Lipsky v. Polinski

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This disposition is not appropriate for publication.1
Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1) it has no precedential value.
See 9th Cir. BAP Rule 8013-1.
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NOT FOR PUBLICATION
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: ) BAP No. NC-07-1295-JuMkK
)
ALEXANDRU POLINSKI, ) Bk. No. 07-10102
)
) Adv. No. 07-01037
Debtor, )
______________________________)
)
DAVID LIPSKY, )
)
Appellant, )
)
v. ) M E M O R A N D U M1
)
ALEXANDRU POLINSKI, )
)
Appellee. )
______________________________)
Argued and Submitted on January 24, 2008
at San Francisco, California
Filed - February 19, 2008
Appeal from the United States Bankruptcy Court
for the Northern District of California
Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding
Before: JURY, MARKELL and KLEIN, Bankruptcy Judges.
FILED
FEB 19 2008
HAROLD S. MARENUS, CLERK
U.S. BKCY. APP. PANEL
OF TH E N IN TH C IR C U IT
Entered on Docket
February 20, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-01037 Doc# 24 Filed: 02/19/08 Entered: 02/20/08 10:15:00 Page 1 of
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Unless otherwise indicated, all chapter, section and rule2
references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, as
enacted and promulgated on the effective date of the Bankruptcy
Abuse Prevention and Consumer Protection Act of 2005, Pub. L.
109-8, 119 Stat. 23 (generally October 17, 2005).
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I. INTRODUCTION
Creditor-Appellant, David Lipsky (“Appellant” or “Lipsky”)
appeals the bankruptcy court’s order dismissing his late-filed
nondischargeability adversary complaint. For the reasons below,
we AFFIRM.
II. FACTS
Alexandru Polinsky (“Polinski” or “debtor”) was a jewelry
designer and dealer. Lipsky took a diamond necklace to debtor to
reset its 2.75 carat diamond into a gold ring, that Lipsky also
provided. Debtor did not perform the services. After months of
delay, Lipsky was unsuccessful in getting the diamond or ring
back from debtor, despite demands.
On January 31, 2007, debtor filed his voluntary chapter 7
petition. Lipsky was listed as an unsecured creditor on	2
Schedule F with a $25,000 undisputed debt. Debtor incorrectly
listed Lipsky’s address as 153 Koch Road, Corte Madera,
California, 94925. Lipsky had moved from that address
approximately five years earlier to 34 Madera Del Presidio, Corte
Madera, California 94925.
The bankruptcy court issued a notice to all interested
parties of a creditors’ meeting to be held March 6, 2007. The
notice established May 7, 2007 as the deadline for the filing of
complaints objecting to the discharge of Polinski’s debts (the
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Although the § 341(a) transcript is not included in the3
appellate record, debtor’s alleged testimony is consistent with
his Schedule F which lists Lipsky as a creditor holding an
undisputed claim in the amount of $25,000.
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“Discharge Bar Date”). The clerk mailed the notice to Lipsky at
the 153 Koch Road address on February 1, 2007.
According to the declaration of Barbara R. McEntyre,
debtor’s former attorney, she received a telephone call from
Lipsky about a week after debtor’s petition was filed. She
declared that Lipsky knew about the bankruptcy, but he had not
received notice of the case. She took Lipsky’s correct address
and mailed him a copy of the notice on or about February 7, 2007.
She also stated that she believed she had entered a change of
address for Lipsky in the case at the same time.
On March 6, 2007, Lipsky filed a proof of claim which stated
his correct address. Lipsky was also elected to the unsecured
creditors’ committee at the § 341(a) meeting. The U.S. Trustee’s
account of the election stated Lipsky’s correct address.
Lipsky personally questioned debtor about the diamond at the
creditors’ meeting. Debtor admitted that he had sold the stone,
but could not remember to whom or for how much. At the	3
meeting, debtor’s attorney handed Lipsky the gold ring without
the diamond.
Lipsky met his attorney, Lawrence Alioto (“Alioto”), at the
creditors’ meeting. Alioto agreed to prepare a
nondischargeability complaint for Lipsky. On April 19, 2007,
well before the May 7, 2007 Discharge Bar Date, Alioto sent a
copy of the complaint, coversheet and summons form which he had
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prepared to Lipsky. Alioto admits that he inadvertently sent
these documents to the Koch Road address which was listed on
debtor’s petition rather than Lipsky’s correct address which he
had put on the complaint and cover sheet.
