Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01966/USCOURTS-azd-2_08-cv-01966-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

In re:

Richard Juarez Armenta,

Debtor.

Priscilla Penera, 

Appellant, 

vs. 

Richard J. Armenta, 

Appellee. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

CV 08-1966-PHX-JAT

ORDER

Pending before the Court is Appellant Priscilla Penera’s (“Appellant”) Opening Brief.

(Doc. #5.) Appellee Richard J. Armenta (“Appellee”) also filed an Opening Brief, (Doc. #7),

to which Appellant filed a Reply Brief. (Doc. #8.) For the following reasons, the Court

affirms the United States Bankruptcy Court for the District of Arizona’s (“Bankruptcy

Court”) Order. (Doc. #6 at 122.) 

I. BACKGROUND

On April 17, 2008, Appellee filed a motion to reopen a 2005 bankruptcy case in order

to determine the dischargeability of a debt that was the subject of a judgment obtained by

Appellant in the Maricopa County Superior Court for a breach of contract action. (Doc. #6

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 1 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

at 1.) On April 24, 2008, the Bankruptcy Court ordered that the case be reopened. (Id. at 3.)

On May 1, 2008, Appellee filed a Complaint to Determine the Dischargeability of a Debt.

(Id. at 14.) 

On August 20, 2008, Appellee filed a Motion for Summary Judgment alleging that the

debt at issue was discharged. (Id. at 38.) On August 28, 2008, Appellant filed a cross-motion

for summary judgment. (Id. at 60.) On October 14, 2008, the Bankruptcy Court granted

Appellee’s motion for summary judgment. (Id. at 122.) On November 18, 2008, Appellant

filed this appeal. 

II. LEGAL STANDARD

The Court has jurisdiction over this case pursuant to 28 U.S.C.A. § 158(a), which

provides that “district courts of the United States shall have jurisdiction to hear appeals . . .

from final judgments, orders, and decrees . . . of bankruptcy judges entered in cases and

proceedings referred to the bankruptcy judges under section 157 of this title.” 28 U.S.C. §

158(a)(1). This Court reviews the Bankruptcy Court’s findings of fact under the clearly

erroneous standard, and conclusions of law de novo. In re Lazar, 83 F.3d 306, 308 (9th Cir.

1996); Granite State Ins. Co. v. Smart Modular Techs., 76 F.3d 1023, 1028 (9th Cir. 1996).

III. ANALYSIS

Appellant makes three arguments as to why the Court should reverse the Bankruptcy

Court’s Order and determine the debt not discharged: the Bankruptcy Court erred in (1) reopening Appellee’s case to add a creditor; (2) refusing to consider the fraudulent issues

presented relating to Appellee’s bankruptcies; and (3) granting Appellee’s Motion for

Summary Judgment rather than determining the debt at issue to be an exception under 11

U.S.C. § 523(a)(2)(A). Because the Court’s analyses of the second and third arguments

overlap in their entirety, the Court will address them concurrently. 

A. The Bankruptcy Court Did Not Err in Re-opening the Case

Appellant argues that the Bankruptcy Court should not have re-opened the case to

allow Appellee to add the name of a creditor because Appellee had intentionally omitted the

creditor from his bankruptcy petition. As a preliminary matter, Appellee was not re-opening

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 2 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 3 -

the case in order to add an omitted creditor. Rather, he was requesting a determination of the

dischargeability of the debt at issue. Re-opening a Chapter 7 no-assets, no-bar date case does

not affect the dischargeability of a debt because a dischargeable debt will have already been

discharged, and a non-dischargeable debt under § 523 will not have been discharged. See In

re Nielsen, 383 F.3d 922, 926 (9th Cir. 2004). Therefore, Appellant’s arguments that Appellee

intentionally omitted the creditor have no bearing as to whether the case should be opened.

Moreover, the cases cited by Appellant (In re Moran, 456 F.2d 1030 (3rd Cir. 1972);

Allender v. Fields, 800 N.E.2d 584 (Ind. Ct. App. 2003)) do not support her argument.

Allender actually weakens her argument because the Indiana Court of Appeals, in that case,

affirmed a decision to allow a creditor to be added. Furthermore, the Indiana Court of Appeals

determined, under circumstances similar to these, that the debtor’s debt was discharged and

that the creditor’s breach of contract action was consequently unenforceable. Allender, 800

N.E.2d at 586. In re Moran is distinguishable because it pertains to a Chapter 13 bankruptcy

claim, which involves different implications as to dischargeability. In re Moran, 456 F.2d at

1030. 

Appellant further argues that the Bankruptcy Court should not have re-opened the case

because Appellee failed to plead his discharge as an affirmative defense in the breach of

contract action and thus waived it as an affirmative defense. This argument fails because this

case is independent of the breach of contract action, and Appellee is therefore not raising

discharge in bankruptcy as an affirmative defense. Appellant may argue that, by not raising

discharge in bankruptcy as an affirmative defense in the breach of contract action, Appellee

waived the discharge altogether. This argument fails, however, because a discharge voids any

judgment, regardless of whether the discharge was waived. 11 U.S.C. § 524(a)(1) (“A

discharge . . . voids any judgment at any time obtained . . . whether or not discharge of such

debt is waived.”) 

