In re Williams

• Decision Date: 28 June 2005
• Docket Number: Bankruptcy No. 03-16311-SD.,Adversary No. 04-1823-SD.
• Citation: 333 B.R. 68
• Parties: In re Deborah WILLIAMS, Debtor. Tidewater Finance Company, Plaintiff, v. Deborah Williams, Defendant.
• Court: U.S. Bankruptcy Court — District of Maryland

333 B.R. 68

In re Deborah WILLIAMS, Debtor.

Tidewater Finance Company, Plaintiff, v. Deborah Williams, Defendant.

Bankruptcy No. 03-16311-SD.

Adversary No. 04-1823-SD.

United States Bankruptcy Court, D. Maryland.

June 28, 2005.

COPYRIGHT MATERIAL OMITTED

David L. Ruben, Ellicott City, MD, for debtor.

Bud Stephen Tayman, Greenbelt, MD, for trustee.

MEMORANDUM AND ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING SUMMARY JUDGMENT FOR DEFENDANT

E. STEPHEN DERBY, Bankruptcy Judge.

The Motion for Summary Judgment by Plaintiff Tidewater Finance Company ("Tidewater") and the response by Defendant Deborah Williams (the "Debtor") require the court to determine whether the mandatory six year period between discharges in 11 U.S.C. § 727(a)(8) should be equitably tolled during the pendency of Chapter 13 cases filed by Debtor after she received a Chapter 7 discharge. For the reasons set forth below, the court concludes there was no equitable tolling, and grants summary judgment in favor of the Debtor.

I. BACKGROUND AND RELEVANT FACTS

The material facts are not in dispute. The Debtor filed a petition under Chapter 7 on October 29, 1996, Case No. 96-60644, and she received a discharge on February 2, 1997. She subsequently filed three separate Chapter 13 Cases. The first, Case No. 99-62251, was filed on September 21, 1999 and dismissed on November 2, 1999, after 42 days. The second, Case No. 00-56264, was filed on May 15, 2000 and dismissed on January 25, 2001, after 254 days. This second case was filed 15 days after expiration of the 180 prohibition on refiling imposed by the court in Debtor's first Chapter 13 case under 11 U.S.C. § 109(g). The third, Case No. 01-62584, was filed on August 14, 2001, and it was dismissed on September 11, 2003, after 758 days. Finally, Debtor filed her present Chapter 7 Case on March 15, 2004.

Tidewater is the assignee from Auto Sport, Inc. of a purchase money note and security agreement for an automobile bought by the Debtor on or about October 18, 1997, after Debtor had received her Chapter 7 discharge but before the Debtor had filed the first of her three Chapter 13 cases. The Debtor defaulted under the note; the motor vehicle was repossessed and sold; and Tidewater reduced the resulting deficiency to judgment in a Virginia General District Court on July 6, 2001, after Debtor's second Chapter 13 case was dismissed but before she had filed her third Chapter 13 case. The unpaid principal amount of the judgment is $7,468.84, plus interest and costs.

Tidewater seeks summary judgment on its sole claim in this proceeding that Debtor should be denied her discharge under 11 U.S.C. § 727(a)(8). Tidewater claims that the six year waiting period after Debtor filed her first Chapter 7 case before she was eligible to file a Chapter 7 case in which she could receive a discharge, should be equitably tolled for the two years and 324 days that Debtor's intervening Chapter 13 cases were pending. If equitable tolling is applied, Debtor is not entitled to a discharge under § 727(a)(8). Conversely, as Tidewater acknowledges in its Summary Judgment Motion, if the court does not apply equitable tolling, the Debtor is eligible for discharge in this case. See Motion for Summary Judgment by Tidewater Finance and Supporting Memorandum of Law, at 3. This is a matter of first impression before the court.¹

II. ANALYSIS

A. Summary Judgment Standard

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," demonstrate the absence of a genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56( c), made applicable by Fed. R. Bankr.P. 7056.

Summary judgment may also be entered in favor of a non-movant, so long as the losing party was on notice that she had to come forward with all of her evidence. See Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); In re Chateaugay Corporation, 154 B.R. 843, 852 (Bkrtcy.S.D.N.Y.1993). Here, although the Debtor has not filed a cross motion, the court may grant summary judgment in favor of Debtor, sua sponte, because Tidewater's own motion put the elements of its case into play, and the basis of the decision is purely legal. In re Snyder, 171 B.R. 532, 535 (Bkrtcy.D.Md.1994), reversed on other grounds, 184 B.R. 473 (D.Md.1995).

