Shahrestani v. Alazzeh (In Re Alazzeh) , 2014 Bankr. LEXIS 1584 ( 2014 )

FILED
APR 11 2014
1 NO FO PUBL A IO
T R IC T N
2 SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5 In re: ) BAP No. CC-13-1350-DKiTa
)
6 RAED YAHIA ALAZZEH, ) Bk. No. 8:11-24735
)
7 Debtor. ) Adv. Proc. No. 8:12-ap-1058
______________________________)
8 )
MOSTAFFA SHAHRESTANI, )
9 )
Appellant, )
10 )
v. ) M E M O R A N D U M1
11 )
RAED YAHIA ALAZZEH, )
12 )
Appellee. )
13 ______________________________)
14 Argued and Submitted on March 20, 2014
at Pasadena, California
15
Filed - April 11, 2014
16
Appeal from the United States Bankruptcy Court
17 for the Central District of California
18 Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding
19
Appearances: David Brian Lally, Esq. argued for Appellant
20 Mostaffa Shahrestani; and David Van Luu, Esq.
argued for Appellee Raed Yahia Alazzeh.
21
22 Before: DUNN, KIRSCHER, and TAYLOR, Bankruptcy Judges.
23
24
25
26 1
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.
1 The chapter 72 debtor agreed to extend the time for the
2 creditor to file an adversary proceeding seeking to deny debtor’s
3 discharge pursuant to § 727 of the Bankruptcy Code. The creditor
4 filed the adversary proceeding complaint (“Complaint”) within the
5 agreed extension. More than a year later, after engaging in an
6 unsuccessful mediation and substantial discovery, the debtor
7 filed a motion for summary judgment (“SJ Motion”) seeking
8 dismissal of the Complaint on the basis that it was untimely
9 filed. The bankruptcy court granted the SJ Motion and dismissed
10 the Complaint. We AFFIRM.
11 I. FACTUAL BACKGROUND
12 In November 2008, Raed Yahia Alazzeh assumed, as obligor, a
13 promissory note (“Note”) obligation payable to Mostaffa
14 Shahrestani in the amount of $140,800. The Note was due and
15 payable in full in August 2010.
16 After Mr. Alazzeh defaulted on his payment obligation under
17 the Note, Mr. Shahrestani obtained a default judgment against
18 Mr. Alazzeh in the Orange County (California) Superior Court.
19 The judgment was for the full amount due under the Note, plus
20 interest, costs, and attorneys’ fees.
21 Mr. Alazzeh filed a chapter 7 bankruptcy case on October 24,
22 2011. Thereafter, Mr. Shahrestani filed the Complaint seeking
23 denial of Mr. Alazzeh’s discharge pursuant to §§ 727(a)(2),
24
25
2
Unless otherwise indicated, all chapter and section
26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
27 all “Rule” references are to the Federal Rules of Bankruptcy
Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure
28 are referred to as “Civil Rules.”
-2-
1 (a)(3), (a)(4)(A), and (a)(5).
2 As provided in the “Notice of Chapter 7 Bankruptcy Case,
3 Meeting of Creditors, & Deadlines” issued by the bankruptcy court
4 on October 25, 2011, the § 341(a) Meeting of Creditors
5 (“Creditors’ Meeting”) was set for December 6, 2011, and the
6 deadline (“Deadline”) for filing the Complaint was February 6,
7 2012.3 The chapter 7 trustee held the Creditors’ Meeting as
8 scheduled on December 6, 2011, but thereafter continued it, first
9 to January 19, 2012, and finally to February 21, 2012.
10 On January 20, 2012, Mr. Shahrestani’s attorney, Susan K.
11 Ashabraner, began an email correspondence with Mr. Alazzeh’s
12 attorneys with the goal of obtaining an agreement to extend the
13 Deadline. On February 2, 2012, attorney Michael N. Nicastro
14 responded:
15 Mr. Alazzeh has agreed to extend the time to object to
one week after the continued 341a meeting date. That
16 provides enough time for you to examine the documents
and then examine Mr. Alazzeh at the continued 341a
17 meeting.
18 Mr. Nicastro’s email to Ms. Ashabraner concluded, “I await your
19 proposed stipulation to extend.” Seven minutes later
20 Ms. Ashabraner sent a follow up email which stated,
21 I will stipulate to extend the deadline for Mr.
Shahrestani to object to Mr. Alazzeh’s discharge from
22 Monday, February 6, 2012, to Tuesday, February 28,
2012, which is 7 days after the February 21 creditors’
23 meeting.
24 The Complaint was filed February 24, 2012, four days prior
25 to the date contemplated by the parties as the extended Deadline.
26
3
27 The sixtieth day following the date set for the
Creditors’ Meeting was February 4, 2012, a Saturday. See
28 Rule 9006(a)(1)(C).
-3-
1 Mr. Alazzeh, acting in pro per, filed his answer (“Answer”) on
2 March 21, 2012. The Answer denied each of the allegations of the
3 Complaint and asserted generically a boilerplate laundry list of
4 sixteen affirmative defenses, including one alleging that
5 Mr. Shahrestani’s claims were barred “by the applicable Statute
6 of Limitations.”
