In re Overmyer, Bankruptcy No. 82 B 20329.

• Decision Date: 05 November 1982
• Docket Number: Bankruptcy No. 82 B 20329.
• Citation: 24 BR 437
• Parties: In re Daniel H. OVERMYER, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

24 B.R. 437 (1982)

In re Daniel H. OVERMYER, Debtor.

Bankruptcy No. 82 B 20329.

United States Bankruptcy Court, S.D. New York.

November 5, 1982.

Reich & Reich, White Plains, N.Y., for debtor.

Weil, Gotshal & Manges, New York City, for The First Nat. Bank of Boston.

DECISION ON DEBTOR'S MOTION FOR AN ORDER VACATING PART OF ORDER OF SEPTEMBER 2, 1982

HOWARD SCHWARTZBERG, Bankruptcy Judge.

This case involves the "me too" principle and the question as to whether or not one creditor may piggyback on another creditor's successful application to extend the time to object to the debtor's discharge and the dischargeability of its claims against the debtor.

On May 28, 1982 the debtor, Daniel H. Overmyer, filed with this court his voluntary petition for relief under Chapter 7 of the Bankruptcy Code. By order dated June 30, 1982, the court set September 3, 1982 as the last day for the filing of objections to the dischargeability of debts and to the debtor's discharge. On September 2, 1982, The First National Bank of Boston (the "bank") a scheduled creditor, filed an application for an ex parte order extending its time, and that of D.H. Overmyer Telecasting Company, Inc. ("Telecasting"), to object to the debtor's discharge and the dischargeability of their claims. The bank's application embraced Telecasting on the theory that the bank was then the record owner of all the common stock of Telecasting. The propriety of the bank's application, to the extent that it sought an extension of time for Telecasting to object to the debtor's discharge and the dischargeability of claims, is now disputed by the debtor.

Based upon the bank's application, dated September 2, 1982, the court entered an ex parte order the same day extending the time of the bank and Telecasting to file objections to the dischargeability of their claims and to the discharge of the debtor to December 1, 1982. The order extending the time to file objections was bottomed in part on the allegation in the application that "the affairs of the Debtor are complex and entangled in numerous nominee corporations, some of which are Chapter XI debtors . . . and more time is needed to investigate them to determine whether there exists grounds to deny discharge and dischargeability. . . ."

By application dated October 1, 1982, the debtor applied to this court for an order vacating that part of the September 2, 1982 order that extended Telecasting's time and striking a quotation from a decision of the United States Court of Appeals for the Second Circuit, and statements in the bank's application in support of the bank's position that cause existed to support the extension of time which this court granted.

The debtor argues that Telecasting and the bank are each separate entities so that even if the bank owned all the stock of Telecasting, this fact alone did not give the bank standing to obtain an order extending the time for Telecasting to file objections to the dischargeability of its claim and to the discharge of the debtor. The debtor maintains that there is nothing in Bankruptcy Rules 404(c) and 409(a)(2) that states that a stockholder is a party in interest who may apply for an extension on behalf of the issuing corporation.

PARTY IN INTEREST

Bankruptcy Rule 404(c), relating to the discharge of a debtor, provides that:

"The court may for cause, on its own initiative or on application of any party in interest, extend the time for filing a complaint objecting to discharge." Emphasis added

Bankruptcy Rule 409(a)(2), applicable to extensions of time to file complaints objecting to the dischargeability of specific debts, provides in pertinent part as follows:

"The court may for cause, on its own initiative or on application of any party in interest, extend the time fixed under this paragraph." Emphasis added

Similarly, Bankruptcy Rule 906(b), dealing with enlargements states:

". . . the court for cause shown may at any time in its discretion (1) with or without application or notice order the period enlarged if request therefor is made before the expiration of the period originally prescribed or as extended by a previous order. . . . "

This court previously said in In re Fragetti, 24 B.R. 392 (Bkrtcy. S.D.N.Y. 1982) that a prerequisite for obtaining an extension of time under these Rules is that cause must be shown to warrant the extension. Accordingly, under the Bankruptcy Rules as they now read, the court may extend a creditor's time to object to the debtor's discharge or dischargeability of claims with or without application and with or without notice.¹ See Dulaney v. Coppard, 145 F.2d 468 (5 Cir.1944) cert. den. 325 U.S. 861, 65 S.Ct. 1199, 89 L.Ed. 1982 (1945).

