In re Galvin, Bankruptcy No. 8300324.

• Decision Date: 20 June 1985
• Docket Number: Bankruptcy No. 8300324.
• Citation: 50 BR 583
• Parties: In re Joseph E. GALVIN, d/b/a Patrician Canteen and Patrician Caterers, Debtor.
• Court: U.S. Bankruptcy Court — District of Rhode Island

50 B.R. 583 (1985)

In re Joseph E. GALVIN, d/b/a Patrician Canteen and Patrician Caterers, Debtor.

Bankruptcy No. 8300324.

United States Bankruptcy Court, D. Rhode Island.

June 20, 1985.

John A. Sabatini, Pawtucket, R.I., for debtor.

Harold Winsten, Feiner & Winsten, Providence, R.I., for creditor.

Louis A. Geremia, Quinn, Cuzzone & Geremia, Providence, R.I., Trustee.

DECISION GRANTING DEBTOR'S MOTION TO ADD CREDITOR

ARTHUR N. VOTOLATO, Jr., Bankruptcy Judge.

Heard on the debtor's motion to amend his schedules to include a judgment debt to one Americo Figliuzzi in the amount of $1,187, and on that creditor's objection to the proposed amendment.

The debt in question¹ relates to an automobile accident in July 1981 involving motor vehicles owned by Galvin (the debtor), Ludovico Sergicuomo, and (with hindsight) Americo Figliuzzi. The debtor contends that he was not aware of any liability to Figliuzzi at the time he filed his petition, because his car was being operated by his wayward son, Edward, who did not tell him the accident involved other vehicles.

Some time after the accident, a person named Sergicuomo levied an execution on Galvin's property. Only then, according to the debtor, did Edward confess that he had been involved in a collision causing damage to Sergicuomo's vehicle, but even then the son failed to say that the Figliuzzi vehicle was also involved in the same incident. When the debtor filed his Chapter 7 petition on April 28, 1983, he listed Sergicuomo, but not Figliuzzi, as a creditor. He testified that he had scheduled all of his known creditors, and did not learn of Figliuzzi's involvement until October 12, 1983, when Figliuzzi instituted supplementary proceedings against him in the Rhode Island District Court.

The debtor testified that he received a summons and complaint approximately one week after filing his bankruptcy petition, and in response, telephoned the attorney named on the summons, who informed him that the lawsuit pertained to the 1981 accident. Galvin mentioned the bankruptcy filing, and believing this to be the same creditor (Sergicuomo) he had already listed, informed the attorney that his client was listed on his bankruptcy schedules. The attorney replied, upon hearing that Galvin was in bankruptcy, "Don't worry about it the lawsuit."

The debtor's recollection of events is hotly contested by Figliuzzi's counsel, whose statements came through colloquy rather than testimony, and who denies any knowledge of the bankruptcy until sometime in 1984. Nevertheless, this creditor, mistakingly believing that there were assets in the case, argues that his failure to be notified of the bankruptcy resulted in prejudice: "The bankruptcy was not a no-asset petition in which there could be no prejudice to the creditor." Creditor's Memorandum at 3. The fact is that from the beginning this has been a no-asset case, and continues to remain so.² Also, the creditor asserts, without elaboration, the debtor's laches and lack of good faith as factors to be considered against his being added as a creditor.

Fortunately, we are not required to resolve the factual questions regarding notice or knowledge. Because of the debtor's practically unlimited statutory right to include an omitted creditor, we see no reason why the debt to Figliuzzi may not be scheduled at this time. Bankruptcy Rule 1009³ permits a debtor to amend a voluntary petition, schedule or statement of affairs "as a matter of course at any time before the case is closed."⁴ Rule 1009 constitutes a blanket authorization to amend schedules any time prior to the close of the bankruptcy case. See In re Drake, 39 B.R. 75 (Bankr.E.D.N.Y.1984). The Court of Appeals for the Third Circuit has strictly construed Bankruptcy Rule 110,⁵ Rule 1009's predecessor, holding that the court is without discretion to deny leave to amend, or to require a showing of good cause. In re Gershenbaum, 598 F.2d 779 (3rd Cir.1979); accord Redmond v. Tuttle (In re Tuttle), 698 F.2d 414 (10th Cir.1983); Doan v. Hudgins (In re Doan), 672 F.2d 831 (11th Cir. 1982); In re Sheridan, 38 B.R. 52 (Bankr. D.Vt.1983); In re Gannon, 25 B.R. 360 (Bankr.D.N.J.1982); In re Jordan, 21 B.R. 318 (Bankr.E.D.N.Y.1982). In Gershenbaum, the debtor made application to amend his schedules to add a creditor after entry of the discharge, but before the case was closed. The objecting creditor argued that it was in the bankruptcy court's discretion to deny the amendment where good cause was not shown. The Third Circuit Court of Appeals rejected this contention as outside the statutory language, and in conflict with the Advisory Committee comments supporting a liberal approach to amendment of a voluntary petition:

When the bankrupt files an application to amend a voluntary petition in bankruptcy, the court\'s only role under Rule 110 1009 is to decide who should be given notice of the amendment. It does not have discretion to deny leave to amend or to require a showing of good cause.

598 F.2d at 781.

Nothing could be plainer, and in the case at bar, because the case is still open, arguments of discretion, laches and bad faith are irrelevant.

Had the case been closed, Rule 1009 would not apply and we would be guided, instead, by Bankruptcy Code § 350(b), pursuant to which "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." It is only at the stage where a case is closed, that the court may exercise discretion whether to allow reopening to permit a creditor to be added. See In re Lorenzen, 21 B.R. 129 (Bankr.N.D.Ohio 1982), which held that in its discretion, the court should determine if the debtor has used "reasonable diligence" in filling out his schedules and whether the debtor's omission qualifies as "excusable neglect" to warrant reopening of the case. See In re McNeil, 13 B.R. 743 (Bankr.S.D. N.Y.1981).

Since this case has not been closed, as a matter of law, we may not inquire into the issue of good cause. Based on the record, however, and in the event that review is sought of this ruling, we also find that there is no evidence of bad faith, or failure by the debtor to exercise reasonable diligence. The facts indicate, rather, that the debtor, who appeared to be neither clever or sophisticated, but who was a truthful witness, simply did not know of this creditor until he was summoned to appear in state court, six months after he had filed for bankruptcy. The debtor properly listed one party to the accident, Mr. Sergicuomo, and there is nothing to suggest that he would not have also scheduled Figliuzzi's debt, had he known of it. Thus, even were this case now closed, we would, on the facts presented, grant the debtor's request to re-open to add this creditor. See In re Rosinski, 759 F.2d 539, 149 Bankr.L.Rep. (CCH) ¶ 70,376 (6th Cir.1985) (harm to creditor, rather than whether notice was received, is key inquiry in adding creditor late); In re Adams, 41 B.R. 933, 11 C.B.C.2d 124 (D.Me.1984) (in no-asset case with no claims deadline, re-opening to add creditor causes no prejudice)....