In re Bona

• Decision Date: 23 February 1990
• Docket Number: Bankruptcy No. 89-B-12550.
• Parties: In re Jack BONA, a/k/a Jack Bonaccolta, Debtor.
• Court: U.S. Bankruptcy Court — Southern District of New York

110 B.R. 1012 (1990)

In re Jack BONA, a/k/a Jack Bonaccolta, Debtor.

Bankruptcy No. 89-B-12550.

United States Bankruptcy Court, S.D. New York.

February 16, 1990.

As Amended February 23, 1990.

Marc Stuart Goldberg & Associates, P.C., New York City by Marc Stuart Goldberg, for debtor.

Greenberg Margolis by Clark E. Alpert and Steven Pasternak, Roseland, N.J., for GNAC and FDIC as Manager for FSLIC Resolution Fund as Receiver for San Marino Sav. and Loan Ass'n.

Isaac Nutovic, New York City, Chapter 7 Trustee for debtor.

MEMORANDUM DECISION DENYING DEBTOR'S MOTION FOR IMMEDIATE RELEASE FROM INCARCERATION AND GRANTING CREDITOR'S MOTION TO PARTICIPATE IN CAPIAS PROCEEDING

PRUDENCE B. ABRAM, Bankruptcy Judge.

The underlying legal issue in this case is one for which there was an express statutory answer in the former Bankruptcy Act of 1898 and in cases under the present Bankruptcy Code until 1984. The issue is how and under what circumstances may a debtor imprisoned under a civil writ for the nonpayment of a debt secure his release after the filing of a Chapter 7 petition.

This court has determined that the debtor in this case is entitled to no relief as the debtor has already been denied the relief which he is now seeking in the bankruptcy court by the state and federal courts to which he has resorted since his Chapter 7 petition was filed.

Statement of Facts

The Debtor, Jack Bona ("Bona" or "Debtor"), filed a voluntary Chapter 7 petition in this court late in the afternoon on Monday, October 2, 1989. The petition indicates that Bona had signed it on Wednesday, September 27. No schedule of assets and liabilities or statement of affairs was filed with the petition and only a single page list of creditors without any indication of the amounts due was attached to the petition. Concurrently with the filing of the Chapter 7 petition, Bona's counsel requested that the court sign an order to show cause fixing an immediate hearing on Bona's application for a writ of habeas corpus pursuant to 28 U.S.C. Sec. 2256 for production of the debtor and discharging him absolutely and unconditionally from the civil arrest and custody of the sheriff of Cape May County, State of New Jersey. The court signed the order to show cause and fixed a hearing for that Thursday afternoon, October 5. An interim Chapter 7 trustee, Isaac Nutovic, was promptly appointed.

Bona had been incarcerated the week prior to the filing of the Chapter 7 petition and on Monday, September 25, 1989 on a writ of capias ad satisfaciendum¹ by the Superior Court of New Jersey, Law Division, Atlantic County (the "Capias Court") at the request of a judgment creditor, GNAC, Corp. ("GNAC").² GNAC Appendix at 33-35. On March 18, 1988, GNAC had obtained a judgment against Bona in the amount of $29,264,168. GNAC Appendix at 373. Thereafter the judgment was amended on April 14, 1988 to provide for its deemed satisfaction by $18 million if the real property involved was returned free and clear of liens. GNAC Appendix at 503. Various appeals and hearings followed. GNAC Appendix at 7-9. On September 25, 1989, the Capias Court entered a further amended Final Money Judgment in favor of GNAC and against Bona which potentially reduced the amount of the judgment to $10,406,821. GNAC Appendix at 1-2. GNAC's judgment is based on a finding that Bona fraudulently caused a lis pendens to be filed and maintained on property owned by GNAC. GNAC Appendix at 4-15.

On October 5, 1989 this court held a hearing on Bona's application for release on a writ of habeas corpus. GNAC vigorously opposed Bona's request on both legal and factual grounds. GNAC provided extensive documentation of Bona's prior efforts to avoid court process and the circumstances under which GNAC had obtained its judgment and the capias writ. GNAC Appendix at 1-396. In particular, GNAC opposed Bona's release until he satisfied the requirements of disclosure about his financial affairs which he had agreed to in the Capias Court as a precondition of his release. In addition, GNAC argued that the statute under which Bona sought his release, 28 U.S.C. Sec. 2256, was no longer effective and therefore could not form the basis for Bona's release. Both the Chapter 7 Trustee and counsel for the FDIC as Manager for FSLIC Resolution Fund as Receiver for San Marino Savings and Loan Association ("FDIC") appeared at the hearing in opposition to Bona's motion.

