Rogers v. Corrosion Products, Inc.

United States Court of Appeals,

Fifth Circuit.

No. 94-30229.

Celeste ROGERS and Ronald Glen Rogers, Plaintiffs-Appellants,

v.

CORROSION PRODUCTS, INC., Defendant-Appellee.

Jan. 12, 1995.

Appeals from the United States District Court for the Eastern
District of Louisiana.

Before HIGGINBOTHAM, SMITH, and PARKER, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

Ronald Rogers ("Rogers") appeals the district court's

dismissal of his diversity-based delictual action against Corrosion

Products, Inc. ("CPI"), on statute of limitations grounds. He

argues that the prescriptive period was suspended, either under

Louisiana law or the Bankruptcy Code, when CPI was placed

involuntarily into chapter VII bankruptcy. Concluding that this

event did not stop the running of the prescriptive period, we

affirm.

I.

Rogers, a worker for Chevron, allegedly was injured when

working at a CPI facility in Belle Chasse, Louisiana, on June 20,

1991. On March 23, 1993, Rogers, basing his suit upon diversity of

citizenship, filed a Louisiana delictual action in federal court.

Under Louisiana law, however, the period for bringing

delictual actions is one year. LA.CIV.CODE ANN. art. 3492 (West

1994). Accordingly, CPI asserted the affirmative defense of

1
liberative prescription and moved for summary judgment. Rogers

opposed the motion, arguing that bankruptcy proceedings had

suspended the running of the prescriptive period.

On February 10, 1992, bankruptcy proceedings had been

instigated against CPI by the filing of a petition for involuntary

relief by several of CPI's creditors. An automatic stay was put

into effect until the petition was dismissed on December 3, 1992.

Notice of the dismissal was issued on December 7, 1992.

Because Rogers could not bring suit during the period of the stay,

he argued that this period should not be counted in determining the

prescriptive period. The district court disagreed, however, and

held that Rogers was time barred.

II.

Rogers argues that the running of the prescriptive period was

suspended by either Louisiana law or the Bankruptcy Code. The

questions presented are purely matters of law that we review de

novo. FDIC v. Dawson, 4 F.3d 1303, 1308 (5th Cir.1993), cert.

denied, --- U.S. ----, 114 S.Ct. 2673, 129 L.Ed.2d 809 (1994).

A.

The one-year prescriptive period of art. 3492 may be

increased either by interruption, which restarts the prescriptive

period, or by suspension, which only stops it for the applicable

time. Compare LA.CIV.CODE ANN. art. 3466 (effect of interruption)

with LA.CIV.CODE ANN. art. 3477 (effect of suspension). On the face

of the Louisiana Civil Code, the exceptions that allow an extension

of the prescriptive period are limited to those legislatively

2
created. See LA.CIV.CODE ANN. art. 3467 ("Prescription runs against

all persons unless exception is established by legislation.").1

Louisiana law, however, has long recognized a judicial

doctrine, contra non valentem agere non currit praescripto,2 which

suspends the running of the prescriptive period for a limited

category of claimants who are unable to bring suit. This doctrine

continues to be recognized as an implied doctrine of article 3467.

See LA.CIV.CODE ANN. art. 3467 revision cmts.—1982 (d) (stating that

the jurisprudence of contra non valentem continues to be relevant);

Plaquemines Parish Comm'n Council v. Delta Dev. Co., 502 So.2d

1034, 1055 (La.1987).

Under Louisiana law, the contra non valentem doctrine has

been parsed into four distinct categories. The doctrine may

suspend the running of the prescriptive period where (1) there was

some legal cause that prevented the courts or their officers from

taking cognizance of or acting on the plaintiff's action; (2)

there was some condition coupled with the contract or connected

with the proceedings that prevented the creditor from suing or

acting; (3) the debtor himself has done some act effectually to

prevent the creditor from availing himself of his cause of action;

or (4) the cause of action is not known or reasonably knowable by

the plaintiff, even though his ignorance is not induced by the

defendant. Whitnell v. Menville, 540 So.2d 304, 308 (La.1989);

1
Rogers concedes that there is no applicable, legislatively
imposed suspension exception for bankruptcy proceedings.
2
"No prescription runs against a person unable to bring an
action." BLACK'S LAW DICTIONARY 327 (6th ed. 1990).

