Court Opinion

ID: 9373926
Source: CourtListenerOpinion
Date Created: 2023-02-22 16:10:33.912822+00
Date Added: 2024-06-11T17:16:49.766857
License: Public Domain

FILED
                                                                                  OCT 17 2022
                          NOT FOR PUBLICATION                                 SUSAN M. SPRAUL, CLERK
                                                                                U.S. BKCY. APP. PANEL
                                                                                OF THE NINTH CIRCUIT

           UNITED STATES BANKRUPTCY APPELLATE PANEL
                     OF THE NINTH CIRCUIT

In re:                                               BAP No. AZ-22-1053-LBF
LETICIA MIRANDA-GARCIA,
             Debtor.                                 Bk. No. 2:20-bk-08707-EPB

GREG BEST,
                    Appellant,
v.                                                   MEMORANDUM∗
LETICIA MIRANDA-GARCIA; LOTHAR
GOERNITZ, Chapter 7 Trustee,
             Appellees.

              Appeal from the United States Bankruptcy Court
                          for the District of Arizona
          Eddward P. Ballinger, Jr., Chief Bankruptcy Judge, Presiding

Before: LAFFERTY, BRAND, and FARIS, Bankruptcy Judges.

                                 INTRODUCTION

      Creditor Greg Best appeals the bankruptcy court’s order denying his

request to extend retroactively the deadline for filing a § 523(c)1 complaint

      ∗  This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
       1 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532. “Rule” references are to the Federal Rules of
Bankruptcy Procedure, and “Civil Rule” references are to the Federal Rules of Civil
Procedure. “LBR” references are to the Local Bankruptcy Rules for the District of
Arizona.
                                            1
and related relief. Best argued that relief was warranted because, although

he was aware of the deadline, he relied on the chapter 7 trustee’s statement

at the § 341(a) meeting that he would be seeking dismissal of the case for

Debtor Leticia Miranda-Garcia’s failure to appear. But the trustee did not

move to dismiss the case because Debtor informed him that her failure to

appear was due to COVID. A continued § 341(a) meeting was then

scheduled without notice to creditors. The deadline for filing

nondischargeability complaints passed, and the case essentially proceeded

in due course.

      Upon learning that Debtor had received a discharge, Best filed a

motion to reopen and vacate the discharge, which the bankruptcy court

granted. He then filed an untimely adversary proceeding seeking to except

his debt from discharge. Next, he filed motions: (1) for relief from stay and

to abstain from determining Best’s claim, (2) to extend the deadline for

objections to discharge, and (3) to dismiss Debtor’s bankruptcy case.

Debtor moved to reinstate the discharge. The bankruptcy court denied

Best’s motions and granted Debtor’s.

      The primary question underlying the motions was whether, under

the facts before it, the bankruptcy court had the authority to extend the

deadline for Best to file a nondischargeability complaint. The bankruptcy

court found that although mistakes were made by others, in the end it was

Best’s responsibility to track the bankruptcy court docket to ensure that he

filed a timely complaint, and neither the Code nor the Rules, as interpreted

                                       2
by the Ninth Circuit, permitted the bankruptcy court to extend the

deadline in the circumstances.

      We AFFIRM.

                                   FACTS

      Debtor filed a chapter 7 bankruptcy case in July 2020. Lothar

Goernitz was appointed chapter 7 trustee (“Trustee”). Debtor listed Best on

her Schedule F as a nonpriority unsecured creditor holding two

unliquidated claims, and she included Best on her master mailing list. Best

holds a state court judgment in excess of $1 million against Debtor and

others and, as of the petition date, was litigating fraud and related claims

against Debtor in a separate lawsuit.

      The day after Debtor filed her petition, the bankruptcy clerk issued

notice of the date of the First Meeting of Creditors (“First 341 Meeting”)

and the October 30, 2020 deadline for the filing of objections to discharge

and dischargeability complaints. A few days before the First 341 Meeting,

the bankruptcy clerk dismissed the case for Debtor’s failure to pay the

filing fee. Apparently unaware of the dismissal, Best and his state court

counsel appeared for the First 341 Meeting.

