Opinion ID: 660686
Heading Depth: 2
Heading Rank: 1

Heading: The Timeliness of the Bank's Objection to Nasser

Text: Farouki's Discharge 10 The Bank timely filed a motion for enlargement of time in which to file a complaint objecting to the debtor's discharge pursuant to Bankruptcy Rules 4004(a) and (b) and 9006(b)(3). Rule 4004(a) provides: 11 In a chapter 7 liquidation case a complaint objecting to the debtor's discharge under Sec. 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 Sec. 341(a). 12 Rule 9006(b)(3) provides in pertinent part: 13 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. 14 Rule 4004(b) allows the bankruptcy court, on the motion of any party in interest, to extend the time for filing a complaint objecting to discharge for cause. Such a motion shall be made before such time [60 days] has expired. The Bank filed its motion for enlargement on May 11, 1987, the last day of the applicable 60 day time period. 15 Nasser Farouki has argued that, under Rule 4004, the Bank's complaint objecting to his discharge was not timely filed. When counsel for the Bank failed to appear at 10:00 a.m., the time fixed for the hearing on the Bank's motion for enlargement of time, the judge denied that motion. The creditors filed a motion for reconsideration that same day. The court, finding the 25 minute delay excusable due to transportation difficulties, granted the motion for reconsideration on September 1, 1987. Nasser Farouki has argued that the judge's initial denial of the Bank's motion for enlargement closed the applicable time period and that any subsequent action by the Bank regarding the discharge was precluded by that closure and hence of no effect. 16 Farouki's argument has both a procedural and a substantive aspect. Putting the merits of his claim aside for the moment, it may well be that Farouki waived his claim asserting the untimeliness of the Bank's complaint because he made that claim for the first time on appeal. Under the rule established in In re Santos, 112 B.R. 1001, 1008 (Bankr. 9th Cir.1990), the timeliness of a dischargeability complaint presents an affirmative defense that must be raised in an answer or responsive pleading.... If the defense is not raised in the answer or responsive pleading, it is generally waived. 6 Farouki did not raise the defense of untimeliness until he appealed to this court. Therefore, the trial court did not have the opportunity to consider the merits of such a defense. Because we find Farouki's argument unpersuasive on substantive grounds, however, we need not rule on the procedural aspect of his claim. 17 As to the merits of his argument, Farouki has suggested that the bankruptcy court did not have jurisdiction to grant the motion for reconsideration because such a ruling violated the strict time limitations imposed by Rule 4004(b). 7 Farouki has asserted that all courts, other than the Ninth Circuit, consider the time period of Rule 4004 to be a jurisdictional requirement. 8 Discussing Santos, supra, an opinion rejecting the jurisdictional argument, Farouki has asserted that the Ninth Circuit's decision represents a minority position supporting the conclusion that the time periods delineated in Rule 4004 are non-jurisdictional. Farouki has provided no basis for such an assertion. Santos was decided by the United States Bankruptcy Appellate Panel of the Ninth Circuit. The case analogizes Rules 4004(a) and 4007(c), holding that the deadlines for filing dischargeability complaints and objections to discharge set forth in Rules 4007(c) and 4004(a) are not jurisdictional time limits. 112 B.R. at 1006. 9 In support of its holding, the court refers to the structure and policy of 4007(c), the relevant statutory scheme, and the purposes and policies underlying the bar date. The Santos court concludes that the total preclusion of equitable relief would be inconsistent with those Panel cases which recognize, in dicta, that relief from the bar date should be allowed in extraordinary cases. Id. at 1006. 18 In opposition, Farouki has offered In re Barley, 130 B.R. 66, 68 (Bankr.N.D.Ind.1991), which held that the time limits governing filings under Rule 4007(c) and Sec. 9006(b)(3) are jurisdictional, but, again, did not mention Rule 4004. 10 Barley does, however, reject the holding in Santos, concluding that the timeliness of a dischargeability complaint is part and parcel of the creditor's cause of action and not merely a procedural bar that can be waived if not pled. A timely complaint is a jurisdictional prerequisite to a creditor's right to relief. Id. at 69. 19 No Fourth Circuit cases have ruled on the jurisdictional issue. As between Santos and Barley, the former appears to be the more well-reasoned case on the issue, and we believe it should be followed. Under Santos, then, Rule 4004(a) does not preclude the bankruptcy court from exercising its equitable powers in extraordinary cases. The denial of discharge in the instant case was not improper on jurisdictional grounds. It should be made clear, moreover, that we find the bankruptcy and district courts had jurisdiction because the Bank timely filed a motion for enlargement of time to file an objection to discharge. 11 20 Although the Bankruptcy Rules and the case law indicate that courts may not use their discretion to enlarge the time periods at issue in 4004(a) on the basis of excusable neglect, there is no case law regarding the validity of such discretion as applied to motions for reconsideration. The Bank did timely file its motion for enlargement. The issue before the court concerned the judge's discretion to grant a timely motion for reconsideration, not to grant an untimely motion for enlargement, on the basis of excusable neglect. 21 There is no authority specifically governing motions for reconsideration of a denial of a motion for enlargement. Farouki has failed to present a single case holding that a court may not reconsider and ultimately grant a timely filed motion for enlargement based on its own discretion or equitable powers. 12 22 In In re Riso, 57 B.R. 789 (D.N.H.1986), a creditor timely filed a motion to extend the time for filing an objection to discharge from September 7, 1984 to October 27, 1984. The court granted the extension, and the clerk proceeded to mail out a routine order to all the parties erroneously setting a new deadline for filing objections to discharge as December 3, 1984. The creditor relied on the date in the order, filing his objection at the end of November, that is, one month after the court ordered, extended deadline of October 27. In Riso, the district court addressed the issue of whether the bankruptcy court had the equitable power to extend the deadline for filing objections to dischargeability. The court concluded that a bankruptcy court has the inherent equitable power to correct its own mistake to pre[v]ent an injustice. Id. at 793. 13 23 The lawyer for the Bank experienced car trouble and was only 25 minutes late. It is understandable that a judge would deny a motion if he were under the impression that counsel for the moving party did not care enough to show up at court and to make an argument. That was, however, a mistaken impression. Circumstances considered as a whole did not justify a conclusion assigning the fault to the lawyer. The creditors filed a motion for reconsideration the same day the judge denied the motion for enlargement. 14 24 Although the excusable neglect rationale may not be available to excuse a failure to file within the initial time period, 15 we have found no authority suggesting that excusable neglect is not available to justify the grant of a motion for reconsideration filed on the same day that a timely filed motion for enlargement is denied. Such a rule would not be equitable. Therefore, we reject Farouki's arguments that the judge's denial of the Bank's motion for enlargement closed the applicable time period and that further action by the Bank was precluded by that denial.