Duffy Petit v. Fessenden

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 95-1376

CATHERINE DUFFY PETIT,

Plaintiff, Appellant,

v.

PETER C. FESSENDEN, TRUSTEE, ET AL.,

Defendants, Appellees.

No. 95-1377

CATHERINE DUFFY PETIT,

Plaintiff, Appellant,

v.

PETER C. FESSENDEN, TRUSTEE, ET AL.,

Defendants, Appellees.

No. 95-1378

CATHERINE DUFFY PETIT,

Plaintiff, Appellant,

v.

PETER C. FESSENDEN, TRUSTEE, ET AL.,

Defendants, Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Gene Carter, U.S. District Judge]

Cyr, Circuit Judge,

Bownes, Senior Circuit Judge,

and Stahl, Circuit Judge.

Stephen F. Gordon, with whom Gordon & Wise was on brief for

appellant.
Peter C. Fessenden, with whom John G. Connor, Law Office of John

G. Connor, James F. Molleur, Woodman & Edmands, P.A., U. Charles

Remmel, II, Kelly, Remmel & Zimmerman and Mark S. O'Brien, Special

Assistant United States Attorney, were on brief for appellees.

April 3, 1996

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CYR, Circuit Judge. Plaintiff Catherine Duffy Petit,
CYR, Circuit Judge.

a chapter 11 debtor, appeals from a district court judgment

affirming a bankruptcy court order allowing the chapter 11

trustee to reconvene a meeting of creditors several months after

its indefinite adjournment, see Bankruptcy Code 341, 11 U.S.C.

341; Fed. R. Bankr. P. 2003, thereby purportedly recommencing

the 30-day limitation period within which a trustee may interpose

objections to an exemption claim made by the debtor. See Fed. R.

Bankr. P. 4003(b). We affirm.

I
I

BACKGROUND
BACKGROUND

In June 1993, creditors initiated an involuntary

chapter 7 proceeding against Petit in the United States Bankrupt-

cy Court for the District of Maine. The bankruptcy court entered

the order for relief under chapter 7 on December 10, 1993,

following its denial of Petit's motion to dismiss the involuntary

petition. See 11 U.S.C. 305(a). One week later, Petit filed a

motion to convert to chapter 11. See id. 348. At a hearing on

February 2, 1994, and over the objection of the petitioning

creditors, the bankruptcy court directed entry of an order for

relief under chapter 11, and took under advisement the appoint-

ment of a chapter 11 trustee.

Petit filed her statement of financial affairs

(Official Form 7) and schedules (Official Form 6), including

Schedule C (Property Claimed as Exempt), see id. 521(1), on

February 25, 1994, asserting a claim to certain exemptions

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prescribed under federal law, see id. 522(d)(11)(A) ("an award

under a crime victim's reparation law"); 522(d)(11)(D) ("pay-

ment[s], not to exceed $7500, on account of personal bodily

injury"). In Schedule B, Petit listed as an exempt asset, inter

alia, the entire anticipated proceeds from a pending state-court

action against Key Bank, having an estimated value in excess of

$25 million. On March 28, 1994, the order for relief under

chapter 11 was entered on the bankruptcy court docket.

The United States Trustee convened a meeting of credi-

tors on May 17, 1994. See id. 341; Fed. R. Bankr. P. 2003.

Before it ended, the meeting of creditors was "continued without

date" by the Assistant United States Trustee. On June 17, the

bankruptcy court approved the appointment of defendant-appellee

Peter Fessenden, Esquire, as the chapter 11 trustee. Two months

later, on August 22, Fessenden filed objections to the list of

property claimed as exempt by Petit, particularly her claim to

the anticipated proceeds from the pending legal action against

Key Bank. Petit responded that the objection was time-barred by

Fed. R. Bankr. P. 4003(b), because it was not filed until more

than 30 days after the "conclusion" of the meeting of creditors.

See Taylor v. Freeland & Kronz, 112 S. Ct. 1644, 1648-49 (1992).

Fessenden meanwhile sent a notice to creditors that the continued

meeting of creditors would be reconvened on October 20, thus

purportedly extending until at least 30 days after October 20

the time for filing any objection to the list of property

claimed exempt and rendering timely the objection filed by

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Fessenden on August 22.

