In re Price
| Decision Date | 08 October 1987 |
| Docket Number | Bankruptcy No. LA 86-05753-RM.,BAP No. CC 86-2032 MoVJ |
| Citation | 79 BR 888 |
| Parties | In re Robert John PRICE, Debtor. Roy E. LOMPA, Plaintiff/Appellee, v. Robert John PRICE, Defendant/Appellant. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Kenneth Jay Schwartz, Schwartz & Wilton, Encino, Cal., for defendant/appellant.
Michael P. Ring, Law Offices of Michael P. Ring, Santa Barbara, Cal., for plaintiff/appellee.
Before MOOREMAN, VOLINN and JONES, Bankruptcy Judges.
This appeal arises from an order by the bankruptcy court allowing the appellee/Lompa to file a nondischargeability complaint under section 523(c), after the bar date had passed.
As a basis for his nondischargeability complaint, the appellee alleges that he advanced $93,000 to the debtor based on certain misrepresentations. The underlying agreement between the parties was that the debtor would assist the appellee in obtaining certain "certificate of deposit financing" through a reputable company in order to purchase land in Australia. The appellee alleges that the debtor failed to obtain the financing and he lost the opportunity to purchase the land. The debtor failed to return the advanced funds.
In February, 1983, the appellee filed a complaint in state court alleging fraud and breach of contract. Three years later, on April 3, 1986, the debtor filed a Chapter 7 petition, but failed to schedule the appellee as a creditor. The bar date for filing complaints to determine dischargeability was set for July 22, 1986. Although the appellee was not listed as a creditor, his attorney ("Mr. Ring") received a "Notice of Injunction" from the debtor's counsel on May 21, 1986, which notified Mr. Ring that the debtor had filed bankruptcy. There is no evidence of when the appellee was personally notified of the bankruptcy proceeding. However, Mr. Ring was representing the appellee in the underlying state court action and there is no dispute that he had authority to act for the appellee.
After receiving notice of the debtor's bankruptcy, Mr. Ring assumed his client had been properly scheduled and awaited notice of the deadline for filing a section 523(c) complaint. Because of the debtor's failure to list the appellee as a creditor, the notice under BR 4007(c) and BR 2002(f) was never sent to the appellee or to Mr. Ring.
On August 4, 1986, (13 days after the bar date had run), Mr. Ring called the debtor's counsel and learned that the filing date had passed. On August 25, 1986, the appellee filed his Motion for Leave to File a Late Complaint to Determine Dischargeability of Debt. At the hearing on the motion, the bankruptcy court found that the appellee did not receive notice of the bar date, that it was reasonable to assume that notice would be received and that the matter was "pursued in a reasonably timely matter." Based on these findings, the trial court granted the appellee's motion and the debtor appeals.
The debtor argues that because Mr. Ring received actual notice of the bankruptcy petition in time to file a complaint, the trial court erred in granting the extension. The appellee initially argues the Panel lacks jurisdiction to hear this appeal from a "nonfinal order" and that the debtor failed to obtain "leave of the Court" to allow review of the order as interlocutory. The appellee alternatively argues that although notice of the bankruptcy was received in the form of a Notice of Injunction, it was reasonable to assume that notice of the bar date would be sent to the appellee and, therefore, the trial court did not err. The appellee further argues that his failure to file a timely complaint was "directly caused" by the debtor's failure to schedule him as a creditor and the debtor should not be "allowed to profit from his own negligence."
With regard to the appellee's initial argument that the Panel lacks jurisdiction to hear this appeal, Bankruptcy Rule 8003(c) provides for consideration of the notice of appeal as a motion for leave to appeal. Further, this Panel hereby grants review of this appeal based on the standards set forth in 28 U.S.C. § 1292(b), in that it involves a controlling question of law as to which there is a substantial ground for difference of opinion and an immediate appeal may materially advance the ultimate termination of the litigation. Although section 1292(b) deals with appeals of interlocutory orders from district courts to courts of appeals, it is appropriate for this Panel to adopt such standards for appeals from the bankruptcy court. See e.g. Matter of Bertoli, 58 B.R. 992, 995 (D.N.J. 1986); In re Johns-Manville Corp., 45 B.R. 833, 835 (S.D.N.Y.1984).
