TD Banknorth N.A. v. Ewing et al

In re
NANCY R. EWING and
DANIEL J. EWING,
Debtors
______________________________________
TD BANKNORTH, N.A.,
Plaintiff
v.
NANCY R. EWING and
DANIEL J. EWING,
Defendants
U NITED STATES BANKRUPTCY COURT
D ISTRICT OF M ASSACHUSETTS
Chapter 7
Case No. 03-18490-RS
Adversary Proceeding
No. 05-1562
MEMORANDUM OF DECISION AND ORDER ON
MOTION OF PLAINTIFF FOR SUMMARY JUDGMENT
By its complaint in this adversary proceeding, the Plaintiff, TD BankNorth, N.A.
(“BankNorth”), seeks a determination that a debt owed by the debtors, Nancy R. Ewing and
Daniel J. Ewing (“the Debtors”), to BankNorth under certain postpetition guarantees is excepted
from discharge. The debt is excepted from discharge, BankNorth contends, both because it did
not arise before entry of the order for relief, 11 U.S.C. § 727(b) (limiting discharge to, in part,
“all debts that arose before the date of the order for relief”) and, in the alternative, because the
Debtors neither listed nor scheduled the debt in time to permit timely filing of a proof of claim
and timely filing of a complaint to determine the dischargeability of the debt, 11 U.S.C. §
523(a)(3). The adversary proceeding is before the Court on BankNorth’s motion for summary
judgment. The Debtors have filed no opposition to the motion, but the Court is nonetheless
obligated to determine whether cause for summary judgment has been established.
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1The established facts consist entirely of Debtors’ admissions in their answer of facts
alleged in the complaint and, where noted, matters of record of which the Court takes judicial
notice.
2
A party is entitled to summary judgment only upon a showing that there is no genuine
issue of material fact and that, on the uncontroverted facts, the movant is entitled to judgment as
a matter of law. FED . R. CIV . P. 56(c). Where, as here, the burden of proof at trial would fall on
the party seeking summary judgment, that party must support its motion with evidence—in the
form of affidavits, admissions, depositions, answers to interrogatories, and the like—as to each
essential element of its cause of action. The evidence must be such as would permit the movant
at trial to withstand a motion for directed verdict under FED . R. CIV . P. 50(a). Anderson v Liberty
Lobby, Inc., 477 U.S. 242, 250 (1986). If the motion is properly supported, the burden shifts to
the adverse party to submit evidence demonstrating the existence of a genuine issue as to at least
one material fact. If the adverse party does not so respond, “summary judgment, if appropriate,
shall be entered against the adverse party.” FED . R. CIV . P. 56(e); Jaroma v. Massey, 873 F.2d
17, 20 (1st Cir. 1989).
FACTS
The following facts, and no others relevant to the counts at issue, are established and
uncontroverted.1
On May 6, 2003, the Debtors personally guaranteed a secured business loan given by
BankNorth to New Bridge Auto Body, Inc. (“New Bridge”) in the amount of $35,000. On
October 9, 2003, the Debtors filed a petition for relief under Chapter 7 of the Bankruptcy Code,
thereby commencing the present bankruptcy case. The Court takes judicial notice of the
following facts: in the Debtors’ chapter 7 case, (a) the trustee filed a report of no distribution,
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and consequently no deadline for filing proofs of claim was ever set; (b) the Debtors were issued
a discharge on January 20, 2004; (c) no reaffirmation agreement was filed as to any debt to
BankNorth; and (d) the case was closed on February 4, 2004.
In or around June 2004, New Bridge and the Debtors defaulted on their payment
obligations under the promissory note and guarantees. BankNorth instituted collection
proceedings and then entered into a forbearance agreement with New Bridge and the Debtors.
Under the forbearance agreement, Bank North agreed to refrain from further collection action
and extended a new three-year repayment plan to New Bridge; in exchange, on September 15,
2004, New Bridge gave BankNorth a new promissory note in the amount of $31,633, and the
Debtors executed new guarantees.
In or around December 2004, New Bridge and the Defendants defaulted on the new
promissory note and new guarantees. BankNorth then commenced a civil action against New
Bridge and the Debtors in state court and, in that action, obtained judgment against them on May
17, 2005. An execution issued on July 6, 2005, for recovery against the Debtors in the total
amount of $41,141.99.