Petit then sought to quash the notice reconvening the

meeting of creditors, contending in the alternative that (1)

Bankruptcy Code 341 permits only the United States Trustee or

an express "designee" and not an undesignated chapter 11

trustee to convene a meeting of creditors and that the United

States Trustee had objected to reconvening the meeting of credi-

tors scheduled by Fessenden; or (2) the 30-day deadline pre-

scribed in Bankruptcy Rule 4003(b) for objecting to an exemption

claim cannot be enlarged, citing the Supreme Court decision in

Taylor, 112 S. Ct. at 1648 ("[Rule 4003(b)] [d]eadlines may lead

to unwelcome results, but they prompt parties to act and produce

finality."). But cf. Mercer v. Monzack, 53 F.3d 1 (1st Cir.)

(distinguishing Taylor), petition for cert. filed, 64 U.S.L.W.

3439 (U.S. Dec. 12, 1995) (No. 95-970). Petit argued that

allowing trustees to circumvent Taylor, through the simple

expedient of routine, indefinite adjournments of meetings of

creditors, would deprive chapter 11 debtors of the benefit of the

very policies of repose and finality acknowledged by the Supreme

Court in Taylor. Petit urged, at the very least, that a meeting

of creditors adjourned without day be deemed "concluded" for

purposes of the Rule 4003(b) time-bar if, as here, the United

States Trustee (or chapter 11 trustee) fails to announce, within

30 days of the adjournment, a firm date for reconvening the

meeting of creditors. See In re Levitt, 137 B.R. 881 (Bankr. D.

Mass. 1992); infra note 2.

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The bankruptcy court first denied the motion to quash

the notice reconvening the continued meeting of creditors, then,

after it had been reconvened, ruled that the Fessenden objection

to Petit's exemption claim was not time-barred, In re Petit, 172

B.R. 706 (Bankr. D. Me. 1994) (Votolato, B.J.);1 Petit, 174 B.R.

868 (Bankr. D. Me. 1994) (Votolato, B.J.).2 The district court

1The bankruptcy court ruled that Fessenden possessed
unilateral authority to reconvene the meeting of creditors
because Bankruptcy Code 102(9) defines the term "United States
trustee" to include a "designee," the term "designee" is synony-
mous with the term "appointee," and the United States Trustee had
appointed Fessenden as the chapter 11 trustee. In light of our
holding, we need not resolve this question.

2The bankruptcy court sustained the objections on the
following grounds. First, it found In re Levitt inapposite

because the indefinite adjournment of the meeting of creditors by
the chapter 7 trustee in that case had been followed by an
unreasonable 15-month delay in reconvening the meeting. Treating

the "reasonableness" of any delay in reconvening a meeting of
creditors as a matter requiring case-by-case determination, the
bankruptcy court noted several factors which indicated that the
delay in this case was not unreasonable: (1) Fessenden did not
become the chapter 11 trustee until after the initial meeting of
creditors, in part because Petit, a "particularly litigious and
obstructionist" debtor, had opposed the appointment of a chapter
11 trustee; (2) the Fessenden appointment, which occurred the
same day the 30-day period prescribed in Bankruptcy Rule 4003(b)
expired, followed the unexpected withdrawal or disqualification
of other potential chapter 11 trustee candidates; (3) thus
Fessenden was relegated to the role of a mere "spectator" at the
initial May 17 meeting of creditors, and did not participate in
questioning Petit regarding her schedules; (4) the Assistant
United States Trustee had informed Petit at the initial meeting
of creditors that although it was unlikely the meeting of
creditors would be reconvened, "some special reason" might
require it; and (5) Fessenden filed objections to the Petit
exemption claims 66 days after his appointment.
On the merits, the bankruptcy court found the Petit exemp-
tion claims here at issue frivolous, for two reasons. First,

Maine law does not permit residents to elect the federal slate of
property exemptions, and Petit's contention that she was not a
Maine resident was found to be "farcical." Her real and personal
property was all located in Maine, where she also voted, received
her mail, and secured her driver's license. She adduced no

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affirmed. Petit v. Fessenden (In re Petit), 182 B.R. 59 (D. Me.

