
      tion of the first trustee under section 702,
      1104, 1163, 1202 or 1302 of this title if
      such election occurs before the expira-
      tion of the time specified in subparagraph
      (A); or


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

11 U.S.C. S 546 (amended) (emphasis added). Although the
added phrase "or election," could suggest that the unamended


                               14786


S 546(a) applies to only the permanent trustee, the statute also
now contains the phrase "first trustee." The added "first
trustee" language suggests that the statute of limitations
should be applied to the interim trustee because the interim
trustee is the "first trustee." These contradictory changes do
not help to clear up the confusion present in the unamended
version of S 546(a).


IV.

The most logical interpretation of 11 U.S.C. S 546(a), con-
sistent with this court's prior decisions, is that the statute of
limitations period begins to run when the interim trustee is
appointed under 11 U.S.C. S 701. The statute of limitations
here, accordingly, began to run on May 4, 1993, the date that
Daff was appointed as interim trustee. Because the Creditors'
suit was filed more than two years after this date, it was
untimely.


AFFIRMED.

_________________________________________________________________

McKEOWN, Circuit Judge, concurring in part and dissenting
in part:


In this issue of first impression before the Ninth Circuit, the
clear language of the statute, 11 U.S.C. S 546(a) (1994),1
mandates that the limitations period begins to run at the time
of appointment of the permanent trustee under S 702. The
statute says nothing about S 701 (interim trustee) and neither
should we--to do so is to rewrite the statute. While I agree
that the unsecured creditors had standing to pursue these
claims, I respectfully disagree with the majority's conclusion
_________________________________________________________________
1 Congress amended 11 U.S.C. S 546(a) in 1994, but did not add S 701
to the statute. Unless otherwise noted, all statutory references are to the
pre-1994 version of Title 11 of the U.S. Code.


                               14787


that those claims are time-barred because the statute of limita-
tions begins to run upon appointment of an interim trustee
under S 701.


As the Supreme Court reminded us in interpreting the
Bankruptcy Code in United States v. Ron Pair Enterprises,
Inc.,


      [t]he task of resolving the dispute over the meaning
      of [the bankruptcy statute] begins where all such
      inquiries must begin: with the language of the statute
      itself. In this case it is also where the inquiry should
      end, for where, as here, the statute's language is
      plain, "the sole function of the courts is to enforce it
      according to its terms."


489 U.S. 235, 241 (1988) (citations omitted). Here, too, a
plain reading of the statute should end the inquiry. Section
546(a) expressly states that the statute of limitations com-
mences when a trustee under S 702, not S 701, takes office:


      (a) An action or proceeding under section 544, 545,
      547, 548, or 553 of this title may not be commenced
      after the earlier of--


      (1) two years after the appointment of a
      trustee under section 702, 1104, 1163, 1302
      or 1202 of this title; or


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

11 U.S.C. S 546(a) (emphasis added).

The majority's holding ignores the explicit reference to
S 702 and instead reads S 701 into the statute. Under the
majority's analysis, the statute would now read:


      two years after the appointment of a trustee under
      701, 702, 1104, 1163, 1302 or 1202 . . . .


                               14788


This wholesale revision of the statute through insertion of an
additional, specific statutory reference runs contrary to basic
rules of statutory construction. Expresso unius est exclusio
alterius. The statute is unambiguous and needs no judicial
flourishes for interpretation.


No other circuit court has directly addressed this issue.2 The
Ninth Circuit Bankruptcy Appellate Panel and virtually every
district and bankruptcy court faced with the issue have
rejected the majority's view.3 Two leading bankruptcy trea-
tises are in accord. See 3 William L. Norton, Jr., Norton Bank-
ruptcy Law and Practice, S 56:1 (2d ed. 1996) ("Since the
appointment of an interim trustee under S 701 is not men-
tioned within Code S 546(a), it should be clear that a perma-
_________________________________________________________________
2 In dicta, the Fourth Circuit stated that, in a Chapter 7 proceeding, the
selection of a permanent trustee under S 702 is the starting point for the
statute of limitations. See Maurice Sporting Goods, Inc. v. Maxway Corp.
(In re Maxway Corp.), 27 F.3d 980, 984 (4th Cir. 1994) (holding in a
Chapter 11 case that statute of limitations "does not begin to run until the
appointment of one of the trustees specified inS546(a)(1)" but noting in
dicta that in a Chapter 7 proceeding, the statute of limitations "does not

