Summary
construing agreed order extending deadline regarding dischargeability as a motion
Summary of this case from Shoemaker v. U.S. Tr. for Region 16 (In re Shoemaker)Opinion
Case No. 11-30499 Adv. No. 11-3226
03-22-2012
In re: M. DONALD HAYES, Debtor FIFTH THIRD BANK, Plaintiff v. M. DONALD HAYES, Defendant
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
Guy K. Humphrey
United States Bankruptcy Judge
Judge Humphrey
Decision Denying Defendant's Motion for Judgment on the Pleadings
I. Introduction
On February 1, 2011 the debtor, M. Donald Hayes ("Hayes"), filed a petition for relief under Chapter 7 of Title 11 of the United States Code (est. doc. 1). The first date set for the meeting of creditors was March 28, 2011 (estate docket entry entered February 1, 2011). Objections to a debtor's discharge must be filed in the form of an adversary complaint not later than 60 days from the first date set for the meeting of creditors, unless a timely extension is sought. See Fed. R. Bankr. P. 4004(a) & (b)(1) & 7001(4). In addition, a complaint requesting the court find a debt owed to a creditor nondischargeable under 11 U.S.C. § 523(a)(2), (4) or (6) must be filed within the same 60 day period or an extension sought prior to that deadline. Fed. R. Bankr. P. 4007(c) & 7001(6). The general rule on extensions of time, Bankruptcy Rule 9006(b), does not apply to extensions of time to object to a debtor's discharge or the dischargeability of a debt. Fed. R. Bankr. P. 9006(b)(3).
The date for the meeting of creditors was changed to March 9, 2011 (est. doc. 12), but the date first set for the meeting of creditors is the relevant date. See Bankruptcy Rules 4004(a) and 4007(c) and Peerless Ins. Co. v. Miller (In re Miller), 228 B.R. 399, 401 (B.A.P. 6th Cir. 1999); Schnell v. Tieman (In re Tieman), 73 B.R. 22, 23-24 (Bankr. S.D. Ohio 1987).
Unless otherwise noted, all statutory references are to the Bankruptcy Code of 1978, as amended, 11 U.S.C. §§ 101-1532, cited hereinafter in this decision as "§ _."
The one recently enacted exception to these deadlines is that, effective December 1, 2011, Bankruptcy Rule 4004(b)(2) now allows an untimely extension when the objection would be based on facts that would provide a basis to revoke the discharge and the movant did not have knowledge of those facts prior to the extension deadline.
In this instance, an adversary complaint or a motion for an extension of time was to be filed not later than May 27, 2011. On May 24, 2011 the court entered an agreed order between Hayes and Fifth Third Bank (the "Bank") which granted the Bank until June 30, 2011 "to file a complaint or otherwise object to the dischargeability of Debtor." ("Agreed Order") (est. doc. 24). The caption of the Agreed Order similarly states "Agreed Order For Creditor Fifth Third Bank To Object To Dischargeability of Debtor M. Donald Hayes." A motion was not filed prior to the entry of the Agreed Order. The Agreed Order was signed by counsel for the Bank and approved by counsel for Hayes through a facsimile authorization.
On June 30, 2011 the Bank filed a complaint objecting to Hayes' discharge under § 727 and to the dischargeability of a debt owed by Hayes to the Bank under § 523(a)(2) (adv. doc. 1). On August 12, 2011 Hayes filed an answer (adv. doc. 6). As an affirmative defense, Hayes asserted all the counts in the complaint were time barred pursuant to Bankruptcy Rules 4004(a) and 4007(c). On December 7, 2011 Hayes filed a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), applicable through Federal Rule of Bankruptcy Procedure 7012(b). The motion asserts that 1) the complaint was filed untimely because a motion was not filed prior to the entry of the Agreed Order; 2) the language of the Agreed Order does not extend either the discharge or dischargeability deadline; and 3) neither waiver nor equitable estoppel apply in these circumstances as to the failure to file a motion nor to disregard the deadlines altogether.
The court finds that granting judgment on the pleadings is not appropriate.
II. Jurisdiction
This court has jurisdiction pursuant to 28 U.S.C. § 1334 and this is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I), (J) and (O).
