Opinion
Case No. 03-65561, Adv. Pro. No. 04-2024.
July 13, 2005
OPINION AND ORDER DENYING MOTION FOR STAY OF JUDGMENT PENDING APPEAL
I. Background
This adversary proceeding came before the Court for trial on April 8, 2005 on a complaint filed by the plaintiffs Philip A. LaRocco and Gail F. LaRocco ("Plaintiffs") against Owen Smithers and Deborah Smithers ("Defendants" or "Debtors"). The complaint sought a judgment (1) determining that the debt owed to the Plaintiffs by the Debtors — arising from a prepetition, state court judgment — is nondischargeable under 11 U.S.C. § 523(a)(4) and (6); and (2) denying Debtors' discharge under 11 U.S.C. § 727(a)(2) and (a)(4).
When the record was closed, the parties sought leave either to file post-trial briefs or return to the Court at a later date to make closing arguments. The Court heard closing arguments on May 19, 2005. Following closing arguments, the Court made oral findings of fact and conclusions of law ("Oral Decision"). For the reasons explained in the Oral Decision, the Court entered judgment against the Debtors ( see Judgment Entry dated May 24, 2005 (Doc. 21)) on Plaintiffs' § 727(a)(4)(A) claim, determining that Debtors' discharge should be denied because they knowingly and fraudulently made a false oath or account in connection with their case.
Although the Plaintiffs prevailed on their § 727(a)(4) claim, the Court entered judgment in favor of the Debtors on the dischargeability claims asserted under 11 U.S.C. § 523(a)(4) and (a)(6) and on Plaintiffs' separate claim for denial of discharge under § 727(a)(2).
Debtors filed a Motion for Stay of Judgment Pending Appeal ("Motion") (Doc. 26) on June 3, 2005.
II. Legal Analysis
A. Standard Governing Requests for a Stay Pending Appeal
Procedurally, stays pending appeal are governed by Bankruptcy Rule 8005, which provides, in pertinent part:
A motion for a stay of the judgment, order, or decree of a bankruptcy judge, for approval of a supersedeas bond, or for other relief pending appeal must ordinarily be presented to the bankruptcy judge in the first instance. Notwithstanding Rule 7062 but subject to the power of the district court and the bankruptcy appellate panel reserved hereinafter, the bankruptcy judge may suspend or order the continuation of other proceedings in the case under the Code or make any other appropriate order during the pendency of an appeal on such terms as will protect the rights of all parties in interest. . . .
Fed.R.Bankr.P. 8005. In passing on a request for a stay pending appeal, a court must apply substantially the same factors that govern requests for temporary or preliminary injunctive relief. See, e.g., Barna v. Haas (In re Haas), 292 B.R. 167, 180 (Bankr. S.D. Ohio 2003); In re Barnes, 119 B.R. 552, 557 (S.D. Ohio 1989). Thus, the Court must consider:
(1) the likelihood that the party seeking the stay will prevail on the merits on appeal;
(2) the likelihood that the moving party will be irreparably harmed absent a stay;
(3) the harm to others that will occur if the court grants the stay; and
(4) the public interest in granting the stay.
In re Level Propane Gases, Inc., 304 B.R. 775, 777 (Bankr. N.D. Ohio 2004) (citing Am. Imaging Servs., Inc. v. Eagle-Picher Indus., Inc. (In re Eagle-Picher Indus., Inc.), 963 F.2d 855, 858 (6th Cir. 1992) (other citations omitted)). In determining whether a stay pending appeal should issue, the Court is required to balance these four factors ("Stay Factors"). The moving party bears the burden of proving by a preponderance of the evidence that a stay should issue. See id. (citations omitted). "[A] court's decision to [grant or] deny a Rule 8005 stay is highly discretionary." Matter of Forty-Eight Insulations, Inc., 115 F.3d 1294, 1301 (7th Cir. 1997). B. Analysis of the Stay Factors 1. Likelihood of Success on the Merits
Debtors have not shown that they are likely to succeed on the merits of their appeal. Debtors admit "they may have technically made a false oath," but they point out that it was "minor" and that they lacked "any intent to secret an asset." Motion at 2.
A party objecting to a debtor's discharge under § 727(a)(4)(A) must establish by a preponderance of the evidence that (1) the debtor made a statement under oath; (2) that the statement related materially to the bankruptcy case; (3) that the statement was false; (4) that the debtor had knowledge of the statement's falsity; and (5) that the debtor made the statement with fraudulent intent. See Keeney v. Smith (In re Keeney), 227 F.3d 679, 685 (6th Cir. 2000); Hunter v. Sowers (In re Sowers), 229 B.R. 151, 156 (Bankr. N.D. Ohio 1998).