B. Equitable Tolling Principles

The doctrine of equitable tolling applies to periods of limitation in appropriate circumstances. It permits a court to suspend the measuring period for a party to take action during the time the party was unable to act. Equitable tolling "allows a claim to be filed outside of the applicable statute of limitations where some action on the defendant's part makes it such that the plaintiff is unaware that the cause of action exists." In re Everfresh Beverages, Inc., 238 B.R. 558, 576 (Bankr.S.D.N.Y.1999). It "permits courts to extend a statute of limitations on a case-by-case basis to prevent inequity." In re Randall's Island Family Golf Centers, 288 B.R. 701, 705 (Bankr.S.D.N.Y.2003), quoting Warren v. Garvin, 219 F.3d 111, 113 (2d Cir.2000), cert. denied 531 U.S. 968, 121 S.Ct. 404, 148 L.Ed.2d 312 (2000). Equitable tolling has been used when a litigant has actively pursued his judicial remedies by filing a defective pleading within the period of limitations, or has been induced or tricked by his adversary into permitting the deadline to pass. Id., citing Young v. United States, 535 U.S. 43, 122 S.Ct. 1036, 1041, 152 L.Ed.2d 79 (2002); Irwin v. Dep't of Veterans Affairs, 498 U.S. 89, 96, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990).

The Supreme Court has outlined specific considerations that a court must weigh when deciding whether the imposition of equitable tolling is appropriate. Burnett v. New York Central R.R. Co., 380 U.S. 424, 426-27, 85 S.Ct. 1050, 13 L.Ed.2d 941 (1965). The bottom line inquiry is "whether congressional purpose is effectuated by tolling the statute of limitations in given circumstances. In order to determine Congressional intent, [a court] must examine the purposes and policies underlying the limitation provision, the Act itself, and the remedial scheme developed for the enforcement of the rights given by the Act." McDonald v. Centra, 118 B.R. 903, 929 (D.Md.1990), quoting Burnett v. New York Central R.R. Co., 380 U.S. at 427, 85 S.Ct. 1050. Although generally equitable tolling principles are to be read into every federal statute of limitations, see Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946), "equitable tolling is a matter of congressional prerogative and can be read in only in the absence of congressional intent to the contrary." McDonald v. Centra, 118 B.R. at 929, quoting Cook v. Deltona Corp., 753 F.2d 1552, 1562 (11th Cir.1985).

Equitable tolling has been applied in bankruptcy cases. For instance, to protect the rights of a debtor in possession or trustee in exercising their avoidance powers, the ultimate aim of which is to bring funds into the estate and eventually distribute to creditors, applicable statutes of limitations under 11 U.S.C. §§ 546(a)(1), 548(a)(1) and 549(d) have been equitably tolled for the commencement of actions. See In re Randall's Island Family Golf Centers, 288 B.R. 701, 706 (Bankr.S.D.N.Y.2003)(applying equitable tolling to second lawsuit under 11 U.S.C. § 546(a) to protect plaintiff debtor in possession that did not sit on its rights but rather filed a defective pleading that had been dismissed without prejudice); In re Stanwich Financial Services Corp., 291 B.R. 25, 29 (Bankr.D.Conn.2003)(applying equitable tolling under 11 U.S.C. § 548 to protect creditors committee where debtors engaged in a "systematic course of conduct which thwarted [the committee's] discovery of the instant cause of action"); In re Olsen, 36 F.3d 71, 73 (9th Cir.1994)(applying equitable tolling under 11 U.S.C. § 549 to protect trustee that "remained in the dark without any fault or want of diligence or care on his part")(internal quotations and citation omitted).

To protect the priority status of tax claims for distribution from the bankruptcy estate, equitable tolling has been applied for the period while a debtor was in an intervening Chapter 13 case to extend three year look back period under 11 U.S.C. § 507(a)(8)(A)(I). Young v. U.S., 535 U.S. 43, 122 S.Ct. 1036, 1043, 152 L.Ed.2d 79 (2002). The lookback period was considered to be a limitations period because "it prescribes a period within which certain rights (namely, priority and nondischargeability in bankruptcy) may be enforced." Young, 535 U.S. at 47, 122 S.Ct. 1036. The Court elaborated:

...[T]he lookback period serves the same "basic policies [furthered by] all limitations provisions: repose, elimination of stale claims, and certainty about a plaintiff's opportunity for recovery and a defendant's potential liabilities."

Young v. U.S., 535 U.S. 43, 47, 122 S.Ct. 1036, 152 L.Ed.2d 79 (2002), quoting Rotella v. Wood, 528 U.S. 549, 555, 120 S.Ct. 1075, 145 L.Ed.2d 1047 (2000). Thus, equitable tolling was applied to protect the integrity of the period for the IRS to assert its right as priority claimant. See also Womble v. Pher Partners, 299 B.R. 810, 812 (N.D.Tex.2003)(determining that "similarities" between the one year look back period under 11 U.S.C. § 727(a)(2) for fraudulent transfers of property and the three year look back period for determining priority status of tax claims under § 507(a)(8)(A)(I) dictated "similar treatment").²

To protect creditors in bankruptcy cases, specifically mortgage creditors seeking to foreclose on defaulted obligations from Debtors, equitable tolling has been applied to the 180 day bar to filing repetitive consumer bankruptcy cases under 11 U.S.C. § 109(g). See In re Bowman, 2004 WL 1083256 (Bkrtcy.W.D.Mo.2004)(upon motion of foreclosing lien creditor, court...