In re David

• Decision Date: 17 October 1989
• Docket Number: Bankruptcy No. 86-07561.
• Citation: 106 BR 126
• Parties: In re Thomas Lee DAVID, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Michigan

106 B.R. 126 (1989)

In re Thomas Lee DAVID, Debtor.

Bankruptcy No. 86-07561.

United States Bankruptcy Court, E.D. Michigan, S.D., at Flint.

October 17, 1989.

Jeffrey A. Chimovitz, Flint, Mich., for debtor.

Andrew J. Transue, Flint, Mich., for Jerome and Julia Lamparski.

MEMORANDUM OPINION ON DEBTOR'S MOTION TO AMEND SCHEDULE

ARTHUR J. SPECTOR, Chief Judge.

The issue in this case is, after having reopened the closed Chapter 7 case, whether the Court should permit¹ the debtor to amend his Schedule A-3 to list the creditors he omitted therefrom.

Facts

On August 28, 1984, Thomas Lee David (hereinafter "the Debtor") and Thomas Henry jointly executed a note in the amount of $25,000 payable to the order of Jerome and Julia Lamparski. The Lamparskis' daughter was at that time married to Mr. Henry. The Lamparskis loaned the money for use by Mr. Henry and the Debtor in their corporate business venture.

The business failed. On January 31, 1986, the Debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. He filed schedules in bankruptcy which failed to list the Lamparskis. On February 19, 1986, the Debtor amended his schedules to add one creditor, Associates Commercial Corporation, which he failed to list previously. That creditor was then listed as possessing a $173,384.02 claim. On April 1, 1986, the Debtor once again amended his schedules, this time to add Second National Bank of Saginaw, another creditor he omitted originally, for a claim he alleged to be in the amount of $70,000. On April 10, 1986, the trustee filed a Final Report and Account of Trustee in Case Where No Distribution Is Made (a/k/a a No Asset Report). On May 14, 1986, the Debtor received his discharge in bankruptcy. On August 7, 1987, the case was closed.

On May 18, 1988, the Lamparskis filed suit against Mr. Henry and the Debtor in the Oakland County, Michigan, Circuit Court seeking a judgment for the more than $24,000 allegedly still owed them on the note. The Debtor was served on June 6, 1988. On June 28, 1988, the Debtor filed an answer to the state court complaint through Mr. Jeffrey Chimovitz, his attorney. Mr. Chimovitz had also represented the Debtor in the 1986 bankruptcy case. The answer denied that the Debtor executed the note in question but did not assert the affirmative defense of discharge in bankruptcy. After some minimal discovery, the case was pre-tried and thereafter sent to mediation. The Debtor accepted but the Lamparskis rejected the mediation award. A new pre-trial conference was held on May 4, 1989. The trial was scheduled for July 14, 1989.

On July 12, 1989, the Debtor moved to reopen this bankruptcy case. On July 20, 1989,² this Court entered an order reopening the case. On August 1, 1989, the Debtor filed a "Motion to Amend Schedule A-3 to Add Unsecured Creditor." In the motion, the Debtor stated that "Debtor believed that a debt he had co-signed for had been satisfied or otherwise waived." The motion was served upon the Lamparskis, and on August 10, 1989, they filed an objection to the motion. The matter was set for hearing. On August 25, 1989, the Lamparskis filed a "Motion to Set Aside Ex Parte Order to Reopen".

On August 30, 1989, the Court heard the testimony of the Debtor and of Jerome Lamparski. The Debtor testified that he is an unemployed 34-year old accountant who subsists on welfare. He said that when he filed the bankruptcy petition, he did not believe he owed any money to the Lamparskis, and that was why he did not list them on his schedules. When the business was being started, he said, each of the co-venturers borrowed money from his own family. When the schedules were filed, he believed that neither was liable for the debt due to the other's family. He only learned to the contrary, he said, when shown the note during discovery in the lawsuit. He now acknowledges that he co-signed the note to the Lamparskis. The Debtor argues that these facts establish that his failure to list the Lamparskis on his schedules was due to mere inadvertance or mistake, and so he should be allowed to amend Schedule A-3 to list them now.

Mr. Lamparski testified that he never received notice of the Debtor's bankruptcy until May, 1989, one year after he and his wife had filed suit to collect the debt. In the meantime, he had paid one attorney $777.50 and owes another $122.50 for proceeding in the collection action.

Law

This matter is within the core jurisdiction of this Court. 28 U.S.C. § 157(b)(2)(A), (I) and/or (O).

