Duffy Petit v. New England Mortgage

• Court: Court of Appeals for the First Circuit
• Decided: April 3, 1996
• Docket: 95-1376
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT



                                                     
                                 ____________________

        No. 95-1376



                                CATHERINE DUFFY PETIT,



                                Plaintiff, Appellant,



                                          v.



                         PETER C. FESSENDEN, TRUSTEE, ET AL.,



                                Defendants, Appellees.



                                                     
                                 ____________________

        No. 95-1377



                                CATHERINE DUFFY PETIT,



                                Plaintiff, Appellant,



                                          v.



                         PETER C. FESSENDEN, TRUSTEE, ET AL.,



                                Defendants, Appellees.



                                                     
                                 ____________________

        No. 95-1378



                                CATHERINE DUFFY PETIT,



                                Plaintiff, Appellant,



                                          v.



                         PETER C. FESSENDEN, TRUSTEE, ET AL.,



                                Defendants, Appellees.



                                                     
                                 ____________________


APPEALS FROM THE UNITED STATES DISTRICT COURT



                              FOR THE DISTRICT OF MAINE



                       [Hon. Gene Carter, U.S. District Judge]
                                          ___________________



                                                     
                                 ____________________



Cyr, Circuit Judge,
                                      _____________



                            Bownes, Senior Circuit Judge,
                                    ____________________



                              and Stahl, Circuit Judge.
                                         _____________



                                                     
                                 ____________________


Stephen F. Gordon, with whom Gordon & Wise was on brief for
             _________________            _____________

        appellant.

             Peter C. Fessenden, with whom John G. Connor, Law Office of John
             __________________            ______________  __________________

        G. Connor, James F. Molleur, Woodman & Edmands, P.A., U. Charles
        _________  ________________  _______________________  __________

        Remmel, II, Kelly, Remmel & Zimmerman and Mark S. O'Brien, Special
        __________  _________________________     _______________

        Assistant United States Attorney, were on brief for appellees.


____________________



                                    April 3, 1996

                                                     
                                 ____________________


2



CYR, Circuit Judge.    Plaintiff Catherine Duffy Petit,
                    CYR, Circuit Judge.
                         _____________



          a  chapter 11  debtor,  appeals from  a  district court  judgment



          affirming  a  bankruptcy  court  order allowing  the  chapter  11



          trustee to reconvene  a meeting of creditors several months after



          its indefinite adjournment, see Bankruptcy Code    341, 11 U.S.C.
                                      ___



            341; Fed. R.  Bankr. P. 2003, thereby purportedly  recommencing



          the 30-day limitation period within which a trustee may interpose



          objections to an exemption claim made by the debtor.  See Fed. R.
                                                                ___



          Bankr. P. 4003(b).  We affirm.



                                          I
                                          I



                                      BACKGROUND
                                      BACKGROUND
                                      __________



                    In  June  1993,   creditors  initiated  an  involuntary



          chapter 7 proceeding against Petit in the United States Bankrupt-



          cy Court for the District of Maine.  The bankruptcy court entered



          the  order for  relief  under chapter  7  on December  10,  1993,



          following its denial of Petit's motion to dismiss the involuntary



          petition.  See 11 U.S.C.   305(a).  One week later, Petit filed a
                     ___



          motion to convert to chapter 11.  See id.   348.  At a hearing on
                                            ___ ___



          February  2,  1994, and  over  the objection  of  the petitioning



          creditors, the  bankruptcy court directed  entry of an  order for



          relief  under chapter 11, and took  under advisement the appoint-



          ment of a chapter 11 trustee.  



                    Petit   filed  her   statement  of   financial  affairs



          (Official  Form 7)  and  schedules (Official  Form 6),  including



          Schedule C (Property  Claimed as  Exempt), see id.    521(1),  on
                                                     ___ ___



          February  25,  1994,  asserting  a claim  to  certain  exemptions


3



prescribed under federal law, see id.    522(d)(11)(A) ("an award
                                        ___ ___



          under  a crime  victim's reparation  law"); 522(d)(11)(D)  ("pay-



          ment[s],  not to  exceed  $7500, on  account  of personal  bodily



          injury").   In Schedule B, Petit listed as an exempt asset, inter
                                                                      _____



          alia, the entire anticipated  proceeds from a pending state-court
          ____



          action against Key Bank,  having an estimated value in  excess of



          $25  million.   On March  28, 1994,  the  order for  relief under



          chapter 11 was entered on the bankruptcy court docket.



