Pablo Lopez Baez v. Ridel Alegre Fernandez Rosado

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: April 3, 2009
• Docket: 08-00029
• Status: Unknown

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT 5 FOR THE DISTRICT OF PUERTO RICO . IN RE: : CASE NO. 07-05871 (ESL) ‘ RIDEL ALEGRE FERNANDEZ ROSADO CHAPTER 7 ° Debtor

7 |PABLO LOPEZ BAEZ : ADVERSARY NO. 08-0029 8 Plaintiff : 9 VS. 10 RIDEL ALEGRE FERNANDEZ ROSADO Defendant : 12 13 OPINION AND ORDER 14 This adversary proceeding is before the court upon the motion to dismiss filed by Ridel Alegre 15 |lFerndndez Rosado (the “Defendant”) on December 14, 2008 (Docket No. 28) alleging that this action 16 fis time barred pursuant to Fed. R. Bankr. P. 4004 (b) and 4007(c) and that the Order entered by the 17 on January 15, 2008 (Docket No. 31 in lead case No. 07-0587 1)' was unduly entered and 18 lloranted. Dr. Pablo Lopez Baez (the “Plaintiff”) filed an opposition to the motion to dismiss on 19 December 31, 2008 (Docket No. 35). For the reasons set forth below the motion to dismiss is 20 |igranted. 21 Facts and Procedural Background 22 Defendant Ridel Alegre Fernandez Rosado filed a bankruptcy petition under Chapter 7 of the 23 Bankruptcy Code on October 9, 2007. Plaintiff was scheduled as an unsecured creditor and included 24 the master address list. Plaintiff was duly notified of the filing of the bankruptcy case, the date of 25 341 meeting and the deadline to file objections to the discharge and to the dischargeability of 26 |idebts. The 341 meeting of creditors was initially scheduled for November 1, 2007 (Docket No. 4 in 27 2006060 "References to the lead case are to the entries and documents filed in the bankruptcy case, case number 07-05871(ESL).

I lead case). The meeting of creditors was rescheduled to November 15, 2007 (Docket No. 7 in lead 2 and subsequently continued to December 13, 2007 (Docket No. 12 in lead case) and January 3 2008 (Docket No. 20 in lead case). The deadline to file objections to the discharge and the 4 |idischargeability of debts was December 31, 2007 (Docket No. 4 in lead case). 5 On December 18, 2007 the U.S. Trustee filed a motion to extend the deadline to file 6 Jobjections to the discharge pursuant to the provisions ofthe Bankruptcy Code, 11 U.S.C. §§707(b)(1), 7 1707(b)(3) and 727 (Docket No. 15 in lead case). The court granted the U.S. Trustee’s motion on 8 [December 19, 2007 (Docket No. 16 in lead case). On December 31, 2007 creditor Juan Botello filed 9 motion requesting an extension to file a complaint objecting to the debtor’s discharge (Docket No. 10 in lead case). The court granted Juan Botello’s motion on January 1, 2008 (Docket No. 24 in lead Hl case). 12 On January 8, 2008 Plaintiff in conjunction with Dr. Osiris Delgado and Emma Teresa 13 |/Benitez, filed a motion captioned “Motion Requesting Amendment to Order Extending Deadlines to 14 Objections to Dischargeability”’(Docket No. 27 in lead case). The motion prayed that “the orders 15 llextending the deadlines to file objections to discharge be amended to be extensive to all creditors and 16 any such objections be filed on or before February 29, 2008.” The court granted the motion filed 17 Plaintiff on January 15, 2008 (Docket No. 31 in lead case). 18 On February 27, 2008, Plaintiff filed the present adversary proceeding alleging that the debt 19 by Defendant to Plaintiff not dischargeable under the provisions of 11 U.S.C. §523(a)(2)(A). 20 }On March 27, 2008, Defendant submitted a motion requesting an extension of 45 days to answer the 21 |icomplaint to be computed from the due date (March 27, 2008) to answer such complaint (Docket No. 22 |6). The court entered an Order granting the extension to answer the complaint on March 31, 2008 23 |(Docket No. 7}. On August 9, 2008 Defendant filed a motion requesting an additional extension of 24 of 30 days to answer any pending matters in this case, including the complaint (Docket No. 12). 25 |The court entered an Order granting the additional extension of time to answer any pending matters 26 August 15, 2008 (Docket No. 15). Defendant filed the answer on September 2, 2008 (Docket No. 27 On November 25, 2008, Plaintiff filed a motion for leave to amend complaint (Docket No. 27). 28 ||Subsequently, on December 30, 2008 Defendant filed its answer to the amended complaint (Docket

