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In re Firth

United States District Court, E.D. Michigan, Southern Division

February 27, 2017

In Re Eric Firth, Debtor
v.
Eric Firth, Appellee-Debtor. Lance and Claudia Brady, Appellants,

          United States Magistrate Judge David R. Grand

          OPINION AND ORDER AFFIRMING BANKRUPTCY COURT'S DECISION

          GERSHWIN A. DRAIN United States District Court Judge

         I. Introduction

          This 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.

         II. Facts

         The 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.[1] 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 $29, 900.00.

         During 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.

         On 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 bankruptcy paperwork.

         In 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.

         On 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.

         On 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.

         III. Standard of Review from Bankruptcy Court

         The 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).

         IV. Discussion & Analysis

         11 U.S.C. § 727 governs discharge under Chapter 7 Bankruptcy. Section 727(a)(4)(A) of the Bankruptcy Code provides:

(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.

         “The 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 ...


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