Opinion
Case No. 2:22-bk-51185
2023-07-20
IN RE: Leo NEAL Jr., Debtor.
Matthew J. Thompson, Nobile & Thompson Co., L.P.A., Reynoldsburg, OH, for Debtor.
Matthew J. Thompson, Nobile & Thompson Co., L.P.A., Reynoldsburg, OH, for Debtor. OPINION AND ORDER SUSTAINING OBJECTION OF CREDITOR 4030 WEST BROAD , INC. TO CONFIRMATION OF DEBTOR'S AMENDED CHAPTER 13 REPAYMENT PLAN (DOC. # 193) C. Kathryn Preston, United States Bankruptcy Judge
This matter came before the Court on April 20, 2023 for an evidentiary hearing (the "Hearing") on the Objection of Creditor 4030 West Broad, Inc. to Confirmation of Debtor's Amended Chapter 13 Repayment Plan (Doc. # 193) (the "Objection"). The creditor 4030 West Broad Inc. ("4030") objected to the Debtor Leo Neal Jr.'s ("the Debtor") [Sixth Amended] Chapter 13 Plan (Doc. # 178) (the "Plan") on the basis of bad faith of the Debtor. Present at the hearing was the Debtor (appearing pro se), Gregory Wetzel (attorney for 4030), Michael Hrabcak (attorney for 4030), and David Powell (attorney for the Chapter 13 Trustee Edward Bailey).
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and the Amended General Order 05-02 entered by the United States District Court for the Southern District of Ohio, referring all bankruptcy matters to this Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2). I. Findings of Fact
For the sake of brevity, the Court will not recount all of the Debtor's state court actions and the numerous appeals and motions that followed. The Court will summarize only the state court proceedings between the Debtor and 4030, as well as the bankruptcy court proceedings involving the two parties.
The Debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code on April 27, 2022, seeking a discharge of various debts. His debts include Claim # 2 filed by 4030 (the "Claim"), based on a judgment obtained by 4030 in the Franklin County Municipal Court (the "State Court"). Neal v. 4030 West Broad Inc., No. 2016 CVF 19268 (Franklin Cnty. Mun. Ct. filed June 27, 2016) (the "State Court Case"). The Debtor had sued 4030 for breach of contract. 4030 filed a counterclaim for breach of contract. The State Court granted judgment to 4030. 4030 Ex. 4 (State Court Case, Decision and Entry [on damages hearing] (Apr. 5, 2018)).
The Debtor failed to appear at the State Court damages hearing, but he nonetheless subsequently filed several motions to vacate the award and appeals to overturn the decision. The Debtor variously claimed the damages hearing was an ex parte trial on account of his nonappearance, that the State Court had erred in its application of the law, that 4030 had fraudulently misrepresented facts of the case, and that 4030 had been in default in the original trial. 4030 Ex. 8 (Motion to Vacate Judgment and Set Jury Trial Per Civ. R 60(b), State Court Case (Mar. 28, 2019) ("Motion to Vacate")). In all, the Debtor filed four post-judgment motions, six appeals, and one petition for certiorari with the Supreme Court of Ohio. In each instance, the respective court denied the Debtor's request for relief.
In the current bankruptcy case, creditors have filed nine claims, eight of which have drawn objections by the Debtor. The Debtor has filed five objections and amended objections to the Claim of 4030.
In its Objection, 4030 alleges that bad faith on the Debtor's part should preclude him from utilizing the bankruptcy process to obtain Chapter 13 relief or a discharge. 4030, therefore, seeks dismissal of this Chapter 13 case.
II. The Hearing, Including the Debtor's Refusal to Testify
At the Hearing, shortly after appearances were entered, the Debtor claimed that he had not been served copies of 4030's proposed exhibits as ordered by the Court. The Debtor has previously claimed on multiple occasions that he regularly does not receive mail sent to him at his residence. As he said at an early hearing in this case, this has been a problem for some time. Confirmation Hearing at 2:22, November 10, 2022. In light of this problem, at the pretrial hearing on the Objection held on March 16, 2023, the Court suggested that 4030 consider hand delivery of its exhibits to the Debtor. 4030 complied. After delivering the exhibits to the Debtor's doorstep, the courier photographed the box containing the documents and signed an affidavit swearing that he had delivered the exhibits to the Debtor's residence. 4030's counsel submitted both the affidavit and the photograph of the box at the Hearing. The Debtor nevertheless claimed that he found only an empty box in his front yard and did not receive the exhibits.
The Court reminded the Debtor that he had previously been advised by the Court on multiple occasions that it was his responsibility to secure a reliable mailing address at which the Debtor would receive his mail. The Court pointed out that despite being so advised and being presented with alternatives to regular mail service at his home (such as a post office box, a friend or family's home address, or a private mail acceptance point such as UPS), the Debtor failed to obtain another mailing address. He had also declined to accept the exhibits from 4030 via email. The Court concluded that the Debtor has been actively evading 4030's attempts to serve him and participate in efficient litigation of issues.
