Rosinski, In re
| Decision Date | 12 April 1985 |
| Docket Number | No. 84-1022,84-1022 |
| Citation | 759 F.2d 539 |
| Parties | 12 Collier Bankr.Cas.2d 923, 13 Bankr.Ct.Dec. 495, Bankr. L. Rep. P 70,376 In re Aida Lucilla ROSINSKI d/b/a New Caravan Garden Bar, Debtor. Aida ROSINSKI d/b/a New Caravan Garden Bar, Plaintiff-Appellant, v. Willard BOYD, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Kay Schwarzberg, Detroit, Mich., argued, David E. Howell, Berkley, Mich., Christine D. Oldani, Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen, Detroit, Mich., for plaintiff-appellant.
Willard Boyd, Madeira Beach, Fla., for defendant-appellant.
Before KEITH, MERRITT and JONES, Circuit Judges.
Plaintiff-Appellant, Aida Rosinski d/b/a New Caravan Garden Bar, appeals from an order of December 7, 1983, 35 B.R. 406, issued by the United States District Court for the Eastern District of Michigan, upholding a ruling by Bankruptcy Judge Ray R. Graves. Judge Graves had denied debtor's petition to amend her schedule of assets and liabilities to include the claim of Willard Boyd as a dischargeable debt. For the reasons set forth below we reverse and remand to the District Court to order the Bankruptcy Court to allow Ms. Rosinski to amend her schedule of liabilities and assets to include the debt to Willard Boyd.
Appellant Rosinski executed a security agreement and a promissory note with Arnold Boyd, who resided in Detroit, and his brother Willard Boyd, a resident of Florida. The property subject to the agreement was a bar known as "Caravan Gardens" located in Detroit. Ms. Rosinski defaulted on her loan, thus prompting Arnold Boyd to pursue a collection action in Wayne County Circuit Court. Ms. Rosinski subsequently filed a Chapter 7 petition for relief in bankruptcy on January 14, 1982.
Following the filing of the Petition for Relief Arnold Boyd died and on March 22, the debtor was relieved of all dischargeable debts. While Willard Boyd was in Michigan for the funeral he contacted Arnold's attorney, requesting information on the Wayne County collection action. This contact occurred on or after January 23, 1982. On October 5, 1982, Willard Boyd commenced an action in Circuit Court seeking a return of his secured property and a deficiency judgment on the unsecured debt. Immediately following service on Ms. Rosinski, she filed a Motion for an Order to Show Cause why Willard Boyd should not be held in contempt of court because of his conduct in bringing the collection action thereby failing to comply with 11 U.S.C. Sec. 524 and the discharge order of March 22. Debtor filed the motion with the Bankruptcy Court and obtained an Order to Show Cause dated November 22, 1982 from Judge Graves.
A hearing on the Order to Show Cause was held on April 14, 1983. At this hearing, Ms. Rosinski argued that Willard Boyd had received sufficient notice. After hearing testimony, including that of Willard Boyd detailing his business relationship with his brother and the extent to which he had received notice of the bankruptcy, Judge Graves found that Willard Boyd had not received adequate notice. The Bankruptcy Court then dissolved the Order to Show Cause.
On March 31, 1983 debtor filed a petition to amend the schedule of assets and liabilities to include the debt owed to Willard Boyd. On April 14, 1983 debtor's attorney received a notice of hearing and objections to the petition to amend. A hearing on the motion to amend was held on May 24, 1983. At the hearing, debtor again attempted to argue that Willard Boyd had received adequate notice. Judge Graves ruled that the matter of notice had already been decided at the April 14 hearing, and that the debtor was precluded from rearguing the issue. Judge Graves went on to rule that the motion to amend was not brought in timely fashion, and that the equities of the situation dictated that amendment should not be allowed. For those reasons, Judge Graves issued an order dated June 6, 1983 denying debtor's petition to amend her schedule.
Debtor then took this appeal to the United States District Court for the Eastern District of Michigan, Chief Judge John Feikens presiding. On December 7, 1983, the District Court upheld the Bankruptcy Court whereupon the debtor filed a timely appeal to this Court.
The debtor essentially asks this Court to find that the Bankruptcy Court committed reversible error in denying her petition to amend the schedule of assets and liabilities. It is well settled that decisions as to whether to reopen bankruptcy cases and allow amendment of schedules are committed to the sound discretion of the bankruptcy judge and will not be set aside absent abuse of discretion. In re Jones, 490 F.2d 452 (5th Cir.1974). See also In re Lorenzen, 21 B.R. 129, 130 (Bkrtcy.N.D.Oh.1982). A further clarification of the standard of review was offered by the District Court which, after a discussion of whether Emergency Interim Rules adopted by the district court below were applicable, correctly acknowledged the vitality of the new rules of bankruptcy which became effective on August 1, 1983. Bankruptcy rule 8013 imposes the clearly erroneous standard of review on findings of fact made by the Bankruptcy Court. Specifically the rule provides:
On appeal the district court or bankruptcy appellate panel may affirm, modify, or reverse a bankruptcy court's judgment, order, or decree or remand with instructions for further proceedings. Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.
During the proceedings below and in the brief on appeal, the parties focused on notice as the key issue. Both Judge Feikens and Judge Graves relied on the factual findings of lack of notice to prevent Ms. Rosinski from amending her schedule of assets and liabilities to include the claim of Willard Boyd. The courts below implicitly held that Ms. Rosinski had no right to amend her schedule of assets and liabilities in order to include Willard Boyd among the dischargeable debtors because she had failed to give him adequate notice. Given the applicable standard of review, Judge Graves' factual findings including the holding that Willard Boyd did not receive adequate notice must stand. However, we are persuaded from the appellant's oral argument on recent case law that harm to the creditor rather than notice is the key issue here.
Under current law, Ms. Rosinski may be prevented from amending her schedule only if her failure to include the creditor on the original schedule can be shown to have prejudiced him in some way or to have been part of a scheme of fraud or intentional design. Stark v. St. Mary's Hospital (Matter of Stark), 717 F.2d 322 (7th Cir.1983); In re Meile, 36 B.R. 719, 720 (Bkrtcy.S.D.Ill.1984). Thus the key inquiry is whether Ms. Rosinski's failure to include Willard Boyd on the original schedule of assets and liabilities has deprived him of remedies...
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