In re Riso
| Decision Date | 07 January 1986 |
| Docket Number | No. C85-302-L.,C85-302-L. |
| Citation | 57 BR 789 |
| Parties | In re Richard RISO, Debtor. Donald H. FRANCIS, Plaintiff/Appellee, v. R. Richard RISO, Defendant/Appellant. |
| Court | U.S. District Court — District of New Hampshire |
Mark Vaugh, Devine, Millimet Stahl & Branch, Manchester, N.H., for plaintiff/appellee.
John James, Lawrence, Mass., Jerome Gokin, Boston, Mass., for defendant/appellant.
ORDER ON APPEAL FROM UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Defendant R. Richard Riso appeals from the order of the United States Bankruptcy Court, District of New Hampshire, 48 B.R. 244, denying his motion for reconsideration of the denial of his motion to dismiss plaintiff Donald Francis' complaint objecting to discharge. This court has jurisdiction pursuant to 28 U.S.C. § 158(a).
The facts are briefly as follows:
Defendant Riso originally initiated a voluntary Chapter 7 proceeding in the United States Bankruptcy Court for the Southern District of Florida on June 7, 1984. The Florida court issued an order setting September 7, 1984 as the deadline for filing objections to debtor Riso's discharge pursuant to Bankruptcy Rule 4004(a). Donald Francis, as a creditor of Riso, filed a motion to transfer the proceeding to the United States Bankruptcy Court for the District of New Hampshire. The Florida court, finding venue improper in the Florida district, transferred the case to New Hampshire on August 8, 1984. Donald Francis subsequently filed a motion to extend the time to object to discharge until October 27, 1984; the bankruptcy court in New Hampshire granted the motion. On September 13, 1984 the bankruptcy court staff in the District of New Hampshire mailed a routine order to the debtor and all creditors, erroneously setting a new deadline for filing objections to discharge as December 3, 1984. Although not signed by the presiding bankruptcy judge, the notice indicated clearly that it was: "By the Court, James E. Yacos, Bankruptcy Judge." "This new date was erroneous as it was beyond the deadline required for objections to discharge under Bankr.R. 4004(a).
In reliance on the new date set, Donald Francis filed his objection to Riso's discharge on November 29, 1984, before the December 3, 1984 deadline as set by the bankruptcy court in New Hampshire, but after the extended October 27th date granted to him.
Defendant Riso filed a motion to dismiss the plaintiff Francis' objection to discharge on the grounds the complaint was filed beyond the October 27th deadline. On January 30, 1985, the Bankruptcy Court for the District of New Hampshire denied the defendant's motion to dismiss. Defendant then filed a motion for reconsideration, citing a recently reported case, In re Richards, 43 B.R. 554 (Bankr.D.Minn.1984) affirmed 47 B.R. 423 (D.Minn.1985). After a hearing on March 19, 1985, the bankruptcy court declined to treat Richards as controlling and denied defendant's motion for reconsideration. Defendant now appeals that denial and seeks dismissal of the plaintiff Donald Francis' objection to discharge.
The standard of review in an appeal of a decision of the bankruptcy court is stated in Bankr.R. 8013. That rule states:
On an appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy court\'s judgment, order, or decree or remand with instructions for further proceedings. Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.
