Ichinose, Matter of

• Decision Date: 13 November 1991
• Docket Number: No. 90-3909,90-3909
• Citation: 946 F.2d 1169
• Parties: 25 Collier Bankr.Cas.2d 1709, Bankr. L. Rep. P 74,326 In the Matter of Beverly ICHINOSE and Herbert Ichinose, Debtors. Herbert ICHINOSE and Beverly Ichinose, Appellees, v. HOMER NATIONAL BANK, Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1169

946 F.2d 1169

25 Collier Bankr.Cas.2d 1709, Bankr. L. Rep. P 74,326

In the Matter of Beverly ICHINOSE and Herbert Ichinose, Debtors.

Herbert ICHINOSE and Beverly Ichinose, Appellees, v. HOMER NATIONAL BANK, Appellant.

No. 90-3909.

United States Court of Appeals, Fifth Circuit.

Nov. 13, 1991.

John C. Anderson, Brook, Morial, Cassibry, Fraiche & Pizza, Baton Rouge, La., for appellant.

R. Patrick Vance, James E. Bailey, III, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, John Herr Musser, IV, New Orleans, La., for appellees.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before KING, JOHNSON and EMILIO M. GARZA, Circuit Judges.

KING, Circuit Judge:

This adversary proceeding, arising from consolidated bankruptcy filings, presents us with a question of the timeliness of a complaint contesting dischargeability of a debt. The creditor who filed the complaint never moved for an extension of the filing deadline, but relied on deadline-extension orders issued for the benefit of other creditors. The bankruptcy court accepted the complaint and denied a motion by the defendants to dismiss it as untimely. We review the district court's reversal of the bankruptcy court's order.

I. Background

In March 1988, appellees Beverly and Herbert Ichinose filed individual voluntary petitions under Chapter Seven of the Bankruptcy Code. ¹ Appellant Homer National Bank (Homer) was a creditor in both bankruptcy cases (which were later consolidated) with a purported claim against each debtor for over $660,000. Alleging preliminary evidence that the debts owed them were procured through fraud, and therefore were nondischargeable under § 523 of the Bankruptcy Code, several creditors--but not Homer--filed successive applications for extensions of time, pursuant to Bankruptcy Rule 4007(c), in order to investigate the allegations prior to filing a complaint to determine dischargeability pursuant to § 523. Just prior to the close of the extended deadline, and approximately fifteen months after the first scheduled meeting of creditors, ² Homer filed a complaint seeking to determine dischargeability of the debts under § 523.

The Ichinoses filed a motion to dismiss Homer's complaint as untimely filed. The bankruptcy court denied their motion, holding that Homer was entitled to rely on the orders extending the deadline, notwithstanding that Homer itself had never moved for such an order. The bankruptcy court's memorandum opinion of May 24, 1990 refers to a standing policy of that court that it would, as a matter of course, "grant general extensions for filing complaints under § 523 when the facts so warrant." The opinion also states that this policy had been upheld on appeal to the district court, at least " 'where the [bankruptcy] Court indicates that to grant a general extension is, in fact, the intent of the Court.' "

On appeal, the district court reversed the bankruptcy court, holding that Homer's complaint had been untimely filed. The district court based its decision on its review of the record on appeal, finding that there had been a gap of over three months between the expiration of the last deadline granted by the bankruptcy court (November 22, 1988) and the motion for extension of time (March 6, 1989) which resulted in the order relied on by Homer in filing its amended complaint. The Ichinoses had not originally argued this point to the district court on appeal, however. The point they had sought to appeal was whether Homer could rely on a succession of motions for extensions of time which had been filed by other creditors. The district court did not reach this issue, since it found that there had been a gap between the deadlines and thus that the motion relied on by Homer had been untimely filed.

II. The Law

The purpose of Chapter Seven of the Bankruptcy Code is to give individual debtors a "fresh start," and the heart of this goal is embodied in § 727's discharge provisions. See, e.g., S.Rep. No. 989, 95th Cong., 2d. Sess. 7 (1978), reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5793. "The discharge provisions require the court to grant the debtor a discharge of all his debts except for very specific and serious infractions on his part." Id. Section 727(b) provides that a discharge granted by the bankruptcy court under § 727(a) "discharges the debtor from all debts that arose before the date of the order for relief under this chapter...." 11 U.S.C. § 727(b).