III. Standard of Review - Motion for Judgment on the Pleadings
Federal Rule of Civil Procedure 12(c), applicable to this adversary proceeding through Bankruptcy Rule 7012, states that "[a]fter the pleadings are closed—but early enough to not delay trial—a party may move for judgment on the pleadings." A motion to dismiss under Rule 12(c) is reviewed under the same standard as a motion to dismiss under Rule 12(b)(6). JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581-82 (6th Cir. 2007); Wentz v. Saxon Mortgage (In re Wentz), 393 B.R. 545, 549 (Bankr. S.D. Ohio 2008).
The court construed the Debtor's motion as a motion for judgment on the pleadings because the pleadings were closed when it was filed.
Rule 12(b)(6) states that a defendant may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." The Sixth Circuit has stated that "[d]ismissal of a complaint for the failure to state a claim on which relief may be granted is appropriate only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Thomas v. Eby, 481 F.3d 434, 437 (6th Cir. 2007). To survive a defendant's motion, the plaintiff's complaint "must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Varljen v. Cleveland Gear Co., Inc., 250 F.3d 426, 429 (6th Cir. 2001).
In considering a motion to dismiss, the court "must consider as true the well-pleaded allegations of the complaint and construe them in the light most favorable to the plaintiff." Id. However, the court "need not accept as true legal conclusions or unwarranted factual inferences" in the complaint. Id. The Supreme Court has recently reminded the federal courts that while a plaintiff need not provide detailed factual allegations to survive a motion to dismiss pursuant to Rule 12(b)(6), "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), quoting Papasan v. Allain, 478 U.S. 265, 286 (1986).
IV. Analysis
A. Deadlines for Filing a Complaint Objecting to a Discharge or to the Dischargeability of a Debt May be Extended Through an Agreed Order Signed by All Affected Parties Without a Separate Motion
Hayes argues that the deadline to file an adversary complaint objecting to his discharge or objecting to the dischargeability of the debt he owes to the Bank could not be extended through an agreed order without a separate motion because Bankruptcy Rules 4004(b) and 4007(c) require a party in interest to file a motion to extend the deadline, which may be extended after notice and a hearing. While the language of those rules is not in dispute, the court disagrees with Hayes' analysis.
First, this court construes an agreed order submitted by all of the affected parties as a motion for the relief sought that is provided for in the proposed order. Prior to the signing and entering of the proposed order by the court, the proposed order is a motion or a request for the relief described. The court's signing and entering of the proposed order is the court's granting of the requested relief. Of course, if not all of the affected parties have signed the proposed order and are not otherwise timely and appropriately noticed of the requested relief as required under the Federal Rules of Bankruptcy Procedure, the Federal Rules of Civil Procedure, the Local Bankruptcy Rules or due process constraints, the court cannot enter the relief requested in the proposed order. However, when the affected parties have agreed to the relief, such as an extension of time, and have consented to the submission of an agreed order extending that time, a separate motion is unnecessary.
This is not much different than the historical practice of some courts having entered "notation" orders on motions through the judge's writing of the word "granted" with her signature on the margin of the first page of motions such as motions for extensions of times rather than preparing a separate order to grant such motions.
This court's Local Bankruptcy Rule 9013-1(a) and General Order 12 identify the limited circumstances under which the court will grant relief without notice to parties in interest ("ex parte" relief). See also Fed. R. Bankr. P. 9013.
This court has entertained and will continue to entertain agreed orders in other areas also without the filing of a motion or adversary proceeding when all affected parties have consented to the relief sought as evidenced through their consent obtained to the proposed agreed order. For example, while the Judges of the Dayton location of the court construe Bankruptcy Rule 7001(2) to require the filing of an adversary proceeding to avoid a wholly unsecured inferior mortgage pursuant to Lane v. Western Interstate Bancorp. (In re Lane), 280 F.3d 663 (6th Cir. 2002), this court will enter agreed orders avoiding such mortgages without the filing of an adversary proceeding when the mortgagee has consented to the relief sought through signing the agreed order. Requiring a motion or adversary proceeding to be filed under such circumstances when the affected parties have consented to the relief sought serves no purpose and only adds to the costs and unnecessary expenditure of time and resources by the parties and the court. As another example, agreed orders between a debtor and creditor concerning dischargeability occasionally are entered without the filing of an adversary proceeding. An old legal maxim is appropriate: "The law will not require the doing of a vain or useless thing." Grider v. Travelers Indem. Co., 315 F. Supp. 616, 617 (C.D. Tenn. 1969); See also Hettrick Mfg. Co. v. Waxahachie Cotton Mills, 1 F.2d 913, 920 (6th Cir. 1924); Sudduth v. Storm King Coal Co., 268 F. 433, 442 (6th Cir. 1920).
