In Re Rowland
Opinion
Introduction
First Republic Bank (“First Republic” or “the Bank”) has filed a Motion entitled, Motion to Extend the time to File a Complaint to Determine the Non-Discharge-ability of the 5510 Concord Pike Indebtedness, Nunc Pro Tunc (Motion). The Debtor has filed an Answer and Affirmative Defenses (Answer) which opposes the Motion. A hearing on the Motion was held on February 20, 2002. For the reasons set forth below, the Motion will be denied.
Background
Because no testimony was offered at the hearing, the factual record consists only of those uncontested allegations in the pleadings and the attached exhibits. What is agreed to is the following: In July 2000, First Republic loaned the Debtor $7.3 million. Motion, ¶ 1. This loan was secured by three mortgages, one of which pertained to the real estate at 5510 Concord Pike in Delaware County, Pennsylvania (the Property). Motion, ¶ 2. When the Debtor filed this bankruptcy, it listed the Bank among its secured creditors in the approximate amount of $7.25 million. Motion, ¶¶ 7, i 0. A first meeting of creditors would be held on September 11, 2001, thereby making November 10, 2002 the last day for filing nondischargeability complaints. Motion, ¶¶ 8, 28. That deadline passed and on January 25, 2002, First Republic filed this Motion requesting that the deadline be extended nunc pro tunc so that the complaint it intended to file would be deemed timely filed. Motion, ¶ 23.
Although sparse, the evidence presented is sufficient to support our denial of the Motion.
Discussion
The complaint which the Bank intends to file would seek to have its claim declared nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). 1 Motion, ¶30. Subsection (c) of Section 523 provides that a creditor who seeks to have his claim excepted from discharge under subsection (a)(2) must obtain a determination of nondischargeability from the bankruptcy court:
Except as provided in subsection (a)(3)(B) of this section, the debtor shall be discharged from a debt of a kind specified in paragraph (2), (4), (6), or (15) of subsection (a) of this section, unless, on request of the creditor to ivhom such debt is owed, and after notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), (6), or (15), as the case may be, of subsection (a) of this section.
11 U.S.C. § 523(e)(l)(emphasis added).
This requirement that the creditor act affirmatively to have this type of debt ex-
The crux of the parties’ dispute is whether the Bank’s failure to move for an extension before November 11 prohibits the Court from considering the Motion. A leading commentator maintains that the failure to timely file such a motion will have a preclusive effect:
If the motion is not filed within that time period, the court has no discretion to grant the motion. Moreover, Rule 9006(b)(3) makes clear that the normal rule allowing an extension of time by motion filed after a time period has expired does not apply to the deadline set by Rule 4007. This rule marks a change from the practice under the former bankruptcy rules, which permitted a court to grant a motion filed after expiration of the time period allowed upon a showing of excusable neglect.
9 Collier on Bankruptcy, ¶ 4007.04[3][a] (Matthew Bender 15th Ed. Revised 2001). Notwithstanding, First Republic contends that principles of equity are applicable to extend the deadline where appropriate. The Debtor, as expected, argues that the Bank’s tardiness deprives the Court of any discretion to extend the deadline. Because our research has revealed no controlling Third Circuit case law on this issue (but a split of authority elsewhere), a thorough analysis is required.
The line of cases holding that Rule 4007(c) is not jurisdictional is led by the Second Circuit’s opinion in
In re Benedict,
A second line of cases avoids the question of whether Rule 4007(c) is jurisdictional and would permit the filing of a nondis-chargeability complaint when the lateness is due to a bankruptcy court clerk’s error.
See In re Themy,
Finally, there is a third line of cases which holds that Rule 4007(c) is jurisdictional.
See First National Bank in Okeene v. Barnes,
When interpreting a statute, a court’s analysis should be consistent with the actual language of the statute, and should be consistent with the plain meaning of the statutory language.
See United States v. Ron Pair Enterprises, Inc.,
The Third Circuit has continued its strict application of bankruptcy statutes where such interpretations are consistent with the intent of Congress.
See In re Montgomery Ward Holding Corp.,
We believe that the Third Circuit would interpret Rule 4007(c) similarly, and we hold here that the deadline in that rule is jurisdictional. The rule’s plain language, and it specific exception from the rule pertaining to enlargement (B.R.9006), evince a clear intent to limit the deadline for nondischargeability actions. As one bankruptcy court has stated:
The result is automatic and sometimes leads to harsh results. However, Congress intended to establish a system whereby certain types of nondischarge-ability claims would be automatically cut off after a relatively short period of limitations in order to prevent debtors from being harassed by creditors after theirclaims had been discharged in bankruptcy. Congress meant to cure the abuse whereby debtors were routinely sued by creditors long after bankruptcy creditors [sic] claiming that their claims were not discharged because of fraud or a false financial statement. See Countryman, “The New Dischargeability Law”, 45 Am.Bankr.L.J. 1 (1971). This policy underlies § 523(c) of the Bankruptcy Code.
Kirsch, supra at 299-300. In order to implement that policy, a strict reading of Rule 4007(c) is required and the Bank’s Motion must be denied.
Even if the Rule 4007(c) Deadline Were not Jurisdictional, First Republic has not Demonstrated that Equitable Estop-pel or Equitable Tolling Would Excuse its Lateness
Assuming that the Court would concur with its threshold argument that Rule 4007(c) is not jurisdictional, First Republic contends that the deadline in the rule should be equitably tolled. It is now settled law in this circuit that equitable tolling of a statute of limitations may be appropriate where: (1) the defendant has actively misled the plaintiff respecting the plaintiffs cause of action; (2) the plaintiff in some extraordinary way has been prevented from asserting his or her rights; or (3) the plaintiff has timely asserted his or her rights mistakenly in the wrong forum.