      A few days later, Trustee filed a Report of No Distribution, which

contained form language stating:

      I, LOTHAR GOERNITZ, having been appointed trustee of the
      estate of the above-named debtor(s), report that this case was
      dismissed or converted. I have neither received any property
      nor paid any monies on account of this estate. I hereby certify

                                        3
      that the chapter 7 estate of the above-named debtor(s) has been
      fully administered through the date of conversion or dismissal.
      I request that I be discharged from any further duties as
      trustee. . . .
      Nearly a month later, Debtor filed a motion to reinstate the case,

which the bankruptcy court granted. The bankruptcy clerk issued a new

notice of § 341(a) meeting (“Second 341 Meeting”) and of the new deadline

for objections to discharge and nondischargeability complaints, December

18, 2020 (“Bar Date”). It is undisputed that Best had notice of these dates.

Best and his state court counsel appeared at the Second 341 Meeting, but

Debtor did not. Trustee stated on the record he would be moving to

dismiss the case due to Debtor’s failure to appear.

      Trustee never filed a motion to dismiss because, shortly after the

Second 341 Meeting, he received a “frantic phone call” from Debtor in

which she informed him that she had been unable to attend the meeting

because she was dealing with COVID. He nevertheless filed another Report

of No Distribution containing the same language as the first, including the

verbiage that the case had been dismissed or converted. A week later, he

filed a withdrawal of that report, which stated, “Trustee’s Report in a

dismissed case was filed in error.”

      Two weeks later, without notice to interested parties, Trustee

conducted Debtor’s § 341 meeting (“Third 341 Meeting”). Best did not

appear, presumably because he lacked notice.

                                      4
      About a month later, Trustee filed a standard Report of No

Distribution, which indicated that there were no funds for distribution and

that the case had been fully administered. Eventually, the bankruptcy clerk

closed the case and discharged Trustee of his duties. This was followed by

the filing of a Notice that Case Was Closed Without Entry of the Discharge

due to Debtor’s failure to file her Financial Management Course Certificate,

notice of which was provided to Best.

      Three months later, Debtor filed her Financial Management Course

Certificate and a motion to reopen, which the bankruptcy court granted.

Her discharge was entered that same day, and the case was closed shortly

thereafter.

      After receiving notice of the discharge, Best hired counsel and filed a

motion to reopen and vacate the discharge. Although it does not appear

that Debtor filed anything in response to that motion, she appeared at the

initial hearing on the matter to express her opposition, claiming she had

proof that Best had been notified of the Third 341 Meeting.

      The bankruptcy court set the matter for an evidentiary hearing, at

which Trustee and Debtor testified. Trustee conceded that his office had

mistakenly failed to provide notice of the Third 341 Meeting, and Debtor

had no evidence to the contrary. The bankruptcy court thus granted the

motion to vacate the discharge.

      In September 2021, approximately nine months after the Bar Date,

Best filed a complaint seeking a declaration of nondischargeability with

                                      5
respect to his claim under §§ 523(a)(2) and (a)(6). He then filed a motion in

the bankruptcy case seeking relief from stay to liquidate his pending claims

against Debtor in state court and asking the bankruptcy court to abstain

from hearing those claims. He also filed a motion to extend the deadline for

filing objections to discharge, arguing that the bankruptcy court had

authority under § 105(a) to set a new deadline to prevent an abuse of

process.

      Debtor filed a motion under Civil Rule 60, applicable via Rule 9024,

to reconsider the vacatur of the discharge order. In response, Best moved to

dismiss the bankruptcy case on the grounds that Debtor had failed to

appear for her first two meetings of creditors, to provide documents to

Trustee, and to provide notice of the Third 341 Meeting as required by the

Local Bankruptcy Rules for the District of Arizona.

      After a hearing, the bankruptcy court denied Best’s motions and

granted Debtor’s. Best timely appealed.

                              JURISDICTION

      The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and

157(b)(2)(A) and (G). We have jurisdiction under 28 U.S.C. § 158.

                                  ISSUES

      Did the bankruptcy court abuse its discretion in denying Best’s

motion to extend the deadline for filing a nondischargeability complaint?