1 No. 34). 2 On December 14, 2008 Defendant filed a “Motion to Dismiss Complaint” (Docket No. 28) 3 alleging that Plaintiff's action is time barred by Fed. R. Bankr. P. 4004(a) and 4007 (c), which must be 4 tread in conjunction with Fed. R. Bankr. P. 9006(b)\(3). Thus, Defendant sustains that the order entered 5 |by the court on January 15, 2008 (Docket No. 31 in lead case No. 07-5871) was unduly entered and 6 |igranted. The Plaintiff filed an opposition to the motion to dismiss on December 31, 2008 (Docket No. 7 in which he argues that the other creditors could rely on previous court orders granting the separate 8 independent requests for time extensions filed by the U.S. Trustee and Juan Botello (unsecured 9 |creditor) to file objections to the discharge within the time limits established by Fed. R. Bankr, P. 10 ||4004(a) and 4007(c) despite the fact that Plaintiff did not participate in these previous motions to request 11 fan extension of time. 12 Applicable Law and Analysis 13 |Extension of Time to □□ ile a Complaint Objecting to Debtor’s Discharge or Dischargeability of 14 |Debts in a Chapter 7 Liquidation 15 Fed. R. Bankr. P. 4004(a) and 4007(c) establish a sixty (60) day time limit within which a 16 Hicreditor may file a complaint to dispute the discharge of the debtor under §727(a) of the Bankruptcy 17 ||Code and the dischargeability of debts under §523(c) of the Bankruptcy Code in Chapter 7 cases. This 18 limit begins to run from the first date set for the meeting of creditors under §341(a) of the 19 |Bankruptcy Code. Fed. R. Bankr. P. 4004(a) and 4007(c). In addition, Fed. R. Bank. P. 9006(b)(3) 20 |ilimits the bankruptcy court’s discretion in certain circumstances by providing, inter alia, that a 21 |bankruptcy court may enlarge the-time for filing a complaint under 4004(a) and 4007(c) to the extent 22 under the conditions permitted under such rules. See Fed. R. Bankr. P. 9006(b)(3); Vazquez v. 23 (In re Cruz), 323 B.R. 827, 831 (Bankr. D. PR. 2005). In this particular adversary proceeding, 24 |ithe Plaintiffis objecting to the discharge of a particular debt under the provisions of §§523(a)(2)(A) 25 |jand 523(a){4), thus the applicable rule is Fed. R. Bank. P. 4007(c). 26 There is “almost universal agreement that the provisions of Fed. R. Bankr. P. 4007(c) are 27 limandatory and do not allow the Court any discretion to grant a late filed motion to extend time to file 28 |la dischargeability complaint”. In re Alton, 837 F. 2d 457, 459 (11™ Cir. 1988) quoting In re Maher, . 3

