Monbo v. Blair
| Decision Date | 09 September 2020 |
| Docket Number | Civil Action No. CCB-19-3565 |
| Citation | 621 B.R. 383 |
| Parties | Deafueh MONBO and Taje Monbo, Creditors, Appellants v. Eric J. BLAIR, Debtor, Appellee |
| Court | U.S. District Court — District of Maryland |
Deafueh Monbo, Bel Air, MD, pro se.
James R. Logan, James R. Logan PA, Baltimore, MD, for Appellee.
Deafueh Monbo and Taje Monbo appeal the bankruptcy court's order denying the motion to dismiss Eric J. Blair's Chapter 7 case (ECF 2-47), and the order denying the motion to extend time to object to discharge (ECF 2-48). The issues have been fully briefed and no hearing is necessary. Because the bankruptcy court properly applied the law to a thoroughly developed factual record, the Monbos' appeal will be denied and the bankruptcy court's Orders entered December 9, 2019, will be affirmed.
The bankruptcy court's December 9, 2019, order denying the motion to dismiss provides a comprehensive and thorough discussion of the factual findings made by Bankruptcy Judge Michelle Harner following an evidentiary hearing held on July 17, 2019, and October 18, 2019. For the sake of completeness, the most relevant facts are recounted here.
Eric J. Blair filed for Chapter 7 bankruptcy on January 28, 2019. Prior to the filing, Blair was named as a defendant in a civil lawsuit in the U.S. District Court for the Eastern District of New York brought by Deafueh Monbo and Taje Monbo, alleging wrongful conduct including copyright infringement. The Monbos, as creditors, seek to dismiss the Chapter 7 case.
Blair is the owner of Mission Film Inc. ("MFI"), a Maryland corporation, which Blair operated from 2000–2012 until its charter was forfeited by the Maryland Department of Assessment and Taxation. Blair reinstated MFI in 2014 to permit him to cash a check for a small project completed for Carroll County that year, and it was forfeited again in 2015. MFI currently has no operations, employees, or assets.1
Blair was one of several producers of a feature film titled 12 O'Clock Boys , and invested $8,600 in the film. Blair worked on the film for three days, primarily using a "Phantom Camera" to facilitate slow motion filming. It is not clear from the bankruptcy court's opinion when Blair worked on the film. Blair stated that neither he nor MFI received any money from the film, and there is no evidence to contradict this.
Blair failed to disclose certain information in his bankruptcy papers. He failed to disclose the existence of MFI and websites he owned or used, and provided incomplete information regarding the Monbos' lawsuit against him. Additionally, he failed to disclose Taje Monbo's address on the creditor matrix. Blair explained that he provided information to his counsel in a two-hour interview, and then signed, but did not review, the completed papers. He did not believe that any domain names were still active, and had told counsel that he closed down MFI in 2012, although he did not tell counsel about the 2014 reinstatement and subsequent forfeiture.
Based on Blair's bankruptcy schedules, Blair had $3,321 in secured debt, $96,045 in unsecured debt, and assets in the amount of $8,197.38. This does not include the Monbos' claim against Blair, which is disputed, unliquidated, and contingent and thus has no specific identified value. There are 27 scheduled creditors in the bankruptcy case, including the Monbos. Blair stated that he contemplated filing for bankruptcy prior to the Monbos' lawsuit, and denied filing the bankruptcy case solely because of the lawsuit.
The Monbos moved to dismiss the Chapter 7 filing under Section 707(a) and 707(b)(3) of the Bankruptcy Code. The Monbos generally alleged that Blair had filed for Chapter 7 bankruptcy in bad faith. As to the Section 707(b)(3)2 claim, the bankruptcy court found that the Monbos did not have standing. This was because Blair's income was below the median income for the state, and therefore under Section 707(b)(6), "[o]nly the judge or United States trustee (or bankruptcy administrator, if any) may file a motion under section 707(b) [.]" 11 U.S.C. § 707(b)(6).
As to the Section 707(a)3 claim, the court found that there was not enough evidence to show bad faith. The court found that, factually, Blair had not filed for bankruptcy solely to avoid paying the Monbos and, legally, even if he had it would not constitute bad faith. The court found that none of Blair's omissions from his bankruptcy filings were material, and that, although the Monbos argued that Blair made more money than he disclosed, they provided no evidence to support this, nor was there evidence to show that MFI had continuing business operations.
