In re Schicke
| Decision Date | 17 March 2003 |
| Docket Number | BAP No. KS-01-089.,Bankruptcy No. 96-10945. |
| Citation | 290 B.R. 792 |
| Parties | In re Michael Charles SCHICKE, Debtor. Chanute Production Credit Association, Appellant, v. Michael Charles Schicke, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
Eric D. Bruce (Petra H. Johnson with him on the brief), of Bruce, Bruce & Lehman, L.L.C., Wichita, KS, for Appellant.
Philip J. Bernhart, Coffeyville, KS, for Appellee Michael Charles Schicke.
Before CLARK, CORNISH, and CORDOVA, Bankruptcy Judges.1
Chanute Production Credit Association ("CPCA") appeals an Order of the United States Bankruptcy Court for the District of Kansas denying its Motion to Reopen the debtor's closed Chapter 7 case.3 CPCA sought to reopen the case to file a complaint against the debtor under 11 U.S.C. § 523(a)(2), (4) or (6).4 Although the time to file such complaints established under § 523(c) and Fed. R. Bankr.P. 4007(c) has lapsed, CPCA argues that it should be granted additional time under § 523(a)(3)(B) to file a complaint because it had neither notice nor actual knowledge of the debtor's Chapter 7 case. For the reasons stated below, we conclude that CPCA had timely notice of the debtor's case through its agent-attorney and, therefore, § 523(a)(3)(B) does not afford CPCA additional time to file a § 523(a)(2), (4) or (6) complaint against the debtor. As such, the debtor's debt to CPCA has been discharged and reopening the debtor's closed case would afford CPCA no relief. The bankruptcy court, therefore, did not abuse its discretion in denying CPCA's Motion to Reopen and its Order must be AFFIRMED.
In 1981, CPCA commenced an action against the debtor in Kansas State Court, alleging that the debtor had obtained loans from it based on fraudulent representations and actual fraud ("Fraud Action"). A judgement was entered in the Fraud Action against the debtor in 1984, awarding CPCA approximately $583,000 ("Judgment"). The State Court expressly found that the debtor had induced CPCA to make loans to him by providing it with false financial statements and other misrepresentations concerning his financial condition.
From 1984 to 1989, CPCA was represented in the Fraud Action by William D. Coombs, an attorney practicing law in Chanute, Kansas. After Mr. Coombs was diagnosed with cancer, CPCA retained attorney Frank C. Beyerl, and Mr. Beyerl filed a Notice of Appearance in the Fraud Action in March 1989. Despite Mr. Beyerl's 1989 Notice of Appearance, Mr. Coombs made an appearance in the Fraud Action as late as October 1991, when he filed a Request for Execution on behalf of the CPCA. Mr. Coombs' 1991 appearance was the last action of record made by the CPCA in the Fraud Action prior to the filing of the debtor's Chapter 7 case.5
In March 1996, the debtor filed a petition seeking relief under Chapter 7 of the Bankruptcy Code. His petition was accompanied by a Schedule of Liabilities. In Schedule F, the debtor listed CPCA as a creditor holding an unsecured nonpriority claim in the amount of the Judgment. CPCA appears in Schedule F as follows:
Chanute Production Credit Assn
c/o Coombs & Hull
P.O. Box
306 Chanute, Kansas 667206
The debtor scheduled CPCA based on the name listed in the Judgment. Unknown to the debtor, however, was the fact that CPCA had changed its name at least twice prior to March 1996. CPCA had not had any contact with the debtor since 1984 that would have informed him of any of its new names.
The debtor did not list CPCA's 1996 address in Schedule F. Rather, he scheduled CPCA in care of Coombs & Hull at a P.O. Box belonging to Mr. Coombs, the last attorney to have made an appearance on behalf of CPCA in the Fraud Action. While we have no record regarding the debtor's reasons for using Mr. Coombs's address, the record we do have demonstrates the following.7
Neither the Judgment nor any papers filed in the Fraud Action disclose CPCA's address. Rather, they merely indicate CPCA's attorney of record. Mr. Coombs, who at the time of the 1984 Judgment and 1991 Renewal Affidavit was signing papers as a member of the law firm of "Coombs & Pringle," was the last attorney to make an appearance on behalf of CPCA in the Fraud Action as of March 1996. Although the record does not indicate when Mr. Coombs formed or joined the law firm of Coombs & Hull, in 1996 he was undisputably affiliated with Coombs & Hull. The P.O. Box listed under Coombs & Hull in Schedule F is a P.O. Box that belonged to Mr. Coombs in 1996.8 Mr. Coombs, although ill and not working full-time in 1996, was a practicing attorney in good standing in Kansas at that time.