51 B.R. 848, 852 (Bankr. N.D. lowa 1985) (and cases cited therein). Thus, Rule 4007( c) precludes 2 bankruptcy court from granting late-filed motions to extend the period in which a party can object 3 Ito the dischargeability of a debt. Lure launchers, LLC v. Spino, 306 B.R. 718, 721(B.A.P. 1* Cir. 4 12004); Vazquez v. Cruz (in re Cruz), 323 B.R. 827, 831 (Bankr. D. PR. 2005); Hecht v. Hatch (In 5 Hatch), 175 B.R. 429, 434 (Bankr. D. Mass. 1994); In re Gray, 156 B.R. 707, 710 (Bankr. D. Me. 6 1993). Courts have extended the deadline absent a timely filed motion under extraordinary 7 \Icircumstances. These exceptional circumstances generally encompass situations in which the court 8 has made a mistake in setting the deadline or where notice of the deadline has not been furnished to 9 jla party in interest. See Nicholson v, Isaacman (In re Isaacman), 26 F. 3d 629 (6" Cir. 1994); In re 10 Tatum, 60 B.R. 335, 337 (Bankr. D. Colo. 1986). These extraordinary circumstances are not present i1 the case at hand. 12 Fed. R. Bankr. P. 4004(b) provides that a court for cause may extend the filing deadline to file 13 |jacomplaint objecting to discharge under §727(a) of the Bankruptcy Code if the motion is filed before 14 time has expired. Fed. R. Bankr. P. 4004(b). There are five basic requirements to Rule 4004(b): 15 (1) that a motion be filed; (2) by a party in interest; (3) that the order be entered after hearing on 16 |inotice; (4) that the extension be for cause; and (5) that the motion be filed before the time has expired. 17 re Amezaga, 192 B.R. 37, 40 (Bankr. D. PR 1996). Thus, “a clear and affirmative action is necessary, meaning that a motion must be filed by a party in interest; that is, absent extraordinary 19 licircumstances compelling an order under 11 U.S.C. § 105(a), the court may not act sua sponte. The 20 Imotion for extension must be filed before the period has expired because Rule 4004(c) and 11 U.S.C. 21 4§727(a) expressly state that the Court shall forthwith grant a discharge upon the expiration of the time 22 |fixed for filing a complaint objecting to discharge.” In re Amezaga, 192 B.R. at 40. See also Inre 23 289 F.3d 540, 542 (8 Cir. 2002). 24 Plaintiff in his “Opposition to Dismiss Complaint” cites the case of In re Demos, 57 F. 3d 25 11037 (11" Cir. 1995) to sustain that creditors may rely upon an order of the court granting an 26 flextension of time for filing nondischargeability complaints even if the creditors did not participate 27 the motion. Plaintiffs reliance is misplaced because in Demos the motion requesting that an 28 |lextension of time be granted was not filed pursuant to Fed. R. Bankr. P. 4004 but under §105 of the 4

1 Bankruptcy Code. In addition, the debtor and the trustee in Demos filed such motion specifically 2 \lrequesting the court to exercise its equitable powers to extend the time for filing complaints primarily 3 for two reasons. The first being the problems that had arisen due to the large number of creditors 4 |involved in the bankruptcy and the second the possibility that the debtor’s attorney might not be able 5 attend the 2004 examination of the debtor. In re Demos, 57 F. 3d at 1039. 6 Plaintiff also cites the case of In re Watkins, 365 B.R. 574 (Bankr. W.D. Pa. 2007) to sustain 7 ||his argument that the court has discretion to extend the deadlines to all creditors based on a motion 8 a single creditor. However, the circumstances surrounding the extension to file dischargeability 9 |icomplaints in Watkins are very different from the situation at hand, specifically because of the prior 10 hearing that had been conducted in which the Trustee indicated that a Rule 2004 examination was 11 |going to be conducted and that this in itself constituted sufficient cause to extend the time to file 12 Ildischargeability complaints for all creditors. See Inre Watkins, 365 B.R. at 577. In addition, the order 13 jlissued by the court granting an extension of time did not specify a particular movant. This court finds 14 |lthat the circumstances of this case are very particular and only conform to that particular case, and 15 |Ithus are inapplicable to this adversary proceeding. 16 In this adversary proceeding, the orders granting the extension of time which were requested 17 |by the U.S, Trustee and Juan Botello specified that the extensions were granted to the particular 18 |imovants requesting the same. When an interested party obtains an extension of time from the court, 19 extension applies only to the party who requested the same. See In re Demas, 57 F. 3d at 1039. 20 |\*Absent (1) an express finding that all creditors of the particular debtor need an extension, and (2) 21 this universal extension is based on some “cause” by which all creditors in general have a need 22 an extension of time, the language of rule 4007(c) does not appear to permit the bankruptcy court 23 Ito grant an extension to nonmoving parties. In addition, the moving creditors’ motions cannot 24 llreasonably be interpreted as requesting a general extension.” Burger King Corporation v. B-K of 25 |iKansas, Inc.; 73 B.R. 671, 674 (D. Kan. 1987); See also In re McCord, 184 B.R. 522, 524 (Bankr. 26 Mich. 1995); In re Floyd, 37 B.R. 890, 893 (Bankr, N.D. Tex. 1984); In re Overmyer, 24 B.R. 27 #437 (Bankr. §.D. N.Y. 1982). Consequently, if a creditor and/or the U.S. Trustee has obtained an 28 llextension of time to file a complaint objecting to the discharge, a creditor that has not obtained a