When the May 7, 2007 deadline passed, Alioto assumed that
Lipsky had changed his mind about filing the complaint. On May
8, 2007, Lipsky called Alioto and asked where the complaint was.
At that time, they both discovered the complaint was mailed to
the wrong address.
Lipsky filed his nondischargeability complaint on May 9,
2007, two days after the deadline. Debtor moved under Federal
Rule Civil Procedure 12(b) to dismiss Lipsky’s late-filed
complaint. At the hearing, the bankruptcy court dismissed
Lipsky’s complaint pursuant to Jones v. Hill (In re Hill), 811
F.2d 484, 486-87 (9th Cir. 1987), which holds that a court has no
discretion to enlarge the time period under Rule 4007(c) on the
basis of excusable neglect.
Lipsky timely appealed.
III. ISSUE
Whether the bankruptcy court abused its discretion in
dismissing Appellant’s late-filed nondischargeability complaint.
IV. JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
§§ 1334 and 157(b)(1) and (2)(I). We have jurisdiction under 28
U.S.C. § 158.
V. STANDARDS OF REVIEW
The interpretation of Rule 4007(c) is a question of law to
be reviewed de novo. Wilzig v. Lopez (In re Lopez), 192 B.R.
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Furthermore, common sense dictates that any attorney opens4
a client file with a current address, so Alioto must have had
personal knowledge of his client’s address.
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539, 543 (9th Cir. BAP 1996). Whether circumstances justify a
trial court granting relief from the bar date is reviewed under
an abuse of discretion standard. Id. “A bankruptcy court would
necessarily abuse its discretion if it bases its ruling upon an
erroneous view of the law or a clearly erroneous assessment of
the evidence.” Id. (citation omitted).
VI. DISCUSSION
Lipsky and Alioto acknowledge that Alioto was arguably
negligent. However, Lipsky contends that debtor must share some
responsibility for Lipsky’s late-filed complaint. Lipsky
maintains that there is a “causal link” between his late-filed
complaint and debtor’s failure to list Lipsky’s correct address
in his schedules. Lipsky argues that debtor failed to use
diligence in scheduling him as a creditor because debtor used an
address that Lipsky had moved from in January 2002, five years
before debtor’s filing.
In opposition, debtor argues it is undisputed that Lipsky
and Alioto had notice of the Discharge Bar Date. Debtor also
contends that Alioto could have looked numerous places for
Lipsky’s correct address. For example, the complaint Alioto
prepared for filing, the U.S. Trustee’s summary of the creditors’
committee election and the proof of claim filed by Lipsky all
contained his correct address. Instead, debtor argues, against	4
“all odds”, Alioto used the incorrect address that was listed in
debtor’s schedules. Debtor also points out that Lipsky could
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have called Alioto or Alioto could have called Lipsky prior to
the deadline. Debtor maintains that he cannot be held
responsible for their actions.
A. The Standards For Enlarging the Time to File a Complaint
Under Bankruptcy Rule 4007(c)
Section 523 applies to individual debtors and specifies
which of the debtor's debts are not discharged in a bankruptcy
case. The section sets forth certain effectuating procedures.
Section 523(c)(1) provides that, notwithstanding subsection (a),
debts of a kind specified in paragraphs (2), (4), or (6) of
§ 523(a) will be automatically discharged, unless the creditor to
whom such debt is owed initiates proceedings in the bankruptcy
court to obtain a determination that the debt is
nondischargeable. Subsection (c)(1) therefore creates
substantive rights both in the debtor (the automatic discharge of
otherwise nondischargeable debts) and creditors (the right to
object). However, it does not contain any directive regarding
the time period in which the creditor must take such action.
Rule 4007(c) implements § 523(c) by requiring that a party
must either file a complaint objecting to discharge not later
than sixty days following the first date set for the meeting of
creditors held pursuant to § 341(a) or file a motion for an
extension within that period. See Fed. R. Bankr. P. 4007(c).
The primary purpose underlying this time limitation is the
granting of the debtor's fresh start in a timely and expeditious
manner. Schunck v. Santos (In re Santos), 112 B.R. 1001, 1006
(9th Cir. BAP 1990)(stating that the purpose of Rule 4007(c) is
to further the prompt administration of bankruptcy estates and
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the fresh start goals of bankruptcy relief).
