In re Mendoza

Decision Date10 February 1982
Docket NumberBankruptcy No. 80-03002-M,Adv. No. C81-0118-M.
Citation16 BR 990
PartiesIn re Henry F. MENDOZA, Debtor. PATTERSON DENTAL COMPANY, a corporation, Plaintiff, v. Henry F. MENDOZA, Defendant.
CourtU.S. Bankruptcy Court — Southern District of California

Philip J. Giacinti, Jr., San Diego, Cal., for debtor/defendant.

Samuel W. Gordon, Encino, Cal., for plaintiff.

OPINION ON ORDER GRANTING SUMMARY JUDGMENT

JAMES W. MEYERS, Bankruptcy Judge.

I FACTS

On September 16, 1977, the debtor, Mr. Henry F. Mendoza, filed for bankruptcy under the now repealed United States Bankruptcy Act ("Act"), in the Bankruptcy Court for the Northern District of California (Case No. 4-77-1913 WK). In his schedules the debtor listed Patterson Dental Company ("Patterson") as a creditor. On January 16, 1978, a discharge was entered on the debtor's behalf. However, on November 7, 1978, Judge Cameron W. Wolfe revoked the discharge order because of the debtor's failure to appear and be examined before that Court.

Subsequent to the entry of the revocation order, Patterson reduced its claim to judgment entered in the Orange County Superior Court on January 23, 1980, in the amount of $30,022.35.

On October 22, 1980, Mr. Mendoza filed a Chapter 7 petition in this Court under the Bankruptcy Reform Act of 1978 ("Code"). Patterson was listed as a creditor, but the debtor included Patterson's old address even though he had knowledge of its new address. On November 14, 1980, this Court sent out a notice setting January 26, 1981, as the bar date for the filing of complaints objecting to the entry of a discharge, or contesting the dischargeability of the debtor's obligations. The two notices sent to Patterson were returned as undeliverable.

Nevertheless, on February 2, 1981, Patterson filed this complaint challenging the debtor's right to a discharge and asking that this Court determine that the debt, owed by the debtor to Patterson, be declared nondischargeable. The filing of this complaint came one week after the applicable bar date.

On August 13, 1981, Judge Wolfe entered an order denying the debtor's motion to vacate the 1978 order revoking his discharge in Case No. 4-77-1913 WK.

On October 22, 1981, Patterson filed a motion for summary judgment claiming that the debtor's previous bankruptcy filing, coming within six years, constitutes a bar to the debtor receiving a discharge, or in the alternative, having any of the debts scheduled in the prior case discharged in this case. At the hearing before this Court on November 13, 1981, the debtor was allowed to move that this complaint be dismissed as not timely filed and to move for summary judgment.

After this hearing, the parties were allowed to file additional memorandums of law, and this opinion is filed to announce this Court's final decision on the motions described above.

II DISCUSSION
A. TIMELINESS OF COMPLAINT

This complaint challenges the debtor's right to receive a discharge in this case and the dischargeability of the debt owed to Patterson, an obligation scheduled in the prior bankruptcy case. On the debtor's motion to dismiss, no issue is presented regarding the dischargeability issue. For, under 11 U.S.C. § 523(c), a creditor is only required to file a complaint if it is alleged that the obligation was created by a transaction involving a false statement, embezzlement or larceny, or willful and malicious injury. See H.Rep.No. 95-595, 95th Cong., 1st Sess. 365 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787 ("House Report"). If a debt is excepted from discharge based on one of the other grounds listed in 11 U.S.C. § 523(a), then no specific court order is required. See In re Wright, 7 B.R. 197, 198, 7 B.C.D. 114, 115 (Bkrtcy.N.Ala.1980); 9A Am.Jur.2d, Bankruptcy § 831 at 611 (1980).

However, this complaint also involves a challenge to the debtor receiving a discharge in this, his second bankruptcy case filed within six years. That presents an independent question regarding the timeliness of the filing of this complaint.

Under Bankruptcy Rule 404(a), the Court is required to fix a time for the filing of a complaint objecting to the debtor's discharge not less than thirty days, nor more than ninety days, from the date set for the first meeting of creditors. In re Capshaw, 423 F.Supp. 1388, 1390 (E.Va.1977).1 Here, this Court issued an order setting November 26, 1980, as the date for the meeting of creditors, and January 26, 1981, as the last day for the filing of objections regarding the debtor's right to receive a discharge. Patterson did not file this complaint until February 2, 1981.

Under Bankruptcy Rule 404(c), the Court may grant an extension of time on a showing of cause. This discretionary power can even be exercised after the bar date has passed. See In re Magee, 415 F.Supp. 521, 524 (W.Mo.1976); In re Magouirk, ___ B.R. 1982), slip op. at 2. As cause, Patterson points at the debtor's failure to include Patterson's correct current address, so that it could receive timely notice of the bar date.

