Hank Willms v. Rowe Sanderson, Iii

Appellant Rowe Sanderson III appeals from the district court’s judgment affirming the bankruptcy court’s order granting Appellees Hank and Dolly Willmses’ motion for an extension of time to file a nondischargeability complaint. We conclude that under our existing case law the bankruptcy court erred in two ways — by sua sponte extending the time for the Willmses to file a nondischargeability complaint after the deadline had already passed and by doing so without either a showing or a finding of cause. Therefore, we reverse the district court and remand with instructions to dismiss.

I.

A.

The material facts underlying the parties’ dispute are straightforward. Rowe Sanderson’s company (“SCI”) was experiencing a cash flow problem. It had a promissory note for $1.5 million from La Pine Village, LLC (“LPV”) that was secured by a deed of trust to real property in Oregon. Sanderson expected to receive full repayment on the LPV note in two months but in the meantime needed operating capital for SCI.

Hank and Dolly Willms agreed to provide bridge financing. They loaned $500,000 to SCI, in exchange for which SCI executed a note agreeing to repay that amount plus interest within…