Patterson Dental Co. v. Mendoza (In Re Mendoza)Patterson Dental Co. v. Mendoza (In Re Mendoza)
OPINION ON ORDER GRANTING SUMMARY JUDGMENT
I
FACTS
On Sеptember 16, 1977, the debtor, Mr. Henry F. Mendoza, filed for bankruptcy under the now repealed United States Bankruptcy Act (“Act”), in the Bankruptcy Court for the Northern District of California (Case No. 4-77-1913 WK). In his schedules the debtor listed Patterson Dental Company (“Patterson”) as a creditor. On January 16, 1978, a discharge was entered on the debtor’s behalf. However, on November 7, 1978, Judge Cameron W. Wolfe revoked the discharge order because of the debtor’s failure to appear and be examined before that Court.
Subsequent to the entry of the revocation order, Patterson reduced its claim to judgment entered in the Orange County Superi- or Court on January 23,1980, in the amount of $30,022.35.
On October 22, 1980, Mr. Mendoza filed a Chapter 7 petition in this Court under the Bankruptcy Reform Act of 1978 (“Code”). Patterson was listed as a creditor, but the debtor included Patterson’s old address even though he had knowledge of its new address. On November 14, 1980, this Court sent out a notice setting January 26, 1981, as the bar date for the filing of complaints objecting to the entry of a discharge, or contesting the dischargeability of the debt- or’s obligatiоns. The two notices sent to Patterson were returned as undeliverable.
Nevertheless, on February 2, 1981, Patterson filed this complaint challenging the debtor’s right to a discharge and asking that this Court determine that the debt, owed by the debtor to Patterson, be declared nondischargeable. The filing of this complaint came one week after the applicable bar date.
On August 13,1981, Judge Wolfe entered an order denying the debtor’s motion to vacate the 1978 order revoking his discharge in Case No. 4-77-1913 WK.
On October 22, 1981, Patterson filed a motion for summary judgment claiming that the debtor’s previous bankruptcy filing, coming within six years, constitutes a bar to the debtor receiving a discharge, or in the alternative, having any of the debts scheduled in the рrior case discharged in this case. At the hearing before this Court on November 13, 1981, the debtor was allowed to move that this complaint be dismissed as not timely filed and to move for summary judgment.
After this hearing, the parties were allowed to file additional memorandums of law, and this opinion is filed to announce this Court’s final decision on the motions described abovе.
II
DISCUSSION
A. TIMELINESS OF COMPLAINT
This complaint challenges the debt- or’s right to receive a discharge in this case and the dischargeability of the debt owed to Patterson, an obligation scheduled in the prior bankruptcy case. On the debtor’s motion to dismiss, no issue is presented regarding the dischargeability issue. For, under
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11 U.S.C. § 523(c), a creditor is only required to file a complaint if it is alleged that thе obligation was created by a transaction involving a false statement, embezzlement or larceny, or willful and malicious injury.
See
H.Rep.No. 95-595, 95th Cong., 1st Sess. 365 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787 (“House Report”). If a debt is excepted from discharge based on one of the other grounds listed in 11 U.S.C. § 523(a), then no specific court order is required.
See In re Wright,
However, this complaint also involves a challenge to the debtor receiving a discharge in this, his second bankruptcy case filed within six years. That presents an independent question regarding the timeliness of the filing of this complaint.
Under Bankruptcy Rule 404(a), the Court is required to fix a time for the filing of a complaint objecting to the debtor’s discharge not less than thirty days, nor more than ninety days, from the date set for the first meeting of creditors.
In re Capshaw,
Under Bankruptcy Rule 404(c), the Court may grant an extension of time on a showing of cause. This discretionаry power can even be exercised after the bar date has passed.
See In re Magee,
A discharge in bankruptcy is a privilege, and not a one-way street. To earn the discharge, the debtor has certain obligations to fulfill, and his creditors are, at least, entitled to timely notice.
King v. Harry,
B. EFFECT OF REVOCATION OF DISCHARGE ON CASE COMMENCED WITHIN SUBSEQUENT SIX YEARS
Patterson argues that the discharge, even though revoked, entered in the debtor’s previous bankruptcy case, which was filed within six years of this petition, blocks his right to have a discharge here or, in the alternative, seeks to have the Patterson debt declared nondischargeable, claiming it is excepted from any discharge.
