In the Matter of Dunlap, 99-10338

• Citation: 217 F.3d 311
• Decision Date: 29 June 2000
• Docket Number: N,No. 99-10338,99-10338
• Parties: (5th Cir. 2000) In The Matter Of: ELIJAH THOMAS DUNLAP, JR., Debtor. State Bank & Trust, N.A., Appellant, v. ELIJAH THOMAS DUNLAP, JR., Appellee. In The Matter Of: ELIJAH THOMAS DUNLAP, JR., Debtor. ELIJAH THOMAS DUNLAP, JR., Appellee. v. SENTRY GROUP SERVICES INC., Appellant. o. 99-11195
• Court: U.S. Court of Appeals — Fifth Circuit

Page 311

217 F.3d 311 (5th Cir. 2000)

In The Matter Of: ELIJAH THOMAS DUNLAP, JR., Debtor.

State Bank & Trust, N.A., Appellant, v. ELIJAH THOMAS DUNLAP, JR., Appellee.

In The Matter Of: ELIJAH THOMAS DUNLAP, JR., Debtor.

ELIJAH THOMAS DUNLAP, JR., Appellee. v. SENTRY GROUP SERVICES INC., Appellant.

No. 99-10338, No. 99-11195

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

June 29, 2000

Appeals from the United States District Court for the Northern District of Texas -- Dallas Division

Before GARWOOD, DeMOSS and PARKER, Circuit Judges.

ROBERT M. PARKER, Circuit Judge:

Creditors appeal from final orders issued by the district court dismissing their nondischargeability complaints as untimely. Because we disagree with the district court's interpretation of Fed. R. Bankr. P. 4007(c), we REVERSE and REMAND.

I.

On October 25, 1996, an Oklahoma state court awarded two judgments against Elijah Thomas Dunlap in civil actions brought by appellants State Bank & Trust, N.A. ("State Bank") and Sentry Group Services, Inc. ("Sentry"). State Bank was awarded a $358,167.73 judgment based upon the court's finding that Dunlap had committed fraud and breached his representation of warranty and authority when he obtained a loan from State Bank. Sentry was awarded a $941,913.22 judgment for conversion, misappropriation of funds and breach of fiduciary duty.

On July 3, 1997, Dunlap filed a voluntary Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the Northern District of Texas, Dallas Division. Pursuant to the notice originally issued by the Bankruptcy Court Clerk, and in accordance with 11. U.S.C. § 341 (1994), the first meeting of creditors (the "section 341 meeting") was scheduled for August 11, 1997. The Clerk, in accordance with Fed R. Bankr. P. 4007(c), then calculated the deadline for the filing of nondischargeability complaints to be October 10, 1997 -- 60 days after the August 11, 1997, "date first set for the meeting of creditors held pursuant to § 341(a)." Fed R. Bankr. P. 4007(c). At the debtor's request, the 341 meeting was rescheduled for September 5, 1997, but the October 10, 1997, bar date was not altered.

Dunlap did not appear at the meeting of creditors, instead his attorney appeared and announced that Dunlap would be filing a motion to dismiss the bankruptcy. Counsel for Sentry informed Dunlap's counsel that an objection to the dismissal would likely be forthcoming and asked that an order of dismissal not be presented to the court ex parte. Nevertheless, Dunlap filed his motion, and on September 15, 1997, the bankruptcy court dismissed the case. Both appellants moved to vacate the court's order of dismissal as premature and in violation of the due process safeguards mandated by the Bankruptcy Code. See 11 U.S.C. § 707(a)(1994); Fed. R. Bankr. P. 1017(a). On December 2, 1997, the bankruptcy court, concluding that it had erred in granting debtor's motion to dismiss without a hearing and an opportunity for all interested parties to be heard, reinstated the case and directed Dunlap to reset his motion for a hearing. Due to a clerical error, the order vacating the dismissal was not entered until December 15, 1997.

Dunlap never moved to reset his motion to dismiss and the motion ultimately went unresolved. Given Dunlap's failure to re-prosecute his motion to dismiss, on January 12, 1998, the Chapter 7 Trustee set a new date for the first meeting of creditors, February 6, 1998, and calculated a corresponding bar date for nondischargeability complaints as April 7, 1998. Later that same day, the debtor rescheduled the first meeting of creditors for January 30, 1998, and issued a notice titled "Notice of Continued Section 341 Meeting."

Although both dates were docketed by the Bankruptcy Court Clerk, no formal notice of the dates was issued to interested parties. Counsel to both appellants obtained the new scheduling information through consultation by telephone with the Bankruptcy Court Clerk. On at least three separate occasions in February and March the creditors were informed that the docket reflected a bar date of April 7, 1998.