                    The United States Trustee  convened a meeting of credi-



          tors on May  17, 1994.  See  id.   341;  Fed. R. Bankr. P.  2003.
                                  ___  ___



          Before it ended, the meeting  of creditors was "continued without



          date" by the Assistant  United States Trustee.   On June 17,  the



          bankruptcy court approved  the appointment of  defendant-appellee



          Peter  Fessenden, Esquire, as the chapter 11 trustee.  Two months



          later,  on August 22, Fessenden  filed objections to  the list of



          property claimed as  exempt by Petit,  particularly her claim  to



          the anticipated  proceeds from  the pending legal  action against



          Key  Bank.  Petit responded that the objection was time-barred by



          Fed. R.  Bankr. P. 4003(b), because  it was not filed  until more



          than  30 days after the "conclusion" of the meeting of creditors.



          See Taylor v.  Freeland & Kronz, 112 S. Ct. 1644, 1648-49 (1992).
          ___ ______     ________________



          Fessenden meanwhile sent a notice to creditors that the continued



          meeting of  creditors  would be  reconvened on  October 20,  thus



          purportedly  extending    until at least 30 days after October 20



              the time for  filing any  objection to  the list  of property



          claimed  exempt  and  rendering  timely the  objection  filed  by


4



Fessenden on August 22. 



                    Petit then  sought to quash the  notice reconvening the



          meeting  of creditors,  contending  in the  alternative that  (1)



          Bankruptcy Code   341  permits only the United States  Trustee or



          an express  "designee"     and  not  an undesignated  chapter  11



          trustee    to convene a meeting of creditors and  that the United



          States Trustee had objected to reconvening  the meeting of credi-



          tors  scheduled by  Fessenden; or  (2)  the 30-day  deadline pre-



          scribed in Bankruptcy Rule 4003(b)  for objecting to an exemption



          claim cannot be  enlarged, citing the  Supreme Court decision  in



          Taylor,  112 S. Ct. at 1648 ("[Rule 4003(b)] [d]eadlines may lead
          ______



          to  unwelcome results, but they prompt parties to act and produce



          finality.").  But cf.  Mercer v.  Monzack, 53  F.3d 1  (1st Cir.)
                        ___ ___  ______     _______



          (distinguishing Taylor),  petition for  cert. filed, 64  U.S.L.W.
                          ______    ________ ___  _____ _____



          3439  (U.S. Dec.  12,  1995) (No.  95-970).   Petit  argued  that



          allowing  trustees  to  circumvent  Taylor,  through  the  simple
                                              ______



          expedient  of  routine, indefinite  adjournments  of  meetings of



          creditors, would deprive chapter 11 debtors of the benefit of the



          very policies of repose and finality acknowledged by the  Supreme



          Court in  Taylor.  Petit urged, at the very least, that a meeting
                    ______



          of  creditors adjourned  without  day be  deemed "concluded"  for



          purposes of the  Rule 4003(b)  time-bar if, as  here, the  United



          States Trustee (or chapter 11 trustee) fails  to announce, within



          30  days  of the  adjournment, a  firm  date for  reconvening the



          meeting of creditors.  See In re Levitt, 137 B.R.  881 (Bankr. D.
                                 ___ ____________



          Mass. 1992); infra note 2.
                       _____


5



The bankruptcy  court first denied the  motion to quash



          the notice reconvening the  continued meeting of creditors, then,



          after it had been reconvened, ruled that the  Fessenden objection



          to  Petit's exemption claim was not time-barred, In re Petit, 172
                                                           ___________



          B.R.  706 (Bankr. D. Me. 1994) (Votolato, B.J.);1 Petit, 174 B.R.
                                                            _____



          868 (Bankr. D. Me.  1994) (Votolato, B.J.).2  The  district court

                              
          ____________________



               1The  bankruptcy   court  ruled  that   Fessenden  possessed

          unilateral  authority  to  reconvene  the  meeting  of  creditors

          because Bankruptcy Code    102(9) defines the term "United States

          trustee" to include a "designee,"  the term "designee" is synony-

          mous with the term "appointee," and the United States Trustee had

          appointed Fessenden as the chapter 11  trustee.  In light of  our

          holding, we need not resolve this question.



