KSB

Judge Berger

04-06062 Perry Developers Inc v. Volkerding (Doc. # 58) - Document Text

Case 04-06062 Doc# 58

The relief described hereinbelow is SO ORDERED.

Signed August 25, 2009.

United States Bankruptcy Judge

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF KANSAS


In re:

JEFFREY V. VOLKERDING and Case No. 03-25058
SHERRI L. VOLKERDING, Chapter 7
Debtors.

__________________________________
ROBERT D. BERGER
Filed 08/25/09 Page 1 of 5

PERRY DEVELOPERS, INC.,
Plaintiff,

v. Adv. No. 04-6062
JEFFREY VOLKERDING,
Defendant.

ORDER GRANTING DEFENDANT’S MOTION TO DISMISS

Plaintiff Perry Developers, Inc. (“Perry”), filed this action under 11 U.S.C. §523 seeking
to except from discharge in excess of $308,000.00 arising from a state court judgment finding
Debtor obtained funds through fraud. Debtor moves the Court to dismiss Perry’s §523 complaint
because it was filed after the March 8, 2004, deadline. The Court grants Debtor’s motion.

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Background

Debtor filed for bankruptcy on December 1, 2003. The Court set March 8, 2004, as the

deadline for filing complaints objecting to discharge and determining the dischargeability of

certain debts. Perry filed its complaint on April 7, 2004. Perry did not file any motions for an

extension of time.

On May 26, 2004, Debtor filed an answer, but did not specifically raise the time

limitation found in Rule 4007(c) as an affirmative defense. In the Answer, Debtor raised

“latches [sic], waiver, lack of jurisdiction, and any other matter that constitutes an affirmative

defense or avoidance that may be discovered during the pendency of this action.” On October

29, 2004, Debtor filed his first motion to dismiss. The Court denied the first motion without

prejudice stating,

[I]n Kontrick v. Ryan, the United States Supreme Court agreed with the Seventh
Circuit Court of Appeal’s observation that time bars, such as the time constraints
of Rules 4004(a) and (b) of the Federal Rules of Bankruptcy Procedure, which
provide essentially the same time prescriptions as Rule 4007(c), must be raised in
an answer or responsive pleading.1 Mr. Volkerding did not raise the time
constraints prescribed by Rule 4007(c) by answer or responsive pleading.
Consequently, Mr. Volkerding’s Motion to Dismiss must be denied.2

The Court notes, however, that “leave [to amend an answer] shall be
freely given when justice so requires.”3 Because Mr. Volkerding filed his Motion
to Dismiss early in this proceeding and both he and Perry should have been aware
of the time bar prescribed by Rule 4007(c), allowing Mr. Volkerding to amend his
Answer will not unduly prejudice Perry. The Court therefore grants Mr.
Volkerding leave to file an Amended Answer . . . .

1 Kontrick v. Ryan, 540 U.S. 443, 459 (2004) (citing Fed. R. Civ. P. 8(c) and agreeing with the 7th Circuit
Court of Appeals that time bars generally must be raised in an answer or responsive pleading).

2 Although the statute of limitations is an affirmative defense, it may be raised as a Fed. R. Civ. P. 12(b)(6)
motion for failure to state a claim when the critical dates alleged in the complaint plainly show the limitations period
to have expired. See Aldrich v. McCulloch Properties, Inc., 627 F.2d 1036, 1041 n.4 (10th Cir. 1980). Here, the
complaint does not plainly show the limitations period to have expired. Accordingly, the time bar prescribed by
Rule 4007(c) is not properly raised in Mr. Volkerding’s Motion to Dismiss.

3 FED. R. CIV. P. 15(a), made applicable to this proceeding by FED. R. BANKR. P. 7015.

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Debtor filed his First Amended Answer in the time allowed by the Court and cited Rule
4007(c). Thereafter, Debtor filed his second motion to dismiss. Then, for over two years, the
case languished after the parties advised the Court they were attempting to settle. In May 2009,
the Court summoned the parties to a status conference and advised counsel it would take the
second motion to dismiss under advisement.

Discussion

A §523 complaint to determine the dischargeability of a particular debt must be filed not
later than 60 days following the first date set for the meeting of creditors.4 Rule 4007(c) reflects
an important policy and purpose to protect debtors from continued creditor demands after a date
certain. A definitive end to creditor collection attempts facilitates the debtor’s prompt
emergence from bankruptcy and advances bankruptcy’s preeminent goal, the debtor’s fresh
start. Accordingly, the time limit for §523 actions is to be strictly enforced.5

A debtor forfeits the timeliness defense if he proceeds to trial on the merits without
raising it.6 In Kontrick, a creditor filed an objection to a debtor’s discharge out of time. The
debtor answered the complaint and responded to a summary judgment motion without raising the
timeliness defense. Only after the bankruptcy court granted the creditor summary judgment did
the debtor move for reconsideration, arguing the complaint was not timely filed. The Supreme
Court held the timeliness defense is lost if the debtor does not raise the issue before the court
reaches the merits of the complaint.7 Kontrick noted the proper place and time to raise timeliness

4 FED. R. BANKR. P. 4007(c).
5 In re Atteberry, 194 B.R. 521, 523 (D. Kan. 1996), citing In re Themy, 6 F.3d 688, 689 (10th Cir. 1993).
6 Kontrick v. Ryan, 540 U.S. 443, 459 (2004).

7

Id.

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is in the answer or responsive pleading; however, Kontrick also noted an answer may be
amended to include an inadvertently omitted affirmative defense even after the time to amend
“as a matter of course” has passed.8

Debtor’s first motion to dismiss was denied without prejudice for the stated purpose of
allowing an amended answer to raise the timeliness defense. A legal defense to a claim not
raised in a pre-answer motion to dismiss may be raised in an amended pleading, a motion for
judgment on the pleadings or summary judgment except for the defenses specifically mentioned
in Fed. R. Civ. P. 12(h)(1).9 Timeliness is not a defense mentioned in Fed. R. Civ. P. 12(h)(1);
thus, it is a legal defense capable of being raised by amendment or other method listed in Fed. R.
Civ. P. 12(h)(2).10

Despite the passage of time spent on a possible settlement, Debtor raised a Rule 4007(c)
defense prior to the Court reaching the case on the merits. Further, Debtor raised the defense
according to leave previously granted by the Court. Perry’s §523 complaint was untimely filed
without leave for an extension. Rules 4007 and 9006 are unforgiving to Perry, while Debtor,
under Rules 7012(h)(2) and 7015, has until the Court renders judgment on the merits of the case
to raise timeliness as a defense.

Conclusion

IT IS ORDERED Debtor’s Motion to Dismiss the Complaint is GRANTED.
###
ROBERT D. BERGER

U.S. BANKRUPTCY JUDGE
8

Id.

9 FED. R. CIV. P. 12(h)(2).
10 See Roderick v. Roderick (In re Roderick), 126 B.R. 280, 283 (Bankr. N.D. Okla. 1991).


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DISTRICT OF KANSAS


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