Wilson v. Key ( 1997 )


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  • UNPUBLISHED
    UNITED STATES COURT OF APPEALS
    FOR THE FOURTH CIRCUIT
    In Re: DALE ALAN KEY,
    Debtor.
    DAVID S. WILSON; SMITH MOUNTAIN
    REALTY, INCORPORATED, a Virginia
    No. 97-1408
    corporation,
    Plaintiffs-Appellants,
    v.
    DALE ALAN KEY,
    Defendant-Appellee.
    Appeal from the United States District Court
    for the Western District of Virginia, at Lynchburg.
    Jackson L. Kiser, Senior District Judge.
    (CA-96-16-L, BK-95-271-WA-1-7, AP-95-27-A)
    Argued: October 2, 1997
    Decided: December 11, 1997
    Before MICHAEL, Circuit Judge, BUTZNER,
    Senior Circuit Judge, and MAGILL, Senior Circuit Judge of the
    United States Court of Appeals for the Eighth Circuit,
    sitting by designation.
    _________________________________________________________________
    Affirmed by unpublished per curiam opinion.
    _________________________________________________________________
    COUNSEL
    ARGUED: George Irving Vogel, II, VOGEL & CROMWELL,
    L.L.C., Roanoke, Virginia, for Appellants. William Floyd Schneider,
    SMITH & FALCONE, Lynchburg, Virginia, for Appellee. ON
    BRIEF: James Robert Cromwell, VOGEL & CROMWELL, L.L.C.,
    Roanoke, Virginia, for Appellants. W. Alan Smith, Jr., SMITH &
    FALCONE, Lynchburg, Virginia, for Appellee.
    _________________________________________________________________
    Unpublished opinions are not binding precedent in this circuit. See
    Local Rule 36(c).
    _________________________________________________________________
    OPINION
    PER CURIAM:
    David S. Wilson appeals a judgment of the district court that
    affirmed the decision of a bankruptcy court discharging the debt Dale
    Alan Key owed him. We affirm.
    This claim arises out of the 1993 sale of a real estate brokerage
    business, Smith Mountain Realty, Inc. (SMR), by Wilson to Key. Key
    paid $25,000 in cash and signed a purchase money note for the
    $60,000 balance, secured by an assignment of SMR's stock and
    assets. In January of 1994, Key defaulted on the note. Wilson sued
    Key and on February 9, 1995, obtained a judgment against him for
    $64,867 plus interest, costs, and attorney fees. Key filed for bank-
    ruptcy on February 22, 1995. Key turned the stock and tangible assets
    of SMR over to Wilson, as ordered, on or before March 8, 1995.
    Wilson contested the discharge of Key's liabilities under 
    11 U.S.C. § 727
    (a)(3), (a)(4)(A), and (a)(5). Wilson also claimed that the debt
    owed him by Key should be excepted from discharge pursuant to 
    11 U.S.C. § 523
    (a)(4) and (a)(6). After a trial, the bankruptcy judge dis-
    missed Wilson's complaint and granted Key a discharge of his debts
    in bankruptcy. Wilson appealed to the district court. The district judge
    remanded the action to the bankruptcy judge to make specific findings
    of fact. The bankruptcy judge made findings of fact, to which Wilson
    objected. After a hearing on Wilson's objections, the bankruptcy
    judge declined to amend his findings of fact.
    2
    The district judge then found that the bankruptcy judge's findings
    were not clearly erroneous and affirmed the denial of Wilson's
    motion and Key's entitlement to a discharge in bankruptcy. Wilson
    now appeals.
    While we review the district court's judgment de novo, we review
    the bankruptcy judge's findings of fact for clear error and his conclu-
    sions of law de novo. See In re Tudor Assocs., Ltd., II, 
    20 F.3d 115
    ,
    119 (4th Cir. 1994). The bankruptcy judge held both a trial of this
    case and a later hearing in order to make findings of fact. We review
    his findings giving "due regard . . . to the opportunity of the bank-
    ruptcy court to judge the credibility of the witnesses." Bankr. Rule
    8013. Before addressing Wilson's three assignments of error, we note
    that the bankruptcy code favors discharge in bankruptcy and that the
    code's exceptions to discharge are narrowly construed. See generally
    6 Collier on Bankruptcy ¶ 727.01[4], at 727-12 (15th ed. rev. 1997).
    I
    Wilson alleges that he proved by a preponderance of the evidence
    that Key knowingly and fraudulently made a false oath and that Wil-
    son is therefore entitled to relief under 11 U.S.C.§ 727(a)(4)(A). To
    deny discharge under this section of the bankruptcy code, Wilson
    must prove that Key "made a statement under oath which he knew to
    be false, and . . . made the statement willfully, with intent to defraud."
    Williamson v. Fireman's Fund Ins. Co., 
    828 F.2d 249
    , 251 (4th Cir.
    1987). "Whether a debtor has made a false oath within the meaning
    of § 727(a)(4)(A) is a question of fact." Id. The bankruptcy judge
    reviewed 11 statements that Wilson alleged were false and found that
    Wilson failed to prove the requisite intent to deceive. The bankruptcy
    judge further declined to infer fraudulent intent from the facts and cir-
    cumstances of the case.
    II
    Wilson argues that he proved by a preponderance of the evidence
    that Key did not satisfactorily explain the difference between his 1994
    income and his stated annual expenses and that Wilson is therefore
    entitled to relief under 
    11 U.S.C. § 727
    (a)(5). To merit a denial of dis-
    charge under this section, Wilson must prove that Key "has failed to
    3
    explain satisfactorily . . . any loss of assets or deficiency of assets to
    meet the debtor's liabilities." 
    11 U.S.C. § 727
    (a)(5). The bankruptcy
    judge found that Wilson failed to provide evidence as to specific
    missing funds and that the fact that Key's income exceeded his
    expenditures did not prove that Key was secreting assets. As the
    bankruptcy judge noted, "Key's personal and banking records were
    introduced, and there was no evidence of any missing funds. Key tes-
    tified at the hearing, and the court found that such testimony was
    credible." (JA 249)
    III
    Wilson also alleges that he proved by a preponderance of the evi-
    dence that Key's withdrawal of funds and transfer of assets from
    SMR was contrary to Wilson's perfected security interest and that
    Wilson is therefore entitled to relief under 
    11 U.S.C. § 523
    (a)(6). To
    establish that Key's debt to Wilson should be excepted from dis-
    charge under this section Wilson must prove that Key willfully and
    maliciously injured Wilson's security interest in the property of SMR.
    
    11 U.S.C. § 523
    (a)(6). Wilson must therefore prove that Key acted
    deliberately and in knowing disregard of Wilson's rights. See In re
    Stanley, 
    66 F.3d 664
    , 667 (4th Cir. 1995). The bankruptcy judge
    found that Key traded some of SMR's equipment but that there was
    no evidence that the trade was for less than fair value. The bankruptcy
    judge further found that Key's withdrawals of funds from SMR were
    in line with compensation paid him by SMR before he took over the
    business, were for legitimate business purposes, were not extravagant,
    and were not made with the intent to defraud.
    IV
    We conclude that the bankruptcy judge's findings are not clearly
    erroneous. Its decision to discharge Key's debts, including that owed
    Wilson, properly applied pertinent sections of bankruptcy law. We
    affirm the judgment of the district court upholding the bankruptcy
    court's discharge.
    AFFIRMED
    4
    

Document Info

Docket Number: 97-1408

Filed Date: 12/11/1997

Precedential Status: Non-Precedential

Modified Date: 10/30/2014