The Court takes judicial notice of the following: On July 25, 2005, the Debtors moved in
the Bankruptcy Court to reopen their chapter 7 case to list BankNorth and another creditor, both
of whom, the Debtors contend, they inadvertently omitted from the schedules they filed in the
case. The Court allowed the motion and reopened the case (a) to permit the Debtors to amend
their schedules by adding the omitted creditors and (b) to afford the added creditors an
opportunity to file a complaint to determine the dischargeability of the newly-scheduled debt.
The Court added: “This order shall not be construed as a ruling on the dischargeability of the
unscheduled debt. See In re Thibodeau, 136 B.R.7 (Bankr.D.Mass.1992)”; and, at the end of the
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2In a voluntary case such as this one, the order for relief is deemed to enter upon the
commencement of the case. 	11 U.S.C. § 301 (“The commencement of a voluntary case under a
chapter of this title constitutes an order for relief under such chapter.”).
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paragraph establishing a deadline for the newly-added creditors to file a complaint to determine
the dischargeability of their debts, “This paragraph should not be construed to override or
modify the filing deadlines set forth in FED . R. BANKR . P. 4007(c).”
DISCUSSION
a. When did the Debt Arise?
In seeking a determination that its debt is not subject to discharge, BankNorth advances
two distinct grounds. The first is that the debt—here BankNorth refers to the Debtors’ obligation
under the forbearance agreement and the new guarantee given thereunder, to which the Debtors
bound themselves only after the bankruptcy case was commenced—does not fall within the
scope of the discharge at all because it arose after entry of the order for relief. This argument is
based on § 727(b) of the Bankruptcy Code, which, in relevant part, provides that, subject to the
exceptions set forth in § 523(a), a discharge in a case under chapter 7 discharges the debtor
“from all debts that arose before the date of the order for relief under this chapter.”2 11 U.S.C. §
727(b).
The Court agrees with the BankNorth that the obligation in question arose after entry of
the order for relief. The Debtors entered into the forbearance agreement and signed the new
guarantees on September 15, 2004, more than eleven months after they commenced their
bankruptcy case. The obligation therefore arose after entry of the order for relief.
BankNorth, however, is not home free. A large part of the consideration for the
forbearance agreement and the attendant guarantee was consideration that was given in
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3The term “reaffirmation agreement” is not defined by the Bankruptcy Code and does not
appear in subsection 524(c). It refers to agreements to which that subsection, by its own terms,
pertains: any “agreement between a holder of a claim and the debtor, the consideration for
which, in whole or in part, is based on a debt that is dischargeable in a case under this title.”
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conjunction with the original guarantee: BankNorth advanced no new monies (or at least no
evidence of a new advance has been adduced), and both involved an agreement to repay the
principal and interest loaned under the original loan agreement. To be sure, new consideration
was added to the mix in the form of forbearance on the part of BankNorth. Nonetheless, the
consideration for the new agreement was comprised in large part of the consideration for the old.
In the language of bankruptcy law, the forbearance agreement (including the attendant
guarantee) was a form of “reaffirmation agreement.” Such agreements, though they arise
postpetition, are not enforceable unless statutorily-prescribed procedures are followed with
respect to those agreements. 11 U.S.C. § 524(c). As this Court recently explained:
although debts arising postpetition are, as a general rule, not
subject to a chapter 7 discharge, section 524(c) makes clear that
debts arising under certain postpetition agreements are nonetheless
not enforceable, and therefore are subject to the discharge, unless
specified procedures are followed with respect to those
agreements. This is true of any “agreement between a holder of a
claim and the debtor, the consideration for which, in whole or in
part, is based on a debt that is dischargeable in a case under this
title,” 11 U.S.C. § 524(c), so-called “reaffirmation agreements.”3
In re Creighton, 2007 WL 541622 (Bankr.D.Mass. 2007). Insofar as the consideration for the
forbearance agreement and the attendant guarantee was consideration that was given in
conjunction with the original guarantee, the forbearance agreement was subject to § 524(c) and
its procedural requirements. At least two of those requirements were not followed here: the
requirement that the agreement be entered before the granting of the discharge; and the
requirement that the agreement be filed with the court. 11 U.S.C. § 524(c)(1) and (3).
