Court Opinion

ID: 2669340
Source: CourtListenerOpinion
Date Created: 2014-04-09 18:58:11.939242+00
Date Added: 2024-06-11T13:03:07.853892
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                             No. 13-1457

In Re: DAVID EDGAR BANE,

                Debtor.

------------------------

U.S. TRUSTEE,

                Plaintiff - Appellee,

          v.

DAVID EDGAR BANE,

                Debtor - Appellant.

Appeal from the United States District Court for the Western
District of Virginia, at Roanoke.    Samuel G. Wilson, District
Judge. (7:12-cv-00529-SGW; BK-11-70118; AP-11-07013)

Submitted:   February 24, 2014             Decided:   April 9, 2014

Before NIEMEYER and AGEE, Circuit Judges, and HAMILTON, Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

Gary M. Bowman, Roanoke, Virginia, for Appellant.       Judy A.
Robbins, United States Trustee, Robert B. Van Arsdale, Assistant
United States Trustee, W. Joel Charboneau, Roanoke, Virginia,
Ramona D. Elliott, P. Matthew Sutko, Robert J. Schneider, Jr.,
Executive Office for United States Trustees, UNITED        STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

                              - 2 -
PER CURIAM:

      On    January     21,     2011,       David   Edgar     Bane    (Bane)      filed    a

voluntary Chapter 7 bankruptcy petition in the United States

Bankruptcy Court for the Western District of Virginia.                            On March

21, 2011, W. Clarkson McDow, Jr., the United States Trustee for

Region 4 (UST), initiated an adversary proceeding by filing a

two-count       complaint     in     the    bankruptcy      court     alleging     that    a

denial     of   discharge       of   Bane’s     debts    was    warranted       under     11

U.S.C.     § 727(a)(2)(A) 1          and,    alternatively,          under   11     U.S.C.

§ 727(a)(4)(A). 2        Following discovery, a trial was held before

the bankruptcy court on the UST’s complaint.                         On June 13, 2012,

the   bankruptcy        court      entered     a    decision    and     order      denying

discharge       under   both       § 727(a)(2)(A)       and    § 727(a)(4)(A).            On

appeal,     the    district        court     affirmed    the    bankruptcy         court’s

§ 727(a)(2)(A)’s decision, and, given this affirmance, declined

      1
       Under § 727(a)(2)(A), the bankruptcy court shall deny
discharge if, within one year before the date of the filing of
the petition, “the debtor, with intent to hinder, delay, or
defraud a creditor or an officer of the estate charged with
custody of property under this title, has transferred, removed,
destroyed, mutilated, or concealed, or has permitted to be
transferred, removed, destroyed, mutilated, or concealed-- . . .
property of the debtor.” 11 U.S.C. § 727(a)(2)(A).
      2
       Under § 727(a)(4)(A), the bankruptcy court shall deny
discharge if the debtor “knowingly and fraudulently, in or in
connection with the case-- . . . made a false oath or account.”
11 U.S.C. § 727(a)(4)(A).

                                            - 3 -
to address the bankruptcy court’s § 727(a)(4)(A) decision.      For

the reasons stated below, we affirm.

                                I

                                A

     In 2007, Bane’s company, Aequitas-Energy, Inc., purchased

fifty acres of land (the Angel Lane Property) in Roanoke County,

Virginia, from Bane’s mother, Martha Bane. 3    As payment, Martha

Bane received a $400,000 note, which was to be secured by a deed

of trust that was never recorded.       Aequitas-Energy, Inc. then

obtained a loan (the Loan) from Community Trust Bank (the Bank)

secured by a properly recorded deed of trust on the Angel Lane

Property.   Consequently, the Bank’s lien was superior to that of

Martha Bane’s.

     By 2010, the Loan was in default, and the Bank scheduled a

foreclosure sale for July 2, 2010.     The day before the scheduled

foreclosure sale, Bane transferred the Angel Lane Property from

his company to himself.    He also filed a voluntary Chapter 7

bankruptcy petition, which resulted in a stay of the foreclosure

sale.    In September 2010, Bane moved to dismiss his bankruptcy

     3
       The Angel Lane Property was purchased by Martha Bane and
Phillip Bane, as tenants in common, from Gilbert Miles and
Frances McLaughlin in 1992.    Phillip Bane’s half interest was
conveyed to Martha Bane’s husband, Clyde Bane, in 1993.    Upon
Clyde Bane’s death in 1995, Martha Bane became the fee simple
owner of the Angel Lane Property.

                              - 4 -
petition    on       the     basis       that    he     failed      to    engage       in    credit

counseling prior to the filing of his bankruptcy petition, and

the bankruptcy court granted the motion on November 9, 2010.

     The Bank scheduled another foreclosure sale, this time for

January 24, 2011.             On December 31, 2010, Bane prepared a deed

transferring 90% of his ownership interest in the Angel Lane

Property to his mother, with whom he then resided, for $10.                                     The

deed recited that it was “exempt from recordation tax pursuant

to   Virginia         Code    Section       58.1-811(d),”               which     exempts      from

taxation transfers made for no consideration.                             (J.A. 66).