Galvis v. HGO Services,
First Republic maintains that the Debtor misled it into believing that it did not have a claim of fraud against the Debt- or until it was too late to bring suit. See Motion, ¶ 30. The specific acts of alleged deception consist of the following: the Debtor’s listing of First Republic among its secured creditors (see Debtor’s Bankruptcy Schedule “D”); the recital in a draft agreement to assume the lease of the Property wherein the Debtor acknowledged that First Republic has a mortgage on the Property (see Motion Ex. A, Rowland Deposition, Ex. Rowland-2); the Debtor’s having made current postpetition payments to the Bank (see Motion, Ex. B); and the Debtor’s observation that First Republic “[ought] to have an enforceable mortgage.” (see Motion, Ex. A., Rowland deposition, pp. 71-72).
None of these acts demonstrates an intent to mislead the Bank into believing that it need not pursue nondischargeability of its claim. The listing of the Bank as a secured creditor on its Schedule D may likely have been done because Debtor believed that the Bank’s claim was secured. The recital in the draft Assumption Agreement that the Bank holds a secured interest in the Property could be a case of misapprehension by all parties concerned. The Debtor’s current payments to the Bank until January 2002 could also be a case of misinformation (at least on the Debtor’ part). And the Debtor’s deposition testimony that “what’s right and correct is for the [B]ank...to have an enforceable mortgage” was made after the dischargeability deadline had expired, and thus cannot possibly have misled the Bank.
What little evidence there is tends to suggest that the Debtor’s decision to stop paying the Bank is not part of a premeditated plan. Rather, it was made after the Debtor learned that the Bank may not have the secured position that the parties
Similarly, the Evidence Does Not Support First Republic’s Claim that Equitable Estoppel Applies
In the alternative, First Republic argues that the Debtor should be equitably estopped from raising the Rule 4007(c) as a bar to the Bank’s nondischargeability claim. Equitable estoppel focuses on the relationship between the parties and prevents a party from assuming a position inconsistent with an earlier position upon which another party reasonably relied.
See Godwin v. Schramm,
First Republic maintains that the Debtor has “misrepresented his position vis-a-vis the .. .mortgage.” See Motion, ¶ 41. We take this vague statement to mean that, prior to the nondischargeability deadline, the Debtor effectively represented that the Bank had a perfected mortgage, but that after that deadline passed, the Debtor disavowed that claim when it stopped making payments. The alleged misrepresentations are the same acts and statements which were offered in support of the Bank’s equitable tolling claim: the Debtor listing the Bank’s claim as secured on his Bankruptcy Schedule D; acknowledging in the Assumption Agreement that the Bank holds a mortgage on the Property; making all postpetition payments to the Bank; and opining that the Bank “[ought] to have an enforceable mortgage.” See Motion, ¶ 39.
Nothing in the record, however, demonstrates that any of these acts are false or misleading, as opposed to merely incorrect or inaccurate. It may turn out that the Debtor’s listing of the Bank’s claim as secured is erroneous, but that does not mean that the Debtor did so to deceive the Bank. The same goes for the recital in the draft Assumption Agreement which pur
In sum, the deadline in Rule 4007(c) for filing nondischargeability complaints is a jurisdictional threshold which bars First Republic from now raising section 523(a) claims against the Debtor. But even if the rule allowed some latitude, First Republic has failed to demonstrate that it is entitled to equitable relief.
An appropriate order follows.
ORDER
AND NOW, upon consideration of First Republic Bank’s Motion to Extend the Time to File a Complaint to Determine the Non-Dischargeability of the 5510 Concord Pike Indebtedness, Nunc Pro Tunc, the Debtor’s Answer and Affirmative Defenses thereto, and after a hearing held on February 20, 2002, it is hereby:
ORDERED, that the Motion is Denied for the reasons set forth in the accompanying Opinion.
Notes
. That section provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition!.]
11 U.S.C. § 523(a)(2)(A)
.The Court notes the Bank's citation to
In re Desiderio,
. Section 522(1) provides:
(1) The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section. If the debtor does not file such a list, a dependent of the debtor may file such a list, or may claim property as exempt from property of the estate on behalf of the debtor. Unless a party in interest objects, the property claimed as exempt on such list is exempt. 11 U.S.C. § 522(1) (emphasis added)
. Bankruptcy Rule 4003 provides, in pertinent part:
A party in interest may file an objection to the list of property claimed as exempt only within 30 days after the meeting of creditors held under § 341(a) is concluded or within 30 days after any amendment to the list or supplemental schedules is filed, whichever is later. The court may, for cause, extend the time for filing objections if, before the time to object expires, a party ininterest files a request for an extension. B.R. 4003(b)(emphasis added)
. Bankruptcy Rule 9006 provides, in pertinent part: "The court may enlarge the time for taking action under Rule[] ... 4003(b) ..., only to the extent and under the conditions stated in thfat] rule[].” B.R. 9006(b)(3).
. Section 365(d)(3) reads, in relevant part: "The trustee shall timely perform all the obligations of the debtor... arising from and after the order for relief under any unexpired lease of nonresidential real property, until such lease is assumed or rejected,..." 11 U.S.C. § 365(d)(3).