Michael Jay Goldstein v. Richard Allen Diamond

United States Bankruptcy Appellate Panel
For the Eighth Circuit
___________________________
No. 14-6001
___________________________
In re: Richard Allen Diamond
lllllllllllllllllllllDebtor
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Michael Jay Goldstein
lllllllllllllllllllllCreditor - Appellant
v.
Richard Allen Diamond
lllllllllllllllllllllDebtor - Appellee
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Appeal from United States Bankruptcy Court
for the Eastern District of Missouri - St. Louis
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Submitted: March 18, 2014
Filed: April 22, 2014
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Before FEDERMAN, Chief Judge, KRESSEL and SALADINO, Bankruptcy
Judges.
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KRESSEL, Bankruptcy Judge
Michael Jay Goldstein appeals from an order of the bankruptcy court
directing the clerk to reject the filing of his dischargeability complaint. The court
ordered the complaint and a subsequent brief to be returned to him because he
failed to make a motion to reopen the underlying bankruptcy case. For the reasons
that follow, we reverse.
BACKGROUND
On November 29, 2011, Richard Allen Diamond filed a chapter 7
bankruptcy petition in the Eastern District of Missouri. February 28, 2012 was set
as the deadline for filing a complaint to determine the dischargeability of certain
debts under 11 U.S.C. § 523(c).
On February 15, 2012, Goldstein filed a motion in Diamond’s bankruptcy
case entitled “Motion to Extend.” The motion requested a sixty day extension of
proceedings and withholding of the entry of the discharge order. Goldstein
claimed that he was a creditor but he did not receive proper notice of the
bankruptcy case. He intended to pursue an adversary proceeding to determine the
dischargeability of his claim.
The bankruptcy court did not interpret Goldstein’s motion to include a
request for an extension of the February 28, 2012 filing deadline. Instead, it found
the request to be one for “abatement of the case for sixty days.” Finding there was
no cause for such relief, it denied the motion. The court also denied the request to
withhold the discharge.
On February 29, 2012, the court entered the debtor’s discharge. On March
15, 2012, the case was closed. On April 13, 2012, Goldstein filed a “Motion to
Extend Time to Appeal.” The court denied that motion.
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On March 14, 2012, Goldstein looked elsewhere for relief and filed a
dischargeability complaint against Diamond in the Eastern District of
Pennsylvania. According to Goldstein, the complaint was filed pursuant to §
523(a)(3)(B) “to determine the nondischargeability of debts, to Plaintiffs,
emanating from certain Defendant actions that fall within § 523(a)(4) of the
Federal Bankruptcy Code.”
The bankruptcy court for the Eastern District of Pennsylvania held a hearing
requiring Goldstein to show cause why the complaint should not be dismissed for
lack of subject matter jurisdiction, and, if not dismissed, why it should not be
transferred to the Eastern District of Missouri. After the hearing, the court
transferred the adversary proceeding to the Eastern District of Missouri.
The complaint was then referred by the district court to the bankruptcy court,
but on instruction of the bankruptcy judge, it was not docketed. Instead, the court
issued an order instructing Goldstein to file a motion to reopen the underlying
bankruptcy case and pay the reopening fee.
Goldstein did not file a motion to reopen. Instead, he presented a brief
arguing that reopening the case was not a necessary prerequisite to initiating an
adversary proceeding. Again, the court directed the clerk to not docket this
submission because it was “an unsolicited brief, offered to address no open
matter.”
On December 17, 2013, the bankruptcy court issued an order stating that
absent a motion to reopen the case, the court would not permit the complaint to be
filed. According to the bankruptcy court, new requests for relief are not properly
before the court until the case is reopened. The court directed the clerk to return
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the complaint and the brief to Goldstein, who filed a timely notice of appeal of this
order on December 31, 2013.1
STANDARD OF REVIEW
We review factual findings for clear error and legal conclusions de novo.
Temperato Revocable Trust v. Unterreiner (In re Unterreiner), 699 F.3d 1022 (8th
Cir. 2012).
ANALYSIS
The Bankruptcy Code provides that once an estate is fully administered and
the trustee has been discharged, the case shall be closed. § 350(a). However, “A
case may be reopened in the court in which such case was closed to administer
assets, to accord relief to the debtor, or for other cause.” § 350(b). There is a fair
amount of case law deciding when a case may be reopened. There is little case
law, however, on whether a case must be reopened for the purpose of filing a
dischargeability complaint.
However, the Ninth Circuit has addressed the issue directly. It held that a
separate motion to reopen is not necessary when commencing an action for
nondischargeability of a debt under § 523(a)(3)(B). Staffer v. Predovich (In re
Staffer), 306 F.3d 967 (9th Cir. 2002). In concluding this, the Ninth Circuit
partially relied on the Bankruptcy Appellate Panel’s holding that reopening a
closed case is irrelevant to the bankruptcy court’s jurisdiction to determine whether
1
In his appellate brief, Goldstein appears to argue that the bankruptcy
court for the Eastern District of Pennsylvania erred when it ordered the case to be
transferred to Missouri. However, the Notice of Appeal lacks any mention of this
order. Even if it did, we have no jurisdiction to review orders from Pennsylvania.