Section 727(b) notes, however, that this general discharge is subject to § 523. Section 523 of the Bankruptcy Code enumerates the various exceptions to discharge (the "specific and serious infractions" noted by the Senate Report). The basis for the complaint in this case was that the debt had been procured through fraud.

A discharge under section 727 ... does not discharge an individual debtor from any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by 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).

In order to determine the dischargeability of a debt under § 523, a creditor must follow the process outlined in Rule 4007. Rule 4007(c) provides that, in a Chapter Seven liquidation,

[a] complaint to determine the dischargeability of any debt pursuant to § 523(c) of the Code shall be filed not later than 60 days following the first date set for the meeting of creditors held pursuant to § 341(a).... On motion of any party in interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be made before the time has expired.

Rule 4007(c)'s deadline for filing a complaint or motion must be interpreted with the aid of Rule 9006, which governs the computation of time under the Bankruptcy Rules. Rule 9006(b)(3) permits the enlargement of time for taking action under Rule 4007, "only to the extent and under the conditions stated in [that] rule[ ]." This strict limitation on the extension of time reflects the overall goal of the bankruptcy process to provide individual debtors a fresh start. Consequently, any exceptions to discharge must be filed within a strictly enforced time limit. See, e.g., Neeley v. Murchison, 815 F.2d 345 (5th Cir.1987) (enforcing the Rule 4007(c) time limitation even given the failure of the court clerk's office to provide notice of the deadline date, as required by the rule).

III. Overview

Homer argues that we should reverse the district court for any of three reasons. First, Homer contends that it properly relied on the deadline-extension orders issued by the bankruptcy court, notwithstanding that they were issued on motions of other creditors. Second, Homer asserts that the bankruptcy court's order can be upheld alternatively as a proper exercise of that court's equity powers. Finally, Homer disputes the appealability of the bankruptcy court's order.

The Ichinoses respond that the Bankruptcy Code and Rules do not permit a creditor to rely on extensions obtained on motions of other creditors. They also point out the obvious flaws in Homer's two alternative arguments.

We conclude that the orders on which Homer purports to have relied do not support the interpretation it seeks to impose on them. The language and context of the orders clearly demonstrate that their applicability was limited to the parties on whose motions they were issued. Since the bankruptcy court's practice of granting general extensions was not reduced to writing, Homer's reliance on it was misplaced. Consequently, we do not reach the question of whether the Bankruptcy Code and Rules would support reliance by one creditor on a deadline-extension order issued on the motion of another, if that order was actually intended to apply to all creditors. We dispense summarily with Homer's two alternative arguments, finding them spurious and unwarranted.

IV. Homer's Reliance on Other Creditors' Motions

Homer's argument, seeking to overcome the district court's judgment on appeal ordering dismissal of Homer's § 523 complaint, depends on three steps. First, Homer must demonstrate that the bankruptcy court issued a seamless series of deadline-extension orders. Next it must prove that the orders in this case were intended to operate as general extensions--applicable to all creditors, not just those on whose motions they were issued. Finally, if the first two steps are met, Homer must show that the Bankruptcy Code and Rules permit such a general extension.

A. The District Court's Opinion and the Missing Order

The district court opinion reversing the bankruptcy court's order rested on a missing link in the chain. The district court found that the last deadline resulting from a timely motion to extend expired on November 22, 1988. Consequently, the order on which Homer relied was the result of an untimely motion, filed March 6, 1989. Since the district court found that there had not been a complete chain of timely motions and orders extending the deadline, it did not reach the issue, urged by Homer there as well as here, of whether the orders extending the deadline ran to the benefit of all creditors or solely to those who filed motions seeking extension. According to the district court's holding, the order relied on by Homer was invalid even as to the moving party.

On appeal to a district court from a bankruptcy court's ruling, the appellant has the initial responsibility to designate the relevant items to be included in the record on appeal. This list of designated items must be served on the appellee. See Bankruptcy Rule 8006. The appellant does not have the final word on the designation of items to be included, however. "[A]fter the service of the statement of the appellant the appellee may file and serve on the appellant a designation of additional items to be included in the record on...