Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-06293/USCOURTS-ca10-90-06293-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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• FILED 

Uoired States Court of Appeals 

'T'~nth Circuit 

UNITED STATES COURT OF APPEALS APR 11 1991 

ROBERT L. HOECKER 

Clerk 

FOR THE TENTH CIRCUIT 

In re: JOHN A. GRAHAM, 

NANCY GRAHAM, 

Debtor, 

) 

) 

) 

) 

) 

--------------------------------) ) 

JOHN A. GRAHAM and NANCY ) 

GRAHAM, ) 

) 

Appellants, ) 

) 

v. ) 

) 

PAUL B. DAVIDSON, ) 

) 

Appellee. ) 

No. 90-6293 

(D.C. No. CIV-90-849-W) 

(W.D. Oklahoma) 

ORDER AND JUDGMBBT* 

Before LOGAH, KOORB, and BALDOCK, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

*This order and judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

Appellate Case: 90-6293 Document: 010110031905 Date Filed: 04/11/1991 Page: 1 
34(a); 10th Cir. R. 34.1.9. The cause is therefore ordered 

submitted without oral argument. 

The question presented in this appeal is whether a debtor may 

automatically include an unscheduled debt within the ambit of a 

general bankruptcy discharge by reopening a closed case to permit 

an amendment to the schedule of creditors. Because this device 

would effectively deny the innocent creditor of any opportunity to 

challenge the dischargeability of the debt, the answer is no. In 

this case, we approve the bankruptcy court's equitable decision to 

allow the conditional reopening of the case. 

When debtors filed their original schedule of creditors, they 

omitted a debt to David Davidson created by Mr. Davidson's payment 

of an obligation co-made between the parties. Whether Mr. 

Davidson had actual knowledge of the bankruptcy proceedings in 

time to file a proof of claim is disputed, but it is agreed none 

was filed. 1 The debtors eventually obtained an 11 u.s.c. S 727 

general discharge. 

After the Grahams received their discharge, Mr. Davidson 

filed an action in state court against them for contribution. 

Having only then discovered that the Davidson debt was not 

scheduled, debtors filed a motion in the bankruptcy court to 

111 u.s.c. S 523(a)(3)(A) permits the general discharge of an 

unscheduled debt if the creditor had "notice or actual knowledge 

of the case in time for" the filing of a timely proof of claim. 

Debtors, in their brief in this court, assert Mr. Davidson did not 

raise lack of knowledge in the trial court, but in his brief he 

responds, "[t]here has been no evidence elicited herein as to 

whether there was actual notice, and whether there was time for 

filing a complaint." While both parties dance around the issue, 

it is evident that whether Mr. Davidson had notice is a question 

of fact yet to be established. 

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Appellate Case: 90-6293 Document: 010110031905 Date Filed: 04/11/1991 Page: 2 
reopen their case "to schedule said debts and or [sic] determine 

that the same were discharged." 

The bankruptcy court granted the motion to reopen,

2 but 

limited the scope to "the sole purpose of permitting the debtors 

to file an adversary proceeding under [11 U.S.C.] Section 

523(a)(3), pursuant to Rule 7001 [Federal Rules of Bankruptcy 

Procedure] in order to adjudicate the dischargeability of this 

obligation." The ruling bypassed the issue of amending the 

schedule of creditors, which the bankruptcy court reasoned was 

irrelevant to the ultimate issue of whether the debt was 

dischargeable. Concurrently, the court found the debtors' omission was unintentional and Mr. Davidson suffered no damage as a 

result of the omission. On appeal, the district court affirmed 

these rulings. 

Stripped of its procedural trappings, what we have before us 

is a case of debtors who are faced with the possibility of having 

to liquidate a debt that would have been subject to a general 

discharge in bankruptcy except for their failure to schedule the 

obligation. Unfortunately, this failure arguably deprived the 

creditor of notice of the proceeding in time to file a complaint 

to determine the dischargeability of the debt. When faced with 

the state suit, debtors attempted to bring their obligation under 

the umbrella of their general discharge, thus avoiding any 

211 u.s.c. S 350(b) provides: "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." Debtors 

seemingly argue the bankruptcy court should only reopen a case to 

accord relief to the debtor. The scope of the statute is broader, 

however. 

