Matter of Hershkovitz

• Decision Date: 06 July 1989
• Docket Number: Adv. No. 89-0173A.,Bankruptcy No. 88-09863-ADK
• Parties: In the Matter of Benjamin HERSHKOVITZ and Haya Hershkovitz, Debtors. Joan Turner DWYER and Joan Turner Dwyer as Guardian of Kelly Turner, Plaintiffs, v. Benjamin HERSHKOVITZ and Haya Hershkovitz, Defendants.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia

101 B.R. 816 (1989)

In the Matter of Benjamin HERSHKOVITZ and Haya Hershkovitz, Debtors.

Joan Turner DWYER and Joan Turner Dwyer as Guardian of Kelly Turner, Plaintiffs, v. Benjamin HERSHKOVITZ and Haya Hershkovitz, Defendants.

Bankruptcy No. 88-09863-ADK, Adv. No. 89-0173A.

United States Bankruptcy Court, N.D. Georgia, Atlanta Division.

July 6, 1989.

David H. Cofrin, Lamar, Archer & Cofrin, Atlanta, Ga., for plaintiffs.

John C. Ringhausen, Lamberth, Bonapfel, Cifelli & Willson, P.A., Atlanta, Ga., for defendants.

ORDER

A. DAVID KAHN, Chief Judge.

Plaintiffs filed the above-styled adversary complaint to determine the dischargeability of a debt pursuant to 11 U.S.C. § 523(a)(2). It is before the Court on Defendant-Debtors' Motion to Dismiss and Plaintiffs' Motion for Change of Venue. For the following reasons, the Court will deny both Motions.

A. MOTION TO DISMISS

Defendant-Debtors move to dismiss the instant complaint on the ground that it is untimely. Bankruptcy Rule 4007(c) provides that

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.

In the case sub judice, the Clerk's Office generated by computer and caused to be served on all creditors and parties in interest an "Order for Meeting of Creditors, Combined with Notice Thereof and of Automatic Stay" dated November 21, 1988 in which December 19, 1988 was set for the meeting of creditors and February 17, 1989 was given as the last day to file complaints pursuant to § 523(c). That Order and Notice also listed the name of the interim trustee. Later it was discovered that the interim trustee had a conflict and could not serve in the case.

Upon notice of the conflict, the Clerk's Office then generated by computer and caused to be served on all creditors and parties in interest another "Order for Meeting of Creditors, Combined with Notice Thereof and of Automatic Stay" dated January 9, 1989. This new Order and Notice set the meeting of creditors for February 1, 1989 and gave April 3, 1989 as the last day to file complaints pursuant to § 523(c). It also listed the name of the new interim trustee. "A.D. Kahn, Bankruptcy Judge" appeared at the bottom of both the first and second Order. In reliance upon this second Order and Notice, Plaintiffs filed the instant complaint on March 31, 1988.

It is clear that the Clerk's issuance of the second Order and Notice containing a new bar date was erroneous in that it violated Bankruptcy Rule 4007(c). Pursuant to that Rule, the last day to file complaint under § 523(c) is "60 days following the first date set for the meeting of creditors." (emphasis added). That date can only be extended "on motion of any party in interest after hearing on notice." Bankr.Rule 4007(c). The motion must be made prior to the expiration of the bar date. Id.

The question remains: Which party must bear the consequences of the Clerk's mistake? The Court has carefully examined the cases on point. The general trend of the cases is to strictly enforce Bankr.Rule 4007(c). The Eleventh Circuit Court of Appeals has stated that

The dictates of the Code and Rules are clear. It is not our place to change them. Under Rule 4007(c), any motion to extend the time period for filing a dischargeability complaint must be made before the running of that period. There is "almost universal agreement that the provisions of F.R.B.P. 4007(c) are mandatory and do not allow the Court any discretion to grant a late filed motion to extend time to file a dischargeability complaint." See In re Maher, 51 B.R. 848, 852 (Bankr.N. D.Iowa 1985) (and cases cited therein).

