Court Opinion

ID: 51449
Source: CourtListenerOpinion
Date Created: 2010-04-26 01:05:37+00
Date Added: 2024-06-11T09:03:22.963295
License: Public Domain

[DO NOT PUBLISH]

             IN THE UNITED STATES COURT OF APPEALS
                                                                 FILED
                     FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
                       ________________________ ELEVENTH CIRCUIT
                                                             FEB 23, 2007
                              No. 06-14998                 THOMAS K. KAHN
                          Non-Argument Calendar                CLERK
                        ________________________

               D. C. Docket No. 06-00526-CV-ORL-31-DAB
                          BKCY No. 04-11013-BK-KSJ

In Re: WALLACE M. RUDOLPH,

                                               Debtor,
________________________________________________

JOHN M. KEEFE,

                                                      Plaintiff-Appellant,

                                   versus

WALLACE M. RUDOLPH,

                                                      Defendant-Appellee,

KENNETH C. MEEKER,

                                                      Trustee.
                        ________________________

                 Appeal from the United States District Court
                     for the Middle District of Florida
                      _________________________

                            (February 23, 2007)
Before DUBINA, BLACK and MARCUS, Circuit Judges.

PER CURIAM:

      Appellant John M. Keefe, an attorney proceeding pro se, appeals the district

court’s order affirming the bankruptcy court’s judgment denying his claim that the

debt owed by his former client, Wallace M. Rudolph, was non-dischargeable.

      “In reviewing bankruptcy court judgments, a district court functions as an

appellate court.” In re JLJ Inc., 988 F.2d 1112, 1116 (11th Cir. 1993). It reviews

the bankruptcy court's legal conclusions de novo, but must accept the bankruptcy

court's factual findings unless they are clearly erroneous. Id. In turn, we

independently examine the bankruptcy court's factual findings for clear error and

review de novo the legal determinations of both the bankruptcy and district courts.

Id. Neither we nor the district court may make independent factual findings. Id.

“If the bankruptcy court is silent or ambiguous as to an outcome determinative

factual question, the case must be remanded to the bankruptcy court for the

necessary factual findings.” Id. We review a bankruptcy court's consideration of a

summary judgment motion de novo. In re Optical Technologies, Inc., 246 F.3d

1332, 1334-35 (11th Cir. 2001). We review a district court’s denial of a motion to

compel discovery for an abuse of discretion. Holloman v. Mail-Well Corp., 443

F.3d 832, 837 (11th Cir. 2006). Issues not raised clearly on appeal are abandoned.

                                          2
In re Securities Group 1980, 74 F.3d 1103, 1114 (11th Cir. 1996). Pro se

pleadings are construed liberally. See In re Wrenn, 791 F.2d 1542, 1543 (11th Cir.

1986).

         An individual debtor's pre-bankruptcy debts are generally dischargeable in a

Chapter 7 bankruptcy case. 11 U.S.C. § 727(a), (b). “Moreover, courts generally

construe the statutory exceptions to discharge in bankruptcy ‘liberally in favor of

the debtor,’ and recognize that ‘[t]he reasons for denying a discharge . . . must be

real and substantial, not merely technical and conjectural.’” In re Miller, 39 F.3d

301, 304 (11th Cir. 1994) (quoting In re Tully, 818 F.2d 106, 110 (1st Cir. 1987)).

         At trial, the party objecting to a discharge has the burden of proving
         the objection. But once that party meets the initial burden by
         producing evidence establishing the basis for his objection, the burden
         shifts to the debtor to explain satisfactorily the loss. Vague and
         indefinite explanations of losses that are based upon estimates
         uncorroborated by documentation are unsatisfactory. To be
         satisfactory, an explanation must convince the judge. The question of
         whether a debtor satisfactorily explains a loss of assets is a question of
         fact.

In re Chalik, 748 F.2d 616, 619 (11th Cir. 1984) (citations and internal quotation

omitted).

A. 11 U.S.C. § 523(a)(2)(A)

         Keefe argues that Rudolph’s $31,250 debt to him was non-dischargeable

under 11 U.S.C. § 523(a)(2)(A). Keefe contends that Rudolph was able to pay

                                             3
Keefe for his legal services at the time of their fee agreement. Further, Rudolph

repudiated the fee agreement without notice to Keefe after receiving legal services.

Keefe argues that Rudolph made material misrepresentations to Keefe about

payment but only intended to pay Keefe $4,000 to $5,000. Moreover, Rudolph did

not inform Keefe of this intent until he sent him a release in September 2001 for

$4,000. Keefe argues that the bankruptcy court clearly erred because its factual

findings are silent as to whether this evidence establishes Rudolph’s intent to

defraud Keefe. Keefe finally argues that he relied on his relationship with Rudolph

and incurred a loss; therefore, Rudolph’s debt was non-dischargeable.

