Court Opinion

ID: 70330
Source: CourtListenerOpinion
Date Created: 2010-04-26 06:59:41+00
Date Added: 2024-06-11T14:58:54.351442
License: Public Domain

United States Court of Appeals,

                          Eleventh Circuit.

                             No. 94-4254.

                   In re Menelaos P. DEMOS, Debtor.

         Arthur R. MARSHALL, III., M.D., Plaintiff-Appellant,

                                  v.

                Menelaos P. DEMOS, Defendant-Appellee.

                            July 12, 1995.

Appeal from the United States District Court for the Southern
District of Florida. (No. 93-1711-CIV), Sidney M. Aronovitz, Judge.

Before COX, Circuit Judge, HILL and GARZA*, Senior Circuit Judges.

     HILL, Senior Circuit Judge:

     This is an appeal from a district court order affirming a

bankruptcy court's dismissal of Appellant/Creditor's adversary

complaint as untimely filed.      Appellant maintains (1) that the

district court erred in not finding that his complaint was timely

filed, the extension of time having been validly granted to him;

(2) that the complaint was timely filed inasmuch as it was in

reliance upon an order of the bankruptcy court which had not been

modified, vacated or set aside, whether subject thereto or not;

and (3) that, the foregoing considered, the bankruptcy court abused

its discretion in not exercising its equitable powers under 11

U.S.C. § 105 to find the complaint timely filed.         For reasons

hereinafter stated, we reverse.

                            I. BACKGROUND

     On October 30, 1992, Debtor, Menelaos P. Demos, filed a

     *
      Honorable Reynaldo G. Garza, Senior U.S. Circuit Judge for
the Fifth Circuit, sitting by designation.
petition      for   relief    under      Chapter    7   of    the   Bankruptcy     Code.

February 8, 1993, was the deadline for filing complaints objecting

to discharge and to determine dischargeability.                           Problems then

developed.       There were creditors who might, or might not, wish to

file       adversary     complaints.          Examination     of    the   Debtor   under

Bankruptcy Rule 2004 would be of importance in their decisions to

file or not file.          The Debtor's attorney was unable to attend the

Rule 2004 examination on the date set and sought accommodation by

postponement.          Postponement might jeopardize creditors' rights to

file their adversary complaints or compel them to file when the

2004 proceeding might have persuaded them not to do so.                          Counsel

for the parties conferred and worked out an arrangement to protect

the creditors and to accommodate the problems of Debtor's attorney.

On January 12, 1993, pursuant to that arrangement, Trustee filed

his    "Motion      to    Extend   the    Times     for      Objections     to   Claimed

Exemptions       and     Complaints      to    Determine      Dischargeability      and

Objecting to Discharge." Debtor joined the motion. The motion was

premised upon the problems briefly recited above and specifically

asked the bankruptcy court to act pursuant to 11 U.S.C. § 105.1

       On January 19, 1993, the bankruptcy court entered its "Order

Granting Motion to Extend the Times for Objections to Claimed

       1
        11 U.S.C. § 105 provides:

               (a) The court may issue any order, process, or judgment
               that is necessary or appropriate to carry out the
               provisions of this title. No provision of this title
               providing for the raising of an issue by a party in
               interest shall be construed to preclude the court from,
               sua sponte, taking any action or making any
               determination necessary or appropriate to enforce or
               implement court orders or rules, or to prevent an abuse
               of process.
Exemptions    [and]    Complaints   to   Determine    Dischargeability   and

Objecting to Discharge" extending the deadline until March 15,

1993.

     On January 21, 1993, Appellant/Creditor, Arthur R. Marshall,

III, filed "Marshall's Notice of Adoption and Concurrence with

Trustee's Motion to Extend the Times for Filing Complaints to

Determine Dischargeability and Objecting to Discharge."            On March

15, 1993, Marshall filed his "Adversary Complaint."

     On April 5, 1993, despite having joined in the request for an
                                                 2
extension of time, Demos filed a motion              to dismiss Marshall's

adversary complaint as untimely filed and, therefore, outside the

court's jurisdiction.        On May 14, 1993, the bankruptcy court

entered its "Order Granting Debtor's Motion to Dismiss Marshall's

Adversary Complaint." In the order, the bankruptcy court relied on

Fed.R.Bankr.P.     4007(c)    and   In    re   Gallagher,    70 B.R. 288

(Bankr.S.D.Tex.1987) to hold that Marshall's adversary complaint

was untimely filed, dismissing it with prejudice.             The district

court affirmed.       This appeal followed.

                              II. DISCUSSION

         The bankruptcy court entered an order extending the time for

filing complaints to determine dischargeability and objections to

discharge.      Marshall filed his complaint within the extension

granted by the order. Marshall's complaint was timely filed unless

there is some reason why Marshall could not rely upon the court's

order.

     The bankruptcy court found that "the creditor [Marshall] never

     2
        The motion was filed by new counsel.
filed or pursued his own motion for extension, and cannot take

advantage of the motion filed by the Trustee."             The court reasoned

that:

      ... the Trustee's timely motion for an extension of time to
      file objections to discharge or dischargeability will not
      extend the time for filing objections by any other party in
      interest, and the bankruptcy rule authorizing the extension of
      time permits only the person seeking the extension, and who
      timely requests such extension, to take advantage of same. In
      re Gallagher, 70 B.R. 288, (Bankr.S.D.Tex.1987).

