In re Gonday, Bankruptcy No. 82-00274
| Decision Date | 07 February 1983 |
| Docket Number | Bankruptcy No. 82-00274,Adv. No. 82-0162. |
| Citation | 27 BR 428 |
| Parties | In re Roger GONDAY & Marie B. Gonday, Debtors. ECONOMY BRICK SALES, INC., Plaintiff, v. Roger GONDAY & Marie B. Gonday, Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Louisiana |
Michael J. Matthews, Baton Rouge, La., for plaintiff.
John A. Gutierrez, Gonzales, La., for defendants/debtors.
This matter comes before the Court on a complaint filed by Economy Brick Sales, Inc., a creditor herein, on August 10, 1982, seeking to bar the discharge of the abovenamed debtors, Roger Gonday and Marie B. Gonday. A hearing on the complaint was held on October 28, 1982, and the matter was taken under advisement. The disposition of the issues presented in said complaint is now addressed herein.
Roger Gonday and Marie Baker Gonday filed a voluntary joint petition on May 17, 1982, seeking relief under the provisions of Chapter 7 of Title 11 of the United States Code. Annexed to their petition, pursuant to Rule 108 of the Rules of Bankruptcy Procedure, were a "Statement of Financial Affairs For Debtor Not Engaged in Business" ("Statement of Affairs") and schedules of assets and liabilities of said debtors ("Schedules").
The debtors affirmed under oath dated March 30, 1982, by affixing their respective signatures on the appropriate lines pursuant to Rule 109 of the Rules of Bankruptcy Procedure, that they had read the Statement of Affairs and Schedules before signing, and that the information contained therein was true and correct to the best of their knowledge, information and belief.
A meeting of creditors of said debtors was held on June 15, 1982, pursuant to Section 341(a) of said Title 11 ("Meeting of Creditors"). Both Mr. and Mrs. Gonday appeared at the Meeting of Creditors and testified, under oath, as to their financial affairs, assets and liabilities of the estate. Because of apparent inconsistencies between the information contained in the Statement of Affairs and Schedules filed May 17, 1982, and the testimony adduced on June 15, 1982, the debtors were asked by both the Trustee and the Deputy Clerk presiding over the meeting to amend their papers to make whatever corrections were necessary in order for the papers to reflect accurate information.
On August 10, 1982, as no attempt to make amendments was made, Economy Brick Sales, Inc., a creditor herein ("Economy"), filed a complaint to bar the discharge of the debtors. The particular reasons upon which Economy seeks relief are not itemized in the complaint, but no answer was ever filed by the debtors. In a memorandum supporting the denial of the discharge and throughout the hearing on the complaint, counsel for Economy made clear to the Court that Economy relied upon Sections 727(a)(2)(A) and 727(a)(4)(A) of said Title 11.
From an examination of all the evidence, including the Statement of Affairs and Schedules in the record, the transcript of the Meeting of Creditors on June 15, 1982, the testimony of both Mr. and Mrs. Gonday on October 28, 1982, and the exhibits introduced into the record, this Court finds as a matter of fact that the debtors' Statement of Affairs and Schedules intentionally contained the following omissions and misrepresentations:
(1) In Question 1(d) of the Statement of Affairs debtors intentionally omitted the existence of a prior residency in which they resided within six years preceding the filing of the petition. The debtors lived as late as December, 1981, in a house titled in their names located on Florida Boulevard, Denham Springs, Louisiana. During the meeting of creditors, the debtors acknowledged the existence of the residency relative to questions about the house, but never explained why the omission in 1(d) was made.
(2) The debtors answered "None" in response to Question 2(c) of the Statement of Affairs, which requires a debtor to detail prior business conduct during the six years preceding the filing of the petition. Mr. Gonday, however, testified that he had started a business in April or May, 1981, and sustained operation of that business for "a couple of months" thereafter. There is nothing in the Statement of Affairs which would indicate that Mr. Gonday had started a business. Without the trustee asking about business enterprises, the Court would not have known about them. The omission was never corrected.