     On    January         21,    2011,     the       last    business         day    before    the

scheduled foreclosure sale, the deed transferring 90% of Bane’s

ownership interest in the Angel Lane Property to Bane’s mother

was notarized and recorded.                      Within hours, Bane filed another

voluntary       Chapter       7     bankruptcy          petition,         which       stayed    the

January 24, 2011 foreclosure sale.

     In    conjunction            with    his    bankruptcy         petition,         Bane     filed

schedules       of    his     assets       and    liabilities            and    statements         of

financial affairs.                In these filings, Bane failed to disclose

that: (1) he is a named beneficiary of The Martha Harrison Bane

Irrevocable          Trust    (the       Trust);        (2)       V&V    Land     Management       &

Resource    Recovery,            LLC     (V&V    Land    Management)            had    a    $25,000

judgment against him, his brother, Roy Bane, as trustee for the

Trust,    and    the       Trust       itself;     (3)       he    and   his     sister      had   a

                                                - 5 -
judgment in the amount of $5,150 against Howard E. Payton; and

(4) he had certain property at a Louisiana storage facility.

                                          B

       As to the UST’s § 727(a)(2)(A) claim, the bankruptcy court

found that Bane’s transfer of 90% of his ownership interest in

the Angel Lane Property was done with the intent to defraud his

creditors.     In so finding, the bankruptcy court observed that

the “transfer of the Angel Lane Property . . . w[ore] several

badges of fraud: (1) there was no consideration for the transfer

of the property from the Debtor to his mother; (2) the Debtor

and his mother have a close familial relationship; and (3) the

Debtor retained a partial interest in the property allowing him

to continue to use the property.”                (J.A. 396-97).            According to

the bankruptcy court, these facts established a prima facie case

of     fraudulent    intent     which      was     not       rebutted       by    Bane’s

implausible    explanations       for    the     transfer.           See    Farouki    v.

Emirates Bank Intern., Ltd., 14 F.3d 244, 249 (4th Cir. 1994)

(“Although    the    burden     may     shift    to    the     debtor       to   provide

satisfactory,       explanatory       evidence        once     the     creditor       has

established a prima facie case, the ultimate burden rests with

the creditor.”).       Consequently, the bankruptcy court concluded

that    the   UST   met   his     ultimate       burden      of   persuasion        and,

therefore,     a     denial     of      discharge        was      warranted        under

§ 727(a)(2)(A).

                                        - 6 -
     As to the UST’s § 727(a)(4)(A) claim, the bankruptcy court

found that Bane made material omissions in connection with his

bankruptcy petition, including Bane’s failure to disclose his

interest in the Trust, V&V Land Management’s $25,000 judgment,

the $5,150 judgment against Howard E. Payton, and the property

he kept at a Louisiana storage facility.              The bankruptcy court

was most concerned about Bane’s failure to disclose V&V Land

Management’s $25,000 judgment because such disclosure would have

revealed Bane’s interest in the Trust.            However, the bankruptcy

court made clear that “each individual omission constitute[d]

grounds to deny a discharge.”         (J.A. 398).      The bankruptcy court

found that each omission, individually and collectively, gave

rise to a presumption of fraudulent intent, thereby establishing

a prima facie case, that was not rebutted by Bane’s implausible

explanations for the omissions.              Consequently, the bankruptcy

court concluded that a denial of discharge was warranted under

§ 727(a)(4)(A).

     On appeal from the bankruptcy court, the district court

agreed     with   the   bankruptcy    court’s    conclusion       that    Bane’s

transfer of 90% of his ownership interest in the Angel Lane

Property    “bore   common   badges    of    fraud,   including    a     lack   of

consideration for the transfer of the property from Bane to his

mother, the close familial relationship between the parties, and

Bane’s retention of a partial interest in the property allowing

                                     - 7 -
him continued use of that property.”                        (J.A. 409-10).           These

facts, coupled with the dearth of evidence negating fraudulent

intent,   led     the    district     court       to    agree   with     the   bankruptcy

court’s     conclusion        that        “Bane        intended     to     defraud       his

creditors.”        (J.A.      410).        Accordingly,           the    district    court

affirmed the bankruptcy court’s § 727(a)(2)(A) decision, and, in

so    affirming,        declined     to    address        the     bankruptcy      court’s

§ 727(a)(4)(A) decision.

                                            II

      “When considering an appeal from a district court acting in

its   capacity     as    a   bankruptcy      appellate         court,    we    conduct   an

independent review of the bankruptcy court’s decision, reviewing

factual findings for clear error and legal conclusions de novo.”

Campbell v. The Hanover Ins. Co., 709 F.3d 388, 394 (4th Cir.

