Court Opinion

ID: 3189027
Source: CourtListenerOpinion
Date Created: 2016-03-25 20:00:28.310857+00
Date Added: 2024-06-11T14:35:39.243007
License: Public Domain

United States Court of Appeals
                         For the First Circuit

No. 14-2340

              IN RE:    JULIO ENRIQUE GIL-DE LA MADRID

                                Debtor,

                  JULIO ENRIQUE GIL-DE LA MADRID,

                         Plaintiff, Appellant,

                                   v.

                       BOWLES CUSTOM POOLS & SPA,

                          Defendant, Appellee.

           APPEAL FROM THE UNITED STATES DISTRICT COURT
                  FOR THE DISTRICT OF PUERTO RICO

          [Hon. Francisco A. Besosa, U.S. District Judge]

                                 Before

                  Thompson, Hawkins,* and Barron,
                          Circuit Judges.

      Maximiliano Trujillo-Gonzalez was on brief for appellant.
      José Vázquez García was on brief for appellee.

*   Of the Ninth Circuit, sitting by designation.
March 25, 2016
           HAWKINS, Circuit Judge.             This appeal arises from a

dispute whether the bankruptcy court erred in enlarging time for

a creditor to file an unsecured claim.              Appellant Julio Enrique

Gil-De La Madrid, debtor to Appellee Bowles Custom Pool & Spa,

appeals   the   district    court's    order      affirming   the   bankruptcy

court's decision to permit Bowles to file an unsecured claim after

the initial statutory ninety-day deadline from the date of the

initial creditors' meeting had passed.1              Because this deadline

fell in a period between the case's dismissal and subsequent

reinstatement, the bankruptcy court reset the deadline to account

for the time the case was dismissed and accepted Bowles's claim as

timely.   We affirm.       We also deny Bowles's motion for attorney

fees, costs, and/or sanctions.

                             I.    Background

           After   Appellant      filed     for     Chapter   13    bankruptcy

protection, the bankruptcy court set July 19, 2012, as the deadline

for creditors to file unsecured claims.              On June 13, 2012, the

bankruptcy court granted the trustee's motion to dismiss the case.

Pursuant to Appellant's motion for reconsideration, however, the

1 Appellant's opening brief also argues against the propriety of
an 115,000 dollar attorney fee judgment ordered by a Florida court
against him. As Bowles points out, however, such a question was
not raised below and Gil-De La Madrid does not demonstrate why it
should be addressed on this appeal, let alone by this circuit. We
therefore do not consider it.

                                      -3-
case was reinstated on August 1, 2012, after the July 19 deadline

had passed.   When Bowles sought leave to file an untimely unsecured

claim on August 7, 2012, explaining it had assumed the July 19

deadline was no longer operative after the case's June dismissal,

the bankruptcy court reset the filing deadline to September 6,

2012, and accepted Bowles's claim.     The district court affirmed

this decision and entered final judgment.

                       II. Standard of Review

           A bankruptcy court order on appeal from the district

court is reviewed directly.   We disturb its factual findings only

if clearly erroneous, but apply de novo review to its conclusions

of law.   In re Furlong, 660 F.3d 81, 86 (1st Cir. 2011).

                          III. Discussion

     A. Bankruptcy Court's Discretion to Enlarge Time

           A proof of claim filed under 11 U.S.C. § 501 is deemed

permissible unless a party in interest objects.         Federal Rule

3002(c) of Bankruptcy Procedure lists six exceptions to the rule

that an unsecured creditor's proof of claim is timely in a Chapter

13 case "if it is filed not later than 90 days after the first

date set for the meeting of creditors called under § 341(a) of the

Code."2   Rule 9006, on computing time in accordance with time

2 These exceptions include: (1) claims by governmental units; (2)
extensions for infants or incompetent persons; (3) claims that
become allowable as a result of judgment; (4) claims arising from
rejection of an executory contract or unexpired lease; (5) claims

                                -4-
limits set forth elsewhere in the Federal Rules of Bankruptcy

Procedure, expressly confines the bankruptcy court's jurisdiction

to enlarge time for filing proofs of claim to the conditions stated

under Rule 3002(c).   Fed. R. Bankr. P. 9006(b)(3).    None of this

rule's enumerated exceptions apply in this instance.   In addition,

Rule 9006(a)(1)(B) is clear that in computing the ninety-day

period, the court should "count every day, including intermediate

Saturdays, Sundays, and legal holidays."   The text further states

that even a day on which the clerk's office is inaccessible should

be counted, unless such a day happens to be the last of the ninety

days.   Fed. R. Bankr. P. 9006(a)(3).   The rule does not, however,

address how time should be computed in the event of a case's

dismissal and subsequent reinstatement.

