Tidewater Finance Co. v. Williams

• Decision Date: 16 August 2007
• Docket Number: No. 06-1618.,06-1618.
• Citation: 498 F.3d 249
• Parties: TIDEWATER FINANCE COMPANY, Creditor-Appellant, v. Deborah WILLIAMS, Debtor-Appellee, and Bud Stephen Tayman, Trustee.
• Court: U.S. Court of Appeals — Fourth Circuit

498 F.3d 249

TIDEWATER FINANCE COMPANY, Creditor-Appellant, v. Deborah WILLIAMS, Debtor-Appellee, and Bud Stephen Tayman, Trustee.

No. 06-1618.

United States Court of Appeals, Fourth Circuit.

Argued: March 12, 2007.

Decided: August 16, 2007.

ARGUED:

James Robert Sheeran, Tidewater Finance Company, Chesapeake, Virginia, for Appellant. Edward A. Derenberger, Glen Burnie, Maryland, for Appellee.

ON BRIEF:

Matthew M. Barnes, Tidewater Finance Company, Virginia Beach, Virginia, for Appellant.

Before NIEMEYER, MOTZ, and DUNCAN, Circuit Judges.

Affirmed by published opinion. Judge MOTZ wrote the majority opinion, in which Judge DUNCAN joined. Judge DUNCAN wrote a separate concurring opinion. Judge NIEMEYER wrote a dissenting opinion.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

In this bankruptcy appeal we must decide whether a court should toll the mandatory period a debtor must wait to obtain a second Chapter 7 discharge, during the pendency of any intervening Chapter 13 proceeding filed by the debtor. For the reasons stated below, we agree with the bankruptcy and district courts that tolling does not apply here, and so affirm.

I.

A.

The Bankruptcy Code offers individual debtors two primary avenues of relief: Chapters 7 and 13 of the Code.¹ Under Chapter 7, a debtor liquidates his non-exempt assets; the proceeds are then distributed to creditors pursuant to a schedule of priorities. 11 U.S.C.A. § 701 et seq. (West 2007); see 6 Collier on Bankruptcy ¶ 700.01 (Alan N. Resnick & Henry J. Sommer eds., 15th ed. rev.2007) [hereinafter Collier]. At the conclusion of a Chapter 7 proceeding, the debtor normally receives a discharge. See 11 U.S.C.A. § 727 (West 2007). The discharge provides the debtor with a "fresh start" by enjoining the collection of any remaining debts, unless the Code excepts those debts from discharge. See 11 U.S.C.A. §§ 523-24 (West 2007).

Alternatively, an individual may attempt to repay his debts through the procedure set forth in Chapter 13. 11 U.S.C.A. § 1301 et seq. (West 2007). Chapter 13 "provides a reorganization remedy for consumer debtors and proprietors with relatively small debts." Johnson v. Home State Bank, 501 U.S. 78, 82, 111 S.Ct. 2150, 115 L.Ed.2d 66 (1991). Under Chapter 13, the debtor submits a repayment plan to the bankruptcy court, which will confirm the plan if it meets statutory criteria that protect creditors' interests. See 8 Collier ¶¶ 1300.01, 1325.01, 1325.05. If a debtor successfully completes a confirmed plan, he receives a discharge of remaining eligible debts. See id. ¶ 1328.01. Because Congress intended Chapter 13 proceedings to be entirely voluntary, a debtor, as a matter of right, may at any time dismiss his Chapter 13 petition or convert it to a Chapter 7 proceeding. See id. ¶ 1307.01.

The initiation of either Chapter 7 or Chapter 13 proceedings triggers an "automatic stay" under 11 U.S.C.A. § 362(a) (West 2007). This automatic stay bars creditor collection activity for the duration of the proceeding, although creditors may petition the court to terminate, suspend, or condition the stay. See 3 Collier ¶¶ 362.01, 362.07.

The case at hand involves 11 U.S.C.A. § 727(a) (West 2004). That section of the Bankruptcy Code governs discharges in Chapter 7 cases and requires a court to grant a discharge unless certain conditions apply. See id. The condition at issue here, § 727(a)(8), provides that a debtor is not entitled to a discharge if he "has been granted a discharge under [Chapters 7 or 11], in a case commenced within six years before the date of the filing of the petition." Id. § 727(a)(8).² In other words, § 727(a)(8) requires debtors to wait at least six years, after filing a Chapter 7 or 11 case that resulted in a discharge before initiating a later Chapter 7 case, in order to be entitled to a discharge in the later case.

B.

The parties do not dispute the material facts of this case. On October 29, 1996, Deborah Williams filed a petition under Chapter 7; she later received a discharge. Almost two years later, on September 21, 1999, Williams initiated a Chapter 13 proceeding, which was dismissed on November 2, 1999. Williams initiated a second Chapter 13 case on May 15, 2000, which was dismissed on January 25, 2001.

On July 6, 2001, Tidewater Finance Company ("Tidewater") obtained a judgment for $7,468.84, plus accrued interest and costs, against Williams based on her default on an auto loan. After obtaining this judgment, Tidewater did not initiate proceedings to either enforce it or secure it through a lien or other device.³

Williams initiated a third Chapter 13 proceeding on August 14, 2001; it was dismissed on September 11, 2003. Tidewater has neither alleged nor presented evidence that Williams filed for Chapter 13 relief in bad faith. Based on the record before us, we have no reason to doubt that each time Williams filed for Chapter 13, she did so in a sincere effort to manage and pay her debts.

