Opinion ID: 730866
Heading Depth: 2
Heading Rank: 1

Heading: Whether creditor's complaint was untimely

Text: 14 The initial deadline for filing nondischargeability complaints was on or before July 21, 1992. Because creditor did not file his nondischargeability complaint until October 20, 1992, debtor argues that the Bankruptcy Court should have dismissed the complaint as untimely. Although the Bankruptcy Court issued an order on July 23, 1992 granting the trustee's July 20, 1992 motion to extend the deadline for filing non-discharge complaints to October 21, 1992, debtor urges that this order did not and could not extend to creditor more time in which to file his complaint. 15 Because debtor's claim requires interpretation of both the Bankruptcy Court's July 23, 1993 order and provisions of the Bankruptcy Code, it presents questions of law. We therefore review de novo the refusal of the Bankruptcy Court to dismiss creditor's complaint. See Stewart v. East Tenn. Title Ins. Agency, Inc. (In re Union Sec. Mortgage Co.), 25 F.3d 338, 340 (6th Cir.1994).1. Whether the Bankruptcy Court meant to grant a time extension 16 Debtor first asserts that the combined terms of the trustee's motion and the Bankruptcy Court's order demonstrate that the Bankruptcy Court (1) granted only to the trustee an extension of time in which to object under 11 U.S.C. § 727(c) to the discharge of the debtor, and (2) did not grant to all creditors an extension of time in which to file complaints under 11 U.S.C. § 523 to determine the dischargeability of debts. Debtor notes that the trustee's motion for an extension of time referred only to the trustee and to non-discharge complaints, did not mention creditors, and did not state under which rule or statute the trustee was proceeding. Debtor also urges that the order of the Bankruptcy Court, which provided that the Trustee in bankruptcy for James A. Brady shall, on behalf of the estate and all unsecured or undersecured creditors of the estate, have through and including October 21, 1992 in which to file non-dischargeability complaints in the aforesaid case, revealed a plain intent to grant an extension of time only to the trustee, rather than to creditors. Because a trustee may object to the ultimate discharge of a debtor, see 11 U.S.C. § 727(c)(1), but cannot file nondischargeability complaints regarding particular debts, see Bankruptcy Rule 4007(a), debtor concludes that the motion and order at issue did not seek to provide creditors with additional time in which to file nondischargeability complaints. 17 We cannot agree that the creditors never received an extension of time in which to file nondischargeability complaints. As noted, the Bankruptcy Court indicated in a January 12, 1993 order that the order granting the trustee's motion in fact extended the time for all creditors to file nondischargeability complaints. Although the order and the trustee's motion are somewhat ambiguous, they are able to bear the interpretation of the Bankruptcy Court. The motion referred to a non-discharge complaint, not to an objection to discharge. Further, the order provided that the trustee had secured additional time for filing nondischargeability complaints on behalf of the estate and all unsecured or undersecured creditors of the estate. We therefore decline to contradict the Bankruptcy Court's interpretation of its own order. 18 2. Whether the Bankruptcy Court could grant a time extension 19 Debtor argues in the alternative that, regardless of the actual intent of the trustee and the Bankruptcy Court, the July 23, 1992 order is invalid because the trustee lacked standing to request an extension of time on behalf of any creditor to file a nondischargeability complaint. 20 Bankruptcy Rule 4007(a) states that [a] debtor or any creditor may file a complaint with the court to obtain a determination of the dischargeability of any debt. Likewise, 11 U.S.C. § 523(c)(1) allows creditors to request determinations regarding the dischargeability of certain debts. Bankruptcy Rule 4007 controls the timing of such dischargeability complaints: 21 (c) Time for filing complaint under § 523(c) in chapter 7 liquidation and chapter 11 reorganization cases; notices of time fixed 22 A complaint to determine the dischargeability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a). The court shall give all creditors not less than 30 days notice of the time so fixed in the manner provided in Rule 2002. On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired. 23 Bankruptcy Rule 4007(c) (emphasis added). 24 Debtor asserts that a Chapter 7 trustee may not move to extend the time for creditors to file nondischargeability complaints because a Chapter 7 trustee is not a party in interest under Rule 4007(c). Debtor emphasizes that the Fourth Circuit already has reached this precise conclusion. See In re Farmer, 786 F.2d 618 (1986); see also Fed. Deposit Ins. Corp. v. Kirsch (In re Kirsch), 65 B.R. 297, 300 (Bankr.N.D.Ill.1986) (following Farmer ). For the reasons that follow, however, we reject the holding of the Fourth Circuit in Farmer and hold that a Chapter 7 bankruptcy trustee has standing under Rule 4007(c) to move for an extension of time on behalf of creditors to file nondischargeability complaints. 25 The Farmer opinion stresses that a trustee lacks a statutory basis for asserting an interest in extending the time for filing nondischargeability complaints because a trustee may not file such complaints on behalf of a creditor. See Farmer, 786 F.2d at 620. The Farmer opinion is correct that a trustee may not file a nondischargeability complaint. The fact remains, however, that while Bankruptcy Rule 4007(a) explicitly restricts the ability to file complaints to debtors and creditors, Bankruptcy Rule 4007(c) more broadly provides that any party in interest may move for an extension of time in which to file nondischargeability complaints. See In re Linn, 88 B.R. 365, 368 (Bankr.W.D.Okla.1988) (noting that restriction of the meaning of Rule 4007(c) would make the difference in the phrasing of Rule 4007(a) and 4007(c) meaningless). Further, Farmer itself indicated that a parent company whose wholly-owned subsidiary is a creditor of a Chapter 7 debtor is a party in interest under Rule 4007(c) even though the parent company cannot file a dischargeability complaint. See Farmer, 786 F.2d at 620 n. 2. Even under Farmer, therefore, the inability to file a nondischargeability complaint does not preclude the ability to request additional time to file such a complaint. 