Matthew Jenkins v. James Ward, Sr.

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-1385
In re: MATTHEW ALAN JENKINS,
Debtor.
-----------------------------------------------
MATTHEW ALAN JENKINS, formerly doing business as Shephard
Service Company,
Plaintiff - Appellant,
v.
LINDA WRIGHT SIMPSON,
Appellee,
JAMES T. WARD, SR.,
Trustee - Appellee.
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte. Robert J. Conrad,
Jr., District Judge. (3:13-cv-00192-RJC)
Argued: March 24, 2015 Decided: April 27, 2015
Before MOTZ, KEENAN, and THACKER, Circuit Judges.
Reversed and remanded by published opinion. Judge Motz wrote
the opinion, in which Judge Keenan and Judge Thacker joined.
Beth Richardson, SOWELL, GRAY, STEPP, & LAFFITTE, LLC, Columbia,
South Carolina, for Appellant. Linda Wright Simpson, UNITED
STATES BANKRUPTCY COURT, Charlotte, North Carolina; A. Cotten
Wright, GRIER FURR & CRISP, PA, Charlotte, North Carolina, for
Appellees.
2
DIANA GRIBBON MOTZ, Circuit Judge:
After Matthew Alan Jenkins filed a voluntary petition for
relief under Chapter 7 of the Bankruptcy Code, the Trustee and
the Bankruptcy Administrator (collectively, “the Trustee”) filed
a complaint objecting to Jenkins’s discharge and then moved for
summary judgment. The bankruptcy court granted the motion and
entered an order denying the discharge. The district court
affirmed. Jenkins appeals, arguing that the Trustee’s complaint
should have been dismissed as untimely. For the reasons that
follow, we agree and so reverse and remand for further
proceedings consistent with this opinion.
I.
On April 11, 2012, acting pro se, Jenkins filed a petition
for Chapter 7 bankruptcy relief. In his Statement of Financial
Affairs, filed with the bankruptcy court on April 24, Jenkins
disclosed receipt of more than $235,000 in lawsuit proceeds in
the two years preceding the filing of his petition, but offered
no information as to the current status of those funds. On May
14, the Trustee convened a meeting of the creditors at which
Jenkins testified that the proceeds from the lawsuits had been
deposited into his wife’s bank account, an account to which he
admitted he had access, but of which he claimed not to be an
owner.
3
Citing Jenkins’s failure to provide necessary information,
as well as his general lack of cooperation, counsel for the
Trustee requested an extension of the deadline to file a
complaint objecting to Jenkins’s discharge. The Bankruptcy Code
permits a trustee to file such a complaint, 11 U.S.C.
§ 727(c)(1), but absent judicial permission, the Bankruptcy
Rules require that it be filed within 60 days after the first
date set for the creditors’ meeting. Fed. R. Bankr. P. 4004(a).
The bankruptcy court here granted the Trustee’s request and
extended the deadline to “sixty days beyond . . . whenever the
341 [creditors’] meeting is concluded.” J.A. 91. 1
The creditors’ meeting was then scheduled to reconvene on
July 11. Jenkins, however, neither responded to the Trustee’s
emails regarding the continuation date, nor attended the July 11
meeting. As a result, the bankruptcy court found Jenkins in
contempt. At the rescheduled creditors’ meeting on July 19,
Jenkins appeared by telephone and thus purged the contempt. But
1
References to J.A. refer to the Joint Appendix filed by
the parties in this appeal. The bankruptcy court followed its
oral grant of the motion with a text order that reiterated the
deadline had been extended, but set the new date at “sixty (60)
days after the meeting of creditors pursuant to 11 U.S.C. § 341
has been adjourned,” rather than concluded. J.A. 117 (emphasis
added). However, the parties agree that the bankruptcy court
erred in using the word “adjourned,” and that the court intended
the deadline to be sixty days beyond the meeting’s conclusion,
in accordance with the court’s oral announcement. See
Appellant’s Br. 3 n.1; Appellee’s Br. 14 n.16; Reply Br. 8 n.6.
