UNITED STATES BANKRUPTCY COURT
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
NORTHERN DISTRICT OF CALIFORNIA
QUENTIN and KAREN SMITH, No. 1-82-00285
QUENTIN and KAREN SMITH,
v. A.P. No. 97-1255
FRANCHISE TAX BOARD,
Memorandum of Decision
Debtors Quentin and Karen Smith filed consolidated Chapter 13 petitions almost eighteen years
ago. Since they had not filed state income tax returns for several years prior to the filing, the California
Franchise Tax Board filed claims based on estimate assessments. During the case, the FTB received
$13,770.60 from the Chapter 13 trustee on account of its claims. The Smiths were discharged and the
case was closed in 1991.
After the Chapter 13 case was closed, the Smiths finally filed their state income tax returns.
They showed that no tax had in fact been owed. In this adversary proceeding, filed some 15 years after
the Chapter 13 was filed and almost 7 years after it was closed, the Smiths ask the court to disallow the
FTB claim and order the return to them of the funds it received from the trustee. For the reasons stated
below, summary judgment will be granted in favor of the FTB.
This dispute is governed by section 502(j) of the Bankruptcy Code, which provides, in pertinent
(j) A claim that has been allowed or disallowed may be reconsidered for
cause. A reconsidered claim may be allowed or disallowed according to
the equities of the case. . . . This subsection does not alter or modify the
trustee's right to recover from a creditor any excess payment or transfer
made to such creditor.
The court first notes that reconsideration of claims pursuant to § 502(j) must be made before the
case is closed. In re Resources Reclamation Corp. of America
, 34 B.R. 771, 773 (9th
Even if this case somehow had not been closed, it would still be too late under the equities of the
case to reconsider the FTB claims. Two important factors in considering requests for reconsideration of
claims are the length of the delay and its impact on efficient court administration and whether the delay
was beyond the reasonable control of the person whose duty it was to perform. In re Resources
Reclamation Corp. of America
, 34 B.R. at 774. The Smiths themselves caused this situation by failing
to file their state tax returns. They had the power to do so for eight years while the case was pending.
There is no equity in asking the court to revisit an ancient case for their benefit under these
Even if the Smiths were not time-barred, they have no standing to bring this action. Section
502(j) notes the trustee's
right to recover excess payments. There is no basis in the law for discharged
debtors to seek recovery of funds paid to their creditors by a bankruptcy trustee. The Smiths' argument
that they are somehow bringing this action on behalf of their creditors, notwithstanding their discharge,
is without merit to the point of sanction.
For the foregoing reasons, the motion of the FTB for summary judgment will be granted and the
Smiths' motion for reconsideration of the court's tentative ruling will be denied. The Smiths will take
nothing by their complaint and this adversary proceeding will be dismissed with prejudice. The FTB
shall recover its costs of suit from the Smiths.
Counsel for the FTB shall submit an appropriate form of order granting its summary judgment
motion and an appropriate form of judgment.
Dated: November 8, 1999 ____________________________
United States Bankruptcy