Opinion
Case No. 96-16356-SSM, Adversary Proceeding No. 97-1039
March 17, 1997
James W. Reynolds, Esquire, Odin, Feldman Pittleman, P.C., Fairfax, VA, of Counsel for the plaintiff
Joel Steinberg, Esquire, Steinberg Associates, P.C., Fairfax, VA, of Counsel for the defendant-debtor
MEMORANDUM OPINION
This matter is before the court on the plaintiff's motion to determine that this adversary proceeding was timely filed. Oral argument was heard on March 11, 1997, at which time the court took the matter under advisement to permit the plaintiff to submit an affidavit from the clerk and to permit the defendant to file a reply to the plaintiff's memorandum of law.
The affidavit has been filed. The defendant did not file a reply memorandum.
Facts
The facts are straight-forward. The debtor, Frank J. Kroeger, III, filed a voluntary petition under chapter 7 of the Bankruptcy Code in this court on November 14, 1996. The date set for the meeting of creditors under § 341, Bankruptcy Code, was December 9, 1996.
Accordingly, as discussed below, the deadline for filing objections to discharge and complaints to determine dischargeability under §§ 727 and 523(c), Bankruptcy Code, was February 7, 1997. Notice of that date was given to creditors in the Notice of Commencement of Case mailed by the clerk. The debtor was granted a discharge on February 23, 1997.
Two other adversary proceedings have been filed to determine the dischargeability of debts owed by the debtor: Lawyers Title Ins. Co., v. Kroeger, A.P. No. 97-1009 (filed Jan. 10, 1997); Fidelity Nat'l Title Ins. Co., v. Kroeger, A.P. No. 97-1038 (filed Feb. 7, 1997).
The plaintiff in this action, Stewart Title Guaranty Company, alleges that it paid a title insurance claim arising from the debtor's action, as escrow agent, in converting certain funds escrowed as part of a real estate settlement. Prior to the chapter 7 filing, a judgment had been entered against the debtor in the Circuit Court of Fairfax County, Virginia, on November 3, 1995, in the amount of $160,092 as compensatory actions and $150,000 as punitive damages arising from the conversion. On February 7, 1997 — a Friday — Stewart Title attempted to file the complaint that is presently before the court, but the clerk rejected the filing because the complaint was not accompanied by the correct filing fee. Plaintiff's counsel had used a commercial courier service to deliver the complaint to the court, and by the time counsel learned that the filing had been rejected, the clerk's office was closed for business. In addition, because the court was moving that weekend to a new courthouse, the telephones had been disconnected, and counsel was unable to reach the clerk to arrange for an after-hours filing. On Monday, February 10, 1997, the complaint — this time accompanied by the correct filing fee — was accepted by the clerk. With the complaint, the plaintiff filed the motion that is presently before the court.
As discussed below, the filing fee for complaints in adversary proceedings had increased from $120 to $150 on December 18, 1996. The check sent by Stewart Title with the complaint was in the amount of $120.
The telephones were disconnected at 4:00 p.m. The clerk's office itself remained open until 5:00 p.m.
Conclusions of Law and Discussion
The question, simply stated, is whether the clerk properly rejected the complaint when it was not accompanied by the correct filing fee, or whether, notwithstanding the failure to tender the correct filing fee, the complaint should be treated as filed on the date it was presented to the clerk. If so, it was unquestionably timely; otherwise it was not.
A.
Section 523(a), Bankruptcy Code, sets forth 16 categories of debts that are not dischargeable in a chapter 7 case of an individual debtor. With respect to twelve of those categories — for example, alimony and child support, certain taxes, student loans, fines, and injury or death resulting from driving while intoxicated — no particular action need be taken during the bankruptcy in order to preserve the creditor's rights after discharge. With respect to four of the categories, however, the rule is different. Debts of the type described in §§ 523(a)(2), (a)(4), (a)(6), and (a)(15), Bankruptcy Code are discharged unless the creditor brings a timely complaint in the bankruptcy court to have the debt declared nondischargeable. § 523(c), Bankruptcy Code. The debts in question are those arising from fraud, larceny, embezzlement, defalcation by a fiduciary, willful injury to person or property, or a divorce decree or property settlement agreement.
