Opinion
Case No. 00-53249.
May 26, 2011
MEMORANDUM DECISION ON MOTION TO RECONSIDER ORDER VACATING DISCHARGE
Before this Court is the Motion of former Debtor Warren Alexander Bevan ("Debtor") for Order Discharging Debtor in Re: City of San Jose Claim ("Debtor's Motion"). The City of San Jose ("Creditor") opposes Debtor's Motion. Hearings on Debtor's Motion were held on November 8, 2010 and February 1, 2011. Debtor is appearing in propria persona. Creditor is represented by Shannon Smyth-Mendoza, Esq. of the Office of the City Attorney. This Court will treat Debtor's Motion as a motion to reconsider under Federal Rule of Civil Procedure 60 ("Federal Rule"), as incorporated by Federal Rule of Bankruptcy Procedure 9024 ("Bankruptcy Rule"). This Memorandum Decision constitutes the Court's findings of fact and conclusions of law, pursuant to Bankruptcy Rule 7052.
Debtor's Motion requests "an order to discharge debtor in re: City of San Jose claim." Debtor's Motion at 1:22, 5:7-8. Debtor apparently seeks to attack this Court's May 30, 2008 Order which revoked Debtor's discharge (the "2008 Order"). Creditor's Opposition to Debtor's Motion treats the Motion as a motion to reconsider the 2008 Order. This Court is expressly not ruling at this time whether Creditor's claim was or was not discharged in Debtor's bankruptcy.
I. FACTUAL BACKGROUND
Debtor's bankruptcy case has an unusual procedural history. On June 21, 2000, Debtor filed a petition for relief under Chapter 11 of the Bankruptcy Code. On November 5, 2002, this Court entered an order granting a motion to convert Debtor's case to Chapter 7. The first meeting of creditors for the converted Chapter 7 was scheduled for December 6, 2002, and was apparently continued. On February 4, 2003, the Chapter 7 Trustee moved this Court to extend the deadline to object to Debtor's discharge because Debtor may have, among other things, concealed substantial assets from Debtor's creditors. On April 1, 2003, this Court extended the deadline to June 6, 2003. No objection to Debtor's discharge was filed. On July 2, 2003, the Court entered an order granting Debtor a Chapter 7 discharge ("2003 Discharge Order").
Unless otherwise noted, all references are to the Bankruptcy Code, 11 U.S.C. § 101, et seq.
The Court's docket is not clear on this point. The United States Trustee's motion to dismiss Debtor's case asserts that Debtor failed to attend a continued meeting of creditors scheduled for February 28, 2003. See Docket No. 162.
On January 15, 2004, after Debtor received a Chapter 7 discharge, the United States Trustee moved this Court for an order dismissing Debtor's case for failure to attend a continued meeting of creditors.
On February 26, 2004, this Court held a hearing on the motion to dismiss. At the hearing, Debtor requested "reversal of the discharge" because Debtor had come to a resolution with Debtor's ex-wife, who was a creditor in Debtor's case. The Court orally held at the hearing that Debtor lacked standing under Bankruptcy Code section 727(d) to seek revocation of Debtor's discharge pursuant to In re Markovich, 207 B.R. 909 (9th Cir. BAP 1997). The Court denied Debtor's request to vacate Debtor's discharge and dismissed Debtor's case with full knowledge that Debtor had previously received a discharge.
On March 16, 2004, this Court entered an order dismissing Debtor's case ("2004 Dismissal Order"). The 2004 Dismissal Order ordered Debtor's case dismissed for cause pursuant to Bankruptcy Code section 707(a). On June 8, 2004, Debtor's case was closed. No papers were filed in Debtor's case from June 8, 2004 to May 30, 2008.
On May 30, 2008, this Court entered an order vacating Debtor's discharge ("2008 Order"). The 2008 Order stated:
The order of discharge for the above-entitled debtor(s) having been inadvertently entered on July 2, 2003; and good cause appearing therefor;
IT IS HEREBY ORDERED that the discharge of debtor entered July 2, 2003, be and is hereby vacated.
2008 Order at 1:17-20. The 2008 Order contained no other substantive language. The Court vacated Debtor's discharge sua sponte, without notice to Debtor, and without a hearing. According to a declaration filed by Creditor, this Court vacated Debtor's discharge because Creditor contacted the clerk's office of this Court regarding the status of Debtor's discharge.
Docket No. 191.
On August 20, 2010, Debtor filed Debtor's Motion. An initial hearing on the Motion was held on November 8, 2010. At the November 8, 2010 hearing, the Court stated that attendance at a meeting of creditors was not a requirement of obtaining a discharge. The Court further stated: "The question before the Court now is whether it was appropriate for the Court to have vacated the discharge at that time without a noticed hearing, and it may well be that it wasn't. . . . I'm considering holding it wasn't."
