Gil De La Madrid v. Bowles Custom Pools & Spa

Filing

OPINION issued by Rogeriee Thompson, Appellate Judge; Michael Daly Hawkins,* Senior Appellate Judge and David J. Barron, Appellate Judge. Published. * Of the Ninth Circuit, sitting by designation. [14-2340]

Case: 14-2340

Document: 00116977051

Page: 1

Date Filed: 03/25/2016

Entry ID: 5987273

United States Court of Appeals
For the First Circuit
No. 14-2340
IN RE:

JULIO ENRIQUE GIL-DE LA MADRID
Debtor,

JULIO ENRIQUE GIL-DE LA MADRID,
Plaintiff, Appellant,
v.
BOWLES CUSTOM POOLS & SPA,
Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]

Before
Thompson, Hawkins,* and Barron,
Circuit Judges.

Maximiliano Trujillo-Gonzalez was on brief for appellant.
José Vázquez García was on brief for appellee.
*

Of the Ninth Circuit, sitting by designation.

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HAWKINS, Circuit Judge.

Entry ID: 5987273

This appeal arises from a

dispute whether the bankruptcy court erred in enlarging time for
a creditor to file an unsecured claim.

Appellant Julio Enrique

Gil-De La Madrid, debtor to Appellee Bowles Custom Pool & Spa,
appeals

the

district

court's

order

affirming

the

bankruptcy

court's decision to permit Bowles to file an unsecured claim after
the initial statutory ninety-day deadline from the date of the
initial creditors' meeting had passed.1

Because this deadline

fell in a period between the case's dismissal and subsequent
reinstatement, the bankruptcy court reset the deadline to account
for the time the case was dismissed and accepted Bowles's claim as
timely.

We affirm.

We also deny Bowles's motion for attorney

fees, costs, and/or sanctions.
I.
After

Appellant

Background
filed

for

Chapter

13

bankruptcy

protection, the bankruptcy court set July 19, 2012, as the deadline
for creditors to file unsecured claims.

On June 13, 2012, the

bankruptcy court granted the trustee's motion to dismiss the case.
Pursuant to Appellant's motion for reconsideration, however, the

1

Appellant's opening brief also argues against the propriety of
an 115,000 dollar attorney fee judgment ordered by a Florida court
against him. As Bowles points out, however, such a question was
not raised below and Gil-De La Madrid does not demonstrate why it
should be addressed on this appeal, let alone by this circuit. We
therefore do not consider it.

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case was reinstated on August 1, 2012, after the July 19 deadline
had passed.

When Bowles sought leave to file an untimely unsecured

claim on August 7, 2012, explaining it had assumed the July 19
deadline was no longer operative after the case's June dismissal,
the bankruptcy court reset the filing deadline to September 6,
2012, and accepted Bowles's claim.

The district court affirmed

this decision and entered final judgment.
II. Standard of Review
A bankruptcy court order on appeal from the district
court is reviewed directly.

We disturb its factual findings only

if clearly erroneous, but apply de novo review to its conclusions
of law.

In re Furlong, 660 F.3d 81, 86 (1st Cir. 2011).
III. Discussion

A. Bankruptcy Court's Discretion to Enlarge Time
A proof of claim filed under 11 U.S.C. § 501 is deemed
permissible unless a party in interest objects.

Federal Rule

3002(c) of Bankruptcy Procedure lists six exceptions to the rule
that an unsecured creditor's proof of claim is timely in a Chapter
13 case "if it is filed not later than 90 days after the first
date set for the meeting of creditors called under § 341(a) of the
Code."2

Rule 9006, on computing time in accordance with time

2

These exceptions include: (1) claims by governmental units; (2)
extensions for infants or incompetent persons; (3) claims that
become allowable as a result of judgment; (4) claims arising from
rejection of an executory contract or unexpired lease; (5) claims
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limits set forth elsewhere in the Federal Rules of Bankruptcy
Procedure, expressly confines the bankruptcy court's jurisdiction
to enlarge time for filing proofs of claim to the conditions stated
under Rule 3002(c).

Fed. R. Bankr. P. 9006(b)(3).

None of this

rule's enumerated exceptions apply in this instance.

In addition,

Rule 9006(a)(1)(B) is clear that in computing the ninety-day
period, the court should "count every day, including intermediate
Saturdays, Sundays, and legal holidays."

The text further states

that even a day on which the clerk's office is inaccessible should
be counted, unless such a day happens to be the last of the ninety
days.

Fed. R. Bankr. P. 9006(a)(3).

The rule does not, however,

address how time should be computed in the event of a case's
dismissal and subsequent reinstatement.
An order dismissing a bankruptcy case does not in and of
itself end the "case."

