Court Opinion

ID: 17827
Source: CourtListenerOpinion
Date Created: 2010-04-25 07:08:16+00
Date Added: 2024-06-11T15:04:23.733382
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                         FOR THE FIFTH CIRCUIT

                         ____________________

                             No. 98-30779
                           Summary Calendar
                         ____________________

          IN THE MATTER OF GREGORY M POROBIL,

                              Debtor.
          ---------------------------

          GREGORY M POROBIL,

                                 Appellant,

          v.

          SANDRA A AUTRY,

                                 Appellee.

_________________________________________________________________

           Appeal from the United States District Court
              for the Eastern District of Louisiana
                           (98-CV-288-R)
_________________________________________________________________

                             June 4, 1999

Before KING, Chief Judge, WIENER and DENNIS, Circuit Judges.

PER CURIAM:*

     Appellant Gregory Porobil appeals a bankruptcy court’s order

denying him a discharge of his debts under Chapter 7 of the

bankruptcy code, 11 U.S.C. §§ 701-766, based on allegedly

fraudulent statements that Porobil included in his application

for bankruptcy relief.    We affirm.

     *
      Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
                 I. FACTUAL & PROCEDURAL BACKGROUND

     Appellant Gregory Porobil filed a petition for protection

under Chapter 7 of the bankruptcy code on December 14, 1995.

Porobil, an attorney practicing in Louisiana, stated in a

schedule attached to his petition that he held an interest of

unknown value in a professional law corporation bearing his name

(the PLC).    Porobil stated that he had an employment agreement

with the PLC and had received $25,000 in salary since January 1,

1995.    Porobil listed no other interest in any incorporated or

unincorporated business in the schedules attached to his

petition, and he marked “[n]one” when asked on his Statement of

Financial Affairs to “list the names and addresses of all

businesses in which [he] was an officer, director, partner, or

managing executive of a corporation, partnership, sole

proprietorship, or was [a] self-employed professional within the

two years immediately preceding the commencement of this case, or

in which [he] owned 5 percent or more of the voting or equity

securities within the two years immediately preceding the

commencement of this case.”    Finally, Porobil listed appellee

Sandra Autry, the receiver of Comco Insurance Company (Comco), as

an unsecured creditor in the amount of $748,518.43 resulting from

a 1993 judgment in favor of Comco.

     Autry filed a complaint to deny Porobil discharge under 11

U.S.C. § 727(a)(2), (4), and (5) on March 18, 1996.1   Autry

     1
       Section 727(a) provides, in part, that the court shall
grant a discharge unless:

                                  2
alleged, inter alia, that Porobil had failed to reveal properly

both his ownership interest in an insurance company named

Southern Assurance, Inc. (SA) and his interest in a salary and

legal fees from the PLC.   Specifically, Autry asserted that

Porobil owned one hundred percent of SA’s stock, was entitled to

$100,000 per year in salary from the PLC, and collected a fee in

excess of $24,000 six days after filing his Chapter 7 petition.

Autry claimed that the “overwhelming majority” of the fee was

earned prior to Porobil’s bankruptcy filing, and that the fee

resulted from the settlement of a case (the Fenasci case) that

was at least partially negotiated prior to the filing.   Autry

argued that, in light of the above information, Porobil knowingly

and fraudulently made false statements in his Chapter 7 petition

and therefore should be denied a discharge of his debts.

     (2) 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--
          (A) property of the debtor, within one year before the
          date of the filing of the petition; or
          (B) property of the estate, after the date of the
          filing of the petition;

     . . .

     (4) the debtor knowingly and fraudulently, in or in
     connection with the case--
          (A) made a false oath or account; [or]

             . . .

     (5) the debtor has failed to explain satisfactorily, before
     determination of denial of discharge under this paragraph,
     any loss of assets or deficiency of assets to meet the
     debtor’s liabilities[.]

                                 3
     The bankruptcy court heard evidence regarding Autry’s

complaint and entered an order denying Porobil discharge on

October 15, 1997.   Although the bankruptcy court found

insufficient evidence to support Autry’s claims under 11 U.S.C.

§ 727(a)(2) and (a)(5), the court determined that Porobil’s

failure to disclose his fees from his interest in the Fenasci

case and his failure to disclose his connection with SA were both

material to a determination of Porobil’s true financial

condition.   The court found that “[i]t is obvious that [Porobil]

must have put in the bulk of his time on the Fenasci case pre-

petition,” and that his omission of either the fees themselves or

his contingent interest in the case was a false statement.

Furthermore, the court did “not find it credible” that Porobil

did not know that SA was still doing business in the two years

prior to his filing, pointing to tax returns that indicated that

SA had gross receipts of $1,749,456 in 1993 and $137,715 in 1994,

and a net income of $4238 in 1995.   The court concluded that

“[t]he effect of the Debtor’s multiple omissions and the failure

to clear them up with the filing of amended schedules evidence to

the Court a reckless disregard for the truth and, thus, the

intent to deceive required for § 727(a)(4)(A).”   The United

States District Court for the Eastern District of Louisiana

affirmed the order denying discharge, see Autry v. Porobil, No.

CIV.A.98-288, 1998 WL 395137, at *1 (E.D. La. July 14, 1998), and

Porobil timely appeals.

                                 4
                            II. DISCUSSION

     Porobil argues on appeal that he was not required to

disclose his ownership interest in SA in either the schedules

attached to his Chapter 7 petition or the Statement of Financial

Affairs because SA “ceased operations and closed its doors in

March, 1995,” and was defunct at the time of filing.   Porobil

argues that SA had no assets or other value, and that therefore

his failure to list his interest in it caused no prejudice.

