Baitcher, Matter of

• Citation: 781 F.2d 1529
• Decision Date: 10 February 1986
• Docket Number: No. 85-8074,85-8074
• Parties: Bankr. L. Rep. P 71,005 In the Matter of Barbara Ann BAITCHER, Debtor. John SAMUEL, Plaintiff-Appellant, v. Barbara Ann BAITCHER, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1529

781 F.2d 1529

Bankr. L. Rep. P 71,005

In the Matter of Barbara Ann BAITCHER, Debtor.

John SAMUEL, Plaintiff-Appellant, v. Barbara Ann BAITCHER, Defendant-Appellee.

No. 85-8074.

United States Court of Appeals, Eleventh Circuit.

Feb. 10, 1986.

Kenneth G. Levin, Rose H. Nathan, Atlanta, Ga., for plaintiff-appellant.

Gus H. Small, Jr., Shereen Walls, Atlanta, Ga., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before RONEY and HATCHETT, Circuit Judges, and NICHOLS ^*, Senior Circuit Judge.

NICHOLS, Senior Circuit Judge:

This case is before us on Samuel's appeal from a judgment of the United States District Court, Northern District of Georgia, which affirms the bankruptcy court's determination of dischargeability of Baitcher's debt to Samuel "under all subsections of 11 U.S.C. Sec. 523." This court is of the opinion that the judgment is final for our jurisdictional purposes despite what is said to be pendency of proceedings under 11 U.S.C. Sec. 727 to set aside Baitcher's discharge on statutory grounds. We hold that there are issues of fact which should have been tried, and it was error to discharge Baitcher by summary judgment in advance of such trial. Therefore, we vacate and remand.

Facts

In 1974 Barbara Baitcher and her former husband, Daniel Baitcher, owned and controlled an Atlanta restaurant, The Flame, Inc. He was indicted for an offense unrelated to that business, but the liquor license was suspended according to official policy. The business became unable to pay its debts and Barbara, as corporate secretary, executed and filed a voluntary petition in bankruptcy. She had, up to that time, managed the restaurant as Mr. Baitcher had business interests elsewhere that preempted his attention. She spent 12 to 15 hours there daily and had been accustomed to procure, among other things, necessary insurance. They were not allowed to remain as debtors in possession and the bankruptcy court appointed receivers who were ostensibly and legally in charge. She continued to work on the premises for long hours and made many managerial decisions. However, neither she nor the receivers renewed the workmen's compensation insurance required by Georgia law, and while it was lapsed, a waiter, appellant Samuel, suffered a fall with resultant injury. The State Compensation Board made an award to Samuel, to be paid by the employer plus a penalty, as state law required, if it had failed to obtain proper coverage, but the bankruptcy prevented recovery from that source. In 1976 Samuel sued both Baitchers, personally, for the award and penalty, but Daniel Baitcher, though acquitted of the criminal charge, was not in business thereafter, and judgment proof as seems to be assumed.

Barbara Baitcher being greatly afflicted by suits and attachments deriving from The Flame failure, but filed against her personally, on October 2, 1979, petitioned for her individual discharge in bankruptcy. She failed to list Samuel among her creditors, though she was, through counsel, actively defending against his suit. At about that time, strictly, the day before, the state trial court dismissed Samuel's suit against the Baitchers. The ground of dismissal was that the state compensation law provided, according to its terms, the sole and only remedies for the industrial injuries it covered, and it provided for the employer's liability plus penalty in case it failed to obtain legally required insurance, but failed to deal with the case of alleged liability of any other and further persons.

In 1980 Barbara Baitcher obtained her discharge, but of course it did not discharge Samuel's claim, which she had failed to list, and he had been given no actual notice of the new bankruptcy proceeding. It had been a "no assets" bankruptcy in which all the creditors got nothing.

Samuel was unsuccessful in an intermediate appeal in his state case, but in February 1981, obtained a reversal. Samuel v. Baitcher, 247 Ga. 71, 274 S.E.2d 327. The Georgia Supreme Court took the view that as corporate officers, the Baitchers were responsible for procuring the insurance and had failed in their duty. It repeatedly calls them "agents" saying:

The issue here can be stated thusly: Can an agent who failed to perform his duty to procure workers' compensation for an insolvent employer rely upon the exclusive remedy bar in defending a suit for an amount equal to the award assessed against the employer?