4
he had still failed to provide the Trustee with some necessary
information by that date, and so, before ending the telephonic
meeting, counsel for the Trustee announced that she was “not
going to conclude the meeting today.” J.A. 471. Counsel
explained, “I am going to talk with the trustee and, if he
determines that we can adjourn the meeting, we will file a
notice of that, but officially the meeting is continued.” J.A.
471. No notice of a continued meeting was ever filed, nor did
the meeting ever reconvene.
On September 26, 2012, sixty-nine days after the July 19
creditors’ meeting, the Trustee filed a complaint, objecting to
Jenkins’s discharge in bankruptcy. Jenkins responded, asserting
that the Trustee’s complaint was “barred by the applicable
statute of limitations.” J.A. 161. The Trustee moved for
summary judgment, which the bankruptcy court granted. The court
found the Trustee’s complaint timely and denied Jenkins a
discharge.
Jenkins appealed to the district court, contending there,
as he does before us, that the bankruptcy court erred in finding
the Trustee’s complaint timely filed. The district court
disagreed and affirmed the judgment of the bankruptcy court.
Jenkins timely noted this appeal, and we have jurisdiction
pursuant to 28 U.S.C. § 158(d)(1). When considering “an appeal
from a bankruptcy proceeding, we apply the same standard of
5
review that the district court applied when it reviewed the
bankruptcy court’s decision.” In re Nieves, 648 F.3d 232, 237
(4th Cir. 2011) (per curiam). Thus, “[t]he legal conclusions of
both the district court and the bankruptcy court are reviewed de
novo and the factual findings of the bankruptcy court are
reviewed for clear error.” Id. 2
II.
The Bankruptcy Code provides that a bankruptcy court “shall
grant [a qualifying] debtor a discharge” of his debts, thereby
extinguishing creditors’ claims. 11 U.S.C. § 727(a) (emphasis
added). By “free[ing] the debtor from all debts existing at the
commencement of the bankruptcy proceedings” except those
exempted by statute, Kontrick v. Ryan, 540 U.S. 443, 447 (2004),
discharge provides the fresh start that is the hallmark of our
bankruptcy system.
Not all debtors qualify for such relief, however. Indeed,
the Code supplies “ample authority to deny the dishonest debtor
a discharge.” Law v. Siegel, 134 S. Ct. 1188, 1198 (2014)
(citing 11 U.S.C. §§ 727(a)(2)-(6)). Thus, “[t]he trustee, a
creditor, or the United States trustee may object to the
2
Though Jenkins represented himself before both the
bankruptcy court and the district court, we appointed counsel to
represent him before this court, a duty his appointed counsel
discharged ably.
6
granting of a discharge” by filing a complaint with the
bankruptcy court. 11 U.S.C. § 727(c)(1); see also Fed. R.
Bankr. P. 4004 (outlining procedure for objecting to discharge).
Ordinarily, such a complaint must “be filed no later than 60
days after the first date set for the meeting of creditors under
§ 341(a).” Id. at 4004(a). But “the court may,” as it did
here, “for cause extend the time to object” on motion of “any
party in interest.” Id. at 4004(b).
The consequence of missing the deadline to object is
severe. With respect to a Chapter 7 debtor, “on expiration of
the time[] fixed for objecting to discharge . . . the court
shall forthwith grant the discharge,” subject only to limited
exceptions not applicable here. Id. at 4004(c)(1).
Accordingly, because Jenkins challenges the denial of his
discharge on timeliness grounds only, a great deal hinges on the
resolution of that issue. 3 We must decide whether the Trustee
filed a timely objection; in doing so, we necessarily determine
3
The Trustee’s contention that Jenkins waived his
timeliness argument by failing to raise it before the bankruptcy
court is meritless. In Jenkins’s response to the Trustee’s
complaint, he averred that the complaint was “barred by the
applicable statute of limitations.” J.A. 161. Proceeding pro
se, Jenkins was entitled to a liberal construction of his
pleadings. See Jackson v. Lightsey, 775 F.3d 170, 178 (4th Cir.
2014). Under such a construction, Jenkins certainly preserved
the timeliness defense he now advances.
7
whether the claims of Jenkins’s creditors survive or are
extinguished.