The Federal Rules of Bankruptcy Procedure require that a complaint to determine the dischargeability of such debts be filed within 60 days of the first date set for the meeting of creditors. F.R.Bankr.P. 4007(c). Although the time may be extended, the motion requesting such extension must be made "before the time has expired," and the Bankruptcy Rules expressly prohibit an extension based on excusable neglect when the request is made after the time has expired. Id.; F.R.Bankr.P. 9006(b)(3). The Fourth Circuit, in dicta, has sided with those courts that have held that the time limit is not jurisdictional. Farouki v. Emirates Bank Int'l, Ltd., 14 F.3d 244, 248 (4th Cir. 1994) (adopting Schunk v. Santas (In re Santos), 112 B.R. 1001 (9th Cir. BAP 1990)). At the same time, it is clear that the deadline is strictly enforced and is not subject to enlargement based on excusable neglect. Farouki, 14 F.3d at 249 n. 15; Santos, 112 B.R. at 1008; Mann v. CCR Financial Planning, Ltd., 199 B.R. 347, 349 (Bankr. E.D. Va. 1996) (Bostetter, C.J.) ("The provisions of Rule 4007(c) are mandatory and do not allow the Court any discretion to allow a late filed dischargeability complaint or grant a late filed motion for enlargement of time to file such a complaint, even for excusable neglect."). Under Santos, as adopted by Farouki, the Bankruptcy Rules "[do] not preclude the bankruptcy court from exercising its equitable powers in extraordinary cases." 14 F.3d at 248. Such circumstances, for example, include those where a notice from the court misleads creditors as to the bar date. Themy v. Yu (In re Themy), 6 F.3d 688 (10th Cir. 1993). However, relief from the bar of Rule 4007(c) cannot be granted on the basis of equitable tolling. Santos, 112 B.R. at 1006-7. In appropriate circumstances, it may be based on equitable estoppel or waiver. Id. at 1007-8. Neither of the latter grounds is remotely applicable to the present case, however.
As explained in Santas, "The essence of the doctrine of equitable tolling is that a limitations period does not run against a plaintiff who is unaware of his cause of action [such as] when the defendant conceals or makes it impossible for the plaintiff to discover the facts underlying his cause of action." 112 B.R. at 1006.
"Equitable estoppel requires reasonable reliance on a defendant's words or conduct in forebearing suit within the applicable limitations period. . . . [T]he application of estoppel . . . takes its life from the principle that no person will be permitted to profit from his or her wrongdoing in a court of justice." 112 B.R. at 1007. The court held in Santas, however, that equitable estoppel did not apply where a plaintiff relied on a defendant's informal agreement to extend the bar date; the court ruled that such reliance was not reasonable, as only the court had the power to extend the deadline.
"[T]he timeliness of a dischargeability complaint presents an affirmative defense that must be raised in an answer or responsive pleading. If the defense is not raised in the answer or responsive pleading, it is generally waived." 112 B.R. at 1008 (internal citations omitted).
B.
Stewart Title does not dispute these general principles. Rather, it asserts that the complaint was timely filed because it was delivered to the clerk prior to the expiration of the bar date. The failure to accompany the complaint with the correct filing fee was not, the plaintiff argues, a proper basis for the clerk to reject the filing, and instead the clerk, under the plain language of the local rules of this court, should have accepted the filing and issued a notice of filing deficiency, which would have allowed ten days to cure the defect.
Under F.R.Bankr.P. 7001, a proceeding to determine the dischargeability of a debt is an adversary proceeding. Such a proceeding is commenced by filing a complaint. F.R.Bankr.P. 7003; Fed.R.Civ.P. 3. Under 28 U.S.C. § 1930(b), the Judicial Conference of the United States may prescribe fees in bankruptcy cases "of the same kind as the Judicial Conference prescribes under section 1914(b) [of title 28, United States Code]." Pursuant to that authority, the Judicial Conference has directed, "(6) For filing a complaint, a fee shall be collected in the same amount as the filing fee prescribed in 28 U.S.C. § 1914(a) for instituting any civil action other than a writ of habeas corpus." Jud. Conf. Schedule of Fees, 28 U.S.C.A. § 1930. Prior to December 18, 1996, that fee was $120.00, but effective that date it was increased to $150.00. Federal Courts Improvement Act of 1996, Pub.L. No. 104-317, § 401 (Oct. 19, 1996). Local Bankruptcy Rule 7054-1 requires that such fees be paid in advance:
(B) Payment in Advance. All fees and costs due the Clerk in adversary proceedings shall be paid in advance except:
(1) in actions brought on behalf of seamen,
(2) where a party has been authorized to proceed in forma pauperis, or
(3) where a party is otherwise exempt by law. . . .
Federal Rule of Civil Procedure 5, which is made applicable to bankruptcy adversary proceedings by Federal Rule of Bankruptcy Procedure 7005, provides in relevant part as follows:
(e) Filing with the court defined. The filing of papers with the court as required by these rules shall be made by filing them with the clerk of the court, except that the judge may permit the papers to be filed with the judge, in which event the judge shall note thereon the filing date and forthwith transmit them to the office of the clerk. . . . The clerk shall not refuse to accept for filing any paper presented for that purpose solely because it is not presented in proper form as required by these rules or any local rules or practices.
