Opinion
No: 99-3885 Section: "J" (5).
May 19, 2000.
Bankruptcy Appeal.
ORDER AND REASONS
Before the Court is the appeal filed by debtor, Lawrence Gerard Meany, proceeding in proper person. In this appeal, debtor/appellant argues that the bankruptcy judge erred in denying the discharge of a $93,000 debt owed to his ex-wife, Linda Forte Meany, plaintiff in the adversary proceeding below, Meany v. Meany, Adversary Proceeding 97-1069.
This case presents the appeal of debtor Lawrence Gerard Meany, defendant in Adversary Proceeding 97-1069, captioned Meany v. Meany, which was consolidated for trial purposes with Adversary Proceeding 97-1070, captioned Burkhart v. Meany. A.P. 97-1070, Rec. Doc. 26.
STANDARD OF REVIEW
In reviewing decisions of bankruptcy courts, the district court acts as an appellate court and reviews findings of fact under the clearly erroneous standard, and conclusions of law de novo. Matter of Delta Towers, Ltd., 924 F.2d 74, 76 (5th Cir. 1991).
BACKGROUND
The case below from which debtor appeals is an adversary proceeding initiated by creditor Linda Forte Meany when she filed an objection to the discharge of debtor's debt to her. After four days of trial, the bankruptcy court dismissed creditor/plaintiff's claims for non-dischargeability based on 523(a)(6) 727(a)(4), and ordered counsel to file post-trial memoranda on whether the debt was non-dischargeable under 11 U.S.C. § 727, with emphasis on the applicability of the "continuing concealment" doctrine.
On October 14, 1999, in a thorough opinion detailing his findings of fact and conclusions of law, the bankruptcy court found that the debtor/appellant's activities had included behavior which amounted to "continuous concealment" within the meaning of § 727(a)(2)(A), and denied discharge of the debt, and judgment was entered accordingly. After denial of a subsequent motion to alter or amend judgment and motion for new trial, the instant appeal was filed.
The Court has reviewed the record of this matter and finds that the bankruptcy court's findings of fact are not clearly erroneous, and adopts the facts as set forth in the Memorandum Opinion of October 14, 1999 as its own.
ASSIGNMENTS OF ERROR
In the section of his original brief captioned "Issues for Review", debtor/appellant lists 24 items, most of which take issue with factual findings of the bankruptcy court, some of which are prayers for relief addressed to the Bankruptcy Appellate Panel (¶¶ 23 24), and even include mention of an error which debtor acknowledges is harmless (¶ 9). In addition, the body of the brief contains seven headings alleging errors, many of which are not mentioned in (or even foreshadowed by) the listed issues for review.
While the Court acknowledges its prerogative to decline to consider pleadings which are not clear, in deference to appellant's pro se status, it has attempted to distill the legal issues for review. (As above, the Court finds that the bankruptcy court's factual findings are not clearly erroneous.) The legal issues which the Court is able to isolate from appellant's brief are as follows: (1) whether the doctrine of res judicata or collateral estoppel bars plaintiff's adversary proceeding; (2) whether the bankruptcy court erred in applying the "preponderance of the evidence" standard to the issue of continuing concealment; and (3) whether creditor/plaintiff Linda Forte Meany met her burden of proof for demonstrating the applicability of 727(a)(2)(A).
1. Res Judicata
In January 1993, appellant filed for bankruptcy under chapter 7. Shortly afterwards, in March 1993, appellee filed an objection to discharge, which was docketed as an adversary proceeding related to debtor's bankruptcy. In July 1993, debtor voluntarily dismissed the bankruptcy. Subsequently, on April 18, 1994, the adversary proceeding was dismissed for failure to prosecute.
Bankruptcy No. 93-10063.
Adversary Proceeding No. 93-1068.
In the instant appeal, debtor makes the argument for the first time that the April 1994 dismissal of appellee's adversary proceeding was a decision on the merits, which barred plaintiff/appellee from filing her objection to discharge/adversary proceeding in his second bankruptcy, under the doctrine of res judicata.
Appellant's Brief on the Merits, 18 et seq.; id. at 28 et seq.
However, it is hornbook law that res judicata is an affirmative defense which must be pled by a defendant in the trial court, and may not be considered for the first time on appeal. Fed.R.Civ.P 8(c); Exxon Corp. v. Texas Motor Exchange of Houston, 628 F.2d 500, 507 n. 3. Accordingly, because appellant did not raise the defense until the appellate stage of these proceedings, the Court will not consider it.