After opening statements concluded, 4030 began its presentation of evidence by calling the Debtor as a witness. The Debtor refused to take the stand. The Court warned the Debtor several times that he had no right to refuse to testify on the grounds that he asserted, and that if he continued to do so, he would possibly face adverse consequences. However, the Debtor did not yield. At that point, 4030 moved the Court to hold the Debtor in contempt and impose sanctions in the form of precluding him from participating in the Hearing. After the debtor refused several opportunities to take the witness stand, the Court found him in contempt and imposed the requested sanction.
The Debtor first asserted that as he had not been subpoenaed, he could not be called to testify. The Court informed the Debtor that a subpoena is not necessary to call a person already present at a hearing, and that he had no right to refuse to testify at his own bankruptcy hearing. The Debtor then asserted that he would not take the stand without first having seen 4030's exhibits.
4030 proceeded with its presentation of evidence, presenting Exhibits 1-93, all of which were certified copies of court documents from various state court proceedings involving the Debtor, as well as documents from the Debtor's current and previous bankruptcy cases. 4030 argued that the exhibits illustrated bad faith by the Debtor and asked that the Court take judicial notice of the documents. The Court did so and admitted all of the documents into evidence.
4030 urges that the evidence demonstrates that the Debtor is abusing the bankruptcy process to relitigate matters that were resolved in state court, is evading service, and is engaging in frivolous conduct to harass his creditors and cause them undue delay and cost. 4030 called for the dismissal of the Debtor's bankruptcy case.
III. Analysis
a. Criteria for Confirmation of a Chapter 13 Plan
The criteria for confirmation of a Chapter 13 plan are set forth in 11 U.S.C. § 1325 (a)(b). 4030 alleges that the Debtor has failed to meet the requirements for good faith set forth in 11 U.S.C. § 1325(a)(3) and (7). Section 1325(a)(3) requires that: "the plan has been proposed in good faith and not by any means forbidden by law." (Emphasis added). Section 1325(a)(7) further requires that "the action of the Debtor in filing the petition was in good faith." (Emphasis added). As these are the only grounds on which 4030 bases its Objection, the Court will analyze only the eligibility of the Debtor's Plan for confirmation in light of these two provisions.
The Sixth Circuit Court of Appeals elaborated on the good faith requirements of § 1325(a) in Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123 (6th Cir. 1990) in the form of a suggested twelve-factor test to assess good faith. The factors that the Sixth Circuit articulated are:
(1) the amount of the proposed payments and the amount of the debtor's surplus;
(2) the debtor's employment history, ability to earn and likelihood of future increase in income;
(3) the probable or expected duration of the plan;
(4) the accuracy of the debtor's statements of the debts, expenses and percentage repayment of unsecured debt and whether any inaccuracies are an attempt to mislead the court;
(5) the extent of preferential treatment between classes of creditors;
(6) the extent to which secured claims are modified;
(7) the type of debt sought to be discharged and whether any such debt is nondischargeable in Chapter 7;
(8) the existence of special circumstances such as inordinate medical expenses;
(9) the frequency with which the debtor has sought relief under the Bankruptcy Reform Act;
(10) the motivation and sincerity of the debtor in seeking Chapter 13 relief;
(11) the burden which the plan's administration would place upon the trustee; and,
(12) whether the debtor is attempting to abuse the spirit of the Bankruptcy Code.
Caldwell, 895 F.2d 1123, 1126-1127. See also Metro Employees Credit Union v. Okoreeh-Baah (In re Okoreeh-Baah), 836 F.2d 1030, 1032 n. 3 (6th Cir. 1988).
Notwithstanding the thorough list of factors articulated by the Sixth Circuit, that court emphasized in both Caldwell and Okoreeh-Baah that the bankruptcy courts must look to the totality of the circumstances in determining a debtor's good faith in filing a Chapter 13 petition and plan. The Sixth Circuit's totality-of-circumstances test is not a matter of assigning equal weight to each factor and determining whether the balance of the factors weighs in favor of good faith or bad faith. Rather, it is a subjective analysis of the debtor's conduct and intentions when taking all relevant factors into consideration. Okoreeh-Baah at 1032-34. Thus, the Court is not constrained by these listed factors, but rather may also consider other information relevant to the assessment of the Debtor's good faith. The Debtor's pre-petition conduct is relevant as well as conduct in the instant bankruptcy case. Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427, 432 (6th Cir. 1982).
b. Factors Weighing in the Debtor's Favor
The Court would be remiss if it did not acknowledge that some of the Sixth Circuit factors for testing the Debtor's good faith weigh in Debtor's favor: The Debtor has proposed a Plan that provides for a dividend to unsecured creditors of 100%. See Plan (Doc. # 178). The latest version of the Plan provides for monthly payments for the maximum period of 60 months; the Debtor proposes monthly Plan payments of $3,015 for nine months and $5,210 for 51 months. Based on the Debtor's Schedules outlining his assets and income, the Court does not doubt the Debtor's ability repay his creditors. The Debtor has not shown any preferential treatment between classes of creditors. The Plan does not appear to propose to modify any secured claims. There is no indication that the Debtor is seeking to discharge any nondischargeable debt. This case is just the second attempt by the Debtor to reorganize his financial affairs; he filed his first Chapter 13 case without benefit of counsel and the Court dismissed the case for his failure to file required documents. The Court does not see the administration of this Plan placing an undue burden on the Trustee.