On March 31, 1998, Sentry filed its complaint seeking a determination that the fraud and embezzlement rendered Sentry's judgment nondischargeable pursuant to 11 U.S.C. § 523(a)(2) and (4) (1994). On April 2, 1998, State Bank filed its complaint also seeking a determination of nondischargeability. Dunlap then moved to dismiss the adversary proceedings contending that both complaints were time-barred. A hearing was held on debtor's motion on June 23, 1998. The bankruptcy court concluded that the 60-day window for filing complaints commenced on January 30, 1998, the date the section 341 meeting was actually "held," not February 6, 1998, the "first date set for the meeting."¹ The bankruptcy court determined that the 60-day filing window ended on March 31, 1997, and accordingly, the court ruled that Sentry's March 31, 1997, complaint was timely, but State Bank's April 2, 1997, complaint was not. Within its order resolving debtor's motion to dismiss the complaints, the bankruptcy court discussed its belief that debtor's attempt to dismiss his case should act to toll the running of the 60-day filing period while the bankruptcy court considers the motion. Under the bankruptcy court's tolling theory, the clock on the filing period would not commence again until the section 341 meeting of creditors was held on January 30, 1998. Nevertheless, the suggestion of tolling as an appropriate equitable remedy in this case did not form the basis for the bankruptcy court's ruling, and therefore, was mere dicta.

State Bank appealed the bankruptcy court's ruling only to have the district court affirm the dismissal after application of a tolling rule based in part upon the bankruptcy court's dicta. But the district court did not adopt the bankruptcy court's tolling proposal wholesale, instead, it determined that "the tolling period would have ended when Dunlap noticed the January 30, 1998, meeting of creditors on January 12." The court concluded that although debtor's motion to dismiss was never resolved -- because the debtor failed to take any action to prosecute the motion after reinstatement of the case -- the motion could be deemed abandoned by January 12, 1998. Ultimately, the district court concluded that the bar date was actually March 13, 1998, 60 days after the motion to dismiss was deemed abandoned. State Bank took appeal from that ruling.

Debtor appealed the bankruptcy court's order finding Sentry's complaint timely. The district court, with a different judge presiding, adopted the reasoning from the order dismissing State Bank's complaint as untimely after calculating a bar date of March 13, 1998. Based on the newly calculated complaint filing deadline, the court ruled that Sentry's complaint was untimely. Further adding to the procedural confusion, the court incorrectly stated that "the date first set for the creditors' meeting was January 12, 1998, not January 30, 1998." Sentry appealed the district court's dismissal of its complaint. On appeal to this Court, both cases were consolidated.

II.

Since there are no contested issues of fact in this appeal, we are presented solely with questions of law. We review a bankruptcy court's legal rulings and decisions de novo. See Traina v. Whitney National Bank, 109 F.3d 244, 246 (5th Cir. 1997).

III.

The sole issue before us is how to determine the bar date for the filing of nondischargeability complaints after a bankruptcy court has dismissed the case. There is no controlling Fifth Circuit precedent, and our sister circuits have not yet addressed the issue. Accordingly, we turn first to the relevant provision of the Bankruptcy Rules, Fed. R. Bankr. P. 4007(c), which provides:

A complaint to determine the dischargeability of a debt pursuant to § 523(c) of the Code shall be filed no 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 no less than 30 days' notice of the time so fixed in the manner provided in Rule 2002. On motion of any party interest, after hearing on notice, the court may for cause extend the time fixed under this subdivision. The motion shall be filed before the time has expired.

Fed. R. Bankr. 4007(c)(emphasis added).

Rule 4007(c) must be read in conjunction with Rule 9006(b)(3) which permits a bankruptcy court to "enlarge the time for taking action under [Rule 4007] . . . only to the extent and under the conditions stated in [that rule]." Fed. R. Bankr. P. 9006(b)(3). The strict time limitation placed upon creditors who wish to object to a debt's dischargeability reflects the Bankruptcy Code's goal of providing debtors with a fresh start. See Matter of Ichinose, 946 F.2d 1169, 1172 (5th Cir. 1991); see also Neeley v. Murchison, 815 F.2d 345, 346 (5th Cir. 1987)(Rule 4007(c) "evince[s] a strong intent that the participants in bankruptcy proceedings be assured that, within the set period of 60 days, they can know which debts are subject to an exception to discharge."). Also, "[t]his fixed, relatively short limitation period enables the debtor and creditors to make better-informed decisions early in the [] proceedings." Neeley, 815 F.2d at 346-47. In evaluating the various rules for interpreting Rule 4007(c) proffered by the parties and the courts below, we seek a rule that best preserves the integrity of the fixed 60-day window following the section 341 meeting of creditors, facilitates informed decision making by creditors, and allows creditors sufficient unequivocal information to calculate the bar date with certainty.

Like the bankruptcy and district courts below, we can quickly discard debtor's proffered rule for interpreting Rule 4007(c). Debtor argues that the "date first set" language must refer to August 11, 1997, the original setting for the meeting of creditors, with the corresponding bar date of ...