In re: Michael Franzese

FILED
JUL 02 2013
1
SUSAN M SPRAUL, CLERK
U.S. BKCY. APP. PANEL
2 OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL
4 OF THE NINTH CIRCUIT
5
6 In re: ) BAP No. CC-12-1360-DKiPa
)
7 MICHAEL FRANZESE, ) Bk. No. 11-25169-CB
)
8 Debtor. ) Adv. No. 12 -AP-01169-CB
______________________________)
9 )
IRWIN A. MANDEL, )
10 )
Appellant, )
11 )
v. ) M E M O R A N D U M1
12 )
MICHAEL FRANZESE, )
13 )
Appellee. )
14 ______________________________)
15 Argued and Submitted on June 20, 2013
at Pasadena, California
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Filed - July 2, 2013
17
Appeal from the United States Bankruptcy Court
18 for the Central District of California
19 Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding
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Appearances: David L. Speckman, Esq. appeared and argued
21 for Appellant Irwin A. Mandel.
22
23 Before: DUNN, KIRSCHER, and PAPPAS, Bankruptcy Judges.
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 Appellant Irvin Mandel (“Mandel”) appeals the order
2 (“Dismissal Order”) dismissing his exception to discharge
3 adversary proceeding against the debtor appellee Michael Franzese
4 (“Debtor”) as untimely filed. We AFFIRM.
5 I. FACTUAL BACKGROUND
6 The relevant background facts in this appeal are not in
7 dispute.
8 Before the Debtor’s bankruptcy filing, Mandel had obtained a
9 fraud judgment in the San Diego Superior Court (“State Court
10 Judgment”) against the Debtor by default, supported by fact
11 findings made after a prove up hearing on May 6, 2011. The State
12 Court Judgment is final and not appealable.
13 The Debtor filed for relief under chapter 7 of the
14 Bankruptcy Code2 on October 31, 2011. In the notice (“Notice”)
15 of the Debtor’s bankruptcy filing sent to all scheduled
16 creditors, interested parties were advised in bold-faced type
17 that the deadline to “Object to Debtor’s Discharge or to
18 Challenge Dischargeability of Certain Debts” was February 13,
19 2012.
20 It is not clear from the record exactly when Mandel and his
21 counsel became aware of the Debtor’s bankruptcy. However, by
22 letter dated January 16, 2012, Mandel’s counsel responded to a
23 letter dated January 10, 2012, from the Debtor’s counsel advising
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.”
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1 of the Debtor’s bankruptcy filing.
2 The § 341(a) meeting in the Debtor’s chapter 7 case was
3 originally scheduled for December 15, 2011, but it apparently was
4 continued a number of times based on the Debtor’s nonappearance.
5 Mandel’s counsel did not attend the initially scheduled § 341(a)
6 meeting, but he attended “a number of those which had been
7 continued.”
8 On January 25, 2011, the duly appointed trustee (“Trustee”)
9 in the Debtor’s bankruptcy case and Debtor’s counsel entered into
10 a stipulation (“Original Stipulation”), apparently prepared by
11 Debtor’s counsel, to extend the deadline for the Trustee to
12 object to the Debtor’s discharge to April 13, 2012. The
13 substance of the Original Stipulation reads as follows:
14 The deadline for filing either a complaint objecting to
the debtor’s discharge under 11 U.S.C. §727 and
15 11 U.S.C. §523 or a motion to dismiss under §727(b)(3)
[sic] by the chapter 7 trustee currently set for
16 February 13, 2012 is extended up to April 13, 2012.
(Emphasis added.)
17
18 On April 10, 2012, the bankruptcy court entered an order
19 titled “Order Approving Stipulation to Extend Deadlin[e] for the
20 Chapter 7 Trustee to file a Complaint, an Objection to Discharge,
21 or a Motion to Dismiss” (“Extension Order”). The Extension Order
22 in its entirety reads as follows:
23 A stipulation to continue extend [sic] the deadlines
described in the above-caption was filed January 25,
24 2012 as docket number 10.
IT IS ORDERED
25 The stipulation is approved and the deadline for filing
either a complaint objecting to the debtor’s discharge
26 under 11 U.S.C. § 727 and 11 U.S.C. § 523, or a motion
to dismiss under 11 U.S.C. § 727(b)(3) [sic] by the
27 chapter 7 trustee is extended up to and including
April 13, 2012. (Emphasis added.)
