THOMAS P. AGRESTI, Bankruptcy Judge.
A hearing was held on October 3, 2013, on the Trustee's
On the one hand, as is clear by its prior, record statements, the Court is certainly sympathetic to the plight of the Debtor. As has been well-documented previously in the case, the Debtor was in a vulnerable position during the time period prior to the case filing due to the recent death of her husband. The Debtor was not well served by her former attorney, who very questionably, advised her to file a bankruptcy when there were much better options available to her. Then, once the case was filed, and after it had become apparent what had happened, no one took any steps on the Debtor's behalf to prevent a discharge from being entered in the normal course.
On the other hand, when a Chapter 7 discharge order has been entered in a case it is not something that can just casually be set aside. The Court has previously addressed this topic in In re Grabowski, 462 B.R. 534 (Bankr.W.D.Pa.2011), finding that a debtor may not "waive" a discharge entered pursuant to 11 U.S.C. § 727(a)(10) post discharge. Under the circumstances presented in Grabowski, the debtor also lacked standing to move for a revocation of the discharge because of the debtor misconduct component of 11 U.S.C. § 727(d). The Court found in Grabowski that, not only is this conclusion in accordance with the law, it is also prudent from a policy perspective in that it prevents
Although Grabowski appears at first blush to be an insurmountable obstacle blocking any possibility of revoking the Debtor's discharge here, there are two notable differences between it and the present case that compel a more penetrating inquiry before any final conclusion can be reached. First, the attempted revocation in the present case is being pursued not by the Debtor, but by the Trustee (albeit with the Debtor's full support). Thus, the lack of standing that hampered the debtor in Grabowski is not implicated here and need not be discussed further.
The second difference is more complex. Unlike Grabowski, the Trustee's effort here to revoke the Debtor's discharge is not based on either waiver under Section 727(a)(10) or debtor misconduct under Section 727(d). Indeed, the Trustee explicitly acknowledges that the Debtor has not committed any bad acts under Section 727(d). See Trustee's Brief, Doc. No. 115 at 3. The primary focus of the Trustee is instead on Fed.R.Bankr.P. 9024, incorporating Fed.R.Civ.P. 60(b),
Can a motion to revoke discharge under Rule 9024 succeed where a motion under Section 727(d) would admittedly fail? There is some support for the view that Rule 9024 may be the basis for the revocation of a discharge order in such circumstances. See, e.g., Disch v. Rasmussen, 417 F.3d 769 (7th Cir.2005) ("Final bankruptcy orders can be set aside under Bankruptcy Rule 9024 ... and nothing in the rule indicates that it does not apply to the revocation of discharges"). See also In re Cisneros, 994 F.2d 1462 (9th Cir. 1993) (reaching a similar conclusion with respect to the revocation of a Chapter 13 discharge). In reaching the conclusion it did, the Disch court rejected the argument that allowing Rule 9024 to be used to revoke a Chapter 7 discharge would enable an end-run around the provisions of Section 727(d), finding that there were different standards for relief and different timing requirements under the two provisions.
The Trustee has not, however, directed the Court to any binding authority from the Third Circuit in support of this view. The Court's own research on the issue raises significant doubt that it can adopt the approach taken in Disch. The basis for this "doubt" is found in In re Fesq, 153 F.3d 113 (3d Cir.1998), which was a Chapter 13 case but is highly relevant in the present case.
The Bankruptcy Code provision dealing with the revocation of a Chapter 13 plan confirmation order provides:
11 U.S.C. § 1330(a). The debtor in Fesq had obviously not procured the confirmation order by fraud, and the issue for the Third Circuit was whether the order could nevertheless be revoked in the face of this statutory language. The court found that the "procured by fraud" phrase could not simply be ignored as mere surplusage, and by keeping that phrase in the statute there were only two possible interpretations of Section 1330(a):
153 F.3d at 115. The creditor urged the adoption of the expansive second interpretation, pointing to Rule 9024 and arguing that the computer error qualified as mistake, inadvertence or excusable neglect under the incorporated Rule 60(b). The Fesq court noted that the creditor had "wisely" avoided arguing that Rule 9024 "trumped" Section 1330(a), instead characterizing his position as being that Section 1330(a) "complements" Rule 9024 in the sense that Rule 9024 sets forth all of the grounds upon which a confirmation order might be revoked, while Section 1330(a) simply shortens the deadline for challenging confirmation orders for fraud to 180 days.