3
Plaquemines Parish, 502 So.2d at 1054-55; Corsey v. State Dep't of

Corrections, 375 So.2d 1319, 1321-22 (La.1979).

At issue here are exceptions two and three.3 Rogers argues

that the bankruptcy proceeding is either "connected to the

proceedings" so that Rogers could not sue, or CPI availed itself of

the bankruptcy "safe harbor" and should not now be able to use it

as a bar to Roger's suit. Rogers believes that the limited caselaw

in this area is dispositive on the prescription issue.

Rogers cites two case that moderately support his position on

exception two. Both cases, however, discuss the issue only in

dicta. In Cole v. Celotex Corp., 611 So.2d 153, 157-58 (La.App. 3d

Cir.1992), rev'd, 620 So.2d 1154 (La.1993), the delictual plaintiff

proceeded against a number of defendants, including Johns-Manville.

The trial court, however, dismissed the action against the other

defendants on prescription grounds. On appeal, the plaintiff

argued that if the defendants were solidarily liable, suspension of

the prescriptive period for one would apply to all of them. The

prescriptive period was suspended for one, he argued, because

defendant Johns-Manville filed for bankruptcy during the pendency

of the suit, an act that the court assumed "clearly precluded [the

plaintiff] from proceeding against Johns-Manville." Id. at 157.

Nevertheless, the assumption was not essential to the conclusion,

3
The district court interpreted exception one as applying
only to situations of physical impossibility. See National Fire
Union Ins. Co. v. Ward, 612 So.2d 964, 968 (La.App.2d Cir.1993)
("A "legal cause' in this context appears to refer to a situation
such as the courts being closed because of wartime
conditions...."). Rogers says that exception one arguably
applies, but he fails to brief this issue.

4
as the court found that only interruption, rather than suspension,

would apply to all solidary obligors. Id. at 158.

In Cockerham v. Armstrong World Indus., 717 F.Supp. 433

(M.D.La.1989), a court faced the same issue as in Cole (as well as

one of the same defendants). Again, the court assumed that under

Louisiana law, bankruptcy proceedings would suspend, but not

interrupt, the prescriptive period. See id. at 434 ("[Bankruptcy

proceeding] may well amount to a suspension of prescription as to

Johns-Manville under Article 3472 of the Louisiana Civil Code.").

This assumption was not necessary to support the holding.

Other courts in Louisiana that have directly addressed this

issue have reached a contrary result. In Christen v. Al Copeland

Enters., 635 So.2d 596, 598 (La.App. 3d Cir.1994), the court, with

little discussion, disavowed the Cole dictum, stating that the

"[p]laintiff's claim for suspension of prescription because of the

bankruptcy automatic stay is without merit." See also Lee v.

Champion Ins. Co., 591 So.2d 1364, 1366 (La.App. 4th Cir.1991)

(holding that "liquidation" does not bar filing of suit or suspend

the prescriptive period).

In diversity cases, we apply substantive state law. Erie

R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188

(1938). Louisiana's highest court, however, has not decided

whether contra non valentem applies to proceedings stayed by

bankruptcy filings. Therefore, we must make an "Erie guess" on how

the court would rule. See Labiche v. Legal Sec. Ins. Co., 31 F.3d

350, 352 (5th Cir.1994); Transcontinental Gas Pipe Line Corp. v.

5
Transportation Ins. Co., 953 F.2d 985, 988 (5th Cir.1992) ("When

there is no ruling by the state's highest court, it is the duty of

the federal court to determine as best it can, what the highest

court of the state would decide.") (footnote omitted). The

decisions of lower state courts should be given some weight, but

they are not controlling where the highest state court has not

spoken on the subject. Commissioner v. Estate of Borsch, 387 U.S.

