Glenn McCutchen

1 	The motion is entitled Motion to Reconsider or Modify
Discharge or in the Alternative to Recast Motion for Relief from
Stay as Motion to Extend Time for Filing Complaint to Deny
Dischargeability of Debt.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
GLENN McCUTCHEN,
Debtor.
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Case No. 08-00220
(Chapter 7)
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION AND ORDER RE
MOTION OF U.S. BANK N.A. TO PURSUE FRAUD CLAIMS
U.S. Bank National Association (as trustee respecting a
mortgage pass through certificate) (“U.S. Bank”) has filed a
motion (Docket Entry (“DE”) No. 60) 1 seeking first an order that
would modify the discharge injunction to permit U.S. Bank to
recover a fraud claim against the debtor McCutchen in a civil
action in the Superior Court of the District of Columbia.
Alternatively, if this court holds that the Bankruptcy Court must
determine the nondischargeability of any such debt, U.S. Bank
requests an order permitting the Superior Court to determine the
existence of the debt and the amount of the debt, with U.S. Bank
The document below is hereby signed.
Signed: February 04, 2009.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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to then have thirty days to file a complaint for the
determination of nondischargeability in the Bankruptcy Court.
The motion is unopposed.
I
After a debtor’s chapter 7 discharge is entered, that
discharge “operates as an injunction against the commencement or
continuation of an action . . . to collect, recover or offset any
[discharged] debt as a personal liability of the debtor . . . .”
11 U.S.C. § 524(a)(2). 	This court has exclusive jurisdiction to
determine whether U.S. Bank’s fraud claims are dischargeable. 	11
U.S.C. § 523(c). 	U.S. Bank’s first request, if granted, would
circumvent those statutory provisions by letting the Superior
Court enter a fraud judgment that U.S. Bank could then collect
without having obtained a determination of nondischargeabilty by
this court.
Although this court has observed in In re Richardson, 2000
Bankr. Lexis 1907 (Bankr. D.C. Dec. 4, 2000), that a bankruptcy
court has the power to modify the discharge injunction, that
decision does not justify granting U.S. Bank’s first request.
The decision in In re Richardson modified the discharge
injunction only by clarifying its reach consistent with §
524(a)(2). 	The creditor in In re Richardson did not seek to
obtain a judgment to recover the debtor’s debt as a personal
liability of the debtor if the debt was a discharged debt.
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2 	Steps to collect such a judgment, therefore, would have
run afoul of 11 U.S.C. § 524(a)(3) unless the bankruptcy court
issued a judgment pursuant to § 523(c) decreeing the judgment
debt to be nondischargeable.
3
Rather, it sought to obtain entry of a judgment in state court to
recover the debt as a personal liability of the debtor
conditioned on the bankruptcy court’s then determining that the
judgment debt was of a nondischargeable character. 2 	Accordingly,
I reject U.S. Bank’s first request (to let the Superior Court to
enter a judgment for fraud without this court’s ever addressing
the dischargeability of the fraud claim), and I turn to its
second request.
II
U.S. Bank’s second request has two prongs, first, permitting
it to have the issue of the existence and the amount of the debt
to be first tried in the Superior Court before this court
adjudicates the issue of dischargeabilty, and, second permitting
it to pursue a dischargeability complaint within thirty days of
the entry of a judgment in the Superior Court. 	Assuming that
U.S. Bank establishes that it may pursue a dischargeability
complaint (an issue addressed in part III, below), it would be
appropriate to permit the existence and amount of the debt to be
tried in the Superior Court.
Although the bankruptcy court has exclusive jurisdiction
under § 523(c) to determine whether a debt based on fraud is
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dischargeable, the bankruptcy court may make that determination
by applying principles of issue preclusion (also called
collateral estoppel) to a state court judgment determining the
existence and amount of such a debt. 	Even though no such
judgment is yet in existence, common sense dictates that there
ought not be a bar to this court’s permitting a state court to
try and issue a judgment determining the issue of whether a debt
exists and the amount of the debt.