               2The  bankruptcy  court  sustained  the  objections  on  the

          following  grounds.   First,  it found  In  re Levitt  inapposite
                                                  _____________

          because the indefinite adjournment of the meeting of creditors by

          the  chapter  7 trustee  in that  case  had been  followed  by an

          unreasonable 15-month delay in reconvening the meeting.  Treating
                       ________

          the  "reasonableness" of any  delay in  reconvening a  meeting of

          creditors  as a matter  requiring case-by-case determination, the

          bankruptcy court  noted several factors which  indicated that the

          delay in this case was not  unreasonable:  (1) Fessenden did  not

          become  the chapter 11 trustee until after the initial meeting of

          creditors, in  part because Petit, a  "particularly litigious and

          obstructionist" debtor, had opposed  the appointment of a chapter

          11 trustee; (2)   the Fessenden  appointment, which occurred  the

          same day the 30-day period  prescribed in Bankruptcy Rule 4003(b)

          expired,  followed the unexpected  withdrawal or disqualification

          of  other  potential  chapter  11 trustee  candidates;  (3)  thus

          Fessenden was relegated to the role of a  mere "spectator" at the

          initial May 17 meeting  of creditors, and did not  participate in

          questioning  Petit  regarding her  schedules;  (4)  the Assistant

          United  States Trustee had informed Petit  at the initial meeting

          of creditors  that  although  it  was  unlikely  the  meeting  of

          creditors  would  be  reconvened,  "some  special  reason"  might

          require  it; and  (5)  Fessenden filed  objections  to the  Petit

          exemption claims 66 days after his appointment. 

               On the  merits, the bankruptcy court found  the Petit exemp-

          tion claims here  at issue  frivolous, for two  reasons.   First,
                                      _________

          Maine law does not permit residents to elect the federal slate of

          property exemptions, and  Petit's contention that  she was not  a

          Maine resident was found to be "farcical."  Her real and personal

          property was all located in Maine, where she also voted, received

          her  mail,  and secured  her driver's  license.   She  adduced no



                                          6



affirmed.  Petit v. Fessenden (In re Petit), 182 B.R.  59 (D. Me.
                     _____    _________  ___________



          1995); Petit, 182 B.R. 57 (D. Me. 1995).
                 _____


II
                                          II



                                      DISCUSSION
                                      DISCUSSION
                                      __________



          A.   Standard of Review
          A.   Standard of Review
               __________________



                    In a bankruptcy appeal, the  conclusions of law made by



          the district  court are subject  to plenary  review; whereas  the



          facts found by the  bankruptcy court are reviewed only  for clear



          error.   See  Indian Motocycle  Assocs. III  Ltd. Partnership  v.
                   ___  _______________________________________________



          Massachusetts Hous.  Fin. Agency (In re  Indian Motocycle Assocs.
          ________________________________  _______________________________



          III Ltd. Partnership), 66 F.3d 1246, 1249 (1st Cir. 1995).    
          ____________________



          B.   The Claim of Exemptions
          B.   The Claim of Exemptions
               _______________________



                    Although Petit  renews on appeal most  of the arguments



          made below, we do not reach them, see Juniper Dev.  Group v. Kahn
                                            ___ ___________________    ____



          (In re Hemingway Transp.), 993 F.2d 915, 935 (1st Cir.) (court of
           _______________________



          appeals  may affirm  on  any ground  established  by the  record,



          whether  or not  raised or  addressed in  the  bankruptcy court),



          cert. denied,  114 S. Ct. 303  (1993), since she has  not met the
          _____ ______



          first indispensable precondition to  a valid claim of exemptions:



          a  timely claim of exemptions.    See Fed. R. App. P. 11(a); Byrd
             ______                         ___                        ____

                              
          ____________________



          concrete  evidence that she had  resided in Massachusetts for 180

          days prior to the  involuntary chapter 7 petition.   Second, even

          if  Petit had been  permitted by Maine  law to claim  the federal

          exemptions,  she had  not  established that  the pending  lawsuit

          against Key Bank involved a claim arising "under a crime victim's

          reparation  law," see  11 U.S.C.    522(d)(11)(A),  or for  "pay-
                            ___

          ment[s] .  . . on account  of personal bodily injury,"  see id.  
                                                                  ___ ___

          522(d)(11)(D).   Further, Petit had not  claimed these exemptions

          under    522(d) (11)(E)  (compensation for "loss  of future earn-

          ings") because Schedule C did not cite to   522(d)(11)(E). 



