Smith v. Kennedy (In re Smith)

We must decide whether objections filed following adjournment of the bankruptcy creditors’ meeting “until further notice” were timely.

I

This appeal arises out of the bankruptcy of John Douglas Smith (“Smith”), a physician who is one of the two co-founders of Wilshire Oncology Medical Group Inc. (“Wilshire”). On November 6, 1992, the *1103 objecting creditors (“Appellees”) filed an action against Wilshire in state court for abuse of pension funds, breach of fiduciary-duty, employee lockouts, and self-dealing. On August 4, 1995, Appellees obtained a jury verdict for more than $4 million.

Smith filed for Chapter 11 bankruptcy on August 7,1995. On August 9, 1995, the bankruptcy court granted Appellees leave to prosecute their case to completion and they obtained a corrected judgment for $5.5 million on September 9, 1995. That state court action remains on appeal.

In his bankruptcy, Smith timely filed exemptions for various assets, including his limited partnership interest in Bell-wood Limited Partnership (“Bellwood”). The assets in Bellwood consist of three real estate properties that were purchased by Smith and his wife during the period from 1975 through 1981. Smith contends…

dissenting:

I respectfully dissent. I do not object to the substance of the majority’s ruling on the merits regarding Smith’s claimed exemption, but to the fact that it reached the question at all. Even though the listed exemption may have been without merit, the objection was untimely and should have been rejected.

In Taylor v. Freeland & Kronz, 503 U.S. 638 , 112 S.Ct. 1644 , 118 L.Ed.2d 280 (1992), the debtor claimed a meritless exemption. Had the trustee or creditors objected to the claim within 30 days after the initial creditors meeting, as required under Federal Rule of Bankruptcy Procedure 4003(b), the property could have been retained in the bankruptcy estate. 503 U.S. at 642 , 112 S.Ct. 1644 . However, their failure to do so within that period, the Supreme Court ruled, prevented them from challenging the validity of the exemption later — “whether or not [the debtor] had a colorable statutory basis for claiming it.” Id. at 644 , 112 S.Ct. 1644 .

I would reach the same result here. Pursuant to 11 U.S.C. § 341 (a), the creditors held their initial meeting on September 8,1995, then continued it to September 22, and then to October 27. At the conclusion of the October 27…