Free Order - District Court of Delaware - Delaware

Case 1:04-cv—O1265-SLR Document 15 Filed O3/31/2006 Page 1 of 4
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
In re: ) Chapter 7
US WOOD PRODUCTS, INC., ) Bk. No. 00—03l98(MFW)
) Adv. No. 03—53656
Debtor. )
PANOLAM INDUSTRIES, INC., )
et al., )
Appellants, g
v. g Civ. No. 04—l265—SLR
MONTAGUE CLAYBROOK, CHAPTER 7 g
TRUSTEE, )
Appellee. g
O R D E R
At Wilmington this 3l“ day of March, 2006, having reviewed
the appeal filed by Panolam Industries, Inc. and the papers filed
in connection therewith;
IT IS ORDERED that said appeal is denied and the August 20,
2004 opinion and order of the bankruptcy court is affirmed, for
the reasons that follow:
l. Standard of review. This court has jurisdiction to hear
an appeal from the bankruptcy court pursuant to 28 U.S.C. §
l58(a). In undertaking a review of the issues on appeal, the
court applies a clearly erroneous standard to the bankruptcy
court’s findings of fact and a plenary standard to that court’s
legal conclusions. See Am. Flint Glass Workers Union v. Anchor

Case 1:04-cv—O1265-SLR Document 15 Filed O3/31/2006 Page 2 of 4
Resolution Corp., 197 F.3d 76, 80 (3d Cir. 1999). With mixed
questions of law and fact, the court must accept the bankruptcy
court's "finding of historical or narrative facts unless clearly
erroneous, but exercise[s] ‘p1enary review of the [bankruptcy]
court's choice and interpretation of legal precepts and its
application of those precepts to the historical facts.’" Mellon
Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635, 642 (3d
Cir. 1991) (citing Universal Minerals, Inc. v. C.A. Hughes & Co.,
669 F.2d 98, 101-02 (3d Cir. 1981)). The district court's
appellate responsibilities are further informed by the directive
of the United States Court of Appeals for the Third Circuit,
which effectively reviews on a dg QQEQ basis bankruptcy court
opinions. In re Hechinger, 298 F.3d 219, 224 (3d Cir. 2002): lg
re Telegroup, 281 F.3d 133, 136 (3d Cir. 2002).
2. Background. The underlying bankruptcy case of U.S. Wood
Products, Inc. was commenced when the debtor filed its voluntary
bankruptcy petition on July 31, 2000. The bankruptcy case was
initially filed as a chapter 11 reorganization case, but was
converted to a chapter 7 liquidation by an order of the
bankruptcy court entered on July 29, 2002. On July 30, 2002, the
United States Trustee appointed appellee, Montague Claybrook, as
the interim chapter 7 bankruptcy trustee, pursuant to 11 U.S.C. §
70l(a)(1). The first meeting of creditors in the chapter 7
proceedings was held on April 7, 2004. Because the creditors
2

Case 1:04-cv—O1265-SLR Document 15 Filed O3/31/2006 Page 3 of 4
attending the meeting did not request the election of a trustee,
appellee has continued to serve as trustee in the case, pursuant
to ll U.S.C. § 702(d).
3. On June 5, 2003, appellee filed a complaint commencing
this adversary proceeding against appellant Panolam. The
complaint seeks to avoid and recover from Panolam certain
preferential payments, pursuant to ll U.S.C. § 547. Panolam
filed a motion in the bankruptcy court to dismiss the lawsuit as
time—barred by the 2—year statute of limitations contained in ll
U.S.C. § 546(a)(l)(A). The bankruptcy court denied the motion,
finding that the July 30, 2002 appointment of appellant as
interim trustee was an event that triggered the l-year extension
of the limitations period, as authorized by ll U.S.C. §
546(a)(l)(B).
4. Analysis. I find no error in the bankruptcy court's
decision. Under § 546, a preference action is timely commenced
if filed no later than 2 years after the entry of the order for
relief or l year after the appointment or election of the first
trustee under § 702, if such appointment or such election occurs
before the expiration of the 2—year period. In this case, the
trustee was appointed on July 30, 2002, before the expiration of
the 2—year period under § 546(a), and the complaint was filed on
June 5, 2003, within l year of the appointment. The fact that
the appointment was first made pursuant to § 70l, rather than §
3

Case 1:04-cv-01265-SLR Document 15 Filed O3/31/2006 Page 4 of 4
702, does not change this result, when the United States Trustee
issued only one Notice of Appointment dated July 30, 2002 and §
702(d) specifically provides that an interim trustee “shall serve
as trustee in the case" if a trustee is not elected at the § 341
meeting of creditors.
United Staggs District Judge
4