While narrow exceptions exist which would allow the Court to raise res judicata sua sponte on appeal, they have no application here. SeeCarbonell v. Louisiana Dept. of Health and Human Resources, 772 F.2d 185 (5th Cir. 1985).
2. Burden of proof
In ruling in favor of creditor/plaintiff on her objection to discharge, the bankruptcy court found that she had proved the elements of 727(a)(2)(a) by a preponderance of the evidence. Appellant alleges that plaintiff is required to prove the elements of a 727(a)(2)(a) exception by clear and convincing evidence, and that the bankruptcy court erred in holding her to a preponderance of the evidence standard.
Appellant's Brief on the Merits, 31; 40 et seq.
Appellant's argument on this point is misguided. It is well-established that the burden of proof on objections to discharge is preponderance of the evidence. In re Beaubouef, 966 F.2d 174 (5th Cir. 1992). In fact, the Supreme Court has recognized that the preponderance of the evidence standard (rather than a heightened "clear and convincing" standard) applies to non-dischargeability even when the basis for the objection to discharge is the fraud of the debtor. Grogan v. Garner, 498 U.S. 279, 287, 111 S.Ct. 654, 660 (1991). Accordingly, this assignment of error is without merit.
3. Alleged failure of plaintiff/appellee to meet burden of proof
Finally, while maintaining that the bankruptcy court erred in applying the preponderance of the evidence standard, appellant argues that even under the preponderance standard, creditor/plaintiff has not met her burden of proof with respect to the elements required for the application of 727(a)(2)(A).
Appellant's Brief on the Merits, 41 et seq.
With respect to objections to discharge, § 727(a)(2)(A) provides:
(a) The court shall grant the debtor a discharge, unless —
(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 —
(A) property of the debtor, within one year before the date of the filing of the petition.
Thus, for an objection to discharge to be sustained under this provision, a creditor must prove by a preponderance of the evidence (1) a transfer of property; (2) belonging to the debtor; (3) within one year before the filing of the petition; and (4) with the intent to hinder, delay, or defraud a creditor or officer of the estate. In re Chastant, 873 F.2d 89, 90 (5th Cir. 1989).
The bankruptcy court, having conducted a lengthy trial and having reviewed all of the evidence, and having had the opportunity to observe the demeanor of the witnesses, determined that "[biased on the totality of the circumstances, [it was] convinced that the debtor's transfer of his [50 shares of stock of Esprit Shipping/Louisiana] on August 12, 1992 was a sham, and that the debtor has been concealing his continued ownership interest in Esprit Shipping/Louisiana and the corporate successors to Esprit Shipping Louisiana." Rec. Doc. 204, 10/14/99 Memorandum Opinion, 18-19. In so holding, the bankruptcy court found applicable the "continuing concealment" doctrine discussed in In re Olivier, which requires denial of a discharge even when the complained of transfer took place beyond the one year look-back period of 727(a)(2), when "the concealment of an interest in an asset that continues, with the requisite intent, into the year before bankruptcy" and is therefore "within the reach of section 727(a)(2)(A)." 819 F.2d 550, 555 (5th Cir. 1987).
As previously stated, this Court adopts the bankruptcy court's finding of facts, and further finds that In re Olivier is applicable to the facts presented, and that the bankruptcy court was correct in its finding of a continuing concealment warranting non-dischargeability, and in its finding that despite Ms. Meany's knowledge of the transfer, the debtor concealed his beneficial ownership interest in Esprit Shipping/Louisiana. It is beyond dispute that the sale of the stock was a transfer of property of the debtor; and the Court adopts the bankruptcy court's finding that "the sole purpose of filing this bankruptcy case was to wipe out the debt of Linda Meany." Rec. Doc. 204, 10/14/99 Memorandum Opinion, 18-19. Thus, having reviewed the record, the memoranda of counsel, and applicable law, the Court finds that the bankruptcy court's finding that the creditor/plaintiff has proven by a preponderance of evidence the elements required for the application of 727(a)(2)(A) is not clearly erroneous, but is supported by the facts and law. Accordingly;
IT IS ORDERED that the bankruptcy court's Judgment of October 14, 1999 should be and is hereby AFFIRMED.