Bankr. L. Rep. P 75,449 in Re Tim Themy, Dba Brinecell Manufacturing Co., Debtor. Tim Themy, Dba Brinecell Manufacturing Co. v. Jason Yu, 6 F.3d 688, 10th Cir. (1993)
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Scribd Government DocsBankr. L. Rep. P 75,449 in Re Tim Themy, Dba Brinecell Manufacturing Co., Debtor. Tim Themy, Dba Brinecell Manufacturing Co. v. Jason Yu, 6 F.3d 688, 10th Cir. (1993)
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3d 688
Bankr. L. Rep. P 75,449
In re Tim THEMY, dba Brinecell Manufacturing Co., Debtor.
Tim THEMY, dba Brinecell Manufacturing Co., Appellant,
v.
Jason YU, Appellee.
No. 93-4020.
United States Court of Appeals,
Tenth Circuit.
Sept. 16, 1993.
1
David E. Leta and Jeffrey T. Sivertsen of Snell & Wilmer, Salt Lake City, UT,
for appellant.
J. Thomas Bowen of Tanner, Bowen & Williams, Salt Lake City, UT, for
appellee.
Before BALDOCK and KELLY, Circuit Judges, and CAUTHRON,* District
Judge.
CAUTHRON, District Judge.
Debtor-appellant Tim Themy appeals the district court order affirming the
bankruptcy court's denial of his motion to dismiss. Because the bankruptcy
court was within its authority to accept the creditor's out-of-time complaint, we
affirm.1
Tim Themy, acting pro se, filed a petition for relief under Chapter 7 of the
Bankruptcy Code on September 17, 1990. The bankruptcy court issued a notice
setting the Sec. 341 meeting of creditors for October 22, 1990, and setting
December 21, 1990, as the deadline for filing objections to the debtor's
discharge under 11 U.S.C. Sec. 727, and for filing complaints challenging the
dischargeability of a debt under 11 U.S.C. Sec. 523. The notice was in the form
of a court order, issued over the typed name "John H. Allen, Bankruptcy
Judge." R.I., at 1.
Creditor Jason Yu received the court's notice, and his attorney attended the
October 22, 1990 meeting of creditors. This meeting was continued to permit
Themy's newly retained counsel to file amended schedules.
The bankruptcy court sent out a second notice, advising creditors of the
continued meeting, and setting February 15, 1991, as the deadline for filing
complaints under Secs. 523 and 727. The notice was again in the form of a
court order, bearing the bankruptcy judge's name. On February 14, 1991,
creditor Yu filed a complaint against Themy seeking to have his debt deemed
nondischargeable and seeking to deny Themy's discharge.
Themy filed a motion to dismiss, arguing that because the complaint was filed
beyond the mandatory sixty-day time limit set by Bankr.R. 4004(a) and
4007(c), and because no motion to extend the deadline had been made, the
bankruptcy court was without jurisdiction to determine the complaint. The
bankruptcy court denied the motion to dismiss, holding that a creditor is
entitled to rely on information sent out by the clerk's office even though it is
contrary to the rules when it leads him to defer action otherwise required. The
district court affirmed, holding that if it were error to send the second notice,
the bankruptcy court had authority to correct its own error and, in fact, was
required to do so. This appeal followed.
10
The legal conclusions of the bankruptcy court are subject to de novo review.
Rowe Int'l, Inc. v. Herd (In re Herd), 840 F.2d 757, 759 (10th Cir.1988). We
are bound by the bankruptcy court's factual findings, however, unless they are
clearly erroneous. Id.
11
Rules 4004(a) and 4007(c) set a strict sixty-day time limit within which a
creditor may dispute the discharge of the debtor and the dischargeability of
debts. Rules 4004(b) and 4007(c) provide that this deadline may only be
extended for cause, after a hearing, if a motion is made before expiration of the
sixty days. Finally, Rule 9006(b)(3) provides that a "court may enlarge the time
for taking action under Rules ... 4004(a) [and] 4007(c) ... only to the extent and
under the conditions stated in those rules." Together, these rules prohibit a
court from sua sponte extending the time in which to file dischargeability
complaints. SeeAnwiler v. Patchett (In re Anwiler), 958 F.2d 925, 927 (9th
Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 236, 121 L.Ed.2d 171 (1992). This
circuit has strictly construed such deadlines, holding that a Chapter 7 creditor
with actual notice of a bankruptcy is bound by the sixty-day limit even if no
formal notice of the deadline is received. SeeWalker v. Wilde (In re Walker),
927 F.2d 1138, 1145 (10th Cir.1991); Yukon Self Storage Fund v. Green (In re
Green), 876 F.2d 854, 857 (10th Cir.1989).