1 similar extension cannot file such complaint. Alan N. Resnick and Henry J. Sommer, 9 Collier on 2 Bankruptcy J 4004.03 (15" ed. 2008). 3 4 Time-Barred Defense/Application of Waiver 5 In Kontrick v. Ryan, 540 U.S. 443, 447, 124 S. Ct. 906, 910, 157 L. Ed. 2d 867 (2004), the 6 Supreme Court held that the time limits under Fed. R. Bankr. P. 4004 are not jurisdictional and that 7 debtor forfeits his or her right to rely on the time limits under said Rule if the same does not raise 8 Rule’s time limitations before the court reaches the merits of the creditor’s objections. The same 9 prescriptions apply to complaints objecting to the dischargeability of a particular debt in 10 Jaccordance with 11 U.S.C. §523(c). Kontrick v. Ryan, 540 U.S. at 448 n. 3, 1124S. Ct. at 912 n.3, 157 1] IL. Ed. 2d at 875, n.3. The Supreme Court also concluded that, “... the filing deadlines prescribed in 12 ||/Bankruptcy Rules 4004 and 9006(b)(3) are claim-processing rules that do not delineate what cases 13 ||bankruptcy courts are competent to adjudicate.” Kontrick v. Ryan, 540 U.S. at 454, 124 S. Ct. at 914, 14 1157 L. Ed. 2d at 879. Bankruptcy Rules 4004(a) and (b) and 9006(b)(3) serve three primary purposes, 15 namely, (1) inform the objecting creditor of the time for filing a complaint; (2) instruct the court on 16 limits of its discretion to grant motions for complaint-filing-time enlargements; and (3) provide 17 |the debtor an affirmative defense to a complaint filed outside the Rules 4004(a) and (b) limits. 18 ||Kontrick v. Ryan, 540 U.S. at 456, 124 S. Ct. at 916, 157 L. Ed. 2d at 880. 19 Under the Bankruptcy Rules as well as under the Federal Rules of Civil Procedure, a defense 20 lost if it is not included in the answer or amended answer. See Fed. R. Bankr. P. 7012(b) (“Rule 21 {}12(b)-(1) Fed. R. Civ. P. applies in adversary proceedings”). “... [T]he timeliness ofa dischargeability 22 |lcomplaint presents an affirmative defense that must be raised in an answer or responsive pleading.” 23 re Santos, 112 B.R. 1001 (B.A.P. 9" Cir. Cal. 1990) citing In re Kleinoeder, 54 B.R. 33, 34-35 | - 24 N.D. Ohio 1985); See Fed. R. Civ. P. 8(c). In determining whether a failure to timely raise a 25 ||limitations defense should constitute a waiver, a court should consider the following factors: “(i)} the 26 |jobviousness of the defenses’s availability; (ii) the stage at the proceeding at which the defense is 27 |Iraised; (iii) the time which has elapsed between the filing of the answer and the raising of the defense; 28 the amount of time and effort expended by the plaintiff in the case at the time the defense is

1 jlraised; and (v) the prejudice resulting to the plaintiff which would result from allowing the defense 2 ||to be asserted.” In re Kleinoeder, 54 B.R. at 35. In this adversary proceeding, the Defendant raised 3 jas an affirmative defense the untimeliness of Plaintiffs complaint in his answer to the complaint and 4 the amended complaint. Thus, the defense was timely and presented before reaching the merits 5 jlof the complaint, as amended. Therefore, Kontrick is inapposite in this respect. The order granting 6 {Plaintiff's request that the orders extending the deadlines to file objections to discharge be amended 7 be extensive to all creditors cannot, and will not, be construed as an order denying ex ante any 8 jlatfirmative defense the defendant may have, such as the one subject of the motion to dismiss before 9 ithe court, that is, that the action is time barred. 10 Although the deadlines to object the discharge or the dischargeability of a debt set forth in 11 |Bankruptey Rules 4004 and 4007 are the same, Bankruptcy Rule 4004 focuses on debtor’s general 12 |\discharge under section 727, while Bankruptcy Rule 4007 addresses the dischargeability of particular 13 under section 523. Discharges under section 727 are a right under the exclusive jurisdiction of 14 |the bankruptcy court. Whenever a bankruptcy court denies the debtor a discharge, all of the debtor’s 15 and obligations are denied a discharge and survive bankruptcy. Thus, ifthe discharge is denied 16 is no need for any particular creditor to object to the dischargeability of its debt since the remedy 17 |lis included in the denial of the discharge. The provisions in section 523 and Rule 4007 come into 18 when a particular creditor wants to object to the dischargeability of its particular debt. 19 Rule 9006(b)(3), Fed. R. Bankr. P. 9006, provides that the court may not enlarge the time to 20 a complaint to object the dischargeability ofa particular debt for any cause outside the provisions 21 Rule 4007 (c) , which provides that the motion must be filed before the time has expired. Fed. R. 22 Bankr. P. 4007 (c). 23 Plaintiff in the motion captioned “Motion Requesting Amendment to Order Extending 24 |Deadlines to File Objections to Dischargeability” specifically requested the following in the prayer 25 |ifor relief, “[I]n view of the above, it is requested that the orders extending the deadlines to file 26 |iobjections to discharge be amended to be extensive to all creditors and that any such objections be 27 |ifiled on or before February 29, 2008.” (p. 2 of motion). The order issued by the court with respect to 28 particular motion specifically stated the following, “[T]he motion filed by Ricardo Agrait Defillo