This argument has a remote chance of success on appeal. The Sixth Circuit Bankruptcy Appellate Panel has held that "a fact is material if it concerns discovery of assets, business dealings or [the] existence or disposition of property." Hamo v. Wilson (In re Hamo), 233 B.R. 718, 725 (B.A.P. 6th Cir. 1999) (alteration in original) (citation and internal quotation marks omitted). Here, the Debtors' listed only one gun on their Schedule B and valued the gun at $100. But the Debtors admitted at trial that they owned three guns worth approximately $725. Because this sworn statement in their schedules "concerns . . . the existence . . . of property" of the bankruptcy estate, it relates materially to Debtors' bankruptcy case. Id.
Arguing that materiality is a function of value, Debtors contend that their omission was minor and thus not material. However, "[t]he relative value of the assets . . . is not outcome determinative" in a § 727(a)(4)(A) proceeding. See, e.g., Netherton v. Baker (In re Baker) 205 B.R. 125, 133 (Bankr. N.D. Ill. 1997) (finding that failure to disclose several hundred dollars in fish tanks constituted a material omission under § 727(a)(4)(A)). "[A] false oath regarding [even] a worthless asset may constitute a material omission so as to prevent discharge in bankruptcy." Bensenville Cmty. Ctr. Union v. Bailey (In re Bailey), 147 B.R. 157, 162 (Bankr. N.D. Ill. 1992) (citations omitted). "[T]he 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 relationship or holding; such a defense is specious." Hamo, 233 B.R. at 725 (citing Chalik v. Moorefield (In re Chalik), 748 F.2d 616, 618 (11th Cir. 1984) (internal quotation marks omitted)). Thus, although Debtors' false oath did not relate to an asset having substantial value, it nevertheless constituted a material omission warranting denial of their bankruptcy discharge. As the court noted in Land O'Lakes Farmland Feed LLC v. Gehl (In re Gehl), 325 B.R. 269, 277 (Bankr. N.D. Iowa 2005), the "omission of a relatively modest asset will merit denial of discharge, if done with knowledge and fraudulent intent." See also Mertz v. Rott, 955 F.2d 596, 598 (8th Cir. 1992) (discharge denied for debtor's failure to disclose his right to a $1,358.00 state tax refund, even though refund may be exempt); Job v. Calder ( In re Calder), 907 F.2d 953, 955 (10th Cir. 1990) (discharge denied for debtor's failure to disclose supposedly worthless bank accounts and mineral interests); Chalik, 748 at 618 (discharge denied for debtor's failure to list his stock ownership of 12 supposedly worthless corporations); Hillis v. Martin (In re Martin), 124 B.R. 542, 544 (Bankr. N.D. Ind. 1991) (denying discharge where debtor concealed one bank account with a $100.00 balance and his transfer of various small personal items).
As for fraudulent intent, it may be inferred from circumstantial evidence or from a debtor's course of conduct. See Hamo, 233 B.R. at 725; Sowers, 229 B.R. at 159. Often, resolution of the question of whether a false statement was made with intent to deceive will turn on the Court's assessment of the demeanor and credibility of the debtor. See Groman v. Watman (In re Watman), 301 F.3d 3, 8 (1st Cir. 2002). For the reasons detailed in the Oral Decision, the Court found that the Debtors — and Owen Smithers in particular — were not credible witnesses. This credibility assessment supports the finding that Debtors had the requisite intent to deceive. Debtors will have difficulty obtaining reversal of factual findings based on this credibility determination as "[f]indings of fact by a bankruptcy court shall not be set aside unless clearly erroneous. . . . This circuit has clearly enunciated that findings of fact of a bankruptcy court should not be disturbed by the district court judge unless there is most cogent evidence of mistake or miscarriage of justice." St. Farm Ins. Co. v. McConnehea (In re McConnehea), 96 B.R. 121, 123 (S.D. Ohio 1988) (quoting Johnson Assocs., Inc. v. Johnson, 845 F.2d 1395 (6th Cir. 1988) (internal quotation marks omitted)). See also Fed.R.Bankr.P. 8013 ("Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses."); Johnson v. Fors (In re Fors), 259 B.R. 131, 140 (B.A.P. 8th Cir. 2001) ("As the trier of fact, it is the burden of the bankruptcy court to assess the credibility of the witnesses as well as the sufficiency of the evidence. The bankruptcy court's impression of the credibility of the witnesses is entitled to great weight. Due regard must be given to the opportunity of the bankruptcy judge to assess the credibility of the witnesses.") (citations omitted).
