Opinion
Case No. 09-13709, Adv. Pro. 09-01110.
10-26-2009
In re: Thomas G. Winkler Chapter 7, Debtor. Fifth Third Bank, Plaintiff, v. Thomas G. Winkler, Defendant.
This matter is before the Court on Defendant Debtor's Motion to Dismiss Complaint of Fifth Third Bank (Doc. 4) and Fifth Third Bank's Response (Doc. 5).
The Court has jurisdiction over this matter under 28 U.S.C. §1334 and the general order of reference entered in this district. This is a core proceeding under 28 U.S.C. §157(b)(2)(I).
The material facts are not in dispute. The Debtor filed Chapter 7 bankruptcy on June 11, 2009. The initial 341 meeting of creditors was scheduled for July 21, 2009. Pursuant to Fed. R. Bankr. P. 4004(a) and 4007(c), the deadline to file a complaint objecting to discharge of the debtor or to determine dischargeability of a debt was September 21, 2009. On September 21, 2009, Fifth Third Bank filed an Objection to Dischargeability of its debt pursuant to 11 U.S.C. §523(c) in the main bankruptcy case. However, the Court entered an order denying the objection on September 22, 2009 because an adversary proceeding is required to determine dischargeability of a debt. Fed. R. Bankr. P. 7001(6).
On September 24, 2009, Fifth Third Bank filed this adversary proceeding in order to determine the dischargeability of its debt under 11 U.S.C. §523. The Debtor filed a Response to the complaint and a Motion to Dismiss because the complaint was filed after the deadline set for objecting to dischargeability. On October 7, 2009, Fifth Third Bank responded to the Motion to Dismiss indicating they timely objected to dischargeability of its debt because they entered their objection in the main bankruptcy case by the September 21, 2009 deadline. Notably, Fifth Third Bank did not request equitable relief in their response. Also on October 7, 2009, Fifth Third Bank filed a Motion to Extend Time for Filing a Complaint Objecting to Discharge in the main case stating that they inadvertently omitted to file a motion to extend time. The Debtor objected to the Motion to Extend Time because it was not filed within the time prescribed by Fed. R. Bankr. P. 4007.
Federal Rule of Bankruptcy Procedure 4007(c) provides
...[A] complaint to determine the dischargeability of a debt under §523(c) shall be filed no later than 60 days after the first date set for the meeting of creditors under § 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 a party in 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. P. 4007(c).
The Sixth Circuit has held that this filing deadline is not jurisdictional, but is a statute of limitation subject to the defenses of waiver, estoppel, and equitable tolling. In re Maughan, 340 F.3d 337 (6th Cir. 2003). There are five factors to be considered when applying the doctrine of equitable tolling: "(1) lack of actual notice of filing requirement; (2) lack of constructive knowledge of filing requirement; (3) diligence in pursuing one's rights; (4) absence of prejudice to the defendant; and (5) a plaintiff's reasonableness in remaining ignorant of the notice requirement." Id., at 344, citing Andrews v. Orr, 851 F.2d 146, 151 (6th Cir.1988).
The debtor in Maughan failed to comply with court orders to produce documents, which caused delay to the creditor filing a motion to extend time to file a complaint under 11 U.S.C. §523(c). In re Maughan, 340 F.3d at 340. The Sixth Circuit affirmed the bankruptcy court in using its equitable power to extend the time to file a complaint under 11 U.S.C. §523(c) because the debtor should not be able to "frustrate the ability of a litigant to comply with applicable law by failing or neglecting to adhere to lawful orders of the Court". Id, at 344.
In In re Forsythe, 2005 WL 4041162 (Bankr. S.D. Ohio), Judge Waldron looked to Maughan in determining that a late filed complaint was timely filed. In Forsythe, on the last day to file a complaint objecting to dischargeability of a debt, the creditor filed the complaint in the main bankruptcy case and not in an adversary proceeding. In re Forsythe, 2005 WL 4041162 at 1. The following day, the creditor filed its complaint in an adversary proceeding, and withdrew the incorrectly filed initial complaint. Id. Judge Waldron concluded that equitable tolling was appropriate in that case because the initial complaint was timely filed, although not in compliance with Administrative Procedures for electronic filing, and the error was corrected within 24 hours to promptly pursue the creditor's rights. Id., at 4. Judge Waldron distinguished Forsythe from those cases where "there is a complete failure to comply with a local rule or other governing law". Id., at 3.
In In re Hannen, 383 B.R. 683 (Bankr. N.D. Ohio 2008), the court did not allow the filing of a late filed complaint where the only reason for the delay was counsel's inexperience with electronic filing. The court concluded that absent any facts which would support equitable relief, Fed. R. Bankr. P. 4007(c) must be enforced. In re Hannen, 383 B.R. at 688. "Bankruptcy courts `cannot use equitable principles to disregard unambiguous statutory language'....[t]he equitable powers of section 105(a) may only be used in furtherance of the goals of the Code."
Id., citing Childress v. Middleton Arms, L.P., 934 F.2d 723, 725 (6th Cir. 1991), citing In re C-L Cartage Co., Inc., 899 F.2d 1490, 1494 (6th Cir. 1990).
We find that Fifth Third Bank cannot prevail when applying Maughan to the instant case. Fifth Third Bank has not claimed lack of notice or knowledge of the filing deadline, therefore this Court must look at their diligence in pursuing their rights, and the prejudice to the Debtor. See In re Maughan, 340 F.3d at 344.
Fifth Third filed an objection to dischargeability of its debt in the Debtor's main bankruptcy case. If an objection was all that was necessary under the rules, then Fifth Third Bank would have been sufficiently diligent in pursuing their rights. However, the Federal Rules of Bankruptcy Procedure are clear that a proceeding to determine dischargeability of a debt is done by adversary complaint. See Fed. R. Bankr. P. 7001, 7003, 4007(c). Unlike Maughan, there are no allegations of debtor misconduct in this case which would have frustrated the creditor in filing a timely complaint. Indeed, the only apparent reason for the late filed complaint is Fifth Third Bank's own inattention to the rules. In addition, Fifth Third Bank has not requested equitable relief. There is no absence of prejudice to the Debtor in this case. If allowed to proceed, the Debtor could potentially be liable again for a debt that would otherwise be discharged.
Accordingly, the Defendant Debtor's Motion to Dismiss is GRANTED.
IT IS SO ORDERED.