In responding to a similar argument as made by Hayes, Judge Lifland in a case involving an extension of time to assume a lease under § 365 stated that: "Extensions of the 60-day grace period in a chapter 7 case do not require a motion when as here, the Landlord, the very party Congress was seeking to protect, is a party to the stipulation." Toledano v. Kittay (In re Toledano), 299 B.R. 284, 298 (Bankr. S.D.N.Y. 2003). The court went on to state that "when a statute gives a court discretion to extend the time in which a party is required to act, the court has authority to grant such an extension without affording other parties notice and a hearing." Id., citing Chapman Investment Assocs. v. Am. Healthcare Mgmt. (In re Am. Healthcare Mgmt, Inc.), 900 F.2d 827, 831 (5th Cir. 1990). Similarly, when the party who Congress was seeking to protect - Hayes - is a party to the stipulation extending the time, notice and a hearing are not necessary.
Second and related to the previous discussion, in consenting to the Agreed Order extending the time period, Hayes waived any right to a properly served and noticed motion and the attendant due process. Any irregularities to what appears to be a garden variety agreed order may be raised through evidence outside the pleadings at an appropriate time. However, absent some unusual revelation, it would be difficult to imagine a result more inequitable than the result sought by Hayes - rewarding a party who agreed to an extension of time only to deny that agreed upon extension after the time to take action has run. Fortunately, common sense and the legal concepts of waiver and equitable estoppel are in harmony.
It appears Hayes is hypothetically raising a fact pattern under which a lawyer would upload an agreed order despite an understanding between counsel that an underlying motion would be filed before the order was uploaded. To the extent it is not being argued hypothetically, Hayes can introduce evidence at the appropriate time and explain why a member of the bar would choose such an action and what relevance it would have in relation to the waiver, estoppel and other principles discussed in this decision.
To the extent Hayes is challenging the cause for the entry of the order - despite his apparent agreement - the court rejects this argument as well. The cause required under Bankruptcy Rules 4004 and 4007 - a requirement to enter an order extending these complaint filing deadlines - is that the parties are, by consent, addressing a procedural extension of a deadline. No more is required under the flexible definition of cause. Of course, the parties could not stipulate to time-barred claims to the detriment of other creditors, but that principle is of no relevance here. See Kontrick v. Ryan, 540 U.S. 443, 458, n. 12 (2004).
As argued by the Bank, waiver and equitable estoppel apply to prevent the conclusion now argued by Hayes. Waiver is defined as "the intentional relinquishment or abandonment of a known right." Days Inn Worldwide, Inc. v. Patel, 445 F.3d 899, 905 (6th Cir. 2006). The United States Supreme Court has held that the deadline in Bankruptcy Rule 4004 is not jurisdictional, but a "claim-processing" rule that can be forfeited if it is not timely raised. Kontrick v. Ryan, 540 U.S. 443, 456 (2004) (claim-processing rule may not be raised after losing at trial). The Sixth Circuit has reached the same conclusion for the parallel language in Bankruptcy Rule 4007. Nardei v. Maughan (In re Maughan), 340 F.3d 337, 344 (6th Cir. 2003). The Sixth Circuit has also recognized that equitable defenses such as waiver, equitable tolling, and equitable estoppel are available for the failure to comply with Bankruptcy Rules 4004 and 4007. Id.
Hayes argues that the waiver doctrine should not be applied. However, his argument falls short because it ignores the general rule that clients are responsible for the decisions and actions of their counsel and because it misapplies cases involving substantive rights that cannot be waived except under heightened standards.
