From Casetext: Smarter Legal Research

In re Deluca

United States Bankruptcy Court, E.D. Virginia
Oct 3, 1995
Case No. 95-11924-AM (Jointly Administered) (Bankr. E.D. Va. Oct. 3, 1995)

Opinion

Case No. 95-11924-AM (Jointly Administered)

October 3, 1995

Thomas P. Gorman, Esquire, Tyler, Bartl, Burke Albert, Alexandria, VA, counsel for the debtor

Robert B. Baumgartner, Esquire, Fairfax, VA, counsel for F M Bank — Winchester


MEMORANDUM OPINION AND ORDER


This matter is before the court on the motion of F M Bank — Winchester ("F M") filed September 7, 1995, to extend the time for filing a dischargeability complaint against the debtors. A hearing was held on September 26, 1995, at which time the court took the motion under advisement. For the reasons set forth herein, the court concludes that the motion should be granted and the deadline to file a non-dischargeability complaint under § 523 of the Bankruptcy Code extended to November 1, 1995.

Procedural History

Robert and Marilyn DeLuca filed a joint voluntary petition under chapter 11 of the Bankruptcy Code in this court on May 5, 1995. The meeting of creditors under § 341 of the Bankruptcy Code was scheduled for, and held, on June 12, 1995. The deadline under F.R.Bankr.P. 4007 to file complaints under § 523(c) to determine the dischargeability of debts alleged to be excepted from discharge under § 523(a)(2), (a)(4), (a)(6), and (a)(15) was August 11, 1995.

On August 8, 1995, F M Bank — Winchester, a creditor in Mr. and Mrs. DeLuca's case, filed an inartfully drafted motion evidently seeking to extend that deadline. The motion began with the statement that the creditor was moving "under Rule 4004(b) to extend the time for filing a complaint objection [sic] to discharge of Robert R. DeLuca and Marilyn S. DeLuca." It then recited that information available to the creditor "raises a substantial question as to whether the debtors are entitled to a discharge pursuant to 11 U.S.C. § 727, or to a discharge of the F M Bank — Winchester claim pursuant to 11 U.S.C. § 523" and asserted that additional time was needed to conduct examinations of the debtors and other parties under F.R.Bankr.P. 2004. Finally, the motion concluded with the prayer "that the time for filing a Complaint to determine dischargeability" be extended for 60 days.

The debtor agreed to the extension and endorsed an order which was signed by this court on August 29, 1995 and entered on the docket on September 11, 1995. The order decreed:

It is therefore ORDERED that the time within which F M Bank — Winchester may file a complaint objecting to discharge be, and the same hereby is, extended through and including October 10, 1995.

(emphasis added). On September 7, 1995, F M filed the motion that is currently before the court seeking a further extension to 90 days "after the conclusion of the 2004 examination," which, it was alleged, had been delayed because of numerous scheduling difficulties and the debtors' failure to respond to document requests. Like the earlier motion, this one recited that it was made under F.R.Bankr.P. 4004 to extend the time for filing "a complaint objection [sic] to discharge," made reference to both § 727 and § 523 of the Bankruptcy Code, and concluded with a prayer that the deadline to file "a Complaint to determine dischargeability" be extended.

The debtors filed a timely written objection. At the hearing, the court, which was familiar with the scheduling problems for the Rule 2004 examination (since the debtors were required to be in court in connection with the trial of an unrelated adversary proceeding on the date originally set) concluded that a short additional extension was appropriate to allow the 2004 examinations to be completed. At that point, debtors' counsel orally raised the issue of (1) whether there was even a deadline to extend, since the previous extension order extended only the deadline for filing a § 727 complaint and not a § 523 complaint, and (2) whether, in the absence of a valid prior extension, the court had jurisdiction to further extend the time.

Discussion

Under the Bankruptcy Code, creditors may bring two conceptually quite distinct types of actions relating to the discharge of an individual debtor. If the debtor has engaged in certain kinds of activities set forth in § 727 of the Bankruptcy Code, such as hiding assets, filing false schedules, and disobeying court orders, the debtor may be denied any discharge whatsoever. As a separate issue, even if the debtor is entitled to a discharge, certain types of debts are excluded from the discharge under § 523(a). With respect to some of these non-dischargeable debts, no action need be taken by the creditor in the course of the bankruptcy. With respect to debts of the type specified in § 523(a)(2), (a)(4), (a)(6), and (a)(15), however, § 523(c) requires the creditor to file a timely complaint to have the debt declared nondischargeable.

F.R.Bankr.P. 4007 ("Determination of Dischargeability of a Debt" sets forth the time for filing a complaint under § 523(c). Specifically, the rule provides as follows:

Time for Filing Complaint Under § 523(c) in Chapter 7 Liquidation, Chapter 11 Reorganization, and Chapter 12 Family Farmer's Debt Adjustment Cases; Notice of Time Fixed. A complaint to determine the dischargeability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a). The court shall give all creditors not less than 30 days notice of the time so fixed in the manner provided in Rule 2002. On motion of any party in interest, and after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.

(emphasis added). The deadline created by Rule 4007(c) is specifically excluded from a bankruptcy court's general power under F.R.Bankr.P. 9006(b) to enlarge the period within which an act is required or allowed to be done by the Bankruptcy Rules.

"Enlargement Limited. The court may enlarge the time for taking action under Rules . . . 4007(c) . . . only to the extent and under the conditions stated in those rules." (emphasis added).