But first, because the bankruptcy court established a
deadline of sixty days beyond the conclusion of the creditors’
meeting, we must determine when the creditors’ meeting
concluded. Unfortunately, neither the Bankruptcy Code nor the
Bankruptcy Rules expressly address this question. The Code, 11
U.S.C. § 341, mandates a creditors’ meeting and directs both its
content and its attendees. And Rule 2003 supplies the
procedures by which such a meeting must progress. But neither
instructs a trustee as to how to conclude a meeting, nor points
to any circumstances under which a meeting must be deemed
concluded. The parties offer competing contentions as to these
questions -- and thus as to the date when the sixty-day clock
began to run in this case.
On the one hand, the Trustee argues that “[t]he key date”
is not the date of the meeting’s conclusion at all, but rather
“the date that all parties to whom the Extension Order applied
received notice that the creditors’ meeting had concluded.”
Appellee’s Br. 18 (emphasis added). “Only then,” he argues,
“would the clock start ticking on the 60-day extended deadline
for discharge complaints.” Id. The Trustee waffles in
pinpointing this date, suggesting it might be either August 7,
2012, when the bankruptcy court entered a text order indicating
8
Jenkins had purged his contempt charge, or May 9, 2013, when the
Trustee himself filed a Notice of Conclusion. Id. at 19-20.
Either way, the Trustee maintains, he filed a complaint prior to
expiration of the 60-day period.
On the other hand, Jenkins maintains that the creditors’
meeting concluded on July 19, 2012, when the Trustee failed to
adjourn the meeting to a stated later date and time.
Appellant’s Br. 18. He contends that a meeting not properly
adjourned to a stated date and time, as specified in Rule
2003(e), must “[l]ogically” be concluded. Id. Accordingly,
Jenkins argues, the Trustee’s complaint should have been
dismissed as untimely.
III.
We agree with Jenkins and hold that the creditors’ meeting
concluded on July 19, 2012, and thus that the Trustee’s
objection to discharge was not timely.
We recognize of course that the Trustee did not intend to
conclude the meeting on July 19. To be sure, the Trustee’s
counsel could not have been more clear on that point. See J.A.
471 (“I am not going to conclude the meeting today. . . .
[O]fficially the meeting is continued.”). Moreover, the Trustee
was entitled to adjourn the meeting to a later date and time.
See Fed. R. Bankr. P. 2003(e) (providing that a creditors’
9
meeting may be “adjourned,” meaning continued). But the
Bankruptcy Rules supply clear procedures on how to do so, none
of which were followed here.
Rule 2003(e) provides, in its entirety: “The meeting may
be adjourned from time to time by announcement at the meeting of
the adjourned date and time. The presiding official shall
promptly file a statement specifying the date and time to which
the meeting is adjourned.” The presiding official in this case
neither announced an adjourned date and time, nor filed a
statement specifying as much. And the Trustee never sought to
rectify this omission and never attempted to reconvene the
creditors’ meeting after July 19. The meeting therefore
concluded on that date.
Arguing to the contrary, the Trustee asks us to consider
only whether “the trustee’s actions in continuing [the]
creditors’ meeting [were] reasonable and necessary to timely
move [the] case forward.” Appellee’s Br. 34-35. Under such an
approach, the Trustee would have us weigh several factors to
determine if his “delay in concluding the meeting of the
creditors” was justifiable. Id. at 34 (emphasis added). But
this formulation fatally relies on the validity of its own
premise -- i.e., that the meeting’s conclusion was somehow
delayed beyond July 19, 2012. Accepting this formulation would
require us first to accept that the meeting was successfully
10
continued on that date rather than concluded. Thus, we cannot
even apply the Trustee’s proposed inquiry unless we agree that a
creditors’ meeting may be continued or adjourned sine die,
“[w]ith no day being assigned . . . for resumption of a
meeting.” See Black’s Law Dictionary (10th ed. 2014). Neither
the text of Rule 2003 nor the relevant case law supports such a
conclusion.
The history of the Rule offers some critical guidance.