The Court gave the parties an opportunity for further briefing and scheduled a continued hearing for February 1, 2011. Creditor's and Debtor's supplemental briefs did not allege that any party had any reliance interests in the 2008 Order. At the February 1, 2011 hearing, the Court informed the parties that the Court would issue a written decision vacating the 2008 Order.
II. JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. sections 1334 and 157 because Debtor's Motion asks this Court to enforce the pre-dismissal 2003 Discharge Order via reconsideration of the 2008 Order. See In re Taylor, 884 F.2d 478, 481 (9th Cir. 1989); In re Lawson, 156 B.R. 43, 46 (9th Cir. BAP 1993).
III. ANALYSIS
Debtor requests this Court to vacate the 2008 Order. Creditor asserts Debtor's Motion is untimely because Debtor's Motion was filed more than one year after the date of entry of the 2008 Order. Debtor's Motion was filed outside of the one-year time bar for motions seeking relief from orders under Federal Rule 60(b)(1) as a mistake. See Federal Rules 60(b)(1), 60(c)(1). As explained in more detail below, the Court finds that (1) the 2004 Dismissal Order did not vacate or modify the 2003 Discharge Order, and (2) this Court can vacate the 2008 Order under Federal Rule 60(a). A. The 2004 Dismissal Order Had No Effect on the 2003 Discharge Order.
Because this Court does not need to determine whether Debtor's due process rights were affected by entry of the 2008 Order, the Court does not reach the issue in this Memorandum Decision. See Albion-Idaho Land Co v. Adams, 58 F. Supp. 579, 580 (D. Idaho 1945); United States v. 706.98 Acres of Land, 158 F. Supp. 272, 275 (W.D. Ark. 1958); Chavez v. Balesh, 704 F.2d 774, 776 (5th Cir. 1983).
Bankruptcy Code section 349(b) governs the effect of dismissal and provides:
Bankruptcy Code section 349(a) details the effect of a dismissal on a debtor's ability to obtain later discharges.
(b) unless the court, for cause, orders otherwise, a dismissal of a case other than under section 742 of this title —
(1) reinstates —
(A) any proceeding or custodianship superseded under section 543 of this title;
(B) any transfer avoided under section 522, 544, 547, 548, 549, or 724(a) of this title, or preserved under section 510(c)(2), 522(i)(2), or 551 of this title; and
(C) any lien voided under section 506(d) of this title;
(2) vacates any order, judgment, or transfer ordered, under section 522(i)(1), 542, 550, or 553 of this title; and
(3) revests the property of the estate in the entity in which such property was vested immediately before the commencement of the case under this title.
11 U.S.C. § 349(b). Nothing in the plain language of Bankruptcy Code section 349(b) provides that dismissal vacates a discharge.
The cases in which a Chapter 7 debtor's case was dismissed post-discharge uniformly hold that the dismissal had no automatic effect on the discharge. See, e.g., In re Sherman, 491 F.3d 948 (9th Cir. 2007). In Sherman, the debtor received a Chapter 7 discharge while the creditor's motion to dismiss the debtor's case was on appeal. Id. at 955. The debtor argued that the creditor's motion to dismiss was moot because the debtor had received a discharge and, therefore, the court could not fashion adequate relief. Id. at 965-66. The Ninth Circuit held that:
[T]his appeal is not moot because the entry of a discharge order alone did not terminate the Shermans' bankruptcy petition, and a grant of the dismissal order could have triggered reconsideration of the discharge order.
Id. at 965 (emphasis added). Thus, the Ninth Circuit has held that a dismissal order could potentially vacate a discharge, but does not do so automatically.
Likewise, the Bankruptcy Court for the Eastern District of Virginia has held that dismissal does not automatically revoke a Chapter 7 discharge. In re Adams, 203 B.R. 240 (Bankr. E.D. Va. 1996). In Adams, the debtors received a Chapter 7 discharge while the creditor's motion to dismiss was pending. Id. at 241. The creditor moved the court to condition the dismissal order so that the dismissal order would revoke the debtors' Chapter 7 discharge. Id. The Adams court declined to do so, holding:
[S]ection 349(b) is inapplicable here since its purpose is to restore property rights, wherever practical, to their status prior to the bankruptcy, if a case is dismissed. I find no language in section 349 which would warrant the court's revoking the debtors' discharge under the circumstances of this case.
Id. at 242 (citations omitted). Thus, both the Adams and Sherman courts held that dismissal could potentially revoke a Chapter 7 discharge, but such revocation does not occur simply upon entry of a dismissal order.
Further, the legislative history of Bankruptcy Code section 349 contemplates that dismissals do not automatically revoke discharge orders. The legislative history states in relevant part:
Of course, this subsection only refers to predischarge dismissals. If the debtor has already received a discharge and it is not revoked, then the debtor would be barred under section 727(a) from receiving a discharge in a subsequent liquidation case for six years.