7 Thereafter, Mr. Alazzeh engaged counsel to represent him in
8 defending the adversary proceeding. The adversary proceeding
9 docket reflects that the matter was submitted to mediation, where
10 it was reported settled by the mediator on July 24, 2012. On
11 September 13, 2012, Mr. Shahrestani filed a motion to approve the
12 compromise under Rule 9019, which ultimately was withdrawn.
13 Following the failed settlement effort, a status hearing was
14 set for November 28, 2012, and was continued to December 18,
15 2012, to January 8, 2013, to February 12, 2013, to April 2, 2013,
16 and to June 4, 2013; during this time the parties completed
17 discovery. In a Joint Status Report filed May 20, 2013,
18 Mr. Alazzeh advised that a motion for summary adjudication was to
19 be filed “fairly soon.”
20 Mr. Alazzeh’s motion for summary judgment (“SJ Motion”) was
21 filed on May 20, 2013, and asserted that the Complaint should be
22 dismissed because all of the claims it asserted were statutorily
23 barred by Rule 4004(a). Mr. Shahrestani opposed the SJ Motion on
24 the basis that the parties had agreed to an extension of the
25 Deadline. At the hearing on the SJ Motion held July 2, 2013, the
26 bankruptcy court granted the SJ Motion after noting that no
27 motion ever had been filed requesting that the bankruptcy court
28
-4-
1 extend the Deadline as required by Rule 4004(b).4
2 On July 15, 2013, the bankruptcy court entered an order
3 granting the SJ Motion and dismissing the Complaint.
4 Mr. Shahrestani timely appealed.
5 II. JURISDICTION
6 The bankruptcy court had jurisdiction under 28 U.S.C.
7 §§ 1334 and 157(b)(2)(J). We have jurisdiction under 28 U.S.C.
8 § 158.
9 III. ISSUE
10 Whether the bankruptcy court erred and/or abused its
11 discretion when it dismissed the Complaint as untimely in light
12 of the agreement of Mr. Alazzeh’s attorney to extend the
13 Deadline.
14 IV. STANDARDS OF REVIEW
15 We review the trial court's order granting summary judgment
16 de novo. Aguilera v. Baca, 510 F.3d 1161, 1167 (9th Cir. 2007).
17 De novo review requires that we consider a matter afresh, as if
18 no decision had been rendered previously. United States v.
19 Silverman, 861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v.
20 Chaussee (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
21 We review for an abuse of discretion the bankruptcy court’s
22 decision regarding the treatment of an affirmative defense.
23 389 Orange St. P’ship v. Arnold, 179 F.3d 656, 664 (9th Cir.
24
4
25 The bankruptcy court focused on the “public policy” of
ensuring that an extension of the Deadline appears on the docket,
26 because the court should not have to guess whether it was
27 appropriate to enter the discharge once the Deadline had run.
However, it does not appear that a discharge ever has been
28 entered in Mr. Alazzeh’s case.
-5-
1 1999). However, whether an affirmative defense is waived, is a
2 question of law reviewed de novo. See Owens v. Kaiser Found.
3 Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001).
4 A bankruptcy court abuses its discretion if it applies an
5 incorrect legal standard or misapplies the correct legal
6 standard, or its factual findings are illogical, implausible or
7 without support from evidence in the record. TrafficSchool.com
8 v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011). Only if the
9 bankruptcy court did not apply the correct legal standard, or if
10 its fact findings were illogical, implausible, or without support
11 in inferences that can be drawn from facts in the record, is it
12 proper to conclude that the bankruptcy court abused its
13 discretion. United States v. Hinkson, 585 F.3d 1247, 1262 (9th
14 Cir. 2009) (en banc).
15 V. DISCUSSION
16 Rule 4004 is a claim processing rule that governs the grant
17 or denial of a debtor’s discharge. Rule 4004(a) provides, “In a
18 chapter 7 case, a complaint . . . objecting to the debtor's
19 discharge shall be filed no later than 60 days after the first
20 date set for the meeting of creditors under § 341(a).”
21 Mr. Shahrestani asserts that notwithstanding Rule 4004(a),
22 the Complaint was timely, because Mr. Alazzeh “stipulated” to the
23 extension of the Deadline. However, agreements between the
24 parties that implicate court deadlines are not always effective.
25 Rule 9006(b) governs requests for extensions of time.
26 Rule 9006(b)(3) specifically states that the bankruptcy court can
27 extend the time for taking action under Rule 4004(a) “only to the
28 extent and under the conditions stated in that rule.”
-6-
1 Rule 4004(b) governs the procedure for requesting an extension of
2 the deadline set forth in Rule 4004(a):
3 (1) On motion of any party in interest, after notice
and hearing, the court may for cause extend the time to
4 object to discharge. Except as provided in subdivision
(b)(2),5 the motion shall be filed before the time has
5 expired.
6 Thus, Rule 4004(b) sets forth two guiding principles
7 governing the filing of the Complaint after the Deadline. First,
8 a motion for an extension must not only be filed, it must be
9 filed before the Deadline has passed. Second, an extension is
10 not automatically granted just because a motion has been filed.
