Summary
The bankruptcy court considers the debtor's motion for summary judgment in an adversary proceeding concerning whether a homeowner's construction and warranty claim was excepted from discharge under 11 U.S.C. § 523(a)(3) and (a)(10). The court concludes that § 523(a)(10) is inapplicable because the debtor had not filed a prior bankruptcy case, but finds disputed factual issues concerning the debtor's knowledge of the claim and motivation for failing to schedule it. The motion for summary judgment is therefore overruled.
Topics
Practice areas
Questions Presented
- Whether 11 U.S.C. § 523(a)(10) applied when the debtor reopened the same bankruptcy case to add an omitted creditor, rather than having filed a prior bankruptcy case in which the debt could have been scheduled.
- Whether summary judgment was appropriate on Reid's claim that the debt was nondischargeable under 11 U.S.C. § 523(a)(3) when material facts remained disputed concerning the debtor's knowledge of the claim and his reason for failing to schedule it.
Holdings
- Section 523(a)(10) was inapplicable because the debt was not scheduled or schedulable in a prior bankruptcy case in which the debtor waived or was denied a discharge; Erb had only reopened the same 2009 bankruptcy case.
- Summary judgment for the debtor was improper because genuine disputes of material fact existed regarding whether Erb knew of Reid's claim before completing his schedules and whether his omission was intentional.
Key quotations
“a court should not discharge a debt under section 523(a)(3) if the debtor’s failure to schedule that debt was due to intentional design, fraud, or improper motive.” (854)
“If the failure is attributable solely to negligence or inadvertence, however, equity points toward discharge of the debt.” (854)
“As such, Erb is not entitled to judgment as a matter of law, and his motion for summary judgment must be overruled.” (854)
Factual background
Erb constructed a residential dwelling that Reid purchased in April 2007. Erb filed a Chapter 7 petition in March 2009 but did not list Reid as a creditor; he received a discharge and his no-asset case was closed. Reid later sued him for poor workmanship and breach of warranty, and the Mississippi county court granted Reid partial summary judgment on liability. After Erb reopened the bankruptcy case and listed Reid's $30,388 claim, the parties disputed whether Erb knew of Reid's potential claim before the case closed and whether he intentionally omitted it.
Procedural history
Erb filed a Chapter 7 bankruptcy petition in 2009, received a discharge, and closed the case without listing Reid as a creditor. Reid later sued Erb in Mississippi county court under the New Home Warranty Act and obtained partial summary judgment on liability. After the county court stayed proceedings concerning damages, Erb reopened his bankruptcy case and amended his schedules to list Reid's claim. Reid then filed this adversary proceeding under 11 U.S.C. § 523(a)(3) and (a)(10). The bankruptcy court denied Erb's motion for summary judgment because material factual disputes remained concerning his knowledge and motivation for omitting Reid's claim.