In re Szafranski, Bankruptcy No. 90-01394-W

Decision Date10 December 1992
Docket NumberAdv. No. 90-0299-W.,Bankruptcy No. 90-01394-W
PartiesIn re Paul L. SZAFRANSKI, Debtor. ROYAL AMERICAN OIL AND GAS CO., Plaintiff, v. Paul L. SZAFRANSKI, Defendant.
CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Northern District of Oklahoma

147 B.R. 976 (1992)

In re Paul L. SZAFRANSKI, Debtor.
Paul L. SZAFRANSKI, Defendant.

Bankruptcy No. 90-01394-W, Adv. No. 90-0299-W.

United States Bankruptcy Court, N.D. Oklahoma.

December 10, 1992.

147 BR 977

James H. Werner, Tulsa, OK, for plaintiff.

Chris Economou, Tulsa, OK, for defendant.


MICKEY DAN WILSON, Bankruptcy Judge.

This adversary proceeding was submitted for decision upon stipulations and briefs. The Court takes judicial notice of the record herein and in the related Case No. 81-01069 In re Szafranski and its Adversary Proceeding No. 82-0058 Royal American Oil and Gas Co. v. Szafranski. Upon consideration thereof, the Court, pursuant to F.R.B.P. 7052, finds, concludes and orders as follows.


On September 30, 1981, Paul L. Szafranski ("debtor") filed his voluntary petition for relief under 11 U.S.C. Chapter 7 in this Court, commencing Case No. 81-01069. This case is sometimes referred to below as "the first case." This case was first heard by the Honorable William E. Rutledge, Bankruptcy Judge. After Judge Rutledge's retirement from the bench, the case was assigned to his immediate successor, the Honorable Mickey D. Wilson, Bankruptcy Judge.

Debtor reported over $3 million in debt, most of it unsecured. Debtor's discharge was entered on January 5, 1982. However, various orders gave creditors more time in which to file complaints seeking exception to discharge. Royal American Oil and Gas Company ("Royal") was given until January 29, 1982.

On January 29, 1982, Royal filed in Case No. 81-01069 its complaint commencing Adversary Proceeding No. 82-0058. Said complaint sought damages and exception to

147 BR 978
discharge "under 11 U.S.C. § 523(a)(2) or, alternatively, under . . . § 523(a)(4)." These statutes except from discharge debts incurred by false pretenses, false representations, actual fraud, defalcation in a fiduciary capacity, embezzlement, or larceny. Pre-trial proceedings entailed long delays, by mutual consent of the parties. On September 1, 1987, Royal filed its "Application to Set Case for Trial," alleging that the parties had reached an "agreed settlement" which "had not been fulfilled."

On November 16, 1987, the adversary proceeding was assigned to the Honorable Steven J. Covey, Bankruptcy Judge. The main bankruptcy case was not assigned to Judge Covey, but remained assigned to Judge Wilson.

On December 9, 1987, Adv. No. 82-0058 came on for trial before Judge Covey. The adversary docket's minute entry for that date reads as follows:

No appearance by defendant either in person or by counsel. Finding for plf. by default of debtor for liability of damages. Judgment for $128,000.00 at 6% interest.

Judgment was not formally entered for more than six months thereafter. A "Journal Entry" filed June 20, 1988 recites as follows:

NOW, on this 9th day of December 1987, this matter comes on for hearing, and the Court finds that proper notice has been given of the date and time for this hearing, and that from the testimony as adduced in the original adversary proceeding filed herein, Royal has claims against debtor\'s estate which cannot be discharged in bankruptcy and must remain as valid liens against the Debtor and his estate. Further, the Court finds that, in a trial upon the merits, and having testimony adduced in open Court and hearing oral testimony and having evidence adduced in Court by documents, Royal should have and recover judgment against the Debtor . . . herein in the sum of $189,205.76, with interest thereon as follows: $138,000.00 principal, and $61,205.76 interest, less $5,000.00 payment received June 1, 1984, and $5,000.00 payment received August 1, 1984, for a total payment of $10,000 received.
AND IT IS SO ORDERED by the Court for all of which let execution issue.

A "Notice of Entry of Judgment" filed on the same date refers to the "Journal Entry" as an "Order" and repeats the substance of its terms. A "Judgment" filed on June 23, 1988 recites as follows:

This proceeding having come on for trial or hearing before the court, the Honorable Stephen J. Covey, United States Bankruptcy Judge, presiding, and the issues having been duly tried or heard and a decision having been rendered,


Royal should have and recover judgment against the Debtor . . . in the sum of $189,205.76, with interest thereon as follows: $138,000.00 principal and $61,205.76 interest, less $5,000.00 payment received June 1, 1984 and $5,000.00 payment received August 1, 1984, for a total payment of $10,000.00 received. (Per Journal Entry Filed June 20, 1988)

No motion to vacate said order and judgment was ever filed; no appeal was ever taken. On August 16, 1988, Adv. No. 82-0058 was closed.