2013).     A finding of fact is clearly erroneous when the entire

record demonstrates convincingly to the reviewing court that “a

mistake has been committed.”               United States v. U.S. Gypsum Co.,

333 U.S. 364, 395 (1948).

      On appeal to this court, Bane presses no challenge in his

opening brief to the bankruptcy court’s § 727(a)(4)(A) holding.

He did raise such a challenge in response to an argument in the

UST’s     brief     which      averred        that       the      bankruptcy        court’s

§ 727(a)(4)(A) holding could be affirmed because Bane waived any

                                          - 8 -
challenge        to    that       holding       or,     alternatively,            because       the

bankruptcy court correctly resolved the claim on the merits.

       “It is a well settled rule that contentions not raised in

the    argument       section       of    the        opening    brief       are    abandoned.”

United      States     v.   Al–Hamdi,          356    F.3d     564,   571    n.8    (4th    Cir.

2004); see also United States v. Leeson, 453 F.3d 631, 638 n.4

(4th   Cir.      2006)      (collecting         cases).         In    rare    circumstances,

appellate courts, in their discretion, may overlook this rule

and others like it if they determine that a “miscarriage of

justice” would otherwise result.                      Venkatraman v. REI Sys., Inc.,

417 F.3d 418, 421 (4th Cir. 2005).

       In   this      case,   Bane       has    not     adequately      explained         why    he

failed      to     raise      a     challenge          to      the    bankruptcy       court’s

§ 727(a)(4)(A)         holding      in    his        opening    brief.        In    his     reply

brief, he posits that he did not address the bankruptcy court’s

§ 727(a)(4)(A) ruling in his opening brief because the district

court did not reach this issue.                         The obvious flaw in Bane’s

position is that we review the bankruptcy court’s decision, not

the district court’s decision.                        Campbell, 709 F.3d at 394; In

re: Frushour, 433 F.3d 393, 398 (4th Cir. 2005) (noting that, in

an appeal from the district court sitting as an appellate court

from   a    bankruptcy        court,      we    “review        directly      the    bankruptcy

court’s decision”).

                                               - 9 -
      Moreover, we decline to exercise our discretion to overlook

the waiver of this argument.              Bane suggests that the UST would

suffer    no    prejudice    were   we     to   consider    the   § 727(a)(4)(A)

argument raised in his reply brief, which may or may not be

true, but he has neither adequately explained why the bankruptcy

court’s § 727(a)(4)(A) holding was not discussed in his opening

brief nor why our refusal to exercise our discretion will result

in manifest injustice.           See A Helping Hand, LLC v. Baltimore

County, Md., 515 F.3d 356, 369 (4th Cir. 2008) (declining to

excuse waiver where the appellant had “not even explained why it

failed to raise these arguments earlier, let alone explained

why, absent our consideration, a miscarriage of justice would

result”).      For these reasons, we affirm the bankruptcy court’s

decision to deny discharge under § 727(a)(4)(A).

      Even though we could stop right here, we note that Bane’s

challenge      to   the   bankruptcy      court’s    § 727(a)(2)(A)      ruling    is

without merit.         The record as a whole supports the bankruptcy

court’s finding that Bane’s transfer of 90% of his ownership

interest in the Angel Lane Property was done with the intent to

defraud    his      creditors.      The    lack     of   consideration    and     the

parties to the transaction (mother/son) strongly suggest such

intent, as does the timing of the recordation of the deed and

Bane’s retention of a partial ownership interest, which allowed

his   continued       use   of   the      property.         Considering     Bane’s

                                       - 10 -
preposterous explanations for failing to disclose the transfer

(allegedly, he thought the property was going to be sold or,

alternatively,      his    brother      recorded     the     deed   without     his

knowledge), it is not surprising that the bankruptcy court held

that Bane did not rebut the presumption of fraudulent intent and

that the UST carried his ultimate burden of proof. 4

                                        III

     For the reasons stated herein, the judgment of the district

court is affirmed.        We dispense with oral argument because the

facts    and   legal    contentions     are     adequately    presented    in   the

materials      before   this   court    and     argument   would    not   aid   the

decisional process.

                                                                          AFFIRMED

     4
       Bane argues that there was no “transfer” of the Angel Lane
Property because the deed transferring 90% of his ownership
interest to Martha Bane was never delivered to her as required
by Virginia law. This argument was not raised before either the
bankruptcy court or the district court and, therefore, is
reviewed for plain error.    See In re: Celotex Corp., 124 F.3d
619, 630–31 (4th Cir. 1997) (adopting plain error standard of
review used in criminal cases, as set forth in United States v.
Olano, 507 U.S. 725 (1993), for application in civil cases when
party failed to preserve error below).    Under this standard of
review, we may exercise our discretion to correct an error not
raised below if: (1) there is an error; (2) the error is plain;
(3) the error affects substantial rights; and (4) we determine,
after examining the particulars of the case, that the error
seriously affects the fairness, integrity, or public reputation
of judicial proceedings. Id. at 732-37. We have reviewed this
argument and conclude that Bane cannot meet the plain error
standard.

                                       - 11 -