Porobil asserts that his omission of SA “did not rise to the

level of making a knowing and fraudulent false oath” because he

“believed, at the time he executed the schedules[,] that the

information contained therein was both truthful and all that was

required.”   In addition, Porobil argues that he was not required

to disclose the fee from the Fenasci case because the fee was

received by the PLC and not by Porobil personally.

     We review the bankruptcy court’s findings of fact under the

clearly erroneous standard, but the court’s conclusions of law

are subject to de novo review.    See In re Beaubouef, 966 F.2d
174, 177 (5th Cir. 1992).    To prevail on her claim that Porobil

is not entitled to discharge under 11 U.S.C. § 727(a)(4)(A),

Autry must demonstrate that:    (1) Porobil made a statement under

oath; (2) the statement was false; (3) Porobil knew the statement

was false; (4) Porobil made the statement with fraudulent intent;

and (5) the statement related materially to the bankruptcy case.

See Beaubouef, 966 F.2d at 178.    We have previously determined

that false oaths that are “sufficient to justify the denial of

                                  5
discharge include ‘(1) a false statement or omission in the

debtor’s schedules or (2) a false statement by the debtor at the

examination during the course of the proceedings.’”         Id. (quoting

4 COLLIER   ON   BANKRUPTCY ¶ 727.04[1] (15th ed. 1992)).

      We agree with the district court’s determination that the

first three elements outlined above “are clearly met” with

respect to Porobil’s failure to disclose his interest and role in

SA.   Autry, 1998 WL 395137, at *2.        Porobil admits that he owned

all the stock of SA when he filed his Chapter 7 petition, and his

failure to list this interest in either the schedule or his

Statement of Financial Affairs renders both disclosures, which

were both made under oath, false.         Furthermore, we agree with the

district court that, “given the tax returns of SA for 1994 and

1995, the bankruptcy court did not clearly err when it found that

Porobil knew the statements were false.”         Id.

      Porobil claims that “the mere omission of property from the

schedules does not necessarily establish fraudulent intent on the

part of the debtor,” quoting In re Woerner, 66 B.R. 964, 973

(Bankr. E.D. Pa. 1986), and that his failure to list SA “was not

an attempt to conceal his former interests in it, nor . . . the

result of any intent to hinder, delay, or defraud the Receiver.”

The bankruptcy court rejected these arguments and found that the

evidence presented at trial showed that Porobil made “knowing and

fraudulent false oaths” because he made multiple omissions in his

schedules and Statement of Financial Affairs, did not rectify

these omissions by filing amended schedules, and had “doubtful

                                      6
credibility in certain areas of explanation.”    After carefully

reviewing the record and granting due deference to the trial

court on issues of credibility, we find no clear error in its

conclusion that Porobil intended to fraudulently omit relevant

information from the schedules and Statement of Financial

Affairs.   See In re Cline, 48 B.R. 581, 584 (Bankr. E.D. Tenn.

1985) (“It is sufficient [to find fraudulent intent] if the

debtor knows the truth and nonetheless willfully and

intentionally swears to what is false.”); 6 COLLIER   ON   BANKRUPTCY

¶ 727.04[1][a] (15th ed. rev. 1999) (“The requisite intent [to

defraud] . . . may be discovered by inference from the facts.”).

     Porobil, quoting In re Lineberry, 55 B.R. 510, 513 (Bankr.

W.D. Ky. 1985), argues that “a debtor who, without fraud, omits

from his sworn schedules property of no value is not guilty of

making a false and fraudulent oath,” and that “[i]f the false

oath pertains to an asset of de minimis value . . . this may tend

to vitiate the debtor’s fraudulent intent.”     In re Arcuri, 116
B.R. 873, 881 (Bankr. S.D.N.Y. 1990).   Porobil thus attempts to

use his assertion that SA has no value to challenge the

bankruptcy court’s findings of both fraudulent intent and

materiality.   Porobil’s effort fails, however, because we see no

clear error in the district court’s finding, based on tax returns

indicating net income as recently as 1995, that SA continued to

conduct business in 1993 and 1994 and that its omission from

Porobil’s Chapter 7 petition was both material and detrimental to

an accurate determination of his financial condition.        See

                                 7
Beaubouef, 966 F.2d at 178 (“‘The subject matter of a false oath

is “material,” and thus sufficient to bar discharge, if it bears

a relationship to the bankrupt’s business transactions or estate,

or concerns the discovery of assets, business dealings, or the

existence and disposition of his property.’”) (quoting In re

Chalik, 748 F.2d 616, 617 (11th Cir. 1984)).   Furthermore, as we

stated in Beaubouef,

     “The recalcitrant debtor may not escape a section
     727(a)(4)(A) denial of discharge by asserting that the
     admittedly omitted or falsely stated information concerned a
     worthless business relationship or holding; such a defense
     is specious. It makes no difference that he does not intend
     to injure his creditors when he makes a false statement.
     Creditors are entitled to judge for themselves what will
     benefit, and what will prejudice, them. The veracity of the
     bankrupt’s statements is essential to the successful
     administration of the Bankruptcy Act.”

Id. (quoting Chalik, 748 F.2d at 617).   We therefore conclude

that the bankruptcy court properly denied Porobil discharge under

11 U.S.C. § 727(a)(4)(A).2

                         III. CONCLUSION

     For the foregoing reasons, we AFFIRM the judgment of the

district court affirming the judgment of the bankruptcy court.

     2
       Because we determine that the bankruptcy court properly
denied Porobil discharge after finding that he knowingly and
fraudulently made a false oath by omitting information relating
to his interest and role in SA in both the schedules and the
Statement of Financial Affairs attached to his Chapter 7
petition, we need not consider the bankruptcy court’s finding
that Porobil also made a false oath in violation of 11 U.S.C.
§ 727(a)(4)(A) by failing to include information relating to fees
from the settlement of the Fenasci case.

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