In re Burley, Bankruptcy No. LA 80-08761-RO.

CourtUnited States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California
Writing for the CourtROBERT L. ORDIN
Citation11 BR 369
PartiesIn re James A. BURLEY and Elsie M. Burley. B.H. BRINEY and Lucille M. Briney, Plaintiffs, v. James A. BURLEY and Elsie M. Burley, Defendants.
Docket NumberBankruptcy No. LA 80-08761-RO.
Decision Date28 May 1981

11 B.R. 369 (1981)

In re James A. BURLEY and Elsie M. Burley.
B.H. BRINEY and Lucille M. Briney, Plaintiffs,
v.
James A. BURLEY and Elsie M. Burley, Defendants.

Bankruptcy No. LA 80-08761-RO.

United States Bankruptcy Court, C.D. California.

May 28, 1981.


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COPYRIGHT MATERIAL OMITTED
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Moneymaker & Morrison, Los Angeles, Cal., for plaintiffs

John Owen Meyers, III, Pomona, Cal., for defendants.

MEMORANDUM OPINION ON MOTION OF JUDGMENT CREDITOR TO VACATE THE ORDER ENTERING THE DISCHARGE OF THE DEBTOR.

ROBERT L. ORDIN, Bankruptcy Judge.

By motion filed on March 27, 1981, B.H. Briney and Lucille M. Briney (hereinafter "Brineys") seek an order from this court vacating the discharge of the debtors, entered on March 19, 1981. In support of that motion, the Brineys assert: (i) the debtors' discharges were entered as a result of clerical mistake, oversight, or omission; and (ii) the discharges should be vacated pursuant to Rule 924 of Bankruptcy Procedure, and F.R.Civ.P. 60(b)(1) and (6).

It is necessary to understand the facts of this dispute in some detail in order to analyze the rights of the parties and interface these facts and the jurisdiction and venue provisions of the Bankruptcy Reform Act. The moving papers, and documents filed in opposition to the motion, and the files and records of this case, reveal the following:

(1) On September 10, 1979, the Brineys obtained a judgment against the debtors in the State Court in Colorado.

(2) On August 29, 1980, the debtors filed a Chapter 7 case in the Central District of California. Brineys' judgment was scheduled and the Brineys received notice of the filing of the Chapter 7. The schedules reflect that the Brineys are the only unsecured creditors.

(3) All of the assets reflected in the schedules are claimed as exempt by the debtors.

(4) On October 1, 1980, the trustee filed his Report of Trustee in No-Asset Case, in the Chapter 7 case in California.

(5) On October 9, 1980, an order was made in the Chapter 7 case in California fixing: (i) November 26, 1980 as the Last Date to file complaints re dischargeability; and (ii) December 24, 1980 as the Last Date to file objections to discharge.

(6) On October 27, 1980, the Brineys' attorney, G. Barrett Swayne, whose law office is located in Arcadia, California, wrote a letter to the trustee in the debtors' case in which he stated: (i) that Swayne was the attorney for the Brineys; (ii) that Swayne had conducted a 205 examination with respect to transactions described in Swayne's letter; (iii) that the debtors had engaged in conduct which would bar their right to a discharge; (iv) that the trustee was requested to take appropriate action to bar the discharge of the debtors; and (v) the Last Date to file dischargeability litigation was November 26, 1980, and the Last Date to file objections to discharge was December 24, 1980.

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(7) On November 26, 1980, Brineys, through Colorado counsel David R. DeMuro, whose offices are in Denver, Colorado, filed a complaint in the Bankruptcy Court in Colorado seeking (i) to establish the nondischargeability of their judgment; and (ii) to bar the debtors' discharge.

(8) On November 28, 1980, a copy of that complaint, mailed by the Brineys' Colorado lawyer, was received in the Clerk's Office in the Central District of California. The complaint bore a case number assigned by the Clerk of the Colorado court in accordance with Colorado procedures.

(9) On January 2, 1981, an order was made in the Bankruptcy Court in the Central District of California (i) fixing February 5, 1981 as the date for the Reaffirmation and Discharge hearing in the California Bankruptcy Court; and (ii) ordering debtors' attorney to serve a notice of said hearing by U.S. mail not less than 10 days before the hearing, on plaintiff and plaintiff's counsel in any dischargeability proceedings pending in debtors' Chapter 7 case.

(10) On January 6, 1981, debtors filed a motion in the Colorado Bankruptcy Court seeking to dismiss the Brineys' complaint or change the venue thereon to the Bankruptcy Court in California in which the Chapter 7 case was pending.

(11) On January 16, 1981, the Brineys filed an amended complaint in the Colorado Bankruptcy Court with respect to nondischargeability of their claim and objection to discharge.

