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In re Strong

United States District Court, D. Delaware

February 14, 2018

IN RE EARL STRONG Debtor.
v.
JEOFFREY L. BURTCH, TRUSTEE, and ANDREW R. VARA, Acting United States Trustee for Region 3, Appellees. EARL STRONG, Appellant, Civ. No. 17-1271 (GMS)

          MEMORANDUM

         I. INTRODUCTION

         This appeal arises from a Bankruptcy Court order entered on August 24, 2017, which extended the Bankruptcy Rule 4004(a) deadline to file a complaint objecting to Appellant's discharge in his chapter 7 case. (Bankr. D.I. 79).[1] Appellant timely appealed the order on September 5, 2017. (D.I. 1). Presently before the court is Appellant's motion for stay pending appeal (D.I. 6, 11) ("Stay Motion"), filed September 25, 2017, and motion for disqualification of the bankruptcy judge assigned to Appellant's chapter 7 case (D.I. 7), filed October 4, 2017 ("Recusal Motion"). For the reasons that follow, the court will deny the Stay Motion as moot, deny the Recusal Motion as procedurally improper, and set a briefing schedule on the merits.

         II. BACKGROUND

         On January 13, 2017, Appellant filed a voluntary petition under chapter 7 of the Bankruptcy Code. (Bankr. D.I. 1). On January 19, 2017, Appellant filed the required schedules and other documents regarding his assets, liabilities, and other information in support of his petition. (Bankr. D.I. 10). On January 24, 2017, the Bankruptcy Court Clerk issued a notice that the § 341(a) meeting would be held on February 22, 2017. (Bankr. D.I. 14). On April 6, 2017, the chapter 7 trustee appointed in the case ("Trustee") filed a motion to extend the time to file a complaint objecting to Appellant's discharge. (Bankr. D.I. 45).

         Bankruptcy Rule 4004(b)(1) provides: "On motion of any party in interest, after notice and hearing, the court may for cause extend the time to object to discharge, " and "the motion shall be filed before the time [to object] has expired."). Fed.R.Bankr.P. 4004(b)(1). The motion to extend sought to extend the time for the Trustee, the United States Trustee ("UST"), and creditors to object to Appellant's discharge through July 24, 2017. (See id.). On May 11 and 17, 2017, the Bankruptcy Court held hearings on several matters, including Trustee's motion to extend. (Bankr. D.I. 61, 64). At the hearings, Trustee advised the Bankruptcy Court that an extension until the conclusion of Appellant's litigation with Wells Fargo Bank, N.A. ("Wells Fargo") was warranted based on, inter alia, Appellant's apparent transfer of property to his wife for no consideration during the year prior to the chapter 7 filing, while he was in state court litigation with Wells Fargo regarding nonpayment of his mortgage (which could result in denial of discharge under § 727(a)(2)(A)); and Appellant's apparent false oaths (which could result in denial of discharge under § 727(a)(4)(A)). The Bankruptcy Court took Trustee's motion to extend under advisement. (See Bankr. D.I. 64).

         On June 16, 2017 - before the new deadline sought by Trustee's motion to extend - the UST filed a complaint objecting to Appellant's discharge pursuant to §§ 727(a)(2) and (a)(4). (See Bankr. D.I. 66; Adv. D.I. 1). The complaint was based on Appellant's testimony at the § 341(a) meeting, during which he admitted, inter alia, that: he had transferred real property to his wife for no consideration within the year before the bankruptcy filing; he owned a vehicle that he did not disclosed on his schedules of assets; he owned a bank account that he did not disclose on his schedules; and his wife received rental income that he did not disclose on his schedules. (Id.)

         On June 20, 2017, Appellant filed a motion to dismiss the UST's complaint, and thereafter, an amended version of same. (See Adv. D.I. 6, 7). Appellant argued that, because the Bankruptcy Rule 4004(a) deadline was April 24, 2017, and the complaint was filed on June 16, 2017, the complaint was not timely filed. As the Bankruptcy Court had not yet ruled on his first motion to extend, on July 12, 2017, Trustee filed a second motion to extend the time to file a complaint objecting to discharge. (See Bankr. D.I. 69). Appellant objected, reiterating his argument that both motions, and the UST's complaint, were untimely. (Bankr. D.I. 70).