The order of dismissal may be, as it was

here, overturned following a timely motion for reconsideration,
see Fed. R. Bankr. P. 9023, 9024, or notice of appeal, see Fed. R.
Bankr. P. 8002.

If the dismissed case is reinstated in that way,

then it is still the same "case" when it comes back to life.
In re Gardenhire, 209 F.3d 1145, 1146 (9th Cir. 2000).

See

And thus,

if the court has set the first date for the creditor's meeting in

for which there were previously insufficient assets, but now may
be payable; and (6) claims by creditors notified of the deadline
at a foreign address.

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that case, the reversal of the order of dismissal does not permit
a new "first" date for a meeting of creditors to be scheduled.
Accordingly, the ninety-day filing period for the revived case is
the same one that had been established before the dismissal of
that case.
No circuit has held, however, that in a case that is
dismissed after the petition is filed and then reinstated after
the ninety-day period has run, a creditor must file while the case
is dismissed in order for the claim to be timely filed.

In re

Gardenhire, 209 F.3d at 1148, involved a case that was revived
before

the

bar

circumstances

date

had

(concerning

passed.

time

for

In
filing

closely

analogous

nondischargeability

complaints rather than proofs of claims), the Fifth Circuit has
rejected the idea a creditor must file even when the case has been
dismissed.

See In re Dunlap, 217 F.3d 311, 314-17 (5th Cir. 2000);

Matter of Coston, 987 F.2d 1096, 1099 (5th Cir. 1992).

Nor are

we aware of any lower court that has held otherwise.

Rather,

district

allowed

courts

and

bankruptcy

courts

claims to be filed after reinstatement.

have

routinely

See In re Santos, No. 11–

05567 (MCF) 2012 WL 1570070 (Bankr. D.P.R. May 3, 2012); In re
Gulley, 400 B.R. 529 (Bankr. N.D. Tex. 2009).

And this precedent

-- which aims to further the sensible administration of bankruptcy
cases -- has roots that stretch back nearly a quarter of a century.

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See In re Gulley, 400 B.R. at 538-39 (discussing Matter of Coston,
987 F.2d 1096 (5th Cir. 1992)).
We can see why this allowance has been made.

Indeed,

this is not the only context in which a filing clock has been
adjusted to account for the period of the case's dismissal.

See

Price v. Wyeth Holdings Corp., 505 F.3d 624, 630-31 (7th Cir. 2007)
("The most obvious problem with Price's argument is that it rests
on the illogical premise we have already rejected:

that the

removal clock somehow continues to run after a lawsuit has been
voluntarily dismissed.").

To be sure, a claim could be filed

during the time that the case is dismissed, and filing a claim is
not a terribly onerous task.

See In re Gardenhire, 209 F.3d at

1152 (citing In re Edelman, 237 B.R. 146, 154 n.8 (B.A.P. 9th Cir.
1999)).
But Rule 9024 appears to permit the debtor to seek
reinstatement on an open-ended time frame -- and thus even after
the ninety-day period has ended.

If the dismissal has no effect

on the calculation of the ninety days, creditors would seemingly
have to file their claims during the ninety-day period in every
dismissed case in order to protect against the remote chance that
a case might come back to life long after the ninetieth day has
passed.

It is hard to believe that the drafters envisioned Rules

3002, 9006, and 9024 working together in a way that would require
creditors to engage in such wasteful activity, especially when the

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order of dismissal frees creditors to return to their ordinary
means of collection.
The bankruptcy court here was guided by principles of
equity to recalculate the filing deadline.

See In re Santos, 2012

WL 1570070 (Bankr. D.P.R. May 3, 2012) (proper to enlarge time and
accept a purportedly untimely filed claim, where the initial
deadline fell between the case's dismissal and its reinstatement);
In re Gulley, 400 B.R. at 535 ("[B]ankruptcy courts have the power
to nullify original case deadlines and recalculate them when there
has been the extenuating circumstance of disruption of a case
(e.g., when there has been a stay in or a dismissal of a case),
but bankruptcy courts do not have the power to extend or toll
deadlines generally on any equitable grounds.").
We agree with the decision below insofar as the drafters
of the Rules could not possibly have intended the result that
Appellant

asks

us

to

reach,

in

reconsideration under Rule 9024.

which

it

appears

he

sought

Cf. Lamie v. U.S. Trustee, 540

17 U.S. 526, 534 (2004) ("It is well established that when the
statute's language is plain, the sole function of the courts -- at
least where the disposition required by the text is not absurd -is to enforce it according to its terms." (internal quotation marks
and citation omitted)) (emphasis added); United States v. Dowdell,
22 595 F.3d 50, 71 (1st Cir. 2010) ("it is a well-established canon
of statutory construction that a court should go beyond the literal

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language of a statute if reliance on that language would defeat
the plain purpose of the statute" (quoting Bob Jones Univ. v.
United States, 461 U.S. 574, 586 (1983)).
Yet, we see two possible avenues to finding Bowles's
claim timely filed.