For reasons unrelated to the dispute between Royal and debtor, Case No. 81-01069 remained open thereafter, and was not closed until December 11, 1991.

On May 23, 1990, debtor filed his second voluntary petition for relief under 11 U.S.C. Chapter 7, commencing Case No. 90-01394. This case is sometimes referred to below as "the second case." When debtor filed his second case, he did not disclose the existence of his still-pending first case assigned to Judge Wilson. The second case was assigned to Judge Covey, under Case No. 90-01394-C. On May 30, 1990, Judge Covey issued an "Order" which found the facts just stated in this paragraph and re-assigned the second case to Judge Wilson.

In his second case, debtor reported owing Royal only $40,000. Even so, Royal was

147 BR 979
the single largest unsecured creditor. But Royal was by no means debtor's only creditor; debtor reported debts totalling some $280,000, most of it unsecured and incurred during or after 1982

On July 13, 1990, a status conference was held in both cases before Judge Wilson. As a result of said conference, with the agreement of the parties, Judge Wilson on July 13, 1990 issued an "Order Extending Time for Complaints and Entry of Discharge" in the second case, i.e. in Case No. 90-01394, which said order extended the deadline for filing complaints under 11 U.S.C. § 523(c) to September 28, 1990.

On September 5, 1990, Royal filed in the second case its "Application . . . for Order Adjudging Debt not Dischargeable." Said application recited and requested that

In Case # 81-01069-W the same debtor as the debtor herein listed the debt owed to this applicant . . . and the debtor has again listed this obligation in this case.
By order of this Court on the 20th day of June, 1988, the debt owed to this applicant was determined to be non-dischargeable because of fraud. A copy of the Order of June 20, 1988, is attached hereto . . .
WHEREFORE applicant prays that this Court enter its order declaring said debt owing to applicant . . . to be a nondischargeable debt as previously determined by this Court.

Said application bore a case number, 90-01394-C, which incorrectly indicated assignment to Judge Covey. On September 21, 1990, Judge Covey issued his "Order Denying Motion for Order Adjudging Debt Nondischargeable." This order provided that

. . . Pursuant to Bankruptcy Rule 7001(6), a proceeding to determine the dischargeability of debt is an adversary proceeding and cannot be accomplished by the filing of an application.
IT IS THEREFORE ORDERED that the referenced application is hereby denied as being improperly presented to the Court.

On September 24, 1990, Judge Wilson issued his "Order Reaffirming Order of Judge Covey . . .," which noted the confusion caused by erroneous case numbers, directed all parties to attend to correct case numbers indicating correct judge assignments, and further provided as follows:

IT IS FURTHER ORDERED the Order of Judge Covey denying the motion for order adjudging debt nondischargeable is reaffirmed by this Judge . . .

The deadline for filing complaints under 11 U.S.C. § 523(c) was not further extended, and expired on September 28, 1990. No such complaints were filed before that time.

On October 22, 1990, debtor's discharge was entered in the second case, No. 90-01394-W.

On October 23, 1990, Royal filed its "Complaint" commencing this Adv. No. 90-0299-W in the second case No. 90-01394-W. Royal's complaint referred to Judge Covey's judgment in the previous Adv. No. 82-0058 in the first case No. 81-01069; asserted that "the principle of res judicata bars relitigation of this claim," complaint ¶ IV; and "urges this Court to enter its Order declaring the debt owing by debtor to Royal cannot be discharged as it has previously been determined by this Court that said debt is not dischargeable." Debtor answered, admitting the complaint's allegations of fact, but asserting that the complaint was itself barred as untimely under F.R.B.P. 4007(c).

Thereafter, Royal and debtor filed their joint "Stipulations of Fact on Merits of Royal's Complaint;" Royal filed its "Motion for Summary Judgment" and "Brief . . ." in support thereof; debtor filed his ". . . Response . . ." thereto; and the matter was taken under advisement.


This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I), (O), 11 U.S.C. §§ 105, 523, 524.

This matter comes on for hearing on Royal's motion for summary judgment under

147 BR 980
F.R.B.P. 7056 adopting F.R.Civ.P. 56. It appears that the parties intended to submit certain issues for decision on the stipulated facts, regardless of the technicalities of strict summary judgment procedure — see In re Curtis, 38 B.R. 364, 367-368 (B.C., N.D.Okl.1983). As will appear below, the matter can be resolved at the present stage, whether that be on motion for summary judgment or on stipulated facts and briefs

This adversary proceeding is the latest stage in a battle between debtor and creditor that has dragged on for more than ten years. In 1981, debtor borrowed money from Royal under dubious circumstances. Royal sued debtor for fraud early in 1982, eventually gained judgment...

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