Although the Debtor had counsel at the commencement of this case, the Debtor has since dismissed his attorney.
A common theme among the factors which support the Debtor's good faith is the viability of the Plan. If the Court were to consider just these factors, the Debtor's bankruptcy could have worked. However, it is the Debtor's conscious failure to meet the other factors presented by Caldwell which gives the Court pause. These factors relate to honesty, sincerity, and respect for the bankruptcy process.
c. The Debtor's Insincere Motivations and Apparent Attempts to Abuse the Spirit of the Bankruptcy Code
As mentioned above, two of the factors in the Caldwell analysis are the motivation and sincerity of the Debtor in seeking Chapter 13 relief, and whether the Debtor is attempting to abuse the spirit of the Bankruptcy Code. While these are two distinct factors, the same conduct by the Debtor pertains to both of these factors. The Court finds that throughout his bankruptcy case, the Debtor has sought to abuse the spirit of the bankruptcy process to relitigate state court decisions and to harass and delay his creditors. The Debtor brought repetitive objections to the claims of his creditors without citing any novel legal theories supporting his objections. The Debtor has used the bankruptcy process in a years-long campaign to stiff-arm and delay his creditors through these legally questionable objections. The Debtor has willfully flouted court orders and provisions set forth in the Bankruptcy Code and Rules in a pattern of behavior that spans from previous state court cases to his current bankruptcy case. The Debtor has evaded his creditors' efforts to serve him in an apparent attempt to interpose delay. The Debtor has used his alleged nonreceipt of documents as an excuse for his refusal to testify, thus impeding (or attempting to impede) an orderly resolution of the filings before the Court.
1. The Debtor's Apparent Attempt to use Bankruptcy Proceedings to Relitigate Matters Decided in State Court
In the State Court Case, the Debtor filed four post-judgment motions for relief from the State Court judgment, six appeals (with multiple post-decision motions for reconsideration), and one petition for certiorari to the Supreme Court of Ohio. None were successful. These motions and appeals sprung out of just the State Court Case, to say nothing of the Debtor's other state court proceedings. The Debtor repeatedly presented arguments which the state courts found to lack merit. It was this conduct, in part, which led to the Montgomery County Court of Common Pleas to declare the Debtor a vexatious litigator in the case of Lilly v. Neal, No. 2019 CV 3620 (Montgomery Cnty. Ct. Com. Pl. Aug. 7, 2019) (the "Vexatious Litigator Case"). 4030 Ex. 61 (Vexatious Litigator Case, Order and Entry Declaring Leo Neal, Jr. a Vexatious Litigator (May 7, 2021) ("Vexatious Litigator Judgment")).
As this decision addresses three separate matters, the full title of the order is lengthy. The other matters decided by the Montgomery County court are not relevant to this decision, so this Court just refers to the relevant part of the title here.
The Debtor, having exhausted all his post judgment motions and appeals in the Ohio state court system, and being barred from instituting new legal proceedings by virtue of his status as a vexatious litigator, appears to have filed his petition for bankruptcy under the belief that doing so would provide him yet another opportunity to litigate the claims against him. The Debtor has filed objections to eight of the nine claims submitted in this case. Many of the Debtor's objections raise the same theories that various state courts have rejected in past years. The Debtor has been warned by this Court that his objections to claims may be barred by the principle of res judicata, and that he should proceed cautiously in light of the mandates of Fed. R. Bankr. P. 9011. Nevertheless, the Debtor has continued to ply objections which present arguments already found without merit by the various state courts.
The Court can infer from the history outlined above that the Debtor's motivations in seeking relief under Chapter 13 are insincere, and that he has sought to abuse the spirit of the Bankruptcy Code in an apparent attempt to evade and overturn valid and affirmed state court judgments.
2. The Debtor's Apparent Attempt to use Frivolous Motions to Harass and Impede his Creditors
Throughout his extensive litigation in Ohio state courts and now in his bankruptcy case, the Debtor has frequently used frivolous filings in an apparent attempt to harass and delay his creditors. In the State Court Case, 4030 moved for sanctions against the Debtor on the grounds that he had engaged in frivolous behavior to harass and delay 4030, and that he had refused to serve 4030 with documents as required by Ohio Civ. R. 5(A). 4030 Ex. 1 (Defendant's Motion for Sanctions, State Court Case (Jan. 25, 2017)). The State Court granted 4030's motion for sanctions. See 4030 Ex. 2 (State Court Case, Decision and Entry [on 4030's motion for sanctions] (Mar. 13, 2017)). The State Court later noted that the Debtor typically failed to properly serve 4030 despite repeated admonitions by that court. 4030 Ex. 3 (State Court Case, Decision and Entry [on the Debtor's motion for continuance] (Sept. 21, 2017)).