      Did the bankruptcy court abuse its discretion in granting Debtor’s

motion to reinstate the discharge?

                                      6
      Did the bankruptcy court abuse its discretion in denying Best’s

motion to dismiss Debtor’s case?

      Did the bankruptcy court abuse its discretion in denying Best’s

motion for relief from stay and abstention?

                         STANDARDS OF REVIEW

      The bankruptcy court’s interpretation of the Code and Rules is

reviewed de novo. Kir Temecula, L.P. v. LPM Corp. (In re LPM Corp.), 269

B.R. 217, 220 (9th Cir. BAP 2001), aff’d, 300 F.3d 1134 (9th Cir. 2002). De

novo review means that we review the matter anew, as if the bankruptcy

court had not previously decided it. Francis v. Wallace (In re Francis), 505

B.R. 914, 917 (9th Cir. BAP 2014).

      The bankruptcy court’s rulings on a motion for relief from stay, a

motion to extend the deadline to file a nondischargeability complaint, and

a motion to dismiss a chapter 7 case are all reviewed for abuse of

discretion. Veal v. Am. Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897, 915

(9th Cir. BAP 2011) (relief from stay); Willms v. Sanderson, 723 F.3d 1094,

1103 (9th Cir. 2013) (motion to extend); Mendez v. Salven (In re Mendez), 367

B.R. 109, 113 (9th Cir. BAP 2007) (motion to dismiss). An order granting

reconsideration is also reviewed for abuse of discretion. See First Ave. W.

Bldg., LLC v. James (In re OneCast Media, Inc.), 439 F.3d 558, 561 (9th Cir.

2006) (order denying reconsideration).

      To determine whether the bankruptcy court abused its discretion, we

conduct a two-step inquiry: (1) we review de novo whether the bankruptcy

                                        7
court “identified the correct legal rule to apply to the relief requested”; and

(2) if it did, we consider whether the bankruptcy court’s application of the

legal standard was illogical, implausible, or without support in inferences

that may be drawn from the facts in the record. United States v. Hinkson, 585

F.3d 1247, 1262 (9th Cir. 2009) (en banc).

                                DISCUSSION

      Although the bankruptcy court had several motions before it, the

threshold question affecting all those motions was whether, under the

circumstances, it had the authority to extend retroactively the deadline to

file a nondischargeability complaint. Based on Ninth Circuit authority

placing an affirmative duty on creditors to protect their claims, the

bankruptcy court concluded that Best had not met his burden to show

unique or extraordinary circumstances justifying an extension under Rules

4007(c) or 4004(b), even though Trustee’s actions had created confusion.

This determination supported or mooted the relief requested in the other

motions. As discussed below, the bankruptcy court correctly interpreted

the applicable law.

A.    The bankruptcy court did not abuse its discretion in denying Best’s
      motion to extend the Bar Date.
      Rule 4007(c) provides,

      a complaint to determine the dischargeability of a debt under
      § 523(c) shall be filed no later than 60 days after the first date set
      for the meeting of creditors under § 341(a). The court shall give
      all creditors no less than 30 days’ notice of the time so fixed in

                                        8
      the manner provided in Rule 2002. On motion of a party in
      interest, after hearing on notice, the court may for cause extend
      the time fixed under this subdivision. The motion shall be filed
      before the time has expired.
      Rule 9006(b)(3) provides that a “court may enlarge the time for taking

action under Rule . . . 4007(c) . . . only to the extent and under the

conditions stated in [that rule].”

      Best acknowledges that he had notice of the Bar Date. He

nevertheless relied on Trustee’s representation at the Second 341 Meeting

that he intended to dismiss the case for Debtor’s failure to appear.

Dismissal would have eliminated the Bar Date, and if the case were

reinstated, new deadlines would have been set. Because this did not occur,

and because he was not given notice of the Third 341 Meeting, he argues

the bankruptcy court erred in not granting an extension of the Bar Date.