Byrd v. Alton (In re Alton), 837 F.2d 457, 459 (11th Cir.1988) (emphasis in original) (footnote omitted). In Alton, the debtor had failed to list Byrd as a creditor in his bankruptcy schedules. As a consequence, Byrd had received no notices from the Bankruptcy Court including notice of the bar date for complaints pursuant to § 523(c). However, the debtor's counsel had served Byrd with notice of the filing of the bankruptcy petition. The Court of Appeals held that actual notice of the bankruptcy was sufficient. Once aware of the bankruptcy, Byrd had the burden of ascertaining all of the pertinent dates and necessary information from the bankruptcy file.

The Alton case did not deal with a clerical error as in the proceeding sub judice. The cases dealing with clerical errors are split as upon whom the burden of the error should fall. In Montgomery Ward and Co. v. Gardner (In re Gardner), 55 B.R. 89 (Bankr.D.C.1985), the clerk's office had sent a notice containing the wrong bar date. The correct bar date was January 29, but the notice gave the bar date as January 31. In reliance on the clerk's notice, Montgomery Ward filed its dischargeability complaint on January 31. In granting the debtor's motion to dismiss, the court stated that "the plain meaning of Bankruptcy Rules 4007(c) and 9006(b)(3) is that a court may extend the sixty-day period of Rule 4007(c) only upon a motion of an interested party made before expiration of the sixty days." Gardner at 90 (emphasis in original).

In Neeley v. Murchison, 815 F.2d 345 (5th Cir.1987), the clerk of court had mailed the § 341 notice to all creditors. The notice set the § 341 meeting of creditors but left blank the bar date for complaints under § 523(c). Upon inquiry, the creditor's attorneys were verbally informed by employees of the clerk's office that no bar date had been set. The creditor filed his complaint after the bar date prescribed by Bankr.Rule 4007(c) had passed. The Fifth Circuit Court of Appeals dismissed the complaint. It held that

in today\'s case Neeley was not notified of the exact bar date but he knew of the bankruptcy proceedings. Neeley\'s counsel received notice of the date of the initial meeting of creditors and in fact attended the meeting. Indeed, even before the meeting, Neeley had himself obtained a modification of the stay from the bankruptcy court. At that time, the factual basis of his objection, the fraudulent conduct of the debtor, was established. Under these circumstances, counsel\'s reliance on the blank in the form and on the oral assurances from the clerk\'s employees was misplaced. At the very least, Rule 4007(c) plainly requires that a creditor file his § 523(c) complaint, or his motion for extension, within 60 days from the date set for the initial creditors\' meeting.

Neeley, 815 F.2d at 347.

Although Neeley seems to stand for the proposition that the deadline for complaints contained in Bankr.Rule 4007 must be strictly enforced under all circumstances, it does contain a footnote which supports an exception to the rule under facts similar to those present in the proceeding sub judice. In Footnote 5, the Court noted that "for example, today's case is not one in which the clerk gave an affirmative but erroneous notice of a bar date upon which the creditor might reasonably have relied." 815 F.2d at 347, n. 5 (citations omitted). In the instant proceeding, the Clerk did affirmatively give Plaintiffs erroneous notice of the bar date.

A case which has similar facts to this proceeding is Francis v. Riso (In re Riso), 57 B.R. 789 (D.N.H.1986). In Riso, the debtor filed a voluntary Chapter 7 bankruptcy petition in the Southern District of Florida. A notice went out setting September 7, 1984 as the deadline for filing dischargeability complaints pursuant to § 523(c). The Court then found venue improper and transferred the case to the United States Bankruptcy Court for the District of New Hampshire. Francis, a creditor obtained an extension of time for filing complaints through October 27, 1984 from the Bankruptcy Court for the District of New Hampshire. On September 13, the clerk sent a routine order setting a new deadline of December 3, 1984 for filing complaints pursuant to § 523(c). Francis, in reliance on the new bar date, filed his dischargeability complaint on November 29, 1984.

The district court upheld the bankruptcy court's refusal to dismiss the complaint as untimely. "This court concludes the bankruptcy court has the inherent equitable power to correct its own mistake to present sic an injustice. Based on the facts in the present case, this court believes that an injustice would occur if plaintiff Francis were not allowed to file his objection to discharge." Riso, 57 B.R. at 793. Like the court in Riso, this Court finds that it would be a great injustice if Plaintiffs were precluded from maintaining their dischargeability complaint against Defendant-Debtors simply...