610 B.R. 163 (Bkrtcy.D. Puerto Rico 2019), 18-04586 (ESL), In re Ortiz Franco

Docket Nº:18-04586 (ESL)
Citation:610 B.R. 163
Opinion Judge:Enrique S. Lamoutte, United States Bankruptcy Judge
Party Name:IN RE: Leida Aminta ORTIZ FRANCO, Debtor v. Leida Aminta Ortiz Franco, Defendant Formador, Inc., Plaintiff
Attorney:Maria I. Baco Alfaro, San Juan, PR, for Plaintiff. Juan Manuel Suarez Cobo, Legal Partners PSC, San Juan, PR, for Defendant.
Case Date:December 27, 2019
Court:United States Bankruptcy Courts, First Circuit

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610 B.R. 163 (Bkrtcy.D. Puerto Rico 2019)

IN RE: Leida Aminta ORTIZ FRANCO, Debtor

Formador, Inc., Plaintiff

v.

Leida Aminta Ortiz Franco, Defendant

No. 18-04586 (ESL)

United States Bankruptcy Court, D. Puerto Rico

December 27, 2019

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[Copyrighted Material Omitted]

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Maria I. Baco Alfaro, San Juan, PR, for Plaintiff.

Juan Manuel Suarez Cobo, Legal Partners PSC, San Juan, PR, for Defendant.

OPINION AND ORDER

Enrique S. Lamoutte, United States Bankruptcy Judge

This case is before the court upon the Motion Requesting Dismissal of the Complaint (Docket No. 19) filed by the Defendant, Leida Aminta Ortiz Franco ("Defendant" and/or "Debtor"); the "Motion to Request Sanctions Pursuant to Bankruptcy Rule 9011 filed by the Defendant (Docket No. 17); and the Omnibus Response to Debtor/Defendant’s Motions filed by the Plaintiff, Formador Inc. ("Plaintiff" and/or "Formador") (Docket No. 24).

The Defendant alleges that an action pursuant to 11 U.S.C. § 523(c), as the one filed by Formador, must be filed within the time limits established in the Fed. R. Bankr. P. 4007(c), which states: "[e]xcept as otherwise provided in subdivision (d), a complaint to determine the dischargeability of a debt under 523(c) shall be filed no later than 60 days after the first date set

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for the meeting of creditors under 341(a). The court shall give all creditors no less than 30 days’ notice of the time so fixed in the manner provided in Rule 2002. On motion of a party in interest, after hearing and notice, the court may for cause extend the time fixed under this subdivision. The motion shall be filed before the time has expired."

The Defendant states that the Complaint filed by Formador, which was filed on March 12, 2019, was untimely as the deadline to file a dischargeability action was November 13, 2018. Furthermore, the Defendant requests the court to impose sanctions pursuant to Rule 9011, considering that the court entered an order in the bankruptcy case, 18-04586, Docket No. 71, informing the Plaintiff that the time to file objections was governed by Fed. R. Bankr. P. 4004(a), and Formador, nonetheless, filed the present adversary proceeding untimely.

Formador argues that the order entered by the court on February 5th, 2019 at Docket No.78, "...denied Formador’s request to take notice of the arguments against dischargeability already stated in the Motion for Reconsideration and instructed Formador to file an adversary proceeding", rather than advising on the timeframe to file the objection to the dischargeability of the debt, as alleged by the Defendant. (See Docket No. 24, page 3, ¶ 8).

The Plaintiff alleges that Formador complied with the terms of Rule 4007(c). Formador states that under equitable consideration, the court should apply the "relation back" theory or deem the late complaint as timely filed, considering that the dischargeability claim was timely filed in the main bankruptcy case, previous to the filing of the adversary proceeding.