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a debt is excepted from discharge. Menk v. Lapaglia (In re Menk), 241 B.R. 896,
902 (B.A.P. 9th Cir. 1999).
Likewise, we have previously held that a matter over which a bankruptcy
court has jurisdiction can be considered by that court even if the case is closed.
Koehler v. Grant, 213 B.R. 567, 569-570 (B.A.P. 8th Cir. 1997). Jurisdiction is
conferred on the bankruptcy courts by statute, deriving from 28 U.S.C. § 1334, and
does not end once a plan is confirmed or the case is closed. Id. at 569.
One author writes,
The bankruptcy court has concurrent jurisdiction with
other courts to decide if particular debts were discharged
in a bankruptcy case, other than debts alleged to be
nondischargeable under subsection § 523(a)(2), (4) or (6)
which can be found nondischargeable only by the
bankruptcy court. Therefore a motion to reopen the case
is probably not even necessary for the court to exercise
its jurisdiction.
COLLIER ON BANKRUPTCY ¶ 350.03[4].
In this case, the bankruptcy court did not deny that it had jurisdiction over
Goldstein’s complaint. Despite that jurisdiction, however, the court stated that the
complaint was deficient because it was not “properly raised” before the court. The
bankruptcy court does not rely on any authority for the proposition that a complaint
must be “properly raised” before the court. Additionally, we could find no local
rule in the Eastern District of Missouri that requires a complaint be “properly
raised” before the court.
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The filing of a dischargeability complaint does not affect the administration
of the underlying bankruptcy case. In fact, the filing of an adversary proceeding
initiates an entirely new administrative matter. If there is no bankruptcy
administration that is associated with a particular civil proceeding being considered
by the court, then there is no reason in principle for the “case” to be open. See 3
COLLIER ON BANKRUPTCY ¶ 350.03[4].
The Eighth Circuit has previously noted, “The act of reopening a closed
bankruptcy case is typically ministerial and presents a limited range of issues,
including whether further administration of the estate appears to be warranted.
Apex Oil Co., Inc. v. Sparks (In re Apex Oil Co., Inc.), 406 F.3d 538, 543 (8th Cir.
2005) (citing Lopez v. Specialty Restaurants Corp. (In re Lopez), 283 B.R. 22, 26
(B.A.P. 9th Cir. 2002)). Other courts have also held that the closure of a case
relates merely to its administrative status. See In re Sterling Optical Corp., 302
B.R. 792, 808 (Bankr. S.D.N.Y. 2003); In re Taylor, 216 B.R. 515, 521 (Bankr.
E.D.Pa. 1998).
We agree that opening a case to initiate a dischargeability proceeding is little
more than a managerial act and has no immediate impact on the substance of the
underlying bankruptcy case. Reopening a case allows the court file to be
resurrected from the court’s records and also allows the clerk to orderly administer
the case. While important, the convenience of the clerk is not a proper reason for
refusing to docket a complaint. The filing of an adversary proceeding creates an
entirely new docket, anyway. For these reasons, we hold that reopening a case is
not a prerequisite to filing a dischargeability complaint.2
2
In prior decisions we have affirmed bankruptcy courts’ denials of
motions to reopen. See Finch v. Coop (In re Finch), 378 B.R. 241 (B.A.P. 8th Cir.
2007); Dworsky v. Canal St. Ltd. P’ship (In re Canal St. Ltd. P’ship), 269 B.R. 379
(B.A.P. 8th Cir. 2001); Mid-City Bank, et al. v. Skyline Woods Homeowners
Assoc., et al. (In re Skyline Woods Country Club, LLC.), 431 B.R. 830 (B.A.P. 8th
Cir. 2010); Arleaux v. Arleaux, 210 B.R. 148 (B.A.P. 8th Cir. 1997). Those
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The bankruptcy court alternatively held that even if the complaint should
have been filed it would have been dismissed on its merits for several reasons.
First, the complaint was untimely. And, second, the facts show that Goldstein’s
complaint cannot be supported. While it may be tempting for the court to reach the
merits of the case on a motion to reopen, a court should typically refrain from
doing so.
Only if the complaint is completely lacking in merit, should the court
examine the issues. Arleaux v. Arleaux, 210 B.R. 148, 149 (B.A.P. 8th Cir. 1997).
We do not find that to be the case here. “Ordinarily, when a request is made to
reopen a case for the purpose of filing a dischargeability complaint, the court
should reopen routinely and reach the merits of the underlying dispute only in the
context of the adversary proceeding, not as part of the motion to reopen.” Id.
CONCLUSION
For the foregoing reasons, we reverse the bankruptcy court’s refusal to file
the appellant’s complaint.
holdings do not conflict with our decision today. None of those cases posed the
issue we are deciding today.
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