C.I.T. Financial Services, Inc. v. Belcher (In re Belcher)

13 B.R. 421, 4 Collier Bankr. Cas. 2d 1490, 1981 Bankr. LEXIS 3080
CourtDistrict Court, W.D. Missouri
DecidedAugust 26, 1981
DocketBankruptcy No. 81-00890-C; Adv. No. 81-0933-C
StatusPublished
Cited by2 cases

This text of 13 B.R. 421 (C.I.T. Financial Services, Inc. v. Belcher (In re Belcher)) is published on Counsel Stack Legal Research, covering District Court, W.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
C.I.T. Financial Services, Inc. v. Belcher (In re Belcher), 13 B.R. 421, 4 Collier Bankr. Cas. 2d 1490, 1981 Bankr. LEXIS 3080 (W.D. Mo. 1981).

Opinion

ORDER DENYING MOTION TO DISMISS

FRANK P. BARKER, Jr., Chief Judge.

On May 18, 1981 plaintiff filed this complaint to determine the dischargeability of a debt, alleging that defendants obtained money and a renewal or refinancing of credit by the use of a statement in writing which was materially false, a violation of 11 U.S.C. § 523(a)(2)(B).

On June 1,1981 defendants timely moved to dismiss the complaint, affirmatively stating that this action was barred by plaintiff’s failure to raise the issue of discharge-ability in adversary case No. 81-0580 — C. In that case the debtors had filed their complaint styled Burnis Chilton Belcher and Lois Kathryn Belcher v. C.I.T. Financial Services, Inc. to avoid a lien on their household goods under 11 U.S.C. § 522(f).

Service was proper in the lien avoidance case. C.I.T. Financial Services, Inc. (hereafter C.I.T.) failed to answer. C.I.T. also failed to appear at the hearing on the matter April 17, 1981. This Court, on May 7, 1981 issued its Order Avoiding the nonpos-sessory, nonpurchase-money security interest of C.I.T. in household goods.

The issue presented is whether C.I.T. is barred from bringing this dischargeability complaint because it failed to file a counterclaim in the first adversary proceeding instigated by the debtors to avoid the lien.

Rule 713 of the Rules of Bankruptcy Procedure makes Rule 13 of the Federal Rules of Civil Procedure applicable to adversary proceedings. It states:

Rule 13 of the Federal Rules of Civil Procedure applies in adversary proceedings, except that (1) subdivision (f) does not apply, (2) a party sued by a trustee or receiver need not state as a counterclaim any claim which he has against the bankrupt, his property, or the estate, (3) when a trustee or receiver fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice so requires, he may by leave of court set up the omitted counterclaim by amendment or by commencing a new adversary proceeding or separate action, and (4) persons other than the original parties to the adversary proceeding may be made parties to a counterclaim or cross-claim in accordance with Rules 719 and 720.

Rule 13 of the Federal Rules of Civil Procedure has generally been held applicable in bankruptcy cases. Harris v. Capehart-Farnsworth Corp., 225 F.2d 268, 270 (8th Cir. 1955).

Federal Rules of Civil Procedure, Rule 13, provides in pertinent part at section (a):

(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action, or (2) the opposing party brought suit upon his claim by attachment or other process by which the court did not acquire jurisdiction to render a personal judgment on that claim, and the pleader is not stating any counterclaim under this Rule 13.

As stated in Rule 713 of the Rules of Bankruptcy Procedure, section (f) does not apply. Section (f) reads:

(f) Omitted Counterclaim. When a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, he may by leave of court set up the counterclaim by amendment.

It thus appears that the Federal Bankruptcy Rule 713 is more restrictive than Federal Civil Procedure Rule 13.

[423]*423The purpose of Rule 13 with respect to counterclaims is to provide complete relief to the parties; prevent fragmentation of litigation and multiplicity of actions; and to conserve judicial resources. Southern Const. Co. v. U.S. for Use of Pickard, 371 U.S. 57, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962); U. S. General, Inc. v. City of Joliet, 598 F.2d 1050 (7th Cir. 1979); Bristol Farmers Market and Auction Co. v. Arlen Realty & Development Corp., 589 F.2d 1214 (3rd Cir. 1978); and Montecatini Edison, S.P.A. v. Ziegler, 486 F.2d 1279 (D.C.Cir.1973).

The provision of Rule 13 relating to compulsory counterclaims should be given a broad, realistic interpretation to avoid a multiplicity of suits. Sue & Sam Mfg. Co. v. B—L-S Const. Co., 538 F.2d 1048 (4th Cir. 1976).

The courts have generally agreed that what constitutes a “transaction or occurrence” should be interpreted liberally in order to further the general policies of the federal rules and carry out the philosophy of Rule 13(a) 6 Wright & Miller, Federal Practice and Procedure, § 1410 at page 40. See also Warshawsky & Co. v. Arcata Nat. Corp., 552 F.2d 1257, 1261 (7th Cir. 1977); Columbia Plaza Corp. v. Security Nat. Bank, 525 F.2d 620 (D.C.Cir.1975); Annis v. Dewey County Bank, 335 F.Supp. 133, 138 (D.C.S.D.1971).

The recent 8th Circuit case of Cochrane v. Iowa Beef Processors, 596 F.2d 254, 264 (8th Cir. 1979); cert. denied 442 U.S. 921, 99 S.Ct. 2848, 61 L.Ed.2d 290 (1979); see also Peterson v. United Accounts, Inc., 638 F.2d 1134, 1136 (8th Cir. 1981), set forth the following tests for determining whether the claim in question arose out of the same transaction or occurrence, within the meaning of Rule 13(a) as set forth in 6 Wright & Miller, Federal Practice and Procedure, § 1410 at page 42. The tests are as follows:

1) Are the issues of fact and law raised by the claim and counterclaim largely the same?

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Bluebook (online)
13 B.R. 421, 4 Collier Bankr. Cas. 2d 1490, 1981 Bankr. LEXIS 3080, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cit-financial-services-inc-v-belcher-in-re-belcher-mowd-1981.