In re Godley, Bankruptcy No. 84-00238-R.
| Decision Date | 29 May 1986 |
| Docket Number | Bankruptcy No. 84-00238-R. |
| Citation | 62 BR 258 |
| Court | U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re Brenda Johnson GODLEY, Debtor. |
Harry Shaia, Jr., Richmond, Va., for debtor.
B. Randolph Boyd, Richmond, Va., for Ford Motor Credit Corp.
This matter comes before the Court on the motion of the debtor in the above-styled case, Brenda Johnson Godley ("Godley"), pursuant to 11 U.S.C. § 350(b) and Bankruptcy Rule 5010 to reopen her case so that she may add two creditors omitted from her original schedules, the creditors being Fruehauf Corporation ("Fruehauf") and Ford Motor Credit Corporation ("FMCC"). A hearing was convened on Godley's motion on April 2, 1986, and FMCC appeared in opposition to Godley's motion to reopen. Fruehauf did not appear, nor did it file a written objection. At the conclusion of the aforementioned hearing, the Court made several findings of fact; however, the ultimate decision as to whether the case should be reopened was deferred pending a review of the law applicable to the relief requested. Consequently, as a result of the Court's review of the relevant law on the matter, the evidence adduced at the hearing, and the arguments of counsel, the Court makes the following findings of fact and conclusions of law.
Godley filed a petition for relief under Chapter 7 of Title 11 of the United States Code on February 23, 1984, and she received her discharge in bankruptcy on May 22, 1984. Godley's case was subsequently closed by order of this Court entered on February 22, 1985. Prior to the filing of her petition, Godley had been a principal in a corporation known as JerBren Enterprises, Inc. that filed a petition for relief under Title 11 in December 1983. As a principal in the corporation, Godley had personally guaranteed an obligation owing to Fruehauf; however, believing that her entire obligation on the debt would be discharged by listing it in the corporate bankruptcy, Godley omitted it from the schedules in her personal bankruptcy when she filed for relief several months later. Fruehauf has since attempted to collect the debt, totalling approximately $6,500, from her on the personal guarantee.
FMCC, on the other hand, is a creditor of Godley personally only, having a debt owing to it arising from the lease of a Lincoln Town Car automobile. The evidence adduced at the hearing convened on Godley's motion to reopen her case reflected that debt as being approximately $3,300. The evidence further showed that Godley leased the automobile from Whitten Bros., Inc., an automobile dealership located in Richmond, Virginia, in 1983. FMCC provided for the appropriate lease arrangement, and the payments were to be made to FMCC. Godley became delinquent in her lease payments on the vehicle, and Wally Davis, the collections agent testifying on behalf of FMCC, stated that he attempted to contact Godley on several occasions to try and collect her account or have the vehicle surrendered. Davis testified that attempts to locate the automobile were unsuccessful, given that Godley indicated that her father was driving the car in one instance in Atlanta, Georgia and in another instance in Greensboro, North Carolina. Davis also testified that Godley came in to his office and paid $1,370.77 on her account on February 22, 1984, one day before she filed her individual petition, and the payment brought her account current as of March 1984. Godley made no further lease payments.
When Godley came in to pay the aforesaid arrearage on her account, Davis, who had become aware of the corporate bankruptcy, asked Godley whether she had filed a petition individually. Davis testified that Godley said she had not, and that she stated she would like to retain the car and continue making the lease payments. Davis stated that the reason such an inquiry was made is that it is FMCC's policy of seeking a surrender of its vehicle or a reaffirmation of the obligation immediately upon learning that a debtor has filed a petition for relief under the Bankruptcy Code.
Godley testified that she wanted to retain the automobile leased from FMCC, and she could not recall the conversation with Davis. Godley further indicated that she knew that she was under the obligation to list all her debts in her bankruptcy petition and that she was aware that she should include the debt owed to FMCC; however, she could not explain why she omitted the obligation to FMCC other than by her stated desire to retain the automobile. After her petition was filed, Godley reaffirmed a debt to Commonwealth Propane in order to retain possession of storm windows she had purchased, indicating that she knew the necessity of entering into a reaffirmation agreement with a secured creditor in order not to suffer the loss of the property.
