In re Allezeh 4.11.14

Case: In re Allezeh

Summary: Agreement between parties to extend the deadline for filing a complaint objecting to discharge under 11 U.S.C. 727 insufficient where Debtor later uses time bar as an affirmative defense.  Such deadline can only be extended by the court upon a motion by a party in interest.

 Material and Procedural Facts: 
Debtor assumed a promissory note to Creditor in the amount of $140,000.00.  Debtor defaulted, and Creditor obtained a judgment against Debtor in state court.  Debtor later filed for Chapter 7.  The 341(a) meeting was set for December 6, 2011, giving a rule Rule 4004(a) deadline of February 6, 2012 for any Complaint to be filed objecting to Debtor's discharge.  The 341 meeting was held as scheduled, but thereafter continued to January 19, 2012 and then to February 21, 2012.

On January 20, 2012 Creditor's attorney began an email correspondence with Debtor's attorney to extend the deadline to file a complaint.  Debtor's attorney agreed to extend the deadline from February 6, 2012 to February 28, 2012.  On February 24, 2012 Creditor filed the Complaint, seeking denial of Debtor's discharge under various provisions of 727.  Debtor's answer was filed March 21, 2012 which alleged, among other things, that Creditor's claims were barred "by the applicable statute of limitations."

After failed settlement attempts and extensive discovery thereafter, Debtor filed a motion for Summary Judgment on May 20, 2013, asserting that all of Creditor's claims were statutorily barred by the Rule 4004(a) time limits.  Creditor opposed on the basis of the previous agreement between Debtor and Creditor extending the time to file.  The Bankruptcy court granted the summary judgment motion, noting that no motion asking the court to extend the time had ever been filed, as required by Rule 4004(b).

Creditor appealed, arguing: 1) The complaint was timely, considering the agreement of the parties, and 2) Debtor had essentially waived a time bar as an affirmative defense by agreeing to the extension and waiting until fifteen months after the Complaint had been filed to enforce the original deadline.

The BAP Held:

1) Agreement between the parties is not enough: Rule 9006(b) governs requests for extensions of time.  Under Rule 9006(b), extensions of time limits placed by Rule 4004(a) (in this case 60 days from the 341 meeting) can only be given by the court "on motion of any party in interest."  No such motion was ever filed here, and so the agreement between the parties was not enough to allow the extension agreed to.

2) Debtor timely asserted his affirmative defense:  Assertion of a time bar constitutes an affirmative defense under FRCP 8(c), applied to bankruptcy adversary proceedings under Rule 7008(a). Such a defense must be raised in an answer or be deemed waived.  Further, such defenses may "linger", so long as they are raised before a decision is reached on the merits, under Kontrick v Ryan.  Debtor here first raised a time bar as a defense in Debtor's original answer when Debtor alleged that that Creditor's claims were barred "by the applicable statute of limitations."

Interesting:

At the time of Debtor's answer, Debtor was acting in pro per.  The statute of limitations language, was, in BAP's description, part of a "boilerplate laundry list... of affirmative defenses."  Unclear what significance this has, and perhaps it's just common sense, but this decision seems to equate the rule 4004 time restrictions regarding 727 objections to discharge as equivalent to a statute of limitations.  The decision at least seems to hold that even a generalized allegation of a time bar using the language "applicable statute of limitations" will suffice to preserve just about any time bar as an affirmative defense.