In re Frasier

• Citation: 294 B.R. 362
• Decision Date: 16 June 2003
• Docket Number: No. 01-22572-MSK.,01-22572-MSK.
• Parties: In re Lyman Harwood FRASIER, Debtor.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Colorado

294 B.R. 362

In re Lyman Harwood FRASIER, Debtor.

No. 01-22572-MSK.

United States Bankruptcy Court, D. Colorado.

June 16, 2003.

Guy Humphries, Denver, CO, for Lymon Harwood Frasier.

Terrance A. Hugar, Denver, CO, for Denver Moving and Storage Company.

Jon B. Clarke, Greenwood Village, CO, for Cherry Creek Place, LLC.

MEMORANDUM OPINION AND ORDER DENYING (1) DEBTOR'S MOTION TO REOPEN BANKRUPTCY CASE AND (2) DEBTOR'S MOTION TO VOID JUDICIAL LIENS

SIDNEY B. BROOKS, Chief Judge.

THIS MATTER comes before the Court on April 22, 2003 on:

(1) Lyman Harwood Frasier's ("Debtor") Motion to Reopen Case filed February 4, 2003 (Docket No. 6) and Objections thereto filed by First Cherry Creek Place ("FCCP") on March 3, 2003 (Docket No. 14) and Denver Moving and Storage Company ("DMSC") (together FCCP and DMSC shall also be referred to herein as "Creditors") on March 10, 2003 (Docket No. 16) and

(2) Debtor's Motion to Void Judicial Liens filed February 4, 2003 (Docket No. 7) and the Objection thereto by FCCP on March 3, 2003 (Docket No. 14).

The Court, having reviewed the file, the Stipulated Facts for Hearing on the Motion to Reopen and on Motion to Void Lien filed on April 22, 2003, and having considered the arguments and offers of proof of counsel and being advised in the premises, makes the following findings of fact, conclusions of law and order.

For the reasons stated below, this Court shall DENY the Debtor's Motion to Reopen Bankruptcy Case. Moreover, as a consequence of this Court's denial of the Debtor's Motion to Reopen Bankruptcy Case, the Court shall also DENY Debtor's Motion to Void Judicial Lien as it is MOOT in light of the Court's ruling on the Debtor's Motion to Reopen.

I. SUMMARY

In brief, the Debtor seeks to reopen his case for the purpose of avoiding judicial liens on his home. The Court, mindful that intent and good faith are not factors to consider in reopening a case under the Tenth Circuit precedent, In re Parker, 313 F.3d 1267 (10th Cir.2002), petition for cert. filed, 71 U.S.L.W. 3699 (U.S. Apr. 25, 2003) (No. 02-1568), still declines to reopen this case on the grounds that excessive delay and laches serve to bar Debtor's Motion to Reopen Bankruptcy Case.

II. BACKGROUND

The Debtor filed for relief under Chapter 7 of the United States Bankruptcy Code on August 28, 2001. At the time of his bankruptcy filing, Debtor owned his residence located at 2465B S. Xanadu Way, Aurora, Arapahoe County, Colorado ("Property"). On the date of the bankruptcy filing, the Property had a fair market value of $115,000.00. This value was listed in his Schedule A.

FCCP obtained a default judgment against the Debtor and Frasier Engineering Co., LLC on April 8, 1999. A transcript of this judgment was recorded with the Arapahoe County Clerk and Recorder on May 26, 1999. The judgment lien of FCCP at the time of the filing of the bankruptcy case was in the sum of $186,639.90.

DMSC obtained a default judgment against Debtor and Halbe Engineering Co. on July 6, 1999. A transcript of this judgment was recorded with the Arapahoe County Clerk and Recorder on October 1, 1999. On the filing date of this bankruptcy, DMSC's judgment lien was $7,314.96.

The Property was also subject to at least one consensual lien.¹ The Property was encumbered by a deed of trust to Green Point Mortgage. The Green Point Mortgage deed of trust was dated September 19, 2000 and was recorded on November 14, 2000. The original principal amount due to Green Point Mortgage was $97,750.00. This deed of trust is junior by nearly 18 months to the FCCP judgment lien, and junior by over a year to the DMSC judgment lien.²

On August 28, 2001, the debt owed to Green Point Mortgage was $97,600.00. Debtor claimed this property as exempt under COLO.REV.STAT. §§ 38-41-201 and 202.³ By way of their Stipulated Facts for Hearing on the Motion to Reopen and on Motion to Void Lien filed on April 22, 2003, the parties agree that the Debtor is entitled to the maximum Colorado homestead exemption.

On August 26, 1999, DMSC, in an attempt to seek discovery in aid of execution of its judgment, served written interrogatories on Debtor. Debtor filed his bankruptcy case two days later. C. William Schlosser, Jr. served as Debtor's counsel in the case. On August 30, 1999, two days after the filing of his bankruptcy case, Debtor responded to the interrogatories and signed same.

