In re Arora

Re: In re Suneet & Janet Arora

Case No.: 14-28073

Adv. Pro. No.: 15-01894

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW JERSEY

Entered: January 18, 2018

January 17, 2018

January 16, 2018

Hon. Michael B. Kaplan United States Bankruptcy Judge

David Meth, Esq.

200 Daniels Way

Suite 240

Freehold, NJ 07728

Attorney for Debtor-Defendants Suneet & Janet Arora

Rosaria A. Suriano, Esq.

Carl Sorano, Esq.

Brach Eichler LLC

101 Eisenhower Parkway

Roseland, NJ 07068

Attorney for Plaintiff S.P. Richards Company

Counsel:

This matter comes before the Court on a motion (ECF No. 80) filed by Plaintiff S.P. Richards ("SPR") seeking summary judgment in its favor as to their claims against Debtors under various sub-sections of 11 U.S.C. § 727. Specifically, SPR seeks denial of discharge based on: (1) a false oath in connection with the case under § 727(a)(4)(A); (2) Debtors' failure to preserve records or financial information under § 727(a)(3); (3) Debtors' failure to explain loss of assets under §727(a)(5); and (4) transfer or concealment of property under § 727(a)(2)(A). In the following Letter Opinion, the Court will address the first count; namely, SPR's claims under § 727(a)(4)(A) for false oath. Because, as discussed below, the Court finds that summary judgment in favor of SPR is appropriate on this count, the Court need not address the remaining counts of the Complaint.

I. Background

The facts of this case are well known to the parties and the Court and need not be repeated in detail here. Pertinent facts, which are undisputed and determinative of this motion, are discussed below.

II. Summary Judgment Standard

Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). As the Supreme Court has indicated, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy, and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986) (citing FED. R. CIV. P. 1). "In deciding a motion for summary judgment, the judge's function is to determine if there is a genuine issue for trial." Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir. 1993).

The moving party bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir. 2001) (citing Celotex Corp., 477 U.S. at 323, 106 S. Ct. 2548). In determining whether a factual dispute warranting trial exists, the court must view the record evidence and the summary judgment submissions in the light most favorable to the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L.Ed.2d 202 (1986). Disputed material facts are those "that might affect the outcome of the suit under the governing law." Id. at 248, 106 S. Ct. 2505. Adispute is genuine when it is "triable," that is, when reasonable minds could disagree on the result. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L.Ed.2d 538 (1986) (citations omitted).

"Once the moving party establishes the absence of a genuine dispute of material fact, however, the burden shifts to the non-moving party to 'do more than simply show that there is some metaphysical doubt as to the material facts.'" In re Moran-Hernandez, 544 B.R. 796, 800 (Bankr. D.N.J. 2016) (quoting Matsushita, 475 U.S. at 586, 106 S. Ct. 1348). A party may not defeat a motion for summary judgment unless it sets forth specific facts, in a form that "would be admissible in evidence," establishing the existence of a genuine dispute of material fact for trial. FED. R. CIV. P. 56(e) (providing that in response to a summary judgment motion the "adverse party may not rest upon the mere allegations or denials of [its] pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine [dispute] for trial"). See also Fireman's Ins. Co. of Newark, N.J. v. DuFresne, 676 F.2d 965, 969 (3d Cir. 1982); Olympic Junior, Inc. v. David Crystal, Inc., 463 F.2d 1141, 1146 (3d Cir. 1972). If the nonmoving party's evidence is a mere scintilla or is not "significantly probative," the court may grant summary judgment. Liberty Lobby, Inc., supra, 477 U.S. at 249-250, 106 S. Ct. 2505. "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S. Ct. 1348.

III. Discussion of 11 U.S.C. § 727(a)(4)(A)

Section 727(a)(4) provides that the Court shall grant a debtor a discharge unless "the debtor knowingly and fraudulently, in or in connection with the case—made a false oath or account." Aparty objecting to discharge based on § 727(a)(4)(a) must prove an "actual intent on the part of the bankrupt to hinder, delay, and defraud his creditors." In re Georges, 138 F. App'x 471, 472 (3d Cir. 2005) (internal citation omitted). "Whether a debtor has made a false oath within the meaning of § 727(a)(4)(A) is a question of fact" and "[t]he objecting party has the burden of proof by a preponderance of the evidence." In re Park, No. 13-34203, 2016 WL 693492, at *3 (D.N.J. Feb. 18, 2016), aff'd, 682 F. App'x 88 (3d Cir. 2017) (citations omitted). Specifically, the moving party must show that: (1) the debtor made a false oath in connection with the case; (2) the oath related to a material fact; (3) the oath was made knowingly; and (4) the oath was made fraudulently. See In re Kennedy, 566 B.R. 690, 720 (Bankr. D.N.J. 2017) (citing In re Retz, 606 F.3d 1189, 1197 (9th Cir. 2010)).

