Court Opinion

ID: 6986204
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:12:24.749517+00
Date Added: 2024-06-11T16:09:27.803417
License: Public Domain

REINHARDT, Circuit Judge,
dissenting:
I respectfully dissent. I do not object to the substance of the majority’s ruling on the merits regarding Smith’s claimed exemption, but to the fact that it reached the question at all. Even though the listed exemption may have been without merit, the objection was untimely and should have been rejected.
In Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992), the debtor claimed a meritless exemption. Had the trustee or creditors objected to the claim within 30 days after the initial creditors meeting, as required under Federal Rule of Bankruptcy Procedure 4003(b), the property could have been retained in the bankruptcy estate. 503 U.S. at 642, 112 S.Ct. 1644. However, their failure to do so within that period, the Supreme Court ruled, prevented them from challenging the validity of the exemption later — “whether or not [the debtor] had a colorable statutory basis for claiming it.” Id. at 644, 112 S.Ct. 1644.
I would reach the same result here. Pursuant to 11 U.S.C. § 341(a), the creditors held their initial meeting on September 8,1995, then continued it to September 22, and then to October 27. At the conclusion of the October 27 meeting, the trustee announced: “Time’s been noted at 12:32 p.m. This 341(a) meeting in John Douglas Smith is hereby adjourned until further notice. Thank you very much.” No further notice was ever given and no subsequent meeting ever took place. The appel-lees objected to Smith’s exemptions on June 19, 1996, almost eight months later.
Bankruptcy Rule 2003(e) provides that the creditors’ meeting “may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further notice.” The majority cites In re Flynn, 200 B.R. 481, 483 (Bankr.D.Mass.1996), for the proposition that the word “may” in this rule is “permissive and not mandatory.” I do not disagree with this proposition: that is what “may” means. The trustee may adjourn meetings or not, as he deems advisable. The question, however, is not whether trustees have discretion to adjourn creditors’ meetings — they do, see In re Bernard, 40 F.3d 1028, 1031 (9th Cir.1994)1 — but whether for purposes of Rule 4003(b), adjournment must be accompanied “by announcement at the meeting of the adjourned date and time.”
While the majority acknowledges that adjournment “to a time certain” is a procedure “provided in Rule 2003(e),” it concludes that a creditors’ meeting can be *1107adjourned even when this procedure is not followed. My colleagues determine that a meeting can be adjourned indefinitely, without “a future specified date.” This conclusion is not consistent with the requirements of Rule 2003(e). For a Rule 2003(e) adjournment to be effective, it must be accompanied by an announcement of “the adjourned date and time.” See In re Hurdle, 240 B.R. 617, 621-22 (Bankr.C.D.Cal.1999); In re Levitt, 137 B.R. 881, 883 (Bankr.D.Mass.1992). No other procedure for adjournment is provided by rule or statute, and no other method of adjournment is permitted under Rule 2003(e).2 Policy concerns about which party best bears the burden of seeking closure, or observations about the power of courts to cut off unreasonably long adjournments, are of no consequence. See Taylor, 503 U.S. at 644, 112 S.Ct. 1644 (refusing to alter interpretation of § 522(1) of bankruptcy code based on concern about incentives created by requirement that trustees and creditors object to claimed exemptions within 30 days of creditors’ meeting). Nor do I believe that Rule 2003(e) should be enforced only, if at all, on a case-by-case basis. The rule should be construed to mean what it says.3
As the Supreme Court observed in Taylor, “[deadlines may lead to unwelcome results, but they prompt parties to act and they produce finality.” 503 U.S. at 644, 112 S.Ct. 1644. By authorizing trustees to adjourn meetings indefinitely, even when it is unlikely that any subsequent meeting will in fact be called, the majority nullifies the 30-day requirement of Bankruptcy Rule 4003(b), renders the holding in Taylor hollow, and undermines the concerns expressed by the Supreme Court about promptness and finality. Thus, I would hold that the exemption was not properly challenged in the Chapter 11 proceeding.
Unlike the majority, I am compelled by the conclusion I reach regarding Rule 2003(e) to consider the trustee’s alternate ground. I would reject that argument as well. In my opinion, the conversion of Smith’s bankruptcy from a Chapter 11 reorganization to a Chapter 7 liquidation did not begin a new 30-day period for objections under Bankruptcy Rule 4003(b). The effect of an exemption is to remove property from the bankruptcy estate and vest it in the debtor, making it unavailable to creditors even if the proceeding is subsequently converted to another chapter. See In re Brown, 178 B.R. 722, 726-27 (Bankr.E.D.Tenn.1995) (citing In re Halbert, 146 B.R. 185, 189 (Bankr.W.D.Tex.1992)). Furthermore, Bankruptcy Rule 1019(2), which deals with conversion from Chapter 11 to Chapter 7, specifies a new time period for a number of events, but not for objections to exemptions. I therefore do not believe that the time period for objecting to exemptions commenced anew after the conversion of Smith’s case to a *1108Chapter 7 proceeding. Accordingly, I respectfully dissent from the majority’s decision to affirm the denial of Smith’s claimed exemption.

. In In re Bernard the initial creditors’ meeting was held on November 13, 1991. The trustee continued the meeting to December 2, then to April 6, 1992, then to April 27. Each continuance was made to a date certain. See 40 F.3d at 1031-32. "Because the trustee did not continue the meeting further, the last day for raising objections to the debtors' exemption claims was May 27." Id. at 1032. Bernard does not support the conclusion that when a trustee purports to adjourn a meeting indefinitely, a debtor's only recourse is to move for a court order concluding the meeting. To the contrary, that decision observes: “The objection period ... remains open until 30 days after one of the following events: (a) the trustee concludes a 341(a) meeting without expressly continuing it to a later date, Bankr.R.2003(e)...." 40 F.3d at 1031 n. 4 (emphasis added).

. The majority approves adjournment "until further notice": they hold that the adjourned date and time need not be announced at the meeting, but may be announced at some later time. Even were I to agree with this position generally, I would still conclude that Rule 2003(e) was violated in this case. As the court in In re Levitt held, "Rule 2003(e), by providing for adjournment to a specific time, exhibits a concern to keep the process moving. A trustee who continues a meeting generally and does not within a reasonable time announce the adjourned date and time and reconvene the meeting thereby defeats the policy implicit in these rules." 137 B.R. at 883. Under any reasonable construction of the rule, a delayed announcement would have to be made at least within 30 days of the last meeting held; otherwise, the whole purpose of the 30-day requirement of Rule 4003(b) would be frustrated. Here, no adjourned date and time was ever announced, and the creditors’ meeting never resumed. The trustee failed "to keep the process moving” in any manner. Even worse, the meeting was in fact not adjourned. Whatever the trustee had in mind, it concluded as of October 27.

. The majority observes that at the initial creditors' meeting Smith represented that he would provide additional information and correct certain errors on his schedules. Assuming that was in fact the reason for the trustee's decision to adjourn, no reason exists why the trustee could not have announced "the adjourned date and time.” Why not set a deadline for Smith's production of this information, and change it later if necessary?