      But as the bankruptcy court acknowledged, the time limits set forth

in the Bankruptcy Rules are strictly construed. Further, “[a] creditor with

actual knowledge of a bankruptcy case has an affirmative duty to take

action to protect its claim even where it receives no notice of the bar date.”

Wilzig v. Lopez (In re Lopez), 192 B.R. 539, 543 (9th Cir. BAP 1996) (citations

omitted). See also Lompa v. Price (In re Price), 871 F.2d 97, 99 (9th Cir. 1989)

(even though debtor failed to list creditor on bankruptcy schedules, and

creditor received no notice of bar dates, creditor was not entitled to

extension of bar date when his state court counsel had notice of the

bankruptcy filing in time to ascertain the bar date).

                                        9
      A bankruptcy court has no discretion to extend retroactively the

deadline set in Rule 4007(c). Anwar v. Johnson, 720 F.3d 1183, 1186 (9th Cir.

2013). In Anwar, the creditor’s counsel attempted to file nondischargeability

complaints on the last day for doing so but, due to technical problems with

his computer, he missed the midnight deadline by mere minutes. Id. at

1185-86. The Circuit affirmed the bankruptcy court’s dismissal of the

complaints as untimely: “Consistent with the plain language of FRBP

4007(c) and 9006(b)(3), we have repeatedly held that the sixty-day time

limit for filing nondischargeability complaints under 11 U.S.C. § 523(c) is

strict and, without qualification, cannot be extended unless a motion is

made before the 60-day limit expires.” Id. at 1187 (citations and quotation

marks omitted).

      Of course, Anwar is factually distinguishable because in that instance

there was no confusion about the bar date. But, as noted above, even where

a creditor lacks notice of the bar date, that does not automatically entitle

that creditor to a retroactive extension of the bar date. Such an extension

may be warranted only when the court was responsible for misleading the

creditor. In that circumstance, the Ninth Circuit has held that the

bankruptcy court has the equitable power under § 105(a) to correct its

mistake. Anwiler v. Patchett (In re Anwiler), 958 F.2d 925, 929 (9th Cir. 1992),

as amended on denial of reh’g (Apr. 8, 1992). 2

      2
       The Anwar court cited Anwiler but explicitly stated that it was not deciding
whether “external forces that prevented any filings—such as emergency situations, the
                                          10
       In Anwiler, the debtor filed his chapter 7 case in the Central District of

California. The clerk of that court sent out the required notice of § 341(a)

meeting and bar dates for filing complaints to determine dischargeability

of debts and to object to discharge. Thereafter, the case was transferred to

the Southern District of California. The clerk of that court sent out a new

notice with later deadlines. Creditors filed a nondischargeability complaint

after the earlier deadline but before the latter. Nevertheless, the bankruptcy

court dismissed the complaint as untimely because it was not filed within

60 days of the date set for the first § 341(a) meeting. This Panel reversed,

and the Ninth Circuit affirmed the Panel. The Circuit held that, although

the time limits under Rules 4004 and 4007 are to be strictly construed, the

bankruptcy court had equitable power under § 105(a) to correct its own

mistake:

       Allowing a court to correct its mistakes is not inconsistent with
       the purpose of Bankruptcy Rules 4004 and 4007. Under the
       prior bankruptcy rules a party requesting an extension of time
       after the time to file had passed could plead excusable neglect.
       When the new rules eliminated excusable neglect as a remedy,
       the parties were put on notice that they must be diligent in
       pursuing their claims. The intent behind the rules is not
       circumvented by allowing an untimely complaint to stand
       when a party relied on a court document sent before the
       deadline had expired. It would be very harsh indeed to deny
       equitable relief in cases where the delay in filing is not due to

loss of the court’s own electronic filing capacity, or the court’s affirmative misleading of
a party—would warrant [any equitable] exception” to the strict application of the filing
deadline. Anwar, 720 F.3d at 1188 n.6.
                                             11
      the fault of either party. While it is true that the Creditors could
      have made a motion to extend time if they were confused about
      the proper date for filing the complaint, Anwiler could have
      also asked the court for clarification. As between two innocent
      parties “[i]f one party must bear a loss, it should be the Debtor
      because he had notice of the erroneous date and had greater
      incentive to examine and correct the notice. It does not serve
      the Debtor well in equity to object to the complaint after the
      Claimants have reasonably relied on and complied with the
      erroneous notice.”
In re Anwiler, 958 F.2d at 929 (quoting Brown v. Sibley (In re Sibley), 71 B.R.

