Court Opinion

ID: 1010398
Source: CourtListenerOpinion
Date Created: 2013-07-04 20:10:53.898385+00
Date Added: 2024-06-11T09:34:24.463588
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
               FOR THE FOURTH CIRCUIT

In Re: HENRY GRAUSZ, M.D.,             
                             Debtor.

HENRY GRAUSZ, M.D.,
               Plaintiff-Appellant,           No. 02-1499
                v.
JOHN F. SAMPSON, as Liquidator of
GF Commercial Mortgage, LP,
               Defendant-Appellee.
                                       
           Appeal from the United States District Court
            for the District of Maryland, at Greenbelt.
                 Peter J. Messitte, District Judge.
                 (CA-01-1173-PJM, AP-00-1099)

                      Argued: April 1, 2003

                     Decided: April 21, 2003

  Before NIEMEYER, MOTZ, and GREGORY, Circuit Judges.

Affirmed by unpublished per curiam opinion.

                           COUNSEL

ARGUED: William Francis Sheehan, SHEA & GARDNER, Wash-
ington, D.C., for Appellant. Dennis Douglas Davis, GOLDBERG,
STINNETT, MEYERS & DAVIS, P.C., San Francisco, California,
2                           IN RE: GRAUSZ
for Appellee. ON BRIEF: Matthew M. Hoffman, SHEA & GARD-
NER, Washington, D.C., for Appellant.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

   In this bankruptcy action, Dr. Henry Grausz appeals a decision of
the bankruptcy court finding him in breach of a settlement agreement
and denying him a discharge in a Chapter 11 proceeding. The district
court affirmed, and Dr. Grausz appeals. Finding no reversible error,
we affirm.

                                  I.

  We derive the following summary of the procedural history and
underlying facts from our opinion in a related case, Grausz v.
Englander, 321 F.3d 467 (4th Cir. 2003).1

   On December 29, 1997, Dr. Grausz filed a Chapter 11 bankruptcy
petition in the District of Maryland. One of Dr. Grausz’s major credi-
tors was John F. Sampson, who was acting in his capacity as liquida-
tor of GFI Commercial Mortgage, L.P. In October 1997, shortly
before Dr. Grausz filed for bankruptcy, Sampson’s predecessors had
obtained a judgment for approximately $6.5 million against Dr.
Grausz in California state court. Dr. Grausz appealed the California
judgment, and based on the judgment, Sampson filed a proof of claim
in Dr. Grausz’s bankruptcy case.
    1
  In the related action, we affirmed the district court’s award of sum-
mary judgment to Dr. Grausz’s former bankruptcy attorney, Bradford F.
Englander, on Dr. Grausz’s claim of professional malpractice. See
Grausz, 321 F.3d at 469.
                             IN RE: GRAUSZ                             3
   These events prompted settlement communications between Dr.
Grausz and Sampson. Dr. Grausz, with the assistance of his attorney,
Bradford F. Englander, negotiated and entered into a settlement
agreement with Sampson that was approved by the bankruptcy court
on June 8, 1998. Several provisions of the settlement agreement are
pertinent here. First, Dr. Grausz agreed to withdraw his appeal from
the California judgment. In return, Sampson agreed to accept an
allowed, unsecured, non-priority claim of $4 million in Dr. Grausz’s
bankruptcy case. Second, Dr. Grausz agreed to file amended sched-
ules of assets and liabilities. He warranted that the amended schedules
would "to the best of [his] knowledge, contain a complete, true and
correct listing of all of [his] existing assets as of December 29, 1997."
Third, Dr. Grausz agreed that if he should breach this warranty,
Sampson would be free to object to the discharge of Dr. Grausz’s
debts. Fourth, Dr. Grausz agreed that any breach by him of the war-
ranty would be deemed a post-petition breach, making him liable for
a claim for damages by Sampson that would survive any resolution
of the bankruptcy case.

   Englander prepared the amended schedules in consultation with Dr.
Grausz, and Dr. Grausz filed them on June 22, 1998. The amended
Schedule B (listing personal property) identified Dr. Grausz’s house-
hold goods and furnishings as "goods held in storage" and itemized
in a "packing list" attached as an exhibit. According to Dr. Grausz,
the packing list — which was prepared by Dr. Grausz’s secretary who
packed his belongings without his assistance — assertedly constituted
a list of any household items not taken by his wife from their Califor-
nia home pursuant to their separation. No property settlement had
occurred either at the time of Dr. Grausz’s filing of his bankruptcy
petition or the evidentiary hearing in this case. In any event, Dr.
Grausz maintained that the household items not taken by his wife
were shipped to a storage unit in Maryland to await his retrieval. The
amended Schedule B did not make any reference to substantial com-
munity property, even though Dr. Grausz was still married when he
filed his petition, and his matrimonial domicile was California, a com-
munity property state.2
  2
   The amended schedule valued Dr. Grausz’s household goods and fur-
nishings at $150,000, an amount that Dr. Grausz’s secretary estimated as
4                            IN RE: GRAUSZ
   In October 1999, the unsecured creditors’ committee, chaired by
Sampson, arranged for an inventory of Dr. Grausz’s storage unit. The
inventory revealed that valuable items on the packing list were miss-
ing. In January 2000, the creditors’ committee objected to Dr.
Grausz’s disclosures, in part because of inaccuracies in the listing of
household goods and furnishings. On March 6, 2000, Sampson com-
menced this adversary proceeding against Dr. Grausz by filing a com-
plaint to have Sampson’s claim declared nondischargeable and to
deny Dr. Grausz’s discharge. Sampson alleged that Dr. Grausz
breached the warranty in the settlement agreement by filing an
amended Schedule B (incorporating the packing list) that contained
an incorrect and incomplete list of Dr. Grausz’s personal property.
Sampson claimed, inter alia, that Dr. Grausz had failed to account for
a significant number of valuable articles, including antiques and
works of art.