The Agreed Order waived the original time deadline for filing a complaint and set a new date for the filing of such a complaint and waived the necessity of filing a motion to extend that date. Although Hayes did not sign the Agreed Order, clients are generally responsible for the filings of their counsel. As the United States Supreme Court has stated:
There is one aspect of the Court of Appeals' analysis, however, with which we disagree. The Court of Appeals suggested that it would be inappropriate to penalize respondents for the omissions of their attorney, reasoning that "the ultimate responsibility of filing the . . . proof[s] of clai [m] rested with [respondents'] counsel." Ibid. The court also appeared to focus its analysis on whether respondents did all they reasonably could in policing the conduct of their attorney, rather than on whether their attorney, as respondents' agent, did all he reasonably could to comply with the court-ordered bar date. In this, the court erred.Pioneer Inv. Services Co. v. Brunswick Assocs. Ltd. P'ship, 507 U.S. 380, 396-97 (1993). See FHC Equities, L.L.C. v. MBL Life Assurance Corp., 188 F.3d 678, 685 (6th Cir. 1999) (similar); Nafziger v. McDermott Int'l, Inc., 467 F.3d 514, 524 (6th Cir. 2006) (similar). See also Fed. R. Bankr. P. 9010 ("A debtor . . . may . . . appear in a case under the Code and act either in the entity's own behalf or by an attorney authorized to practice in this court[.]"). Absent a reason to apply a different standard under the substantive law at issue, clients are responsible for their counsel's filings. Bankruptcy law has no general requirement that the client, rather than her counsel, affirmatively sign an agreed order to extend a complaint-processing deadline. Certainly, specified documents need to be verified by a debtor or contain an unsworn declaration - such as the petition, schedules and statement of financial affairs. Fed. R. Bankr. P. 1008. But beyond those limited filings, filings or proposed orders may be signed by counsel on behalf of their client and such filings bind the client. Fed. R. Bankr. P. 9010(a).
In other contexts, we have held that clients must be held accountable for the acts and omissions of their attorneys. In Link v. Wabash R. Co., 370 U.S. 626, 82 S.Ct. 1386, 8 L.Ed.2d 734 (1962), we held that a client may be made to suffer the consequence of dismissal of its lawsuit because of its attorney's failure to attend a scheduled pretrial conference. In so concluding, we found "no merit to the contention that dismissal of petitioner's claim because of his counsel's unexcused conduct imposes an unjust penalty on the client." Id., at 633, 82 S.Ct., at 1390. To the contrary, the Court wrote:
"Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent and is considered to have 'notice of all facts, notice of which can be charged upon the attorney.' " Id., at 633-634, 82 S.Ct., at 1390 (quoting Smith v. Ayer, 101 U.S. 320, 326, 25 L.Ed. 955 (1880)).This principle also underlies our decision in United States v. Boyle, 469 U.S. 241, 105 S.Ct. 687, 83 L.Ed.2d 622 (1985), that a client could be penalized for counsel's tardy filing of a tax return. This principle applies with equal force here and requires that respondents be held accountable for the acts and omissions of their chosen counsel.
Hayes states that the Bank's waiver argument is weakened because the Bank violated Local Bankruptcy Rule 9072-1(a) in failing to identify the document number(s) to which the agreed order relates. According to this unique argument, if the Bank had included "document 1" or similar language in the Agreed Order, "it would be clear to any bankruptcy attorney that no motion was to be filed on the order and was waiving any requirement of a motion." (doc. 20, p. 6). Logic would seem to dictate that either Hayes intentionally entered into the agreed order or he did not. Regardless, this argument cannot be resolved based upon the pleadings alone.
Hayes' rebuttal to the waiver argument also exaggerates waiver requirements by not applying the general waiver standard and, instead, relies on inapplicable cases involving the waiver of constitutional or substantive rights, not procedural deadlines. Such a comparison of the claim-processing deadline in the Federal Rules of Bankruptcy Procedure to waivers of constitutional significance is not warranted. His argument regarding the substantive waiver of a discharge by a debtor also is not helpful.
The cases concerning a debtor's waiver of a discharge under § 727(a)(10) are not analogous. Section 727(a)(10) specifically exempts a debtor from discharge when "the court approves a written waiver of discharge executed by the debtor after the order of relief under this chapter." (emphasis added). These cases recognize that, based on the plain meaning of the statutory language, the waiver must be a conscious and informed choice and executed in writing by the debtor post-petition. See Simmons Capital Advisors, Ltd. v. Bachinski (In re Bachinski), 393 B.R. 522, 533 (Bankr. S.D. Ohio 2008) (pre-petition waivers by contract are not recognized under § 727(a)(10) and are unenforceable as a matter of public policy). The substantive considerations underlying a waiver of a bankruptcy discharge cannot be applied to the waiver of the claim-processing deadline to file a complaint objecting to a debtor's discharge.
