Laurain, In re

• Decision Date: 15 May 1997
• Docket Number: No. 96-5093,96-5093
• Citation: 113 F.3d 595
• Parties: , 37 Collier Bankr.Cas.2d 1536, Bankr. L. Rep. P 77,389 In re Victoria Johnston LAURAIN, Debtor. David G. ROGERS, Trustee, Plaintiff-Appellee, v. Victoria Johnston LAURAIN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 595

113 F.3d 595

65 USLW 2762, 37 Collier Bankr.Cas.2d 1536,

Bankr. L. Rep. P 77,389

In re Victoria Johnston LAURAIN, Debtor David G. ROGERS, Trustee, Plaintiff-Appellee, v. Victoria Johnston LAURAIN, Defendant-Appellant.

No. 96-5093.

United States Court of Appeals Sixth Circuit.

Submitted March 18, 1997.

Decided May 15, 1997.

David G. Rogers (briefed), Rogers & Easter, Brentwood, TN, for Plaintiff-Appellee.

Joseph P. Rusnak (briefed), Tune, Entrekin & White, Nashville, TN, for Defendant-Appellant.

Before: KENNEDY, CONTIE, and NORRIS, Circuit Judges.

KENNEDY, J., delivered the opinion of the court, in which NORRIS, J., joined. CONTIE, J. (pp. 600-03), delivered a separate dissenting opinion.

OPINION

KENNEDY, Circuit Judge.

This appeal presents an issue of first impression in this Circuit: Does a bankruptcy court's failure to rule on a timely filed FED. R. BANKR.P. 4003(b) motion for an extension of time to file objections to a claimed exemption of property from the bankrupt estate divest the bankruptcy court of jurisdiction to grant an extension after the Rule's prescribed thirty-day period expires? The bankruptcy court held that it lost jurisdiction to rule on a timely-filed request for an extension when it failed to rule within the thirty-day period. The District Court reversed. Because we agree with the bankruptcy court, we REVERSE.

I. Facts

The facts of this case are undisputed. Victoria Johnston Laurain (debtor) filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code on May 16, 1995. Pursuant to a Schedule C filed with the bankruptcy court on June 16, 1995, the debtor claimed various items of personal property exempt. Included among the items was an interest in a contingent and unliquidated claim for personal injuries sustained by the debtor as the result of an "ACTD category" breast implant.

On June 19, 1995, the meeting of creditors took place. ¹ On July 18, 1995, David G. Rogers, the debtor's trustee (trustee), filed a Motion to Extend Time to Object to Exemptions of Debtor. In an order signed on July 20, but not entered until July 26, 1995, the bankruptcy court granted an additional 60 days from the entry of the order to file an objection. The debtor filed no objections to this order.

On August 11, 1995, the trustee filed an objection to the debtor's exemption of the ACTD breast implant claim. On September 12, 1995, the bankruptcy court conducted a hearing on the trustee's objection. At this hearing, the trustee orally requested additional time within which to ascertain the value of the ACTD claim, because both parties had been unable to place a value on the claim. The bankruptcy court took this request under advisement. Counsel for the debtor objected to the request for an additional extension of time.

By an order entered October 3, 1995, the bankruptcy court set aside the July 26 order purporting to extend the objection period, because it found that it had lost jurisdiction to grant an extension on July 19, thirty days after the meeting of creditors was concluded. It therefore denied the trustee's objection and the oral motion for an additional extension of time as untimely.

The trustee appealed. The District Court reversed the bankruptcy court. The court agreed that the literal language of Rule 4003(b) requires that the court grant an extension of time for the filing of objections within thirty days after the conclusion of the meeting of creditors. However, it concluded that such a strict application of the rule was inappropriate and that the drafters really intended only that the filing of a request for an extension of time be made within the prescribed thirty days, but that the court could grant the request after the thirty days had expired.

This timely appeal followed.

II. Discussion

A. Standard of Review

The proper interpretation of Rule 4003(b) is a question of law which we review de novo. See Baker & Getty Fin. Servs., Inc. v. Rafoth, (In re Baker & Getty Fin. Servs., Inc.), 106 F.3d 1255, 1259 (6th Cir.1997).

B. Trustee's First Request for Additional Time

When a debtor files a bankruptcy petition, all of the debtor's property becomes property of the bankruptcy estate. See 11 U.S.C. § 541. However, the debtor is entitled to exempt certain eligible property from the bankruptcy estate. See id. § 522(l ). Section 522(l ) states the procedure for claiming exemptions and objecting to claimed exemptions as follows: "The debtor shall file a list of property that the debtor claims as exempt under subsection (b) of this section.... Unless a party in interest objects, the property claimed as exempt on such list is exempt." Although § 522(l ) itself does not specify the time for objecting to a claimed exemption, Rule 4003(b) provides in pertinent part:

The trustee or any creditor may file objections to the list of property claimed as exempt within 30 days after the conclusion of the meeting of creditors held pursuant to Rule 2003(a) ... unless, within such period, further time is granted by the court.