In this case the debtor does not dispute that the bank is a party in interest with standing to obtain its own extension of time for objecting to the debtor's discharge and for filing a complaint with respect to the dischargeability of its own claim against the debtor. Moreover, the debtor does not question that sufficient cause was shown for the granting of such application. However, the debtor asserts that the bank is not a "party in interest" who may apply for an extension of time for Telecasting, a separate entity, to file a complaint objecting to the debtor's discharge or with respect to the dischargeability of Telecasting's claim against the debtor.

In so far as the debtor's general discharge is concerned, all creditors of the estate, as well as the trustee in bankruptcy, would be interested in whether or not the debtor's conduct justifies a denial of a discharge in bankruptcy as delineated under 11 U.S.C. § 727. Therefore, an extension of time for the trustee or any creditor to file an objection to the debtor's discharge affects the interests of all creditors. Accordingly, the scope of an extension order obtained by one creditor with respect to objecting to the debtor's discharge could conceivably be appropriately worded so as to inure to the benefit of other creditors. This point was recognized in the Advisory Committee's Note following Bankruptcy Rule 404, which reads as follows:

"An extension granted on an application pursuant to subdivision (c) of the rule would ordinarily redound to the benefit only of the applicant, but the scope and effect of the extension would in any event depend on the terms of the extension." Emphasis added.

The extension that the bank obtained, to the extent it related to the debtor's general discharge, clearly redounded to Telecasting's benefit as well.² In light of the fact that Telecasting is interested in, and is affected by, the operation of any discharge that may be granted to the debtor, it necessarily follows that the extension order obtained by the bank in favor of itself and Telecasting to object to the debtor's general discharge was properly obtained by "a party in interest." Indeed, if one objecting creditor withdraws or fails to prosecute a filed complaint, other parties who were originally entitled to oppose the discharge would normally be given an opportunity to proceed with the objection, notwithstanding that the time to file objections to the discharge may have lapsed. See 1A Collier on Bankruptcy, ¶ 14.141 p. 1314.7 (14th Ed. 1981). Clearly there is no point in having two complaints filed against the debtor in which the same conduct is asserted as a basis for objecting to his discharge. The evidence of any conduct proscribed under 11 U.S.C. § 727 will carry no greater conviction merely because another party in interest voices a similar objection.

The dischargeability of specific debts is another matter. Generally, each creditor is interested only in the dischargeability of its own claims and not those of strangers. An extension of time to object to the dischargeability of one creditor's claim does not usually concern creditors other than the one who obtained the extension. Manifestly, the bank was a proper party in interest to obtain an extension of time to file a complaint to determine the dischargeability of its own claim against the debtor. The debtor contends, however, that the bank was not a proper "party in interest" to obtain an extension for Telecasting to object to the dischargeability of its claim merely because the bank owned all of Telecasting's common stock.

The phrase "party in interest" is employed in Bankruptcy Rules 404(c) and 409(a)(2) without definition as to who may be such a party in interest. In Chapter 7 of the Bankruptcy Code the words "party in interest" appear in various sections,³ also without definition. Although not controlling,⁴ 11 U.S.C. § 1109(b) is instructive as to whom may be included as a "party in interest" for purposes of appearing and being heard on any issue in a case under Chapter 11 of the Code. This section provides that:

"A party in interest, including the debtor, the trustee, a creditors\' committee, an equity security holders\' committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case under this chapter."

The bank and Telecasting note that 11 U.S.C. § 1109(b) was the basis for the holding in Hadar Leasing International Co. v. D.H. Overmyer Telecasting Co., 18 B.R. 110 (Bkrtcy.N.D.Ohio 1982) that the bank had sufficient interest in Telecasting to intervene in the adversary proceeding as a "party in interest." However, the bank was a creditor in that case and was allowed to intervene to protect its own interests; such intervention was not also in furtherance of Telecasting's interests, as Telecasting was already a party to the action. Therefore, that decision is not res judicata as to the propriety of the bank's application on behalf of Telecasting for an order extending Telecasting's time to object to the dischargeability of the latter's claim.

Although 11 U.S.C. § 1109(b) specifies who may be included as a "party in interest" for purposes of appearing in a Chapter 11 case, it must be recognized that the words...