Pablo Lopez Baez v. Ridel Alegre Fernandez Rosado

Opinion

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

PABLO LOPEZ BAEZ : ADVERSARY NO. 08-0029 Plaintiff : VS. Defendant : This adversary proceeding is before the court upon the motion to dismiss filed by Ridel Alegre lFerndndez Rosado (the “Defendant”) on December 14, 2008 (Docket No. 28) alleging that this action fis time barred pursuant to Fed. R. Bankr. P. 4004 (b) and 4007(c) and that the Order entered by the on January 15, 2008 (Docket No. 31 in lead case No. 07-0587 1)' was unduly entered and lloranted. Dr. Pablo Lopez Baez (the “Plaintiff”) filed an opposition to the motion to dismiss on December 31, 2008 (Docket No. 35). For the reasons set forth below the motion to dismiss is igranted. Facts and Procedural Background Defendant Ridel Alegre Fernandez Rosado filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code on October 9, 2007. Plaintiff was scheduled as an unsecured creditor and included the master address list. Plaintiff was duly notified of the filing of the bankruptcy case, the date of 341 meeting and the deadline to file objections to the discharge and to the dischargeability of idebts. The 341 meeting of creditors was initially scheduled for November 1, 2007 (Docket No. 4 in 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 and subsequently continued to December 13, 2007 (Docket No. 12 in lead case) and January 2008 (Docket No. 20 in lead case). The deadline to file objections to the discharge and the idischargeability of debts was December 31, 2007 (Docket No. 4 in lead case). On December 18, 2007 the U.S. Trustee filed a motion to extend the deadline to file Jobjections to the discharge pursuant to the provisions ofthe Bankruptcy Code, 11 U.S.C. §§707(b)(1), 1707(b)(3) and 727 (Docket No. 15 in lead case). The court granted the U.S. Trustee’s motion on [December 19, 2007 (Docket No. 16 in lead case). On December 31, 2007 creditor Juan Botello filed motion requesting an extension to file a complaint objecting to the debtor’s discharge (Docket No. in lead case). The court granted Juan Botello’s motion on January 1, 2008 (Docket No. 24 in lead Hl case). On January 8, 2008 Plaintiff in conjunction with Dr. Osiris Delgado and Emma Teresa /Benitez, filed a motion captioned “Motion Requesting Amendment to Order Extending Deadlines to Objections to Dischargeability”’(Docket No. 27 in lead case). The motion prayed that “the orders llextending the deadlines to file objections to discharge be amended to be extensive to all creditors and any such objections be filed on or before February 29, 2008.” The court granted the motion filed Plaintiff on January 15, 2008 (Docket No. 31 in lead case). On February 27, 2008, Plaintiff filed the present adversary proceeding alleging that the debt by Defendant to Plaintiff not dischargeable under the provisions of 11 U.S.C. §523(a)(2)(A). }On March 27, 2008, Defendant submitted a motion requesting an extension of 45 days to answer the icomplaint to be computed from the due date (March 27, 2008) to answer such complaint (Docket No. 6). The court entered an Order granting the extension to answer the complaint on March 31, 2008 (Docket No. 7}. On August 9, 2008 Defendant filed a motion requesting an additional extension of of 30 days to answer any pending matters in this case, including the complaint (Docket No. 12). The court entered an Order granting the additional extension of time to answer any pending matters August 15, 2008 (Docket No. 15). Defendant filed the answer on September 2, 2008 (Docket No. On November 25, 2008, Plaintiff filed a motion for leave to amend complaint (Docket No. 27). Subsequently, on December 30, 2008 Defendant filed its answer to the amended complaint (Docket

No. 34). On December 14, 2008 Defendant filed a “Motion to Dismiss Complaint” (Docket No. 28) alleging that Plaintiff's action is time barred by Fed. R. Bankr. P. 4004(a) and 4007 (c), which must be tread in conjunction with Fed. R. Bankr. P. 9006(b)\(3). Thus, Defendant sustains that the order entered by the court on January 15, 2008 (Docket No. 31 in lead case No. 07-5871) was unduly entered and igranted. The Plaintiff filed an opposition to the motion to dismiss on December 31, 2008 (Docket No. in which he argues that the other creditors could rely on previous court orders granting the separate independent requests for time extensions filed by the U.S. Trustee and Juan Botello (unsecured creditor) to file objections to the discharge within the time limits established by Fed. R. Bankr, P. 4004(a) and 4007(c) despite the fact that Plaintiff did not participate in these previous motions to request fan extension of time. Applicable Law and Analysis Extension of Time to □□ ile a Complaint Objecting to Debtor’s Discharge or Dischargeability of Debts in a Chapter 7 Liquidation Fed. R. Bankr. P. 4004(a) and 4007(c) establish a sixty (60) day time limit within which a Hicreditor may file a complaint to dispute the discharge of the debtor under §727(a) of the Bankruptcy Code and the dischargeability of debts under §523(c) of the Bankruptcy Code in Chapter 7 cases. This limit begins to run from the first date set for the meeting of creditors under §341(a) of the Bankruptcy Code. Fed. R. Bankr. P. 4004(a) and 4007(c). In addition, Fed. R. Bank. P. 9006(b)(3) ilimits the bankruptcy court’s discretion in certain circumstances by providing, inter alia, that a bankruptcy court may enlarge the-time for filing a complaint under 4004(a) and 4007(c) to the extent under the conditions permitted under such rules. See Fed. R. Bankr. P. 9006(b)(3); Vazquez v. (In re Cruz), 323 B.R. 827, 831 (Bankr. D. PR. 2005). In this particular adversary proceeding, ithe Plaintiffis objecting to the discharge of a particular debt under the provisions of §§523(a)(2)(A) jand 523(a){4), thus the applicable rule is Fed. R. Bank. P. 4007(c). There is “almost universal agreement that the provisions of Fed. R. Bankr. P. 4007(c) are limandatory and do not allow the Court any discretion to grant a late filed motion to extend time to file 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 Tatum, 60 B.R. 335, 337 (Bankr. D. Colo. 1986). These extraordinary circumstances are not present i1 the case at hand. Fed. R. Bankr. P. 4004(b) provides that a court for cause may extend the filing deadline to file jacomplaint objecting to discharge under §727(a) of the Bankruptcy Code if the motion is filed before time has expired. Fed. R. Bankr. P. 4004(b). There are five basic requirements to Rule 4004(b): (1) that a motion be filed; (2) by a party in interest; (3) that the order be entered after hearing on inotice; (4) that the extension be for cause; and (5) that the motion be filed before the time has expired. 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 licircumstances compelling an order under 11 U.S.C. § 105(a), the court may not act sua sponte. The Imotion for extension must be filed before the period has expired because Rule 4004(c) and 11 U.S.C. 4§727(a) expressly state that the Court shall forthwith grant a discharge upon the expiration of the time fixed for filing a complaint objecting to discharge.” In re Amezaga, 192 B.R. at 40. See also Inre 289 F.3d 540, 542 (8 Cir. 2002). Plaintiff in his “Opposition to Dismiss Complaint” cites the case of In re Demos, 57 F. 3d 11037 (11" Cir. 1995) to sustain that creditors may rely upon an order of the court granting an flextension of time for filing nondischargeability complaints even if the creditors did not participate the motion. Plaintiffs reliance is misplaced because in Demos the motion requesting that an lextension of time be granted was not filed pursuant to Fed. R. Bankr. P. 4004 but under §105 of the 4

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

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

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

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

? 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 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. 6 In San Juan, Puerto Rico, this By of March 2009. 7 8

i EWRIQ . LAMOUTT U.S. Bankruptcy Judge .

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