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1 The Trustee and Debtor’s counsel ultimately entered into two
2 further stipulations to extend the deadline for the Trustee to
3 object to the Debtor’s discharge, extending the deadline to
4 June 12, 2012, and further to August 13, 2012, respectively. On
5 June 18, 2012, the bankruptcy court entered an order approving
6 the later stipulation between the Trustee and Debtor’s counsel,
7 extending the deadline for the Trustee to object to the Debtor’s
8 discharge to August 13, 2012.
9 The Trustee filed a “no asset” report on July 11, 2012, and
10 the Debtor received his discharge on August 20, 2012.
11 In the meantime, Mandel filed a complaint (“Complaint”) to
12 except the State Court Judgment debt from the Debtor’s discharge
13 on April 12, 2012. On May 16, 2012, Debtor’s counsel filed a
14 Civil Rule 12(b)(6) motion to dismiss (“Motion to Dismiss”) the
15 Complaint as not timely filed under Rule 4007(c). Rule 4007(c)
16 generally requires that a complaint to except a debt from
17 discharge be filed “no later than 60 days after the first date
18 set for the meeting of creditors under § 341(a).” In the
19 Debtor’s case, as noted above, that deadline had been noticed as
20 February 13, 2012.
21 Mandel opposed the Motion to Dismiss, arguing that the
22 Extension Order misled Mandel and his counsel into believing that
23 the deadline to file exception to discharge claims had been
24 extended to April 13, 2012 for the benefit of all creditors.
25 The Debtor responded that the Extension Order was not confusing
26 or ambiguous and extended the § 523 claim deadline only as to the
27 Trustee.
28 The bankruptcy court heard the Motion to Dismiss on June 26,
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1 2012 (the “Hearing”). After hearing argument from counsel for
2 Mandel and the Debtor, the bankruptcy court noted that Mandel was
3 not a party to the Original Stipulation and found that “the fact
4 that the Trustee got a stipulation with the Debtor does not
5 translate to a stipulation with the creditors.” At the
6 conclusion of the Hearing, the bankruptcy court granted the
7 Motion to Dismiss.
8 The bankruptcy court entered an order dismissing Mandel’s
9 adversary proceeding on July 5, 2012. Mandel filed a timely
10 Notice of Appeal on July 6, 2012. Mandel filed an amended Notice
11 of Appeal on July 20, 2012, attaching a copy of the dismissal
12 order.
13 II. JURISDICTION
14 The bankruptcy court had jurisdiction under 28 U.S.C.
15 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C.
16 § 158.
17 III. ISSUE
18 Did the bankruptcy court err in dismissing Mandel’s
19 Complaint as untimely?3
20 IV. STANDARDS OF REVIEW
21 Interpretation of Rule 4007(c) is a legal question reviewed
22 de novo. Herndon v. De La Cruz (In re De La Cruz), 176 B.R. 19,
23 22 (9th Cir. BAP 1994). The application of equitable estoppel or
24 waiver principles likewise is a question of law reviewed de novo.
25 Valenzuela v. Kraft, Inc., 801 F.2d 1170, 1172 (9th Cir. 1986),
26
3
27 In Appellant’s Opening Brief, Mandel articulates six
separate issues, all of which revolve around and are encompassed
28 by the single issue stated above.
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1 amended and reh’g denied, 815 F.2d 570 (1987); Schunck v. Santos
2 (In re Santos), 112 B.R. 1001, 1004 (9th Cir. BAP 1990). De novo
3 review requires that we consider a matter afresh, as if no
4 decision had been rendered previously. United States v.
5 Silverman, 861 F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v.
6 Chaussee (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
7 Fact findings with respect to notice of bar dates and
8 extensions of bar dates are reviewed for clear error.
9 In re Buckman, 951 F.2d 204, 206 (9th Cir. 1991); In re De La
10 Cruz, 176 B.R. at 22. We must affirm the bankruptcy court’s
11 fact findings unless we conclude that they are “(1) ‘illogical,’
12 (2) ‘implausible,’ or (3) without ‘support in inferences that may
13 be drawn from the facts in the record.’” United States v.
14 Hinkson, 585 F.3d 1247, 1262 & n.20 (9th Cir. 2009) (en banc).
15 “Where there are two permissible views of the evidence, the fact
16 finder’s choice between them cannot be clearly erroneous.”
17 Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 574
18 (1985).