      For a debt to be excepted from discharge based on fraud, under 11 U.S.C.

§ 523(a)(2)(A), the creditor must show, by a preponderance of the evidence, that: “

  (1) the debtor made a false representation with the purpose and intention of

deceiving the creditor; (2) the creditor relied on the representation; (3) the

creditor’s reliance was reasonably founded; and (4) the creditor sustained a loss as

a result of the representation.” In re Villa, 261 F.3d 1148, 1150 (11th Cir. 2001).

      After reviewing the record, we conclude that the bankruptcy and district

courts did not err in determining that Keefe failed to carry his burden in showing

that Rudolph’s debt was non-dischargeable under § 523(a)(2)(A). Keefe cannot

show that Rudolph made a false representation with the purpose and intention of

                                           4
deceiving him. Rudolph regularly paid Keefe for his services beginning in 1997

and had paid him approximately $19,000 during the course of their relationship.

When Rudolph asked that Keefe take steps to protect promissory notes issued by

Empirical Research Systems, Inc., (“ERSI”), he only intended to spend

approximately $5,000. When Rudolph realized that his legal bills had grown to

nearly $28,000, he tried to settle the bills for $4,000. Rudolph’s earlier payments

of his legal bills do not constitute false representations to Keefe, but rather timely

payment for Keefe’s earlier litigation services. Further, Rudolph’s stated intention

to pay only a certain amount for the ERSI promissory notes litigation does not

show that he intended to deceive Keefe into performing legal services without

payment. Rather, such statements reflect what Rudolph believed to be a fair price

for such services. Keefe admitted that his relationship with Rudolph was largely

informal and that Randolph incurred most of the legal fees before the September 3,

2001, fee agreement. Keefe points to no evidence in the record showing that

Rudolph made a false representation, or that Rudolph acted with the intent to

deceive him.

B. 11 U.S.C. §§ 727(a)(2)(A), (a)(3)

      Keefe also argues that a preponderance of the evidence showed that the

bankruptcy court should have denied the discharge of Rudolph’s debts under 11

                                           5
U.S.C. § 727(a)(2)(A), (a)(3). Keefe claims that the bankruptcy court’s findings of

fact concerning Rudolph’s wife’s income were insufficient. Further, because

Rudolph had an extensive educational and business background, his inability to

produce records of his business transactions bars discharge under 11 U.S.C.

§ 727(a)(3). Keefe claims that the bankruptcy court clearly erred by failing to

determine whether $26,700 that Rudolph’s wife deposited in a Wachovia account

was her income, which was required to be disclosed. Keefe argues that by failing

to disclose evidence of the University of Orlando settlement in the bankruptcy

schedules, and by hiding the information from the trustee and creditors, Rudolph

knowingly concealed the property with the intent to defraud Keefe under

§ 727(a)(2).

      A bankruptcy court will grant a debtor a discharge of a debt unless the

debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve

any recorded information, including books, documents, records, and papers, from

which the debtor's financial condition or business transactions might be

ascertained, unless such act or failure to act was justified under all of the

circumstances of the case. 11 U.S.C. § 727(a)(3).

      As an initial matter, we will not consider Keefe’s claim under § 727(a)(2)(A)

because he failed to challenge the bankruptcy court and district court’s refusal to

                                            6
consider that claim. The bankruptcy court did not consider Keefe’s § 727(a)(2)(A)

claim because he did not plead it in his complaint. The district court did not appear

to consider the claim as well. Although we construe pro se pleadings liberally,

because Keefe is an attorney and fails to address directly the bankruptcy and

district courts’s rulings on the § 727(a)(2)(A) claim, we deem this claim

abandoned.

      The bankruptcy and district courts did not err in finding that Keefe failed to

show that Rudolph concealed or failed to preserve records of his financial

condition. Rudolph admitted his original petition for bankruptcy was not perfect.

Rudolph amended the petition several times to reflect that (1) his suit against ERSI

for the promissory notes was dormant; (2) he had received a distribution from the

partnership; (3) he traded his defective Honda CRV for a Honda Odyssey; and (4)

he disclosed the value of his TIAA-CREF pension accounts. Although Rudolph’s

documents were often filed late, he ultimately provided the requested and required

documents, including the settlement agreement with the University of Orlando.

Rudolph failed to provide documentation showing his $900 in income derived

from his wife’s LSAT business in 2005, but the bankruptcy court did not clearly

err by finding that this income was adequately explained and de minimis in nature.

