Salisbury v. Moussa (In Re Moussa)

95 B.R. 449, 20 Collier Bankr. Cas. 2d 1427, 3 Tex.Bankr.Ct.Rep. 319, 1989 Bankr. LEXIS 183, 18 Bankr. Ct. Dec. (CRR) 1400, 1989 WL 11651
CourtUnited States Bankruptcy Court, N.D. Texas
DecidedFebruary 13, 1989
Docket19-40594
StatusPublished
Cited by5 cases

This text of 95 B.R. 449 (Salisbury v. Moussa (In Re Moussa)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Salisbury v. Moussa (In Re Moussa), 95 B.R. 449, 20 Collier Bankr. Cas. 2d 1427, 3 Tex.Bankr.Ct.Rep. 319, 1989 Bankr. LEXIS 183, 18 Bankr. Ct. Dec. (CRR) 1400, 1989 WL 11651 (Tex. 1989).

Opinion

MEMORANDUM OPINION

HAROLD C. ABRAMSON, Bankruptcy Judge.

This opinion addresses the question of whether a plan of reorganization adopted under 11 U.S.C. § 1101 can extend deadlines for creditors’ objections to a debtor’s general discharge. This Court finds that compliance with the procedures of Bankruptcy Rule of Procedure 4004(a) and (b) is the exclusive means of enlarging the time period for filing dischargeability objections under 11 U.S.C. § 727(a). However, the plan of reorganization in the present case extended the time for. filing an objection, and no party objected to the plan of reorganization or the confirmation order. Therefore, the plan because of the doctrine of res judicata bars the debtor’s collateral attack on the order and is binding on all parties. Accordingly, the time period for filing dis-chargeability objections under 11 U.S.C. § 727(a) established under the confirmed plan of reorganization will be given effect. The following constitutes findings of fact and conclusions of law pursuant to Bankruptcy Rule of Procedure 7052.

FINDINGS OF FACT

The debtor, Mr. Stanley A. Moussa (“Moussa”), petitioned for Chapter 11 relief on April 3,1987. Mr. Duke Salisbury (“the Trustee”) was appointed trustee for the estate in September 1987. A hearing on confirmation of the plan of reorganization was set for January 21, 1988; however, this hearing was cancelled to allow the trustee to amend the plan of reorganization. An amended plan was filed on January 29, 1988 and confirmed on March 2, 1988.

Under its terms, the Amended Plan became effective sixty days after becoming a final order. Creditors then had sixty days after the effective date to file objections to Moussa’s discharge. The bar date for objecting to discharge under the Amended Plan was July 11, 1988. On July 8, 1988, *450 the trustee filed an objection to discharge under 11 U.S.C. § 727(a).

DISCUSSION OF LAW

The issue before the Court is whether to give effect to the Plan’s bar date as to objection to discharge of debtor. Moussa argues that the Trustee’s objection is barred under Bankruptcy Rule of Procedure 4004 which governs time limits for filing an objection to the debtor’s discharge. The Trustee responds by noting that the objection was timely filed under the provisions of the Amended Plán; that the Plan itself could be viewed as a timely motion under Rule 4004(b) for extension of the deadline for objections, and that Mous-sa is estopped from challenging the Amended Plan’s extension since Moussa agreed to the extension, and the Trustee relied on it. In deciding, the Court looks first to Bankruptcy Rule of Procedure 4004(a) which limits the time for objecting to discharge under section 727(a).

Rule 4004(a) requires that section 727 objections in a Chapter 11 reorganization be “filed not later than the first date set for the hearing on confirmation.” The facts indicate that the final day for filing objections pursuant to Rule 4004 was January 21, 1988. The Trustee filed his objection on July 8, 1988. Accordingly, under a strict interpretation of Rule 4004, the Trustee’s objection would ordinarily have been time-barred by Rule 4004. 1

The Trustee next argues that the plan itself is a timely request for extension of the deadline. Extensions of the time limits in Rule 4004(a) are governed by Rule 4004(b) which states:

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.

Bankr.R.Proc. 4004(b),

The Trustee cannot use Rule 4004(b) in this situation. Applying the Rule to our facts, the Amended Plan was not a motion, nor was a hearing on notice held concerning the extension. The Trustee’s argument is an afterthought designed to correct an ordinarily time-barred objection. Accordingly, because Rule 4004(b) requires the request for extension to be made “before such time has expired,” the Plan as a request for extension would also be time-barred. 2

The Court’s restrictive interpretation of Rule 4004(b) is mandated by Bankruptcy Rule of Procedure 9006(b)(3) which limits the court’s flexibility in extending time limits in a number of situations. Rule 9006(b)(3) states in relevant part: “The court may enlarge the time for taking action under Rules ... 4004(a) ... only to the extent and under the conditions stated in those rules.” Rules Bankr.Proc.Rule 9006(b)(3).

The case law interpreting Rule 4004 and its companion rule, Rule 4007(c), confirms the necessity of a restrictive approach. The cases start from the proposition that Congress intended to restrict the court’s flexibility in granting extensions of time to file objections to discharge when it created Rule 4004 in 1983. For example, the court refused to allow two creditors to “piggyback” onto an extension filed by another creditor in the case of In re Floyd, 37 B.R. 890 (Bankr.N.D.Tex.1984). See also In re Figueroa, 33 B.R. 298 (Bankr.S.D.N.Y. 1983), In re Puente, 49 B.R. 966 (Bankr.W.D.N.Y.1985) and In re Klein, 64 B.R. 372 (Bankr.E.D.N.Y.1986) for restrictive approaches to Rules 4004 and 4007.

The rationale for limiting the court’s power to grant extensions is discussed in the case of Neeley v. Murchison, 815 F.2d 345 (5th Cir.1987) where the Fifth Circuit refused to allow an objection to discharge filed 10 days after the 60 day period for filing objections under Rule 4007(c) had run. The court stated:

This fixed, relatively short limitation period enables the debtor and creditors to *451 make better-informed decisions early in the proceedings. In Chapter 11 cases, the debtor is better able to formulate a timely reorganization plan and the creditors are better able to evaluate the feasibility of the plan.

Id. at 346-347.

The Trustee’s final argument, that the Debtor should be estopped from challenging the extension granted in the Plan of Reorganization since the Debtor agreed to it, and the Trustee relied on it, has some merit. However, this Court believes res judicata disposes of the issue, giving effect to the Plan’s bar date. In particular, the Court looks to Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir.1987). In Shoaf, the Fifth Circuit held that res judi-cata bars a creditor from challenging the release of a non-debtor guarantor under a plan of reorganization where the creditor did not object to the release until after the confirmation.

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95 B.R. 449, 20 Collier Bankr. Cas. 2d 1427, 3 Tex.Bankr.Ct.Rep. 319, 1989 Bankr. LEXIS 183, 18 Bankr. Ct. Dec. (CRR) 1400, 1989 WL 11651, Counsel Stack Legal Research, https://law.counselstack.com/opinion/salisbury-v-moussa-in-re-moussa-txnb-1989.