           An order dismissing a bankruptcy case does not in and of

itself end the "case."   The order of dismissal may be, as it was

here, overturned following a timely motion for reconsideration,

see Fed. R. Bankr. P. 9023, 9024, or notice of appeal, see Fed. R.

Bankr. P. 8002.   If the dismissed case is reinstated in that way,

then it is still the same "case" when it comes back to life.    See

In re Gardenhire, 209 F.3d 1145, 1146 (9th Cir. 2000).    And thus,

if the court has set the first date for the creditor's meeting in

for which there were previously insufficient assets, but now may
be payable; and (6) claims by creditors notified of the deadline
at a foreign address.

                                -5-
that case, the reversal of the order of dismissal does not permit

a new "first" date for a meeting of creditors to be scheduled.

Accordingly, the ninety-day filing period for the revived case is

the same one that had been established before the dismissal of

that case.

             No circuit has held, however, that in a case that is

dismissed after the petition is filed and then reinstated after

the ninety-day period has run, a creditor must file while the case

is dismissed in order for the claim to be timely filed.                   In re

Gardenhire, 209 F.3d at 1148, involved a case that was revived

before     the    bar    date    had   passed.       In     closely   analogous

circumstances      (concerning     time    for   filing     nondischargeability

complaints rather than proofs of claims), the Fifth Circuit has

rejected the idea a creditor must file even when the case has been

dismissed.       See In re Dunlap, 217 F.3d 311, 314-17 (5th Cir. 2000);

Matter of Coston, 987 F.2d 1096, 1099 (5th Cir. 1992).                   Nor are

we aware of any lower court that has held otherwise.                     Rather,

district    courts      and   bankruptcy   courts    have    routinely   allowed

claims to be filed after reinstatement.             See In re Santos, No. 11–

05567 (MCF) 2012 WL 1570070 (Bankr. D.P.R. May 3, 2012); In re

Gulley, 400 B.R. 529 (Bankr. N.D. Tex. 2009).               And this precedent

-- which aims to further the sensible administration of bankruptcy

cases -- has roots that stretch back nearly a quarter of a century.

                                       -6-
See In re Gulley, 400 B.R. at 538-39 (discussing Matter of Coston,

987 F.2d 1096 (5th Cir. 1992)).

           We can see why this allowance has been made.        Indeed,

this is not the only context in which a filing clock has been

adjusted to account for the period of the case's dismissal.        See

Price v. Wyeth Holdings Corp., 505 F.3d 624, 630-31 (7th Cir. 2007)

("The most obvious problem with Price's argument is that it rests

on the illogical premise we have already rejected:           that the

removal clock somehow continues to run after a lawsuit has been

voluntarily dismissed.").    To be sure, a claim could be filed

during the time that the case is dismissed, and filing a claim is

not a terribly onerous task.    See In re Gardenhire, 209 F.3d at

1152 (citing In re Edelman, 237 B.R. 146, 154 n.8 (B.A.P. 9th Cir.

1999)).

           But Rule 9024 appears to permit the debtor to seek

reinstatement on an open-ended time frame -- and thus even after

the ninety-day period has ended.        If the dismissal has no effect

on the calculation of the ninety days, creditors would seemingly

have to file their claims during the ninety-day period in every

dismissed case in order to protect against the remote chance that

a case might come back to life long after the ninetieth day has

passed.   It is hard to believe that the drafters envisioned Rules

3002, 9006, and 9024 working together in a way that would require

creditors to engage in such wasteful activity, especially when the

                                  -7-
order of dismissal frees creditors to return to their ordinary

means of collection.

            The bankruptcy court here was guided by principles of

equity to recalculate the filing deadline.           See In re Santos, 2012

WL 1570070 (Bankr. D.P.R. May 3, 2012) (proper to enlarge time and

accept a purportedly untimely filed claim, where the initial

deadline fell between the case's dismissal and its reinstatement);

In re Gulley, 400 B.R. at 535 ("[B]ankruptcy courts have the power

to nullify original case deadlines and recalculate them when there

has been the extenuating circumstance of disruption of a case

(e.g., when there has been a stay in or a dismissal of a case),

but bankruptcy courts do not have the power to extend or toll

deadlines generally on any equitable grounds.").

            We agree with the decision below insofar as the drafters

of the Rules could not possibly have intended the result that

Appellant   asks   us   to   reach,   in     which   it   appears   he   sought

reconsideration under Rule 9024.            Cf. Lamie v. U.S. Trustee, 540

17 U.S. 526, 534 (2004) ("It is well established that when the

statute's language is plain, the sole function of the courts -- at

least where the disposition required by the text is not absurd --

is to enforce it according to its terms." (internal quotation marks

and citation omitted)) (emphasis added); United States v. Dowdell,

22 595 F.3d 50, 71 (1st Cir. 2010) ("it is a well-established canon

of statutory construction that a court should go beyond the literal

                                      -8-
language of a statute if reliance on that language would defeat

the plain purpose of the statute" (quoting Bob Jones Univ. v.

