Matter of McDaniel, Bankruptcy No. N95-11158-WHD.

• Decision Date: 30 January 1998
• Docket Number: Bankruptcy No. N95-11158-WHD.
• Parties: In the Matter of Kenneth A. McDANIEL, Debtor.
• Court: United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Georgia

217 B.R. 348 (1998)

In the Matter of Kenneth A. McDANIEL, Debtor.

Bankruptcy No. N95-11158-WHD.

United States Bankruptcy Court, N.D. Georgia, Newnan Division.

January 30, 1998.

Timothy D. Roberts, Oliver Maner & Gray, Savannah, Georgia, Patrick Connors DiCarlo, Magill & Bondurant, Atlanta, GA, for Industrial Tractor Company, Inc.

David L. Miller, Atlanta, GA, for Debtor.

ORDER

W. HOMER DRAKE, Jr., Bankruptcy Judge.

Now before the Court in this proceeding is a Motion for Reconsideration filed by Industrial Tractor Company, Inc. (hereinafter "the Creditor"). Through this Motion, the Creditor seeks review of an Order whereby the Court granted the "Motion to Reopen Case and Add Omitted Creditor" filed by Kenneth A. McDaniel (hereinafter "the Debtor"). This Motion gives rise to a core proceeding, see 28 U.S.C. § 157(b)(2)(A) & (O), and as such, it shall be disposed of in accordance with the reasoning that follows.

BACKGROUND

The Debtor commenced his present bankruptcy case by filing a Chapter 7 Petition on May 22, 1995. Since the bankruptcy estate contained no assets beyond the Debtor's exemptions, no bar date was set for filing proofs of claim against the Debtor's estate, as proscribed by Bankruptcy Rule.¹ Apart from this distinguishing characteristic, however, the case proceeded in due course, and on October 16, 1995, the Debtor received a discharge from his prepetition debt obligations. Thereafter, his case was closed.

Throughout the foregoing process, however, the Debtor failed to include as part of his bankruptcy schedules a certain claim owed to the Creditor, which indebtedness arose from the Debtor's status as guarantor of loans made to River Landings, Inc. and KM Trucking, Inc. The Creditor had sent the Debtor no direct notice of its intent to proceed against the guaranty obligation prior to the date of his petition, instead sending correspondence to agents of the corporate obligors in Hilo, Hawaii.² Thus, circumstances suggest that the Debtor did not realize his impending liability until the Creditor filed a garnishment on debtor's joint bank account with his wife on or about May 8, 1997.

Upon commencement of such garnishment proceedings, the Debtor filed a Motion to Reopen Case and Add Omitted Creditor. A hearing thereafter was conducted, at which time the Creditor appeared and vigorously contested any amendment of the Debtor's schedules to include that obligation owed to it. Notwithstanding the Creditor's contentions, however, the Court found that the Debtor had a right both in law and in equity to amend his bankruptcy schedules as requested. The Creditor now characterizes that decision as inapposite with the Eleventh Circuit's ruling in Samuel v. Baitcher (In re Baitcher), 781 F.2d 1529 (1986), and thus, seeks reconsideration of its terms.³

I. The Standard for Reconsideration and The Creditor's Failure to Present New Evidence or Case Law Justifying the Relief Sought.

FEDERAL RULE OF CIVIL PROCEDURE 59(e) grants bankruptcy courts license to reconsider orders and judgments after their entry. See FED.R.CIV.P. 59(e) (made applicable in bankruptcy by FED.R.BANKR.P. 9023); see also FED.R.BANKR.P. 9002 (references, like that of FEDERAL RULE OF CIVIL PROCEDURE 59(e), to the alteration or amendment of a "judgment" shall be read to include reconsideration of any order appealable to an appellate court); see also NationsBank v. Blier (In re Creative Goldsmiths), 178 B.R. 87, 90-91 (Bankr. D.Md.1995) (applying Rule 59(e) in bankruptcy). Understandably, however, the goal of this provision is limited to the correction of any manifest errors of law or misapprehension of fact. See Hutchinson v. Staton, 994 F.2d 1076, 1081 (4th Cir.1993); Lux v. Spotswood Constr. Loans, 176 B.R. 416, 420 (E.D.Va.), aff'd, 43 F.3d 1467 (4th Cir.1994). "This Rule is not designed to furnish a vehicle by which a disappointed party may reargue matters already argued and disposed of, nor is it aimed at providing a mechanism by which new arguments or legal theories, which could and should have been raised prior to the issuance of judgment, can be later advanced." See In re DEF Inv., Inc., 186 B.R. 671, 680-81 (Bankr.D.Minn.1995) (citing Bannister v. Armontrout, 4 F.3d 1434, 1440 (8th Cir.1993)); see also Concordia College Corp. v. W.R. Grace, 999 F.2d 326, 330 (8th Cir.1993), cert. denied, 510 U.S. 1093, 114 S.Ct. 926, 127 L.Ed.2d 218 (1994); Fed. Deposit Ins. Corp. v. World Univ., Inc., 978 F.2d 10, 16 (1st Cir.1992); Dale & Selby Superette & Deli v. Dep't of Agric., 838 F.Supp. 1346, 1348 (D.Minn.1993); DeGidio v. Pung, 125 F.R.D. 503, 505 (D.Minn.1989). Attempts to take a "second bite at the apple," to introduce new legal theories, or to pad the record for an appeal, constitute an abuse of the Rule 59(e) motion which the Court normally will not condone. See id. Thus, the Court will grant a Rule 59(e) motion only under extraordinary circumstances, such as a change in the law or the facts upon which it based its decision. See Wilson v. Runyon, 981 F.2d 987, 989 (8th Cir.1992), cert. denied, 508 U.S. 975, 113 S.Ct. 2968, 125 L.Ed.2d 668 (1993); Dale & Selby, 838 F.Supp. at 1347-48.