The factual merits of Bona's position were significantly undermined by the fact that he had not as of the October 5 hearing filed the required bankruptcy schedules or statement of affairs. It was in that light that this court considered whether the disclosure conditions which had been set in the Capias Court for Bona's release violated any fundamental precept of the Bankruptcy Code and found that they did not as adequate disclosure is fundamental to a bankruptcy case and to a debtor's entitlement to a bankruptcy discharge. This court declined to grant Bona the emergency relief he requested because it appeared that there was a significant possibility that 28 U.S.C. Sec. 2256 was not in effect. In addition, it appeared that there were possible grounds on which Bona's discharge might be denied and certain debts that might be found non-dischargeable, conditions that would preclude release under 28 U.S.C. Sec. 2256 even if it were in force.

The court also heard oral argument by Bona's counsel on two additional theories on which Bona's counsel claimed Bona would be entitled to release but which had not been urged in Bona's written motion. The first was whether the continuation of the Debtor's imprisonment violated the automatic stay provisions of Bankruptcy Code Sec. 362 and the second was whether the court could grant relief to Bona under Bankruptcy Code Sec. 105. The court found neither additional theory sufficient to warrant changing the status quo by directing Bona's release from incarceration because Bona had made neither a legal nor a factual case sufficient for preliminary or permanent relief. This court offered Bona's counsel the opportunity to further brief the legal issues and continue the matter to another date. It was agreed that the October 5 hearing would be adjourned sine die and that GNAC would receive not less than five days' notice of any renewed or amended motion.

Less than a week after the hearing in this court and on October 11, 1989, Bona through his New Jersey counsel moved in the Capias Court for an order discharging him from custody or in the alternative staying his arrest under the capias writ. GNAC Appendix at 465-467. In a letter memorandum in support of the motion, Bona's counsel argued that the automatic stay provided in Bankruptcy Code Sec. 362 required the extinguishment of the capias writ, that the capias statute violates the equal protection clause, that Bona's arrest on the capias writ was improper and defective and finally that the use of the capias writ on the facts before the court was totally inappropriate and that its continuance ran counter to the bankruptcy stay. GNAC Appendix at 468-476. As Bona's papers make no mention of N.J.S.A. 2A:20-1, see footnote 1, it does not appear that his motion was intended to be one for release under that provision as an insolvent debtor.³ The Capias Court treated the motion as an emergency matter and held a hearing on October 13, 1989. GNAC Appendix at 638-670.

At the hearing in the Capias Court, Bona's counsel stated that it was their understanding of the law that the Capias Court had concurrent jurisdiction with the bankruptcy court over the issues surrounding Bona's custody. GNAC Appendix at 639-640. The Capias Court heard the matter on the merits and denied Bona's motion for immediate release. GNAC Appendix at 655-656. The Capias Court issued its order on October 18, 1989 (GNAC Appendix at 592-595) in which it found, inter alia, that the interests of the State of New Jersey as reflected in its capias statute and other laws are essentially parallel to the interests of the relevant provisions of the bankruptcy laws and both bodies of law

"require (a) full and truthful descriptions of assets and liabilities to the reasonable satisfaction of the Court and the parties involved, as per the Bankruptcy Court\'s ruling on October 5, 1989, and (b) consideration of potential fraudulent conveyances. Bona has without adequate explanation failed to file any list of assets and has not complied with the capias statute." GNAC Appendix at 593.

The Capias Court stated its intention to interpret Bona's application for release, including his right to a release under the automatic bankruptcy stay, in a manner consistent with this court's interpretation of the bankruptcy laws. GNAC Appendix at 593-594. The Capias Court found that Bona had utilized a variety of devices and forum-shopping prior to seeking relief on October 13, including the filing of the bankruptcy petition. GNAC Appendix at 593. Bona appealed from the Capias Court's order (GNAC Appendix at 630-635) and sought a stay of incarceration pending appeal (GNAC Appendix at 636-637). No stay was granted. That appeal is still pending.

Only after proceeding unsuccessfully in the Capias Court did Bona seek to bring on a hearing on a motion to transfer venue of this case although at the October 5 hearing which was almost three weeks earlier this court had expressed considerable doubt about the propriety of venue in this district in light of questions about Bona's residence, Bona's incarceration in New Jersey and the pendency of an at least once related bankruptcy case in New Jersey. On October 23, 1989, this court signed an order to show cause fixing a hearing for October 27, 1989, on Bona's motion to transfer the venue of his case from this district to the United States Bankruptcy Court for the District of New Jersey at Camden. In his Chapter 7 petition Bona had alleged that his address for the greater of the 180 day period preceding the filing of the...