Robert Young Alexander and Laura Shiltz Alexander

1 This motion appears on the docket after the entry of the discharge, but there is no indication
why the docket entries are not in chronological order.
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NORTH CAROLINA
RALEIGH DIVISION
IN RE:
ROBERT YOUNG ALEXANDER
LAURA SHILTZ ALEXANDER
DEBTORS
CASE NO.
06-00250-5-ATS
ORDER REGARDING DEBTORS' MOTION TO REOPEN
The matter before the court is the motion filed by the chapter 7 debtors, Robert Young
Alexander and Laura Shiltz Alexander, to reopen their case to file a motion for sanctions against
Cemex Construction Materials, L.P. A hearing took place in Raleigh, North Carolina on August 20,
2008.
The Alexanders filed a petition for relief under chapter 7 of the Bankruptcy Code on
February 24, 2006, and the discharge and final decree were entered on July 27, 2006. Cemex is a
creditor of Atlantic Concrete Systems ("ACS"), a corporation in which Mr. Alexander was a
shareholder. On July 26, 2007, Cemex filed a motion to delay discharge,1 and on August 1, 2007,
Cemex filed an amended motion for revocation of discharge and request to reopen closed case. The
same document was re-docketed on August 14, 2007. A hearing was held on the motion to reopen
SO ORDERED.
SIGNED this 20 day of August, 2008.
________________________________________
A. Thomas Small
United States Bankruptcy Judge
____________________________________________________________
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and to set aside the discharge on September 27, 2007, and an order denying the motion to reopen
was entered on October 2, 2007.
In its motion to reopen and set aside the discharge, Cemex alleged that it was not listed as
a creditor and had no notice of the case, that Mr. Alexander improperly transferred funds from ACS
into his personal accounts, that the ACS corporate veil should be pierced with respect to Mr.
Alexander, and that the debtors obtained their discharge through fraud. Cemex asked the court to
reopen the case so that it could file an adversary proceeding to determine the question of
dischargeability. 	At the hearing on September 27, 2007, the court took extensive evidence and
concluded that Cemex did not meet its burden of proof to justify reopening the case. The court
found that "[i]t does not appear that Cemex is a creditor of the Alexanders, and Mr. Alexander's
explanation of the financial records and the financial operations of ACS was credible." The court
denied the motion, but left open the possibility that the chapter 7 trustee could request to have the
case reopened and the discharge revisited.
On March 3, 2008, Cemex filed a lawsuit against Mr. Alexander in the North Carolina
Superior Court for Wake County, alleging claims for fraud, fraudulent transfers and piercing the
corporate veil. Mr. Alexander filed a motion to dismiss the case pursuant to Rule 12(b)(6) of the
North Carolina Rules of Civil Procedure, contending that this court had already determined the issue
and that the debt, if any, was discharged. At the hearing before this court, counsel for the debtors
reported that the Superior Court judge stated that he is not familiar with bankruptcy laws and
declined to dismiss the case. The debtors now wish to reopen their chapter 7 case so that they may
pursue sanctions against Cemex for violation of the discharge injunction.
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Cemex contends that the debt in question was not discharged pursuant to 11 U.S.C. §
523(a)(3), which excepts from discharge debts that are neither listed nor scheduled in time to permit
a creditor to file a request for determination of dischargeability if the debt falls within the exceptions
to discharge listed in § 523(a)(2), (4) or (6). Because the debts alleged are for fraud, the debts would
fall within § 523(a)(2). Cemex maintains that the state court has concurrent jurisdiction to determine
whether the debt is dischargeable, and though it came to this court initially to determine whether to
proceed in this court or in state court, the court's decision did not preclude it from seeking relief in
state court.
The question of concurrent jurisdiction is a complex one. In general, state and federal courts
have concurrent jurisdiction to determine dischargeability of a debt. However, dischargeability
under § 523(a)(2), (4), and (6) lies exclusively with the bankruptcy court. There is some question
whether an unlisted debt that falls within these categories, that would then also be nondischargeable
pursuant to § 523(a)(3), comes within the general rule of concurrent jurisdiction or the exception to
the general rule that provides for exclusive jurisdiction. 	Some courts have concluded that an
unlisted fraud nondischargeability action is "transmuted" into a nondischargeability action for an
unlisted debt, and thus is subject to concurrent jurisdiction. Fidelity Nat'l Title Ins. Co. v. Franklin
(In re Franklin), 179 B.R. 913, 924 (Bankr. E.D. Cal. 1995) ("the penalty to the debtor for failing
to schedule a fraud debt or otherwise to inform the creditor of the bankruptcy is forfeiture of the
right to enjoy exclusive federal jurisdiction"); In re Masa, 217 B.R. 412, 413 (Bankr. W.D.N.Y.
1998) ("concurrent jurisdiction to determine that an unscheduled debt is nondischargeable pursuant
to Section 523(a)(3)(B) exists"). The question, however, is not settled.
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2 Section 523(a)(3) simply does not apply, because there is no debt to be listed and nothing
to except from discharge.
4
Whether or not the state court has concurrent jurisdiction is not determinative in this case.
Here, Cemex first brought the matter to this court seeking to invoke this court's jurisdiction to except
the debt from discharge. The court heard extensive evidence and found that Cemex has no claim
against the debtors, and thus there was no reason to reopen the case to determine the dischargeability
of a debt that does not exist.2 The court did not rule that Cemex could then seek to relitigate the
question in state court; the hearing before this court resolved the matter entirely.
Though the institution of the action in state court was improper given this court's prior
resolution of the matter, because the law on concurrent jurisdiction falls in shades of gray, the court
will not impose sanctions at this time. However, should Cemex proceed with its litigation in state
court, the court will reopen the case and sanctions will be available needed.
SO ORDERED.
END OF DOCUMENT
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