A discharge in bankruptcy is a privilege, and not a one-way street. To earn the discharge, the debtor has certain obligations to fulfill, and his creditors are, at least, entitled to timely notice. King v. Harry, 131 F.Supp. 252, 254, (D.C.1955). The Code places the obligation on the debtor to properly list his creditors, including their addresses. In re Gelman, 5 B.R. 230, 232, 6 B.C.D. 676, 677, (Bkrtcy.S.Fla.1980). See also Ward v. Meyers, 578 S.W.2d 570, 573 (Ark.1979). The debtor here has failed in this duty by not listing Patterson's correct address. This Court finds that he should not be able to profit from his own omission, and he will be deemed to have waived his right to resist this late extension of time allowing the filing of this complaint. See In re Daniels, 2 B.C.D. 526, 529 (Or.1976). See also In re Eisenzimmer, 1 B.C.D. 1587, 1588 (N.Ill.1975); Matter of Fulton, 3 B.R. 600, 603 (Bkrtcy.E.Mich.1980) (dicta); In re Faino, 1 C.B.C.2d 762 (S.Fla.1980) (Code case).

B. EFFECT OF REVOCATION OF DISCHARGE ON CASE COMMENCED WITHIN SUBSEQUENT SIX YEARS

Patterson argues that the discharge, even though revoked, entered in the debtor's previous bankruptcy case, which was filed within six years of this petition, blocks his right to have a discharge here or, in the alternative, seeks to have the Patterson debt declared nondischargeable, claiming it is excepted from any discharge.

As a preliminary matter, this Court must consider whether the Act, or the Code, is controlling on the questions presented. Transition Section 403(a),2 does contain a savings clause. This clause directs that all matters relating to Act cases are to be determined by reference to the Act. However, since here we are concerned solely with the debtor's present rights in a Code case, the Code must govern. Accord, Matter of Dole, 7 B.R. 986, 987-8, 7 B.C.D. 92, 93 (Bkrtcy.Idaho 1981). See also In re DeBose, 16 B.R. 881 at 882 (9th Cir. Bkrtcy. Jan. 12, 1982), slip op. at 3.

1. Right to Receive Discharge in Subsequent Case.

The discharge provision of the Code is found in Section 727. 11 U.S.C. § 727. This section is the heart of the fresh-start provision of the Code and embodies the well-accepted principle that the Code is intended to allow the honest debtor a fresh start in life, free from oppressive debt. In re Rubin, 12 B.R. 436, 440 (Bkrtcy. S.N.Y.1981); House Report, at 117, 128. See Lines v. Frederick, 400 U.S. 18, 19, 91 S.Ct. 113, 27 L.Ed.2d 124 (1970). Given this beneficial policy, the courts must construe Section 727 strictly against the objector, and liberally in favor of the debtor. In re Rubin, Id. See In re Tabibian, 289 F.2d 793, 795 (2d Cir. 1961). Further, it is well settled that exceptions to discharge should be limited to those clearly expressed in the Code, with exceptions not expressly included being excluded by implication. In re Cairone, 12 B.R. 60, 63 (Bkrtcy.R.I.1981).

Section 727(a)(8) states, in part, that a debtor shall be granted a discharge unless, he has been granted a discharge under Section 14 of the Act in a case commenced within six years before the date of the filing of the petition. 11 U.S.C. § 727(a)(8). The purpose of this six-year provision is to prevent the creation of a class of habitual debtors, who would rid themselves of their debts by going through bankruptcy every time they find themselves unable to pay their debts. See Perry v. Commerce Loan Co., 383 U.S. 392, 399, 86 S.Ct. 852, 856, 15 L.Ed.2d 827 (1966); Turner v. Boston, 393 F.2d 683, 685 (9th Cir. 1968). This six-year bar provision is derived from Section 14(c)(5) of the Act and presents no change from the treatment afforded under the Act. S.Rep.No. 95-989, 95th Cong., 2d Sess. 99 (1978). See also House Report, at 385. It would appear, therefore, that decisions under the Act would be helpful in interpretation of the Code provision. 4 Collier on Bankruptcy, ¶ 727.11 at 727-77 (15th ed.) ("Collier, 15th ed.").

While no decision can be found directly on point, it should be noted that under the Act dismissal of a second case was allowed where the bankrupt had been denied a discharge in the first case and had scheduled entirely the same debts in each case. See Perlman v. 322 West Seventy-Second Street Co., 127 F.2d 716 (2d Cir. 1942). However, under the Act it was generally accepted that denial of a discharge, or failure to obtain a discharge, for any reason, in one bankruptcy proceeding was a bar to the discharge of the debts scheduled in the first case, in any subsequent bankruptcy proceedings. See Countryman, The New Dischargeability Law, 45 Am.Bankr.L.J. 1, 9, 50, 52 (1971); Freshman v. Atkins, 269 U.S. 121, 123, 46 S.Ct. 41, 70 L.Ed. 193 (1925); In re Seiden, 174 F.2d 586 (2d Cir. 1949); In re Zimmer, 63 F.Supp. 488, 491 (S.Cal.1945).3 Thus, under the Act, if you failed to get a discharge in one case you could obtain one in a second case, excepting all debts scheduled in the first...

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