         There are several problems with this analysis.            First, the

motion for an extension of time in this case was not filed pursuant

to   the   "bankruptcy    rule   authorizing   the   extension      of    time."

Bankruptcy Rule 4004 is not mentioned by the motion.               The motion

specifically invoked the equitable powers of the bankruptcy court

under 11 U.S.C. § 105.           Calling the court's attention to the

problems created by the large numbers of "creditors" involved in

the bankruptcy and the possibility that the Debtor's attorney might

not be able to attend the 2004 examination of the Debtor, the

Debtor     and   the   Trustee   requested   the   court    to   exercise    its

equitable power to extend the time for filing complaints.                Section

105 of the Bankruptcy Code authorizes the bankruptcy court to

"issue any order ... that is necessary or appropriate to carry out

the provisions of [the bankruptcy code]" 11 U.S.C. § 105.                   This

would include the order entered in this case.              Therefore, even if

the request for an extension of time under Rule 4004 normally

inures to the benefit of the movant only, this limitation does not

necessarily apply in this case.

      Furthermore, even if we were dealing with an application for

an extension of time made pursuant to Rule 4004, the Gallagher case
cited by the bankruptcy court, is inapposite to the facts of this

case.     In that case, the Trustee filed a motion for an extension of

time for filing complaints, but while it was still pending she

informed the court that she did not wish to pursue the motion.                   A

creditor, however, who had not filed a motion, sought after the bar

date to rely on the Trustee's timely filed motion to persuade the
                                                                           3
court to issue an order extending the creditor's time.                         The

Gallagher court declined to do so.          Therefore, there was no order

extending the time for filing adversary complaints;                    no creditor

could have relied on one.

      In this case, the bankruptcy court issued an order extending

the time for filing complaints to determine dischargeability.                    A

party may rely on such an order.         In re Overmyer, 24 B.R. 437, 441

(Bankr.S.D.N.Y.1982).         See    also   In     re   Falk,     96 B.R. 901

(Bankr.D.Minn.1989);              In re Herring,            116 B.R. 313

(Bankr.M.D.Ga.1990).     To hold otherwise would be to permit parties

the option of deciding which orders to obey, or conversely to

condemn parties to the instability of guessing which orders to

abide and which to ignore.         This will not do.

      Of course, the reliance of a party on an order must be

reasonable.      A party may not rely on an order that clearly has

nothing to do with him.       In this case, it was entirely reasonable

for   Marshall   to   rely   on   the   bankruptcy      court's   order.       The

Trustee's motion, joined by the Debtor, and served on Marshall,

stated:

      3
      Additionally, it should be noted that in Gallagher the
Trustee's motion never referred to any creditors. In this case,
the Trustee's motion specifically referred to creditors.
     7. That there are numerous interested parties and attorneys
     who wish to attend the 2004 Examination of the Debtor ...
     which would be after the deadline for exemptions and the
     deadline for determining dischargeability and objecting to
     discharge.

     8. That due to the large numbers of creditors involved in this
     bankruptcy proceeding, the Debtor's attorney and the Trustee
     have no objection to the said extension. (emphasis added)

     The court's subsequent order stated in part:

     3. That the deadline for filing "Complaints to Determine
     Dischargeability and Objecting to Discharge" be, and the same
     is hereby, extended up to and including March 15, 1993.

         The plain meaning of this language is that an extension of

time was granted to creditors—all creditors.       There is no one else

to whom the order can refer, as only creditors are allowed to file

such complaints. It cannot be said that Marshall's reliance on the

plain meaning of this order was unreasonable.

     Demos argues that notwithstanding the plain meaning of the

order, Marshall's reliance was unreasonable because, as noted

above, normally a request for an extension of time inures to the

benefit of the movant only,4 and Marshall knew or should have known

that.     Demos argues that the wording of the bankruptcy court's

order (as well as Trustee's motion) was merely sloppy, and that

Marshall should have inquired regarding the deadline for filing

complaints.

         We disagree.   The court's order extended the time for filing

complaints     to   determine   dischargeability   and   objecting   to

     4
      But see In re Myers, 168 B.R. 856 (Bankr.D.Md.1994) in
which the court held that a Chapter 11 trustee can file a motion
to extend the time for filing complaints on behalf of creditors
under Section 523 and Rule 4007. Furthermore, the Advisory
Committee Note To Rule 4004 states that "An extension granted on
a motion ... would ordinarily benefit only the movant, but its
scope and effect would depend on the terms of the extension."
discharge.   Creditors are the only parties allowed to file these

complaints and Marshall filed his within the extended time. If the

bankruptcy court did not intend to grant creditors an extension of

time—as the district court found—then the bankruptcy court made a

mistake, and it should have exercised its equitable powers under

Section 105 to allow Marshall's complaint to stand.      See In re

Isaacman, 149 B.R. 502, 508 (Bankr.W.D.Tenn.1993).5

     For these reasons, we hold that Marshall's Adversary Complaint

in this matter was timely filed.

     REVERSED and REMANDED.

     5
      We say so notwithstanding that we have previously held that
creditors have a duty to investigate in some cases of judicial
"mistake," e.g., where no bar date is set. In re Alton, 837 F.2d
457 (11th Cir.1988). See also In re Anwiler, 958 F.2d 925 (9th
Cir.1992) (conflicting bar dates). A creditor may not stand
silent in the face of judicial silence or obvious conflict and
complain later of confusion. Marshall, however, did neither. He
relied on a validly entered court order which extended a deadline
to which he was subject.