Mark D. Montgomery

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/10/06
Mark D. Montgomery
05-10930
Order Granting [60-1] Motion For Relief From Stay As To Order dismissing
Debtor's case and/or Motion to extend deadlines for filing plan by Mark D.
Montgomery .
Received on: 2006-05-10 14:00:08.000
2006-05-10 00:00:00.000
2006-05-10 00:00:00.000
James Burke
Case 05-10930-s13 Doc 64 Filed 05/10/06 Entered 05/10/06 15:29:00 Page 1 of 12

1 The Chapter 13 Trustee had been excused from further
participation in the hearings at her request. 	The Hendersons,
having been forced to file their own chapter 7 case, negotiated
with their trustee to reacquire the claim against Debtor
Montgomery. 	In consequence, by the time of the final hearing,
only Debtor’s counsel and the Hendersons’ counsel were left
contesting the matter.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
Mark D. Montgomery,
Debtor. 	No. 13 - 05-10930 - SL
ORDER GRANTING MOTION TO (RECONSIDER) REOPEN CASE
ON THE BASIS OF EXCUSABLE NEGLECT
On March 27, 2006, the Court entered an order dismissing
this chapter 13 case due to Debtor’s failure to timely file a
chapter 13 plan. 	Doc 58. 	The Debtor filed his Motion for Relief
from Order Dismissing Debtor’s Case Entered March 28 [sic], 2006
and/or Motion to Extend Deadlines for Filing Plan of
Reorganization (doc 60) (“Motion”) on April 6, 2006. 	The Motion
came before the Court for a preliminary hearing on April 24,
2006, and for a final hearing on May 8, 2006. 	At the preliminary
hearing the Court granted the Motion insofar as the Court agreed
to consider again the merits of its dismissal of the chapter 13
case. 	Having heard the presentations of counsel 1 at the final
hearing, the Court grants the Motion, setting aside the order of
dismissal and reopening the case.
Background
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Page -2-
Debtor commenced this case by filing a chapter 7 petition on
February 10, 2005. 	The Hendersons sought to dismiss the case,
and also filed a non-dischargeability action against the Debtor
in connection with the contract to remodel their house and a
guilty plea by Debtor to a charge of contracting without a
contractor’s license. 	On October 10, 2005, Debtor moved to
convert his case to one under chapter 13 (doc 27), which motion
was granted on November 3, 2005 (doc 30). 	Debtor’s chapter 13
plan was therefore due, absent an extension of time, on Friday,
November 18, pursuant to Fed.R.Bankr.P. 3015(b). 	Taking into
account this Court’s “drop box rule”, NM LBR 5005-1 and Order
Adopting Guidelines for Attorney Filing by Electronic
Transmission, Misc. No. 99-359 (Aug. 18, 1999), applicable to all
filings unless otherwise ordered by the Court, the last moment
for filing the plan timely was Monday, November 21, at 7.59 a.m.
The plan was instead received the next day, Tuesday, November 22,
at 2.53.07 p.m.
On December 8, the Hendersons filed their objection to the
plan, which included a request to dismiss the plan as untimely
filed. Doc 40. 	The motion to dismiss was separately docketed
(doc 42), even though it was part of the single document which
constituted among other things the plan objection. 	On the same
day, the Hendersons noticed out a twenty-day objection period
(doc 44), exactly as permitted and required by NM LBR 9013-1(c).
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Page -3-
The notice stated in part that “[i]f objections are timely filed,
a hearing to consider them will be held on short notice to the
movant and any objecting party.” 	Debtor objected to the motion
to dismiss on January 5, 2006, saying “Said error was harmless
and it did not prejudice any of the creditors.” 	Doc 53. 	No
hearing specifically on the motion to dismiss was ever requested,
scheduled or noticed out (presumably because by this time the
chapter 7 trustee had taken responsibility for pursuing the claim
objection, which would have included the motion to dismiss).
In the meantime, on December 27, 2005, the Henderson’s
chapter 7 trustee filed an entry of appearance (doc 49) and a
“transfer” of the Hendersons’ claim to himself as trustee in
their chapter 7 case (No. 7-05-21369ML), copying Debtor’s counsel
on both documents. 	The Hendersons had filed their chapter 7
petition on October 14, 2005. 	The Hendersons’ trustee did not
file anything specifically in respect of the Henderson’s motion
to dismiss; at the March 21, 2006 preliminary hearing he stated
for the first time that he would pursue the motion to dismiss.
The Chapter 13 Trustee had also objected to the plan (doc
45). 	As he is required to do by NM LBR 3015-3, Debtor’s counsel
sent out (albeit belatedly) a preliminary hearing notice on those
objections (doc 55) on February 28, 2006, noticing March 21, 2006
as the date for the preliminary hearing. 	Oddly enough in this
case, on March 14, 2006, the Hendersons’ chapter 7 trustee filed
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Page -4-
and sent out an amended notice, changing the time of the
preliminary hearing (doc 56), and the preliminary hearing took
place on March 21 at 1.30 p.m. 	Doc 57 (minutes). 	Neither notice
mentioned the Henderson’s motion to dismiss or Debtor’s response
thereto. 	At the hearing, the Court noted that the plan had been
filed later than the fifteen days after the conversion of the
case, and dismissed the case. 	The Debtor then timely filed the
Motion.