With respect to complaints objecting to the debtor's discharge altogether under § 727 of the Bankruptcy Code, the time limits are fixed by a different rule, F.R.Bankr.P. 4004 ("Grant or Denial of Discharge"), which provides:

(a) Time for Filing Complaint Objecting to Discharge; Notice of Time Fixed. In a chapter 7 liquidation case a complaint objecting to the debtor's discharge under § 727(a) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a). In a chapter 11 reorganization case, such complaint shall be filed not later than the first date set for the hearing on confirmation. . . .

(b) Extension of Time. On motion of any party in interest, after hearing on notice, the court may extend for cause the time for filing a complaint objecting to discharge. The motion shall be made before such time has expired.

Since this is a chapter 11 case, and since a plan has not yet been filed or a hearing on confirmation set, there is currently no deadline for filing a complaint under § 727 objecting to the debtor's discharge.

The problem presented here is not simply that both motions to extend time are internally inconsistent as to whether the § 727 deadline or the § 523 deadline is to be extended. Rather, the problem is that the order of August 29, 1995, explicitly extended the time for filing "a complaint objecting to discharge," which is the language used in Rule 4004(c) to refer to § 727 complaints, rather than "a complaint to determine . . . dischargeability," which is the language used in Rule 4007(c) to refer to § 523 complaints. Accordingly, if the order of August 29, 1995, did not extend the deadline to file complaints under § 523(c), then that time had long expired by the time F M filed its motion on September 7, 1995, for a further extension. This circumstance, assert the debtors, is fatal to F M's current motion, since the requirement of Rule 4007(c) that a motion to extend the deadline be "made before the time has expired" is "jurisdictional."

It is true that some courts have characterized the requirements of Rule 4007(c) as "mandatory" or "jurisdictional." Other decisions, most notably the 9th Circuit Bankruptcy Appellate Panel decision in Schunck v. Santos (In re: Santos), 112 B.R. 1001 (9th Cir. BAP, 1990), while holding that the requirements of Rule 4007(c) were to be strictly construed, have rejected the view that the time limits were jurisdictional and left open the possibility of equitable relief or waiver in limited circumstances. In Farouki v. Emirates Bank International, Ltd., 14 F.3d 244 (4th Cir. 1994), the Fourth Circuit, reviewing the two lines of cases, held that "Santos . . . appears to be the more well-reasoned case on the issue, and we believe it should be followed." Although Farouki specifically involved Rule 4004 and a general objection to discharge under § 727, it seems clear from the court's reasoning that the Fourth Circuit would reach the same result with respect to Rule 4007 and complaints to determine dischargeability under § 523(c). Accordingly, while the time limits of Rule 4007 are to be strictly construed, they are not jurisdictional, and at least some measure of equitable relief is available in appropriate circumstances.

In re: Barley. 130 B.R. 66 (Bankr.N.D.Ind. 1991);In re: Sheehan. 153 B.R. 384 (Bankr.R.I. 1993); In re: Walgamuth. 144 B.R. 465 (Bankr.S.D. 1992); In re: Poskanzer. 146 B.R. 125 (D.N.J. 1992).

Here, notwithstanding the confusion in the body of the motion, and notwithstanding that the order extended the wrong deadline a deadline, indeed, that did not need to be extended, because it did not yet exist it is difficult to conceive that the debtors misunderstood that F M was seeking, both in its motion and in the order it tendered, to extend the deadline for filing a § 523 complaint. No assertion has been made that the debtors consented to the relief requested because they mistakenly believed that only the § 727 deadline was being extended. The motion to extend the deadline was filed before the original deadline had passed, and though it mis-cited to Rule 4004, it did contain a reference to § 523 and prayed for an extension of the time "for filing a Complaint to determine dischargeability." Although the tendered order instead extended the time for filing an objection to discharge, this appears to have been simply a drafting error. While F M's counsel may be justly criticized for sloppy drafting, it does not appear that anyone was actually misled or that the debtors were prejudiced. In short, this appears to be an appropriate case for the court to grant relief under F.R.Bankr.P. 9024 and Fed.R.Civ.P. 60(b)(1) by amending the order of August 29, 1995, to reflect that the deadline being extended was the deadline for filing a complaint under § 523(c) to determine the dischargeability of a debt. Once so amended, the subsequent motion of September 7, 1995, was clearly filed before the previously extended time had expired and was therefore itself timely.

ORDER

For the foregoing reasons, it is

ORDERED:

1. The order previously signed on August 29, 1995, and entered on the docket on September 11, 1995, is amended to extend through and including October 10, 1995, the time within which F M Bank — Winchester may file a complaint under § 523(c) of the Bankruptcy Code to determine the dischargeability of a debt.

2. The motion filed September 7, 1995, for a further extension of the time for filing a complaint under § 523(c) to determine the dischargeability of a debt is GRANTED in part, and such time is extended through and including November 1, 1995.

3. The clerk will mail copies of this order to counsel for the debtors, counsel for F M Bank — Winchester, and the United States Trustee.


Summaries of

In re Deluca

United States Bankruptcy Court, E.D. Virginia
Oct 3, 1995
Case No. 95-11924-AM (Jointly Administered) (Bankr. E.D. Va. Oct. 3, 1995)
Case details for

In re Deluca

Case Details

Full title:In re: ROBERT MARILYN DELUCA, Chapter 11, Debtors

Court:United States Bankruptcy Court, E.D. Virginia

Date published: Oct 3, 1995

Citations

Case No. 95-11924-AM (Jointly Administered) (Bankr. E.D. Va. Oct. 3, 1995)