Beezley, In re, 91-55809

Citation994 F.2d 1433
Decision Date06 October 1992
Docket NumberNo. 91-55809,91-55809
PartiesBankr. L. Rep. P 75,277 In re Gilbert G. BEEZLEY, Debtor. Gilbert G. BEEZLEY, Appellant, v. CALIFORNIA LAND TITLE COMPANY, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Gilbert G. Beezley, pro se.

Mark E. Rohatiner, Ellen L. Frank, Schneider, Goldberg, Rohatiner & Yuen, Beverly Hills, CA, for appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel.

Before O'SCANNLAIN and RYMER, Circuit Judges, and ZILLY, ** District Judge.

PER CURIAM:

Debtor Gilbert G. Beezley appeals the decision of the Ninth Circuit BAP, affirming the bankruptcy court's denial of his motion to reopen his bankruptcy case under 11 U.S.C. § 350(b). We have jurisdiction pursuant to 28 U.S.C. § 158(d), and we affirm.

Beezley argues that the bankruptcy court abused its discretion by failing to grant his motion to reopen his case. See In re Herzig, 96 B.R. 264, 266 (9th Cir. BAP 1989) (bankruptcy court's refusal to reopen a closed case under 11 U.S.C. § 350(b) reviewed for an abuse of discretion). We disagree. Based on the assumption that amendment was necessary to discharge the debt, Beezley sought to add an omitted debt to his schedules. Beezley's, however, was a no asset, no bar date Chapter 7 case. After such a case has been closed, dischargeability is unaffected by scheduling; amendment of Beezley's schedules would thus have been a pointless exercise. See American Standard Ins. Co. v. Bakehorn, 147 B.R. 480, 483 (N.D.Ind.1992); In re Stecklow, 144 B.R. 314, 317 (Bankr.D.Md.1992); In re Tucker, 143 B.R. 330, 334 (Bankr.W.D.N.Y.1992); In re Peacock, 139 B.R. 421, 422 (Bankr.E.D.Mich.1992); In re Thibodeau, 136 B.R. 7, 10 (Bankr.D.Mass.1992); In re Hunter, 116 B.R. 3, 5 (Bankr.D.D.C.1990); In re Mendiola, 99 B.R. 864, 865 (Bankr.N.D.Ill.1989). If the omitted debt is of a type covered by 11 U.S.C. § 523(a)(3)(A), it has already been discharged pursuant to 11 U.S.C. § 727. If the debt is of a type covered by 11 U.S.C. § 523(a)(3)(B), it has not been discharged, and is non-dischargeable. 1 In sum, reopening here in order to grant Beezley's request would not have "accord[ed] relief to" Beezley; thus, there was no abuse of discretion.

AFFIRMED.

O'SCANNLAIN, Circuit Judge, concurring:

The simple question with which we are presented--whether the bankruptcy court abused its discretion by denying the debtor's motion to reopen--requires, in my view, more than a simple answer. I write separately to address certain matters that the per curiam opinion does not discuss, but which are squarely presented on the record before us and implicate important principles of bankruptcy law.

I

Beezley filed for bankruptcy under Chapter 7 on June 10, 1987. Because he had no assets available for distribution to his creditors in bankruptcy, no bar date was set by the court establishing a deadline for creditors to file proofs of claim.

Three years earlier, California Land Title Co. ("Cal Land") had obtained a default judgment against Beezley in California state court arising out of a 1979 transaction in which Beezley was the seller and Cal Land the title insurer of certain real property. Beezley made no mention of Cal Land's claim or of its judgment against him in any of his schedules. Consequently, Cal Land did not receive notice of Beezley's bankruptcy. Beezley received his discharge on November 6, 1987, and his case was thereafter closed.

In January 1990, Beezley moved to reopen his bankruptcy case for the purpose of amending his schedules to add the omitted debt to Cal Land. Cal Land filed a memorandum with the bankruptcy court in opposition to Beezley's motion to reopen, advising the court that Cal Land would seek to establish that its claim was nondischargeable. The bankruptcy court held a hearing, at the conclusion of which it denied Beezley's motion, citing the case of In re Stark, 717 F.2d 322 (7th Cir.1983) (per curiam). The Bankruptcy Appellate Panel ("BAP") subsequently affirmed by memorandum, citing the same authority.