Moreover, the cases cited by Appellant (Allender, 800 N.E.2d at 584; Morrison v.

Mahoney, 399 F.3d 1042 (9th Cir. 2005); In re Adbox, Inc., 488 F.3d 836 (9th Cir. 2007);

McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000); In re St. Laurent, 991 F.2d 672 (11th Cir.

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 3 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

1993)) do not support her argument. Allender, Morrison, and In re Adbox are inapposite

because they pertain to waiver of affirmative defenses, which is not the issue in this case.

McLellan and In re St. Laurent do not have any relevance to the issue of whether to re-open

a bankruptcy case. The cases support a policy argument that defrauders should not be able to

benefit from their fraudulent actions, but this argument does not have any bearing on the issue

at hand. 

The Court therefore rejects Appellant’s argument that the Bankruptcy Court erred in

re-opening Appellee’s bankruptcy case. 

B. The Bankruptcy Court Did Not Err in Granting Appellee’s Motion for

Summary Judgment Rather than Determining That the Debt Was

Excepted from Discharge or That the Discharge Should Be Revoked

As a preliminary matter, there is some question as to whether raising claims of nondischargeability in a response to an adversary’s Complaint to Determine the Dischargeability

of a Debt is procedurally sufficient. If it is, then the Court can determine whether the debt at

issue was excepted from discharge. If it is not procedurally sufficient, then Appellant’s claim

fails because at no point has she filed an adversarial proceeding alleging that the debt is nondischargeable or requesting the revocation of the discharge. 

The purpose behind the requirement that a petitioner file a Complaint to Determine the

Dischargeability of a Debt is to provide notice to the respondent. Notice is not an issue in this

case as Appellee commenced this proceeding. In any event, the Court does not need to decide

whether raising a claim of non-dischargeability in a response is procedurally sufficient,

because Appellant’s argument fails on other grounds. 

Appellant claims that the debt is non-dischargeable, or that the discharge should be

revoked, because of the fraudulent activity of Appellee. This argument could be brought under

one of four statutory provisions (the Court will treat them in the following order for

coherence): (1) 11 U.S.C. § 523(a)(3)(A); (2) 11 U.S.C. § 727(d)(1); (3) 11 U.S.C. §

523(c)(1); or (4) 11 U.S.C. § 523(a)(3)(B). 

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 4 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 5 -

1. 11 U.S.C. § 523(a)(3)(A) 

The relevant part of the statute states:

A discharge under section 727 . . . of this title does not discharge

an individual debtor from any debt– . . . (3) neither listed nor

scheduled . . . with the name . . . of the creditor to whom such

debt is owed, in time to permit–(A) if such debt is not of a kind

specified in paragraph (2) . . . of this subsection, timely filing of

a proof of claim, unless such creditor had notice or actual

knowledge of the case in time for such timely filing . . . . 

11 U.S.C. § 523(a)(3)(A). 

Appellant’s argument that the debt is excepted from discharge under § 523(a)(3)(A)

fails because, regardless of whether the debt falls under paragraph (2), § 523(a)(3)(A) does

not apply to Chapter 7 no-assets, no-bar date cases. In re Nielsen, 383 F.3d at 926 (“While

section 523(a)(3)(A) makes some otherwise dischargeable debts non-dischargeable if the

creditor is not scheduled, that provision does not have that effect in a no-assets, no-bar date

Chapter 7 bankruptcy.”) No proof of claim can be untimely in Chapter 7 no assets, no-bar date

cases because there is no time limit for “timely filing of a proof of claim.” Id. at 926-27.

The Court therefore affirms the Bankruptcy Court’s judgment as to Appellant’s

argument that the debt is excepted from discharge under § 523(a)(3)(A). 

2. 11 U.S.C. § 727(d)(1) 

The relevant part of the statute states:

On request of . . . a creditor . . . and after notice and a hearing,

the court shall revoke a discharge granted under subsection (a)

of this section if–(1) such discharge was obtained through the

fraud of the debtor, and the requesting party did not know of

such fraud until after the granting of such discharge. 

11 U.S.C. 727(d)(1).

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 5 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

The argument that the discharge should be revoked under § 727(d)(1) fails because

Appellant did not request the revocation within one year after the discharge as required. See

11 U.S.C. § 727(e) (“[A] creditor...may request a revocation of a discharge–(1) under

subsection (d)(1) of this section within one year after such discharge is granted . . . .”).

The Court therefore affirms the Bankruptcy Court’s judgment as to Appellant’s

argument that the discharge should be revoked under § 727(d)(1). 

3. 11 U.S.C. § 523(c)(1) 

The relevant part of the statute states:

[T]he debtor shall be discharged from a debt of a kind specified

in paragraph (2) . . . of subsection (a) of this section, unless, on

request of the creditor to whom such debt is owed, and after

notice and a hearing, the court determines such debt to be

excepted from discharge under paragraph (2) . . . of subsection

(a) of this section. 

