Stefani v. Peterson (In re Peterson), Case No. 13-60973-7
| Decision Date | 09 December 2014 |
| Docket Number | Adv No. 14-00009,Case No. 13-60973-7 |
| Court | U.S. Bankruptcy Court — District of Montana |
| Parties | In re GARY J PETERSON and BEVERLY K. BEAL, Debtors. DENNIS STEFANI, Plaintiff. v. GARY J PETERSON, Defendant. |
At Butte in said District this 9th day of December, 2014.
This adversary proceeding is an action against Debtor/Defendant Gary J. Peterson ("Peterson") seeking exception from Debtor's discharge of a state court judgment in the amount of $25,460.00 based on actual fraud arising from a roofing contract, under 11 U.S.C. §§ 523(a)(2)(A) and § 523(a)(3)(B). Trial of this cause was held at Great Falls on November 7, 2014. Plaintiff Dennis Stefani ("Stefani") appeared and testified, represented by attorney Steven T. Potts. Defendant Peterson appeared pro se andtestified. Exhibits ("Ex.") 1, 2 and 3 were admitted into evidence. The Court took judicial notice of Debtors' Schedule F and amendment. At the conclusion of the parties' cases-in-chief the Court closed the record and took the matter under advisement. After review of the record and applicable law, for the reasons set forth below judgment shall be entered against the Defendant Gary J. Peterson excepting the judgment from his discharge under § 523(a)(2)(A), § 523(a)(3)(A) & (B).
This Court has original jurisdiction of Defendant's Chapter 7 bankruptcy under 28 U.S.C. § 1334(a). This adversary proceeding to determine dischargeability of a particular debt is a core proceeding under 28 U.S.C. § 157(b)(2)(I). This Memorandum of Decision includes the Court's findings of fact and conclusions of law pursuant to F.R.B.P. Rule 7052 ().
FACTS
The underlying facts are not subject to reasonable dispute and are set forth in Ex. 1, a certified copy of "Findings of Fact, Conclusions of Law and Judgment" entered on April 27, 2011, after a bench trial held on March 15, 2014, in the Montana Eighth Judicial District Court, in state court litigation between the same parties in Cause No. BDV-09-1175. Ex. 1.1 Peterson was not present at the state court trial despite having been notified of the time and place of trial.
Among the state court Findings of Fact set forth in Ex. 1 are: That Peterson made representations to Stefani about his experience as a roofer which were false and material; that Peterson knew his representations were false and that Stefani was ignorant of the falsity of Peterson's representations; that Peterson intended that Stefani rely on Peterson's representations and that Stefani did rely on Peterson's fraudulent and false representations; that Stefani had a right to rely on Peterson's representations; and that Stefani was proximately injured by his reliance on Peterson's false representations. Ex. 1, pp. 4-5.
Among the state court's conclusions of law is that Peterson breached his contract with and committed actual fraud upon Stefani, which proximately caused Stefani damage in the amount of $25,460. Ex. 1, p. 5. The state court entered judgment against Peterson in the total amount of $25,625 including costs, based upon both Stefani's breach of contract and actual fraud claims, on April 25, 2011. Ex. 1, pp. 5-6.
Peterson filed a motion to set aside the judgment on May 27, 2011. Ex. 2. In his motion Peterson argued that he was not notified of the court date. The state court denied his motion to set aside the judgment, noting that Peterson had not complied with pretrial deadlines, did not cooperate in scheduling the pretrial conference, and had a history of not appearing with court dates and not complying with court orders.2 Ex. 2. The courtconcluded that Peterson's argument that he was not notified of the trial date to be without merit, because the court itself gave Peterson the trial date both orally and by written order which was sent to Peterson's address, which remained the same throughout the proceeding. Ex. 2.
At the trial of the instant adversary proceeding Peterson testified that he missed the state court trial because his spouse was ill on the date of the state court trial and was undergoing surgery, which had been scheduled in advance. He testified that he has been a roofer for 40 years, that the roofing job for Stefani was the first problem he has ever had, and that he never got a chance to say a thing at the state court trial or mediation.
Peterson did not appeal the state court judgment; it is final. Stefani obtained writs of execution to enforce his judgment beginning in September of 2011. Ex. 3. Peterson filed a notice of his bankruptcy filing in the state court case on January 16, 2014. Ex. 3.
Peterson and his spouse filed a voluntary joint Chapter 7 petition on July 12, 2013, with Schedules and a Statement of Financial Affairs ("SOFA"). Stefani is not listed in Debtors' original Schedule F as a creditor with an unsecured nonpriority claim or elsewhere in their Schedules, for which Peterson and his spouse signed a declaration under penalty of perjury stating that they read the schedules and that they are true and correct to the best of their knowledge, information and belief. Although Stefani is not listed in Schedule F, Debtors' SOFA filed with their original Schedules lists Stefani's state court lawsuit against Peterson at Item 4 ("Suits and . . . ."), noting the judgmententered and describing the nature as "lawsuit for breach of contract."
Despite listing Stefani in the SOFA, Debtors did not include Stefani in the master mailing list required under Montana Local Bankruptcy Rule 1007-2(a)(1). As a result, the notice of commencement of Debtors' bankruptcy case, creditors' meeting and deadlines was sent to creditors on July 17, 2013, but was not sent to Stefani. That notice fixed a deadline of October 11, 2013, to challenge dischargeability of certain debts. On August 15, 2013, the Clerk set a notice to file claims to creditors, fixing a deadline to file proofs of claim on November 13, 2013. That notice was sent to creditors, but not to Stefani because he still was not a scheduled creditor.
A discharge of the Debtors was entered on October 15, 2013. The discharge (Document No. 17) explains on the backside some of the common types of debts which are not discharged in a chapter 7 bankruptcy case, including
On January 21, 2014, Debtors filed an amended Schedule F which lists Stefani as a creditor holding an unsecured nonpriority claim against Peterson in an unknown amount arising from the state court judgment. A final decree was entered closing the case on February 21, 2014.
Stefani commenced the instant adversary proceeding on April 28, 2014, seeking exception of his claim against Peterson under § 523(a)(2) for fraud and under § 523(a)(3)(B) because Stefani was not notified of Peterson's bankruptcy in time to permitthe timely filing of a proof of claim. Peterson's pro se answer denies all allegations and prays that Plaintiff take nothing.
DISCUSSION
Section 523(a)(3)(B) excepts from discharge a debt "neither listed nor scheduled . . . in time to permit . . . timely filing of a proof of claim and timely request for a determination of dischargeability of such debt," unless the creditor "had notice or actual knowledge of the [bankruptcy] case in time for such timely filing and [complaint]." 11 U.S.C. § 523(a)(3)(B); See Anwar v. Johnson, 720 F.3d 1183, 1187 n. 5 (9th Cir. 2013). A § 523(a)(3)(B) complaint as to nondischargeability of a debt can be brought at virtually any time of the creditor's choosing. Partners for Health and Home, L.P. v. Seung Wee Yang, 488 B.R. 109, 118 (C.D. Cal. 2012), In re Bartomeli, 303 B.R. 254, 269 (Bankr. D. Conn. 2004).
Ninth Circuit case law construing § 523(a)(3)(B), which this Court is bound to follow, is discussed in a concurrence written in Beezley v. Cal. Land Title Co. (In re Beezley), 994 F.2d 1433 (9th Cir. 1993), and was adopted by the full circuit in White v. Nielsen (In re Neilsen), 383 F.3d 922 (9th Cir. 2004). The following lengthy quotation from Beezley provides important policy context for the instant adversary proceeding:
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