Leyva v. Braziel (In re Braziel)

653 B.R. 537

IN RE: Marcus Anthony BRAZIEL, Debtor.

Joanna Leyva, Individually and as Representative of the Estate of Leilah Hernandez,

Deceased, Nathan Hernandez, Rodolfo Trejo, Gary Griffith,Sharon Griffith, Rabecca Griffith, as next friend of A.G. and Z.G.,minor children, and Mary Brown, Individually and as Representative of the Estateand Wrongful Death Beneficiary of Kameron Brown, Deceased, Plaintiffs, v. Marcus Anthony Braziel, Defendant.

Case No.: 21-50170-rlj7

Adversary No. 22-05000

United States Bankruptcy Court, N.D. Texas, Lubbock Division

Entered July 10, 2023

Signed July 7, 2023

Sam C. Gregory, Lubbock, TX, for Plaintiffs.

Joseph Edwin Price, J. Edwin Price, P.C., Lubbock, TX, for Defendant.

MEMORANDUM OPINION

Robert L. Jones, United States Bankruptcy Judge

On October 8, 2016, Marcus Braziel illegally sold an "AR-15 style" rifle to Seth Ator. Just less than three years later, on August 31, 2019, Ator used the rifle in a mass shooting in Midland and Odessa, Texas, killing seven people and wounding twenty-five more. In the aftermath of the shooting, the plaintiffs, who are or represent victims of the shooting, sued Braziel in Ector County, Texas, asserting claims on negligence-based theories of liability. Braziel, who pleaded guilty to criminal charges of illegally selling firearms without a license and tax evasion, filed this chapter 7 bankruptcy case to discharge any civil liabilities he may have as a result of the state-court claims against him. The bankruptcy filing stayed the suit in Ector County.

The plaintiffs filed this adversary proceeding in Braziel's chapter 7 bankruptcy case. The plaintiffs contend that Braziel's conduct in connection with his bankruptcy case disqualifies him from receiving a discharge of his debts in bankruptcy. They assert three causes of action against Braziel: first, they contend that Braziel should be denied the bankruptcy discharge under § 727(a)(2) because he transferred property within the year prior to his bankruptcy filing with intent to "hinder, delay, or defraud a creditor"; second, they submit the discharge must be denied under § 727(a)(4) because Braziel "knowingly and fraudulently" made false oaths during his case; third, they allege that his illegal sale of the assault rifle to Ator constituted a "willful and malicious injury" to the plaintiffs, which bars the discharge of their potential claims under § 523(a)(6) of the Code.¹ Braziel contests the plaintiffs' claims and asks that the discharge be granted.

As set forth below, the Court concludes that transfers made by Braziel in the year prior to his bankruptcy filing were not made to hinder, delay, or defraud his creditors; the Court further concludes that though Braziel failed to affirmatively disclose several transfers in his bankruptcy schedules, such "omissions" were not knowingly and fraudulently made. For the cause under § 523(a)(6), the Court finds that Braziel's sale of the assault rifle almost three years prior to the shooting does not implicate the dischargeability exception of § 523(a)(6).

The Court therefore denies the relief requested by the plaintiffs.

I. Background

A.

Marcus Braziel assembled and sold AR-style rifles and other firearms without holding a federal license to engage in the business of manufacturing and selling firearms. Between approximately April 2014 and October 2017, Braziel purchased 94 firearms from multiple dealers. Joint Pre-Trial Order, ECF No. 34 at 6 ¶ 19.² At least 70 of the firearms were then sold by Braziel.³ Id.

On October 8, 2016, Braziel sold a firearm to Seth Ator. Id. at 6 ¶ 17. Under federal law, Seth Ator was prohibited from buying or possessing a weapon due to a disqualifying mental health condition. Id. at 6 ¶ 16. Braziel did not perform a background check, as required for federally licensed firearms dealers. Had he done so, Braziel would have known that Seth Ator was disqualified from purchasing or possessing the weapon. Id. at 7 ¶ 23.

On August 31, 2019, Seth Ator, in a mass shooting, killed seven people and injured twenty-five more. Id. at 6 ¶ 15.

After the shooting, a federal criminal investigation began. Id. at 7 ¶ 27. Braziel testified here that the publicity of the investigation motivated the Braziels, he and his wife Vanessa, to relocate. They sold their residence and purchased a smaller home in a cash deal with the equity from their prior residence ($123,511) and an additional $85,000 in cash. See Case No. 21-50170, ECF No. 20 at 9. The Braziels were scaling back—their prior house sold for $400,000 with a mortgage of over $247,000; the new home cost $210,000 and was purchased without a mortgage. Def. Ex. D-2 at 22; Pl. Exs. P-18 and P-19. Both the sale of their prior home and purchase of the new one took place on November 8, 2019. ECF No. 34 at 10 ¶ 49.