In the Vexatious Litigator Case, the Montgomery County Court of Common Pleas described the Debtor's motions as frivolous. 4030 Ex. 61 (Vexatious Litigator Judgment). An exhaustive list of the Debtor's frivolous claims and objections can be found in the Vexatious Litigator Judgment. The Montgomery County court and the Ohio Court of Appeals have both found a lack of legal bases in the Debtor's filings. 4030 Ex. 61 (Vexatious Litigator Judgment). See generally 4030 Ex. 48 (4030 W. Broad, Inc. v. Leo Neal, Jr., No. 20-AP-31, Decision, 2021 WL 4786623 (Ohio App. Ct. Oct. 14, 2021).
The Debtor also pursued meritless endeavors to disqualify judges who found his arguments unpersuasive. The first attempt occurred in 2020, when the Debtor moved to disqualify the Hon. Judge Nelson of the Ohio Court of Appeals. The Debtor posited that Judge Nelson was biased against the Debtor, alleging that the judge was related to an attorney for 4030 with whom Judge Nelson shared a last name. The Supreme Court of Ohio denied the request for disqualification. 4030 Ex. 44 (In re Disqualification of Hon. Frederick Nelson, No. 20-AP-064 Judgment Entry and Decision (Ohio Sup. Ct. Aug. 20, 2020)) In 2021, the Debtor attempted to disqualify the Hon. Judge Wiseman of the Montgomery County Court of Common Pleas. The Supreme Court of Ohio again found request for disqualification without merit. See 4030 Ex. 61 (Vexatious Litigator Judgment).
The Debtor moved to disqualify Judge Wiseman on at least one other occasion. After the Supreme Court of Ohio denied the first request for disqualification discussed above, the Montgomery County court overruled the Debtor's subsequent Motion to Disqualify Judge Wiseman and Montgomery County Common Pleas Court in Comity as the Debtor failed to file an additional affidavit of disqualification with the Supreme Court of Ohio. See 4030 Ex. 61 (Vexatious Litigator Judgment).
The discussion above provides an abridged history of the Debtor's egregious conduct in state court. In his bankruptcy case, the Debtor continued his harassment of his creditors by many familiar means. As noted above, the Debtor has filed objections to eight of the nine proofs of claim filed in this case. The Debtor also repeated many of the arguments already found without merit in various state courts. In light of the fact that the Debtor is disputing all but one claim, most of which have been the subject of hotly contested litigation or state administrative procedures, it is apparent that the Debtor's motivation is to relitigate these claims.
These repetitive and frivolous filings are not without effect. The Debtor's actions have cost his creditors time and money. Through his vexatious conduct, the Debtor appears to be waging a war of attrition on his creditors. 4030 noted in its closing statement that the Debtor's schedules suggest he has sufficient funds to pay all his creditors in full, and while he has proposed in his Plan to pay all claims in full, the Debtor has also challenged eight of the nine creditors' claims. While the Debtor claims to seek a discharge, it appears he is attempting to outlast his creditors by battering them with endless litigation.
This conduct earned the Debtor the title of vexatious litigator in state court. After being labelled as such (discussed below), the Debtor appears to have sought fresh opportunities to harass and impede his creditors through declaring bankruptcy. This conduct is abusive of the Bankruptcy Code and warrants a finding of bad faith.
d. Other Considerations Pertinent to Assessment of Good Faith
1. The Debtor's Status as a Vexatious Litigator, and his Defiance of an Order Requiring him to Seek Leave Regarding Litigation
In 2021, the Montgomery County court declared the Debtor a vexatious litigator. 4030 Ex. 61 (Vexatious Litigator Judgment). The Debtor's status as a vexatious litigator does not in itself support a finding of bad faith in the present case. However, the Debtor's actions in defiance of the order provide early examples of the Debtor's pattern of disregarding court orders and procedures, a pattern which has continued into his bankruptcy case.
The primary consequence of the Montgomery County court's order is that, as a vexatious litigator, the Debtor is required to seek leave of that court before "instituting legal proceedings in the court of claims or in a court of common pleas, municipal court, or county court" or "continuing legal proceedings that the Debtor had instituted in any of the abovementioned courts." The duration of this mandate is indefinite. This, however, does not appear to have deterred the Debtor, who filed a demand for a hearing to determine his right to a homestead exemption in the Franklin County Court of Common Pleas in 2022, in continuation of his legal disputes with 4030. The Franklin County court dismissed his action, as he had initiated the proceedings without leave of the Montgomery County court. 4030 Ex. 37 (4030 West Broad, Inc. v. Neal, No. 2018 CV 9586, Order to Terminate Case (Franklin Cnty. Ct. Com. Pl. Apr. 28, 2022)).
The full title of the order is lengthy; therefore the Court refers to the part of the title relevant here.