147, 149 (Bankr. D. Mass. 1987)). Because the confusion resulted from two

courts setting two different deadlines, the Circuit agreed with the BAP that

it would be an abuse of discretion to dismiss the complaint on the ground

that it was untimely filed. Id.

      Similarly, in In re Lopez, 192 B.R. 539, the bankruptcy clerk issued

confusing notices regarding the § 341(a) meeting and bar dates for filing

nondischargeability complaints. The first notice set a date for the § 341(a)

meeting but did not include a bar date; the second set a new date for the

§ 341(a) meeting and included a bar date that was more than 60 days after

the date scheduled for the first § 341(a) meeting. A creditor filed a

nondischargeability complaint on the later bar date, and the bankruptcy

court granted the debtor’s motion to dismiss. The Panel reversed, holding

that although creditors generally have an affirmative duty to ascertain bar

dates, the ambiguous notices created confusion that warranted granting an

extension:

                                        12
            Because a creditor’s actual knowledge of a bankruptcy
      case creates an affirmative duty to ascertain the bar dates,
      arguably the implication of the September notice of the
      existence of an earlier date set for the meeting of creditors
      should have elicited an attempt by the creditor to determine the
      earlier date. However, under the circumstances attendant here,
      a confusing problem was presented. An investigation of the
      docket would have shown that no earlier order had been
      entered. While this information could have led the creditor to
      the assumption that the September notice announced the “first
      date set,” this conclusion is not readily apparent. Since the
      notice facially purports not to set the first date and refers to a
      prior effective order, this assumption could reasonably not
      have come to mind. In this instance, the erroneous notice
      placed the creditor in a worse position than no notice at all.
Id. at 544.

      On appeal, Best attempts to equate Trustee’s actions to those of the

bankruptcy court, arguing that he was misled by Trustee’s statement that

he would move to dismiss the case and Trustee’s (and Debtor’s) failure to

comply with the local rules by giving notice of the Third 341 Meeting. He

points out that Trustee and his counsel are officers of the court.

Alternatively, he argues that the errors in this case were so egregious that

there must be a remedy for them, and he urges the Panel to view them as

“unique” circumstances that warrant an extension of the Bar Date. In light

of the Ninth Circuit’s pronouncements regarding the narrow circumstances

in which a retroactive extension may be granted, however, we will not

expand Anwiler’s holding to apply to Trustee’s errors in this case.

                                      13
      Best emphasizes the failure to notice the rescheduled Third 341

Meeting. He correctly points out that the Local Bankruptcy Rules for the

District of Arizona require the re-noticing of a continued § 341(a) meeting.

See LBR 2003-1 and 2084-7.3 The parties agree that this requirement was not

met. But, as noted by the bankruptcy court, when a § 341(a) meeting is

continued in a case that is not dismissed, the continuance does not impact

the deadline for filing a nondischargeability complaint. See In re Anwiler,

958 F.2d at 927 (“Absent a motion to extend, the [bar] date, once set, does

not change.” (citations omitted)). Best erroneously conflates the

requirement to notice the continued § 341(a) meeting with a requirement to

re-notice the deadline for filing nondischargeability complaints.

      Best also assigns error to the bankruptcy court’s conclusion that a

creditor who has knowledge of a bankruptcy has an affirmative duty to

      3
          LBR 2003-1(a) provides:
      Any request to continue the meeting of creditors, to consolidate the
      meetings of creditors, or to change the location of the meeting of creditors
      shall be directed to the United States Trustee in chapter 9 or 11 cases or to
      the case trustee in chapter 7, 12 or 13 cases. If the trustee grants the
      continuance, the requesting party must immediately file a notice of the
      new date, time, and location, and serve that notice on all creditors and
      parties in interest on the master mailing list, and file a certificate of
      service.
      LBR 2084-7 provides:
      For good cause, the trustee may reschedule or continue the meeting of
      creditors. If rescheduled, the trustee must request that the Clerk provide
      notice of the rescheduled meeting using the applicable ECF filing event so
      that service can be effected by the Clerk or Bankruptcy Noticing Center. If
      continued, the trustee will note the continued hearing date on the docket.
                                           14
protect his claim. See In re Lopez, 192 B.R. at 543. But as the bankruptcy

