In re Wolfson, Bankruptcy No. 90 B 10007 (BRL)

• Decision Date: 27 April 1992
• Docket Number: Bankruptcy No. 90 B 10007 (BRL),Adv. No. 90-5845A,90-5855A.
• Citation: 139 BR 279
• Parties: In re Stanley WOLFSON, Debtor. Alan NISSELSON, as Trustee, Plaintiff, v. Stanley WOLFSON, Defendant. Judith Ripps WOLFSON, Plaintiff, v. Stanley WOLFSON, Defendant.
• Court: U.S. Bankruptcy Court — Southern District of New York

139 B.R. 279 (1992)

In re Stanley WOLFSON, Debtor.

Alan NISSELSON, as Trustee, Plaintiff, v. Stanley WOLFSON, Defendant.

Judith Ripps WOLFSON, Plaintiff, v. Stanley WOLFSON, Defendant.

Bankruptcy No. 90 B 10007 (BRL), Adv. Nos. 90-5845A, 90-5855A.

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

April 27, 1992.

Brauner Baron Rosenzweig & Klein, New York City, for trustee; Robert Minkoff, of counsel.

Jill Lesser, New York City, for Judith Ripps.

Phillip Mann, New York City, for debtor.

DECISION ON SUMMARY JUDGMENT MOTIONS FOR DENIAL OF DISCHARGE

BURTON R. LIFLAND, Chief Judge.

I. Dispute Summary

The plaintiffs, Judith Ripps ("Ripps") and Bankruptcy Trustee Alan Nisselson (the "Trustee") (together, the "Movants"), have brought a joint motion for summary judgment to deny the discharge of Stanley Wolfson (the "Debtor") pursuant to 11 U.S.C. § 727(a)(3), (4), (5), and (6) and Bankruptcy Rules 4004 and 7001. The Debtor cross-moved for an order pursuant to Bankruptcy Rule 7037 and Federal Rule of Civil Procedure 37 to direct each of the plaintiffs to produce documents and for the Court to deny the plaintiffs' summary judgment motion. This Court has jurisdiction over the proceeding pursuant to 28 U.S.C. §§ 157 and 1334 and the "Standing Order of Referral of Cases to Bankruptcy Judges" by the District Court dated July 10, 1984. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2)(J).

On January 3, 1990, the Debtor filed a voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code. Alan Nisselson was subsequently appointed Chapter 7 Trustee of the Debtor's estate. The other plaintiff, Judith Ripps (formerly known as Judith Ripps Wolfson), is involved in divorce proceedings with the Debtor.

A § 341(a) meeting was initially scheduled for March 9, 1990. The March 9 meeting was adjourned because the Debtor claimed his counsel could not be present. At the meeting rescheduled for April 23, 1990, the Debtor claimed to be ill and refused to answer the Trustee's questions. No counsel appeared on the Debtor's behalf. On numerous occasions the Debtor was requested to produce records for the April 23 meeting relating to his financial condition which the Trustee alleges are necessary to administer the case. At an adjourned § 341(a) meeting held on November 1, 1990, the Debtor finally agreed to supply the Trustee with certain records. The Trustee alleges that the Debtor has failed to produce several of these records and has made inconsistent statements as to the existence of many of them. The Movants therefore state that the Debtor should be denied a discharge under §§ 727(a)(3), (4) and (5) for concealing or failing to keep adequate records, withholding records from an officer of the estate, and failing to satisfactorily explain a loss or deficiency of assets. The Debtor has denied the existence and/or the materiality of the records. He has subsequently attributed misstatements concerning existence of the records to memory loss or theft of the records by Ripps (his estranged former spouse). The Debtor asserts that the Movants' motion for denial of discharge should be denied.

On March 27, 1990, this Court entered an Order approving a Stipulation providing for turnover of a cooperative apartment by the custodian and authorizing sale of the apartment.¹ The Order directed the Trustee to take all reasonable steps to carry out the terms of the Stipulation.² By letter dated April 2, 1990, the Trustee directed the Debtor to vacate the apartment no later than April 16, 1990. The Debtor did not vacate the apartment until a second court order was issued on July 2, 1990. The Movants allege that, because the Debtor failed to comply with the March 27, 1990 Order of this Court, the Debtor should be denied a discharge under § 727(a)(6). The Debtor states that the March 27, 1990 Order did not actually direct him to vacate the apartment. The Debtor alleges that there was, technically speaking, no duty to vacate the apartment until the second Order was issued on July 2, 1990, expressly directing the Debtor to do so.

A canvas of the record before the Court on the motions reveals that no genuine issue of material facts exists. This case is ripe for summary judgment. The depositions, written evidence, and testimony indicate a manifest failure by the Debtor to cooperate with the Trustee and to produce the requested records. The Debtor has produced no evidence which would legitimatize his convenient assertion of stolen records. His documented misstatements and timely lack of memory make his quest to create issues for determination at trial unavailing. Based upon the record placed before this Court and the for the reasons set forth herein, the Debtor is denied a discharge under § 727(a)(3), (4) and (5).