begin to run until a permanent trustee is selected pursuant to 11 U.S.C.A.
S 702").
3 See, e.g., General Electric Capital Auto Lease, Inc. v. Broach (In re
Lucas Dallas, Inc.), 185 B.R. 801, 805-06 (B.A.P. 9th Cir. 1995); Kroh
v. T.R.M. Mfg. (In re Conco Bldg. Supplies, Inc.) , 102 B.R. 190, 192
(B.A.P. 9th Cir. 1989); Mendelsohn v. Sequa Financial Corp. (In re Frank
Santora Equip. Corp.), 231 B.R. 486, 492 (E.D.N.Y. 1999); Hirsch v.
Union Trust Co. (In re Colonial Realty Co. ), 229 B.R. 567, 572 (Bankr.
D. Conn. 1999); Compass Bank v. Reynolds, 1996 WL 673618, at *3
(N.D. Ala. 1996); Huennekens v. Greene (In re Francis R. Dove), 199
B.R. 342, 347 (Bankr. E.D. Va. 1996); Damir v. Trans-Pacific Nat'l Bank
(In re Raymond Kong et al.), 196 B.R. 167, 170 (N.D. Cal. 1996); Seals
v. Abedi (In re Fort Worth Campbell & Assoc., Inc.), 182 B.R. 748, 750
(Bankr. N.D. Tex. 1995); Field v. Montgomery County, Md. (In re Anton
Motors, Inc.), 177 B.R. 58, 60-61 (Bankr. D. Md. 1995); Styler v. Conoco,
Inc. (In re Peterson Distributing, Inc.), 176 B.R. 584, 590 (Bankr. D. Utah

1995); Govaert v. Anagnos (In re Kendall Meat Imports, Inc.), 176 B.R.
80, 81 (Bankr. S.D. Fla. 1994); Biggs v. Biljo, Inc. (In re Goetz), 175 B.R.
743, 746 (Bankr. C.D. Cal. 1994).


                               14789


nent appointment was intended."); 5 Lawrence P. King,
Collier on Bankruptcy, P 546.02[2][a] (15th ed. 1999)
("Subparagraph (B) [of S 546(a)(1) as amended] refers only to
appointment or election of a trustee under S 702 and not to
S 701.").


The purpose of a statute of limitations is to cabin the period
of time that a party is at risk of suit. On the flip side, the stat-
ute defines the period in which a party must commence suit.
In the case of a proceeding under Chapter 7, the suit must be
commenced no more than "two years after the appointment of
a trustee under section 702 . . . ." 11 U.S.C.S 546(a). Instead
of focusing on the statute's clear trigger point for initiation of
the two-year period, the majority instead engages in a discus-
sion of whether a S 701 interim trustee is the "functional
equivalent" of a S 702 permanent trustee. Even if that were
the case, which I do not concede, it is irrelevant. The statute
says nothing about S 701 and the clear trigger is the qualifica-
tion of a permanent trustee under S 702. Functional equiva-
lency analysis has no role in the interpretation of this
unambiguous statute.


Not only does the statute dictate this result, it is also a prac-
tical outcome. Although interim trustees usually become per-
manent trustees, it is not true in every case. Either substantive
or scheduling conflicts may preclude service as aS 702
trustee, or the creditors may vote for a different permanent
trustee, or there may be a dispute over appointment of the
trustee. As a practical matter, the interim trustee is a tempo-
rary caretaker. See In re Lucas Dallas, 185 B.R. at 805.


The majority overlooks the importance of the meeting of
creditors pursuant to 11 U.S.C. S 341 as a distinguishing fac-
tor between S 701 interim trustees and S 702 permanent trust-
ees. At the S 341 meeting, the permanent trustee is determined
either through an election by the creditors or, if no election is
held, by automatically making the interim trustee the perma-
nent trustee. See 11 U.S.C. S 702(c)-(d). As trustee elections


                               14790


are relatively rare, a key purpose of the meeting is to examine
the debtor. See 3 Collier at P 341.01; 5 Collier at
P 546.02(2)(a)(i). This examination under oath enables
"creditors and the trustee to determine if assets have improp-
erly been disposed [of] or concealed." In re Conco Bldg.
Supplies, 102 B.R. at 192 (quoting legislative history of 11
U.S.C. S 343, H.R. Rep. No. 95-595, 95th Cong., 1st Sess.
332 (1977)). It is no accident that this investigative kick-off,
which is contemporaneous with the designation of the perma-
nent trustee under S 702, triggers the statute of limitations. As
such, courts and commentators underscore the significance of
the S 341 meeting as the logical starting point for the statute
of limitations under S 546.4


Although the majority claims to discern "the most logical
reading of S 546(a) that is consistent" with Ford v. Union
Bank (In re San Joaquin Roast Beef), 7 F.3d 1413 (9th Cir.
1993), and Upgrade Corporation v. Government Technology
Services, Inc. (In re Softwaire Centre International, Inc.), 994
F.2d 682 (9th Cir. 1993), the problem is that those cases are
not on point, let alone controlling precedent. Neither case
addressed the issue of whether, in an original Chapter 7 pro-
ceeding, the statute of limitations begins running when a
S 701 interim trustee takes office. Instead, those cases
involved Chapter 11 trustees and debtors in possession, not
S 701 interim trustees.