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Appellate Case: 90-6293 Document: 010110031905 Date Filed: 04/11/1991 Page: 3 
I 

question of whether the debt was indeed dischargeable. 3 If this 

attempt were successful, debtors would have left Mr. Davidson 

firmly in possession of the proverbial bag, but with little else. 

The bankruptcy court astutely recognized the purpose of the 

debtors' gambit, and devised a means of fairly adjudicating the 

interests of both sides. The court effectively placed the Grahams 

and Mr. Davidson in the relationship they would have been in had 

the debtors scheduled the debt in the first place. The bankruptcy 

court will now determine, within the scope of the bankruptcy code, 

whether the Grahams are obliged to pay Mr. Davidson for co-signing 

an obligation with them. 4 This result meets not only the 

equitable spirit of bankruptcy, but also the provisions of the 

bankruptcy code. 

Debtors' argument that the bankruptcy court erred in refusing 

them the right to amend their schedules dangerously borders on the 

frivolous. 5 Whether the schedules are amended is irrelevant 

because the case is closed and Mr. Davidson now has actual notice 

of the proceeding. It is therefore obvious that debtors' only 

3Debtors candidly admit this objective by stating in their brief: 

"The relief debtors were seeking was to schedule the debt and 

bring the obligation within the scope of the discharge previously 

entered." (emphasis added). Obviously, they perceive this 

objective to be achievable in one swoop. 

4Actually, the debtors are in a better posture because the 

bankruptcy court limited the determination of dischargeability to 

S 523(a)(3) and did not give Mr. Davidson the opportunity to file 

a complaint under any other part of S 523. 

5Reopening a case simply to permit a schedule amendment is a 

futile endeavor. See In re Hunter, 116 B.R. 3, 5 (Bankr. D. Col. 

1990); In re David, 106 B.R. 126, 129 (Bankr. E.D. Mich. 1989); In 

re Karamitsos, 88 B.R. 122, 123 (Bankr. S.D. Tex. 1988); In re 

Ford, 87 B.R. 641, 643 (Bankr. D. Nev. 1988). 

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Appellate Case: 90-6293 Document: 010110031905 Date Filed: 04/11/1991 Page: 4 
purpose for the amendment was to gain the means to assert the 

defense of discharge to Mr. Davidson's state suit. By this 

device, when coupled with their oversight, they would deprive this 

creditor of a right to file a complaint in the bankruptcy court to 

determine dischargeability. That right would have been available 

to Mr. Davidson had the debtors not failed to comply with their 

duty to schedule debts. The unfairness of this result, however 

intended by the Grahams, is manifest. This unfairness, further, 

obviates debtors' unsupported contention that by amending their 

schedules they would obtain an automatic discharge of the Davidson 

debt. 

Debtors baldly argue, "[d]ischargeability was not and is not 

at issue." The contention is disingenuous. Were the 

dischargeability of the debt of no moment, there would have been 

no need for debtors to seek relief. The whole focus of the 

debtors' effort was to achieve an order from the bankruptcy court 

holding the Davidson obligation resolved by discharge. 

Thus, the bankruptcy court correctly perceived equity demands 

that both sides, not just the debtors, be given the opportunity to 

effectively proceed in the bankruptcy court just as though the 

Davidson debt had been timely scheduled. The debtors now have the 

ability to acquire relief from that debt if it is not subject to 

exception under 11 u.s.c. S 523(a)(3). For his part, Mr. Davidson 

is able to avoid the unfair dischargeability of his claim caused 

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Appellate Case: 90-6293 Document: 010110031905 Date Filed: 04/11/1991 Page: 5 
by debtors' failure to timely schedule his debt. We commend and 

agree with this decision. 

AFFIRMED. 

Entered for the Court 

John P. Moore 

Circuit Judge 

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