FED. R. BANKR.P. 4003(b).

Statutes, regulations, and rules of the court must be read in a "straightforward" and "commonsense" manner. See Bartlik v. United States Dep't of Labor, 62 F.3d 163, 165-66 (6th Cir.1995) (en banc). When we can discern an unambiguous and plain meaning from the language of a rule, our task is at an end. Id. at 166. Rule 4003(b) unambiguously requires that an extension of time be granted within the prescribed thirty-day period. The Rule can only be read to require that an interested party must file a motion for an extension within the prescribed thirty-day period and the court must rule on that motion within the same thirty-day period. Indeed, the rule only implicitly requires that a request for an extension be made within the thirty-day period, while it expressly requires that the court grant such an extension within that period. ² Moreover, FED. R. BANKR.P. 9006(b)(3) provides that the court may enlarge the time for taking action under Rule 4003(b) "only to the extent and under the conditions stated in those rules." Thus, Rule 4003(b) should be viewed as jurisdictional. Because Rule 4003(b) is jurisdictional, it does not matter that the debtor did not object when the Bankruptcy Court granted the extension after the thirty-day period had expired.

The Supreme Court has noted that Congress spent nearly ten years overhauling the bankruptcy system and that "as long as the statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute." United States v. Ron Pair Enters., 489 U.S. 235, 240-41, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). Like the bankruptcy statute, the bankruptcy rules also have undergone revisions in the past decade. When Congress approved the change to Rule 4003(b) in 1987 ³ and its amendment in 1991, the rule did not alter the requirement that the bankruptcy judge must rule on a motion for an extension within a specific time period. Compare [Transfer Binder] Bankr.L. Rep. (CCH) p 20,123, at 20,150 with 92 F.R.D. 499, 596 (1982) (preliminary draft of proposed new bankruptcy rules) and FED. R. BANKR.P. 4003(b). Furthermore, such a focus on timely action by the court is not unique to Rule 4003(b). While some bankruptcy rules provide that only the motion for an extension of time must be filed within a prescribed time period, see, e.g., FED. R. BANKR.P. 4004(b), 4007(c), other rules provide that the court must act within a prescribed time period, see, e.g., FED. R. BANKR.P. 1017(e)(1).

Two circuits have addressed the exact issue presented in this case, and both have held that the bankruptcy court must act within the thirty-day time period. In Stoulig v. Traina (In re Stoulig), 45 F.3d 957 (5th Cir.1995), the trustee moved for an extension of time two days before the expiration of the thirty-day period. Two months later, the bankruptcy court granted the extension. The Fifth Circuit held that under Rule 4003(b) the bankruptcy court was without jurisdiction to grant an extension of time after the prescribed thirty-day period. Id. at 957-58. Similarly, in Clark v. Brayshaw (In re Brayshaw), 912 F.2d 1255, 1257 (10th Cir.1990), the Tenth Circuit held that "[t]here simply is no room in the wording for construing Rule 4003(b) or Rule 9006(b) to permit granting an extension of time to file objections outside the original thirty-day time limit."

One court has approached Rule 4003(b) differently. In In re Williams, 124 B.R. 864 (Bankr.N.D.Fla.1991), the bankruptcy court held that Rule 4003(b) simply requires that a trustee or creditor file a request for an extension of time within the thirty-day period, but that the court can rule on that request after the period has expired. The Williams court relied in part on Southwest Aircraft Services, Inc. v. City of Long Beach, (In re Southwest Aircraft Services, Inc.), 831 F.2d 848 (9th Cir.1987), cert. denied, 487 U.S. 1206, 108 S.Ct. 2848, 101 L.Ed.2d 885 (1988), a case involving Bankruptcy Code § 365(d)(4). Section 365(d)(4) requires a trustee to assume or reject a lease within sixty days after the order for relief, "or within such additional time as the court, for cause, within such sixty-day period, fixes." 11 U.S.C. § 365(d)(4). The Ninth Circuit considered whether the bankruptcy court had authority to rule on a timely filed motion for an extension after the sixty-day limit. The court found that the language of the section was ambiguous because it was unclear whether the second term--"within such 60-day period"--modified the term that preceded it or the term that followed it. See 831 F.2d at 850. The court adopted the more "liberal" reading, holding that the cause must arise within the sixty-day period, but that the court could grant an extension after the sixty-day period had expired. Id. Southwest Aircraft is distinguishable, however, because the court's conclusion was premised on the fact that "the...