         At a pre-trial conference held on July 27, 2017, the Bankruptcy Court directed the UST to file a brief regarding the timeliness of the complaint. (See Adv. D.I. 8). The UST's brief explained that the complaint was timely because it was filed during the extension period requested by Trustee's first extension motion, which was timely as it was filed before the April 24, 2017, deadline. (See Adv. D.I. 18; Del. Bankr. L.R. 9006-2 ("Unless otherwise provided in the Code or in the Fed. R. Bankr. P., if a motion to extend the time to take any action is filed before the expiration of the period prescribed by the Code, the Fed. R. Bankr. P., these Local Rules or Court order, the time shall automatically be extended until the Court acts on the motion, without the necessity for the entry of a bridge order."). The Bankruptcy Court held a hearing on August 23, 2017, at which it found that Trustee had timely filed his first extension motion, and had carried his burden under Fed.R.Bankr.P. 4004(b)(1) to show cause for the extension.[2] The Bankruptcy Court also concluded that the UST was the beneficiary of the relief requested by Trustee, and that the initial extension was sufficient to preserve the UST's time to file a complaint objecting to discharge.[3] As a result, the Bankruptcy Court held that both extension motions would be granted and that the adversary proceeding would continue to trial.[4] A docket entry dated August 23, 2017, stated that "the Chapter 7 Trustee's motions to extend discharge are granted, " and that "the orders will issue." (See Bankr. D.I. 75). On August 24, 2017, the Bankruptcy Court entered an order granting Trustee's second motion to extend. (See Bankr. D.I. 79).

         On September 5, 2017, Appellant filed a notice of appeal attaching the order granting the Trustee's second extension motion. (See Bankr. D.I. 81). Based on the wording of this notice and a subsequent "Notice to Amend Appellant Appeal" (D.I. 3), it is clear that Appellant appeals the determination that the UST's complaint was timely filed. On September 25, 2017, Appellant filed the Stay Motion, which sought "a Stay Order Of the October 23, 2017 Trial Pending the Appeal Decision[.]" (D.I. 6). The two-page Stay Motion cites no legal authority for the relief requested, and argues: (i) the appeal will possibly dismiss the UST's complaint as untimely; and (ii) proceeding to trial would be a violation of Appellant's rights under the Sixth Amendment, Confrontation Clause, and a violation of his right to due process. (Id.) After several continuances intended to accommodate Appellant, but before this court was able to rule on the Stay Motion, the Bankruptcy Court conducted a trial on December 11, 2017, and, based on the uncontroverted evidence presented at trial, the Bankruptcy Court entered an order denying discharge (Adv. D.I. 54). The record reflects that Appellant did not appear at the trial.

         III. JURISDICTION

         Appeals from the Bankruptcy Court to this court are governed by 28 U.S.C. § 158. Pursuant to § 158(a)(1), the court has mandatory jurisdiction over this appeal, which is a final order of the Bankruptcy Court. 28 U.S.C. § 158(a)(1). The court reviews the Bankruptcy Court's findings of fact for clear error and exercises plenary review over questions of law. See Am. Flint Glass Workers Union v. Anchor Resolution Corp., 197 F.3d 76, 80 (3d Cir. 1999). The court must "break down mixed questions of law and fact, applying the appropriate standard to each component." Meridian Bank v. Alten, 958 F.2d 1226, 1229 (3d Cir. 1992).

         IV. DISCUSSION

         A. Stay Motion

         The Stay Motion must be denied as moot. The Stay Motion requested a stay of the trial on the UST's complaint objecting to discharge, pending the court's ruling on this appeal. The trial was completed before the court ruled on the Stay Motion. The relief requested in the Stay Motion is therefore moot. Even if the Stay Motion were not moot, however, the court would not have granted relief. Appellant did not seek a stay pending appeal in the Bankruptcy Court prior to moving for a stay in this court on September 25, 2017.[5] Pursuant to Bankruptcy Rule 8007(a)(1), a party seeking a stay pending appeal of a bankruptcy court order must ordinarily request the stay from the bankruptcy court in the first instance. Where, as here, a stay pending appeal is sought in the district court in the first instance, the movant must "show that moving first in the bankruptcy court would be impracticable." Fed.R.Bankr.P. 8007(b)(2)(A). The Stay Motion does not indicate any reason that a stay was not sought from the Bankruptcy Court. In his reply, Appellant states that he "filed the stay motion with the Federal Court because Appellant feared [t]hat it would be denied and [because] Appellant has filed a motion ...


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