Davis informed Godley by letter dated May 9, 1984 that it had come to FMCC's attention that the collision and liability insurance on the leased vehicle had been cancelled, and he stated in the letter that the vehicle had to be surrendered at his office by May 11, 1984. Davis testified that Godley surrendered the vehicle on May 25, 1984, and upon inspection it was discovered that the automobile was in a seriously deteriorated condition with excessive mileage. The automobile was subsequently sold under the terms of the lease, and a deficiency resulted upon which FMCC has sought to collect. Upon the surrender of the vehicle, FMCC still had not learned of Godley's personal bankruptcy, and Godley made no effort to inform FMCC that she had received a discharge in bankruptcy until FMCC sought to collect the deficiency. FMCC instituted a state court collection action which has been continued pending the resolution of Godley's motion to reopen her estate.
At the conclusion of the hearing on April 2, 1986, the Court made a finding of fact that Godley knew that she had a continuing obligation to FMCC, that she intentionally omitted FMCC from her schedules, and that she deceived FMCC by not informing Davis that she was filing her petition in bankruptcy on the day following her conversation with him. The Court also found that the testimony of Davis was both frank and forthright, and that FMCC had not been informed by Godley of her intention to file her personal bankruptcy.
The Court deferred ruling on Godley's motion to reopen her estate to add FMCC; however, finding no fraud or intent to omit Fruehauf, the Court allowed Godley to reopen her case for the limited purpose of adding that creditor. The Court's reasoning for deferring a ruling on Godley's motion to add FMCC was to allow the opportunity for an inquiry into the relevant law governing the reopening of a closed estate for the purpose of adding an intentionally omitted creditor. In addition, given that Godley's case is a "no-asset" case, and that creditors were notified by the Court pursuant to Bankruptcy Rule 2002(e) on February 29, 1984 that it was unnecessary to file proofs of claim, the Court sought to determine whether FMCC had been prejudiced by Godley's failure to list it as a creditor.
11 U.S.C. § 350(b) provides that "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 decision whether to reopen a bankruptcy case to allow a debtor to amend schedules is within the sound discretion of the bankruptcy court. In re Rosinski, 759 F.2d 539 (6th Cir.1985); Hawkins v. Landmark Finance Co., 727 F.2d 324 (4th Cir. 1984); Matter of Stark, 717 F.2d 322 (7th Cir.1983).
Although authority exists for the position that a no-asset bankruptcy case may not be reopened in order to list inadvertently omitted creditors, see e.g., Milano v. Perrone, 157 F.2d 1002 (2nd Cir.1946); In re Swain, 21 B.R. 594 (Bankr.D.Conn. 1982); more recent authority has allowed reopening where the creditor has not been prejudiced, and where there is no evidence of a debtor's fraud, intentional omission, and reckless disregard for the accuracy of the schedules. In re Gray, 57 B.R. 927, 931 (Bankr.D.R.I.1986); Rosinski, 759 F.2d at 541; Stark, 717 F.2d at 324; see In re Crum, 48 B.R. 486 (Bankr.N.D.Ill.1985); In re Zablocki, 36 B.R. 779 (Bankr.D.Conn. 1984); In re Davidson, 36 B.R. 539 (Bankr. D.N.J.1983). Moreover, the Circuit Courts in Rosinski and Stark have not required that there be a showing of fraud, intentional design and prejudice, but, rather, if the grounds exist alternatively, the debtor's motion to reopen may be denied. Rosinski, 759 F.2d at 541; Stark, 717 F.2d at 324.
In the instant case, the Court finds that not only has FMCC been prejudiced by the debtor's failure to schedule her liability to this creditor, but Godley blatantly disregarded a known duty to list all her liabilities and she intentionally left this creditor's obligation off of her schedules with the intent to deceive FMCC into thinking that she had not filed, or was not filing, for bankruptcy. As the Court stated from the bench at the close of the hearing on Godley's motion to reopen, her statement to Davis one day before the bankruptcy petition was filed that she had not filed was a deception in that she knew at that time that her petition would be filed. Godley's statement was such that it was intended to lull FMCC into foregoing its stated policy of seeking a prompt surrender or reaffirmation of the indebtedness in order for her to continue her uninterrupted use of the automobile. The Court does not believe that there is a significant difference in asking a debtor if she has filed a petition, as opposed to asking if she is going to file a petition if it is done in the immediate future. The distinction, if any,...
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