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#2197 signed 1-31-96

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS



In Re:

DOUG RUEDLINGER, INC.,

DEBTOR(S)

NO. 93-40062-7C

CHAPTER 7

DARCY D. WILLIAMSON,

PLAINTIFF(S),

v.

DOUGLAS O. RUEDLINGER,

LANE RUEDLINGER, and

THE RUEDLINGER CO., INC.,

DEFENDANT(S)

ADV. NO. 95-7052

ORDER DENYING MOTION TO DISMISS

This proceeding is before the Court on the motion to dismiss filed by defendant The Ruedlinger Company, Inc. (TRC). TRC appears by counsel Gary H. Hanson. The plaintiff-trustee appears by counsel Patricia A. Reeder. The Court has reviewed the relevant pleadings and is now ready to rule.

TRC contends the trustee's claims against it must be dismissed pursuant to 11 U.S.C.A. §546(a), relying on a recent amendment to that provision. While section 204 of the Bankruptcy Reform Act of 1994 amended §546, the amendment applies only to cases filed after the effective date of the Act, October 22, 1994. See Pub. L. No. 103-394, §204(b) and §702 (Oct. 22, 1994), reprinted in 1994 U.S.C.C.A.N. (108 Stat.) 4106, 4122, 4150. The debtor filed its chapter 11 petition on January 19, 1993, so, as alleged by the trustee, the prior version of the statute applies to this case.

The prior version of §546(a) read:

An action or proceeding commenced 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.

TRC concedes the trustee was appointed on April 21, 1993, and commenced this proceeding on April 19, 1995. Thus, the trustee's complaint was filed within the two-year limit fixed by the literal wording of the statute. This might be the end of the matter but for a Tenth Circuit decision construing this version of the statute.

In a different situation than that facing this court, the Circuit held that the old version of §546(a)(1) applied to a chapter 11 debtor-in-possession, and the two-year limit began to run on the date of the filing of the chapter 11 petition, effectively equating the debtor's assumption of the status of a debtor-in-possession with "the appointment of a trustee" under the statute. Zilkha Energy Co. v. Leighton, 920 F.2d 1520, 1523-24 (10th Cir. 1990). However, the Circuit expressly declined to decide whether the subsequent appointment of a trustee in the same case would change the analysis. 920 F.2d at 1524, n. 11. An argument could be made that once the time began to run under §546(a)(1), its running was not affected by the subsequent appointment of a trustee under any of the listed sections and, under Zilkha, the time began to run as soon as the debtor filed its chapter 11 petition. The trustee's claims would be time-barred under this theory, despite the literal language of the statute. At least one court in the Tenth Circuit has rejected just such an argument, deciding the time begins to run again on the appointment of a trustee. Styler v. Conoco, Inc. (In re Peterson Distributing), 176 B.R. 584, 587-90 (Bankr.D.Utah 1995). In another case decided by a court bound to follow Zilkha, the court ruled that, when the case was converted to chapter 7, the person who had been the chapter 11 trustee got a new two-year period under §546(a)(1) upon being appointed as the chapter 7 trustee. Jobin v. Boryla (In re M&L Business Machine Co.), 171 B.R. 383 (D.Colo. 1994). The court acknowledged there was a split of authority on the issue, and declared in a footnote that Zilkha was inapplicable to the situation. 171 B.R. at 385-86 & n. 2. Like those courts, this Court is not willing to extend Zilkha to the differing circumstances presented here, and believes the literal language of the statute should control this case.

Consequently, under the circumstances, the Court concludes the trustee's complaint was timely filed. TRC's motion to dismiss is hereby denied.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of January, 1996.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

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