Relevant Procedural History

The Debtor, Leida Aminta Ortiz Franco, filed a chapter 13 bankruptcy petition on August 14, 2018 (Docket No. 1). The First Meeting of Creditors was set for September 13, 2018, and, therefore, the deadline to object to the debtor’s discharge under § 1328(f) or to challenge the dischargeability of certain debts was due on November 13, 2018 (Lead Case No. 18-04286, Docket No. 3). On September 11, 2018, the Debtor filed a Chapter 13 Plan (Lead Case No. 18-04286, Docket No. 22). On October 16, 2018, Formador filed an Objection to Confirmation alleging that the plan was not proposed in good faith, that the Debtor’s real estate was undervalued, and that the transfer of the Debtor’s residential property from a corporation owned by herself, in order to claim the homestead exemption, lacked good faith (Lead Case No. 18-04286, Docket No. 32).

On November 13, 2018, Formador filed its Motion Requesting Extension of Time to Oppose Dischargeability of a Debt which stated that (1) Formador was a judgment creditor with a claim in the amount of $191,731.96 and (2) requested a 60 days extension of time under Rule 40041 to properly evaluate the schedules submitted by debtor and object to the discharge of its claim. Formador specifically requested for a 60-day extension of time, to expire on January 13, 2019 (Lead Case No. 18-04286, Docket No. 39).

On November 26, 2018, the Debtor filed her Opposition for Lack of Cause to Motion Requesting Extension of Time to Oppose Dischargeability of a Debt by Formador Inc. (Lead Case No. 18-04186, Docket No. 43). The Debtor alleged that Formador

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had failed to show cause for the extension of time requested, as mandated by Bankruptcy Rule 4004(b). On December 6, 2019, the court denied the extension of time requested by Formador, for the reasons stated in the Debtor’s Opposition (Lead Case No. 18-04586, Docket No. 47). On December 20, 2018, Formador filed a Motion for Reconsideration of Denial of Extension of Time to Oppose Dischargeability, arguing that it had been denied the opportunity to present its position regarding the Debtor’s Opposition to the Motion for Extension of Time (Lead Case 18-04586, Docket No. 51). Formador explained that several matters required further examination and discovery such as the pre-petition dealings with Formador, the disclosure of assets and the conveyance of a residence in order to claim the homestead exemption. Formador alleged that the Debtor’s acts "suggest Debtor has incurred in the "actual fraud" alluded to in 11 U.S.C. § 523(1)(2)(A)."

On January 28, 2019, the court entered an Order which stated the following: "The Motion for Reconsideration of Denial of Extension of [T]ime to Oppose Dischargeability filed by Formador, Inc. (Docket Entry #51) is hereby granted. However, the sixty (60) day period requested has elapsed. The court notes that the time to file objections to discharge is governed by Fed. R. Bankr. P. 4004(a) (Lead Case No. 18-04586, Docket No. 71).

On January 31, 2019, Formador filed its Motion Requesting That Court Takes Notice of Formador’s Arguments Against Dischargeability (Lead Case No. 18-04586, Docket No. 77). In the Motion, Formador argued that, although the document was not entitled Opposition to Dischargeability, "its arguments in opposition to the dischargeability of its claims were included in the Motion granted on January 29, 2019, which was filed within the sixty (60) day extension requested." (Lead Case No. 18-04586, Docket No. 77, page 1, ¶ 2). Therefore, Formador requested the court "to take notice that its arguments in opposition of the dischargeability of its claim were included in the Motion granted on January 29, 2019." On February 5, 2019, the court entered an Order, denying the Motion filed by Formador Inc. requesting the court to take notice of arguments against dischargeability (Docket Entry #77) and further stating that "[a]n objection to the dischargeability of a debt requires the filing of an adversary proceeding. See Fed. R. Bank. P. 4007" (Lead Case No. 18-04586, Docket No. 78).

On March 12, 2019, Formador filed the present adversary proceeding under 11 U.S.C. § 523(a)(2) to determine that the Defendant’s debt with Formador should not be discharged by the Debtor (Docket No. 1).

Legal Analysis and Discussion

a. Extension of Time to File a Complaint Objecting to Debtor’s Discharge or Dischargeability of Debts

Fed. R. Bankr. P. 4004(a) and 4007(c) establish a sixty (60) day time limit within which a creditor may file a complaint to dispute the discharge of the debtor under § 727(a) of the Bankruptcy Code and the dischargeability of debts under § 523(c) of the Bankruptcy Code [...]. This time limit begins to run from the first date set for the meeting of creditors...

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