1 lon behalf of Pablo Lopez Baez requesting extension of time amendments to Order Extending 2 Deadlines to File Objections to Dischargeability on or before February 29, 2008 (docket #27) is 3 |hereby granted. It is so ordered.” The order issued by the court specifically granted that the orders 4 llextending the deadlines to file objections to discharge objections be amended to be extensive to all 5 ilcreditors. However, the order from the court did not grant an extension of time to Plaintiff to file 6 jlobjections to dischargeability, given that such request was not included in the prayer of relief of 7 |Plaintiff's motion. The motions which were granted by the court specifically requested an extension 8 lof time to file objections to discharge, not to the dischargeability ofa debt. The prayer in the motion, 9 than tts title, controls. Therefore, to the extent that this court’s order may have been relied 10 by plaintiff as extending his time to object to the dischargeability of his particular debt, the 11 |reliance was misplaced in light of the prayer of the motion(s). Moreover, the order, even if in answer 12 prayer to extend the time to file complaints objecting the dischargeability of a debt, would have 13 |lbeen an abuse of discretion as it was based upon an untimely request over which this court had no 14 |idiscretion to grant, except for unusual circumstances, which were not present in this case. 15 Although Rule 4007 is not jurisdictional, the bankruptcy court does not have unfettered 16 |ldiscretion to extend the deadlines in the same, including the requirement that any request to extend 17 deadline must be made before the time has expired. In re Eaton, 327 B.R. 79, 85 (Bankr. N.H. 18 2005); In re Prego Cruz, 323 B.R. 827, 831 (1*. Cir. BAP 2005) (citing Lure Launchers, LLC v. 19 ISpino, 306 B.R. 718 (1" Cir. BAP 2004). See also In re Torres, 336 B.R. 22, 25 (Bankr. P.R. 2005) 20 japplying same principle as to Rule 3002 (c). This court shares the perception expressed by the court 21 iin Eaton, that is, “[1]imitations of time and discretion may impose burdens on the parties.”, and “may 22 jeven lead to unwelcome results, but they prompt parties to act and they produce finality. “ In re 23 |Eaton, 327 B.R. 85, (citing from Taylor v. Freeland & Kronz, 503 U.S. 638, 644, 112 S. Ct. 1644, 118 24 |IL.Ed. 280 (1992)).

25 26 ? This court follows the decision in In re Van Toornburg, 2006 WL 3909929 (Bankr. P.R. 77 || June 26, 2006 (de Jesus, bankruptcy judge), that when a court exercises its discretion in violation of Rules 4004(b) [4007] and 9006 (b)(3), it may reconsider its position and vacate any order granting 28 || an improper extension, either explicitly or impliedly.

1 Conclusion 2 In view of the foregoing, the court finds that the complaint objecting to the dischargeability 3 Jof Plaintiffs debt is time barred. Therefore, Defendant’s motion to dismiss is hereby GRANTED. 4 The clerk shall enter judgment accordingly. 5 SO ORDERED. 6 In San Juan, Puerto Rico, this By of March 2009. 7 8

i EWRIQ . LAMOUTT 11 U.S. Bankruptcy Judge 12 .

14 45 16 17 18 19 20 21 22 23 24 25 . 26 27 28