"Where basic facts and facts permissibly inferred therefrom are found by the bankruptcy court sitting as a fact finder, neither the basic facts nor the inferred facts may be disturbed on review unless they are deemed clearly erroneous." Universal Minerals, Inc. v. C.A. Hughes & Co., 669 F.2d 98, 102 (3d Cir.1981). See also United States v. United States Gypsum Co., 333 U.S. 364, 394, 68 S.Ct. 525, 541, 92 L.Ed. 746 (1948). "The clearly erroneous standard does not apply to the Bankruptcy Court's conclusions of law; that is, the reviewing court must make an independent determination on the legal issues." Prudential Insurance Company of America v. Colony Square Co., 29 B.R. 432, 434 (W.D.Pa.1983) (citing In re Hollock, 1 B.R. 212, 215 (M.D.Pa.1979)). The bankruptcy court is in the best position to judge the credibility of the parties. Therefore, the following findings of fact and factually based inferences are deemed not clearly erroneous and will not be disturbed by this court: 1) a form notice was sent from the bankruptcy court in the district of New Hampshire to all creditors erroneously setting the deadline for objecting to discharge as December 3, 1984; 2) relying on this erroneous notice, creditor Donald Francis did not file his complaint objecting to discharge until November 30, 1984; 3) the prejudice to the debtor if the additional extension of the deadline is allowed, is outweighed by the prejudice to the objecting creditor if he loses all rights to his "day in court" by that reliance; 4) the debtor, having also received notice of the erroneous deadline, failed to bring that error to the attention of the court until such deadline had expired; and 5) R. Richard Riso, debtor and Donald Francis, creditor are essentially equal innocent parties. The court also found that, as between the equally innocent parties, the debtor should suffer the harm of the additional delay. The question now before the court is whether the bankruptcy court has the equitable power to extend the deadline for objections to dischargeability.
Under the Bankruptcy Code, a debtor may seek dischargeability of debts. 11 U.S.C. § 727(a) (1978). The Code further provides that "the trustee or a creditor may object to discharge under subsection (a) of this section." 11 U.S.C. § 727(b) (1978). The deadline for filing such complaints is as follows:
In a chapter 7 liquidation case a complaint objecting to the debtor\'s discharge under § 727(a) 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). In a chapter 11 reorganization case, such complaint shall be filed not later than the first date set for the hearing on confirmation. The court shall give not less than 25 days notice of the time so fixed to all creditors in the manner provided in Rule 2002, and to the trustee and his attorney.
Bank.R. 4004(a) (emphasis added). Under former Bankruptcy Rule 906(b), the court could, for cause "enlarge the time for filing complaints with or without application or notice if requested prior to the expiration of time or upon application after the expiration of time upon a showing of excusable neglect." In re Lane, 37 B.R. 410, 412 (Bankr.E.D.Va.1984) (emphasis added). The current rules provide as follows:
Bankr.R. 9006(b)(1), (2), (3).
Motions for extension of time must now be made before the time limitation in 4004(a) expires.
Bankr.R. 4004(b). Thus, where a motion is filed for enlargement of time under Rule 4004(a) it must be made for cause prior to the expiration of the 60 days following the first date set for the meeting of creditors.
There is no dispute that Donald Francis did not comply with this requirement. The case before this court, however, is not a case of a creditor seeking an enlargement of the time period for objecting to discharge and doing so after the time limit set by the rules. The present case involves the bankruptcy court enlarging the deadline, sua sponte, to prevent an injustice. There was no need for Mr. Francis to seek an extension if he was relying on the December 3, 1984 deadline. He merely relied upon this as the deadline.
The question remains then whether the Bankruptcy court has inherent equitable power to alter that deadline to prevent injustice.
In his order now on appeal, Judge Yacos found that the bankruptcy court as a court of equity has the power to correct its own mistakes. In re Riso, 48 B.R. 244, 246 (Bankr.D.N.H.1984). "The mistake in this case was a mistake of `the court' and should be corrected by the same in the absence of any substantial prejudice to any party." Id.
"The equity jurisdiction of a bankruptcy court is not plenary, but must be exercised within the limitations of the Bankruptcy Act." In re Martin Edsel, Inc. 228 F.Supp. 538, 539 (D.N.H.1963) (citations omitted). Appellant argues that the bankruptcy court exceeded this limitation when it ignored the mandatory, non-discretionary language of Rules 4004 and 9006(b)(3) and retroactively extended the period within which the creditor could file his objection. He further contends that the plaintiff's deadline remained unchanged even after receiving...
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In re Yohler, Bankruptcy No. 90-36997-BKC-RAM.
...Debtor would reaffirm its debt, USPFG asks me to exercise that discretion and allow a late-filed complaint. USPFG cites In re Riso, 57 B.R. 789, 793 (Bankr.D.N.H.1986) for the proposition that as a court of equity, I have and should exercise the authority to extend the deadline in order to ......