One is that the days which pass during a

case's dismissal period simply should not be counted towards the
ninety days.

The creditor would thus have, upon reinstatement,

the balance of days that were left on the ninety-day clock at the
time of the dismissal to file a claim.

Indeed one could read the

bankruptcy rules as inoperative during a case's dismissal, for
parties should not be routinely expected -- especially without
clear statutory or court-issued notice -- to treat a dismissed
case as still active.
The second possible approach is that the days that pass
during dismissal should count towards the ninety days, but that
the

bankruptcy

court

nevertheless

may

exercise

its

equitable

powers under 11 U.S.C. § 105(a) to set a new bar date if the
original one expired while the case was dismissed.

In this way,

the bankruptcy court could account for the anomaly.

See In re

Nosek, 544 F.3d 34, 44 (1st Cir. 2008) ("§ 105(a) has been referred
to as a 'catch-all' provision, effectively filling gaps in the
bankruptcy

code

in

order

to

preserve

the

integrity

of

the

bankruptcy system." (quoting Cuevas-Segarra v. Contreras, 134 F.3d
458, 459 (1st Cir. 1998))).

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Here, we need not choose between the two approaches.
Bowles filed its claim outside the ninety-day period, but just six
days after the reversal of the order of dismissal.

The filing of

the

two

claim

was

approaches.

thus

timely

under

either

of

the

possible

Accordingly, we affirm the district court, but leave

for another day the question of whether, in a case in which the
order of dismissal is reversed before the ninetieth day has passed,
no day during the period of dismissal should be counted as a day
like "every" other, see Fed. R. Bankr. P. 9006(a)(1)(B); In re
Gardenhire, 209 F.3d at 1152.
B. Bowles's Motion for Fees, Costs, and Sanctions
Arguing that this appeal is frivolous, Bowles moves
under Rule 38 of Appellate Procedure and in the alternative under
28 U.S.C. § 1927 for payment of costs and attorney fees.

That

rule provides that "if a court of appeals determines that an appeal
is frivolous, it may, after a separately filed motion or notice
from the court and reasonable opportunity to respond, award just
damages or single or double costs to the appellee."

Section 1927,

by contrast, specifically penalizes attorney conduct, such that
"[a]ny attorney . . . who so multiplies the proceedings in any
case unreasonably and vexatiously may be required by the court to
satisfy personally the excess costs, expenses, and attorney's fees
reasonably incurred because of such conduct."

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According to Bowles, this appeal was filed purely as a
delay tactic to keep creditors at bay, and has no basis in law or
fact. Bowles further argues that Appellant's attempt to raise
before this court an objection to the imposition of attorney fees
in the state of Florida "is a sign of temerity which warrants a
finding that the appeal is frivolous."
The failure to engage substantively with cases on which
a lower court has based its decision has, in the past, merited
sanctions in this court.

See Natasha, Inc. v. Evita Marine

Charters, Inc., 763 F.2d 468, 472 (1st Cir. 1985) ("An appeal is
frivolous when the result is obvious, or the arguments are 'wholly
without merit.'") (internal citation and quotation marks omitted).
This court has also granted fees in instances where an appeal had
been

brought

solely

proceedings.

for

an

improper

purpose

to

delay

legal

Alessandri v. April Ind., Inc., 934 F.2d 1, 3 (1st

Cir. 1991).
Here,

however,

Appellant's

arguments

concerning

the

express language of the Rules of Bankruptcy Procedure are not
altogether frivolous.

While we interpret them to allow for the

recalculation of time in this case, Rules 3002(c) and 9006 do
narrowly define the scope of circumstances in which courts may
reset

claim

evidence

filing

that

deadlines.

either

Appellant

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Bowles
or

furthermore

his

counsel

offers

no

engaged

in

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unreasonable

or

vexatious

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behavior

Date Filed: 03/25/2016

meriting

Entry ID: 5987273

sanctions.

We

therefore deny this motion.
IV.

Conclusion

For the aforementioned reasons, we affirm the bankruptcy
court's decision to extend the filing deadline and accept Bowles's
claim as timely.

We deny Bowles's motion for costs, fees, and

sanctions.
AFFIRMED

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