In re Shaheen

• Citation: 174 BR 424
• Decision Date: 30 November 1994
• Docket Number: Civ. A. No. 4:94cv136.
• Parties: In re Samuel SHAHEEN, Debtor. Samuel SHAHEEN, Defendant/Appellant, v. Kevin PENROSE, Plaintiff/Appellee.
• Court: U.S. District Court — Eastern District of Virginia

174 B.R. 424 (1994)

In re Samuel SHAHEEN, Debtor.

Samuel SHAHEEN, Defendant/Appellant, v. Kevin PENROSE, Plaintiff/Appellee.

Civ. A. No. 4:94cv136.

United States District Court, E.D. Virginia, Newport News Division.

November 30, 1994.

John W. Raymond, Norge, VA, for defendant/appellant.

George R. Leach, Williamsburg, VA, for plaintiff/appellee.

OPINION

REBECCA BEACH SMITH, District Judge.

This matter comes before the Court pursuant to 28 U.S.C. § 158(a) on appeal from the Order of the United States Bankruptcy Court for the Eastern District of Virginia, entered August 3, 1994. After a trial on the merits, the bankruptcy court held that the debt was nondischargeable in bankruptcy in the amount of $60,000.00. At issue in this appeal is (1) whether the bankruptcy court correctly granted Penrose's motion to establish that the Complaint to Determine Dischargeability was timely filed, and (2) whether the bankruptcy court correctly calculated the amount of the debt to be $60,000.00. After due consideration, and for the reasons articulated below, this Court AFFIRMS the bankruptcy court's order of August 3, 1994, which treated Penrose's complaint as timely filed and which found the amount of the debt to be $60,000.00.

I. Factual and Procedural History

Debtor Samuel Shaheen filed a voluntary Chapter 7 petition in bankruptcy on August 27, 1993. Several weeks earlier, on August 1, 1993, Debtor had attacked and injured Kevin Penrose. On December 21, 1993, Debtor pled guilty to an amended indictment charging him with assault and battery and agreed to pay $6,600.00 restitution to Penrose.

Debtor did not list Penrose as a creditor in his initial bankruptcy filing on August 27, 1993. Thus, Penrose did not receive formal notice of the initial meeting of creditors, which occurred on September 29, 1993, However, Debtor amended his list of creditors on November 17, 1993, to include Penrose and Penrose received formal notice at that time.¹ Although the sixty day deadline² for filing a Complaint to Determine the Dischargeability of this type of debt was November 29, 1993, Penrose filed his Complaint on December 3, 1993. Penrose, on December 13, 1993, then filed an amended version of his Complaint to Determine Dischargeability ("Amended Complaint").

On January 11, 1994, Debtor answered Penrose's Amended Complaint and contested its timeliness. Penrose then moved the bankruptcy court to determine whether he had timely filed his Complaint to Determine Dischargeability because he was not listed on Debtor's initial petition under 11 U.S.C. § 523(a)(3) and because the Debtor inflicted willful and malicious injury upon him under 11 U.S.C. § 523(a)(6).³ On February 8, 1994, the bankruptcy court addressed the question of whether Debtor had timely filed his Amended Complaint. By Order and Memorandum Opinion entered on March 8, 1994, the bankruptcy court recognized the Amended Complaint as timely filed because Penrose had not received the thirty days notice required by Fed.R.Bankr.P. 4007(c). Mem.Op. at 2 (Mar. 8, 1994).⁴ On March 14, 1994, the Debtor filed a motion to reconsider this ruling; on April 27, 1994, the bankruptcy court reserved ruling on the motion to reconsider until the time of trial.

At trial, the bankruptcy court denied the motion to reconsider its March 8, 1994 Order and Memorandum Opinion. Tr. at 6. The bankruptcy court then, after hearing testimony and other evidence, ruled that the debt totalled $60,000.00. Tr. at 161. Debtor contests the ruling of the bankruptcy court that the Amended Complaint was timely filed and that the amount of the debt was $60,000.00. Both parties having briefed the issues, the appeal is ready for decision by this Court.⁵

II. Analysis

A. Timely Filing of the Complaint

Title 11, section 523 of the United States Code identifies exceptions to discharge of a debt in bankruptcy. The portions of section 523 pertinent to this case specify:

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt —

* * * * * *

(3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit —

* * * * * *

(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request;

* * * * * *

(6) for willful and malicious injury by the debtor to another entity or to the property of another entity;

* * * * * *

(c)(1) Except as provided in subsection (a)(3)(B) of this section, the debtor shall be discharged from a debt of a kind specified in paragraph (2), (4), or (6) of subsection (a) of this section, unless, on request of the creditor to whom such debt is owed, and after notice and a hearing, the court determines such debt to be excepted from discharge under paragraph (2), (4), or (6), as the case may be, of subsection (a) of this section.