Debtor correctly argued that the notice of the preliminary
hearing, at which the Court granted the Hendersons’ motion to
dismiss, did not notice the motion to dismiss as one of the
subjects of the preliminary hearing. 	For this reason the Court
orally granted the preliminary relief requested in the Motion
immediately.
In the Motion, and at both hearings, Debtor’s counsel
explained that while he had been aware of Rule 3015 of the
Fed.R.Bankr.P, during the middle weeks of November 2005 he was
extraordinarily busy with a multitude of section 341 meetings
required by the tidal wave of filings that preceded October 17,
2005, the effective date of most of the provisions of the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
(“BAPCPA”).
Debtor’s counsel also explained that he was unaware of this
Court’s repeated previous rulings in late filed cases, in which
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2 Counsel maintains an office in Las Cruces, New Mexico, and
also meets with clients in Roswell, New Mexico. 	Pursuant to
Fed.R.Evid. 201 after consulting Google’s map function, the Court
takes judicial notice of the adjudicative facts that Alamogordo
(continued...)
Page -5-
almost never did the Court not dismiss the case. 	Counsel pointed
out that the Court’s “hard and fast rule of dismissing a case if
the Debtor is late filing a plan of reorganization,” Motion, at
4, is not published anywhere within the local rules, the Clerk’s
Practice and Procedure Guide, or this Court’s homepage. 	Putting
aside Counsel’s characterization of the Court’s “hard and fast”
dismissal rule, it is true that nowhere on the Court’s homepage
or in the local rules is there any such explanation or summary.
And Counsel is undoubtedly also correct that not being able to
regularly attend hearings in person, Counsel is deprived of the
opportunity to sit through many of the Court sessions and
accumulate thereby a body of knowledge about how the Court rules
on many different issues, reacts to certain arguments or
situations, and otherwise conducts hearings and makes decisions.
Debtor’s counsel also pointed out that when the Hendersons
filed their objection and motion to dismiss they did not legally
“own” the claim, having filed their bankruptcy petition on
October 14, 2005. 	And Debtor, who lived in Alamogordo at the
time (and still does, when he is not on the road as a truck
driver), had no personal transportation, so that he was unable to
reach his counsel’s office until Monday, November 21. 2 	Finally,
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2(...continued)
is 68 miles from Las Cruces and 117 miles from Roswell. 	The
Court suspects strongly that there is bus service among the three
cities, and thus the Debtor’s inability to get to his counsel’s
office sooner was relative.
3 Rule 9006(b) provides as follows:
“(b) Enlargement
“(1) In general
“Except as provided in paragraphs (2) and (3) of this
subdivision, when an act is required or allowed to be done at or
within a specified period by these rules or by a notice given
thereunder or by order of court, the court for cause shown may at
any time in its discretion (1) with or without motion or notice
order the period enlarged if the request therefor is made before
the expiration of the period originally prescribed or as extended
by a previous order or (2) on motion made after the expiration of
the specified period permit the act to be done where the failure
to act was the result of excusable neglect.
“(2) Enlargement not permitted
“The court may not enlarge the time for taking action under Rules
1007(d), 2003(a) and (d), 7052, 9023, and 9024.
“(3) Enlargement limited
“The court may enlarge the time for taking action under Rules
1006(b)(2), 1017(e), 3002(c), 4003(b), 4004(a), 4007(c), 8002,
and 9033, only to the extent and under the conditions stated in
those rules.”
Page -6-
Debtor argues that the impact on the administration of the estate
and on the creditors will be minimal, whereas the impact on him
will be massive, given that if he must refile, it will be under
the provisions of BAPCPA, which provides in part that §
523(a)(2)(A) claims are no longer dischargeable in a chapter 13
case. 	§ 1328(a)(2) (as amended 2005). 	These facts were
essentially uncontested and thus are the basis for whatever
decision the Court makes. 	Debtor’s counsel cited Rule
9006(b)(1)(2) 3 and Pioneer Inv. Services Co. V. Brunswick Assocs.
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Page -7-
Ltd. Partnership, 507 U.S. 380 (1993) as the legal authority that
allows this Court to grant the Motion.
Analysis
The Court has been faced numerous times with making the
decision to dismiss a chapter 13 case for the failure to file a
plan timely pursuant to Rule 3015. 	In virtually every case the
Court dismissed, on the basis that the deadline was clear and
that Rule 3015 was part of a strong Congressional policy to move
chapter 13 cases along briskly. 	The Court never permitted other
factors to come into play, such as the relative prejudice to the
various parties. 	The standard essentially was whether the
failure to file timely was excusable in some way; if it was not
sufficiently excusable (e.g., ignorance of the rule was not
considered sufficiently excusable), the case was dismissed,
regardless of other considerations.