11 The bankruptcy court, rather than the parties, has discretion to
12 determine if cause exists.
13 It is undisputed that Mr. Shahrestani did not file a motion
14 seeking an order from the bankruptcy court extending the Deadline
15 before the Deadline expired. The Ninth Circuit recently
16 reemphasized that the deadlines which implicate a debtor’s
17 discharge are strict, and “without qualification,” cannot be
18 extended by the bankruptcy court unless a motion is made before
19 the deadline expires. Wilms v. Sanderson, 723 F.3d 1094, 1100
20 (9th Cir. 2013). Thus, the Complaint was untimely as a matter of
21 law. The bankruptcy court did not err when it granted the SJ
22 Motion and dismissed the complaint.
23 Mr. Shahrestani next makes what we construe to be a waiver
24 argument. Specifically, Mr. Shahrestani contends that where
25 Mr. Alezzeh (1) agreed to the extension, and (2) did not seek to
26
27 5
The exception in Rule 4004(b)(2) does not apply to this
28 appeal.
-7-
1 enforce the Deadline until fifteen months after the Complaint had
2 been filed, and after extensive efforts had been expended to
3 mediate the dispute and to complete discovery, the bankruptcy
4 court abused its discretion when it granted the motion for
5 summary judgment and dismissed the Complaint.
6 The assertion of a time bar constitutes an affirmative
7 defense that, pursuant to Civil Rule 8(c), applicable in a
8 bankruptcy adversary proceeding pursuant to Rule 7008(a),
9 generally must be raised in an answer or be deemed waived.
10 Kontrick v. Ryan, 540 U.S. 443, 458 (2004). In Kontrick, the
11 Supreme Court answered the question: How long do the affirmative
12 defenses in Rules 4004(a) and (b) and 9006(b)(3) afforded to a
13 debtor/defendant “linger” in an adversary proceeding? Id. In
14 Kontrick, the debtor/defendant did not raise the issue that a new
15 claim in an amended complaint was untimely until after the
16 bankruptcy court had entered summary judgment against him on the
17 new claim. The Supreme Court ruled that the outermost point at
18 which a time bar may be raised is before a decision on the
19 merits.
20 In the matter before us, Mr. Alazzeh first asserted the time
21 bar in his Answer as his Twelfth Affirmative Defense: “Defendant
22 alleges that Plaintiff’s cause of action is barred by the
23 applicable Statute of Limitations.”6 Because the time bar was
24
6
25 Mr. Alazzeh incorrectly characterized the time bar
established by Rules 4004(a) and (b) and 9006(b)(3) as a statute
26 of “limitations.” It actually is a statute of “repose.” See
27 DeNoce v. Neff (In re Neff), 505 B.R. 255, 263-64 (9th Cir. BAP
2014)(“Statutes of repose are not concerned with plaintiff’s
28 continue...
-8-
1 raised in the Answer, it was not waived in the first instance.
2 Further, under Kontrick, because Mr. Alazzeh requested
3 adjudication of this affirmative defense well before a
4 determination on the merits, the bankruptcy court did not abuse
5 its discretion when it enforced the time bar by granting the
6 SJ Motion and dismissing the Complaint.
7 Mr. Shahrestani could not properly rely only on the
8 agreement of Mr. Alazzeh’s counsel to extend the Deadline. We
9 observe that the “agreement” can be read only to advise
10 Mr. Shahrestani that Mr. Alazzeh would stipulate to a motion
11 Mr. Shahrestani would present to the bankruptcy court to obtain
12 the requested extension of the Deadline. Thus his lawyer’s
13 concluding statement, “I await your proposed stipulation to
14 extend,” which left no doubt that something more was required
15 from Mr. Shahrestani to obtain the extension. That
16 Mr. Shahrestani’s counsel misinterpreted that sentence does not
17 translate into an abuse of discretion by the bankruptcy court in
18 refusing to deem a time bar affirmative defense waived.
19 VI. CONCLUSION
20 Mr. Shahrestani could not rely on Mr. Alazzeh’s agreement to
21 extend the § 727 complaint Deadline. Any such extension is
22
23 6
...continue
diligence; they are concerned with the defendant’s peace.”).
24
That mischaracterization does not change either our analysis or
25 the result. We interpret pro se pleadings liberally, and a time
bar defense was asserted in the Answer. We also note that in his
26 Second Affirmative Defense, Mr. Alazzeh asserted that
27 Mr. Shahrestani was estopped by his “own acts and omissions
occurring at all times relevant to this action” from obtaining
28 the relief sought in the Complaint.
-9-
1 dependent upon the bankuptcy court granting a motion filed prior
2 to the Deadline, for cause shown. Where Mr. Alazzeh
3 affirmatively raised the time bar defense in his Answer, the
4 bankruptcy court did not abuse its discretion in allowing him to
5 assert it through the SJ Motion, notwithstanding that the
6 SJ Motion was not filed until fifteen months after the Complaint
7 had been filed.
8 We AFFIRM.
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-10-