   In March 2001, the bankruptcy court heard Sampson’s case against
Dr. Grausz to determine dischargeability. The bankruptcy court found
(1) that Dr. Grausz breached the warranty in the settlement agreement
by his failure to list substantial community property interests on his
amended Schedule B, (2) that Dr. Grausz, by resorting to vague and
indefinite statements, failed to satisfactorily explain the loss of certain
of his assets, including several valuable paintings, and (3) that Dr.
Grausz failed to preserve adequate records from which his financial
condition or business transactions might be ascertained. Based on
these findings, the bankruptcy court awarded damages to Sampson for
Dr. Grausz’s breach of the settlement agreement and entered an order
denying Dr. Grausz a discharge based on his failure to satisfactorily
explain his loss of assets and his failure to preserve adequate records,

part of the packing process, i.e., she "didn’t even think about insurance
when this was happening and at the last minute, right before the trucks
were leaving to go wherever they were going, the supervisor that was
handling this said you have to put something in." In contrast, as part of
the divorce proceedings, Dr. Grausz stated that "[i]n my financial state-
ments over the years, I have valued our entire personal property at
$750,000, and it is clear that she [his wife] has taken more than one-half
of the more valuable possessions, including a single diamond ring worth
more than $100,000 and all of the silver."
                            IN RE: GRAUSZ                            5
pursuant to 11 U.S.C.A. §§ 727(a)(3) & (5) (West 1993). The district
court affirmed.

                                  II.

   Dr. Grausz raises a number of arguments on appeal. Only one
requires discussion.

  Dr. Grausz contends that the lower courts committed plain error in
applying the discharge provision for Chapter 7 proceedings, 11
U.S.C.A § 727(a), rather than the discharge provision for Chapter 11
proceedings, 11 U.S.C.A. § 1141(d)(3) (West 1993). Clearly,
1141(d)(3) does apply here; that statute provides:

    The confirmation of a plan does not discharge a debtor if—

         (A) the plan provides for the liquidation of all or
         substantially all of the property of the estate;

         (B) the debtor does not engage in business after
         consummation of the plan; and

         (C) the debtor would be denied a discharge
         under section 727(a) of this title if the case were
         a case under Chapter 7 of this title.

   In this case, the lower courts found that Dr. Grausz should be
denied a discharge under § 727(a), thereby satisfying the requirements
of § 1141(d)(3)(C), and Dr. Grausz concedes that the confirmed plan
satisfies § 1141(d)(3)(A). However, Dr. Grausz asserts that he is enti-
tled to discharge because "the bankruptcy court did not, and could not
on the basis of the record, find that Dr. Grausz was not engaging in
business after consummation of the plan," as required by
§ 1141(d)(3)(B).

   Although the lower courts did err in not completing the full
§ 1141(d)(3) analysis, this error does not require reversal. Dr.
Grausz’s contention to the contrary rests on his argument that "engag-
[ing] in business after consummation of the plan" means any "profit-
6                             IN RE: GRAUSZ
making pursuit[ ]." It is undisputed that after consummation of the
plan, Dr. Grausz worked as a consultant for a business unrelated to
the entities at issue in the bankruptcy. Indeed, the Joint Plan of Liqui-
dation clearly did not permit the continuation of any of Dr. Grausz’s
pre-petition businesses, instead it provided for liquidation of those
businesses. It seems clear to us that § 1143(a)(3)(B) does not refer to
basic employment by an individual debtor but to the continuation of
a pre-petition business, and, therefore, Dr. Grausz’s argument fails.
Cf. In re T-H New Orleans Ltd. P’ship, 116 F.3d 790, 804 & n.15 (5th
Cir. 1997) (finding subsection (B) satisfied where debtor would con-
tinue operating pre-petition hotel business for two years following
plan confirmation, and contrasting In re Wood Family Interests, Ltd.,
135 B.R. 407 (Bankr. D. Colo. 1989) (holding that partnership debtor
was not entitled to a discharge where its plan provided for liquidation
and discontinuation of its business upon confirmation)).

   After careful review of the record, briefs, and applicable law and
consideration of the oral arguments of both parties, we hold that the
lower courts did not err in reaching their other conclusions. Accord-
ingly, we affirm largely on the basis of the opinions of the bankruptcy
court and the district court. See In re Henry Grausz, M.D., Civ. No.
PJM 01-1173 (D. Md. Apr. 4, 2002); In re Henry Grausz, M.D.,
Adversary No. 00-1099-PM (Bankr. D. Md. Mar. 13, 2001).3

                                    III.

    For the foregoing reasons, the judgment of the district court is

                                                              AFFIRMED.
    3
    Section 727 of the Bankruptcy Code provides alternative, disjunctive
bases for denial of discharge. See 11 U.S.C.A. § 727(a). We affirm the
lower courts’ denial of discharge on the basis of the failure to satisfacto-
rily explain the loss of assets under § 727(a)(5) but not on the alternative
basis of failure to keep and preserve adequate records under § 727(a)(3).