United States District Court, E.D. Michigan, Southern Division
States Magistrate Judge David R. Grand
OPINION AND ORDER AFFIRMING BANKRUPTCY COURT'S
GERSHWIN A. DRAIN United States District Court Judge
matter is before the Court as an appeal from the United
States Bankruptcy Court for the Eastern District of Michigan.
Appellants, Lance and Claudia Brady, appeal the Honorable
Thomas J. Tucker's August 3, 2016 order granting the
debtor's Chapter 7 discharge. For the following reasons,
the Court will AFFIRM the United States
Bankruptcy Court's order.
facts in this case are undisputed. The Appellants, Lance and
Claudia Brady, are married. Claudia is the Appellee's
mother. Lance is the Appellee's stepfather. On September
18, 2008, the Appellants loaned the Appellee between $5, 500
and $7, 000. On or about September 21, 2011, the
Appellants loaned the Appellee an additional $23, 000.00. On
September 21, 2011, the Appellee signed a promissory note for
2011 and 2012, the Appellee made payments on the loan which
totaled $3, 020.00. In 2012, the Appellee delivered several
checks to the Appellants which totaled $2, 820.00. However,
these checks were not cashed because the Appellee told the
Appellants that his checking account had insufficient funds.
November 22, 2013, the Appellee filed the underlying
bankruptcy case under Chapter 13 of the Bankruptcy Code. The
Appellee still owed money to the Appellants at the time the
bankruptcy case was filed. Nevertheless, the Appellee's
original bankruptcy schedules did not list the Appellants as
creditors. On February 18, 2014, the Appellee and his
attorney attended the Meeting of Creditors. At this meeting,
the Appellee testified that he listed all of his debts and
liabilities. Later, at the same meeting, the Appellee
testified that there were no errors or omissions in his
January 2015, the Appellants demanded that the Appellee
resume making payments on the loan. The Appellee, however,
did not resume making payments. In March 2015, the Appellants
obtained an attorney, who discovered that the Appellee filed
a Chapter 13 bankruptcy case. That same month, the Appellee
forwarded a letter to the Appellants, asking to renegotiate
the terms of the loan and indicating that he will
“include” the debt in his the bankruptcy
proceedings if they do not agree to renegotiation.
April 30, 2015, the Appellee amended his Schedule F to add
the debt owed to the Appellants. On June 26, 2015, the
Appellants filed an adversary complaint against the Appellee
pursuant to 11 U.S.C. § 523(a)(3)(A). On October 30,
2015, shortly before the hearing on the Appellants'
motion for summary judgment, the Appellant converted the
underlying bankruptcy case from Chapter 13 to Chapter 7. The
Bankruptcy Court, based upon this conversion, rendered
judgment in favor of the Appellee and discharged his
debt-including the loan to the Appellants.
January 14, 2016, during a Meeting of Creditors, the Appellee
testified that, at the time he filed his bankruptcy case, he
understood he had an obligation to repay the loan to the
Appellants. Subsequently, the Appellants filed an adversary
complaint pursuant to 11 U.S.C. § 727(a)(4)(A). The
Appellants sought to have the Appellee's Chapter 7
discharge denied for having made a false statement under oath
when he signed his original bankruptcy schedules. The
adversary complaint also sought to deny the Appellee's
discharge for making false statements under oath at the
February 18, 2014 Meeting of Creditors, in which he testified
that he listed all of his liabilities and that there were no
errors or omissions in his bankruptcy paperwork. A trial was
held on August 2, 2016. The Bankruptcy Court rendered a
fifty-seven-minute bench opinion on August 3, 2016, and
denied the Appellants' complaint. This appeal followed.
Standard of Review from Bankruptcy Court
Parties do not dispute the standard of review of a bankruptcy
court's decision. The bankruptcy court's findings of
fact are reviewed under the clearly erroneous standard.
Fed.R.Bankr.P. 8013. The bankruptcy court's conclusions
of law are reviewed de novo. Nuvell Credit Corp. v.
Westfall (In re Westfall), 599 F.3d 498, 501 (6th Cir.
2010). A bankruptcy court's finding of fraudulent intent
is a factual finding that is reviewed for clear error.
Groman v. Watman (In re Watman), 301 F.3d 3, 8 (1st
Cir. 2002); Brown v. Third Nat'l Bank (In re
Sherman), 67 F.3d 1348, 1353 (8th Cir. 1995); see
also Keeney v. Smith (In Re Keeney), 227 F.3d 679, 685
(6th Cir. 2000) (stating that “[w]hether a debtor has
made a false oath under section 727(a)(4)(A) is a question of
fact.”). “A finding of fact is clearly erroneous
‘when although there is evidence to support it, the
reviewing court, on the entire evidence, is left with the
definite and firm conviction that a mistake has been
committed.' ” United States v. Mathews (In re
Mathews), 209 B.R. 218, 219 (6th Cir. BAP 1997) (quoting
Anderson v. City of Bessemer City, 470 U.S.
564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985));
In re Taylor, 461 B.R. 420, 422 (E.D. Mich. 2011).
Discussion & Analysis
U.S.C. § 727 governs discharge under Chapter 7
Bankruptcy. Section 727(a)(4)(A) of the Bankruptcy Code
(a) The court shall grant the debtor a discharge, unless-
(4) the debtor knowingly and fraudulently, in or in
connection with the case-
(A) made a false oath or account.
elements of a violation of 11 U.S.C. § 727 must be
proven by a preponderance of the evidence to merit
denial of discharge.” In re Keeney, 227 F.3d
679, 683 (6th Cir. 2000) (emphasis added). “The
Bankruptcy Code should ...