In re Ward, Bankruptcy No. B77-1226-M
Decision Date | 08 May 1986 |
Docket Number | B77-1227-M.,Bankruptcy No. B77-1226-M |
Citation | 60 BR 660 |
Parties | In re Frank WARD f/d/b/a Ward Brothers. In re Charlene May WARD. Billy VINING v. WARD, et al. |
Court | U.S. Bankruptcy Court — Western District of Louisiana |
James A. Rountree, Hudson, Potts & Bernstein, Monroe, La., for movant, North Louisiana Farmlands, Inc., Frank and Charlene Ward.
Stephen Katz, Rankin, Yeldell, Herring & Katz, Bastrop, La., for trustee.
James A. Hobbs, Blackwell, Chambliss, Hobbs & Henry, West Monroe, La., for Carlton Ward.
FINDINGS OF FACT
This matter begins in the dark recesses of legal time on February 16, 1972 with the filing of a law suit styled, "Ward Brothers and Frank Ward vs Clinton Smith" # 11609, Fifth Judicial District Court, West Carroll Parish, La. In this State Court suit the plaintiff alleged that Mr. Smith owed $8,057.39 represented by a promissory note and $4,693.94 on account for supplies, materials and chemicals. The Ward Brothers were represented by the law firm of Hamilton & Carroll, of Oak Grove, Louisiana. Subsequently, on March 23, 1972, judgment was entered in the Plaintiff's favor.
On July 13, 1977, Frank Ward, d/b/a Ward Brothers and Charlene Ward filed for protection under Chapter 7 of the 1898 Bankruptcy Act. On August 4, 1977, a Trustee was appointed. The judgment against Mr. Smith was never scheduled as an asset of the estate. Hamilton & Carroll did not represent the debtors in their bankruptcy. On February 9, 1979, the case was closed.
Thereafter, on September 16, 1981, the Smith Judgment was assigned by Ward Brothers and Frank Ward to North Louisiana Farm Lands, Inc., (NLF). The records of the Secretary of State of Louisiana indicates that NLF is a corporation wholly owned by the members of the Hamilton & Carroll firm.
On February 23, 1982, NLF filed a petition to revive the Smith judgment; this was done on September 16, 1982. On January 9, 1985, after a writ of fifa was issued, a Sheriff's Sale occurred, which resulted in a collection of the judgment of a sum in excess of $24,000. This money was then deposited into the Hamilton & Carroll trust account and two-thirds was distributed to the Ward Brothers and one-third was retained by Hamilton and Carroll.1
After numerous allegations and documents were brought to the Court's attention, this Court on its own motion ordered the cases reopened on October 3, 1985 and ordered consolidation.2 Subsequently, a new trustee was appointed to examine this matter and report to the Court.
In concert with the Trustee's examination, this complaint was filed on January 7, 1986. On February 19, 1986, NLF and Frank & Charlene Ward filed a Motion to Dismiss the complaint. In the motion, NLF and the Wards argue that the alleged fraudulent transfer occurred more than two years after the date of the transfer. The motion further states: "This case is governed by the Bankruptcy Act."
Also, on March 3, 1986, a Motion to Dismiss was filed by Carlton Ward. The Carlton Ward Motion echoes the NLF Frank Ward Motion.
The motion came for hearing on March 5, 1986; after argument of counsel the Court took the matter under advisement with a request for memorandum. The Motion to Dismiss3 raises two issues which we address separately.
All parties before this court seem somewhat unsure if the Bankruptcy Act of 1898 or the Bankruptcy Reform Act of 1978 apply in this case. Despite arguments to the contrary, we have no doubt that the 1898 Act and not the 1978 Act, applies in this case. Section 403(a) of the 1978 Act; Pub.L. 95-598, provides:
A case commenced under the Bankruptcy Act (1898) and all matters and proceedings in or related to any such case, shall be conducted and determined under such Act (1898) as if this Act (1978) had not been enacted, and the substantive rights of the parties in connection with any such bankruptcy case, matter, or proceeding shall continue to be governed by the law applicable to such case, matter, or proceeding as if the Act (1978) had not been enacted.
Therefore, the date the bankruptcy case was commenced determines whether the 1898 Act or the 1978 Act applies. In the case at bar, the Ward bankruptcy was filed on July 13, 1977. Thus, the 1898 Act applied to the Chapter 7 case while it was administered and the 1898 Act is the law this Court will apply in determining whether or not the Ward case can be reopened and the complaint against the Wards, Hamilton & Carroll and NLF can be prosecuted.
The debtors in filing their bankruptcy, failed to list the judgment as property of the estate; the debtors were granted their discharge, the case was closed. The facts of this case show that this judgment, although not a listed asset, eventually realized some $24,000.00. The actions of the Hamilton & Carroll firm and the Wards leads this Court to conclude that they were aware that the judgment had some value and was part of the bankruptcy estate.
The question of whether to reopen a bankruptcy proceeding lies, to a large extent, within the sound discretion of the Bankruptcy Court. Beneficial Finance Company of Va. v. Lazroviton, 47 B.R. 358 (Bkrtcy.E.D.Va.1983). In concert with this discretion, we must note that bankruptcy is an equitable proceeding and rules of equity apply.
A Bankruptcy Court's discretion in opening a case is applicable in both 1898 Act and 1978 Act cases. Matter of Seats, 537 F.2d 1176 (4th Cir.1976); In Re Thomas, 204 F.2d 788 (7th Cir.1953). In fact, we believe it is our duty to order a case reopened when, as here, the Court has clear evidence that there are assets of the estate that have not been administered. Doyle v. Ponsford, 136 F.2d 401 (8th Cir.1943); In Re Johnson, 291 F.2d 910 (8th Cir.1961); In Re Foreman, 45 F.Supp. 295 (E.D.N.Y. 1942). The Court finds that there is an asset of the estate which may be administered; the possible return of these monies justifies the reopening of this case. It is in the best interest of the creditors and the debtor. We note however, that realistically, the determination as to whether the judgment was concealed and should be returned may involve some litigation and expense but the Court believes that the expense is justified under the circumstances. The Court is satisfied that there are compelling reasons to reopen the case. In Re Rediker, 25 B.R. 71 (Bkrtcy.M.D.Tenn. 1982); and that there are no intervening rights of which it would be inequitable and unjust to disturb. In Re Admire, 15 B.R. 405 (Bkrtcy.W.D.Mo.1981). This Court's order of October 3, 1985 reopen these cases stands.
This Court concludes that under the Act of 1898 the two-year statute of limitations on suits by a trustee on behalf of the estate does not apply to suits brought by the trustee against a bankrupt or other parties to recover funds or property of the estate concealed or misapplied. Berman v. Provencher, 614 F.2d 823 (1st Cir.1980).4 The basis for our refusal to apply the statute is found in ¶ 546.02 in Collier on Bankruptcy (15th Ed.1985):
See also, In re Thomas, 204 F.2d 788 (7th Cir.1953) ( ) where the Court said, . 204 F.2d at 790.
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