Later in 2022, the Debtor appealed a decision from the Unemployment Compensation Review Commission ("UCRC"), without first obtaining leave of the Montgomery County court. The UCRC found that the Debtor had received $12,225 in pandemic unemployment assistance to which he was not entitled and ordered him to repay the amount to the Ohio Department of Jobs and Family Services ("ODFJS"). See 4030 Ex. 50 (Brief of Appellee, Director, Ohio Department of Job & Family Services, Neal v. Ohio Department of Job & Family Services, No. 2022 CV 5994 (Franklin Cnty. Ct. Com. Pl. Nov. 5, 2022) ("ODJFS Appellate Brief")). The Debtor appealed this decision to the Franklin County Court of Common Pleas, where the court rejected the Debtor's appeal on the grounds that he had been declared a vexatious litigator and had initiated the appeal without leave of court. 4030 Ex. 51 (Neal v. ODJFS, No. 22 CV 5994, Final Judgment Entry Dismissing Case for Failure to Comply with Vexatious Litigator Requirements (Franklin Cnty. Ct. Com. Pl. Dec. 6, 2022)). The Debtor then appealed the Franklin County court's decision to the Ohio Court of Appeals, where his appeal was dismissed because he had again failed to seek leave of the Montgomery County court before filing his appeal. 4030 Ex. 52 (Neal v. ODJFS, No. 22-AP-784, Journal Entry of Dismissal (Ohio App. Ct. Jan. 12, 2023)).
As outlined, the Debtor appears to have a cavalier attitude toward the strictures and requirements in litigation, whether imposed by statute, rule, order of court, or legal doctrines. The Debtor has, throughout many of his proceedings, appeared pro se. As such, some of his failures to comply with litigation parameters may be judged as the results of ignorance of the law, and while ignorance of the law is no excuse for failures to comply with various requirements, it can explain such failures to an extent. Here, the Debtor failed to seek leave of court before initiating three legal proceedings. The first failure to do so may be construed as a failure to comprehend his status as a vexatious litigator. His second and third offenses without leave of court can only be interpreted as willful disregard for the authority of the Montgomery County court and various other courts which refused to hear his claims. These incidents provide another example of where the Debtor has in bad faith ignored rules when they did not suit his aims.
While this digressio on the Debtor's defiance of court orders provides a history of the Debtor's bad faith behavior in state court, it bears relevance to the Debtor's present bankruptcy case as well. Despite being advised on multiple occasions that the Court would not overturn valid state court decisions, the Debtor persisted in his attempts to relitigate claims. At the Hearing, the Debtor refused to testify without articulating a legal basis. As will be discussed later in this analysis, 4030 was compelled to file a motion for sanctions after the Hearing due to the Debtor's refusal to comply with an order directing parties to provide initial disclosures in a contested matter pursuant to an Order of this Court and Fed. R. Civ. P. 26(a).
The Debtor's defiance of rules and orders are not isolated incidents but are part of a pattern of persistent and flagrant disregard for the rules and procedures which bind all litigants. This conclusion weighs in favor of a finding of bad faith, insincere motivations, and an intent to abuse the Bankruptcy Code.
2. The Debtor's Evasion of Service and Making Himself Unavailable.
While the Hearing was the first time the Court found that the Debtor had been evading service, he has a history of making himself unavailable stretching back to his state court proceedings.
In the State Court Case, the Debtor failed to appear at a damages hearing. 4030 Ex. 4 (State Court Case, Decision and Entry [on damages hearing] (Apr. 5, 2018)). The Debtor, in his several attempted appeals of the decision, argued that his failure to attend the hearing meant that the hearing was conducted ex parte. 4030 Ex. 5 (Plaintiff's Motion to set Aside Judgment and to Grant New Trial, State Court Case (Apr. 23, 2018)). See also 4030 Ex. 8 (Motion to Vacate). In its decision on the Debtor's first motion to set aside the judgment, the State Court noted that on the day of the hearing, the court waited an hour for the Debtor to appear. 4030 Ex. 6 (State Court Case, Decision and Entry [on Debtor's motion to set aside judgment and grant new trial] (May 14, 2018)). The Debtor claimed that he had timely requested a continuance of the hearing date; however, the Franklin County court stated that the request was not received until after the hearing. Id.
During the Vexatious Litigator Case, Thomas Lilly recited a pattern of bad faith behavior undertaken by the Debtor in another case, Neal v. Lilly, No. 2017 CV 3306 (Montgomery Cnty. Ct. Com. Pl. filed 2017) (the "Lilly Case"), and in the State Court Case. Among other things, Thomas Lilly pointed to the Debtor's failures to appear for scheduled hearings, status conferences, and depositions in both cases and filing of various meritless objections, motions, and appeals. See 4030 Ex. 61 (Vexatious Litigator Judgment). The Montgomery County court found the Debtor's excuses unavailing and Mr. Lilly's arguments and facts persuasive. The court declared the Debtor a vexatious litigator. 4030 Ex. 61 (Vexatious Litigator Judgment).
While unsuccessful in those earlier cases, the Debtor appears to have developed an approach which he continued to use. Throughout his state court proceedings and this bankruptcy case, the Debtor has sought to make himself unavailable to various courts and opposing parties. The Debtor has often used his supposed unreachability to request extensions in deadlines and to assert an invented privilege that did not require him to participate in proceedings.