                                          7



v. Ronayne, 61  F.3d 1026,  1029 n.4 (1st  Cir. 1995)  (appellant
             _______



          must  include  in appellate  record  all  materials essential  to



          appellate claim).  



                    A debtor must list the property claimed as exempt under



          Bankruptcy Code   522 within the applicable time limit prescribed



          in Bankruptcy  Rule 1007.   See  Fed. R. Bankr.  P. 4003(a).   An
                                      ___



          alleged  debtor  in  an  involuntary case  must  file  schedules,



          including any Schedule  C    Property Claimed as  Exempt, "within



          15 days after the entry of the  order of relief."  Fed. R. Bankr.



          P. 1007(c).  Schedules duly filed in a chapter 7 case are "deemed



          filed in a superseding case  unless the court directs otherwise."



          Id.    Any extension of the filing  deadlines prescribed by Bank-
          ___



          ruptcy  Rule 1007(c)  "may be  granted only  on motion  for cause



          shown and  on  notice to  the United  States trustee  and to  any



          committee  elected pursuant to    705 or appointed  pursuant to  



          1102 of the Code, trustee, examiner,  or other party as the court



          may  direct."   Id.;  see  also  Fed.  R.  Bankr.  P.  9006(b)(1)
                          ___   ___  ____



          (imposing a  heightened showing of "excusable  neglect" where the



          motion to extend the time for filing is made after the expiration



          of the original 15-day filing period). 



                    Petit  filed no  schedules  until  February  25,  1994,



          despite the fact  that the order for  relief under chapter 7  had



          been entered on December 10, 1993, which meant that her schedules



          were due not later than December 26, 1993, absent a timely motion



          to extend the filing period for cause shown or excusable neglect.



          Nonetheless, no request to  extend the filing time was  ever made


8



pursuant to Bankruptcy Rule 1007(c).  See, e.g., Bryant v. Smith,
                                                ___  ____  ______    _____



          165  B.R.  176, 181-82  (W.D. Va.  1994)  ("The court  finds that



          untimely filed  schedules waive  a debtor's exemption  unless the



          untimely  filing  is permitted  by  the bankruptcy  judge  in his



          discretion for cause shown or excusable neglect.").  



                    During  the 15-day window allowed under Bankruptcy Rule



          1007(c), Petit did file a motion to convert the chapter 7 case to



          chapter 11, but this motion neither excused the failure to comply



          with  Bankruptcy  Rule  1007(c),  nor tolled  the  15-day  filing



          period.  Finally, the automatic "deeming" provision in Bankruptcy



          Rule  1007(c),  see supra  p. 8,  can afford  no refuge  since no
                          ___ _____



          chapter 7  schedules were  ever filed.   Nor did  the chapter  11



          schedules eventually filed by  Petit cure her procedural default.


First, although  an order of conversion  constitutes an



          "order for  relief" under the chapter  to which the case  is con-



          verted, see 11 U.S.C.    348(a), it "does not effect a  change in
                  ___



          the date of . . . the order for relief."  That is to say, "[s]ec-



          tion 348(a) provides that 'those provisions of the Code which are



          keyed to  the date of  entry of  the order for  relief for  their



          operation are unaffected . . .  by conversion.'"  F & M Marquette
                                                            _______________



          Nat'l Bank v. Richards, 780 F.2d 24, 25  (8th Cir. 1985) (quoting
          __________    ________



          2  Lawrence P.  King, Collier  on Bankruptcy    348.02  (15th ed.
                                ______________________



          1979)); see Schwartz v. Jetronic Indus., Inc. (In re Harry Levin,
                  ___ ________    _____________________  __________________



          Inc.), 175 B.R. 560, 570 (Bankr. E.D. Pa. 1994); Leydet v. Leydet
          ____                                             ______    ______



          (In re  Leydet), 150 B.R. 641, 642 (Bankr. E.D. Va. 1993).  Since
           _____________


9



the  time  limits  prescribed  in Bankruptcy  Rules  1007(c)  and



          4003(a) are  keyed to the date of the order for relief, which had



          already been entered on  December 10, 1993, the order  of conver-



          sion could  not  effect  an automatic  extension  of  the  15-day



          deadline (December 26, 1993) for filing schedules.