(3) The debtors answered "None" to Question 7 of the Statement of Affairs, which reads:
"What cases under the Bankruptcy Act or Title 11, United States Code have previously been brought by or against you?"
In fact, at the Meeting of Creditors the debtors testified under oath to the trustee that they had been granted a discharge in a personal bankruptcy case filed by them in California about twenty years ago. This testimony, if true, would indicate that the debtors are "bankruptcy wise," and should therefore have a full appreciation of the import of their disclosures and omissions.
The repayments could constitute fraudulent conveyances which might be avoided by a trustee under Section 548 of Title 11 of the United States Code. When asked by the trustee herein, the debtors confirmed their written answer during the Meeting of Creditors. However, under cross-examination by Economy during the same Meeting of Creditors, the debtors conceded that proceeds of a sale confected May 27, 1981, in the amount of $75,000.00 were transferred to Livingston State Bank in order to reduce a $100,000.00 indebtedness. No explanation was given why the omission was originally made.
Mr. Gonday varied the testimony slightly during the hearing on the complaint on October 28, 1982. He then represented that only $70,000.00 or so went to Livingston State Bank while the balance was received for "labor." Mr. Gonday also testified that everything received was spent, but there was no effort to explain any further details of the alleged expenditures.
(5) Question 12(b) of the Statement of Affairs inquired:
"(h)ave you made any other transfer, absolute or for the purpose of security, or any other disposition of real or tangible personal property during the year immediately preceding the filing of the original petition herein?"
In response to this question, the debtors answered "None." During the Meeting of Creditors, however, Mr. Gonday admitted under oath that he did transfer tools he had valued at about $2,000.00 to his brother, Charles Gonday, for and in consideration of about $300.00 sometime around February, 1982 (three months prior to filing a bankruptcy petition). Mr. Gonday also conceded the sale of furniture which may not have been his to sell. When asked by the trustee whether those were the only omissions, Mr. Gonday replied "that is it as far as I know." The omission of the sale was not explained.
The debtors did not concede the sale by them of immovable property until after being specifically examined about the transaction by the attorney for Economy, after the trustee had completed his examination. The debtors then admitted that they had sold about nine-tenths of an acre of immovable property on May 27, 1981, to Mr. Rubin Spillman for $75,000.00 by cash sale.
The Court notes that the debtors still list ownership interest in 1.89 acres of immovable property (thereby including the .85 acres sold a year earlier to Mr. Spillman) in their Schedule B-1—Real Property. Also, during examination by the attorney for Economy, Mr. Gonday suggested that there was a two-story apartment house on the .85 acres. If there was equity in the property, the trustee could perhaps avoid the transfer of that property to Mr. Spillman for the benefit of other creditors. However, the failure to identify the transactions in toto prejudices the trustee's options.
The debtors testified during the Meeting of Creditors that, in fact "(they) have returned quite a number of things to different people."
(7) Question 15 of the Statement of Affairs inquired into whether the debtor had retained attorneys during the year preceding the filing of the petition herein. In response to this inquiry, the name of John A. Gutierrez, attorney for the debtors herein, appears with a fee of $450.00 being promised or paid. Although the reason for the employment was not detailed, the Court presumes that the services rendered were all relative to the bankruptcy.
The employment of Mr. Louis Unglesby is a matter totally omitted from the Statement of Affairs. From the evidence adduced, the Court finds that Mr. Unglesby was retained by the debtors in November, 1981, to represent one of the debtors in a criminal proceeding. During the Meeting of Creditors, Mr. Gonday testified as follows:
However, during the hearing on the complaint, Mr. Gonday represented to the Court that it was his brother, and not he, who paid for the lawyer to defend the debtor in the criminal proceeding. Additionally, at both hearings, Mr. Gonday conceded that the debtors have employed Mr. Unglesby to represent them in civil...
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