In re Parker
| Decision Date | 13 July 2001 |
| Docket Number | BAP No. KS-00-066. Bankruptcy No. 96-42822. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
| Parties | In re Richard W. PARKER, Debtor. Jenee Marie Watson, Appellant, v. Richard W. Parker, Appellee. |
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John Kurtz of Hubbard & Kurtz, L.L.P., Kansas City, MO, for Jenee Marie Watson, Appellant.
Richard W. Parker, pro se.
Before McFEELEY, Chief Judge, CLARK, and BOHANON, Bankruptcy Judges.
Creditor, Jenee Watson ("Watson"), appeals an order of the United States Bankruptcy Court for the District of Kansas ("bankruptcy court") that permitted Richard W. Parker ("Debtor") to reopen his Chapter 7 case and amend his schedules to include a legal malpractice claim Watson had against him ("Claim"). Watson argues that equitable doctrines should have prohibited the Debtor from reopening his Chapter 7 case. Alternatively, Watson contends that the Claim is nondischargeable as it arose post discharge. Finally, Watson argues that her Claim is nondischargeable under the provisions of 11 U.S.C. § 523(a)(2), (4), or (6).1
For the reasons stated below, we AFFIRM.
The Bankruptcy Appellate Panel has jurisdiction over this appeal. The bankruptcy court's judgment disposed of the adversary proceeding on the merits and is a final order subject to appeal under 28 U.S.C. § 158(a)(1). See Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 712, 116 S.Ct. 1712, 135 L.Ed.2d 1 (1996). Watson timely filed her notice of appeal pursuant to Federal Rule of Bankruptcy Procedure 8002.2 The parties have consented to this Court's jurisdiction by failing to elect to have the appeal heard by the United States District Court for the District of Kansas. 28 U.S.C. § 158(c)(1); Fed. R. Bankr.P. 8001; 10th Cir. BAP L.R. 8001-1.
"For purposes of standard of review, decisions by judges are traditionally divided into three categories, denominated questions of law (reviewable de novo), questions of fact (reviewable for clear error), and matters of discretion (reviewable for `abuse of discretion')." Pierce v. Underwood, 487 U.S. 552, 558, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988); see Fed. R. Bankr.P. 8013; Fowler Bros. v. Young (In re Young), 91 F.3d 1367, 1370 (10th Cir. 1996).
Whether a bankruptcy court properly reopened a bankruptcy case is reviewed under the abuse of discretion standard. Nintendo Co., Ltd. v. Patten (In re Alpex Computer Corp.), 71 F.3d 353, 356 (10th Cir.1995). "A court abuses its discretion if it renders a decision that is `arbitrary, capricious, whimsical, or manifestly unreasonable.'" Phillips USA, Inc., v. Allflex USA, Inc., 77 F.3d 354, 357 (10th Cir.1996) (quoting United States v. Robinson, 39 F.3d 1115, 1116 (10th Cir.1994)). Questions of statutory interpretation are reviewed de novo. Dalton v. Internal Revenue Service, 77 F.3d 1297, 1299 (10th Cir.1996). When a bankruptcy court has made factual findings that a debt falls within a statutory exception to discharge and there is no dispute about the legal principles, we review the factual findings under the clearly erroneous standard. Arkansas Aluminum Alloys, Inc. v. Joyner (In re Joyner), 132 B.R. 436, 438-39 (D.Kan.1991). "A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948).
Watson hired Debtor, at that time a practicing attorney, to represent her. Around December 1, 1995, the Debtor filed a complaint on Watson's behalf in the United States District Court for the District of Kansas against Watson's former employer (hereinafter, "Federal Case"). On May 7, 1996, a federal magistrate issued a "Notice and Order to Show Cause" ("Show Cause Order") directing the Debtor to submit cause in a writing to the court before May 24, 1996, as to why the Federal Case should not be dismissed for failure to make service on the defendant within 120 days. The Debtor did not file a response to the Show Cause Order, and on May 31, 1996, the Federal Case was dismissed.
One day prior to the Show Cause Order, on May 6, 1996, the Debtor was arrested for DUI, possession of cocaine, resisting arrest, battery on a law enforcement officer, suspended driver's license, and other miscellaneous charges. On December 15, 1996, the Debtor was arrested on charges of battery and criminal trespass for his conduct in attempting to enter a private residence where a former girlfriend lived.3
On November 26, 1996, the Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code. The Debtor did not list Watson as a creditor. Debtor's case was administered as a "no asset" case, and on May 14, 1998, the Debtor received a discharge. Sometime later, the bankruptcy court closed Debtor's case.
