No. B-76-633United States Bankruptcy Court, D. Utah
May 20, 1980
Former Bankruptcy Act — Discharge of Debts — Unscheduled Debts — Summary Judgment
MABEY, Bankruptcy Judge
Notice or knowledge by a creditor of a bankruptcy proceeding has been interpreted to mean notice or knowledge received in time to allow a creditor to file a claim and avail himself of the opportunity of participating in the administration of the estate. Thus, where the bankrupt amended his schedule to include the creditors two and one half years after the deadline for filing proof of claims, the bankrupt’s motion for summary judgment to discharge the creditors’ debt was denied.See Sec. 17(a)(3) at ¶ 2147 and Sec. 523(a)(3) at ¶ 9229.
[Digest of Opinion]
Nearly three years after the original filing in the bankruptcy court, an application was filed by the bankrupt to add the creditors in the instant case. The creditors received notice approximately one month later.
Thereafter, the creditors filed a motion for summary judgment based upon the bankrupt’s failure to list them on its bankruptcy schedules, the effect of Section 17(a)(3), and their allegation that the court did not have equitable power to extend the time for filing claims under Section 57n. Contrary to these contentions, the bankrupt argued that the complaint did not state a claim upon which relief could be granted and that the bankruptcy schedules had been amended to include the creditors with notice of such amendment given to them so as to discharge their claims.
Turning first to the bankrupt’s motion for summary judgment, the court found that although it was true that the creditors did not state the specific section under which they were asking for the determination of their debt as nondischargable, the averments were sufficient to comply with the liberal federal requirements of “notice” pleading found in Rule 8(a) of the Federal Rules of Civil Procedure. For example, the averments in the creditors’ complaint clearly stated a claim which fell within the exception to discharge found in Section 17(a)(3) of the Bankruptcy Act. Further, the bankrupt’s second contention was not grantable as a matter of law, since the amendment was not allowed by order of the Court, but was merely filed by the bankrupt. The court noted, that the mere fact that a creditor is added does not mean that its debt will be discharged. By the terms of Section 17(a)(3) the debt must have been “duly scheduled in time for proof and allowance” or the creditor must have “notice or actual knowledge” of the bankruptcy proceedings before the debt will be discharged. Accordingly, the bankrupt’s motion was denied, since the date for filing proofs of claim expired nearly two and one half years ago.
However, the court found that the creditors’ motion was grantable as a matter of law. The bankrupt offered only a “sketchy excuse” for his failure to include the creditors, based on an alleged assignment of their claim. Consequently, since facts giving rise to equitable relief were not alleged, and further since, the burden rested upon the bankrupt to show that the creditors were not discharged under Section 17(a)(3) when not duly listed, the court determined that the creditors’ debt was nondischargeable. It was thereby ordered that the creditors’ motion for summary judgment be granted.