19 We review a bankruptcy court’s interpretation of its own
20 orders for abuse of discretion. Marciano v. Fahs
21 (In re Marciano), 459 B.R. 27, 35 (9th Cir. BAP 2011), aff’d,
22 Marciano v. Chapnick (In re Marciano), 708 F.3d 1123 (9th Cir.
23 2013). A bankruptcy court abuses its discretion if it applied
24 the wrong legal standard, or if its fact findings were illogical,
25 implausible or without any support in the record.
26 TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th
27 Cir. 2011).
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1 V. DISCUSSION
2 As noted above, with an exception not relevant in this
3 appeal, Rule 4007(c) provides that a complaint to except a debt
4 from a chapter 7 debtor’s discharge under § 523(c) must be filed
5 no later than 60 days after the first date set for the meeting of
6 creditors under § 341(a). In the Notice, that deadline date was
7 specified as February 13, 2012. Mandel missed that deadline.
8 The Complaint was not filed until April 12, 2012, almost two
9 months beyond the deadline date.
10 Mandel argues that his filing of the Complaint to initiate
11 his adversary proceeding against the Debtor beyond the
12 Rule 4007(c) deadline should be excused for a number of reasons.
13 First, he argues that application of the Rule 4007(c) deadline is
14 subject to the equitable defenses of estoppel and waiver as to
15 the Debtor, based on the Original Stipulation. The basis for
16 Mandel’s argument is that he was misled by the terms of the
17 Original Stipulation to conclude that the deadline for the
18 assertion of § 523 exception to discharge claims had been
19 extended to April 13, 2012. Since the Trustee would not be
20 asserting any § 523 claims, from the perspectives of Mandel and
21 his counsel, the extension of the § 523 deadline in the Original
22 Stipulation must apply to the entire creditor body.
23 We can see from the language of the Original Stipulation,
24 which apparently was prepared by Debtor’s counsel, as the name,
25 address and telephone number of Debtor’s counsel appear in the
26 upper left-hand corner of the Original Stipulation, how Mandel’s
27 counsel might have been confused or misled. The language of the
28 Original Stipulation is not a model of clarity and, indeed, is
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1 even inaccurate in its Bankruptcy Code references.4
2 However, Mandel’s argument does not deal effectively with
3 the problem of the Original Stipulation language referring only
4 to the “chapter 7 trustee.” If the deadline extension was meant
5 to apply to the entire creditor body, why include the limitation
6 “by the chapter 7 trustee” at all? Or why is there no reference
7 to creditors in addition to the Trustee? The bankruptcy court
8 concluded that the original stipulation only was binding between
9 the parties to the stipulation.
10 At worst, the language of the Original Stipulation can be
11 characterized as ambiguous, and if that is the case, authority
12 that binds us is not helpful to Mandel. This Panel considered
13 the potential application of equitable defenses, including
14 estoppel and waiver, to preclude strict application of a bar date
15 to an exception to discharge complaint in the published opinion
16 in In re Santos, 112 B.R. 1001 (9th Cir. BAP 1990). At the
17 outset, we note that Mandel did not explicitly raise either
18 waiver or equitable estoppel as defenses to the Motion to Dismiss
19 in his filed opposition or in argument at the Hearing. Issues
20 not raised in proceedings before the bankruptcy court generally
21 are not considered on appeal. See, e.g., El Paso v. Am. W.
22 Airlines, Inc. (In re Am. W. Airlines, Inc.), 217 F.3d 1161, 1165
23 (9th Cir. 2000) (“Absent exceptional circumstances, we generally
24
25
4
The Original Stipulation purports to extend the deadline
26 for the Trustee to file “a motion to dismiss under § 727(b)(3)
27 . . . .” Section 727(b) does not have any numbered subparts. A
proper reference would have been to the Trustee’s right to move
28 to dismiss under § 707(b)(3).
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1 will not consider arguments raised for the first time on appeal,
2 although we have discretion to do so.”).
3 We further note with respect to equitable estoppel, as
4 stated in Santos, that,
5 Equitable estoppel requires reasonable reliance on the
defendant’s words or conduct in forebearing from taking
6 the necessary action within the applicable limitations
period. A plaintiff cannot reasonably rely upon the
7 defendant’s representation that they would extend a
deadline when the applicable rules clearly provide that
8 a motion to extend the bar date must be filed prior to
the expiration of the bar date and only the court may
9 extend the deadline. (Emphasis added.)
