In re Baker

625 B.R. 27

IN RE: Arnold B BAKER; dba Abbaker Enterprises, LLC ; dba Arnoldbbaker, LLC Debtor.

Case No: 20-33465

United States Bankruptcy Court, S.D. Texas, Houston Division.

Signed December 21, 2020.

H. Gray Burks IV, Shapiroschwartz LLP, Houston, TX, for Debtor.

MEMORANDUM OPINION

Eduardo V. Rodriguez, United States Bankruptcy Judge

There are limited instances where courts afford debtors a metaphorical "get out of jail free" card. This Memorandum Opinion determines whether circumstances exist in which the instant debtor should not justly be held accountable for failure to file a plan of reorganization within an established deadline where under chapter 11, subchapter V, only the debtor may file a plan. On December 8, 2020, the Court conducted a hearing on debtor's second request to extend the deadline to file a plan of reorganization.

For the reasons set forth herein, this Court finds that the need for an extension to file a plan beyond the November 23, 2020 deadline is attributable to circumstances for which the debtor should not justly be held accountable. The debtor shall have until December 28, 2020 to file corrective Schedules D and E/F, properly setting forth the amount of debt for each creditor. This Court previously issued an order establishing the deadline for the filing of governmental proofs of claim as January 4, 2021.¹ Thus, the debtor shall have until January 18, 2021 to file a plan of reorganization.

I. FINDINGS OF FACT

This Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 9014 and Rule 7052, which incorporates Federal Rule of Civil Procedure 52. To the extent that any finding of fact constitutes a conclusion of law, it is adopted as such. To the extent that any conclusion of law constitutes a finding of fact, it is adopted as such. This Court made certain oral findings and conclusions on the record. This Memorandum Opinion supplements those findings and conclusions. If there is an inconsistency, this Memorandum Opinion controls.

On July 7, 2020, Arnold B. Baker ("Debtor ") filed his initial petition under chapter 11, subchapter V, title 11 of the Code.² More than half the amount of Debtor's secured debt is comprised of a single governmental tax obligation.³ On July 8, 2020, the notice of the First Meeting of Creditors was filed on the Court's docket setting November 9, 2020 as the deadline for the filing of all non-governmental proofs of claim ("341 Notice ").⁴ Conspicuously missing, however, was the deadline for the filing of governmental proofs of claim that is routinely contained within a 341 Notice.

On August 12, 2020, and pursuant to 11 U.S.C. § 1188(a), this Court held a status conference and ordered Debtor to file a plan of reorganization, no later than October 5, 2020.⁵ On September 15, 2020, Debtor filed an expedited motion to extend the October 5, 2020 deadline to November 23, 2020, several days past the November 9, 2020 non-governmental proofs of claim bar date.⁶ Debtor requested an extension because of the $4,092,944.50 scheduled general unsecured debt, most of the amounts were listed as contingent, unliquidated, and disputed while other scheduled debt was listed as unknown. For example, the City of New Orleans was listed as "Unknown."⁷ The amount for David White was listed as $0, but Debtor checked the box labeled "Other" and noted that the amount could be $1,000,000 based on an arbitration claim.⁸ Southern Aggregates, LLC was listed as $0, but just like David White's claim, the "Other" box was checked listing an amount of $300,000 based on a litigation claim.⁹ WDD Investments, Inc. was listed as $0 based on a litigation claim.¹⁰ Wells Fargo Bank was scheduled twice and both claims were listed as "Unknown" noting that one claim could be for $45,000 and the other for $72,500.¹¹ Finally, approximately $3,228,328.50 of the remaining debt was listed as contingent, unliquidated, and disputed.¹² Counting the debt listed as "Other", but excluding the "Unknown" amount for the City of New Orleans, Debtor scheduled a total of $6,333,764.91 in debt.¹³

To promote an efficient and orderly administration of bankruptcy cases, it is important for debtors to be aware of all claims asserted against them. As Rule 3003(c)(2) states, only creditors who were not scheduled or scheduled as disputed, contingent, or unliquidated must file claims.¹⁴ Here, Debtor scheduled over $4 million of general unsecured debt as either unknown or contingent, unliquidated, and disputed. The time for claimants to file these claims is set by the Court.¹⁵ The bar date in any bankruptcy case not only allows claimants to benefit by participating in the plan, but also benefits all parties-in-interest. Finally, a bar date fixed before confirmation not only makes it easier for everyone to calculate the relative recovery one can expect to receive under a given plan, it provides the debtor an opportunity to propose a feasible plan based on allowed claim amounts.