The criminal investigation ultimately led to federal criminal charges against Braziel. The criminal charges were brought under Cause No. 5:20-CR-00128-H, U.S. District Court, N.D. of Texas, Lubbock Division. Id. at 7 ¶ 28. Braziel was charged with "Dealing and Manufacturing Firearms Without a License" in violation of 18 U.S.C. §§ 922(a)(1)(A), 923(a), and 924(a)(1)(D) and with "Subscribing to a False Tax Return" in violation of 26 U.S.C. § 7206(1). Id. at 7 ¶¶ 29-30. Braziel pleaded guilty to both charges, and his punishment included two years imprisonment. Id. at 7 ¶ 31.

In August 2020, victims of the shooting initiated a lawsuit in the 70th District Court of Ector County, Texas, under Cause No. A-20-08-0905-CV, against multiple defendants including Braziel. Id. at 7 ¶ 24. The state court suit alleges negligence, negligence per se, gross negligence, and public nuisance. Id. Braziel filed bankruptcy on November 2, 2021, thereby invoking the automatic stay that halted the plaintiffs' prosecution of their claims against Braziel in the state-court action. Id. at 3 ¶ 6, 7 ¶ 26.

After entering his guilty plea, Braziel surrendered himself into custody on April 7, 2021. Id. at 7 ¶ 32. In his testimony at trial of this matter, Braziel clarified the relevant dates of his incarceration. After his surrender, he was placed in El Reno Federal Correctional Institution. On December 29, 2021, he was released to a halfway house in Lubbock, Texas. He remained there until May 25, 2022, when he moved to home confinement. During home confinement, Braziel lived with his then ex-wife and their daughter. Braziel's confinement was relegated to "supervised release" on August 5, 2022.

Less than one month after Braziel began his time in El Reno, his wife, Vanessa, filed for divorce.⁴ See id. at 8 ¶ 38. The Braziels were married in August 2000 and lived together continuously until Braziel reported to federal prison in April 2021. Id. at 8 ¶ 39. Braziel testified that Vanessa threatened him with divorce several times but that he didn't take those threats seriously. He said he was surprised by the divorce petition. The divorce proceedings took place while Braziel was in prison. For the division of their marital property, Vanessa received property exceeding $380,000 in value, while Braziel received property valued at approximately $145,000. The final divorce decree, entered July 21, 2021, comported with a mediated settlement agreement. Id. at 9 ¶ 42.

B.

As stated, Braziel filed his bankruptcy petition on November 2, 2021—after the divorce but prior to being released from prison. Braziel's original petition and schedules did not disclose several items, including the sale of his home, payments to his criminal attorney for representation in the federal criminal case, the sale of a 2005 Lexus LS 430, the trade-in of a 2006 Lexus GX470 toward the purchase of a 2018 Toyota Rav4, the transfer of $49,405.97 from a joint brokerage account to Vanessa, the posting (and refund) of an appearance bond in his criminal case, payments to his civil attorney for representation in the state court action, the closure of a joint brokerage account, the payment of court costs and fines, a contribution to the Texas County & District Retirement System, and dividend income he received.

On December 14, 2021, Braziel attended his section 341 meeting of creditors telephonically and gave sworn testimony. There, he stated he had read his bankruptcy petition and his schedule of assets and debts and statement of financial affairs (collectively, "Schedules") filed in this case. When asked, he testified the documents were correct and that no changes needed to be made. During the meeting, however, he disclosed that there was also an additional car, a 2011 Camry, that he transferred within four years prior to bankruptcy.⁵ Joint Pre-Trial Order, ECF No. 34 at 12 ¶ 59.

C.

On February 11, 2022, the plaintiffs to the state-court suit filed this adversary case against Braziel. ECF No. 1. The plaintiffs ask the Court to deny Braziel's discharge under § 727(a)(2) for fraudulent transfers and § 727(a)(4)(A) for false oaths.⁶ ECF No. 28. Alternatively, the plaintiffs ask the Court to hold that any debt owed them is nondischargeable under § 523(a)(6) as a debt arising from a willful and malicious injury caused by Braziel. Id.

Potential omissions became apparent at Vanessa Braziel's deposition on August 4, 2022. Joint Pre-Trial Order, ECF No. 34 at 12 ¶ 60. The same is true of Braziel's deposition on August 5, 2022, which was continued to November 30, 2022. Id. at 12-13 ¶ 61.

On November 16, 2022, Braziel filed an amended petition and Schedules. Case No. 21-50170, ECF Nos. 18, 19, 20. After his deposition on November 30, 2022, Braziel filed a second amended statement of financial affairs on December 2, 2022 to add dividend income that he had previously failed to list. Case No. 21-50170, ECF No. 21.

D.

For their cause under § 727(a)(2), plaintiffs contend that the division of property in the Braziels' divorce was a transfer made with the intent to defraud creditors and thus Braziel's discharge must be denied. They also contend that omissions in Braziel's Schedules amount to a false oath...