Nor will the court delay itself long to compare the waiver of the federal constitutional right to counsel in a criminal trial under the Sixth Amendment of the United States Constitution or the right to remain silent under the Fifth Amendment to a procedural rule in a civil bankruptcy court allowing an extension of time for a non-jurisdictional claim processing deadline under the Federal Rules of Bankruptcy Procedure. The need to protect such fundamental rights under the federal constitution has no import here and the heightened waiver standards for such rights do not apply.
Unlike the heightened standards just referenced concerning substantive rights, parties waive their right to insist upon the filing of a motion or an adversary proceeding when they intentionally enter into an agreed order. Such waivers are so common and uncontroversial that decisions that mention them in the factual findings do not even pause to discuss the issue. See, e.g., Dillworth v. Vieweg (In re Vieweg), 2011 WL 5593184, at *1 (Bankr. S.D. Fla. Oct. 26, 2011) (In concluding a complaint filed on May 2, 2011 was untimely, the court noted, without discussion, that an agreed order "expressly extended the bar date until Saturday, April 30, 2011[.]").
Equitable estoppel may also apply to the failure of the Bank to file a motion. Equitable estoppel is "an equitable doctrine which a court may invoke to avoid injustice in particular cases." Michigan Express, Inc. v. United States, 374 F.3d 424, 427 (6th Cir. 2004). "[T]he traditional elements of equitable estoppel are: (1) misrepresentation by the party against whom estoppel is asserted; (2) reasonable reliance on the misrepresentation by the party asserting estoppel; and (3) detriment to the party asserting estoppel." Id., quoting LaBonte v. United States, 233 F.3d 1049, 1053 (7th Cir. 2000). Frequently parties enter into agreed orders extending time deadlines prior to motions seeking such extensions are filed. In signing or consenting to such agreed orders, they are representing that service and notice of a motion seeking such relief is not necessary and is being waived. Counsel who otherwise would be required to file a motion rely on the representation, express or implied, that service and filing of a motion requesting that relief is not required.
Accordingly, the Agreed Order extending the filing deadline was entered within the deadlines required by Bankruptcy Rules 4004 and 4007 for a motion to be filed seeking an extension of time to file a complaint under those rules and the right of Hayes to be served a motion is subject to the doctrines of waiver and equitable estoppel, which the court finds applicable to these circumstances. Accordingly, the motion for judgment on the pleadings cannot be granted on the basis that a motion requesting an extension of time was not filed prior to the entry of the Agreed Order.
B. The Language in the Agreed Order is Ambiguous
The Bank and, to a lesser extent, Hayes argue the Agreed Order is not ambiguous and the meaning can be conclusively determined. The Bank claims the order clearly extends the deadlines for discharge and dischargeability because the references to "complaint" and "otherwise object to the dischargeability of Debtor" did not limit the Bank to a particular cause of action. Hayes argues that since the concept of "dischargeability of Debtor" does not exist in bankruptcy law, it could be argued neither deadline was extended by the order's plain meaning. The court finds both these self-serving interpretations divorced from the plain meaning of the language in the Agreed Order and finds that the Agreed Order is ambiguous and that the ambiguity cannot be resolved based upon a motion for judgment on the pleadings.
First, the language "dischargeability of Debtor" is ambiguous because dischargeability relates to specific debts and a discharge concerns all of a debtor's pre- petition debts. Ordinarily, a party would refer to the "dischargeability of a debt" under § 523 or the "discharge of the debtor" under § 727. In some instances, such ambiguous language could be clarified by referring to § 523 or § 727, Bankruptcy Rules 4004 or 4007, or other language within the order. See Rodenberg v. Tyson (In re Tyson), Adv. No. 10-3035 (Bankr. S.D. Ohio June 25, 2010) (Walter. J.). In this instance, no such clues to eliminate the ambiguity within the phrase "dischargeability of Debtor" can be found as to the meaning of the language chosen.
The confusing phraseology could be interpreted in at least three different plausible ways. In no particular order, the Agreed Order could be interpreted to: 1) refer to dischargeability alone, focusing on that word with the reference to "Debtor" rather than debt being an error; 2) refer to the discharge of the "Debtor," focusing on "Debtor" with the reference to "dischargeability" being an error; or 3) refer to both Hayes' discharge and the dischargeability of the debt to the Bank by isolating "dischargeability" and "Debtor" and assuming that words were inadvertently omitted which, if included, would have revealed the intent to extend the time for filing a complaint to both object to Hayes' discharge and to the dischargeability of the debt owed to the Bank, with omission of those words resulting in a single awkward ambiguous phrase.
