In re Richardson
| Decision Date | 26 June 1998 |
| Docket Number | Bankruptcy No. 95-10255,No. 97-CV-71-J.,97-CV-71-J. |
| Citation | 221 BR 956 |
| Parties | In re Donald Edgar RICHARDSON, Don Richards, Debtor. Donald RICHARDSON, Defendant-Appellant, v. HIDY HONDA, INC., Plaintiff-Appellee. |
| Court | U.S. District Court — District of Wyoming |
Stephen R. Winship, Winship & Associates, Casper, WY, for Donald Edgar Richardson.
Bruce N. Willoughby, Keith Aurzada, Brown, Drew, Massey & Sullivan, Casper, WY, David W. Cox, Xenia, OH, for Hidy Honda, Inc.
ORDER AFFIRMING APPEAL FROM BANKRUPTCY COURT
This case is before the court on the debtor's appeal of the bankruptcy court's determination that his debt to Hidy Honda, Inc. was nondischargeable in bankruptcy pursuant to 11 U.S.C. § 523(a)(4) as a debt for embezzlement. Debtor/appellant Donald Richardson admits that the original debt was obtained through his wrongdoing, but contends that the bankruptcy court erred on procedural and substantive matters and therefore the current debt is dischargeable in bankruptcy. The court has considered the entire file and is fully advised.
Debtor admits that his original debt to Hidy Honda arose from his wrongful taking of money entrusted to him. He filed the following affidavit in the adversary proceeding, setting forth sufficient background for the purposes of this appeal.
Record 74-75.
Debtor pleaded guilty to one count of Interstate Transportation of Stolen Monies in violation of Title 18. He was placed on five years' probation and ordered to pay $300 a month restitution through the U.S. Department of Justice. Pursuant to this obligation he executed a promissory note in the amount of $195,587.50 in favor of the Financial Litigation unit of the U.S. Attorney's office. The last payment on this first note was to be paid on September 5, 1995. On October 10, 1995, debtor was notified he was to make the restitution payments directly to his victim, Hidy Honda. Pursuant to this obligation, he executed a second promissory note on September 5, 1995, the same day his probation ended. The second note is in the amount of $194,687.50 and it provides:
Record at 79 (underlining in original).
The note has a default acceleration clause and an attorney's fee provision. Id.
On November 13, 1995, two months after signing the second note, debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. On January 24, 1996, Hidy Honda filed a complaint to determine the dischargeability of its debt. On February 27, 1996, the last day to file complaints to determine the dischargeability of debts, Hidy Honda filed its Amended Complaint. At that time Hidy Honda was represented by out-of-state attorneys. On February 27, 1996, the Clerk of the Bankruptcy Court issued a summons to accompany service of the complaint. Service was made by placing the summons and complaint in the mail on March 7, 1996.1 It was postmarked on March 13, 1996. The debtor says he received it on March 20, 1996.
On March 22, 1996, debtor filed a Motion to Dismiss the adversary proceeding alleging that Hidy Honda had not retained local counsel as required by Local Bankruptcy Rule (L.B.R.) 910(a) and (b). On March 28, 1996, the bankruptcy court ordered compliance with those rules. Rec. at 122. Hidy Honda timely complied. Its out-of-state attorney was admitted to practice in this district pro hac vice on April 11, 1996. Its local counsel entered his appearance on April 9, 1996. The bankruptcy court then denied debtor's Motion to Dismiss as moot.
On August 8, 1996, the debtor filed a Motion for Summary Judgment on the basis that service of process was not made with a valid summons pursuant to Fed.R.Bank.P. 7004(b)(9) and (f) and L.B.R. 910. On October 11, 1996, the bankruptcy court denied the motion. He found that the summons was stale and therefore the service was ineffective. However, pursuant to Fed.R.Civ.P. 4(j), as made applicable to adversary proceedings pursuant to Fed.R.Bank.P. 7004, the bankruptcy court also found good cause to permit Hidy Honda to re-serve the summons and complaint. Hidy Honda did reserve the summons and complaint.
Debtor and Hidy Honda filed cross-motions for summary judgment seeking a determination of whether the debt was nondischargeable under 11 U.S.C. § 523(a)(4). The parties submitted the case on their cross-motions for summary judgment and stipulated facts. Rec. at 44. The bankruptcy court found that although the Arizona statute of limitations for filing a civil action on a claim for embezzlement had expired, the debt arose from Richardson's embezzlement and therefore was non-dischargeable. The bankruptcy court further found that Hidy Honda was the successor-in-interest to Buckeye Acura Inc., of Xenia, Ohio. As assignee of the note, it therefore had standing to pursue claims, including a claim for non-dischargeability, based upon the note. Debtor timely appealed.
The debtor contends that the bankruptcy court erred because the dischargeability complaint was not filed timely. He contends that the bankruptcy court abused its discretion in finding that there was good cause to extend the time for service. He also contends that the complaint was not timely filed because it was signed by counsel, who at the time of the signature was an out-of-state attorney. The debtor contends that the debt was unenforceable under state law because the statute of limitations for bringing a civil action on the basis of embezzlement under Arizona state law had expired. He contends that a subsequent promissory note memorializing a nondischargeable debt supersedes and extinguishes the nondischargeable nature of that debt. He also appeals the bankruptcy court's decisions to consider an affidavit of David Hidy and its resulting finding that Hidy Honda was the proper party in interest.
Hidy Honda contends that the bankruptcy court's decision is supported by the record and the law.
This court has jurisdiction pursuant to 28 U.S.C. § 158(c)(1)(B). This court reviews the bankruptcy court's legal conclusions de novo. Gillickson v. Brown (In re Brown), 108 F.3d 1290, 1292 (10th Cir.1997).
However, we review the bankruptcy court\'s findings which underpin its conclusions under the more deferential clearly erroneous standard. In re Wes Dor, Inc., 996 F.2d 237, 241 (10th Cir.1993). We review de novo mixed questions consisting primarily of legal conclusions drawn from the facts. Id. Finally, we are cognizant in our review of the requirement that the Bankruptcy Code must be construed liberally in favor of the debtor and strictly against the creditor. In re Adlman, 541 F.2d 999, 1003 (2d Cir.1976).
This court reviews a bankruptcy court's decision to extend the time for service of process for "good cause" under Fed.R.Civ.P. 4(j) to determine whether it abused its discretion. Hendry v. Schneider, 116 F.3d 446, 449 (10th Cir.1997).
"It is, of course, well-established that `good cause\' determinations entail discretionary conclusions by the trial court and will not be disturbed absent an abuse of discretion." Floyd v. United States, 900 F.2d 1045, 1046 (7th Cir.1990). The trial court abuses its discretion in determining whether there is "good cause" if its decision is arbitrary, capricious, or whimsical. Cox v. Sandia Corp., 941 F.2d 1124, 1125 (10th Cir.1991).
The debtor contends that the bankruptcy court erred in finding that there was good cause to allow service of the later summons and complaint. He contends that Rule 4(j) rather than the newer and more liberal Rule 4(m) should apply to this case.
Bankruptcy Rule 7004 provides for service in an adversary proceeding. Subsection (f) of this rule provides in part:
If service is made by any authorized form of mail, the summons and complaint shall be deposited in the mail within 10 days following issuance of the summons. If the summons is not timely delivered or mailed, another summons shall be issued and served.
Rule 7004 incorporates the major portion of Fed.R.Civ.P. 4. As a preliminary matter, it appears that the debtor is correct that former subsection (j) rather than current subsectio...
To continue reading
Request your trial