In the instant case, the Creditor has not produced any previously unavailable case law or evidence which might warrant reconsideration from the Court.⁴ Rather, having failed in opposing the Debtor's efforts at schedule amendment to begin with, the Creditor appears to call upon Rule 59(e) as a vehicle for rehashing those same contentions.⁵ Rule 59(e), however, is not to be used for the advancement of arguments that should and could have been made prior to an Order's entry. Concordia College Corp. v. W.R. Grace & Co., 999 F.2d 326, 330 (8th Cir.1993) (litigants may "not use a Rule 59(e) motion to introduce new evidence that could have been adduced earlier, or as the occasion to tender new legal theories for the first time"); California Union Ins. Co. v. Liberty Mutual Ins. Co., 930 F.Supp. 317, 317-18 (N.D.Ill.1996); DeWit v. Firstar Corp., 904 F.Supp. 1476, 1495 (N.D.Iowa 1995). The Court's decisions are "not intended as mere first drafts, subject to revision and reconsideration at a litigant's pleasure." Lester v. Brown, 1995 WL 447764, No. 93-C-7481 at *1 (N.D.Ill. July 26, 1995). Nor should Rule 59(e) be viewed as a means for overcoming one's failure to litigate matters fully. All West Pet Supply Co. v. Hill's Pet Prods. Div., Colgate-Palmolive Co., 847 F.Supp. 858, 860 (D.Kan.1994) ("a party's failure to present his strongest case in the first instance does not entitle him to a second chance in the form of a motion to amend"); Yorke v. Citibank; N.A. (In re BNT Terminals, Inc.), 125 B.R. 963, 977 (Bankr.N.D.Ill. 1990) (second bites are not the function of Rule 59(e)). To the extent that it harbors such an effort, calculated from hindsight without the benefit of any new case law or evidence that could not have been presented earlier, the Creditor's Motion for Reconsideration falls outside the permissible scope of a Rule 59(e) Motion, and it must be denied as such.

II. The Standards for Reopening No-Asset Cases for the Purpose of Schedule Amendment, As Defined By Code Sections 350(b) and 523(a)(3).

A. Sections 350(b) and 523(a)(3) in Overview.

To the extent, however, that the Creditor's present Motion reflects a misunderstanding of its prior ruling, the Court shall herein memorandize the principles of law behind that decision in substantial detail. 11 U.S.C. § 350(b) permits a bankruptcy case to be reopened "to administer assets, to accord relief to the debtor, or for other cause." See generally FED.R.BANKR.P. 5010 ("a case may be reopened on motion of the debtor or other party in interest pursuant to section 350(b) of the Code."). By its reference to "cause," section 350(b) casts a broad net, and a decision in this respect thus necessarily falls within the "sound discretion of a bankruptcy court." See In re Sheerin, 21 B.R. 438, 439-40 (1st Cir. BAP 1982); see also In re Figlio, 193 B.R. 420, 424 (Bankr. D.N.J.1996) ("the decision to reopen the case is within the broad discretion of the bankruptcy court"); In re Winebrenner, 170 B.R. 878, 881 (Bankr.E.D.Va.1994) (quoting In re Carter, 156 B.R. 768, 770 (Bankr. E.D.Va.1993) ("the right to reopen the case depends upon the circumstances of the individual case and the decision whether to reopen is committed to the court's discretion")).

Generally speaking, a debtor's desire to amend his bankruptcy schedules "to include an additional creditor and, thus, accurately reflect all debts owed . . . constitutes sufficient cause to reopen." See In re Jensen, 46 B.R. 578, 581 (Bankr.E.D.N.Y.1985); accord In re Daniels, 51 B.R. 142, 143 (Bankr.S.D.Ohio 1985) ("a classic cause for invoking the cure of reopening is to add an omitted creditor to the schedules"); see also In re Godley, 62 B.R. 258, 261-62 n. 1 (Bankr.E.D.Va.1986) (noting that such cause exists because "the Bankruptcy Code places a premium on scheduling all creditors"). Indeed, in the vast majority of cases, it is a debtor's wish to discharge the omitted debt which forms the impetus behind his Motion to Reopen. Notwithstanding such self-interest, however, this motive shall be validated by the Court's approving the Motion to Reopen, absent some harm or prejudice to the omitted creditor. See, e.g., In re Candelaria, 121 B.R. 140, 142 (E.D.N.Y.1990); Matter of Davidson, 36 B.R. 539, 543 (Bankr.D.N.J. 1983). "Harm or prejudice" arises when Creditor's omission from bankruptcy schedules has precluded it from participating in the case's distribution, or made it unable to challenge the dischargeability of the debtor's obligation to it.

So as to guard against these dual prejudices to the rights of omitted creditors, Bankruptcy Code section 523(a)(3) makes the following provision:⁶

(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt—

* * *

(3) neither listed nor

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