Debtor admitted that he had committed malpractice in Watson's case in a letter dated December 24, 1996. On January 23, 1997, the Debtor filed a motion to reinstate the Federal Case,4 and, in February, Watson terminated his employment.
Watson filed a malpractice lawsuit in state court against the Debtor on July 8, 1998. In the Debtor's Answer he asserted, as an affirmative defense, the discharge of Watson's Claim in bankruptcy. Subsequently, Watson deposed the Debtor on June 26, 1999. In his deposition testimony, the Debtor stated, "I made the conscious decision that I knew I had screwed up this case and I elected not to list her as a creditor so that she would have full rights to come after me." . Following the Debtor's deposition, on September 22, 1999, Watson amended her lawsuit to include as defendants the attorneys she had retained after terminating the Debtor's services.
The Debtor filed a Motion to Reopen his Chapter 7 case on May 6, 2000, seeking to reopen the case to declare Watson's Claim discharged. Watson opposed the reopening of the case in Suggestions of Jenee Marie Watson in Opposition to Debtor Richard W. Parker's Motion to Reopen Case, arguing that laches and equitable estoppel applied and that she would be unfairly prejudiced if the case were reopened. Watson also maintained that her Claim was not discharged in the Debtor's Chapter 7 case and that she was entitled to nondischargeable punitive damages.
On October 5, 2000, the bankruptcy court filed an "Order Reopening the Case and Declaring the Debt Owed Jenee Marie Watson Discharged" ("Order"). In findings of fact and conclusions of law made on the record at two hearings, the bankruptcy court concluded that the only reason to reopen the case was to determine the dischargeability of Watson's Claim. The bankruptcy court found that there were only two issues in this case that would render Watson's claim nondischargeable: 1) whether under § 523(a)(3)(A) Watson was prejudiced by the omission of her Claim from the Debtor's Chapter 7 schedules; 2) whether under § 523(a)(3)(B) the Debtor's malpractice was nondischargeable under §§ 523(a)(2), (4), or (6). The bankruptcy court held that neither of these sections applied.
Subsequently, the bankruptcy court's Order reopened the Debtor's Chapter 7 case and discharged Watson's Claim pursuant to § 727(b). The bankruptcy court granted Watson ten days from the entry of its Order to seek permission to present evidence that the claim was nondischargeable under § 523(a)(6) on the grounds that any malpractice the debtor committed was intentional or willful. Although Watson filed an untimely affidavit, which purported to offer such evidence, to which the Debtor filed a response, Watson never formally sought permission from the bankruptcy court as directed. Subsequently, the bankruptcy court's Order became final on October 8, 2000. This appeal followed.
Watson argues that the court erred when it permitted the reopening of the Debtor's Chapter 7 case under § 350(b) of the Bankruptcy Code as the bankruptcy court did not consider the equitable doctrines of laches, estoppel, and clean hands, which, Watson contends, limit the statute. Pursuant to § 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." 11 U.S.C. § 350(b). The statute gives the bankruptcy court broad discretion in deciding whether to reopen the case.
Bankruptcy Rule 5010 delineates the procedure for reopening a case. Fed. R. Bankr.P. 5010.5 Only a debtor, creditor or trustee, has standing to move for the reopening of a case. Alpex, 71 F.3d at 356. Here, approximately two years after he received his discharge, the Debtor moved to reopen his Chapter 7 case to accord him relief from Watson's malpractice claim. Pursuant to Bankruptcy Rule 9024 a motion to reopen a case is not subject to the one year limitation that governs other motions.6 However, bankruptcy courts have found that when an unreasonable delay has prejudiced the party opposing reopening, laches is a valid reason to deny motions to reopen. H.R.Rep. No. 95-595, at 338 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6294; S.Rep. No. 95-989, at 49 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5835 ().
Watson contends that both laches and/or equitable estoppel should bar the reopening of this case, alleging that the Debtor's failure to include her on his schedules caused her economic harm because of the litigation expenses of her Claim.
Generally, courts will apply the doctrine of laches when the following two elements are met: "(1) lack of diligence by the party against whom the defense is asserted, and (2) prejudice to the party asserting...
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In re Bedell, Case No. 03–10509
...§ 50–624(l) (2015 Supp.).15 Doc. 40.16 11 U.S.C. § 350(b) and Fed. R. Bankr. P. 5010. See Watson v. Parker (In re Parker). 264 B.R. 685, 691 (10th Cir. BAP 2001) (debtor permitted to reopen case to schedule a previously unlisted malpractice claim, and accord him relief from that claim).17 B......
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