II. The Standard for Summary Judgment

Federal Rule of Bankruptcy Procedure 7056 provides that "Rule 56 F.R.Civ.P. applies in adversary proceedings." Fed. R.Civ.P. 56(c) states that summary judgment shall be granted to the moving party if the court determines that:

the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Thus, the party moving for a summary judgment must set forth facts showing that there is no genuine issue of material fact. Once the Movant satisfies the requirements of Rule 56(c), the respondent must set forth specific facts establishing the existence of a genuine issue of material fact, mere allegations or denials of the movant's pleadings are insufficient. Fed. R.Civ.P. 56(e). See Matter of Esposito, 44 B.R. 817, 821 (Bankr.S.D.N.Y.1984).

The non-moving party is to be given the benefit of the doubt in that "all reasonable inferences to be drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion." cites omitted. Glick v. Mirus (In re Mirus), 87 B.R. 960, 969 (Bankr.N.D.Ill.1988).

The affidavits, sworn examination testimony, and other evidence set forth in the record, viewed in a light most favorable to the Debtor, indicate that there is no genuine issue of material fact. Furthermore, a lack of consistency drains the Debtor's counter assertions of all probative force.

III. Denial of Discharge under § 727(a)

The Movants have brought an action to deny Wolfson's discharge pursuant to Code § 727(a)(3), (4), (5), and (6). These subsections provide that the bankruptcy court shall grant a debtor a discharge unless:

(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor\'s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;

(4) the debtor knowingly and fraudulently, in or in connection with the case —

(D) withheld from an officer of the estate entitled to possession under this title, any recorded information, including books, documents, records and papers, relating to the debtor\'s property or financial affairs;

(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under this paragraph, any loss of assets or deficiency of assets to meet the debtor\'s liabilities;

(6) the debtor has refused, in the case —

(A) to obey any lawful order of the court, other than an order to respond to a material question or to testify;

A. The Burden of Proof under § 727(a) Exceptions to Discharge

1. Case Law Prior to Grogan

Prior to the Supreme Court's decision in Grogan v. Garner, ___ U.S. ___, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991), there was a split among and within the circuits as to the appropriate burden of proof under § 727. Most of the courts, including the Southern District of New York, chose the clear and convincing standard as the burden of proof. MacLeod v. Arcuri (In re Arcuri), 116 B.R. 873, 879 (Bankr.S.D.N.Y. 1990); Greene v. Greene (In re Greene), 81 B.R. 829, 834 (Bankr.S.D.N.Y.1988); G & G Cards & Gifts, Inc. v. Berman (In re Berman), 100 B.R. 640, 645 (Bankr.E.D.N.Y. 1989); Braen v. Braen (In re Braen), 94 B.R. 35, 40 (Bankr.D.N.J.1988); Barnett Bank of Tampa v. Muscatell (In re Muscatell), 113 B.R. 72, 74 (Bankr.M.D.Fla.1990); Adams v. Watson (Matter of Watson), 122 B.R. 476, 480 (Bankr.M.D.Ga.1990); St. Luke's Hosp. of Fargo, Inc. v. Smith (In re Smith), 119 B.R. 714, 720-721 (Bankr. D.N.D.1990). However, a substantial number of courts applied the preponderance of the evidence standard. Haywood Properties, Ltd. v. Jacobe, (In re Jacobe), 116 B.R. 463, 467 (Bankr.E.D.Va.1990); Second Nat'l Bank v. Parker (In re Parker), 85 B.R. 384 (Bankr.E.D.Va.1988), aff'd, 879 F.2d 863 (4th Cir.1989); Mclean v. Harlow (In re Harlow), 107 B.R. 528, 531 (Bankr. W.D.Va.1989); Newton v. Essres (In re Essres), 122 B.R. 422, 425 (Bankr.D.Colo. 1990); Francis v. Riso (In re Riso), 74 B.R. 750, 757 (Bankr.D.N.H.1987); Cowan v. Curl (In re Curl), 49 B.R. 302, 304-06 (Bankr.W.D.Mo.1985); Cobb v. Hadley (In re Hadley), 70 B.R. 51, 53 (Bankr.D.Kan. 1987). Some courts applied the clear and convincing standard when fraud or fraudulent conduct was involved (as under § 727(a)(2) and (4)) and applied the preponderance of the evidence standard when fraud or fraudulent conduct was not alleged (as under § 727(a)(3)). Green Hill Corp. v. Kim (In re Kim), 97 B.R. 275, 281 (Bankr.E.D.Va.1989); Hibernia Nat'l Bank v. Perez, 124 B.R. 704, 705-706 (E.D.La.1991).

2. The Grogan Decision

In Grogan, the Supreme Court held that the appropriate burden of proof which must be met in order to prevent the discharge of a debtor under § 523(a) of the Bankruptcy Code is the preponderance of the evidence standard. The Court based its decision upon a number of factors. Looking at the statute, the Grogan Court stated that "the...