As a preliminary matter, this Court must consider whether the Act, or the Code, is controlling on the questions presented. Transition Section 403(a),
2
does contain a savings clause. This clause directs that all matters relating to Act cases are to be determined by reference to the Act. However, since here we are concerned solely with the debtor’s present rights in a Code case, the Code must govern.
Accord, Mat
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ter of Dole,
1. Right to Receive Discharge in Subsequent Case.
The discharge provision of the Code is found in Section 727. 11 U.S.C. § 727. This section is the heart of the fresh-start provision of the Code and embodies the well-accepted principle that the Code is intended to allow the honest debtor a fresh start in life, frеe from oppressive debt.
In re Rubin,
Section 727(a)(8) states, in part, that a debtor shall be granted a discharge unless, he has been granted a discharge under Section 14 of the Act in a case commenced within six years before the date of the filing of the petition. 11 U.S.C. § 727(a)(8). The purpose of this six-year provision is to prevent the creation of a class of habitual debtors, who would rid themselves of their debts by gоing through bankruptcy every time they find themselves unable to pay their debts.
See Perry v. Commerce Loan Co.,
While no decision can be found directly on point, it should be noted that under the Act dismissal of a second case was allowed where the bankrupt had been denied a discharge in the first case and had scheduled entirely the
same debts
in each case.
See Perlman v. 322 West Seventy-Second Street Co.,
This brings us to the long-established rule of statutory construction that in a general revision by codification the revised sections will be presumed to bear the same meaning as did the original sections, unless an intent to change the meaning is clearly, and indubitably manifested.
Peerless Casualty Company v. United States,
In addition, reference to the exact lаnguage of Section 727(a)(8) reveals that its barrier to discharge only applies in situations where the debtor
“has been granted”
a discharge. 4
Collier, 15th ed., supra,
¶ 727.11 at 727-77. This limitation must be considered in light of the established precedent that the revocation of a discharge renders the discharge order a nullity.
See In re Hairston, supra,
It should be noted that this result is in accord with the directive adopted by the Ninth Circuit that:
... provisions regulating discharges are remedial in nature; they should be construed liberally with the purpose of carrying into effect the legislative intent, and that the statutory grounds for opposing a discharge should not be extended by construction.
Turner v. Boston, supra,
2. Right to Have Debts Scheduled in Previous Case Discharged in Second Case.
The operative provisions in regard to the question as to the dischargeability of the debt to Patterson are found in Section 523. 11 U.S.C. § 523. Under that Section, a discharge does not release an individual debtor from a debt that was listed or scheduled by the debtor in a prior case in which the debtor was denied a discharge under Section 14(c)(1), (2), (3), (4), (6), or (7) of the Act. 11 U.S.C. § 523(a)(9). This еxcepts from discharge, debts that the debtor owed before a previous bankruptcy case concerning the debtor in which the debtor was denied a discharge other than on the basis of the six-year bar, or the failure to pay the required filing fees. See House Report at 365. Patterson claims that the effect of this statute is to exempt its debt from the discharge granted to the debtor here.
The debtor, on the other hand, claims that Section 523(a)(9) does not cover this case, as the debtor’s discharge in his previous case was revoked under Section 15(3) of the Act. He argues that since Section 15 is not specifically referred to in Section 523(a)(9) of the Code, then debts scheduled in his previous case are dischargeаble here. In this, he is boosted by the policy requiring Courts to construe Section 523 questions strictly against creditors and liberally in favor of debtors.
See Gleason v. Thaw,
The relevant part of Section 523 reads:
A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt—
(9) that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruрtcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under sec *995 tion 14c(l), (2), (3), (4), (6), or (7) of such Act.
11 U.S.C. § 523(a)(9). This section appears to continue provisions found in Section 17(b) of the Act. While both statutes refer to denial of discharge, neither makes specific reference to revocation of discharge under Section 15 of the Act, or its comparable provision, Section 727(d) of the Code. Each of the grounds supporting revocation of discharge, under both the Act and the Code provisions, concerns an element of dishonesty, or lack of cooperation. In this, the revocation sections were apparently drafted to parallel the provisions dealing with denial of discharge as listed in Section 523(a)(9); namely, Sections 14(c)(1), (2), (3), (4), (6), and (7) of the Act and Sections 727(a)(2), (3), (4), (5), (6), or (7) of the. Code, as these sections also involve an element of dishonesty, or failure to cooperate. 3 Collier, 15th ed., supra, ¶ 523.19 at 523-136.