court pointed out, the docket never indicated that the case had been

dismissed. And Trustee withdrew his report in a dismissed case on

November 2, 2020, over a month before the Bar Date. Finally, as also

pointed out by the bankruptcy court, any confusion could have been

resolved with a phone call to Trustee. While we are sympathetic to Best’s

situation, the bankruptcy court did not misinterpret applicable Ninth

Circuit authority in denying the motion to extend the Bar Date.

B.    The bankruptcy court did not abuse its discretion in granting
      Debtor’s motion to reinstate the discharge.
      Although the bankruptcy court did not explicitly state its rationale

for granting Debtor’s motion to reinstate the discharge, the record supports

its ruling. The denial of Best’s motion to extend the Bar Date eliminated the

only applicable exception to the requirement to grant a discharge, see Rule

4004(c)(1)(E),4 and Debtor had met the other requirements to receive a

discharge. There was thus no reason to deny the motion. Best does not

argue otherwise.

      4
          That rule provides:
             In a chapter 7 case, on expiration of the times fixed for objecting to
      discharge and for filing a motion to dismiss the case under Rule 1017(e),
      the court shall forthwith grant the discharge, except that the court shall
      not grant the discharge if:
      ...
             (E) a motion to extend the time for filing a complaint objecting to
      the discharge is pending[.]
                                            15
C.    The bankruptcy court did not abuse its discretion in denying Best’s
      motion to dismiss.
      The bankruptcy court denied the motion to dismiss without any

analysis, which Best argues was error. Best contends that cause existed to

dismiss the case based on Debtor’s failures to appear at two § 341(a)

meetings and to provide required documents. He also argues that

dismissal would have been an appropriate alternative to extending the Bar

Date and would have remedied the wrong he suffered due to the mistakes

made in this case. But dismissal under both §§ 707(a) and (b) is

discretionary, and, given the bankruptcy court’s denial of Best’s motion to

extend and its reinstatement of the discharge, denial of the motion to

dismiss was appropriate.

      In any event, dismissal would not have afforded any relief to Best

because dismissal would not have automatically revoked the discharge.

Pavelich v. McCormick, Barstow, Sheppard, Wayte & Carruth LLP (In re

Pavelich), 229 B.R. 777, 780 (9th Cir. BAP 1999), as amended (Feb. 22, 1999).

See also Rosado v. Corredera Pablos (In re Rosado), No. PR 11-081, 2012 WL

2564375, at 5 (1st Cir. BAP June 29, 2012) (reversing bankruptcy court’s

grant of motion to dismiss chapter 7 case that had been fully administered

and discharged because creditors lacked constitutional standing, and the

matter was moot because no relief could be afforded to the moving

creditors, citing cases); In re Rodriguez, 255 B.R. 118, 121 (Bankr. S.D.N.Y.

                                       16
2000) (dismissal after discharge confers all the benefits but none of the

burdens of bankruptcy on the debtor).

D.    Best’s motion for relief from stay was rendered moot by the
      granting of Debtor’s motion to reinstate the discharge.
      Although the automatic stay was in effect when Best filed his motion

for relief from stay, the reinstatement of Debtor’s discharge terminated the

stay. § 362(c)(2)(C). The request for relief from stay was thus rendered

moot, as the bankruptcy court could not have granted any effective relief.

Best does not argue otherwise.

                               CONCLUSION

      For these reasons, the bankruptcy court did not abuse its discretion in

denying Best’s motions to extend the Bar Date, motion to dismiss, and

motion for relief from stay, nor did it abuse its discretion in reinstating

Debtor’s discharge. We therefore AFFIRM.

                                       17