City of Saco v. Pulsifer – Case Brief Summary (Maine)

In City of Saco v. Pulsifer, 2000 ME 74, 749 A.2d 153 (Me. 2000), the creditor failed to file a claim during bankruptcy, was not granted a discharge, and consequently was not paid. Id. at 154.

The creditor sued the debtor post-bankruptcy. Id.

A Maine statute provided:

If a person is adjudged an insolvent debtor after a cause of action has accrued against him, and such cause of action is one provable in insolvency, the time of the pendency of his insolvency proceedings shall not be taken as a part of the time limited for the commencement of the action. Id. at 155.

The Supreme Judicial Court of Maine noted that the statute was enacted more than one hundred years ago, and the statute remained the same for over one hundred years, while the bankruptcy laws underwent significant changes. Id.

The court then noted that, "under the current federal bankruptcy code, an individual is never 'adjudged an insolvent debtor,' and debts are no longer 'provable in insolvency.'" Id.

Consequently, the court concluded that the language of the Maine statute simply does not have meaning in the modern bankruptcy context. Nor is there any authority for importing modern language and modern concepts into this century-old piece of legislation. Even if we were to attempt such a creative interpretation, we would have to make assumptions about legislative intent regarding the need for, and the duration of, a tolling provision. Although there are some similarities in the language and concepts found in both the old Maine Act and the current Federal Code, the creditor concedes that "the mechanisms among the statutes differ." These differences are not insignificant to our analysis. For example, the current federal system provides for five distinct categories of bankruptcy-Chapters 7, 9, 11, 12, and 13, whereas the Maine Act provided only one. Additionally, under the Maine Act, the automatic stay was lifted once the debts were discharged. Under the current federal system, however, the automatic stay can be lifted on several different occasions, including (1) when property leaves the estate, (2) when the case is closed, (3) when the case is dismissed, or (4) when the debts are discharged. Moreover, under the current federal system, a creditor may obtain relief from the stay, an option not available under the Maine Act.

More importantly for our analysis today, the Maine statute, by its own terms, only applies after two conditions are met: (1) a creditor with a claim against the debtor has "proven" that his debts are recoverable, and (2) the debtor has been "adjudged an insolvent debtor." Only after these two conditions are met, would the Maine statute toll the statute of limitations. Because the provisions of the current federal system do not require that debts be provable or that a debtor be "adjudged" an insolvent debtor (or even a bankrupt), we are left guessing at when the Maine statute should begin to toll the statute of limitations. We could decide that the filing of a bankruptcy petition would be an appropriate starting point. However, we could also conclude that another date (such as the filing of a reorganization plan, or the first creditor's meeting) triggered the tolling provision.

Similarly, the Maine statute provides that the statute of limitations should be tolled during the "pendency of the insolvency proceeding." Because there is no "insolvency proceeding" under the current system, however, we are again left to speculate at whether the statute should be tolled during the entire proceeding, or just during the automatic stay, while creditors' rights to sue are actually hindered. Because of the significant conceptual differences between the old Maine law and the current federal law, simply inserting "bankruptcy proceeding" in place of "insolvency proceeding" may not give effect to the legislative purpose supporting the Maine statute. (Id. at 155-56.)