No one contests that the bankruptcy court mailed a Notice of Commencement of Case in April 1996 ("Bankruptcy Notice") to CPCA at Mr. Coombs's address stated by the debtor in his Schedule F, disclosing that the deadline to object to the debtor's discharge or the dischargeability of specific debts expired on July 1, 1996 ("Discharge Objection Deadline"). There was no evidence presented that the Bankruptcy Notice was returned to the bankruptcy court for improper service. Neither the Bankruptcy Notice nor notice of its contents were relayed directly to the CPCA prior to the expiration of the Discharge Objection Deadline. CPCA did not file a timely complaint against the debtor seeking to except its Judgment from discharge under § 523(a)(2), (4) or (6).
On November 25, 1996, the bankruptcy court entered its "Discharge of Debtor and Final Decree," discharging the debtor's prepetition debts, including the Judgment, and closing his Chapter 7 case ("Discharge Order"). The Discharge Order was mailed by the bankruptcy court to CPCA at Mr. Coombs's address listed in the debtor's Schedule F. Unlike the Bankruptcy Notice, the Discharge Order was delivered to CPCA sometime in November or December of 1996 as part of a package from Coombs & Hull containing title work done by Mike Hull, a Coombs & Hull attorney who was retained by CPCA on an on-going basis on matters unrelated to the Fraud Action. Thus, CPCA had knowledge and notice of the debtor's Chapter 7 case in November or December 1996, after its Judgment had been discharged.
Just prior to CPCA learning of the debtor's Chapter 7 case, in September 1996, it filed a "Renewal Affidavit" in the Fraud Action. It also commenced an action in the State Court against the debtor to execute its Judgment. When the State Court became aware of the debtor's case, however, it abstained from considering this action, refusing to exercise concurrent jurisdiction with the bankruptcy court to determine the dischargeability of CPCA's Judgment. CPCA appealed the State Court's abstention order, but the Kansas Court of Appeals affirmed the State Court.
In September 2000, shortly after the State Court's abstention order was affirmed on appeal and nearly four years after it admits that it knew of the debtor's Chapter 7 case, CPCA filed its Motion to Reopen in the bankruptcy court. CPCA sought to reopen the debtor's case to determine the dischargeability of its Judgment under § 523(a)(2), (4) or (6). It argued that the Discharge Objection Deadline did not apply to the Judgment under § 523(a)(3)(B) because it did not have timely notice or actual knowledge of the debtor's Chapter 7 case. The debtor objected to CPCA's Motion to Reopen and moved for summary judgment. The bankruptcy court denied the debtor's summary judgment motion, holding that a genuine issue of material fact existed as to whether CPCA had actual knowledge or notice of the debtor's case to allow for an extension of the Discharge Objection Deadline under § 523(a)(3)(B).
After a trial, the bankruptcy court entered an order denying CPCA's Motion to Reopen ("Reopen Order"). There was no "cause" under § 350(b) to reopen the debtor's Chapter 7 case because the Judgment had been discharged and any § 523(a) action against the debtor was time-barred. The time to file a § 523(a) complaint could not be extended under § 523(a)(3)(B) because CPCA, through its attorney of record, had knowledge or notice of the debtor's Chapter 7 case prior to the expiration of the Discharge Objection Deadline.
CPCA timely appealed the Reopen Order to this Court and, given the consent of the parties, this Court has appellate jurisdiction to review the final Order. 28 U.S.C. § 158(a)(1) & (c); Fed. R. Bankr.P. 8002(a).
CPCA argues that the bankruptcy court erred in refusing to reopen the debtor's Chapter 7 case under § 350(b) for "cause"9 because it may file a § 523(a)(2), (4) or (6) complaint against the debtor to determine the dischargeability of its Judgment. An order under § 350(b) related to the reopening of a closed case is reviewed for abuse of discretion.10 A bankruptcy court that refuses to reopen a Chapter 7 case that has been closed will not abuse its discretion if it cannot afford the moving party any relief in the reopened case.
The bankruptcy court did not abuse its discretion in refusing to reopen the debtor's closed Chapter 7 case because it could not afford CPCA any relief if the case were reopened. CPCA's Judgment was discharged by the Discharge Order, and CPCA admits that it did not file a § 523(a)(2), (4) or (6) complaint against the debtor seeking to except the Judgment from discharge prior to the expiration of the Discharge Objection Deadline.11 As discussed below, although § 523(a)(3)(B) could extend the Discharge Objection Deadline, it does not apply in this case because CPCA had formal notice of the debtor's Chapter 7 case through Mr. Coombs, its attorney-agent, prior to the expiration of that Deadline.
1. Section 523(a)(3)(B).
Section 523(a)(3)(B) states:
(a) A discharge under section 727 ... does not discharge an individual debtor from any debt —
...
(3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor...
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