The reopening of a case is of no independent legal significance or consequence. Section 350 of the Bankruptcy Code simply states:

(a) After an estate is fully administered and the court has discharged the trustee, the court shall close the case.

(b) A case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause.

The effect of this statute is merely to resurrect the court file from the stacks of the closed cases, or even from the archives, to enable it to receive a new request for relief. The legislative history on the provision is sparse, but it certainly does not contradict our benign interpretation. The Advisory Committee Note to Bankruptcy Rule 5010,³ which implements § 350, states: "Although a case has been closed, the court may sometimes act without reopening the case. Under Rule 9024, clerical errors in judgments, orders, or other parts of the record or errors therein caused by oversight or omission may be corrected." This statement implies that the purpose for reopening a case is to allow the court to act on a substantive request for relief, and that the mere reopening, by itself, accords no independent relief. Accordingly, the Lamparskis' motion to set aside the order reopening the case will be denied.

What relief does the Debtor want? He claims to want to amend Schedule A-3 so he can list the Lamparskis. But what purpose does merely typing a name and address on an old piece of paper serve?

The Debtor believes that reopening this case will accord him relief. Specifically, the Debtor believes that reopening the case and amending the schedules will bring the debts he intends to list in those amended schedules within the scope of his discharge. He believes that otherwise those debts will not be discharged and the creditors will be able to sue him to collect their debts.

In re Mendiola, 99 B.R. 864, 865 (Bankr.N. D.Ill.1989). However, the debtor's assumption is incorrect. As exhaustively and persuasively discussed recently by Judge Barliant in the Mendiola case, and before him by Judge Kressel in In re Anderson, 72 B.R. 495, 497 (Bankr.D.Minn.1987), reopening a closed case in order to amend schedules to add an omitted creditor is a useless act. "Reopening a case to allow amendment of schedules is futile. The debt in question was either discharged or excepted from discharge based on an analysis of § 523. Subsequent actions by the debtor cannot affect whether or not the debt has already been discharged." Id. Also see In re Bowen, 102 B.R. 752 (9th Cir.B.A.P. 1989); In re Sung Il Kim, 102 B.R. 787, 789 (Bankr.D.Hi.1989); In re Crull, 101 B.R. 60 (Bankr.W.D.Ky.1989); In re Karamitsos, 88 B.R. 122, 17 B.C.D. 1301 (Bankr.S.D.Tex.1988); In re Ford, 87 B.R. 641 (Bankr.D.Nev.1988); In re Padilla, 84 B.R. 194, 196, 18 C.B.C.2d 847 (Bankr.D. Colo.1987); In re Henson, 70 B.R. 363, 366 (Bankr.N.D.Ill.1987); In re Jensen, 46 B.R. 578 (Bankr.E.D.N.Y.1985); In re Rediker, 25 B.R. 71, 73 (Bankr.M.D.Tenn.1982); Norton Bankr. Rules Pamphlet, (1988-1989 ed., Editor's Comment (1983), p. 317 ("The amendment to the schedules to add a creditor has no bearing whatsoever on the dischargeability vel non of the liability owed to the creditor.") What follows here is merely a summary of the cogent rationale of Mendiola, Anderson and the other opinions.

Section 727(b) of the Bankruptcy Code provides that a Chapter 7 discharge "discharges the debtor from all debts that arose before the date of the order for relief," except as provided in § 523. Section 523(a) provides that a discharge is not effective as to any debt:

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

If, after the case is reopened, the creditor is not precluded from filing a proof of claim because the time for filing proofs of claim has not expired, e.g., when the case is, like this one, a no-asset case, see Bankruptcy Rule 2002(e), the first predicate of § 523(a)(3) is not satisfied.

If the debt is one that would be non-dischargeable due to § 523(a)(2), (4) or (6), then, if the time within which to file a determination of non-dischargeability has expired, the debt is not discharged. 11 U.S.C. § 523(a)(3)(B). Clearly, the time within which to file a complaint for determination of non-dischargeability under § 523(a)(2), (4) or (6) has expired in this case as the deadline was May 5, 1986. However, to find out if § 523(a)(3)(B) applies, one still has to determine whether the debt was one that would have been non-dischargeable under § 523(a)(2), (4) or (6).

This issue is usually determined in the bankruptcy court as § 523(c)⁴ places the exclusive jurisdiction to determine dischargeability under sections (a)(2), (4) and (6) there. However, since § 523(c) does not place the...