On March 15, 2004, Williams initiated the Chapter 7 petition at issue in this case. Tidewater commenced an adversary proceeding in the bankruptcy court objecting to discharge and then moved for summary judgment, arguing that Williams was ineligible for a discharge under § 727(a)(8). Tidewater acknowledged that § 727(a)(8) requires only that a debtor wait six years after filing a Chapter 7 petition that resulted in a discharge before filing a subsequent Chapter 7 action and that seven years, 139 days had passed since Williams filed the petition that resulted in her first discharge. Nevertheless, Tidewater argued that the § 727(a)(8) period was "equitably tolled" during Williams's three Chapter 13 proceedings, including the two that occurred prior to accrual of Tidewater's claim against Williams. If the waiting period were in fact tolled during the three Chapter 13 proceedings, for a total duration of two years and 234 days, Williams would not be entitled to obtain a second Chapter 7 discharge under § 727(a)(8).

The bankruptcy court denied Tidewater's motion for summary judgment and granted summary judgment to Williams, holding that § 727(a)(8) did not provide grounds for denial of a discharge in her case. Tidewater Fin. Co. v. Williams (In re Williams), 333 B.R. 68, 70 (Bankr D.Md.2005). The court reasoned that "[e]quitable tolling is not applicable here because § 727(a)(8) does not define a limitations period for Tidewater, a creditor, to assert its claim"; rather, it "defines a condition that [Williams] was required to satisfy in order to qualify for . . . a discharge of her debts." Id. at 73. Tidewater appealed to the district court, which affirmed. Tidewater Fin. Co. v. Williams, 341 B.R. 530 (D.Md.2006).

Tidewater appeals the district court's judgment affirming the order of the bankruptcy court. We review de novo the judgment of a district court sitting in review of a bankruptcy court. In re Merry-Go-Round Enters., Inc., 400 F.3d 219, 224 (4th Cir.2005). We apply to the bankruptcy court judgment the same standard employed by the district court. Id. Thus, we review the bankruptcy court's factual findings for clear error and its legal conclusions de novo. Id.

On appeal, Tidewater contends that: (1) § 727(a)(8) establishes a statute of limitations that must be tolled; and (2) failure to toll § 727(a)(8) would create a "loophole" in the Bankruptcy Code. We address each contention in turn.

II.

Tidewater's first argument is that the six-year waiting period in § 727(a)(8) is a limitations period that the bankruptcy court should have equitably tolled during Williams's Chapter 13 proceedings. In assessing this statutory argument, we begin, as always, with the text of the statute. Limtiaco v. Camacho, 545 U.S. ___, 127 S.Ct. 1413, 1418, 167 L.Ed.2d 212 (2007). Section 727(a)(8) provides:

The court shall grant the debtor a discharge, unless . . . the debtor has been granted a discharge under [Chapters 7 or 11], in a case commenced within six years before the date of the filing of the petition.

11 U.S.C.A. § 727(a)(8) (West 2004).

Plainly, the statute itself — unlike other Code provisions — does not expressly provide for tolling. Cf. 11 U.S.C. § 108(c) (2000) (extending statutes of limitation for creditors when the automatic stay bars their collection efforts). Notwithstanding this plain language, Tidewater argues that tolling applies here because of the principle that statutes of limitation are "customarily subject to `equitable tolling,'" Irwin v. Dep't of Veterans Affairs, 498 U.S. 89, 95, 111 S.Ct. 453, 112 L.Ed.2d 435 (1990), unless tolling would be "inconsistent with the text of the relevant statute." United States v. Beggerly, 524 U.S. 38, 48, 118 S.Ct. 1862, 141 L.Ed.2d 32 (1998).

Tidewater's argument rests on a faulty premise: that § 727(a)(8) is a statute of limitations. In fact, § 727(a)(8) imposes no limitations period. "A statute of limitation requires a litigant to file a claim within a specified period of time." Rector v. Approved Fed. Sav. Bank, 265 F.3d 248, 252 (4th Cir.2001); see also Black's Law Dictionary 927 (6th ed.1990) (statutes of limitation "set[ ] maximum time periods during which certain actions can be brought or rights enforced"). Section 727(a)(8) does not "require[ ] a litigant" — here, Tidewater — "to file [its] claim within a specified period of time." Rector, 265 F.3d at 252. Instead, § 727(a)(8) conditions the ability of a debtor, like Williams, to obtain a Chapter 7 discharge, by requiring her to wait six years after initiating earlier proceedings that ended in a discharge. Thus, as the bankruptcy court explained, § 727(a)(8) "does not define a limitations period for Tidewater, a creditor, to assert its claim," rather it "defines a condition that the Debtor [Williams] was required to satisfy in order to qualify for a benefit, namely, a discharge of her debts." Tidewater, 333 B.R. at 73 (emphasis added).

Despite the fact that § 727(a)(8) does not set forth a "specified period of time" in which Tidewater can...