San Joaquin Roast Beef arose in the context of a conversion
from Chapter 11 to Chapter 7, a wholly inapposite circum-
stance. We considered whether a trustee appointed under
S 1104, a section specified in S 546(a), triggered the statute of
limitations or whether the statute began to run anew upon
_________________________________________________________________
4 See, e.g., In re Lucas Dallas, 185 B.R. at 805-06; In re Art & Co., 179
B.R. at 759-60; Varalli v. PTL Intermodal (In re Metro Shippers, Inc.), 95
B.R. 366, 368 (Bankr. E.D. Pa. 1989); 5 Collier  at P 546.02(2)(a)(i)
("[T]he date of the section 341 meeting usually will be the date of appoint-
ment of the trustee for purposes of section 546(a)[as amended].").


                               14791


conversion to Chapter 7. The majority takes out of context
San Joaquin Roast Beef's statement that the statute of limita-
tions in S 546(a) commences on "the date the first trustee is
appointed," to support its position that the limitations period
begins upon appointment of the S 701 trustee as the "first
trustee." San Joaquin Roast Beef did not address the interplay
between S 701 and S 702. The majority's extension of San
Joaquin Roast Beef's language nullifies the express inclusion
of S 702 in S 546(a). Every original Chapter 7 case starts with
an interim trustee under S 701 who is then succeeded by a
S 702 trustee. 11 U.S.C. S 701. If election of a S 701 interim
trustee were the trigger, what would be the point of including
S 702 in the statute? Just as we professed in San Joaquin
Roast Beef to leave policy considerations to Congress and to
follow a plain reading of the statute (7 F.3d at 1416), we
should leave well enough alone here.


The other case relied on by the majority, Softwaire Centre,
is neither controlling nor instructive, as it involved a totally
different issue--a debtor in possession under Chapter 11.
Although the majority attempts to extrapolate Softwaire
Centre's "functional equivalency" approach to this Chapter 7
case, analogy is no substitute for the clear statutory language.


Nor am I persuaded by the majority's logic that an exclu-
sion of S 701 from S 546(a) would somehow read the term
"appointment" out of the statute. The majority intimates that
because S 702 uses the term "election" rather than
"appointment" of a permanent trustee, "appointment" must
therefore refer to the S 701 interim trustee. "Appointment" is
a broad, generic term which, in this context, means designa-
tion of the trustee. Reading "appointment" to encompass both
the concept of "election" of a trustee underS 702(c), as well
as the default selection of the interim trustee as the permanent
trustee under S 702(d), is a common sense application of the
English language.5 See BLACK'S LAW DICTIONARY 99 (6th ed.
_________________________________________________________________
5 Indeed, when Congress amendedS 546(a) in 1994, it added the phrase
"or election of the first trustee" after the term "appointment," and main-


                               14792


1990) (defining "appointment" as "[t]he designation of a per-
son, by the person or persons having authority therefor, to dis-
charge the duties of some office or trust"). 6 To suggest, as the
majority does, that ambiguity in the term "appointment"
opens the door to rewriting the statute to includeS 701 turns
the plain meaning doctrine on its head.


Because the majority's holding is at odds with a plain read-
ing of S 546(a), I respectfully dissent.

_________________________________________________________________
tained the express reference to S 702, while declining to add a reference
to the interim trustee under S 701. See 11 U.S.C. S 546(a) (1997). These
amendments indicate that Congress intended that the statute of limitations
begin running upon designation of the S 702 trustee. See United States v.
Monroe, 943 F.2d 1007, 1016 (9th Cir. 1991) (subsequent clarifying
amendment "though not controlling, [is] entitled to substantial weight in
construing the earlier law") (citations omitted). The majority's suggestion
that use of the "first trustee" language somehow sweeps in S 701, even
though that section is never mentioned, stretches the limits of statutory
construction.
6 See also In re Lucas Dallas, 185 B.R. at 806 n.5; cf. McPherson v.
Blacker, 146 U.S. 1, 27 (1892) (the word " `appoint' . . . is sufficiently
comprehensive to cover that mode [election], and was manifestly used as

conveying the broadest power of determination"); Wagner v. City of San
Angelo, 546 S.W.2d 378, 379 (Tex. Civ. App. 1977) ("[T]he word
`appointment' . . . encompass[es] election as well as appointment. As a
matter of fact, the term `appointment' appears to be used in this section
as a more comprehensive term, to convey the idea of a mode of constitut-
ing or designating the head of the department whether selected by appoint-
ment, election, or otherwise.").


                               14793



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