From the beginning of his current bankruptcy case, the Debtor has claimed that he does not receive mail sent to his address. This Court has warned the Debtor on numerous occasions that he is responsible for securing a reliable mailing address. Despite these warnings, the Debtor has failed to do so, and has refused service by any other means. When presented with alternatives to delivery through mail, the Debtor obstinately refused to cooperate. For example, when email was suggested, the Debtor claimed that he cannot receive email while on his frequent out-of-state business trips, a representation that this Court finds disingenuous. In connection with the Objection, the Debtor left opposing parties with no option but to hire a personal courier, and then claimed, against proof of delivery and without evidence, that a "transient person" or local worker had interfered with his receipt of the documents. Based on his conduct throughout the case, the Court found that the Debtor had been evading service.
As a result of the Debtor making himself unavailable, his creditors bore numerous delays and had to incur unnecessary legal fees and costs. In restricting the methods in which his creditors could serve him, the Debtor caused his creditors to expend resources pursuing alternative means for serving him. Finally, the Debtor has used his nonreceipt of documents as a contrived basis on which to refuse to testify, denying 4030 the opportunity to examine the Debtor under oath and develop the record.
Considering the Debtor's conscious avoidance and inaccessibility, and the subsequent detriment suffered by his creditors, this Court concludes that the Debtor has abused the spirit of the bankruptcy process to further harass and delay his creditors.
3. The Debtor's Refusal to Testify at the Hearing
As discussed above, the Debtor refused, without legal basis, to testify at the Hearing when called by 4030. The Court draws two points of significance from the Debtor's refusal to testify. First, the unfairness suffered by 4030. It is the right of a party to call the opposing party in a civil case to testify. This right allows a party in a civil proceeding to develop the record and enter into evidence the opposition's testimony. That 4030 wished to call the Debtor to testify and was precluded from doing so by the Debtor's noncompliance amounts to a legal detriment suffered by 4030. Plainly, 4030 had a right to examine the Debtor under oath, and the Debtor interfered with that right when he refused to take the stand. The effect of this was the constriction of 4030's ability to prosecute its case. It is difficult to imagine a functional civil justice system if parties could simply refuse to testify whenever they judged that doing so was not in their interest.
The second point is that the Debtor's refusal to testify indicates to the Court that he does not believe he must comply with the same rules as any other party before the Court. This impression is supplemented by the Debtor's refusal to obey the Court's order to testify. In refusing to testify after being warned he had no right to do so, the Debtor flouted the Court's authority. Above, the Court notes that if parties in a civil suit were able to refuse to testify on a whim, the civil justice system would be rendered impotent. If parties were permitted to disregard court orders without asserting any intelligible legal basis for doing so, the entire civil justice system would be derailed.
The Debtor's refusal to testify is highly relevant to the Caldwell good faith test. The Debtor, in proposing his Plan, has the burden of proving that he is doing so in good faith. Declining to testify before the Court on an objection to his Plan cannot be construed as anything but bad faith on the Debtor's part. In doing so, the Debtor unfairly hampered the ability of 4030 to develop its objection on the record. The Debtor further damaged the credibility of his claim of good faith by showing that he does not feel bound by the Court's authority or the federal rules.
e. The Debtor's Apparent Intention to Mislead the Court
Another factor in the Caldwell test is whether the Debtor is attempting to mislead the Court through inaccuracies in his filings. Hardin v. Caldwell (In re Caldwell), 895 F.2d 1123, 1126 (6th Cir. 1990). In the case of In re Alt, the Sixth Circuit Court of Appeals noted that courts may consider "whether the debtor has been forthcoming with the bankruptcy court and the creditors" when evaluating a debtor's good faith. In re Alt, 305 F.3d 413, 419 (6th Cir. 2002). The evidence illustrates that the Debtor has failed to disclose all secured and unsecured creditors in each of his Chapter 13 cases. There have also been unexplained variations in the Debtor's assets and the values of those assets. These inconsistencies and inaccuracies in the Debtor's schedules and plan are highly relevant to the Caldwell analysis.
There were many variations in the values of Debtor's real and personal property between his schedules filed in his current and previous bankruptcy cases. Virtually none of his many accounts were listed with the same balance between the Debtor's two bankruptcy petitions in January and April of 2022. The Court will not delve into every discrepancy, and instead focus on the most egregious omissions and variations in the Debtor's schedules.
In filing for bankruptcy relief, the Debtor was required to list all his debts, and the creditors to which those debts are owed. That a debtor honestly lists his creditors and assets in his schedules is a basic requirement for receiving a discharge. As mentioned above, one of the factors in the Caldwell test is the accuracy of the schedules regarding debts. Caldwell, 895 F.2d at 1126. As such, a finding that a debtor has attempted to mislead the Court by failing to accurately list such debts weighs against a finding of good faith.