(emphasis added). Additionally, Federal Rule of Bankruptcy Procedure 5005(a) provides as follows:
The lists, schedules, statements, proofs of claim or interest, complaints, motions, applications, objections and other papers required to be filed by these rules . . . shall be filed with the clerk. . . . The clerk shall not refuse to accept for filing any petition or other paper presented for the purpose of filing solely because it is not presented in proper form as required by these rules or any local rules or practices.
(emphasis added).
Courts have split on the question of whether the payment of a required filing fee is essential to a timely filing of a civil action. Charles A. Wright, 4 Federal Practice and Procedure, § 1055 (West 1987). With respect specifically to appeals, the Supreme Court has held that the failure to pay the required filing fee is not a prerequisite to the filing of a valid notice of appeal. Parissi v. Telechron, Inc., 349 U.S. 46, 75 S.Ct. 577, 99 L.Ed. 867 (1955). As a result, a number of courts have concluded that the same rule applies to complaints commencing civil actions. Bolduc v. United States, 189 F. Supp. 640 (D. Me. 1960) (payment of filing fee within limitations period not prerequisite to valid filing of complaint under Federal Tort Claims act); Wrenn v. American Cast Iron Pipe Co., 575 F.2d 544 (5th Cir. 1978) (timely payment of filing fee is not a jurisdictional requirement in an employment discrimination suit); Rodgers v. Bowen, 790 F.2d 1550 (11th Cir. 1986) (complaint "filed" for statute of limitations purposes when it is in actual or constructive possession of clerk of court, regardless of untimely payment of required filing fee); McDowell v. Delaware State Police, 88 F.3d 188 (3rd Cir. 1996) (although complaint is not formally filed until filing fee is paid, it is constructively filed when received by the clerk as long as filing fee is ultimately paid); Ecker v. Replogle (In re Replogle), 70 B.R. 444 (Bankr. D. Mont. 1987) (dischargeability complaint delivered to clerk on the last day and rejected by clerk for failure to pay filing fee was deemed filed as of date first received where the plaintiff paid the filing fee three days after the bar date).
The District Court for this District, however, has held that nonpayment of the filing fee for a civil action within the statute of limitations period is fatal and requires dismissal of the complaint. Keith v. Heckler, 603 F. Supp. 150 (E.D. Va. 1985) (Doumar, J.) (limiting Parissi to its facts and following Turkett v. United States, 76 F. Supp. 769 (N.D. N.Y. 1948)). In so holding, the District Court relied heavily on local rule language essentially identical to Local Bankruptcy Rule 7054-1(B), quoted above. As the court in Keith trenchantly observed,
Authorizing the commencement of the district court action without the required fee would breed countless administrative and procedural woes, and give the Clerk's Office an element of discretion where none was intended. The Clerk's office could be converted into a part-time credit institution, spending significant energy collecting fees as well as extending credit.
603 F. Supp. at 157. Consistent with Keith, another judge of this court has held that a dischargeability complaint was not timely filed where, although it was delivered to the clerk's office prior to the running of the bar date, the clerk did not accept it for filing because it was not accompanied by the proper filing fee. Hartford Accident Indemnity Co. v. Midvaney (In re Mulvaney), 179 B.R. 806 (Bankr. E.D. Va. 1995) (Adams, J.).
Stewart Title, however, points to the provisions of Local Bankruptcy Rule 5005-1 as mandating a different result. In pertinent part, the rule provides as follows:
RULE 5005-1 FILING OF PETITIONS, PLEADINGS AND OTHER PAPERS.
* * *
(D) Additional Requirements:
* * *
(2) Complaints: Each complaint commencing an adversary proceeding must be accompanied by:
(a) the proper filing fee, and
(b) a properly completed Adversary Proceeding Cover Sheet (form B 104).
* * *
(E) Notice of Deficient Filing: The Clerk shall review each filing for compliance with the requirements of these Local Rules. Those pleadings or other papers not meeting the requirements of these Local Rules will receive a Notice of Deficient Filing allowing for ten days to correct the deficiency or to file a request for a hearing on the matter. Failure to cure the deficiency, or to request a hearing within the time allowed, will result in the pleading or other paper being stricken without further notice.