Prior to 2011, Rule 2003(e) provided only that “[t]he meeting
may be adjourned from time to time by announcement at the
meeting of the adjourned date and time without further written
notice.” Fed. R. Bankr. P. 2003(e) (2010) (emphasis added).
But the Rule was amended in 2011 to eliminate the phrase
“without further written notice,” and to add the requirement
that “[t]he presiding official shall promptly file a statement
specifying the date and time to which the meeting is adjourned.”
Fed. R. Bankr. P. 2003(e) (current version).
The Rule now speaks in terms that are plainly mandatory --
“the presiding official shall promptly file a statement.” Id.
(emphasis added). This language prohibits the practice of
adjournment sine die. As one leading treatise has noted, the
provision added by the 2011 amendment “is designed to prevent
indefinite adjournment.” 9 Collier on Bankruptcy ¶ 2003.05 n.3
(Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2014); see
11
also id. ¶ 2003.05 (“The trustee may not indefinitely continue a
meeting of creditors.”). To follow the Trustee’s approach would
require us to ignore this prohibition and hold that the Trustee
could do precisely what the Rule seeks to prevent.
Nor, contrary to the Trustee’s contention, does precedent
compel his conclusion. In fact, except in the case at hand, it
appears that no court has both ordered that the deadline for a
creditor’s objection to discharge run from the conclusion of the
creditors’ meeting and then considered whether a complaint met
that deadline.
That being said, we are not entirely without guidance from
case law. Just as the Bankruptcy Rules limit the time in which
objections to discharge may be filed, so too do they limit the
time in which a “party in interest” may object to the “list of
property that the debtor claims as exempt” under 11 U.S.C.
§ 522(l). But unlike objections to discharge, for which the
limitations period ordinarily runs from the beginning of the
meeting, objections to exemptions must be filed “within 30 days
after the meeting of creditors . . . is concluded.” Fed. R.
Bankr. P. 4003(b)(1) (emphasis added). Thus, because the
Bankruptcy Judge in this case extended the filing of objections
to discharge to 60 days after the creditors’ meeting was
concluded, the conclusion of the creditors’ meeting starts the
clock for objections to discharge here just as it starts the
12
clock for filing objections to exemptions in the normal course
under Rule 4003(b)(1). And a few trial courts, along with two
of our sister circuits, have considered -- in evaluating the
timeliness of an objection to exemptions -- when a creditors’
meeting is concluded. Compare In re Peres, 530 F.3d 375, 378
(5th Cir. 2008) (meeting adjourned sine die not necessarily
concluded), with In re Smith, 235 F.3d 472, 476-77 (9th Cir.
2000) (meeting concluded unless adjourned to a stated date and
time); see also In re Newman, 428 B.R. 257, 264 (B.A.P. 1st Cir.
2010) (declining to decide between Ninth and Fifth Circuits’
approaches); In re Dutkiewicz, 408 B.R. 103, 110 (B.A.P. 6th
Cir. 2009) (same). It is from this body of case law that the
Trustee mines his approach.
Specifically, the Trustee leans heavily on the methodology
outlined in In re Peres, where the creditors’ meeting was
“continued without a formal announcement as to the date of
continuation” and reconvened eleven months later over the
debtors’ objection. 530 F.3d at 376. The debtors argued that
the failure to announce a continued date within thirty days
meant the meeting had been concluded. Id. at 377. The Fifth
Circuit rejected that argument, holding instead “that § 341(a)
creditors’ meetings adjourned indefinitely are not concluded,
and therefore do not trigger the thirty day deadline” under Rule
4003(b)(1). Id. at 377-78. The court adopted a “case-by-case
13
approach,” under which it looked to four factors to “determine
whether any delay in reconvening the meeting was reasonable.”
Id. at 378. 4 The Trustee argues that we should adopt In re Peres
as the blueprint for determining when the creditors’ meeting was
concluded here. We see two difficulties with adopting this
approach.