* * *

* * *

* * * Had the employer's agents (the Baitchers) carried out their duties under the Act by providing workers' compensation insurance coverage, the award would have been collected.

It is to be noted the opinion nowhere attempts to identify who the "employer" was. Whatever or whoever he was, the Baitchers were his agents. It is stated that the court had before it an admission on discovery that the Baitchers were "debtors in possession," but it is clear the court did not rely on it, for then they would have been principals, not agents.

Samuel now obtained a money judgment by the state trial court. Then, and only then, Barbara Baitcher (called Baitcher now as Daniel is out of the case), moved to reopen her bankruptcy, added Samuel's name to the list of creditors, and obtained a new discharge applicable to him.

Proceedings Below

Over Samuel's objections, the bankruptcy judge allowed Baitcher to reopen the proceedings and to add Samuel and his claim. His position was that Samuel was not prevented from "timely filing of a proof of claim" because he was not prejudiced. He was being allowed to file an adversary complaint to litigate even now the issue of dischargeability. 11 U.S.C. Sec. 523(a)(3). As a matter of fact, there never had been a time to file a proof of claim, because there were no assets. We attach the relevant parts of section 523(a) in the section of this opinion that follows.

Upon cross-motions for summary judgment, the bankruptcy judge further rejected the several statutory grounds Samuel asserted to support his complaint of nondischargeability. Samuel addressed these issues under protest, as he asserted the court lacked jurisdiction to consider them. Though Baitcher had a legal duty to obtain the insurance, she was not a fiduciary in the sense of section 523(a)(4). Also, since the appointment of the receivers, she had ceased to be a fiduciary if ever she had been one. It was no longer in her control to pay the insurance. There was no evidence she knew there was no insurance and therefore an intent to deceive Samuel could not be imputed. Section 523(a)(2). As regards the exception for a claim based on willful and malicious injury, section 523(a)(6), the receivers did similar duty in shielding her as to that.

Summary judgment as to the dischargeability complaint was therefore granted on Baitcher's motion and denied on Samuel's, 36 B.R. 588. Samuel's complaint was dismissed, and a discharge was granted to Baitcher, including Samuel's claim.

On the appeal to the district court, the district judge in general followed the same line of reasoning as the bankruptcy judge. At first blush, he had thought the original nonlisting of Samuel's claim had prevented his timely filing of his proof of claim, but on being reminded this had been a no-asset bankruptcy, changed his mind. His final position was, in effect, that there was no such thing as a time too late to file a timely proof of claim, if no deadline for filing such proof was ever set, because there were no assets to distribute to the creditors. There was no such thing as a time too late for filing a dischargeability complaint if, as was the case, such a complaint could now be filed after proper scheduling and notice. It reads as if this would be a per se rule in his court. Prejudice to the creditor would be irrelevant, at least whenever he has the opportunity to defeat an amendment to secure discharge of his claim by a complaint that will be received. The court also added a discussion of the res judicata or collateral estoppel effect of the state court decision. He was of the view it was entitled to no such effect because founded on the error that the Baitchers were debtors in possession on the date of Samuel's accident, contrary to the bankruptcy court's own records, and moreover, the Georgia discovery statute has a clause that discovery admissions are not evidence in other proceedings. Applicable Statute

Sec. 523. Exceptions to discharge

(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt--

(1) for a tax or a customs duty--

(A) of the kind and for the periods specified in section 507(a)(2) or 507(a)(6) of this title, whether or not a claim for such tax was filed or allowed;

(B) with respect to which a return, if required--

(i) was not filed; or

(ii) was filed after the date on which such return was last due, under applicable law or under any extension, and after two years before the date of the filing of the petition; or

(C) with respect to which the debtor made a fraudulent return or willfully attempted in any manner to evade or defeat such tax;

(2) for obtaining money, property, services, or an extension, renewal, or refinance of credit, by--

(A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition; or

(B) use of a statement in writing--

(i) that is materially false;

(ii) respecting the debtor's or an insider's financial condition;

(iii) on which the creditor to whom the debtor is liable for obtaining such money, property, services, or credit reasonably relied; and

(iv) that the debtor caused to be made or published with intent to deceive;

(3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor whom such debt is owed, in time to permit--

(A) if such debt is not of a kind specified in paragraph (2), (4)...