(12) On January 26, 1981 the Bankruptcy Court in Colorado denied debtors' motion to dismiss or change venue. At that hearing, the judge was advised by counsel for the debtors and the Brineys that the reaffirmation and discharge hearing was set in the Bankruptcy Court in California on February 5, 1981.

(13) On February 5, 1981, the debtors filed an answer to the Brineys' complaint in the Colorado court.

(14) On February 5, 1981, the discharge hearing was held in debtors' case in the Central District of California. No pleading was filed on the Brineys' behalf nor was any appearance made by counsel for the Brineys at that hearing.

(15) On February 10, 1981, the Brineys' Colorado counsel wrote a letter to the Bankruptcy Court in the Central District of California requesting a delay of the entry of the discharge.

(16) On March 19, 1981, an order granting a discharge to each of the debtors was entered in the California Bankruptcy Court.

(17) On March 27, 1981, the Brineys filed the within motion.

The Brineys assert the following in support of their request:

(1) The Colorado Bankruptcy Court had jurisdiction to accept, file, and process the adversary proceeding objecting to the debtors' discharge, and seeking a determination of the dischargeability of the Brineys' claim against the debtors, despite the fact that the debtors' case was pending in the Bankruptcy Court in the Central District of California.

(2) The Colorado Bankruptcy Court was a proper court in which to file and try that adversary proceeding; i.e., was a court of proper venue.

(3) If the Colorado Bankruptcy Court was not a proper court in which to file and try Brineys' adversary proceeding (i.e., was a court of improper venue), the Colorado Bankruptcy Court was nevertheless authorized to retain and try that adversary proceeding under the venue provisions of the Bankruptcy Reform Act.

(4) The Bankruptcy Court as a court of equity is authorized to vacate the order of discharge on the grounds specified in F.R. Civ.P. 60(b).1

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(5) The Bankruptcy Court should vacate the discharge under the circumstances here presented.

Disposition of Brineys' contentions will require an analysis (i) of rules governing the exercise of equitable jurisdiction by the Bankruptcy Court; and (ii) of the jurisdiction and venue provisions of the Bankruptcy Court under the Bankruptcy Reform Act.

The power of the bankruptcy court as a court of equity to vacate the discharge.

While Brineys' motion seeks to vacate the discharge under 60(b)(1) and (6),2 the reference to 60(b)(1) finds no support in the record. Accordingly, the motion will be dealt with solely on the basis of 60(b)(6).

The power of a court of equity to vacate an order or decree is too well established to merit extended discussion.3 That power is "inherent in the jurisdiction of the chancery"4 and is explicitly defined in F.R. Civ.P. 60. The exercise of that power lies within the discretion of the trial court, guided by traditional principles of equity jurisprudence.5 "In simple English, the language of the `other reason' clause 60(b)(6) . . . vests power in courts adequate to enable them to vacate judgments whenever such action is appropriate to accomplish justice."6

However, equity jurisdiction is as well defined and limited as that of a court of law.7 It is not an unbridled or unfettered license to fashion relief as seems appropriate to the Chancellor.8 The case at bar suggests at least two such limitations.

First, the power embodied in 60(b)(6) should be exercised only upon a showing that "extraordinary" circumstances existed which prevented the moving party from seeking relief through the usual channels.9

Second, the maxim "equity follows the law"10 imports: (i) that in dealing with legal rights, equity adopts the applicable rules of law,11 and (ii) that in dealing with equitable estates the court applies to them

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the same rules which govern legal estates.12 Whenever the rights of the parties are defined and established by law, and whenever the court is dealing with a legal estate, and there is a direct rule of law governing the case, the court is as much bound by it as a court of law would be if the case were pending there.13 Neither the failure of legal remedy nor the hardship of the case allows a court of equity to administer abstract justice at the expense of well settled principles.14 Equity is a complex system of established law, and is not the chancellor's sense of moral right or his sense of what is just and equal.15 The equitable conscience of the court is not measured by the length of the chancellor's foot.16 The plain mandate of the law cannot be set aside because of considerations which may appeal to a referee or judge as falling within general principles of equity jurisprudence, nor can rules of equity be intruded in matters that are fully covered by positive statute.17

The Brineys seek equitable relief to enable them to vacate the discharge and proceed with their adversary proceeding in the Bankruptcy Court in Colorado. As their legal right to proceed in that court is of considerable importance in determining the propriety of the requested equitable relief, an examination of their legal position in this regard will be dealt with first in this opinion.

Jurisdiction of the Colorado Bankruptcy Court Over the Brineys' Adversary Proceeding.

A primary consideration in drafting the Bankruptcy Reform Act was the elimination of the "summary-plenary jurisdiction" syndrome which plagued the bench and bar in the administration of the Bankruptcy Act of 1898.18 The creation of a bankruptcy court with "pervasive jurisdiction"...

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