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Accordingly, by operation of § 524(c), the forbearance agreement and the guarantee given
thereunder are unenforceable. Accordingly, BankNorth is not entitled to judgment as a matter of
law on its theory that the debt is enforceable as a postpetition obligation, and summary judgment
must be denied as to this theory.
b. Dischargeability under § 523(a)(3)
In the alternative, BankNorth also seeks summary judgment on its second theory: that its
debt is excepted from discharge by 11 U.S.C. § 523(a)(3). Subsection 523(a)(3) is an exception
from discharge for certain debts that were not timely scheduled. Section 523(a)(3) provides:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title
does not discharge an individual debtor from any debt—
(3) neither listed nor scheduled under section 521(1) of this title, with the
name, if known to the debtor, 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), (4), or (6) 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; or
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of
this subsection, timely filing of a proof of claim and timely request for
a determination of dischargeability of such debt under one of such
paragraphs, 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). Paragraph (A), which pertains to debts not listed in time to permit timely
filing of a proof of claim, does not come into play in a no-asset Chapter 7 case, such as this one,
that was closed without a bar date for filing of claims ever having been set; in such cases, the
time for filing proofs of claim has not lapsed. In re Thibodeau, 136 B.R. 7, 9 (Bankr.D.Mass.
1992). Accordingly the Court need only address the requirements of paragraph (B).
Under paragraph (B), a debt of a kind specified in § 523(a)(2), (4), or (6)
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4The quoted language appears in the statute, but in such a way that the relevance of, and
burden of proof as to, the debtor’s knowledge (or lack thereof) of the name of the creditor are
unclear. The Court need not address that issue to resolve the present motion.
5In fact, in its complaint, BankNorth neither alleges that its debt is of a kind specified in §
523(a)(2), (4), or (6) nor makes the necessary allegations in support of a cause of action under §
523(a)(2)(A). (In its motion for summary judgment, BankNorth contends that its debt is of a
kind specified in § 523(a)(2)(A).) Insofar as BankNorth is relying on § 523(a)(2)(A), which is in
the nature of fraud, the allegations of that cause of action must be pled with particularity.
BankNorth will be ordered to amend its complaint to plead the facts on which it relies to
establish that its debt is of a kind specified in § 523(a)(2)(A).
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is excepted from discharge if it was neither listed nor scheduled in time to
permit both timely filing of a proof of claim and timely request for a
determination of the debt's dischargeability. A debt listed in time to
permit one but not the other is excepted from discharge; conversely, to
qualify for discharge, the debt must be listed in time to permit both.
In re Thibodeau, 136 B.R. at 9. The requirement of proof that the debt was not scheduled in time
to permit timely filing of a proof of claim is identical to the requirement contained in paragraph
(A) and, for the same reason as cited above, cannot be satisfied in this case. Therefore, in order
to prevail under § 523(a)(3)(B), BankNorth must establish these two elements: first, that the debt
was neither listed nor scheduled with the name of the creditor, “if known to the debtor,” 4 in time
to permit timely filing of a complaint to determine the dischargeability of a debt under §
523(a)(2), (4), or (6); and second, that its debt is of a kind specified in § 523(a)(2), (4), or (6).
As an affirmative defense, the Debtors can demonstrate that despite the untimely listing, the
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).
The Court must deny the motion for summary judgment on the § 523(a)(3) count because
BankNorth has submitted no evidence to show that its debt is of a kind specified in § 523(a)(2),
(4), or (6). 5 Nor has BankNorth submitted evidence that its debt was not timely listed:
BankNorth made an allegation to this effect in the complaint, but the Debtors denied the
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allegation, and no supplemental evidence has been submitted on the issue. As the party bearing
the burden of proof at trial, BankNorth can prevail on summary judgment only if it supports its
motion with evidence as to each essential element of its cause of action. Therefore, the motion
for summary judgment fails on the count under § 523(a)(3).
ORDER
1. 	For the reasons set forth above, the Motion of BankNorth for Summary Judgment is
hereby DENIED.
2. 	On or before April 20, 2007, BankNorth shall amend its complaint to set forth with
particularity the facts constituting its basis for contending that its debt of a kind specified
in § 523(a)(2)(A).
3. 	The Court will schedule this matter for trial.
Date: March 29, 2007 	_______________________________
Robert Somma
United States Bankruptcy Judge
cc: Peter G. Shaheen, Esq., for TD BankNorth, N.A.
Timothy Mauser, Esq., for Debtors
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