Miyasaki v. Lui (In re Lui)

No. NC–13–1037–JuKiD (B.A.P. 9th Cir. Mar. 7, 2014)
Affirming the bankruptcy court, the bankruptcy appellate panel held that a creditor’s late-filed nondischargeability complaint did not relate back to its objection to the confirmation of the debtor’s Chapter 13 plan because the objection did not substantially comply with the pleading requirements for a civil complaint under Rule 8(a) of the Federal Rules of Bankruptcy Procedure made applicable by Rule 7008 of the Federal Rules of Bankruptcy Procedure. A paragraph in the creditor’s plan objection addressing nondischargeability did not give the debtor a sufficient notice of the basis for the creditor’s claim and the legal grounds for recovery. First, the creditor failed to differentiable between § 523(a)(2)(A) and (B) and the justifiable reliance or reasonable reliance standards of those sections. Second, the facts in the nondischargeability paragraph were neutral and conclusory and failed the standard for pleading a fraud claim with the particularity required by Civil Rule 9(b). Third, the creditor did not appear to make a demand for relief in the plan objection. Finally, there was no statement that the proceeding was core or noncore as required by Bankruptcy Rule 7008(a).
Procedural context:
The bankruptcy court entered an order dismissing the creditor’s late-filed adversary complaint under Bankruptcy Rule 4007(c). The court held that the creditor’s plan objection did not substantially comply with the criteria for a complaint under Civil Rule 8(a). Therefore, the relation back doctrine was inapplicable.
The debtor executed a promissory note as partial payment for real estate. After filing Chapter 13 bankruptcy, the debtor set the deadline to object to its discharge and to challenge the dischargeability of certain debts. Before the deadline, the creditor noteholder filed an objection to the confirmation of the debtor’s plan. In the objection the creditor mentioned the debtor’s alleged fraud in obtaining the real estate, that the debt based on the note was nondischargeable under § 523(a)(2), and that she intended to file an adversary proceeding on this issue. Three weeks after the deadline to file nondischargeability complaints passed, the creditor filed a complaint seeking to except the debt owed to her from discharge under § 523(a)(2).
Jury, Kirscher, and Dunn, Bankruptcy Judges.

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