10 In re Santos, 112 B.R. at 1007.
11 Rule 4007(c) provides that, “On motion of a party in
12 interest, after hearing on notice, the court may for cause extend
13 the time fixed under this subdivision. The motion shall be filed
14 before the time has expired.” No such motion was filed by Mandel
15 before February 13, 2012, and the bankruptcy court did not enter
16 the Extension Order until April 10, 2012, long after the original
17 deadline expired. On the record before us, Mandel does not meet
18 the “reasonable reliance” standard as stated in Santos for
19 application of equitable estoppel.
20 A “waiver” is the “intentional relinquishment or abandonment
21 of a known right.” United States v. Oliver, 507 U.S. 725, 733
22 (1933) (citations omitted). There is no evidence in the record
23 that the Debtor ever knowingly waived the application of the
24 Rule 4007(c) deadline as to any interested party other than the
25 Trustee. Accordingly, Mandel’s equitable estoppel and waiver
26 arguments based on the Original Stipulation lack merit.
27 Mandel’s primary argument to excuse the late filing of his
28 Complaint is that he was misled by the bankruptcy court’s
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1 Extension Order. There is Ninth Circuit authority for the
2 proposition that a party can be relieved from the adverse effects
3 of a missed bar date under “unique” or “extraordinary”
4 circumstances. See, e.g., Allred v. Kennerly (In re Kennerly),
5 995 F.2d 145, 147-48 (9th Cir. 1993). “In light of this court’s
6 statements in Slimick v. Silva (In re Slimick), 928 F.2d 310 (9th
7 Cir. 1990), the unique circumstances exception would appear to be
8 limited to situations where a court explicitly misleads a party.”
9 Id. at 148 (emphasis in original).
10 In Anwiler v. Patchett (In re Anwiler), 958 F.2d 925 (9th
11 Cir. 1992), the Ninth Circuit affirmed a decision of this Panel
12 excusing the filing of an exception to discharge and denial of
13 discharge complaint beyond the Rule 4007(c) deadline date noticed
14 in the first notice of § 341(a) meeting because the court had
15 sent a second notice of § 341(a) meeting date noticing a new,
16 later exception to discharge deadline date. “The intent behind
17 the rules is not circumvented by allowing an untimely complaint
18 to stand when a party relied on a court document sent before the
19 deadline had expired.” Id. at 929.
20 This appeal is distinguishable from In re Anwiler for the
21 following reasons. First, the Extension Order was entered
22 approximately fifty-six days after the Rule 4007(c) deadline date
23 (February 13, 2012) had passed. If Mandel or his counsel were
24 confused in advance of February 13, 2012 about whether the
25 Rule 4007(c) deadline had been extended as to all creditors, such
26 confusion could only have been created by the Original
27 Stipulation. It was Mandel’s obligation to file a motion to
28 clarify the impact of the Original Stipulation and/or request an
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1 extension of the Rule 4007(c) deadline before it expired. See
2 Rules 4004(b) and 4007(c). In fact, the Extension Order was
3 entered only two days before Mandel filed the Complaint. On this
4 record, the Extension Order could not have had any impact on
5 Mandel’s decision to wait to file his Complaint until after
6 February 13, 2012.
7 In addition, as we have discussed, Mandel emphasizes the
8 facts that both the Original Stipulation and the Extension Order
9 provided extensions of the § 523 exception to discharge deadline
10 as well as the § 727 denial of discharge deadline, and the
11 Trustee would not file any § 523 actions. See Appellant’s
12 Opening Brief at 9-10. At the Hearing, after being confronted
13 with this argument, the bankruptcy court noted that Mandel was
14 not a party to the Original Stipulation, and “the fact that the
15 Trustee got a stipulation with the Debtor does not translate to a
16 stipulation with the creditors.” The bankruptcy court also noted
17 that “the drop dead date for a 523 action is 60 days from the
18 first meeting of creditors,” as specified in Rule 4007(c). While
19 the bankruptcy court stated its authority for that deadline was
20 the Bankruptcy Code rather than Rule 4007(c), its statement of
21 the applicable legal rule was correct. The Extension Order
22 itself stated both in its title and in the body of the order that
23 it applied “for . . .[and] by the chapter 7 trustee.” It did not
24 grant any extension of the Rule 4007(c) deadline to, or even
25 refer to, the creditor body generally.
26 Based on the record before us in this appeal, we perceive no
27 abuse of discretion or clear error of the bankruptcy court in
28 granting the Motion to Dismiss.
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1 VI. CONCLUSION
2 Based on the foregoing analysis, we AFFIRM.
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