Simplistically speaking, this was the interpretation of Rule
9006(b)(1)(2) espoused by Justice O’Connor in Pioneer, writing
for the dissenters.
Consequently, until the reason for the omission is
determined to be sufficiently blameless, the
consequences of the failure, such as the effect on the
parties or the impact on the judicial system, are not
relevant.
Id., at 400. 	(Citations omitted.) 	And that interpretation is
what the language of the rule would seem to command.
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Page -8-
However, that is not how the majority interpreted the rule,
and of course that is what the Court is, and should have been in
previous cases, bound by. 	Instead, Pioneer established an
equitable balancing test, as follows:
[T]he determination is at bottom an equitable one,
taking account of all relevant circumstances
surrounding the party's omission. 	These include, as
the Court of Appeals found, the danger of prejudice to
the debtor, the length of the delay and its potential
impact on judicial proceedings, the reason for the
delay, including whether it was within the reasonable
control of the movant, and whether the movant acted in
good faith.
Id., at 395. 	(Citation and footnotes omitted.) 	The court went
on to add that a party is also bound by its counsel’s acts and
omissions. 	Id., at 396-97. 	Based on this view, the court held
that “the lack of any prejudice to the debtor or to the interests
of efficient judicial administration, combined with the good
faith of respondents and their counsel, weigh strongly in favor
of permitting the tardy claim.” 	Id., at 398.
Applying Pioneer to this case, facts that stand out are that
the filing of the plan was minimally late, there would be
virtually no adverse impact on the administration of the chapter
13 case (but for the time that it has taken to reconsider and set
aside the Court’s initial incorrect decision, for which the
Debtor should not suffer), the adverse impact on the Debtor of
dismissing the case would be enormous, the adverse impact on the
creditors is minimal and even beneficial by allowing the case to
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Page -9-
go forward and provide some payment to them (other than the
Hendersons, of course, who would gain something of a “windfall”
benefit by the dismissal of the case), and Debtor and his counsel
were unquestionably acting in good faith.
On the other hand, the delay was clearly within Debtor’s
counsel’s control; he was aware of the deadline and all he had to
do was timely file a precautionary motion for an extension of
time as provided by Rule 9006(b)(1)(1), and thereby protect his
client. 	This he did not do, in what clearly amounted to some
degree of indifference. 	(Given the circumstances, the Court
finds that the degree of indifference was small.) 	But a limited
degree of indifference was precisely what constituted excusable
neglect in Pioneer: “The [bankruptcy] court also found that
respondents’ counsel was negligent in missing the bar date and,
to a degree, indifferent to it.” 	Id., at 386. 	(Citation to
record and internal punctuation omitted.)
The facts in Pioneer differ from those in this case, of
course; that case dealt with a late-filed claim in a chapter 11
case. 	And the Pioneer majority took into account the history of
chapter 11 treatment of claims which, according to the majority,
de-emphasized prompt disposition of claims and emphasized
assurance of payment to those entitled to that. 	Id., at 389-91.
That does not appear to be the prevailing philosophy of chapter
13 cases, in which getting the plan promptly implemented is
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Page -10-
critical. 	(This would seem to be even more the case with claim
filings.) 	Nevertheless, there is no reason not to apply the
Court’s interpretation of Rule 9006(b) to the facts of this or
any case in which Rule 9006(b) comes into play, although
obviously the circumstances of each case will dictate the
outcome. 	And given the relative small degree of Counsel’s
indifference, the massive adverse impact of dismissal on the
Debtor and the quite slight adverse impact on everyone else, the
Court must in these circumstances find “excusable neglect” as
required under Rule 9006(b)(1)(2).
Conclusion and Order
Under the equitable balancing test mandated by Pioneer Inv.
Services Co. V. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380,
the Court finds and concludes that the Motion for Relief from
Order Dismissing Debtor’s Case Entered March 28 [sic], 2006
and/or Motion to Extend Deadlines for Filing Plan of
Reorganization (doc 60) should be, and hereby is, granted. 	It is
further Ordered that the Order Dismissing Case (doc. 58) is set
aside. 	This case shall be set for a preliminary hearing on the
Debtor’s plan at 11.00 a.m. (MDT) on Tuesday, May 16, 2006.
Honorable James S. Starzynski
United States Bankruptcy Judge
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Page -11-
I hereby certify that on May 10, 2006, a true and correct copy of
the foregoing was electronically transmitted, faxed, delivered,
or mailed to the listed counsel and/or parties.
R Trey Arvizu, III
PO Box 1479
Las Cruces, NM 88004-1479
Ronald E Holmes
112 Edith Blvd NE
Albuquerque, NM 87102-3524
Kelley L. Skehen
625 Silver Avenue SW
Suite 350
Albuquerque, NM 87102-3111
Kieran F. Ryan
c/o Atty Kieran F. Ryan
PO Box 26
Las Cruces, NM 88004
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