United States, 461 U.S. 574, 586 (1983)).

             Yet, we see two possible avenues to finding Bowles's

claim timely filed.          One is that the days which pass during a

case's dismissal period simply should not be counted towards the

ninety days.     The creditor would thus have, upon reinstatement,

the balance of days that were left on the ninety-day clock at the

time of the dismissal to file a claim.                Indeed one could read the

bankruptcy rules as inoperative during a case's dismissal, for

parties should not be routinely expected -- especially without

clear statutory or court-issued notice -- to treat a dismissed

case as still active.

             The second possible approach is that the days that pass

during dismissal should count towards the ninety days, but that

the   bankruptcy     court    nevertheless      may    exercise   its   equitable

powers under 11 U.S.C. § 105(a) to set a new bar date if the

original one expired while the case was dismissed.                 In this way,

the bankruptcy court could account for the anomaly.                     See In re

Nosek, 544 F.3d 34, 44 (1st Cir. 2008) ("§ 105(a) has been referred

to as a 'catch-all' provision, effectively filling gaps in the

bankruptcy    code    in     order   to    preserve     the   integrity   of   the

bankruptcy system." (quoting Cuevas-Segarra v. Contreras, 134 F.3d

458, 459 (1st Cir. 1998))).

                                          -9-
              Here, we need not choose between the two approaches.

Bowles filed its claim outside the ninety-day period, but just six

days after the reversal of the order of dismissal.               The filing of

the   claim    was   thus   timely   under   either   of   the   two   possible

approaches.     Accordingly, we affirm the district court, but leave

for another day the question of whether, in a case in which the

order of dismissal is reversed before the ninetieth day has passed,

no day during the period of dismissal should be counted as a day

like "every" other, see Fed. R. Bankr. P. 9006(a)(1)(B); In re

Gardenhire, 209 F.3d at 1152.

      B. Bowles's Motion for Fees, Costs, and Sanctions

              Arguing that this appeal is frivolous, Bowles moves

under Rule 38 of Appellate Procedure and in the alternative under

28 U.S.C. § 1927 for payment of costs and attorney fees.                   That

rule provides that "if a court of appeals determines that an appeal

is frivolous, it may, after a separately filed motion or notice

from the court and reasonable opportunity to respond, award just

damages or single or double costs to the appellee."              Section 1927,

by contrast, specifically penalizes attorney conduct, such that

"[a]ny attorney . . . who so multiplies the proceedings in any

case unreasonably and vexatiously may be required by the court to

satisfy personally the excess costs, expenses, and attorney's fees

reasonably incurred because of such conduct."

                                      -10-
            According to Bowles, this appeal was filed purely as a

delay tactic to keep creditors at bay, and has no basis in law or

fact. Bowles further argues that Appellant's attempt to raise

before this court an objection to the imposition of attorney fees

in the state of Florida "is a sign of temerity which warrants a

finding that the appeal is frivolous."

            The failure to engage substantively with cases on which

a lower court has based its decision has, in the past, merited

sanctions in this court.              See Natasha, Inc. v. Evita Marine

Charters, Inc., 763 F.2d 468, 472 (1st Cir. 1985) ("An appeal is

frivolous when the result is obvious, or the arguments are 'wholly

without merit.'") (internal citation and quotation marks omitted).

This court has also granted fees in instances where an appeal had

been    brought    solely     for   an   improper     purpose    to   delay   legal

proceedings.       Alessandri v. April Ind., Inc., 934 F.2d 1, 3 (1st

Cir. 1991).

            Here,    however,       Appellant's      arguments   concerning      the

express language of the Rules of Bankruptcy Procedure are not

altogether frivolous.          While we interpret them to allow for the

recalculation of time in this case, Rules 3002(c) and 9006 do

narrowly define the scope of circumstances in which courts may

reset   claim     filing    deadlines.          Bowles   furthermore    offers   no

evidence    that     either     Appellant       or   his   counsel     engaged   in

                                         -11-
unreasonable     or   vexatious    behavior   meriting   sanctions.   We

therefore deny this motion.

                             IV.    Conclusion

             For the aforementioned reasons, we affirm the bankruptcy

court's decision to extend the filing deadline and accept Bowles's

claim as timely.        We deny Bowles's motion for costs, fees, and

sanctions.

             AFFIRMED

                                    -12-