IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 6, 2008
No. 07-10764
Charles R. Fulbruge III
Clerk
In The Matter Of: RONALD CHRISTOPHER PERES; DONNA PATRICIA
MEDINA
Debtors
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RONALD CHRISTOPHER PERES; DONNA PATRICIA MEDINA
Appellants
v.
DANIEL J SHERMAN, Trustee; UNITED STATES TRUSTEE
Appellees
Appeal from the United States District Court
for the Northern District of Texas
Before SMITH, DeMOSS, and STEWART, Circuit Judges.
DeMOSS, Circuit Judge:
Appellants Ronald Christopher Peres and Donna Patricia Medina
(collectively “Debtors”) appeal the district court’s order affirming the bankruptcy
court’s granting of Trustee Daniel J. Sherman’s objections to the Debtors’
exemptions. For the reasons stated below, we affirm the decision of the district
court.
No. 07-10764
I.
Debtor Peres and his wife Medina filed for Chapter 7 bankruptcy on June
6, 2005. The Trustee commenced a creditors’ meeting pursuant to 11 U.S.C. §
341(a) on July 20, 2005. The meeting was adjourned and continued on three
occasions. The third § 341(a) creditors’ meeting took place on September 23,
2005, and was continued without a formal announcement as to the date of
continuation. Subsequently, the §341(a) creditors’ meeting was rescheduled for
July 19, 2006. The day before the scheduled meeting the Debtors requested a
continuance to attend to a family matter. Debtors were then notified by
telephone of a § 341(a) creditors’ meeting scheduled for August 24, 2006. Debtor
moved to quash the meeting on the basis that the meeting was untimely, which
the bankruptcy court denied. The §341(a) creditors’ meeting was thus held and
concluded on August 24, 2006. On September 5, 2006, the Trustee filed
objections to the Debtors’ claimed exemptions. The bankruptcy court sustained
the objections on October 25, 2006. The district court entered a final order
affirming the bankruptcy court’s ruling on June 12, 2007. The Debtors timely
filed their notice of appeal.
On appeal, the Debtors argue that because there was no announcement of
a continuation date at the September 23, 2005 meeting, the meeting was
concluded thirty days later. Debtors argue that this triggered the thirty day
deadline for objections to their exemptions, thus the Trustee’s objections filed on
September 5, 2006, were untimely. The Debtors also argue that the August 23,
2006 meeting was a new § 341(a) creditors’ meeting requiring written notice.
II.
A bankruptcy court’s findings of fact are reviewed for clear error. See
Wallace v. Rogers (In re Rogers), 513 F.3d 212, 216 (5th Cir. 2008). When the
district court has affirmed the bankruptcy court’s findings, this standard is
strictly applied, and reversal is appropriate only when there is a firm conviction
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No. 07-10764
that error has been committed. See Chiasson v. J. Louis Matherne & Assocs. (In
re Oxford Management, Inc.), 4 F.3d 1329, 1333 (5th Cir. 1993). Conclusions of
law are reviewed de novo. Id.
Under Federal Rule of Bankruptcy Procedure 4003(b), a party in interest
who disputes an exemption claimed by the debtor must file an objection no later
than 30 days after the meeting of creditors. FED. R. BANKR. P. 4003(b). Section
341 of the Bankruptcy Code provides the statutory basis for holding meetings of
creditors in a bankruptcy case. Section 341(a) provides that following the
commencement of a voluntary Chapter 7 bankruptcy case, “the United States
trustee shall convene and preside at a meeting of creditors.” 11 U.S.C. §§ 301,
341(a). Federal Rule of Bankruptcy Procedure 2003 governs the commencement
and continuance of the meeting. Rule 2003(e) provides 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).
The Debtors argue that the § 341(a) creditors’ meeting was deemed
concluded thirty days after the September 23, 2005 meeting, triggering the
thirty day deadline for the Trustee to file objections. The Trustee argues that the
§ 341(a) creditors’ meeting was continued and concluded on August 23, 2006. The
district court held that the § 341(a) creditors’ meeting was not concluded until
August 23, 2006. The question presented to this court is, if no formal
announcement of a continuation date is made, when is a § 341(a) creditors’
meeting concluded. This court has not previously ruled on this issue.
The Debtor urges this court to apply a “bright-line” approach, holding that
if a trustee does not announce a specific date to which the meeting is being
continued within 30 days of the last meeting held, the meeting will be deemed
to have been concluded on the last date it was convened. Some courts have
adopted this approach. See Smith v. Kennedy (In re Smith), 235 F.3d 472, 476
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No. 07-10764
(9th Cir. 2000) (holding that an indefinite adjournment of the § 341(a) creditors’
meeting would nullify the thirty-day requirement in Rule 4003(b)); In re Leavitt,
137 B.R. 881, 883 (Bankr. D. Mass. 1992) (holding that “where the trustee fails
to announce an adjourned date and time within thirty days of the date on which
the meeting of creditors was last held, the meeting will be deemed to have
concluded on the last meeting date”); In re Friedlander, 284 B.R. 525, 527
(Bankr. D. Mass. 2002) (same). However, Levitt was likely overruled by the First
Circuit Bankruptcy Appellate Panel in Premier Capital, Inc. v. DeCarolis (In re
DeCarolis), 259 B.R. 467, 470-71 (B.A.P. 1st Cir. 2001) (rejecting Levitt’s bright-
line approach but declining to adopt a specific alternative approach).