A. Debtors Made a False Oath

Federal Rule of Bankruptcy Procedure 1008 provides that "[a]ll petitions, lists, schedules, statements, and amendments thereto shall be verified or contain an unsworn declaration as provided in 28 U.S.C. § 1746."¹ "An 'oath' under § 727(a)(4)(A) of the Bankruptcy Code therefore includes the unsworn declarations contained in the petition." In Re Corona, No. 08-15924 (DHS), 2010 WL 1382122, at *7 (D.N.J. Apr. 5, 2010) (collecting cases); see also In re Kennedy, 566 B.R. at 720 n.156 ("Signing the petition and certifying that the statements therein are true under penalty of perjury constitutes an oath under [§ 727(a)(4)(A)]") (citations omitted). A material omission can also be a false oath. See In re Kennedy, 566 B.R. at 720; In re Herchakowski, No. ADV 11-1679, 2013 WL 620291, at *5 (Bankr. D.N.J. Feb. 19, 2013), supplemented, No. 10-49287, 2013 WL 1867991 (Bankr. D.N.J. Apr. 29, 2013).

In its motion, SPR asserts that Debtors have made "several false oaths." For purposes of this Letter Opinion, the Court will focus on Debtors' omission of their ownership interest in Online Ventures, USA, LLC ("Online Ventures") in their bankruptcy schedules. It is undisputed that Debtors were owners of Online Ventures USA, LLC. Debtors concede this fact in a previous deposition, and admit this allegation in their response to SPR's motion. See Deposition Transcript p. 238:25 - 239:2, ECF No. 53-14; Response to Statement of Material Facts ¶ 97, ECF No. 90-2. Nor do Debtors deny that ownership of this entity is not listed in Debtors' bankruptcy schedules. This omission constitutes a false oath. See, e.g., In re Elian, 659 F. App'x 104, 106 (3d Cir. 2016) (affirming bankruptcy court's finding of false oath where debtor did not disclose assets on his initial schedules); In re Corona, 2010 WL 1382122, at *8 ("These omissions equate to 'false oaths' since, in failing to disclose them, the Defendant is misrepresenting the nature of her estate to creditors."); In re Singh, 433 B.R. 139, 154 (Bankr. E.D. Pa. 2010) (collecting cases).

B. Debtor's False Oath Was Made Knowingly and with Fraudulent Intent

Omissions or false statements which are the result of an honest mistake or oversight will not be sufficient to deny debtor a discharge. See, e.g., In re Spitko, 357 B.R. 272 (Bankr. E.D. Pa. 2006). Instead, the statute requires a knowing and fraudulent intent. Here, it is undisputed that Debtors knowingly omitted Online Ventures from their bankruptcy petition. Debtors were undeniably aware that they owned this entity—as evidenced by the fact that they closed its bank account the same day as filing the Petition. Further, in their response to SPR's motion, Debtors assert that they intentionally did not list Online Ventures in the bankruptcy petition based on advice they had received from their accountant. Therefore, the knowingly element of § 727(a)(4)(A) is satisfied, and the Court turns its inquiry to whether Debtors possessed a fraudulent intent.

In determining whether a debtor has acted with fraudulent intent, there is a substantial body of case law—including case law from within the Third Circuit Court of Appeals—affirming that fraudulent intent for purposes of §727(a)(4)(A) can be inferred from a party's conduct and circumstantial evidence. See In re DiLoreto, 266 F. App'x 140, 145 (3d Cir. 2008) (determining that sufficient circumstantial evidence existed to support the bankruptcy court's denial of a discharge); Rosen v. Bezner, 996 F.2d 1527, 1534 (3d Cir. 1993) ("A party's subjective intent can be gleaned from inferences drawn from a party's course of conduct."); see also In re Kennedy, 566 B.R. at 720 ("Fraudulent intent can be inferred where no reasonable explanation for the omission is provided.") (citation omitted); Scimeca v. Umanoff, 169 B.R. 536 (D.N.J. 1993), aff'd sub nom. In re Scimeca, 30 F.3d 1488 (3d Cir. 1994) (holding that for purposes of denial of discharge for making false oath, fraudulent intent can be established by circumstantial evidence or by inferences drawn from course of conduct as established by evidence); In re Spitko, 357...