First, in In re Peres, the trustee reconvened the meeting
after the adjournment sine die. Thus, the chronology facing the
court included (1) a creditors’ meeting continued without an
adjournment date, followed by (2) an eleven-month break,
followed by (3) another creditors’ meeting. The court’s task
was to decide which of those two meeting dates marked the
official conclusion of the creditor’s meeting. It held that an
11-month hiatus was reasonable and that the meeting did not
conclude until the latter date. Id. at 378. Here, by contrast,
the creditors’ meeting never reconvened following the attempted
adjournment on July 19. We cannot “determine whether any delay
in reconvening the meeting was reasonable,” id., when the
meeting was never reconvened. There seems to us a significant
difference in holding that a creditors’ meeting concluded on the
4
The four factors governing this approach are: “(1) the
length of the delay; (2) the complexity of the estate; (3) the
cooperativeness of the debtor; and (4) the existence of any
ambiguity regarding whether the trustee continued or concluded
the meeting.” In re Peres, 530 F.3d at 378.
14
final date the trustee convened the creditors, as in In re
Peres, and holding, as the Trustee would have us do here, that
the meeting concluded at some point after that date, when no
meeting was scheduled and no creditors were convened. 5
The second, and perhaps even more striking, problem with
following the In re Peres approach is that the court there
interpreted the pre-2011 version of Rule 2003(e). In the
absence of the clear prohibition the amendment imposed, the In
re Peres court sought merely to “restrain[]” the trustee’s
“ability to indefinitely postpone a meeting of the creditors”
through its four-factor balancing test. 530 F.3d at 378
(emphasis added). In 2011, the Rules Committee went further:
it eliminated that ability altogether. Although the Trustee
claims that “decisions since the amendment to Rule 2003(e)
support application of the case-by-case approach,” Appellee’s
Br. 31, in fact he can cite only one post-2011 case that stops
short of explicitly rejecting the approach followed in In re
Peres. See In re PMC Mktg. Corp., 482 B.R. 74, 80 (Bankr.
5
Perhaps in recognition of this problem, the Trustee
maintains that the focus of the case-by-case approach is whether
a delay in concluding, rather than in reconvening, a meeting was
reasonable. See Appellee’s Br. 34. But this slight pivot
constitutes an attempt to mask a fundamental difference in the
analysis. By asking us to consider whether he was reasonable in
delaying the meeting’s conclusion beyond July 19, the Trustee
suggests that a creditors’ meeting may conclude at some point
other than when the meeting’s attendees are convened. That is
not a possibility the Fifth Circuit considered in In re Peres.
15
D.P.R. 2012) (applying both the case-by-case approach and the
alternative bright-line approach, to identical effect). And
even that case recognizes that the amendment “required trustee’s
[sic.] to take formal steps to effectuate a continuance[,] . . .
thereby eliminating the use of the term sine die.” Id.
Moreover, we note that the only other court squarely to consider
the issue since Rule 2003(e) was amended has unambiguously
rejected the case-by-case approach. See In re Vierstra, 490
B.R. 146, 151 (Bankr. D. Mass. 2013) (amendment to Rule 2003(e)
“inexorably leads” to conclusion that case-by-case approach no
longer valid).
In sum, the Trustee asks us to ignore what was undeniably a
violation of Rule 2003(e). Though he attempted to adjourn the
creditors’ meeting on July 19, 2012, he failed either to
announce the date and time of the adjourned meeting or to file a
statement thereafter containing that information. Because Rule
2003(e) unambiguously requires these actions to effectuate an
adjournment, the meeting was never adjourned. And because the
meeting was never adjourned, we hold it was concluded.
IV.
Though we rule in Jenkins’s favor today, we stop short of
adopting the “bright-line approach” that he espouses and that
has emerged as an alternative to the case-by-case approach. The
16
bright-line approach dictates that “[t]he result of the failure
to adjourn a creditors’ meeting pursuant to Rule 2003(e) is the
[per se] conclusion of the creditors’ meeting.” Appellant’s Br.
22; see also In re Smith, 235 F.3d at 477.
We agree that the Trustee’s failure here yields that
result, but we hesitate to impose such a penalty for all
possible Rule 2003(e) violations. This strikes us as
particularly prudent given that neither the Code nor the
Bankruptcy Rules attach consequences to the failure to properly
adjourn a meeting. And because both the Code and the Rules are
replete with explicit consequences, we presume this
congressional silence to be intentional. See, e.g., Fed. R.
