In re Golowaty
| Decision Date | 27 August 1981 |
| Docket Number | Adv. No. 81-0106.,Bankruptcy No. 81-00001 |
| Citation | 13 BR 781 |
| Court | U.S. Bankruptcy Court — District of Vermont |
| Parties | In re Michael GOLOWATY (formerly d/b/a Pier One Restaurant), Debtor. Martha M. FREDETTE, Plaintiff, v. Michael GOLOWATY, Defendant. |
John Paul Faignant of Miller, Norton & Cleary, Rutland, Vt., for plaintiff.
Richard L. Hill, Rutland, Vt., for defendant-debtor.
MEMORANDUM, FINDINGS OF FACT AND CONCLUSIONS
This is an adversary proceeding on the Complaint of the Plaintiff objecting to the discharge of the debtor and to determine the dischargeability of debt.
Although that portion of the Plaintiff's Complaint relating to objection to discharge contains a number of allegations which do not by themselves support grounds for denying the discharge it appears that the Plaintiff is relying on § 727(a)(3) and § 727(a)(4) which provide that a discharge may be denied if the Debtor has falsified or failed to keep adequate financial records, without justification, or has in connection with the case knowingly and fraudulently made a falsehood or account, respectively.
That portion of the Complaint which relates to the dischargeability of the debt is predicated on § 523(a)(2) as being a debt for obtaining services by actual fraud and amended at the hearing to include by false pretenses or false representation.
The Debtor, who was engaged in the operation of Pier One Restaurant situated at the corner of Merchants Row and State Street in the City of Rutland, Vermont, filed a Voluntary Petition for Relief "as a voluntary bankrupt" on January 5, 1981, and he listed the Plaintiff as an unsecured creditor in the sum of $2,485.00. The amount of the indebtedness was taken from the claim of the Plaintiff in a pending action instituted against the Debtor in Vermont State Court.
The Debtor represented himself in the bankruptcy proceeding although he did have the assistance of attorneys with the firm of Abatiell and Abatiell, Esquires, in the preparation of the Petition, Statement of Affairs and Schedules. These were sworn to by him on January 5, 1981 before James S. Abatiell, Notary Public, who is a member of the aforesaid firm. These documents were not examined very carefully by the Debtor before they were executed and filed with the Court.
The Debtor had no experience in the restaurant business before he started this operation. He did employ an accountant who set up a "one write" posting system for the business with monthly financial statements prepared by him. These records were made available to the Plaintiff.
On or about the first of November, 1979, he conferred with the Plaintiff relative to engaging her services as a manager of the restaurant and offered compensation of $300.00 a week. She felt that this was high and they settled on a gross salary of $250.00 a week and a net take-home pay of $200.00.
During the months of November and December, 1979, the Plaintiff did perform certain duties in behalf of the Debtor such as contacting would-be suppliers and preparing for the opening of the business. It was anticipated that the opening would occur sometime in November, 1979, but it was delayed until January 9, 1981. During the months of November and December, 1979, the premises were being readied for the start of business and there were many individuals involved in this activity including the Plaintiff.
After the opening the Plaintiff worked for two weeks at the end of which she was fired by the Debtor. The Plaintiff did work long hours during her period of employment for which she was not voluntarily paid by the Debtor. She registered a complaint with the Vermont Department of Labor and Industry and, during the course of an investigation, the Debtor offered to settle the salary issue for $500.00. This was not accepted and a representative of the Department decided to continue the investigation and at its conclusion the Debtor was ordered to make payment. During the course of the investigation the Plaintiff did receive payment for one and one-half weeks of the last two weeks of employment. The Schedules show that at least seven other employees of the Debtor with total wages of $3,600.00 were not paid.
The Debtor furnished about $20,000.00 capital to start the business. The restaurant premises were leased from Jamac Corporation in which James S. Abatiell, Esquire, is the executive officer. From October, 1979 to October, 1980 the Debtor borrowed about $20,000.00 from this landlord. He also entered into a Lease with Jamac beginning October 1, 1979 with rent payable at the rate of $450.00 a month from October 1, 1979 to October 1, 1980, $550.00 a month from October 1, 1980 to October 1, 1981. The rent increased each year thereafter and the Debtor was obligated to pay one-half of the increase in taxes, make all repairs and alterations, and furnish heat and other utilities. The Debtor was in default under the lease and he scheduled Jamac Corporation as a secured creditor in the sum of $39,434.27. He also scheduled Abatiell and Abatiell, Esquires, as unsecured creditors in the sum of $19,239.27 for legal services rendered including those performed in a divorce action involving the Debtor and a picket case with the Labor Board.
On December 18, 1979, the Debtor and James Abatiell opened a joint account in the Rutland Savings Bank with two signatures required on checks drawn against the account. The name "Pier One Seafood Restaurant" was shown on the signature card. Checks were drawn against this account and they were signed by both the Debtor and James S. Abatiell, one of which was payable to the Plaintiff, Martha Fredette, in the sum of $63.25 on January 7, 1980, and it carried the notation "reimbursement." James S. Abatiell was somewhat involved in the Debtor's business but in what capacity and to what extent are unclear. He did, however, have meals at the restaurant for which he was charged and they were carried on the debtor's books as an account receivable.
The Debtor failed to list his joint account with James S. Abatiell in the Rutland Savings Bank as well as two other accounts in the Statement of Affairs, one of which was a joint account with his wife with little activity and used mostly for the payment of medical bills. This failure was due to an oversight.
The Debtor's restaurant business was in financial trouble from its inception. In about one year of operation the Debtor ran up obligations, as shown in his Schedules, of $106,247.22, including unpaid withholding, Social Security and Rooms and Meals Taxes of $17,200.00.
The Debtor has made available to the Plaintiff all records in his possession pertaining to the business.
In seeking a denial of a discharge the Plaintiff relies on § 727(a)(3) and (4) under which the Court shall grant the Debtor a discharge unless:
This Court is satisfied from the evidence adduced at the hearing that the Debtor did not make a false oath and, therefore, should not be denied a discharge under § 723(a)(4). The Plaintiff contends that the Debtor has concealed or failed to keep or preserve books and records from which his financial condition or business transactions might be ascertained. The requirements for keeping books and records by a debtor are spelled out in the case of Matter of Underhill, 82 F.2d 258 (2nd Cir. 1936). In this case the Court said:
It is sufficient if the books and records are kept, if required...
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