                                          7
Rudolph reasonably explained that he earned this relatively small amount of

money working as a consultant for his wife’s business. Finally, no part of the

petition required Rudolph to list his wife’s Wachovia deposits. Keefe fails to point

to any evidence in the record establishing that Rudolph concealed, destroyed,

mutilated, falsified, or failed to keep or preserve any recorded information.

C. 11 U.S.C. § 727(a)(4)

      Keefe also claims that the bankruptcy court erred by denying his request for

discharge under § 727(a)(4). Keefe claims that Rudolph knowingly and

fraudulently made a false account by omitting the ERSI notes from his petition.

Keefe points out that Rudolph also omitted (1) payments to Wells Fargo; (2) a

down payment on a new vehicle; (3) his $6,750 partnership distribution; (3) six

active credit cards; and (4) his settlement of his debt to William O’Grady.

      Courts will not grant a discharge if the debtor knowingly and fraudulently,

in connection with the case, made a false oath or account. § 727(a)(4)(A). “To

justify denial of discharge under § 727(a)(4)(A), the false oath must be fraudulent

and material.” Swicegood v. Ginn, 924 F.2d 230, 232 (11th Cir. 1991).

“Deliberate omissions by the debtor may also result in the denial of a discharge.”

Chalik, 748 F.2d at 618. False oaths regarding worthless assets can still bar

                                          8
discharge of debts. Id. Discharge may not be denied where the untruth was the

result of mistake or inadvertence. In re Cutignola, 87 B.R. 702, 706 (Bankr. M.D.

Fla. 1988). “Rather, the false oath must be made intentionally with regard to a

matter material to the case.” Id.

      The debtor in In re Wines, 997 F.2d 852, 856-857 (11th Cir. 1993), listed a

loan that he made to a third party on his bankruptcy petition as being worth

$12,000. A creditor challenging the discharge argued that the debtor undervalued

the loan on the application and provided evidence to show that the loan was really

for $381,450. Id. The debtor corrected the scheduled amount of the loan and

explained the discrepancy. Id. at 857. We affirmed the bankruptcy court’s

holding that the undervaluation was not a false oath. Id. In Cutignola, a

bankruptcy court found that the debtor falsely omitted a checking account because

it had a zero balance. 87 B.R. at 704, 706. The bankruptcy court denied the

discharge based on this and several other significant omissions and false statements

regarding undisclosed loans of $29,043, and $36,800 held in trust for the debtors

by a parent. Id. at 705, 706.

      After reviewing the record, we conclude that the bankruptcy and district

courts did not err in determining that Keefe failed to show that Rudolph knowingly

                                          9
and fraudulently made a false oath or account. Rudolph made several significant

omissions in his petition. Rudolph should have listed his interest in the ERSI notes

in the petition because their lack of value was immaterial.

      Keefe fails, however, to show that any of these omissions were fraudulent.

Rudolph amended his petition to reflect several of these debts. Rudolph also

provided explanations for, or admitted a lack of knowledge of, several of these

omissions. Additionally, Keefe does not show that the bankruptcy court clearly

erred by determining that Rudolph was a credible witness. Rudolph should have

listed the credit cards with zero balances, but unlike the debtors in Cutignola, there

is no other evidence that Rudolph concealed assets. Like the debtor in Wines,

Rudolph made several significant omissions in his bankruptcy forms, but he

provided explanations and amended his petition to remedy most of them. The

record lacks any evidence that Rudolph acted fraudulently in omitting information

from his petition; therefore, the bankruptcy court did not err in discharging his

debts under § 727(a)(4)(A).

D. Conversion to a Chapter 13 Proceeding and Various Motions

      Keefe argues that Rudolph’s case should be converted into a Chapter 13

proceeding. Keefe also claims that his motions for summary judgment and to

                                          10
compel discovery should have been granted.

       A bankruptcy court may not convert a case under Chapter 7 to a case under

Chapter 13 unless the debtor requests such a conversion. 11 U.S.C. § 706(c).

(2004).1

       The record demonstrates that Rudolph never requested that his petition be

converted to a Chapter 13 proceeding, so Keefe’s argument is meritless. Further,

the bankruptcy court did not abuse its discretion when it determined that Keefe had

an ample amount of time to conduct the necessary discovery. Lastly, the

bankruptcy court’s trial made Keefe’s motion for summary judgment moot.

Accordingly, we affirm the district court’s order affirming the bankruptcy court’s

judgment.

       AFFIRMED.

       1
        The current version of 11 U.S.C. § 706(c) allows conversion if the debtor requests or
consents to it. It does not apply to cases filed before April 20, 2005, so it does not apply here.
11 U.S.C. § 706 (2005).

                                                 11