The Monbos also moved to extend time to object to the discharge of Blair,4 on the basis that Taje Monbo lacked actual notice of the bankruptcy case because only his name and not his correct address was listed on the creditor matrix.5 After Blair filed the bankruptcy case, the Bankruptcy Noticing Center mailed notice to all creditors listed on the creditor matrix, including Deafueh Monbo, on January 31, 2019. Deafueh Monbo received notice of the case on or about February 26, 2019. The court found that, although the notice was not mailed to Taje Monbo, he had actual knowledge of the case at least as of March 4, 2019, when the Monbos' attorneys filed a suggestion of bankruptcy in the civil litigation in which the Monbos are joint plaintiffs. The suggestion of bankruptcy noted that Deafueh Monbo had received the notice of bankruptcy filing, and the suggestion was filed by "Attorney for Plaintiffs Taje Monbo and Deafueh Monbo." Therefore, as the suggestion was filed on behalf of Taje Monbo and Deafueh Monbo, the court found that Taje Monbo had actual knowledge of the bankruptcy filing as of at least March 4, 2019.
Further, the court found that the Monbos had not shown that they exercised all reasonable diligence in attempting to file an objection to discharge, as Deafueh Monbo chose not to attend the section 341 meeting of creditors, and the Monbos had not taken any discovery, despite having commenced contested matters by filing the motion to dismiss and the motion for extension of time. Additionally, there were no allegations that Blair failed to provide them any requested information or delayed their efforts. The court therefore denied the motion to extend time.
In considering an appeal of a bankruptcy court's ruling, a district court reviews findings of fact for clear error and conclusions of law under a de novo standard. In re Tudor Assoc., Ltd. , 20 F.3d 115, 119 (4th Cir. 1994).
Whether the Monbos have standing to move to dismiss Blair's bankruptcy case under Section 707(b)(3) is a question of law that the court reviews de novo. As discussed above, Section 707(b)(6) limits who may bring a claim under Section 707(b) when the debtor's income is less than the median income in the state. In such cases, "[o]nly the judge or United States trustee (or bankruptcy administrator, if any) may file a motion under section 707(b) [.]" 11 U.S.C. § 707(b)(6) ; see In re Hiller , 482 B.R. 462, 469 (Bankr. D. Mass. 2012) ( ).
The bankruptcy court found that the debtor was a below-median debtor. The Monbos do not appear to contest this in their brief, instead arguing the merits of their Section 707(b)(3) motion. They also have not provided evidence that Blair has more income than he disclosed. As such, the court agrees with the bankruptcy court that the Monbos lack standing to file a motion under Section 707(b).
The Monbos argue that the bankruptcy court erred in not dismissing Blair's bankruptcy filing as a bad faith filing, given that he "misrepresented and omitted twenty-two items on his bankruptcy schedule[.]" (ECF 4, Appellant's Brief at 19). A list of these twenty-two alleged misrepresentations and omissions were included as an exhibit to the Monbos' post-hearing brief in bankruptcy court (ECF 2-43) and also attached as an exhibit to their appellant's brief in this court. Most of the omissions concern Blair's failure to disclose information related to MFI. Specifically, the Monbos argue that Blair failed to include his business income from his film production companies and failed to include in his Statement of Financial Affairs information about his businesses, and also filed bankruptcy solely in response to the infringement lawsuit.
"In ascertaining the debtor's lack of good faith the court should apply a totality of the facts and circumstances test." In re Marino , 388 B.R. 679, 682 (Bankr. E.D.N.C. 2008). Marino lists 14 factors that could be considered, and the Monbos state that four are present here. They are: that "[t]he debtor failed to make candid and full disclosure"; "Debtor filed the case in response to a Judgment pending litigation"; "The unfairness of the use of Chapter 7"; and "There are ... other procedural ‘gymnastics.’ " See id. (citation omitted); see also Appellant's Brief at 26–27. The Monbos also cite to In re Green , 934 F.2d 568, 572 (4th Cir. 1991), involving an allegation of substantial abuse under an earlier version of Section 707(b), and state that two of the factors considered in Green , "[w]hether the debtor's schedules and statement of current income and expenses reasonably and accurately reflect the true financial condition" and "[w]hether the petition was filed in good faith," weigh in favor of dismissal. Notably, though, "evaluating these factors ... is a discretionary exercise that is best left to bankruptcy judges," who should beware "elevating any single factor above all others as the sine qua non of bad faith." Janvey v. Romero , 883 F.3d 406, 412, 414 (4th Cir. 2018). Ultimately, "the bar for finding bad...
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