The current language of Local Bankruptcy Rule 5005-1(E) was promulgated by the judges of this court following the 1993 amendments to Federal Rule of Bankruptcy Procedure 5005(a)(1). Those amendments added the language, quoted above, prohibiting the clerk from refusing to accept a petition or other paper presented for filing "solely because it is not presented in proper form." The Advisory Committee note to the 1993 Amendments explains:
An earlier version of the rule — then known as Local Rule 107(E) — granted the clerk authority to reject any filing that did not comply with the local bankruptcy rules, but gave the proponent of the rejected pleading or paper the right to "lodge" it with the clerk and to file a prompt motion for judicial review of the clerk's rejection. See, Crestar Bank v. Silverstein (In re Silverstein), 110 B.R. 219 (Bankr. E.D. Va. 1989), for an explanation of the procedure.
Subdivision (a) is amended to conform to the 1991 amendment to Rule 5(e) F.R.Civ.P. It is not a suitable role for the office of the clerk to refuse to accept for filing papers not conforming to requirements of form imposed by these rules or by local rules or practices. The enforcement of these rules and local rules is a role for a judge.
(emphasis added). The Advisory Committee note to the 1991 amendment of F.R.Civ.P. 5(e) in turn explains:
Several local district rules have directed the office of the clerk to refuse to accept for filing papers not conforming to certain requirements of form imposed by local rules or practice. This is not a suitable role for the office of the clerk, and the practice exposes litigants to the hazards of time bars[.]
(emphasis added).
Stewart Title asserts that the "requirements of these Local Rules" referenced in Local Rule 5005-1(E) includes the requirement for the payment of a filing fee. The rule, read in isolation, could certainly be given such a construction. Read, however, in the context of the amendments to Fed.R.Civ.P. 5(e) and F.R.Bankr.P. 5005(a) that gave rise to its adoption, as well as Local Rule 7054-1(B), requiring advance payment of filing fees in adversary proceedings, it is clear that the "requirements" referred to in Local Rule 7005-1(E) are requirements of form. Indeed, the Local Bankruptcy Rules do provide a number of requirements as to form. See, e.g., Local Bankruptcy Rule 5005-1(C) ("Requirements of Form"). These include, for example, standards as to captions, paper size, margins, identification of counsel, and so on. Under Fed.R.Civ.P. 5(e), F.R.Bankr.P. 5005(a), and Local Bankruptcy Rule 5005-1(E), a complaint presented for filing that fails to comply with one or more such requirements may not be rejected by the clerk but would be the subject of a notice of deficient filing, with a ten day period to cure. The clerk's office, however, has apparently never construed Local Rule 5005-1(E) as applying to nonpayment of filing fees. Where a pleading is not accompanied by the required filing fee, the clerk will not accept the paper for filing and does not issue a Notice of Filing Deficiency but rather returns the paper unfiled.
I conclude that the clerk's practice conforms to, and is consistent with, Local Rule 5005-1(E), Fed.R.Civ.P. 5(e), and Fed.R.Bank.P. 5005(a), and that the clerk is justified in not filing a pleading that requires, but is not accompanied by, a filing fee. The clerk's practice is also consistent with the holding of the District Court for this District in Keith v. Heckler, supra. I conclude, therefore, that Stewart Title's complaint, not having been accompanied by the required filing fee, was properly rejected by the clerk when it was initially presented for filing on February 7, 1997. Since the complaint was not filed until after the deadline established by F.R.Bankr.P. 4007(c), and since the facts do not present the type of "extraordinary case," Farouki, supra, that would justify equitable relief, the court has no choice but to dismiss the complaint.
The result in this case may seem harsh, particularly since the verdict entered against the debtor in the state court lawsuit strongly suggests that the plaintiff has a meritorious cause of action. As other courts have observed, however, "Rigid adherence to the deadline is justified on the basis that Rule 4007(c) and 9006(b)(3) 'reflect a considered determination that a final cut-off date insuring that debtors will be free after a date certain, outweighs individual hardship to creditors. . . .'" Re/Max Properties, Inc. v. Barnes (In re Barries, 96 B.R. 833 (Bankr. N.D. Ill. 1989). Moreover, the unfortunate situation in which Stewart Title now finds itself could easily have been avoided by not waiting until the afternoon of the last day for filing and by closer attention to detail.
Although res judicata does not apply to bankruptcy dischargeability litigation, Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979), collateral estoppel does. Grogan v. Gamer, 498 U.S 279, 284 n. 11, 111 S.Ct. 654, 658 n. 11, 112 L.Ed.2d 755 (1991). See, Combs v. Richardson, 838 F.2d 112 (4th Cir. 1988) (jury verdict against debtor in state court assault action precluded debtor from relitigating willful and malicious nature of actions in subsequent dischargeability proceeding).
C.
A separate order will be entered denying the motion to determine that the complaint was timely filed. Since the complaint was not timely, it will be dismissed.