11 U.S.C. § 523(a)(3)(B) (emphasis added).
The generally recognized rule was stated in Maldonado v. Ramirez, 37 B.R. 219 (D.V.I.1984). There the court stated:
notice or actual knowledge will be imputed to a creditor or claimant when it `comes to someone who has clear authority to act for the creditor and which provides ample opportunity for the creditor to participate in the bankruptcy proceeding . . .\' Matter of Robertson, 13 B.R. 726, 733 (Bankr.E.D.Va.1981) quoting Katz v. Kowalsky, 296 Mich. 164, 295 N.W. 600, 604 (Mich.1941). Notice to a creditor\'s attorney of a bankruptcy filing is usually sufficient if the attorney received knowledge of it while representing his client in enforcing a claim against the bankrupt. 3 Collier on Bankruptcy, 15th Ed., § 523.15(5)(c) (1983). See In re Saltzman, 25 B.R. 125 (Bankr.E.D.Wis.1982); Matter of Robertson, supra.
Id. at 221 (emphasis added).
In the instant case, Mr. Ring was representing the appellee in the underlying state court action on the claim that the appellee now seeks to be declared nondischargeable. Mr. Ring has represented the appellee in these bankruptcy proceedings and does not dispute his authority to receive notice on behalf of the appellee. Based on these facts, notice to the appellee's attorney of the bankruptcy proceeding was sufficient for purposes of section 523(a)(3)(B) and for purposes of due process.
We now turn to the next issue of whether a debtor's failure to schedule a creditor with actual notice of the bankruptcy will allow the unscheduled creditor to file a nondischargeability complaint under section 523(c) after the sixty-day time limitation pursuant to B.R. 4007(c) has passed.
It is now well recognized that a trial court has no discretion to grant untimely extensions to file section 523(c) complaints. E.g. In re Hill, 811 F.2d 484, 487 (9th Cir.1987); In re Fauchier, 71 B.R. 212, 216 (9th Cir.BAP 1986); in re Rhodes, 61 B.R. 626, 629-30 (9th Cir.BAP 1986); Bankr. Rules 9006 and 4007.
The appellee argues that because Bankruptcy Rule 4007(c) requires the court to send notice of the bar date to all creditors, his nondischargeability complaint should be allowed. In support of his contention the appellee cites the case of In re Schwartz & Meyers, 64 B.R. 948 (Bankr.S.D.N.Y.1986), which held that where notice of the deadline is lacking as required by Rule 4007(c), the sixty-day time period for filing a nondischargeability complaint is "not triggered." Id. at 955. Under this rationale, the bankruptcy court is not "extending" the time for filing a 523(c) complaint, rather, the sixty-day time limitation does not run until the "proper notice" is received.
The Schwartz case is, however, distinguishable from the instant case. In the Schwartz case, the initial notice distributed by the bankruptcy clerk failed to advise the creditors of the last day to file section 523(c) complaints. After the expiration of the sixty-day period, an amended notice was sent by the clerk giving the creditors another sixty days. The bankruptcy court determined that both B.R. 4007(c) and B.R. 2002(f) require that the "court shall" give not less than thirty days notice of the time fixed for filing a 523(c) complaint. 64 B.R. at 953 (emphasis added). The court further determined that where the creditors have relied in good faith, "the prejudice to them in denying their day in court outweighs the debtors' plights to obtain a discharge." Id. at 955. Finally the court determined that when notice of the deadline is lacking, the sixty-day time period is not triggered. Id.
The distinguishing fact in the Schwartz case is that the bankruptcy clerk failed in his duty to properly notify the scheduled creditors. See also In re Riso, 57 B.R. 789 (D.N.H.1986) (). In the instant case, however, the failure of the appellee to receive the notice pursuant to B.R. 4007 was not due to a bankruptcy clerk's error. Rather, the lack of the B.R. 4007 notice was the result of the debtor's failure to properly schedule the appellee and the appellee's failure to insure protection of his claim by making an inquiry into the bankruptcy...
To continue reading
Request your trial