H.R. Rep No. 595, 95th Cong., 1st Sess 337-338 (1977), 1978 U.S.C.C.A.N. 5963; S. Rep. No. 989, 95th Cong., 2d Sess 48 (1978) (emphasis added). Hence, Congress contemplated the possibility that a debtor's case could be dismissed without the debtor's discharge being revoked.
In accordance with the case law authority and the legislative history, the 2004 Dismissal Order did not automatically revoke the 2003 Discharge Order. Moreover, the terms of the 2004 Dismissal Order did not revoke the 2003 Discharge Order. The 2004 Dismissal Order makes no reference to Debtor's discharge. In fact, at the February 26, 2004 hearing on the motion to dismiss Debtor's case, this Court explicitly considered and denied Debtor's request to vacate the 2003 Discharge Order because Debtor lacked standing to request that the 2003 Discharge Order be vacated. Hence, the 2004 Dismissal Order had no effect on the 2003 Discharge Order, and the 2003 Discharge Order was still in full effect on May 30, 2008, when the 2008 Order was entered.
B. The 2008 Order Can Be Vacated Pursuant to Federal Rule 60(a).
Federal Rule 60(a) provides:
The court may correct a clerical mistake or a mistake arising from oversight or omission whenever one is found in a judgment, order, or other part of the record. The court may do so on motion or on its own, with or without notice. . . .
Fed.R.Civ.Proc. 60(a) (emphasis added). There is no time limitation within Federal Rule 60(a). Thus, absent equitable circumstances not alleged here, this Court is not time-barred from vacating the 2008 Order under Federal Rule 60(a).
As noted above on page 5, because Debtor waited more than a year after entry of the 2008 Order to file Debtor's Motion, Federal Rule 60(c)(1) precludes the application of Federal Rules 60(b)(1), 60(b)(2), and 60(b)(3).
See In re Bestway Products, Inc., 151 B.R. 530, 537 (Bankr. E.D. Cal. 1993) ("The one limitation on correcting an error under [Federal] Rule 60(a) is that reliance on the erroneous judgment can lead to changes in position that are so substantial as to make it inequitable to grant relief."). See also Lowe v. McGraw-Hill Companies, Inc., 361 F.3d 335 (7th Cir. 2004) ("Security of property rights and other holdings — and a legal judgment is a form of property right — would be greatly undermined if a judgment could be challenged a decade or more after it had been entered, on the ground that the judge had been mistaken to render it.") (citations omitted).
Rule 60(a) authorizes a district court to correct a judgment if doing so reflects the court's original intentions. In determining what the court originally intended, we may look to the circumstances surrounding the original judgment and also to the court's subsequent statements of its original intent, providing the record gives no reason to doubt such statements.
Guenther v. United States, 44 Fed.Appx. 149, 150 (9th Cir. 2002) (footnotes omitted).
Under Guenther, this Court needs to look to the Court's original intent in signing the 2008 Order, the circumstances surrounding the 2008 Order, and any subsequent statements of the Court's original intent to determine whether the 2008 Order should be vacated. Unfortunately, the 2008 Order contains no specific findings of fact or conclusions of law, and any original intent on the part of this Court is not apparent. Thus, the Court will need to look to the circumstances surrounding the 2008 Order and any subsequent statements by this Court.
At the time the 2008 Order was entered, the record reflected that Debtor potentially should not have been granted a discharge because Debtor allegedly had not attended a continued meeting of creditors. However, Bankruptcy Rule 4004(c) does not list attendance at a meeting of creditors as a requirement for receiving a discharge. See Fed.R.Bankr.Proc. 4004(c). A discharge usually is not granted until after the deadline for objecting to discharge passes, see id., and that deadline is usually extended to a date after the date of the continued meeting of creditors. Here, the deadline was not extended to a date after the date for the continued meeting of creditors. This Court's practice is not to grant a Chapter 7 discharge until the debtor attends a meeting of creditors.
However, this Court decided not to revoke Debtor's discharge at the February 26, 2004 hearing on the United States Trustee's motion to dismiss Debtor's case. Further, no party other than Debtor sought to revoke Debtor's discharge. There would be no reason for Debtor or for any other party looking at the record in 2008 to believe that this Court would take any action to vacate the 2003 Discharge Order. It is readily apparent that the Court's original intent was to allow Debtor to receive a discharge, and the 2008 Order contradicted that intent. Thus, entry of the 2008 Order is properly vacated under Federal Rule 60(a).
IV. CONCLUSION
For the above-stated reasons:
(1) The Court vacates the 2008 Order under Federal Rule 60(a).
(2) The Court declines in this Memorandum Decision to determine whether Creditor's claim was discharged by the 2003 Discharge Order.
The Court shall issue an order consistent with this Memorandum Decision.