Bankr. P. 4004(c)(1) (consequence for the “expiration of the
times fixed for objecting to discharge” is the “grant[ing of]
the discharge”); 11 U.S.C. § 522(l) (consequence of failure to
object to property listed as exempt is declaration of the
property as exempt).
Moreover, administering Rule 2003(e) in the bright-line
fashion Jenkins suggests may lead to draconian -- and, we think,
unwise -- results. One can imagine, for instance, a trustee
failing to announce at the initial meeting the adjourned date
and time, but promptly thereafter filing written notice setting
forth that information. Though not in strict accordance with
Rule 2003(e)’s twin requirements, such action may not warrant an
17
automatic declaration of the meeting’s conclusion as of the date
of the improperly adjourned meeting. We see no upside to
hamstringing future courts that may reasonably find a trustee
substantially complied with Rule 2003(e). 6
Nothing, however, dissuades us from our holding that this
is not such a case. The Trustee made no attempt to comply with
any part of Rule 2003(e), and made no effort to reconvene the
meeting he claims he merely adjourned. Instead, the Trustee
asks us to hold that the meeting concluded not when the
meeting’s attendees were last convened, but at some later point
marked only by a docket entry. Such a holding would stretch the
language of Rule 2003(e) too far.
The Trustee had ample tools to avoid this result. He could
have properly adjourned the meeting on July 19, or he could have
timely filed the complaint a mere nine days earlier. At base,
this is a case of failure to meet a deadline. And although,
especially in bankruptcy, deadlines may produce “unwelcome
results,” they also “produce finality” by “prompt[ing] parties
6
In addition, bankruptcy courts of course retain “equitable
powers” that may “be exercised within the confines of the
Bankruptcy Code.” Siegel, 134 S. Ct. at 1194 (internal
quotation marks and citations omitted). Given this latitude, a
bankruptcy court may also conclude that extraordinary
circumstances excuse a failure to comply with Rule 2003(e), thus
precluding a declaration of the meeting’s conclusion. Such
instances will be rare, however, given that compliance with Rule
2003(e) requires very little and is entirely within the
trustee’s control.
18
to act.” Taylor v. Freeland & Kronz, 503 U.S. 638, 644 (1992).
When parties fail to heed the warnings inherent in deadlines,
their interests must often yield, as the Trustee’s do here, to
the virtue of such finality. 7
V.
For the foregoing reasons, the judgment of the district
court is reversed and the case is remanded for further
proceedings consistent with this opinion.
REVERSED AND REMANDED
7
The Trustee contends that even if his complaint was not
timely, we should “sua sponte deny entry of discharge.”
Appellee’s Br. 39. The Bankruptcy Rules, however, provide that,
“[i]n a chapter 7 case, on expiration of the times fixed for
objecting to discharge . . . the court shall forthwith grant the
discharge.” Fed. R. Bankr. P. 4004(c)(1) (emphasis added). To
be sure, exceptions to this automatic discharge exist, see Fed.
R. Bankr. P. 4004(c)(1)(A)-(L), but the Trustee does not argue
that any of these exceptions apply here. Rather, he asserts
that Rule 4004(c)(1) conflicts with the Bankruptcy Code, a clash
in which “the Bankruptcy Code prevails.” Appellee’s Br. 40.
But, in fact, Rule 4004(c)(1) entirely accords with the Code.
In 11 U.S.C. § 727(a), the Code provides a number of scenarios
under which a debtor is ineligible for discharge, and in
§ 727(c)(1), empowers the trustee to object to discharge on
those grounds. Rule 4004(c)(1) reflects the judgment that once
the trustee’s opportunity to object has passed, the discharge
will be granted even if a timely objection might have been
successful. The Trustee argues that this notion offends “[t]he
frequently cited purpose of bankruptcy . . . to afford [only]
the honest but unfortunate debtor . . . a fresh start.”
Appellee’s Br. 40 (quotation marks and citation omitted). Not
so. Rather, this result balances such worthy aims against the
equally critical need for efficiency and finality in the
administration of bankruptcy estates.
19