                    Second, Petit inexplicably made matters more problemat-



          ic by disregarding a  ready opportunity, and her  clear responsi-



          bility, to  cure  the procedural  default  by complying  with  an



          explicit bankruptcy court order directing  her to file chapter 11



          schedules not later than February 23,  1994.  See Fed. R.  Bankr.
                                                        ___



          P. 9006(b), (c).    Instead,  Petit failed  to file the  required



          chapter  11 schedules  until  February 25,  two  days beyond  the



          deadline.   Thus, Petit's  chapter 11 schedules  were time-barred



          even  viewed in the most  favorable light, without  regard to her



          failure to notify the  United States Trustee of her  intention to



          request  an extension under Rule  4003(a) or to  allege or demon-



          strate  either  excusable neglect  or good  cause.   See  Fed. R.
                                                               ___



          Bankr. P. 1007(c), 9006(b)(1). 



                    The Taylor Court recognized that a debtor should not be
                        ______



          indefinitely  or  unreasonably  delayed  in  reacquiring property



          while the trustee  or creditors  ponder whether or  not to  lodge



          objections  to a claim of exemptions.   See Taylor, 112 S. Ct. at
                                                  ___ ______



          1644; In re Young, 806  F.2d 1303, 1305 (5th Cir. 1987);  Fed. R.
                ___________



          Bankr.  P.  4003(b), 9006(b)(3)  (trustee  must  move for  filing



          extension  before  end of  30-day period).    Unless and  until a



          debtor files a  timely claim of exemptions, however,  as required


10



by  the Bankruptcy  Code  and  the  Federal Rules  of  Bankruptcy



          Procedure,  there is no "list of property claimed exempt" for the



          trustee or creditors  to oppose.   See, e.g.,  Redfield v.  Peat,
                                             ___  ____   ________     _____



          Marwick and Co. (In re Robertson), 105 B.R. 440, 450 (Bankr. N.D.
          _______________  _______________



          Ill.  1989) ("The Debtor and  other Defendants here  who seek the



          normal  benefit that flows from  a timely claim  of exemption not



          timely objected to, rest  their contention on a  late-filed claim



          that the Court never allowed to be filed. . . . In this case, the



          exemption claim  late-filed without  notice, motion, or  leave of



          Court,  is not entitled to the automatic allowance that Bankr. R.



          4003(a) gives to  a timely  filed exemption  claim if  it is  not



          timely objected to.   He who seeks  to benefit by the  Bankruptcy



          Rules must abide by them.").  In these circumstances, the princi-



          ple of repose relied  upon in Taylor supports the  rulings below.
                                        ______



          Taylor, 112 S. Ct. at 1648 ("[Rule 4003(b)] deadlines may lead to
          ______



          unwelcome results, but  they prompt  parties to  act and  produce



          finality.").3 



                    The district court judgment is affirmed and the case is
                    The district court judgment is affirmed and the case is
                    _______________________________________________________



          remanded to the bankruptcy  court for further proceedings consis-
          remanded to the bankruptcy  court for further proceedings consis-
          _________________________________________________________________



          tent with this opinion.  Costs are awarded to appellees.   
          tent with this opinion.  Costs are awarded to appellees.
          ______________________   ______________________________


____________________



               3In  opposing Petit's  claim of  exemptions, the  chapter 11

          trustee agreed, in principle,  not to oppose her claim  of exemp-

          tions insofar as it pertained to legitimate state-law exemptions,

          if any.  Consequently,  we express no opinion on  the preliminary

          and  related  question whether,  upon  remand  to the  bankruptcy

          court, Petit  should prevail on any motion  to extend the time in

          which  to file  such  a claim  of  exemptions for  good  cause or

          excusable neglect.



                                          11