12
The bankruptcy court's acceptance of Yu's complaint, however, was not a sua
sponte extension of the deadline, but was an exercise of the court's authority to
correct its own errors. A court has the inherent equitable power to correct its
own mistakes. See, e.g.,Allied Materials Corp. v. Superior Prods. Co., 620 F.2d
224, 226 (10th Cir.1980); Jusino v. Zayas, 875 F.2d 986, 989 n. 3 (1st
Cir.1989). The court's equity powers are recognized in 11 U.S.C. Sec. 105(a),
which provides:
13
The court may issue any order, process, or judgment that is necessary or
appropriate to carry out the provisions of this title. No provision of this title
providing for the raising of an issue by a party in interest shall be construed to
preclude the court from, sua sponte, taking any action or making any
determination necessary or appropriate to enforce or implement court orders or
rules, or to prevent an abuse of process.
14
SeeIn re Anwiler, 958 F.2d at 929 ("The equitable power given to courts by 11
U.S.C. Sec. 105(a) would be meaningless if courts were unable to correct their
own mistakes."); cf.Sheftelman v. Standard Metals Corp., 839 F.2d 1383, 138687 (10th Cir.1987) (holding that bankruptcy court should have used "its equity
powers and general powers (Section 105 of the Code)" to ensure that all
creditors would have an opportunity to present their claims), cert. dismissed,
488 U.S. 881, 109 S.Ct. 201, 102 L.Ed.2d 171 (1988).
15
Although the provisions of Rules 4004 and 4007 are strictly enforced, courts
have almost uniformly allowed an out-of-time filing when the creditor relies
upon a bankruptcy court notice setting an incorrect deadline. For example, in
Francis v. Riso (In re Riso), 57 B.R. 789 (D.N.H.1986), the bankruptcy court
had issued a second order setting the deadline more than a month after the
statutory period expired. The district court affirmed the bankruptcy court's use
of its equitable powers to allow a late filing, holding that "[i]f the equitable
power of the bankruptcy court [were] not invoked, an injustice [would] occur
and [the creditor would] lose his right to object because of his reliance on error
made by the bankruptcy court." Id. at 793. The court emphasized that it was not
creating a new substantive right, but was merely allowing the creditor to
exercise rights already existing. Id.
16
In In re Anwiler, the Ninth Circuit surveyed the cases considering this issue and
concluded that when a second notice is issued by the court with jurisdiction
over a bankruptcy case, the creditors may reasonably believe that it is
operative, requiring an exercise of the court's equitable powers to permit an
untimely filing. 958 F.2d at 929; see alsoOak Hollow South Assocs. v. Cortes
(In re Cortes), 125 B.R. 418, 420-21 (E.D.Pa.1991); Dwyer v. Hershkovitz (In
re Hershkovitz), 101 B.R. 816, 819 (Bankr.N.D.Ga.1989); Brown v. Silbey (In
re Sibley), 71 B.R. 147, 149 (Bankr.D.Mass.1987). But seeP.S.T.C. Employees
Fed. Credit Union v. Kearney (In re Kearney), 105 B.R. 260, 263-65
(Bankr.E.D.Pa.1989).
17
We, too, have approved a late filing when a court exceeded its jurisdiction in
extending the time to file a Fed.R.Civ.P. 59(e) motion. In Stauber v. Kieser,
810 F.2d 1, 1-2 (10th Cir.1982), we held that there were "unique
circumstances" justifying the acceptance of an untimely appeal after the court's
purported extension of time led the parties to believe it was properly done and
induced their detrimental reliance. This was so despite the fact that a timely
notice of appeal is a jurisdictional requirement. See, e.g.Browder v. Director,
Dep't of Corrections, 434 U.S. 257, 264, 98 S.Ct. 556, 560, 54 L.Ed.2d 521
(1978).
18
Here, although the burden of protecting one's rights is ordinarily placed on the
creditor, e.g.,In re Walker, 927 F.2d at 1145, when the court's act affirmatively
misleads the creditor as to a deadline, the court bears responsibility for
correcting its error. A creditor should be entitled to rely on the court's orders.
For these reasons, we hold that the bankruptcy court was within its authority to
accept Mr. Yu's complaint after the sixty-day period expired.
19
The judgment of the United States District Court for the District of Utah is
AFFIRMED.
Honorable Robin J. Cauthron, District Judge, United States District Court for
the Western District of Oklahoma, sitting by designation
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination
of this appeal. See Fed.R.App.P. 34(a); 10th Cir.R. 34.1.9. The case is therefore
ordered submitted without oral argument
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