11 U.S.C. 523(c)(1).

The argument that the debt is excepted from discharge under § 523(c)(1) fails because,

even if the debt was for money obtained by fraud under § 523(a)(2)(A) (“A discharge under

section 727 . . . of this title does not discharge an individual debtor from any debt– . . . (2) for

. . . obtained by–(A) false pretenses, a false representation, or actual fraud . . . .”), Appellant

did not request a determination from the Court within 60 days after the first date set for the

meeting of creditors as required under Federal Rule of Bankruptcy Procedure 4007(c).

Specifically: 

[A] complaint to determine the dischargeability of a debt under

§ 523(c) shall be filed no later than 60 days after the first date

set for the meeting of creditors under § 341(a). The court shall

give all creditors no less than 30 days’ notice of the time so

fixed in the manner provided in Rule 2002. 

Fed. R. Bank. P. 4007(c). 

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 6 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

Regarding the 60-day time limit, Appellant argues that she did not receive notice of the

first meeting of creditors and therefore could not have made the request within the 60-day

time limit. This argument fails because she was aware of the bankruptcy proceeding and of

the fact that she was not scheduled; because only scheduled creditors receive notice of the first

meeting of creditors, Appellant cannot now use lack of notice as a defense against missing the

60-day time limit. See Matter of Barnes, 969 F.2d 526, 528 (7th Cir. 1992). Moreover,

Appellant never did properly request a determination of dischargeability; her request was in

the form of a response to Appellee’s Complaint to Determine the Dischargeability of a Debt,

which was filed long after the 60-day time limit. 

The Court therefore affirms the Bankruptcy Court’s judgment as to Appellant’s

argument that the debt is excepted from discharge under § 523(c)(1). 

4. 11 U.S.C. § 523(a)(3)(B) 

The relevant part of the statute states:

A discharge under section 727 . . . of this title does not discharge

an individual debtor from any debt– . . . (3) neither listed nor

scheduled . . . with the name . . . of the creditor to whom such

debt is owed, in time to permit– . . . (B) if such debt is of a kind

specified in paragraph (2) . . . of this subsection, timely filing of

a proof of claim and timely request for a determination of

dischargeability of such debt . . . unless such creditor had notice

or actual knowledge of the case in time for such timely filing

and request. 

11 U.S.C. § 523(a)(3)(B). This provision is applicable in Chapter 7 no assets, no bar-date

cases because, even though there is no time limit for filing proofs of claim, the time limit for

requests for determination of dischargeability, see Rule 4007(c), still applies. 

In order to persuade the Court, Appellant has to show that the debt was for money

obtained by false representation or fraud under § 523(a)(2)(A) and that Appellant had neither

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 7 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

received notice nor obtained actual knowledge of the bankruptcy proceeding in time to file

a timely Complaint to Determine the Dischargeability of a Debt. 

Regarding the false representation/fraud requirement, the Bankruptcy Court does not

expand on why Appellant’s arguments were not persuasive. The Ninth Circuit has established

five elements that must be satisfied in order to prevail on a claim under §523(a)(2)(A):

(1) misrepresentation, fraudulent omission or deceptive conduct

by the debtor; (2) knowledge of the falsity or deceptiveness of

his statement or conduct; (3) an intent to deceive; (4) justifiable

reliance by the creditor on the debtor’s statement or conduct;

and (5) damage to the creditor proximately caused by its

reliance on the debtor’s statement or conduct. 

In re Slyman, 234 F.3d 1081, 1085 (9th Cir. 2000) (citations omitted). Although it appears to

the Court that Appellant has a meritorious argument as to whether Appellee’s conduct

satisfies these five elements, the Bankruptcy Court’s finding of the facts was not clearly

erroneous because there are material questions as to whether Appellant’s reliance on the

Appellee’s statements and conduct was justifiable. The Court therefore defers to the

Bankruptcy Court’s judgment on this issue. 

Regarding the notice/actual knowledge requirement, Appellant was clearly aware of

the bankruptcy proceeding in question. Appellant could possibly argue that, because the false

representation pertained to whether a proof of claim or a Complaint to Determine the

Dischargeability of a Debt was necessary, the Court could equitably find that she lacked

actual knowledge of Appellee’s bankruptcy proceeding. The Court, however, can find no

precedent for such an argument. The Court therefore finds that, even assuming, arguendo, that

Appellant could establish that Appellee’s conduct constituted fraud or false representation,

Appellee’s conduct would not overcome the requirement that Appellant lack actual

knowledge of the proceeding. Moreover, the Court finds that the Bankruptcy Court’s factual

conclusions as to whether Appellant had actual knowledge of the proceeding are not clearly

erroneous and therefore defers to the Bankruptcy Court’s judgment on this issue. 

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 8 of 9
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

The Court therefore affirms the Bankruptcy Court’s judgment as to Appellant’s

argument that the debt is excepted from discharge under § 523(a)(3)(B). 

IV. CONCLUSION

Accordingly,

IT IS ORDERED that the Bankruptcy Court’s Order (Doc. #6 at 122) is AFFIRMED.

DATED this 30th day of June, 2009.

 

Case 2:08-cv-01966-JAT Document 10 Filed 06/30/09 Page 9 of 9