As mentioned above, under the Act it was well settled, even before the addition of Section 17(b), that a failure to obtain a discharge in a prior proceeding was
res judicata
as to debts scheduled in the prior proceedings, and they would not be subject to discharge in a subsequent case absent specific statutory authority allowing their discharge.
See Colwell v. Epstein,
In several cases under the Act the same question, as found in the instant case, was presentеd. In those cases, the courts found that there was no real distinction between a denial of a discharge under Section 14(c)(6) and a revocation of discharge under Section 15(3).
In re Coffey, supra,
a contrary conclusion would lead to the dubious corollary that a bankrupt who refused to obey an order of the court prior to discharge would be barred from discharging debts in a subsequent proceeding, but a bankrupt whose refusal came after discharge would not. To state such а hypothesis is to refute it.
In re Coffey, supra,
Under the Code, we have no indication that Congress intended any change from the practice under the Act.
See Peerless Casualty Company v. United States, supra,
This statement produces a result which recognizes the Congressiоnal policy of denying the debtor the benefits of the discharge of debts which were scheduled in a case where the debtor was dishonest or failed to cooperate in the administration of the es
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tate. The result is the same whether the dishonesty or recalcitrance occurred before, or after, the entry of the discharge order. In this approach, we forward clear Congressional intent.
See Webb v. Harris,
Applying this rule to this case, we achieve a fair result. In his order denying the debtor’s motion to vacate the revocation order, Judge Wolfe indicated that he disbelieved the debtor’s claim that he was unaware of the revocation proceedings. Thus, it would appear that the debtor’s failures in his first case are fully assessable against him. Patterson has had to incur the additional expense of bringing a state court action in order to reduce its claim to judgment. It would be most unfair if the debt- or could now extinguish this debt given his failures to cooperate in his first ease, which was the only appropriate bankruptcy proceeding for presenting the Patterson claim for discharge. This second attempt to gain discharge of this obligation can only be considered vexatious, and useless repetition.
See In re Dunn,
Ill
CONCLUSIONS
1. Due to the debtor’s failure to properly list Patterson’s current address in his schedules, this complaint will be treated as timely filed under Bankruptcy Rule 404.
2. The debtor’s previous bankruptcy case does not stand as a bar to the debtor receiving a discharge in this case, since no discharge was finally granted and, therefore, Section 727(a)(8) does not apply.
3. The revocation of the debtor’s discharge, for failure to obey a lawful order, in his case filed in the Northern District of California in 1977, resulted in the debtor not being granted a discharge for failure to obеy a lawful order of the court, which this Court finds to be equivalent to being denied a discharge under Section 14(c)(6) of the Act. This acts as a bar to the discharge of the debts scheduled in that first case in any subsequent case pursuant to Section 523(a)(9) of the Code.
4. From the above findings of fact and conclusions of law, it would appear that summary judgment is apprоpriate since there is no genuine issue as to any material fact, and the moving parties are entitled to a judgment as a matter of law.
See In re Centinela Church of Christ,
5. Therefore, the debtor’s motion to dismiss this complaint is denied, and the debt- or’s motion for summary judgment on the first cause of action, dealing with the debt- or’s right to a discharge under 11 U.S.C. § 727, is granted.
6. Patterson’s motion for summary judgment on the sеcond cause of action, dealing with the dischargeability of its claim, is granted!
Counsel for Patterson will prepare an appropriate judgment within fourteen (14) days of the date of the filing of this opinion.
Notes
. Under Local Rule 29, this Court has adopted suggested Interim Rule 4002, which makes Bankruptcy Rule 404 applicable to Chapter 7 cases commenced under the Code and substitutes references to 11 U.S.C. § 727(a) in place of Section 14(c) of the Act. See In re Osborne, 1 C.B.C.2d 924, 925 (S.Fla.1980).
. P.L. 95-598, Sec. 403(a), 92 Stat. 2683 (1978).
. This general rule was slightly modified by the 1970 amendments which allowed scheduled debts to be discharged in a subsequent proceeding where the discharge was not obtained in the first case because of a failure to pay the required filing fees, or that the previous case had been filed within the six-year bar period. See Section 17(b) of the Act. (Added by Act of October 19, 1970, Section 7, 84 Stat. 992, effective December 19, 1970).