456, 465, 87 S.Ct. 1776, 1782, 18 L.Ed.2d 886 (1967). " "[A]n

intermediate appellate state court ... is datum for ascertaining

state law which is not to be disregarded by a federal court unless

it is convinced by other persuasive data that the highest court of

the state would decide otherwise.' " Id. (ellipsis in original

citation and emphasis omitted).

Here, on exception two of the doctrine of contra non valentem,

we are faced with the holdings of two different Louisiana appellate

courts that, albeit with sparse reasoning, refuse to apply contra

non valentem to bankruptcy stays. The contrary authority is found

only in dicta. Therefore, the jurisprudence here counsels us not

to broaden suspension to include bankruptcy proceedings.

Moreover, as Louisiana's highest court has often noted, see,

e.g., Plaquemines, 502 So.2d at 1057, the basic principle of the

doctrine is equity. Rogers has failed to show how CPI has acted

unfairly or taken advantage of him. CPI did not affirmatively seek

to avoid suit by filing for protection under the Bankruptcy Code;

rather, CPI was forced into bankruptcy when several of its

creditors filed a petition for involuntary bankruptcy.

6
 Rogers, on the other hand, failed to pursue his suit. Like

any other creditor of a debtor, he could have petitioned the court

to lift its stay. See 11 U.S.C. § 362(d) (allowing a party in

interest to petition the bankruptcy court to terminate, annul,

modify, or condition a stay upon a showing "for cause"). If the

bankruptcy court does not respond to the petition within [the

prescribed period], the stay is automatically "terminated with

respect to the party making the request...." Id. § 362(e).

Finally, under id. § 108(c)(2), a party's right to sue is preserved

for thirty days after the termination of the stay, regardless of

the prescription period. Even without petitioning the bankruptcy

court to lift the stay, Rogers could have filed suit within thirty

days of the dissolution of the stay. Instead, he "slept on his

rights."

Rogers does not cite any authority on the issue of exception

three, which provides relief for plaintiffs who have been prevented

from filing because of the actions of the other party. See

Plaquemines Parish, 502 So.2d at 1056. Like exception two, this

exception is based generally upon equitable principles and is

applied in situations involving "concealment, fraud,

misrepresentation or other ill practices." Id. Because there was

no inequitable action on the part of CPI, we find this exception

does not apply. In sum, we hold that contra non valentem does not

suspend the running of the prescriptive period because of the

imposition of an automatic stay under the Bankruptcy Code.

B.

7
 If Louisiana law does not suspend prescription, the next step

is to examine the Bankruptcy Code to determine whether it provides

a separate basis for suspension. The "Extension of Time" provision

of the Code provides:

[I]f applicable nonbankruptcy law ... fixes a period for
commencing or continuing a civil action in a court other than
a bankruptcy court on a claim against the debtor ... and such
period has not expired before the date of the filing of the
petition, then such period does not expire until the later of—

(1) the end of such period, including any suspension of such
period occurring on or after the commencement of the case; or

(2) 30 days after notice of the termination or expiration of
the stay under section 362 ... of this title....

11 U.S.C. § 108(c). Both parties agree this is the only pertinent

section of the Code. They differ in interpretation, however, with

CPI finding no separate federal basis for tolling state

prescriptive periods and Rogers arguing that § 108(c) itself tolls

the prescriptive period.

We are not the first circuit to face this issue. Panels of

both the Second and Ninth Circuits have examined the language and

legislative history of this section of the Code. Unfortunately,

they have created a potential split in result. Other federal

courts have divided likewise.

