DORAL BANK v. SCHMIDT GONZALEZ et al

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IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF PUERTO RICO

IN THE MATTER OF

JORGE LUIS SCHMIDT GONZALEZ, : CASE NO. 08-00509 (SEK)
MARCELA CASTRILLO SANCHEZ,
DEBTORS : CHAPTER 7
DORAL BANK,
PLAINTIFF : ADV. NO. 08-000812
Vv

JORGE LUIS SCHMIDT GONZALEZ,
MARCELA CASTRILLO SANCHEZ

DEFENDANTS
OPINION AND ORDER

Defendants filed a motion to dismiss this proceeding
claiming it is time barred, as the complaint objecting to
discharge, the dischargeability of a debt and seeking revocation
of the discharge, was filed after the deadline set by Fed. R.
Bankr. P. 4004(a).

Plaintiff claims the enlargement of time we granted on
motion filed by the U.S. Trustee inures to its benefit, and
consequently, the complaint is timely.

Based on the undisputed facts, we conclude the proceeding is
time barred and dismiss the complaint for reasons that follow.

UNDISPUTED FACTS

Defendants sought bankruptcy protection by filing their

AUTHENTICATED /
U.S. GOVERNMENT.
INFORMATION
GPO

Ny

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petition under Chapter 7. The Clerk notified April 28, 2008 as
the deadline for filing complaints objecting to the discharge of
debts. The U.S. Trustee filed a motion to extend that deadline
for an 30 additional days on the same date the initial term
expired. We granted the enlargement the next day without a
hearing. Defendants then filed a timely motion to set aside this
order. The motion became moot when the U.S. Trustee indicated it
Gid not intend to challenge the discharge, the dischargeability
of a debt, nor file a section 707(b) motion to dismiss. The Order
of Discharge has not been entered.

In the meantime, Plaintiff filed this complaint on May 28,
2008, asserting three causes of action: one for denial of
discharge pursuant to sections’ 727(a) (3), (a) (4) & {a) (5);
another to revoke the discharge pursuant to section 727(d) (1) ;
and, yet another to deny dischargeability of a $339,470 debt
brought pursuant to section 523 (a) (2). Defendants now seek its

dismissal invoking FRBP 4004(a), 4004{b) and 9006({b)(3).7 It also

* References to “section[s]” shall be to the Bankruptcy
Reform Act of 1978, as amended prior to April 20, 2005, 11 U.S.C.
§ 101, et seq., with the exception of the provision of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005,
Pub. L. No. 109-8, 119, Stat. 23 that became effective
immediately with cases filed on or after April 20, 2005.

* Fed. R. Bankr. P 9006({b) (3) addresses enlargement of time
governed by other rules, and as pertinent states: “The court may
enlarge the time for taking action under Rules ... 4004(a) ...,
oniy to the extent required under Rule 1007 (b)(7)...". Thus, this
Rule restricts our discretion for granting the extension sought
by the U.S. Trustee.

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claims the cause of action based on revocation is premature, as
the discharge order has not been entered. Plaintiff argues that
our order granting the U.S. Trustee an enlargement of time to
file the complaint inures to its benefit. It also asserts its
challenge survives because it is joined to the revocation of
discharge that prevents us from dismissing the complaint as
untimely.
DISCUSSION

Fed. R. Bankr. P. 4004(a) establishes a deadline for filing
complaints objecting to discharge. In a case under Chapter 7,
these complaints shall be filed “no later than 60 days after the
first date set for the meeting of creditors under § 341{a).”
Here, the parties agree the Clerk correctly established and
notified that deadline as April 28, 2008.

If parties in interest cannot meet this deadline, then Fed.
R. Bankr. P. 4004(b) authorizes the court to extend it, provided:
(1) a motion is filed before the initial term expires, (2) the
Movant shows cause that merits the enlargement, (3) the court
authorizes after a hearing on notice. We must also bear two
things in mind when dealing with this deadline. First, the U.S.
“Supreme Court made it clear that deadlines set by these rules
mean what they say and violations cannot be ignored or excused.”
9 Collier On Bankruptcy, § 4004.02[3] (15th ed. rev.) (citing

Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S. Ct. 1644, 118 L.

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Ed.2d 280 (1992)}. Second, “[sleveral courts have held that

during the period after the deadline expires, but before the

discharge is entered, the court may permit a complaint objecting
to discharge that raises grounds that would justify revocation of
discharge, or that is based on acts which occurred after the

deadline expired.” 9 Collier on Bankruptcy, § 4004.02[3] (15th ed.

rev.) (citing Jones v. Buzzeo (In re Buzzeo), 315 B.R. 243

(Bankr. Conn. 2004)) .?

Although the first proviso seemingly supports strict
adherence to deadlines set by the rules of bankruptcy procedure,
the courts have been flexible when dealing with chailenges to the
discharge. For example, the bankruptcy court for the Southern
District of New York states that an extension for challenging a
discharge filed by one party in interest in a particular

bankruptcy case, inures to the benefit of all others who may also

be considered parties in interest in that case. In re Overmyer,

24 B.R. 437, 439 (Bankr. S.D.N.Y. 1982). Not so with the

challenge raised to exempt a specific debt from the discharge

order. In re Overmyer, 24 B.R. at 440. Any extension of that
nature inures only to the benefit of the proponent, others have

no right to piggyback on another creditor's successful

3 However, the facts in Buzzeo are materially different
from those at hand. Therefore, the case is readily
distinguishable causing us to discard Plaintiff£’s argument based
on this case. Jones v. Buzgzeo (In re Buzgzeo), 315. B.R. 243
(Bankr. Conn. 2004).

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application. Id.

Then there is the matter of “cause”. While cause is not
defined, apparently it cannot be a pro forma incantation, raised
perfunctorily, without any real meaning, and divested from a

showing of real need for the extra time sought, In re Leary, 185

B.R. 405, 406 (Bankr. Masd. 1995). This is specially true when
one considers the mandate for prompt entry of a discharge
contained in Fed. R. Bankr. P. 4004(c).

Applying the above to the facts at hand, the first thing we
note is that the U.S. Trustee’s request for enlargement became
moot when it notified the Court it would not challenge the
discharge, nor seek the dismissal initially contemplated.
Assuming, arguendo, it did not become moot, was our order entered
the next day without a hearing, without an opportunity for the
Debtors to object or waive their objection, valid? We now
conclude our order was invalid for its failure to afford Debtors
due process and the right to be heard before its entry. 9 Collier
on Bankruptcy, § 4004.03[1] (15% ed. rev.).

Lastly, we note the U.S. Trustee did not tailor its need for
extra time to its specific needs in this particular case.
Unfortunately, it mentioned the same cause used in all its
motions for enlargement filed in cases assigned to my docket.
Hence, our order also fails if we were to reconsider its entry

based on the substance of the motion.

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To summarize, Plaintiff cannot rely on our invalid order to
shore up its claim that it benefitted from the fruit of that ill
gotten order. Therefore, we grant Defendants’ motion to dismiss
the instant complaint, as it is time barred, having been filed
after the deadiine set by Fed. R. Bankr. P.4004(a).

SO ORDERED, in San Juan, Puerto Rico, on March 18, 2009.

Lf p

SARA DE JESUS
U.S./Bankruptcy Judge