Memorandum of Decision Re: Procedural Machinations

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re MTC TELEMANAGEMENT CORP., et al.,                                       No. 97-12893      Debtor(s). ______________________________________/
Memorandum on Curry Claim
     Claimant Thomas F. Curry is a creditor, former employee and minority shareholder of a defunct corporation known as Ranger Telecommunications Corporation ("RTC"). According to his claim, which the court takes as true for these preliminary matters, in 1988 RTC owned a California Certificate of Public Necessity, a Carrier Identification Code, and a Carrier Access Code, all of which are necessary for a telecommunications company to do business in California. Curry alleges that debtor MTC Telemanagement Corporation entered into a conspiracy with officers of RTC whereby MTC was allowed to use RTC's certificate and codes without "fair and adequate consideration."      In 1997, some nine years after the transfer of the assets to MTC, involuntary Chapter 11 petitions were filed against MTC and its related companies in this court. A trustee operated its business until early 1999, when its customer base was sold and the case converted to Chapter 7. Curry, claiming that he has a right to assert a claim on behalf of RTC, has asserted a priority administrative claim for the time the business was operating in Chapter 11. He also asserts the right to a surcharge against the principal secured creditor. The Chapter 7 trustee objects.      Curry bases his claim on his alleged right, as a shareholder of RTC, to bring a derivative action on behalf of the corporation. The reason for the tortured procedural basis of Curry's claim is clear. The claim does not allege that MTC came into possession of RTC's assets through theft or other non-consensual means. He concedes that MTC used these assets with the permission of RTC's CEO, and alleges nothing more wrongful than the fact that RTC was not fairly compensated. The claim states a cause of action for a fraudulent conveyance which Curry, as a creditor of RTC, can assert under his own name. Unfortunately for Curry, under California law fraudulent transfer actions must be commenced within three years of the transfer. 16 Cal.Jur3d, Creditor's Rights and Remedies, § 436. Even if the statute of limitations had not long since passed Curry would be limited to a general unsecured claim, as his cause of action had fully accrued when the bankruptcy petition was filed. See section 101(5)(A) of the Bankruptcy Code.      In substance, all Curry has is a fraudulent conveyance claim which has been lost due to the applicable statute of limitations and, even if not so barred, would be nothing more than a general prepetition claim. No procedural machinations in the form of the claim or the way it is asserted can increase Curry's rights. It is the substance of a claim, not its form, which governs how it is to be treated in bankruptcy proceedings. Pepper v. Litton, 308 U.S. 295, 305 (1939). Accordingly, the trustee's objection will be sustained and the claim disallowed. Counsel for the trustee shall submit an appropriate form of order.
Dated: November 8, 1999                                                                             ____________________________                                                                                                                       Alan Jaroslovsky                                                                                                                        United States Bankruptcy