It is of no help to the Bank to focus on the word "complaint." A complaint, which, unless waived, is required for most discharge and all dischargeability actions, can include a single count or multiple counts. A complaint focused on discharge, dischargeability, or both can have multiple counts. The word "complaint" does not illuminate the meaning of the crucial phrase, "dischargeability of Debtor." The word "otherwise," at best, is a recognition that the parties might proceed to resolve the matter by agreement or some other procedural vehicle rather than a complaint. While it may address the procedural vehicles available to address the legal concerns of the Bank, it does nothing to clarify if the substantive legal issues include discharge, dischargeability, or both.
A motion may be filed for an discharge action under §§ 727(a)(8), 727(a)(9) or 1328(f). Fed. R. Bankr. P. 7001(4).
The Bank argues that Tyson supports its position, arguing that, unlike the Agreed Order, the order in that case was narrower in scope and on its face only concerned dischargeability. Rodenberg v. Tyson (In re Tyson), Adv. No. 10-3035 (Bankr. S.D. Ohio June 25, 2010) (Walter. J.). In Tyson, the creditor filed a motion to extend the period to file a complaint and the debtor and creditor entered into an agreed order. The title of the agreed order was "Agreed Order Extending Time to Determine Dischargeability of Debt" and the text of the order used the word dischargeability two times. The motion filed in that case referred to § 523 and the creditor's only credible argument that the extension obtained included an extension to object to the debtor's discharge was the use of the term "discharge" in the motion, which was inconsistent with the caption of the motion and the order, the prayer for relief, and the agreed order. Id. at *6. This court agrees with Judge Walter's quite sensible conclusions that "the only reasonable interpretation of the Plaintiff's motion is a motion to extend one deadline, the deadline to file a complaint to obtain a determination of the dischargeability of a specific debt under § 523" and "[t]he language of the agreed order extends only one deadline, the date to object to 'dischargeability.'" Id. While the Agreed Order in this case is potentially broader than in Tyson, unlike the order in Tyson, it is subject to more than one reasonable interpretation.
Conversely, Hayes' alternative argument that the Agreed Order does not extend either deadline has a hollow ring. As Hayes essentially concedes in viewing the Agreed Order more realistically in other sections of his counsel's briefing, at a minimum, it had to be intended to extend either the date to object to his discharge or the date to object to the dischargeability of the debt owed to the Bank. It surely was not submitted by both parties to extend no date at all. Hayes argues it should be limited to dischargeability because nowhere does the separate bankruptcy term "discharge" appear. While this argument may ultimately prevail, it is not clear if the Agreed Order was intended to extend the deadline for objecting to discharge, dischargeability, or both and therefore the motion for judgment on the pleadings cannot be granted based on the language in the Agreed Order until, as explained below, the parties have the opportunity to provide the court with any relevant extrinsic evidence.
The court emphasizes that while the Agreed Order is not artfully worded, that fact does not make it ambiguous. Bachinski, 393 B.R. at 538, n. 8. The order is ambiguous because it has at least three plausible interpretations based on the language in the Agreed Order.
C. Hayes' Affirmative Defense cannot be Resolved Through a Motion for Judgment on the Pleadings
Before the court can even address what the language in the Agreed Order meant, Hayes' affirmative defense of Bankruptcy Rules 4004 and 4007 requires a determination whether Hayes waived this defense or is estopped from asserting it. As noted, since the deadlines in Bankruptcy Rules 4004 and 4007 are not jurisdictional but claim-processing deadlines, the deadlines are subject to equitable defenses such as waiver and equitable estoppel.
As the court has already addressed, waiver and equitable estoppel apply to any argument that a motion was required since Hayes, through his counsel, signed the Agreed Order. Beyond that procedural question, the Bank argues that waiver and equitable estoppel may apply to the deadlines themselves because the "Debtor was clearly on notice that [the Bank] intended to pursue its remedies under Section 523 and Section 727." (adv. doc. 19, p. 8). This argument cannot be resolved at the pleading stage. However, since the equitable defenses of waiver and equitable estoppel raise fact specific issues beyond which the pleadings can reach, the Bank must be given an opportunity to develop evidence and present facts to support those equitable defenses.