11 U.S.C.A. § 523 (West.Supp.1994).

Section 523 and Bankruptcy Rule 4007(c) govern the timing for filing complaints to determine the nondischargeability of bankruptcy debts. To implement section 523, Rule 4007(c) provides:

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). The court shall give all creditors not less than 30 days notice of the time so fixed in the manner provided in Rule 2002. 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.

Fed.R.Bankr.P. 4007(c).

The first issue on appeal arises because Penrose, a creditor, filed his original and Amended Complaints to Determine Dischargeability after November 29, 1993, the sixty day deadline set after the initial meeting of creditors. Debtor primarily contests the bankruptcy court's ruling that Bankruptcy Rule 4007(c) grants all creditors at least thirty days notice and because Penrose did not receive thirty days notice prior to November 29, 1993, Penrose's complaint was timely filed, even though filed after the November 29, 1993 deadline. Mem.Op. at 2 (Mar. 8, 1994).⁶ The district court reviews such a conclusion of law de novo. In re Bryson Properties, XVIII, 961 F.2d 496, 499 (4th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 191, 121 L.Ed.2d 134 (1992); In re McCauley, 105 B.R. 315, 318 (E.D.Va.1989).

The parties place different emphasis on the first and second sentences of Rule 4007(c). Debtor claims that Penrose's failure to file his Complaint to Determine Dischargeability before the sixty day deadline established by the first sentence of Rule 4007(c) renders Penrose's complaint untimely, regardless of whether Penrose appeared on the initial list of creditors. Penrose claims that notice of Debtor's late amendment, which added Penrose as a creditor, did not provide the thirty days notice required by the second sentence of Rule 4007(c), if he had to file by November 29, 1993. While the sixty day deadline apparently prevents Penrose's Amended Complaint from being considered timely, the thirty day provision simultaneously permits the filing.

Statutory interpretation requires a court to adhere to the plain meaning of the statute and to endeavor to give effect to all sections and words. In re Maxway Corp., 27 F.3d 980, 982 (4th Cir.1994) ("Statutory interpretation necessarily begins with an analysis of the language of the statute"); Hurley v. United States, 192 F.2d 297, 300 (4th Cir.1951) ("Statutes must be interpreted to give meaning to every portion thereof"). The second sentence of Rule 4007(c) mandates that a creditor receive thirty days notice before the bankruptcy court may foreclose his right to participate in the process. Fed.R.Bankr.P. 4007(c). Usually, creditors who are informed of the initial creditor's meeting receive more than thirty days notice of the filing deadline. Those creditors do not need the protection offered by the second sentence of Rule 4007(c). However, creditors without notice of the initial meeting, who are later appended to the debtor's petition, must receive some adequate notice of the filing deadline before the bankruptcy court discharges the debtor's obligations to them.

In order for the second sentence of Rule 4007(c) to have meaning, the thirty day requirement necessarily applies to those later scheduled creditors, such as Penrose, who received notice less than thirty days before the original sixty day deadline for filing complaints. Strict adherence to the sixty day deadline would render the thirty day notice requirement meaningless in certain instances. This Court simply cannot ignore the plain and clear notice requirement in the second sentence of Rule 4007(c) to enforce the sixty day deadline contained in the first sentence of that Rule. Importantly, granting a minimum of thirty days notice to all creditors still gives effect to the sixty day deadline for the initial creditors and any creditor added more than thirty days before the sixty day deadline.

Neither the Fourth Circuit Court of Appeals nor the courts of the Eastern District of Virginia have addressed the particular question of whether a creditor without the thirty day notice of Rule 4007(c) is still bound by the sixty day deadline of the rule.⁷ Two other United States Circuit Courts of Appeals have confronted this question and have reached opposite results. See In re Dewalt, 961 F.2d 848 (9th Cir.1992) (creditor permitted to make filing); In re Sam, 894 F.2d 778 (5th Cir.1990) (creditor not permitted to make filing). These opinions present competing equities: the right of creditors to...