In his schedules, the Debtor omitted creditors and undervalued the claims of several others. Only after the Chapter 13 Trustee ("Trustee") objected to his plan did the Debtor amend his schedules to partially correct his omissions. See Chapter 13 Trustee's Objection to Confirmation of Amended Chap 13 Plan (Doc. # 61). One prong of the Trustee's objection related to the omission of creditors from the Debtor's schedules. The Debtor amended his Schedule D to include the Franklin County Treasurer and Logan County Treasurer as secured creditors. [Amended] Schedule D (Doc. # 67). The Debtor has yet to amend his schedules to include the debt owed to the ODJFS. The Debtor should certainly have been aware of this debt, as he appealed the UCRC decision twice (to no avail). This pattern of behavior, whereby the Debtor has concealed and understated his debts in an apparent attempt to evade or impede his creditors, leads this Court to infer the Debtor's bad faith. See Alt, 305 F.3d at 421. That the Debtor acknowledges some of his debts only after they are discovered by other parties supports this inference.
The Debtor has also failed to accurately list his assets and potential income anticipated throughout his bankruptcy case. These disclosures are of particular importance, as these determine the amount of debt that a debtor must pay through the Chapter 13 Plan, and the amount of a debtor's monthly payments into the Plan. Failure to accurately disclose this information gives rise to questions of bad faith. The Debtor's omissions and undervaluation of assets and income are telling.
In his initial schedules of assets, the Debtor omitted bank accounts with balances of $185,000 and $100,000, $30,000 in I and E bonds, and a car. See Chapter 13 Trustee's Objection to Confirmation (Doc. # 20). It was only after the Trustee objected to confirmation of the Debtor's Plan that the Debtor amended his Schedule A/B to include these assets. See [Amended] Schedule A/B (Doc. # 66). Inclusion of these assets raised the total value of the Debtor's assets by $200,000.
The cumulative effect of the Debtor's deceptions has been the partial concealment of his estate from the eyes of his creditors, the Trustee, and the Court. As stated above, a debtor seeking a discharge must accurately list all assets and all debts in the bankruptcy filings. The Debtor's failure to do so until his omissions and obfuscations were discovered indicates that he is not honestly and sincerely seeking a discharge but is instead attempting to mislead the Court, the Trustee, and his creditors. This conclusion further lends itself to the Court's determination that the Debtor has acted in bad faith.
f. How the Debt(s) Arose
In its analysis of good faith, the Court may consider factors independent of those set forth in Caldwell. In Alt, the Sixth Circuit offered other factors for determining the good faith of the Debtor. Alt, 305 F.3d at 419. Among other factors, the Sixth Circuit Court noted that the manner in which a debt has arisen may be relevant to an analysis of good faith. Id.
The circumstances surrounding the claim of ODJFS reflects poorly on the Debtor: The Debtor received Pandemic Unemployment Benefits in 2020-2022. In March 2021, the state of Ohio notified the Debtor that he needed to prove eligibility for the benefits in the form of proof of pre-pandemic employment or self-employment, or of planned employment or self-employment. The Debtor failed to do so. He submitted illegible documents, incomplete documents and only select parts of his income tax returns. The Debtor had other opportunities to illustrate his eligibility, of which he chose not to avail himself. Unsurprisingly, ODJFS found that he was overpaid benefits in the amount of over $12,225. 4030 Ex. 50 (ODJFS Appellate Brief). There is no evidence before this Court that the Debtor fraudulently applied for the benefits. However, the Debtor's attempt to avoid the findings of the ODJFS, with use of illegible, incomplete, and partial documents certainly indicates that the Debtor was disingenuous in his dealings with ODJFS when his eligibility was questioned.
The Debtor appealed the decision to the UCRC and Franklin County Court of Common Pleas. The UCRC and the court of common pleas affirmed the decision of ODJFS.
As the manner in which a debt arose may be factored into an analysis of good faith, the Court finds that the circumstances surrounding the ODJFS debt contribute to a finding of bad faith.
g. The Debtor's Treatment of Creditors and How the Debtor's Actions Have Affected Creditors
The Sixth Circuit in Alt held that the Court also may consider how the Debt's actions have affected creditors. Alt, 305 F.3d at 419. Another related factor listed by the Sixth Circuit is "the debtor's treatment of creditors both before and after the petition was filed." Id. Although the discussion above on the Debtor's insincerity and abuse of the spirit of the Bankruptcy Code outline several ways in which the Debtor's conduct has affected his creditors, in light of Alt, the Court considers it worthwhile to further address the issue. The foregoing discussion on the Debtor's attempts to relitigate claims, and to harass, delay, and evade his creditors provide various examples of the how the Debtor's actions have negatively impacted his creditors. Some of the Debtor's creditors have been defending their claims against the Debtor's frivolous and harassing behavior for years. The Debtor's evasion of service throughout this case has further delayed and inconvenienced his creditors. The Debtor's refusal to testify at the Hearing created further legal detriment to 4030 by handicapping its ability to examine the Debtor under oath.