The most current Second Circuit opinion, reading the plain

words of the statute,4 interpreted it to "merely [to] incorporate[

4
While the Second Circuit's reading of § 108(c) in Aslanidis
could have been based solely upon the plain language of the
statute, the court nonetheless also examined the legislative
history and found that it supported its interpretation. It found
that § 108(c)(1) only referred to "special suspensions" that are
found in other non-bankruptcy statutes. Id. at 1073; see 2
Lawrence P. King, COLLIER ON BANKRUPTCY ¶ 108.04 (15th ed. 1993);

8
] suspensions of deadlines that are expressly provided in other

federal or state statutes." Aslanidis v. United States Lines,

Inc., 7 F.3d 1067, 1073 (2d Cir.1993). The section did not provide

a separate ground to toll statutes of limitations. Id. Instead,

it only extended time for filing suit for 30 days "after notice of

termination of a bankruptcy stay, if any such deadline would have

fallen on an earlier date." Id.; see also West v. United States

(In re West), 5 F.3d 423, 425-27 (9th Cir.1993) (holding that

suspension was required by section of Internal Revenue Code

incorporated by § 108(c)), cert. denied, --- U.S. ----, 114 S.Ct.

1830, 128 L.Ed.2d 459 (1994).

The court in Aslanidis was forced to contend with an earlier

Second Circuit decision, Morton v. National Bank of New York City

(In re Morton), 866 F.2d 561 (2d Cir.1989), which had held that "11

U.S.C. § 108(c) tolls the [state] ten-year period limiting judgment

liens on real property until the automatic stay is terminated."

Id. at 562. In Morton, a bank that had a lien on the debtor's

property faced the end of the state ten-year period in which it had

to extend or enforce its lien. The debtor, who was in bankruptcy

and thus had stayed all judgments against him, argued that the lien

had expired, because the bank was foreclosed from renewing its

lien.

The court examined the purpose of § 108(c) and the thirty-day

provision of § 108(c)(2) and held that the lien had not expired.

H.R.Rep. No. 595, 95th Cong., 1st Sess. 318, reprinted in 1978
U.S.C.C.A.N. 5787, 6275.

9
What the court did not decide explicitly was whether the ten-year

period was actually suspended (as the language of the opinion

suggests), or whether, instead, the bank merely had thirty days

after the lifting of the stay to act (as the language of the

section suggests).

Accordingly, when the Second Circuit again addressed this

issue in Aslanidis, that panel distinguished Morton by finding that

it only addressed what happened during the period of the stay (the

lien was preserved),5 and the Code allowed a thirty-day savings

period even if the limiting time had expired. 7 F.3d at 1074.

The Ninth Circuit, citing Morton, wrote an equally opaque

decision in Miner Corp. v. Hunters Run Ltd. Partnership (In re

Hunters Run Ltd. Partnership), 875 F.2d 1425, 1429 (9th Cir.1989).

Again, the general question was whether § 108(c) applied to the

time limits of enforcement actions of liens. The court held that

it did and that the time period was "tolled." Id. The court did

not decide whether the "tolling" meant that the time period ceased

to run, or simply that a thirty-day grace period existed under the

statute if the time period had run.

Some other courts have reached the same result as did the

5
A reading of the cases cited in Morton to support its
position on tolling reveals that they stand for the more general
proposition that § 108(c) applies to the time limits of lien
enforcement (statutes of duration) as well as the more generally
applicable time limits of statutes of limitation. See Victoria
Grain Co. v. Janesville Elevator Constr., Inc. (In re Victoria
Grain Co.), 45 B.R. 2 (Bankr.D.Minn.1984); Meek Lumber Yard,
Inc. v. Houts (In re Houts), 23 B.R. 705 (Bankr.W.D.Mo.1982);
First Am. Title Co. v. Design Builders, Inc. (In re Design
Builders, Inc.), 18 B.R. 392 (Bankr.D.Idaho 1981).

