Gillman v. Swire Pac. Holdings, Inc. (In re D-Mart Servs., Inc.), 138 B.R. 985 (Bankr.D.Utah)
PUBLISHED
See 336.pdf
Chapter 7 trustee filed adversary proceedings, pursuant to 11 U.S.C. § 547(b), seeking to avoid transfers made by debtor to the defendants. The court considered motions regarding whether the adversary proceedings were barred by the two-year limitation period set forth in 11 U.S.C. § 546(a), applicable to such claims. Debtor had previously operated its business as a debtor-in-possession under chapter 11, but the case was converted to chapter 7 approximately seven months after it was filed. Upon conversion to chapter 7, a trustee was appointed. Defendants claimed that the § 546(a) limitation period began to run when the chapter 11 petition was filed, relying on a statement in Zilkha Energy Co. v. Leighton, 920 F.2d 1520 (10th Cir. 1990) to the effect that Congress intended the term "trustee" to include a debtor in possession. The bankruptcy court concluded that defendants' interpretation of Zilkha was overbroad, noting that Zilkha had only decided that a debtor in possession was subject to the same statute of limitations as an appointed trustee, and specifically did not limit the ability of a subsequently appointed chapter 7 trustee to commence avoidance actions for up to two years after that appointment. As a matter of policy, the court held that, following conversion of a case from another chapter, the § 546(a) limitations period runs from the date of the chapter 7 trustee's appointment. Therefore, the adversary proceedings were not time barred.