The Debtor's treatment of his creditors prior to the filing of his petition is exemplified by the behavior which led the State Court and the Montgomery County court to grant his creditors' motions for sanctions against him. The State Court granted 4030's motion for sanctions based on the Debtor's frivolous conduct, specifically his refusal to serve 4030 with copies of his filings as required by the Ohio Rules of Civil Procedure. 4030 Ex. 1 (Defendant's Motion for Sanctions, State Court Case (Jan. 25, 2017)); 4030 Ex. 2 (State Court Case, Decision and Entry [on 4030's motion for sanctions] (Mar. 13, 2017)). In the later Vexatious Litigator Case, the Montgomery County court found that the Debtor had submitted "numerous unwarranted and frivolous filings" in the State Court Case, the Lilly Case, and the Vexatious Litigator Case. 4030 Ex. 61 (Vexatious Litigator Judgment). The fact that both the State Court and Montgomery County court granted motions for sanctions to hold the Debtor accountable for injuries that 4030 and Thomas Lilly suffered due to the Debtor's mischief illustrates how the Debtor's pre-petition conduct has affected his creditors. The fact that, based on the Debtor's actions in those cases, the Montgomery County court decided to bar the Debtor from instituting additional frivolous actions further supports this conclusion.
The Debtor's post-petition actions have been similarly detrimental to his creditors. Since the Hearing, 4030 was compelled to file a motion for sanctions against the Debtor for his continued failure to comply with a court order to make initial disclosures in connection with his Amended Objection to Claim of 4030. See 4030's Amended Motion for Sanctions Against Debtor Leo Neal Jr. (Doc. # 270), Amended Order Setting Trial or Continuing Pretrial and/or Setting Deadlines on Debtor's Amended Objection to Claim #2 of 4030 West Broad, Inc. (Doc. # 240), and the Debtor's Amended Objection to Claim (Doc. # 187). 4030 alleged that after the Debtor failed to make initial disclosures as dictated by the Amended Order Setting Trial or Continuing Pretrial and/or Setting Deadlines on Debtor's Amended Objection to Claim #2 of 4030 West Broad, Inc. (Doc. # 240), it made seven unsuccessful attempts to contact the Debtor. At the hearing on the Order Requiring Leo Neal Jr. to Appear and Show Cause why it/they Should not be held in Contempt for Willful Violation of Court Order (Doc. # 280), the Debtor did not deny his failure to make initial disclosures and did not assert a cognizable basis excusing his failure to do so. The Court granted 4030's motion for sanctions. The Debtor's refusal to comply with the Court's order follows the pattern of the behavior which the Debtor has practiced throughout this bankruptcy case. It is yet another example of how through unreasonableness, unavailability, and refusal to comply with the rules and orders of court the Debtor's actions have detrimentally affected his creditors.
IV. Conclusion
The Debtor claims to be pursuing the bankruptcy process in a good faith effort to discharge his debts and has pointed to the criteria of the Caldwell test which he claims to meet. The Debtor certainly appears to have enough income and assets to pay his debts and has proposed to do as much in his Chapter 13 Plan. Indeed, several of the Caldwell factors which pertain to viability weigh in the Debtor's favor. However, one must recall that the test set forth in Caldwell is not whether a debtor can count a majority of the factors that weigh in his favor. Rather the test is whether, on the whole, the Debtor has maintained good faith in filing his case and his plan. The Court in Okoreeh-Baah stated: "The Bankruptcy Court must ultimately determine whether a debtor's plan . . . satisfies the purposes undergirding Chapter 13: a sincerely intended repayment of prepetition debt consistent with the Debtor's available resources." Okoreeh-Baah, 836 F.2d at 1033. In light of the Debtor's actions in his current bankruptcy, many of which are a continuation from previous state court proceedings, the Court does not see good faith on the Debtor's part, but rather one more bad faith attempt to stiff-arm and impede his creditors, and relitigate claims. The Debtor is not seeking to repay his creditors but wear them down. The Debtor appears to believe that through persistent misuse of the legal system, his efforts will bear fruit, and he will keep his creditors in procedural limbo.
In sum, this Court cannot find that the Debtor has acted in good faith. To do so would be to permit the continued abuse of the Bankruptcy Code. The Debtor has sought to use bankruptcy as a means to circumvent state court judgments and relitigate claims. In filing for bankruptcy, the Debtor apparently believed he found another avenue to continue his years-long harassment of his creditors after exhausting all state court venues and being branded a vexatious litigator. Throughout this case, the Debtor has evaded service in an attempt to further delay the resolution of disputes to the detriment of his creditors. The Debtor has attempted to mislead the Court through the omission of creditors and the undervaluation of his assets. The Debtor has shown brazen disregard for the rules of court, as well as standards of professionalism, by refusing to testify and refusing to accept service of filings and documents. The Debtor's conduct demonstrates his lack of respect for the authority of the Court and other parties, and illustrates his bad faith. Accordingly, it is
ORDERED AND ADJUDGED that 4030's Objection to Confirmation is SUSTAINED. Confirmation of the Debtor's Chapter 13 Plan is DENIED, and this Chapter 13 bankruptcy case will be DISMISSED by separate order.
IT IS SO ORDERED.