2. Irreparable Harm
Second, Debtors have also not established that they will suffer irreparable harm if a stay is not issued. The absence of a showing of irreparable harm may itself constitute sufficient grounds to deny a preliminary injunction. See Rossi, McCreery Assoc., Inc. v. Abbo (In re Abbo), 191 B.R. 680, 683 (Bankr. N.D. Ohio 1996) (citation omitted). Debtors argue that the resumption of collection activity, particularly wage garnishments, will prevent them from supporting themselves and their dependents; however, "monetary harm is generally not irreparable." In re Gleason, 2002 WL 649059, at *2 (Bankr. N.D. Ill. 2002) (rejecting argument that debtor will suffer irreparable harm without stay because she will be "subject to continual harassment by [creditor] as it attempts to collect on its judgment from her, and . . . [creditor's] garnishment of her wages and sale of non-exempt assets will cause needless disruption in her life"). "[H]arm from the denial of a preliminary injunction is irreparable [only] if it is not fully compensable by monetary damages." Overstreet v. Lexington-Fayette Urb. County Gov't, 305 F.3d 566, 578 (6th Cir. 2004).
Resumption of collection activity during the pendency of an appeal does not constitute irreparable harm. See Dornik v. Maurice (In re Maurice), 167 B.R. 136, 138 (Bankr. N.D. Ill. 1994) ("It is not irreparably harmful (or wrongful) for a judgment debtor to be subjected to post-judgment enforcement actions to collect a final judgment in favor of a judgment creditor where the debtor has not posted an adequate supersedeas bond."); Henkel v. Lickman (In re Lickman), 301 B.R. 739, 748 (Bankr. M.D. Fla. 2003) ("[T]he Defendants here point only to the monetary harm that they will suffer if the Plaintiff executes on her judgment during the pendency of the appeal. The record is therefore devoid of facts that support the Defendants' contention that they will be irreparably harmed if a stay is not granted.") (citing Abbo, 191 B.R. at 684); Abbo, 191 B.R. at 684 ("The monetary harm that the Debtor would suffer if the plaintiffs are permitted to enforce their prepetition state court judgment against him does not constitute irreparable harm.").
Nor have Debtors asserted that they cannot be adequately compensated by damages if creditors collect a portion of Debtors' future wages in an ultimately wrongful garnishment. "The fact that an individual may lose his income for some extended period of time does not result in irreparable harm, as income wrongly withheld may be recovered through monetary damages. . . ." Overstreet, 305 F.3d at 579. "The possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weighs heavily against a claim of irreparable harm." Mich. Coalition of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 154 (6th Cir. 1991). See also Hamilton v. Lomas Mortg. U.S.A. (In re Hamilton), 95 B.R. 564, 565 (N.D. Ill. 1989) (finding no irreparable injury due to impending foreclosure as "debtors . . . could be adequately compensated by damages if they lost their interest in the property through a wrongful foreclosure."); First Nat'l Bank of Boston v. Overmyer (In re Overmyer), 53 B.R. 952, 956 (Bankr. S.D.N.Y. 1980) ("The debtor argues that if a stay is not issued he will be left without remedy in the interim and will suffer irreparable injury through the collection efforts of the plaintiffs should he be successful on this motion or in his appeal. . . . [T]here is no basis for assuming that the plaintiffs are not financially able to return any improperly collected assets should the debtor prevail on his appeal.").
3. Harm to Others
4. The Public Interest
The third and fourth Stay Factors are essentially neutral and thus do not weigh for or against issuance of a stay. While some courts have held that a delay in execution on a judgment may constitute substantial harm to the judgment creditor, see Lickman, 301 B.R. at 748; Gleason, 2002 WL 649059, at *3, the Court is not convinced that Plaintiffs would suffer harm outweighing that which Debtors will experience with a resumption of collection activity if their collection efforts were further delayed by the issuance of a stay pending appeal. Finally, the public interest is not implicated here.
III. Conclusion
For these reasons, the Court finds that the Stay Factors weigh against Debtors' request for a stay of judgment pending appeal. Accordingly, the Motion is DENIED. IT IS SO ORDERED.