10
Second Circuit.6 Other courts, perhaps misled by the ambiguity of

some of the prior decisions, have held that the total period of the

stay is added to the time allowed to file suit.7

6
See Mamer v. Apex R.E. & T., 852 F.Supp. 870, 872
(E.D.Mo.1994) (adopting reasoning of Aslanidis ); Farm Credit
Bank v. Vallee, 148 B.R. 1021, 1023 (W.D.La.1992) ("Federal law
extends a prescriptive period 30 days after filing of an order
terminating bankruptcy."); Pettibone Corp. v. Baker (In re
Pettibone Corp.), 110 B.R. 848, 853 (Bankr.N.D.Ill.1990) (holding
that unless applicable federal or state law suspending running of
limitations, only a 30-day "short filing period" exists extending
claim), aff'd, 119 B.R. 603 (N.D.Ill.1990), vacated, 935 F.2d 120
(7th Cir.1991); In re Coan, 96 B.R. 828, 831-33
(Bankr.N.D.Ill.1989) (holding that § 108(c) extends period for
thirty days); Steinberg v. National Survey Serv., Inc. (In re
Chemisphere Partners), 90 B.R. 380, 381-82 (Bankr.N.D.Ill.1988)
(holding that state law incorporated by § 108(c) tolled the
statute of limitations); Grotting v. Hudson Shipbuilders, 85
B.R. 568, 569-70 (W.D.Wash.1988) (finding that plain language,
legislative history, and limited reading of statute "comports
best with expeditious and fair administration of bankrupt's
estate"); Wilkey v. Union Bank & Trust Co. (In re Baird), 63
B.R. 60, 62-63 (Bankr.W.D.Ky.1986) (reading plain language and
legislative history to find statute extends (not suspends ) time
to file for 30 days after end of stay); cf. Pettibone v. Easley,
935 F.2d 120, 121 (7th Cir.1991) ("Plaintiffs who had filed
during the bankruptcy had 30 days after the termination of the
stay to re-file their cases with assurance that they could not be
deemed untimely.").
7
Rogers, for example, cites Major Lumber Co. v. G & B
Remodeling, Inc., 817 S.W.2d 474, 477-78 (Mo.Ct.App.1991), which
holds "that § 108(c) is not restricted to tolling only those
state statutes that have special suspension provisions."
Accordingly, the court, in applying § 108(c), did not count the
time of the stay in the limitations period, even though state law
did not require that result. Major Lumber cites several other
state court decisions that it believes do likewise. See, e.g.,
Garbe Iron Works, Inc. v. Priester, 99 Ill.2d 84, 75 Ill.Dec.
428, 457 N.E.2d 422, 424-25 (1983); Wells v. California Tomato
Juice, Inc., 47 Cal.App.2d 634, 118 P.2d 916, 918-19 (1941). As
noted above, some federal cases such as Morton and Hunters Run
could be read to hold the same. See also In re Richards, 994
F.2d 763, 765 (10th Cir.1993) ("For example, 11 U.S.C. § 108
suspends the statute of limitations for actions outside of
bankruptcy for the pendency of the current bankruptcy
provisions.") (dictum).

11
 We base our decision on the plain words of the statute and

find that § 108(c) does not create a separate tolling provision.

See West Va. Univ. Hosp., Inc. v. Casey, 499 U.S. 83, 98, 111 S.Ct.

1138, 1146-47, 113 L.Ed.2d 68 (1991) (holding that legislative

history is irrelevant for interpreting statutes whose text is

unambiguous). The statute plainly states that for the time period

to be suspended, other federal or state law must mandate it and

then be incorporated through § 108(c). Otherwise, a party must

file suit within the thirty-day grace period after the end of the

stay. We need not and do not reach the legislative history and

policy arguments.

Our conclusion is not contrary to that of the Ninth Circuit.

Its decisions simply use the word "tolling" to mean "extend."

Section 108(c) extends the period in which a party must file suit

in order to preserve the claim for whatever period the stay is in

force plus thirty days. Because a party may not file suit during

the duration of the stay, the thirty-day period becomes the only

functional period in which to commence suit. We reject cases such

as Major Lumber, which hold to the contrary.

For the reasons discussed above, the judgment of the district

court is AFFIRMED.

12