26 Farmer attempts to distinguish a trustee and a parent company by asserting that a trustee, unlike a parent company, has no economic interest in obtaining an extension of time for creditors to pursue the nondischargeability of their claims because nondischargeable debts are not satisfied through the assets of the estate. See Farmer, 786 F.2d at 620-21 (quoting In re Overmyer, 26 B.R. 755, 758 (Bankr.S.D.N.Y.1982)). This crucial assumption is, we believe, incorrect: nondischargeable debts do share in estate distributions pro rata with dischargeable debts of the same class. In re Myers, 168 B.R. 856, 861 (Bankr.D.Md.1994) (acknowledging Farmer as binding precedent but criticizing it and holding that Chapter 11 trustee and creditors' committee have standing under Rule 4007(c)); see also Spilka v. Bosse (In re Bosse), 122 B.R. 410, 416 n. 3 (Bankr.C.D.Cal.1990) (noting that creditor with nondischargeable debt may participate in distribution of estate assets under 11 U.S.C. § 726(a)(2)(c), and claiming that Farmer and the precedent upon which it relies ignore legislative history and reveal no statutory analysis or policy considerations). 27 Similar to Myers, supra, another court has distinguished Farmer in order to hold that a creditors' committee in a Chapter 11 case has standing to request an extension of time for all creditors to file nondischargeability complaints. See In re Linn, 88 B.R. 365 at 368. To distinguish Farmer, the Linn Court in part emphasized the differences between Chapter 7 and Chapter 11 proceedings. See id. Rule 4007(c) itself, however, does not differentiate between Chapter 7 and Chapter 11 cases when referring to a party in interest. If the analysis in Farmer does define a party in interest according to whether the debtor happens to be proceeding under Chapter 7 or Chapter 11, it invests Rule 4007(c) with a directive not present in the explicit language of the rule. 28 Admittedly, while 11 U.S.C. §§ 1109(b) and 1121(c) expressly include a trustee within the definition of a party in interest for the purposes of Chapter 11 proceedings, see Farmer, 786 F.2d at 620 n. 1, the Code lacks a similar provision for the purposes of Chapter 7 proceedings. See id. The Code, however, never defines a party in interest at all for the purposes of Chapter 7. Indeed, sections 1109(b) and 1121(c) are the only provisions in the Code which define a party in interest. The lack of a provision explicitly defining a party in interest to include a trustee for the purposes of Chapter 7 therefore does not demonstrate that a trustee is a party in interest only in Chapter 11 proceedings. 29 Depriving the trustee of standing to secure additional time for creditors to file nondischargeability complaints could undermine the efficient administration of bankruptcy proceedings. For example, some Chapter 7 cases will involve hundreds or perhaps even thousands of creditors who suspect that they have suffered from an elaborate scheme of consumer or securities fraud by the debtor. Forcing each creditor to file an individual motion for an extension of time in which to investigate the basis for a nondischargeability complaint would impose a costly, time-consuming and confusing burden upon the parties and the court. This burden is unnecessary if the trustee, a unique party with comprehensive knowledge of the case and the best ability to communicate with other interested parties, can file a single motion on behalf of all creditors. Further, allowing the trustee to request an extension of time under Rule 4007(c) will not delay bankruptcy proceedings unnecessarily because parties requesting such an extension still must demonstrate some minimally sufficient showing of cause for the extension. E.g., In re James, 187 B.R. 395, 397 (Bankr.N.D.Ga.1995); In re Dekelata, 149 B.R. 115, 116 (Bankr.E.D.Mich.1993). 1 30 The fact that a Chapter 7 trustee has a duty under 11 U.S.C. § 704 to investigate the financial affairs of a debtor further suggests that a trustee has standing under Rule 4007(c) to move to extend the time needed for such an investigation. Although Farmer dismisses this investigatory duty as unable to give the trustee power that another portion of the Code denies, see Farmer, 786 F.2d at 621, whether the Code or the Rules in fact deny a trustee the ability to secure more time to determine the appropriateness of nondischargeability complaints is the very issue at hand. 31 We conclude therefore that because the trustee successfully secured on his behalf an extension of time in which to file, creditor did not file a late nondischargeability complaint. Cf. Marshall v. Demos (In re Demos), 57 F.3d 1037, 1037-040, 1040 n. 5 (11th Cir.1995) (creditor could rely upon validly entered court order granting motion by Chapter 7 trustee to extend the time for all creditors to file nondischargeability complaints); but cf. Flanagan v. Herring (In re Herring), 116 B.R. 313, 315 (Bankr.N.D.Ga.1990) (declining to reject Farmer but nonetheless holding that creditor reasonably relied upon order granting trustee's motion for extension of time for all creditors to file nondischargeability complaints when debtor failed to appeal the order). 2 In view of this finding, it is unnecessary to address the claim by creditor that the Bankruptcy Court could employ 11 U.S.C. § 105 to extend sua sponte the time in which creditor had to file an otherwise untimely nondischargeability complaint. 32