Despite a bankruptcy court’s exclusive jurisdiction under
§ 523(c) to determine the dischargeability of a debt for fraud
alleged to fit within 11 U.S.C. § 523(a)(2), bankruptcy courts
routinely apply collateral estoppel (issue preclusion) principles
to ascertain whether a judgment of a state court entered prior to
the commencement of the bankruptcy case establishes the necessary
elements of nondischargeability. 	Even once a bankruptcy case has
commenced, a bankruptcy court has discretion to permit litigation
to proceed in state court to establish the existence and amount
of the debt. 	With respect to the period during which the
automatic stay is in effect in a case, a bankruptcy court has
authority under 11 U.S.C. § 362(d) to lift the automatic stay of
11 U.S.C. § 362(a)(1) to permit such litigation to proceed in a
state court. 	If liability is then found by the state court to
exist, the bankruptcy court may then apply principles of
collateral estoppel (issue preclusion) as to whether the state
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3 	In any event, by reason of 11 U.S.C. § 524(a)(1) the
state court judgment would be void as a judgment to recover the
debt as a personal liability of the debtor unless the bankruptcy
court determines that the debt is nondischargeable.
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court’s judgment establishes the elements of nondischargeability
under § 523(a)(2).
Logically, this court’s exclusive jurisdiction under
§ 523(c) to determine a claim of nondischargeability based on
fraud similarly does not bar this court from following that
procedure once a discharge is entered. 	The outcome of a request
to permit litigation over the debt to proceed first in state
court ought not vary based on whether the request is made while
the automatic stay of 11 U.S.C. § 362(a)(1) is still in effect
or, instead, has been terminated pursuant to 11 U.S.C. §
362(c)(2)(c) by the entry of the discharge and replaced by a
discharge injunction under 11 U.S.C. § 524(a)2). 	As I held in In
re Richardson, the creditor may be granted permission to obtain
entry of a judgment in state court to recover the debt as a
personal liability of the debtor conditioned on the bankruptcy
court’s then determining that the judgment debt was of a
nondischargeable character. 3
But permitting the issue of liability to be adjudicated in
the Superior Court would make no sense if the debtor would be
entitled to have the court dismiss as untimely any complaint for
a determination of nondischargeability. 	Accordingly, I turn to
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the second prong of U.S. Bank’s alternative request, namely, the
prong requesting that it be permitted to file a dischargeability
complaint in this court within thirty days of the entry by the
Superior Court of a judgment against the debtor for a debt based
on U.S. Bank’s fraud claims.
III
The deadline for U.S. Bank to file a dischargeability
complaint has expired, and the deadline for it to seek an
enlargement of that time has expired as well. 	Fed. R. Bankr. P.
4007(c). 	U.S. Bank’s motion for relief from the automatic stay
to permit it to foreclose on the debtor’s property was filed
before the expiration of the deadline for filing a motion under
Rule 4007(c) to enlarge the time to file a dischargeabilty
complaint. 	But the motion gave no hint that it would be seeking
to obtain a determination of the dischargeability of the debt as
a personal obligation of the debtor. 	Its lien on its collateral
passes through this chapter 7 case unaffected by the discharge,
and so its lift stay motion, addressing enforcement of that lien
via foreclosure, in no way could be viewed as touching on
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4 	The lift stay motion did not seek leave to pursue
litigation in the Superior Court regarding the debt for fraud.
Such a request 	would have made sense only if the creditor were
to be allowed after recovery of a judgment for such a debt to
pursue a dischargeability complaint in the bankruptcy court, and
could be viewed as implicitly seeking an enlargement of time for
filing a dischargeability complaint to sometime after the
Superior Court acted.
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discharge issues. 4 	Accordingly, the court cannot treat the lift
stay motion as having sought a Rule 4007(c) enlargement of time,
and U.S. Bank’s untimely request in the current motion for a Rule
4007(c) enlargement of time cannot be made timely by way of
amending the lift stay motion. 	Cf. Markus v. Gschwend (In re
Markus), 313 F.3d 1146, 1150 (9th Cir. 2002); 	Magno v. Rigsby
(In re Magno), 216 B.R. 34, 39 (9th Cir. BAP 1997) (untimely
request to determine dischargeability of debt under § 523(a)
could not be made timely by way of amending an earlier complaint,
filed before Rule 4007(c) deadline, that sought denial of
discharge under § 727(a)).