1995); Petit, 182 B.R. 57 (D. Me. 1995).

II
II

DISCUSSION
DISCUSSION

A. Standard of Review
A. Standard of Review

In a bankruptcy appeal, the conclusions of law made by

the district court are subject to plenary review; whereas the

facts found by the bankruptcy court are reviewed only for clear

error. See Indian Motocycle Assocs. III Ltd. Partnership v.

Massachusetts Hous. Fin. Agency (In re Indian Motocycle Assocs.

III Ltd. Partnership), 66 F.3d 1246, 1249 (1st Cir. 1995).

B. The Claim of Exemptions
B. The Claim of Exemptions

Although Petit renews on appeal most of the arguments

made below, we do not reach them, see Juniper Dev. Group v. Kahn

(In re Hemingway Transp.), 993 F.2d 915, 935 (1st Cir.) (court of

appeals may affirm on any ground established by the record,

whether or not raised or addressed in the bankruptcy court),

cert. denied, 114 S. Ct. 303 (1993), since she has not met the

first indispensable precondition to a valid claim of exemptions:

a timely claim of exemptions. See Fed. R. App. P. 11(a); Byrd

concrete evidence that she had resided in Massachusetts for 180
days prior to the involuntary chapter 7 petition. Second, even
if Petit had been permitted by Maine law to claim the federal
exemptions, she had not established that the pending lawsuit
against Key Bank involved a claim arising "under a crime victim's
reparation law," see 11 U.S.C. 522(d)(11)(A), or for "pay-

ment[s] . . . on account of personal bodily injury," see id.

522(d)(11)(D). Further, Petit had not claimed these exemptions
under 522(d) (11)(E) (compensation for "loss of future earn-
ings") because Schedule C did not cite to 522(d)(11)(E).

7

v. Ronayne, 61 F.3d 1026, 1029 n.4 (1st Cir. 1995) (appellant

must include in appellate record all materials essential to

appellate claim).

A debtor must list the property claimed as exempt under

Bankruptcy Code 522 within the applicable time limit prescribed

in Bankruptcy Rule 1007. See Fed. R. Bankr. P. 4003(a). An

alleged debtor in an involuntary case must file schedules,

including any Schedule C Property Claimed as Exempt, "within

15 days after the entry of the order of relief." Fed. R. Bankr.

P. 1007(c). Schedules duly filed in a chapter 7 case are "deemed

filed in a superseding case unless the court directs otherwise."

Id. Any extension of the filing deadlines prescribed by Bank-

ruptcy Rule 1007(c) "may be granted only on motion for cause

shown and on notice to the United States trustee and to any

committee elected pursuant to 705 or appointed pursuant to

1102 of the Code, trustee, examiner, or other party as the court

may direct." Id.; see also Fed. R. Bankr. P. 9006(b)(1)

(imposing a heightened showing of "excusable neglect" where the

motion to extend the time for filing is made after the expiration

of the original 15-day filing period).

Petit filed no schedules until February 25, 1994,

despite the fact that the order for relief under chapter 7 had

been entered on December 10, 1993, which meant that her schedules

were due not later than December 26, 1993, absent a timely motion

to extend the filing period for cause shown or excusable neglect.

Nonetheless, no request to extend the filing time was ever made

8

pursuant to Bankruptcy Rule 1007(c). See, e.g., Bryant v. Smith,

165 B.R. 176, 181-82 (W.D. Va. 1994) ("The court finds that

untimely filed schedules waive a debtor's exemption unless the

untimely filing is permitted by the bankruptcy judge in his

discretion for cause shown or excusable neglect.").

During the 15-day window allowed under Bankruptcy Rule

1007(c), Petit did file a motion to convert the chapter 7 case to

chapter 11, but this motion neither excused the failure to comply

with Bankruptcy Rule 1007(c), nor tolled the 15-day filing

period. Finally, the automatic "deeming" provision in Bankruptcy

Rule 1007(c), see supra p. 8, can afford no refuge since no

chapter 7 schedules were ever filed. Nor did the chapter 11

schedules eventually filed by Petit cure her procedural default.