Accordingly, the September 15, 2020 motion was granted, giving Debtor until November 23, 2020, to file his plan.¹⁶ The bar date for the filing of non-governmental unit claims was November 9, 2020,¹⁷ and as of that date, $6.2 million in proofs of claim have been timely filed. However, instead of filing a plan on November 23, 2020, as ordered by this Court, Debtor filed a single matter self-styled as "Expedited Motion for Entry of Order Fixing Claims Filing Date for Governmental Units as December 28, 2020 and Motion to Extend Time to File Subchapter V Chapter 11 Plan January 25, 2021" ("Motion ").¹⁸

II. CONCLUSIONS OF LAW

A. Jurisdiction and Venue

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334, which provides "the district courts shall have original and exclusive jurisdiction of all cases under title 11." Section 157 allows a district court to "refer" all bankruptcy and related cases to the bankruptcy court, wherein the latter court will appropriately preside over the matter.¹⁹ This court determines that pursuant to 28 U.S.C. § 157(b)(2)(A) and (O), this proceeding contains only core matters.

This Court may only hear a case in which venue is proper.²⁰ 28 U.S.C. § 1409(a) provides that "a proceeding arising under title 11 or arising in or related to a case under title 11 may be commenced in the district court in which such case is pending." Debtor's principal residence is Houston, Texas, and his chapter 11 case is presently pending in this Court; therefore, venue of this proceeding is proper.

B. Constitutional Authority to Enter a Final Order

This Court has an independent duty to evaluate whether it has the constitutional authority to sign a final order.²¹ In Stern, which involved a core proceeding brought by the debtor under 28 U.S.C. § 157(b)(2)(C), the Supreme Court held that a bankruptcy court "lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor's proof of claim."²² As indicated above, the pending matter before this Court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A) and (O). The ruling in Stern was limited to the one specific type of core proceeding involved in that dispute, which is not implicated here. Additionally, in Stern, the debtor filed a counterclaim based solely on state law. Here, Debtor's Motion is based on 11 U.S.C. § 1189(b) of the United States Bankruptcy Code. A similar provision does not exist under state law. Accordingly, the narrow limitation imposed by Stern does not prohibit this Court from entering a final order here.²³

III. ANALYSIS

A. Debtor's Bankruptcy Schedules

As a preliminary matter, the aggregate noncontingent liquidated secured and unsecured debt limit of $2,725,625 as of the date of filing applies to the instant subchapter V case.²⁴ However, under the Coronavirus Aid, Relief And Economic Securities Act, the aggregate debt limit is currently $7,500,000.00 effective as of March 25, 2020.²⁵ Debtor scheduled $3,228,328.50 in debt as either disputed, contingent, or unliquidated out of a total debt load of $6,333,764.91. But, Debtor incorrectly filled out Schedules D and E/F by listing debt as $0 or "Unknown," but identifying a dollar amount under "Other."

A debtor's eligibility for Subchapter V relief must be determined based on the information contained within debtor's schedules on the petition date.²⁶ The "Other" box that Debtor improperly utilized is solely intended to describe the type—not the amount—of scheduled debt if that debt does not match one of the itemized descriptions. Debtor must file corrective Schedules D and E/F to properly reflect the amount of debt and utilize the check boxes as they were designed to be used.

B. Plan Filing Deadline Pursuant to U.S.C. § 1189(b)

Section 1189 provides, "[t]he debtor shall file a plan not later than 90 days after the order for relief under this chapter, except that the court may extend the period if the need for the extension is attributable to circumstances for which the debtor should not justly be held accountable."²⁷ As a preliminary matter, the 90-day statutory limit is not jurisdictional, meaning a court is not stripped of jurisdiction over the debtor's case on day 91 post-order for relief if the debtor has not yet filed a plan.²⁸ The Supreme Court has held that "[a] rule should not be referred to as jurisdictional unless it governs a court's adjudicatory capacity, that is, its subject-matter or personal jurisdiction. Other rules, even if important and mandatory, should not be given the jurisdictional band."²⁹

Statutory filing deadlines are generally labeled as "quintessential claim-processing rules" and should not be treated as jurisdictional "[u]nless Congress has ‘clearly state[d]’ that a statutory limitation is jurisdictional."³⁰ Nothing in § 1189(b) indicates that Congress intended the 90-day filing deadline to be jurisdictional. The statute does not preclude extending the filing deadline, and in fact...