Accordingly, Friedlander is also of doubtful precedence.
A majority of courts reject a bright-line approach, holding that § 341(a)
creditors’ meetings adjourned indefinitely are not concluded, and therefore do
not trigger the thirty day deadline; these courts either adopt a case-by-case
approach or require the trustee or court to declare the § 341(a) creditors’ meeting
concluded. See In re Cherry, 341 B.R. 581, 587 (Bankr. S.D. Tex. 2006) (“A
case-by-case approach is most appropriate” because it “affords a trustee
discretion in complicated cases yet restrains a trustee’s ability to indefinitely
postpone a meeting of creditors.”); In re Brown, 221 B.R. 902, 906-07 (Bankr.
M.D. Fla. 1998) (finding that a case-by-case method is best because “[t]rustees
should have the discretion to perform their duties; however, some limitation
based on reasonableness should apply); In re James, 260 B.R. 368, 372 (Bankr.
E.D.N.C. 2001) (applying a case-by-case approach); Petit v. Fessenden , 182 B.R.
59, 63 (D. Me. 1995) (same); In re Havanec, 175 B.R. 920, 923 (Bankr. N.D. Ohio
1994); In re Koss, 319 B.R. 317, 321 (Bankr. D. Mass. 2005) (meeting is not
concluded until the trustee so declares or the court so orders); In re Flynn, 200
B.R. 481, 484 (Bankr. D. Mass. 1996) (same); In re DiGregorio, 187 B.R. 273, 276
(Bankr. N.D. Ill. 1995) (same).
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No. 07-10764
This court declines to hold that a meeting of creditors is not concluded
until such time as the trustee so declares or the court so orders. Such a holding
ignores the clearly-established policy of the Bankruptcy Code of encouraging
promptness in the filing of objections to exemptions, because it would permit a
trustee to continue a meeting of creditors indefinitely. Cherry, 341 B.R. at 587.
A strict rule could impede justice in complex cases when a trustee needs further
time and information to fully understand a debtor’s financial affairs, especially
when the debtor agrees to a continuance or refuses to cooperate, and where no
evidence of unjustified delay is present. Accordingly, this Court is persuaded
that a case-by-case approach is most appropriate. Such an approach affords a
trustee discretion yet restrains a trustee’s ability to indefinitely postpone a
meeting of creditors. This Court will determine whether any delay in
reconvening the meeting was reasonable as opposed to enforcing a bright-line
rule.
Thus, we now turn to whether the Trustee in the present matter acted
reasonably in continuing the § 341(a) creditors’ meeting from September 23,
2005, until August 24, 2006. Courts that have adopted the case-by-case approach
have considered at least four factors in determining the reasonableness of a
trustee’s delay in adjourning a meeting of creditors: (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. See, e.g., Cherry, 341 B.R. at 589 (the delay was not unreasonable
when the decision to continue the meeting was “clearly announced”); In re Bace,
364 B.R. 166, 179 (Bankr. S.D.N.Y. 2007) (trustee’s delay appropriate when
debtor did not produce business records); Petit, 182 B.R. at 63 (finding trustee’s
delay appropriate when debtor was “particularly litigious and obstructionist”).
Finding no clear error with the bankruptcy court’s factual findings, we find
that the circumstances in the present matter indicate that the Trustee acted
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No. 07-10764
reasonably and had legitimate reasons for adjourning the § 341(a) creditors’
meeting for eleven months. The bankruptcy court found that of the eleven
month delay, six months worth of the continuances were granted to
accommodate the Debtors. The September 23, 2005 meeting was continued
because the Debtors were still gathering records to support their amended
schedules. The meeting was then continued in July at the Debtors’ request. The
court also held that at no time did the Debtors move to conclude the § 341(a)
creditors’ meeting, as was their right if they believed that a delay was
prejudicial. Finally, the court found that an unprecedented increase in the
number of bankruptcy filings during the relevant time period made the delay in
continuing and concluding the meeting reasonable.
Lastly, we find that the August 23, 2006 § 341(a) creditors’ meeting did not
require written notice. Bankruptcy Rule 2002 requires that all parties in interest
must receive written notice of the initial creditors’ meeting under 11 U.S.C. §341
at least twenty days in advance. FED. R. BANKR. P. 2002(a)(1). Written notice is
not required if the date of the continuation is set at the original meeting. FED.
R. BANKR. P. 2003(e). Both parties agree that the transcript of the September 23,
2005 meeting shows that it was continued. The district court found that the
debtors had notice in May 2006 that the Trustee intended to continue the
meeting to July 2006, at which point the Debtors requested a continuance rather
than asserting an objection to the meeting. Thus, the Debtors were not
prejudiced by the lack of written notice.
For the foregoing reasons, the decision of the district court is AFFIRMED.
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