II

The source of the bankruptcy court's power to reopen a closed case is section 350(b). 1 This section gives the court discretion to reopen a case "to administer assets, to accord relief to the debtor, or for other cause." The question posed by this appeal is whether the bankruptcy court abused that discretion in denying Beezley's motion to reopen. See In re Herzig, 96 B.R. 264, 266 (9th Cir. BAP 1989) (decision on motion to reopen reviewed for abuse of discretion). Answering this question is a complicated affair, and requires close attention to the difficult language of sections 523 and 727 of the Bankruptcy Code.

A

Section 727(b) of the Bankruptcy Code states in part: "Except as provided in section 523 of this title, a discharge under subsection (a) of this section discharges the debtor from all debts that arose before the date of the order for relief under this chapter [i.e., the date of the bankruptcy filing]...." "The operative word is 'all'. There is nothing in Section 727 about whether the debt is or is not scheduled. So far as that section is concerned, a pre-bankruptcy debt is discharged, whether or not it is scheduled." In re Mendiola, 99 B.R. 864, 865 (Bankr.N.D.Ill.1989). See In re Stecklow, 144 B.R. 314, 317 (Bankr.D.Md.1992) ("breadth of the discharge" under § 727 is "comprehensive"); In re Thibodeau, 136 B.R. 7, 8 (Bankr.D.Mass.1992) ("s 727(b) itself makes no exception for unlisted debts"). Thus, unless section 523 dictates otherwise, every prepetition debt becomes discharged under section 727.

Section 523(a) provides in part:

(a) A discharge under section 727 ... of this title does not discharge an individual debtor from any debt--

(3) neither listed nor scheduled ... in time to permit--

(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice or actual knowledge of the case in time for such timely filing; or

(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request[.]

Unscheduled debts are thus divided into two groups: those that are "of a kind specified in paragraph (2), (4), or (6) of this subsection," and those that are not. Loosely speaking, the paragraphs in question describe debts arising from intentional wrongdoing of various sorts (respectively, fraud, fiduciary misconduct, and the commission of malicious torts). What distinguishes these from all other debts is that, under section 523(c) and rule 4007(c), a creditor must file a complaint in the bankruptcy court within 60 days after the date established for the first meeting of creditors in order to assert their nondischargeability. Failure to litigate the dischargeability of these sorts of debts right away disables the creditor from ever doing so; an intentional tort debt will be discharged just like any other.

Section 523(a)(3) threatens nondischargeability in order to safeguard the rights of creditors in the bankruptcy process. The difference between subparagraphs (A) and (B) reflects the different rights enjoyed by and requirements imposed upon different kinds of creditors. For most creditors, the fundamental right enjoyed in bankruptcy is to file a claim, since this is the sine qua non of participating in any distribution of the estate's assets. Section 523(a)(3)(A) safeguards this right by excepting from discharge debts owed to creditors who did not know about the case in time to file a claim. By contrast, for creditors holding intentional tort claims the salient rights are not only to file a claim but also to secure an adjudication of nondischargeability. Thus, section 523(a)(3)(B) excepts intentional tort debts from discharge notwithstanding the creditor's failure to file a timely complaint under section 523(c) if the creditor did not know about the case in time to file such a complaint (even if it was able to file a timely proof of claim).

With this in mind, the convoluted language of section 523(a)(3) can be paraphrased as follows:

(a) A discharge does not cover--

(3) an unscheduled debt if--

(A) with respect to a debt not covered by § 523(c), the failure to schedule deprives the creditor of the opportunity to file a timely claim, or

(B) with respect to an intentional tort debt covered by § 523(c), the failure to schedule deprives the creditor of the opportunity to file a timely claim or a nondischargeability complaint.

B

In applying section 523(a)(3) to the case before us, it is preferable to begin with subsection (A).

As noted, the entire thrust of subparagraph (A) is to protect the creditor's right to file a proof of claim, and so to participate in any distribution of the assets of the estate. However, "[i]n a case without assets to distribute the right to file a proof of claim is meaningless and worthless." Mendiola, 99 B.R. at 867. The bankruptcy rules therefore permit the court to dispense with the filing of proofs of claim in a no-asset case.

In a chapter 7 liquidation case, if it appears from the schedules that there are no assets from which a dividend can be paid, the notice of the meeting of creditors may include a statement to that effect; that it is unnecessary to file claims; and that if sufficient assets become available for the payment of a dividend, further notice will be given for the filing of claims.

Bankr.Rule 2002(e).

When a no-dividend notice under Rule 2002(e) is sent out, an exception is made to the basic rule requiring proofs of claim to be filed within 90 days after the date established for the first meeting of creditors. Under this exception, creditors need not file a proof of claim unless and until the clerk sends notice...

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