The short time limitation in which to file a
nondischargeability complaint favors debtors, who can feel secure
their creditor slate has been wiped clean and they can get on
with their lives. Yet, as the Bankruptcy Code and the policies
underlying the debtor's discharge make clear, the fresh start is
reserved for the honest but unfortunate debtor. Thus, there are
competing interests at stake. However, if the time deadline for
filing a dischargeability complaint against a dishonest debtor is
missed, in the majority of instances, the debt at issue is
discharged and even the dishonest debtor may walk away with a
clean slate.
Nevertheless, Rule 4007(c) is a claim-processing rule
creating a deadline that does not affect subject-matter
jurisdiction, the benefit of which rule can “be forfeited if the
party asserting the rule waits too long to raise the point.”
Kontrick v. Ryan, 540 U.S. 443, 454 (2004); see also Santos, 112
B.R. at 1006. Moreover, equitable principles may apply to permit
extension of the Rule 4007(c) deadline. Young v. United States,
535 U.S. 43, 49-51; Santos, 112 B.R. at 1006. Consequently,
situations where equitable relief is available are limited.
B. Excusable Neglect Cannot Be Used to Enlarge the Time
In essence, and as recognized by the bankruptcy court,
Lipsky is arguing excusable neglect as a basis for authorizing
his late-filed complaint. The difficulty, however, is that Rules
4007(c) and 9006(b)(3) combine to prohibit retroactive extensions
of the deadline based on excusable neglect. Fed. R. Bankr. P.
4007(c) & 9006(b)(3). Indeed, it was the similar effect of Rule
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9006(b)(3) on the discharge objection deadline created by Rule
4004(a) and (b) that led the Supreme Court in Kontrick to use the
term “inflexible claim-processing rule.” Kontrick, 540 U.S. at
456. Thus, rule 4007(c) is an inflexible claim-processing rule
as to which the court has no discretion.
The court therefore has no discretion to enlarge the time
period under Rule 4007(c) on the basis of excusable neglect.
Santos, 112 B.R. at 1008 citing Hill, 811 F.2d at 486 (noting
that Rule 9006(b)(3) authorizes the court to enlarge the time for
taking action under Rule 4007(c) only when a motion for such an
extension is made before the time has expired). Therefore, the
bankruptcy court applied the proper law.
Even if excusable neglect could be used to extend the time
for filing a nondischargeability complaint, the bankruptcy court
found that while there was neglect, it was not excusable under
the circumstances of this case. We agree. The Supreme Court
held in Pioneer Inv. Serv. Co. v. Brunswick Assoc. Ltd. P’ship,
507 U.S. 380, 395 (1993), that the determination of what kind of
neglect will be considered “excusable” is an equitable one,
taking account of all relevant circumstances. “These include the
danger of prejudice to the debtor, the length of the delay and
its impact on judicial proceedings, the reason for the delay,
including whether it was in the reasonable control of the movant,
and whether the movant acted in good faith.” Id. In Pioneer,
the notice regarding the claims bar date was outside the ordinary
course and there was no prejudice to the debtor or to the
interests of efficient judicial administration. Id. at 398.
Thus, the late-filed claim was allowed.
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None of the criteria set forth in Pioneer are applicable
here. The bankruptcy court’s notice of the creditors’ meeting
and Discharge Bar Date was in the ordinary course. Lipsky and
his attorney had actual and timely notice of the bankruptcy and
Discharge Bar Date to meet the May 7, 2007 deadline. Not only
did they both appear at the creditors’ meeting, but Alioto
prepared and mailed the complaint to Lipsky several weeks ahead
of the deadline. Amazingly, neither one called the other until
the date came and went. The delay in the timely filing of the
complaint was within the reasonable control of Lipsky and his
attorney. Moreover, granting equitable relief by extending the
Discharge Bar Date would prejudice debtor’s fresh start and
impact the prompt administration of his estate. In short, even
if the excusable neglect doctrine could be used to afford Lipsky
relief, the circumstances in this case add up to neglect which is
not excusable.