First, although an order of conversion constitutes an

"order for relief" under the chapter to which the case is con-

verted, see 11 U.S.C. 348(a), it "does not effect a change in

the date of . . . the order for relief." That is to say, "[s]ec-

tion 348(a) provides that 'those provisions of the Code which are

keyed to the date of entry of the order for relief for their

operation are unaffected . . . by conversion.'" F & M Marquette

Nat'l Bank v. Richards, 780 F.2d 24, 25 (8th Cir. 1985) (quoting

2 Lawrence P. King, Collier on Bankruptcy 348.02 (15th ed.

1979)); see Schwartz v. Jetronic Indus., Inc. (In re Harry Levin,

Inc.), 175 B.R. 560, 570 (Bankr. E.D. Pa. 1994); Leydet v. Leydet

(In re Leydet), 150 B.R. 641, 642 (Bankr. E.D. Va. 1993). Since

9

the time limits prescribed in Bankruptcy Rules 1007(c) and

4003(a) are keyed to the date of the order for relief, which had

already been entered on December 10, 1993, the order of conver-

sion could not effect an automatic extension of the 15-day

deadline (December 26, 1993) for filing schedules.

Second, Petit inexplicably made matters more problemat-

ic by disregarding a ready opportunity, and her clear responsi-

bility, to cure the procedural default by complying with an

explicit bankruptcy court order directing her to file chapter 11

schedules not later than February 23, 1994. See Fed. R. Bankr.

P. 9006(b), (c). Instead, Petit failed to file the required

chapter 11 schedules until February 25, two days beyond the

deadline. Thus, Petit's chapter 11 schedules were time-barred

even viewed in the most favorable light, without regard to her

failure to notify the United States Trustee of her intention to

request an extension under Rule 4003(a) or to allege or demon-

strate either excusable neglect or good cause. See Fed. R.

Bankr. P. 1007(c), 9006(b)(1).

The Taylor Court recognized that a debtor should not be

indefinitely or unreasonably delayed in reacquiring property

while the trustee or creditors ponder whether or not to lodge

objections to a claim of exemptions. See Taylor, 112 S. Ct. at

1644; In re Young, 806 F.2d 1303, 1305 (5th Cir. 1987); Fed. R.

Bankr. P. 4003(b), 9006(b)(3) (trustee must move for filing

extension before end of 30-day period). Unless and until a

debtor files a timely claim of exemptions, however, as required

10

by the Bankruptcy Code and the Federal Rules of Bankruptcy

Procedure, there is no "list of property claimed exempt" for the

trustee or creditors to oppose. See, e.g., Redfield v. Peat,

Marwick and Co. (In re Robertson), 105 B.R. 440, 450 (Bankr. N.D.

Ill. 1989) ("The Debtor and other Defendants here who seek the

normal benefit that flows from a timely claim of exemption not

timely objected to, rest their contention on a late-filed claim

that the Court never allowed to be filed. . . . In this case, the

exemption claim late-filed without notice, motion, or leave of

Court, is not entitled to the automatic allowance that Bankr. R.

4003(a) gives to a timely filed exemption claim if it is not

timely objected to. He who seeks to benefit by the Bankruptcy

Rules must abide by them."). In these circumstances, the princi-

ple of repose relied upon in Taylor supports the rulings below.

Taylor, 112 S. Ct. at 1648 ("[Rule 4003(b)] deadlines may lead to

unwelcome results, but they prompt parties to act and produce

finality.").3

The district court judgment is affirmed and the case is
The district court judgment is affirmed and the case is

remanded to the bankruptcy court for further proceedings consis-
remanded to the bankruptcy court for further proceedings consis-

tent with this opinion. Costs are awarded to appellees.
tent with this opinion. Costs are awarded to appellees.

3In opposing Petit's claim of exemptions, the chapter 11
trustee agreed, in principle, not to oppose her claim of exemp-
tions insofar as it pertained to legitimate state-law exemptions,
if any. Consequently, we express no opinion on the preliminary
and related question whether, upon remand to the bankruptcy
court, Petit should prevail on any motion to extend the time in
which to file such a claim of exemptions for good cause or
excusable neglect.

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