Despite this initial praise, the court in Fesq ultimately rejected the creditor's argument as being illogical and having "nothing to commend it" because it would be the equivalent of permitting the drafters of Rule 9024 to deprive the final phrase of Section 1330(a) of any substantive effect. The court found that to be unacceptable on separation of powers grounds because the Bankruptcy Rules cannot abridge, enlarge or modify the substantive rights afforded in the Bankruptcy Code. 153 F.3d at 117. Reasons of plain meaning, logic, case law, and policies underlying the Bankruptcy Code were also cited as reasons for the court's view.
While Fesq was decided in the context of Chapter 13, it appears to have obvious implications for this Chapter 7 matter as well. Similar to what Section 1330(a) provides for plan confirmation orders, Section 727(d) lists specific grounds for the revocation of a discharge order. It is admitted by the Trustee that none of those grounds exists. The Court is unaware of any reason why the logic of the holding in Fesq would not be equally applicable here. A number of other courts have reached that same conclusion. See In re Nader, 1998 WL 767459 (Bankr.E.D.Pa. Oct. 30, 1998) (the reasoning behind Fesq's rejection of equitable grounds to circumvent the plain language of Section 1330(a) applies with equal force to Section 727(d) because in the context of Chapter 7, it serves a purpose very much analogous to the purpose served by Section 1330 in Chapter 13); In re Bugarenko, 373 B.R. 394 (Bankr. E.D.Pa.2007); In re Rodwell, 280 B.R. 100 (Bankr.D.N.J.2002).
This result may seem harsh in the context of the present case — the blamelessness of the Debtor in the present case, when considered in isolation, seeming to cry out for relief. The dissenting opinion in Fesq expresses well this very sentiment, stating that the decision in the case will "tie the hands of bankruptcy judges in situations where justice cries out for review of a previously entered judgment." 153 F.3d at 123. As attractive as this alternative view might seem with respect to the facts involving the Debtor, the Court is not free to adopt it. When one district court judge decided to follow a dissenting view from a Third Circuit panel opinion rather than the majority decision, that court was quick to set that judge straight:
Poulis v. State Farm Fire & Cas. Co., 747 F.2d 863, 867 (3d Cir.1984).
Moreover, when a broader view is taken as to the effect the decision flowing from Fesq may have on the bankruptcy system as a whole, perhaps the seemingly harsh result is tempered a bit. In that regard, the following statement from the majority opinion in Fesq is instructive:
153 F.3d at 120. That same concern applies here.
Were the Court to ignore Section 727(d) in order to provide relief that no one opposes, for a very sympathetic Debtor, it could serve as a precedent and unintentionally open the door for a myriad of challenges to Chapter 7 discharge orders in other cases, by debtors and creditors alike, that have heretofore been viewed as inviolable except in very limited circumstances involving debtor misconduct. The Supreme Court itself has long recognized the dangers that flow from trying to mold the law to meet a particular case:
Caperton v. A.T. Massey Coal Co., Inc., 556 U.S. 868, 899, 129 S.Ct. 2252, 173 L.Ed.2d 1208 (2009).
In any event, whatever might be the Court's personal view as to where true wisdom lies in this matter is irrelevant since it finds, for the reasons stated above, that it is legally required to deny the Trustee's requested revocation of the discharge order.
(1) The Motion is
(2) The Motion is
(3)
(4) The Trustee, John C. Melaragno, Esq., is further authorized to distribute the funds he has on hand in the approximate amount of $7,894, plus any accumulated interest, being held in the Trustee's Bankruptcy Account as previously paid to him by the Respondent regarding issues related to this matter, to himself for the remainder of the fees and costs due and payable to him for Trustee compensation and costs and Attorney for the Trustee compensation and costs.
(5) Since all Estate funds have been properly accounted for and completely disbursed as a result of the settlement of this matter and the within Order, it appears to the Court that the Trustee should be able to simply move to close this case without further compliance with the typical close out procedures required by the United States Trustee ("UST"), and the Court approves such an approach. However, if for some reason the UST requires the Trustee to go through such a procedure even under these circumstances, the Court will defer to the UST in that regard.