Hayes cites Chattanooga Agric. Credit Assoc. v. Davis (In re Davis), 330 B.R. 606, 611 (Bankr. E.D. Tenn. 2005) for the proposition that equitable estoppel cannot apply to the facts of this case. While the court has no qualms with the analysis of Davis in addressing equitable estoppel, this court cannot conclude, from the pleadings alone, that it could not apply as a matter of law. Therefore, the issue of whether equitable estoppel should apply cannot be resolved upon Hayes' Rule 12(c) motion.
D. Extrinsic Evidence may be Considered in Interpreting the Agreed Order
In addition, if waiver and equitable estoppel do not apply in a manner to have waived or extended both deadlines, the court still must interpret the Agreed Order. Hayes argues extrinsic evidence cannot be considered because the Agreed Order is akin to a consent decree which cannot be interpreted through the use of extrinsic evidence. Even if Hayes' argument that the Agreed Order is akin to a consent decree is correct, the court may consider extrinsic evidence in interpreting it if the court finds that it is ambiguous.
The United States Supreme Court has ruled that the "'scope of a consent decree must be discerned within its four corners, and not by reference to what might satisfy the purposes of the parties to it' or by what 'might have been written had the plaintiff established his factual claims and legal theories in litigation.'" Firefighters Local Union No. 1784 v. Stotts, 467 U.S. 561, 574 (1984), quoting United States v. Armour and Co., 402 U.S. 673, 681-92 (1971). However, the Sixth Circuit has also stated that "[a]n agreed order, like a consent decree, is in the nature of a contract, and the interpretation of its terms presents a question of contract interpretation." City of Covington v. Covington Landing Ltd. P'ship, 71 F.3d 1221, 1227 (6th Cir. 1995); Liberte Capital Group, LLC v. Capwill, 99 Fed. Appx. 627, 633, 2004 WL 1152137, at *5 (6th Cir. May 19, 2004). See also Ohio Farmers Ins. Co. v. Hughes-Bechtol, Inc. (In re Hughes-Bechtol, Inc.), 225 F.3d 659, 2000 WL 1091509, at *4 (6th Cir. July 27, 2000) (table decision) (cash collateral order should be interpreted as a contract). The court may give reasonable construction to the words chosen in accordance with the parties' intent. Thomasville Furniture Indus. v. The Elder-Beerman Stores, 250 B.R. 609, 635 (S.D. Ohio 1998) (Rice, J.). A contract is ambiguous if it is susceptible to more than one reasonable interpretation. Id.
The reason consent decrees are interpreted in this manner is because "[c]onsent decrees are entered into by parties to a case after careful negotiation has produced agreement on their precise terms." United States v. Armour & Co., 402 U.S. 673, 681 (1971). Nevertheless, circumstances surrounding the formation of a decree are "always relevant to its meaning" and "[r]esort[ing] to extrinsic evidence is permissible but only when the decree itself is ambiguous." Bartock v. Bae Sys. Survivability (In re Bartock), 398 B.R. 135, 154 (Bankr. W.D. Pa. 2008), citing Fox v. U.S. Dep't of Hous. & Urban Dev., 680 F.2d 315, 319 (3rd Cir. 1999).
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Once the court determines that an ambiguity exists, the court may resort to extrinsic evidence to resolve that ambiguity. Id. In the instance of an agreed order, the court would first look to the motion for assistance, as the court did in Tyson. United States v. Booth, 551 F.3d 535, 538-39 (6th Cir. 2009). Since a motion was not filed and no prior agreed orders reveal the parties' intentions, the court may consider other relevant extrinsic evidence, along with the language in the Agreed Order, to determine the intention of the parties. To the extent relevant extrinsic evidence does not emerge to assist the court in resolving the ambiguity, the court will make the most reasonable construction from the language in the Agreed Order.
V. Conclusion
For all these reasons, the motion for judgment on the pleadings is denied. The court will concurrently issue an order consistent with this decision.
Copies to:
Patricia L. Hill, 1 South Main St., Suite 900, Dayton, OH 45402
(Counsel for the Plaintiff)
William B. Fecher, 1 South Main St., Suite 900, Dayton, OH 45402
(Counsel for the Plaintiff)
Harry B. Zornow, 860 NW Washington Blvd, Eden Roc Suite J, Hamilton, OH 45013
(Counsel for the Defendant)