Debtor did not schedule FCCP and DMSC as creditors in his bankruptcy. Debtor's Meeting of Creditors pursuant to 11 U.S.C. § 341 was held on October 4, 2001. The interim trustee in the Debtor's case filed his Report of No Assets on October 4, 2001. The Debtor received his discharge on December 4, 2001 and his bankruptcy case was closed as a no asset case on December 17, 2001. The record in the case does not reflect that any notice of the bankruptcy case was served on FCCP and DSMC at any time during the pendency of his case.

FCCP obtained a Writ of Execution and had a Sheriff's sale scheduled on the Property set for March 11, 2003. Spurred on by FCCP's actions and after (1) more than three years from the recording of the two transcripts of judgment, (2) seventeen months from the filing of his bankruptcy case, and (3) fourteen months from the date of the granting of his discharge in bankruptcy and the closing of his case, the Debtor filed the pending Motion to Reopen Case and Motion to Void Judicial Lien.

FCCP and DMSC object to the Motion to Reopen Bankruptcy Case for essentially two reasons.⁴ The first reason asserted by the Creditors is that the Debtor knew about their claims but purposely failed to list them as creditors. In other words, the Debtor intended to deceive and mislead the Court and his creditors by not listing FCCP and DMSC and their respective judgment liens on the Property. The second reason asserted by the Creditors is that the Debtor has unreasonably delayed seeking the relief requested to the detriment, reliance, and at the expense of the Creditors. Stated another way, Creditors assert that the doctrine of laches is a basis for precluding the reopening of this case.

III. ISSUES

There are two issues before this Court raised by the pleadings and argument of counsel. They are as follows:

A. Whether a debtor's intent in failing to schedule a claim is relevant to a bankruptcy court's decision to reopen a case in which there are no assets and no bar date.

B. Whether reopening of this case is precluded by the doctrine of laches.

As stated, the Court concludes that a debtor's intent in failing to schedule a claim is not relevant to a bankruptcy court's decision to reopen a case in which there are no assets and no bar date. Nevertheless, this case will not be reopened based upon the doctrine of laches.

IV. DISCUSSION

A. Overview of 11 U.S.C. § 350

Pursuant to 11 U.S.C. § 350(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.

In analyzing the matter at hand, this Court must strike a balance between the rights of these creditors on the one hand and the policy of the fresh start afforded to Debtor by operation of Chapter 7 of the Bankruptcy Code. See In re Beezley, 994 F.2d 1433, (9th Cir.1993). Congress, by its enactment of 11 U.S.C. § 350(b), has evidenced its intent that the courts, in considering the reopening of a case, should consider, as paramount, the relief accorded to the debtor — i.e. discharge.

B. Debtor's Intent

The first issue — whether debtor's intent in failing to schedule a claim is relevant to a bankruptcy court's decision to reopen a case in which there are no assets and no bar date — has recently been decided by the United States Court of Appeals for the Tenth Circuit in In re Parker, 313 F.3d 1267 (10th Cir.2002), petition for cert. filed, 71 U.S.L.W. 3699 (U.S. Apr. 25, 2003) (No. 02-1568). In that case, the Tenth Circuit recognized that the courts are split between applying equitable principles which include consideration of the debtor's intent, or a more mechanical analysis which does not take into consideration of the debtor's intent. Id. at 1268. The Court concluded that the more mechanical approach was "better reasoned and more faithful to the language of the Bankruptcy Code." Id. (quoting the lower court in Watson v. Parker (In re Parker), 264 B.R. 685, 694 (10th Cir. BAP 2001)).

The Court explained:

Pursuant to § 727(b), the Debtor receives a discharge from all debts that arose before the date of the order for relief under Chapter 7, regardless of whether a proof of claim based on any such debt or liability is filed, unless an exception in 523(a) applies. Under § 523(a)(3)(A), a claim will not be discharged if it was neither listed nor scheduled and the creditor did not have notice or actual knowledge of the case so that the creditor could timely file a claim. Here the bankruptcy court correctly found that § 523(a)(3)(A) does not apply because the Debtor's Chapter 7 case was a no asset case with no claims bar date set; therefore, [creditor] had suffered no prejudice because [creditor] will have an opportunity to file a claim if any assets are discovered. Because § 523(a)(3)(A) does not apply, unless [creditor] can establish that the claim was nondischargeable under one of the exceptions referenced in § 523(a)(3)(B), her Claim was discharged by operation of law under § 727(b). We conclude that equitable considerations do not impact the dischargeability of a debt under § 523(a)(3)(A), and therefore, it was unnecessary to reopen the Debtor's Chapter 7 case for the purpose of making that determination. However, we find that the bankruptcy court did not abuse its discretion when it reopened the Debtor's case because the court conducted the right analysis.

Id. at 1268-69 (quoting In re Parker, 264 B.R. at 694-95) (emphasis added).

This Court, abiding by the Tenth Circuit precedent and applying the more mechanical approach, concludes that a debtor's...