Nevertheless, U.S. Bank is free to pursue an untimely Rule
4007(c) motion. 	For reasons explained below, the deadlines
contained in Rule 4007(c) are not jurisdictional, and can be
forfeited.
A complaint objecting to discharge filed after the bar date
of Fed. R. Bankr. P. 4004(a) for objecting to discharge is not
jurisdictionally barred, and the defense of the bar date can thus
be forfeited. 	Kontrick v. Ryan, 540 U.S. 443 (2004). 	This would
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apply as well to a dischargeability complaint filed after the bar
date of Fed. R. Bankr. P. 4007(c).
It logically follows that so too can the debtor forfeit the
defense of the bar date set forth in Fed. R. Bankr. P. 4007(c)
for filing a motion to enlarge the time to file a
dischargeability complaint. 	Cf. Eberhart v. United States, 546
U.S. 12 (2005); National Ecological Foundation v. Alexander, 496
F.3d 466, 476 (6th Cir. 2007) ("where a party forfeits an
objection to the untimeliness of a Rule 59(e) motion, that
forfeiture makes the motion 'timely' for the purpose of Rule
4(a)(4)(A)(iv) [of the Federal Rules of Appellate Procedure]."
Moreover, the court may not sua sponte dismiss a Rule
4007(c) motion to enlarge time as itself untimely. 	See United
States v. Mitchell, 518 F.3d 740, 748-50 (10th Cir. 2008);
Wilburn v. Robinson, 480 F.3d 1140, 1147-48 (D.C. Cir. 2007)
(although court recognized that the appeal was time-barred, it
proceeded to address the merits because the appellee failed
timely to raise the untimeliness of the appeal).
IV
Nevertheless, Rule 4007(c) provides that the court “may for
cause extend the time fixed under this subdivision” for filing a
complaint to determine the dischargeability of a debt. 	Before
granting a motion by default, the court is required to satisfy
itself that the motion sets forth facts that establish the
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required cause for granting the relief sought by the motion.
Here, the bar date under Rule 4007(c) was July 21, 2008. 	U.S.
Bank acknowledges that prior to July 8, 2008 (the date on which
it planned to hold a foreclosure sale), its counsel discovered
that there were potential clouds on McCutchen’s title to the
property upon which it was planning to foreclose. 	Nothing in its
motion suggests it was not aware, well before the July 21, 2008
deadline, of the alleged fraudulent acts of McCutchen that caused
the potential clouds on his title to arise. 	Moreover, no cause
has been shown why U.S. Bank could not have filed a
dischargeability complaint well before December 31, 2008, the
date of the filing of the instant motion. 	Accordingly, no cause
has been alleged to justify extending the time for filing a
complaint to determine the dischargeability of the debt. 	I will
thus deny the request to enlarge the time to file a
dischargeability complaint even though that motion appears to be
untimely under Rule 4007(c).
IV
Because the second prong of U.S. Bank’s request for
alternative relief (the prong seeking a Rule 4007(c) enlargement
of time to file a dischargeability complaint) cannot be granted,
it makes no sense to grant the first prong of that request (the
request that it be permitted to proceed with litigation in the
Superior Court to establish the existence of the debt for fraud).
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10	O:\TEEL\Judge Temp Docs\McCutchen (Glenn) - Order re US Bank Mtn to Modify Discharge Injn & Enlarge Time of Dischblty Complaint.wpd
Unless and until it is clear that U.S. Bank will not be barred
from pursuing a dischargeability complaint, that litigation ought
not go forward. 	(Litigation in that same Superior Court action
seeking equitable relief to clear title is a different matter
that I have addressed separately.)
V
In accordance with the foregoing, it is
ORDERED that U.S. Bank’s motion (DE No. 60) is denied
without prejudice to its filing an amended motion alleging cause
for a Rule 4007(c) extension or its pursuing a dischargeability
complaint (subject, however, to its responsibilities under Rule
9011 with respect to continuing to advocate any such matter if
the debtor fails to forfeit the defense of untimeliness).
[Signed and dated above.]
Copies to: Michael N. Russo, Jr., Esq.; Michael S. Steadman, Jr.,
Esq.; David H. Cox, Esq.; Richard Rogers, Esq.; Wendell W.
Webster, Trustee; Debtor; Debtor’s Attorney.
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