C. Other Equitable Doctrines Are Inapplicable
Lipsky argues for “equity” without referring to any
particular equitable doctrine. While we may affirm the
bankruptcy court's decision on any ground supported by the
record, even if it differs from the reasoning of the court,
Grzybowski v. Aquaslide 'N' Dive Corp. (In re Aquaslide 'N' Dive
Corp.), 85 B.R. 545, 549-50 (9th Cir. BAP 1987), no equitable
doctrines fit the circumstances of this case.
Lipsky is not eligible for the benefit of the doctrine of
equitable tolling under the present circumstances. He had notice
of the filing of the chapter 7 case, and of the Rule 4007(c)
deadline, in time to file a timely complaint. A miscommunication
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Alioto wrote a letter to the trial judge on July 12, 20075
asking him to consider Dewalt before ruling on the debtor’s
motion to dismiss. At the hearing, the trial judge commented
that he didn’t read letters. However, the court was familiar
with Dewalt.
This section provides that a debt of the kind listed in6
§ 523(a)(2), (4) or (6) is not discharged if the creditor who is
(continued...)
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or clerical error on the part of his counsel does not warrant
such equitable relief.
Further, the doctrine of equitable estoppel requires
reasonable reliance on debtor’s words or conduct within the
applicable limitations period. Santos, 112 B.R. at 1007.
Missing from the record is evidence of reasonable reliance.
Alioto could not reasonably rely on debtor’s schedules for
Lipsky’s address when he had put Lipsky’s correct address on the
complaint that he prepared for filing. Accordingly, we perceive
no equitable doctrine that applies under the circumstances here.
D. Lipsky and His Attorney Had Ample Notice of the Discharge
Bar Date
Lipsky’s reliance on Mfr. Hanover v. Dewalt (In re Dewalt),
961 F.2d 848 (9th Cir. 1992) is misplaced. In Dewalt, the	5
debtor listed the creditor with an inaccurate address. As a
result, the creditor received no initial notice of the bankruptcy
or the § 341(a) creditors’ meeting.
Subsequently, the creditor received actual notice of the
debtor’s bankruptcy filing seven days prior to the discharge bar
date, but it did not file a timely complaint. The creditor later
filed a complaint contending it fell within the scope of
§523(a)(3)(B) because it was unscheduled and did not have enough	6
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(...continued)6
owed the debt is neither listed nor scheduled and does not have
notice or actual knowledge of debtor’s bankruptcy filing in time
to file a nondischargeability complaint by the discharge bar
date.
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notice to file a timely complaint.
The debtor sought dismissal because the creditor had notice
of the filing seven days prior to the bar date. The bankruptcy
court dismissed the complaint and this Panel affirmed. The Ninth
Circuit reversed finding that notice to an unscheduled creditor
only seven days prior to the bar date did not conform to Rule
4007(c) which states that the court “shall give all creditors no
less than 30 days’ notice” of the deadline. The Ninth Circuit
reasoned that the thirty-day notice provision of Rule 4007(c)
provides a guide to the minimum time within which it is
reasonable to expect a creditor to act at penalty of default.
Id. at 851.
The only similarity between this case and Dewalt is that
debtor listed an inaccurate address for Lipsky. The record shows
that Lipsky and his counsel had more than thirty-days notice of
the Discharge Bar Date. Thus, there was ample time for them to
file a timely complaint.
VII. CONCLUSION
Although equitable relief from the Discharge Bar Date may be
granted in limited situations, a bankruptcy court has no
discretion to enlarge the time period under Rule 4007(c) on the
basis of excusable neglect. The record does not support
application of any other equitable doctrines. Hence, the
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bankruptcy court did not base its ruling upon either an erroneous
view of the law or a clearly erroneous assessment of the
evidence. Finding no abuse of discretion in the court’s
dismissal of Lipsky’s late-filed complaint, we AFFIRM.
While this appeal was pending, the bankruptcy court entered
a judgment denying the debtor’s discharge under § 727, which
judgment the debtor appealed on February 1, 2008. If, as a
result of the denial of the debtor’s § 727 discharge, Appellant
pursues debtor in state court, our affirming the dismissal of the
nondischargeability complaint on a bankruptcy-specific theory
should have no preclusive effect in the state court on the
underlying substantive claims. See RESTATEMENT (SECOND) OF JUDGMENTS
§ 26(f) (1982). Here, the dismissal involved only the procedural
aspect of filing a timely complaint and did not concern the
underlying merits of Appellant’s claims. Hence, neither issue
nor claim preclusion should prevent such state court action.
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