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Bordonardo v. Fido's Fences, Inc.

United States District Court, E.D. New York

January 20, 2017

James J. Bordonaro, Debtor, Appellant,
v.
Fido's Fences, Inc., Creditor, Appellee.

          MEMORANDUM AND ORDER

          JOSEPH F. BIANCO United States District Judge

         James J. Bordonaro (“Bordonaro” or “debtor”) appeals from an order entered by the United States Bankruptcy Court for the Eastern District of New York in the underlying bankruptcy proceeding. After a trial held on May 12, 2015 and September 17, 2015, the Honorable Robert E. Grossman issued a written opinion dated January 12, 2016 in which he denied the debtor's discharge pursuant to 11 U.S.C. §§ 727(a)(3) and (a)(4)(A). In re Bordonaro, 543 B.R. 692, 703 (Bankr. E.D.N.Y. 2016). Judge Grossman found that creditor Fido's Fences (“creditor”) proved by a preponderance of the evidence that debtor “concealed, destroyed, mutilated, falsified, or failed to keep or preserve records, without justification when [debtor] (i) produced redacted bank statements without justification and (ii) failed to produce his log of cash transactions, despite order by the Court.” Id. at 695. He further found that the debtor “knowingly and fraudulently made a false oath in the . . . bankruptcy case when [debtor], under penalty of perjury, misstated his income and assets and misrepresented that [creditor] held an unsecured claim rather than a secured claim on his Schedules and Statement of Financial Affairs.” Id. Judge Grossman concluded that these were sufficient grounds to deny the discharge. Id.

         This Court holds that the Bankruptcy Court did not clearly err in concluding that debtor (1) failed to produce the required documents without adequate justification under Section 727(a)(3), and (2) fraudulently made materially false statements on the original petition in violation of Section 727(a)(4)(A). Moreover, in light of these findings, the Bankruptcy Court correctly denied debtor's discharge. Accordingly, the Order of the Bankruptcy Court dated January 12, 2016 denying debtor's discharge is affirmed.

         I. Background

         A. Facts

         The following facts are taken from the record of the Bankruptcy Court in the underlying proceeding.[1]

         Debtor owned and operated Advance Graphics Design and Engineering and Advance Graphics Design and Development Corp. (collectively “Advance Graphics”). (R2 at 86-87.) In his capacity as owner and operator of this business, debtor became experienced in business management, including the balancing of accounts and business accounts. (Id. at 87.) Debtor also worked as an adjunct professor at the New York Institute of Technology and owned real property in Bay Shore, New York located at 1707 North Gardiner Drive (“1707 North Gardiner”) and 1705 North Gardiner Drive (“1705 North Gardiner”). (Id. at 87.)

         In March 2013, creditor obtained a money judgment against Advance Graphics and debtor individually in the Supreme Court of New York, County of Nassau, due to debtor's non-payment pursuant to the terms of a Stipulation of Settlement dated October 12, 2012. (Id.) Creditor then filed an Execution Against Property with the Suffolk County Sherriff's Office to collect the amount owed. (Id.) As a result, 1705 North Gardiner was scheduled for auction on January 21, 2014.

         B. Bankruptcy Proceedings

         1. The Original Petition

         On January 20, 2014 (the “Petition date”), the day before the auction, debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code (the “Petition”) (R1 at 5-57), which stayed the auction (R2 at 88). With the Petition, he filed various schedules, a statement of financial affairs (“SOFA”), and a Form 22A Chapter 7 Statement of Current Monthly Income and Means-Test Calculation (“Means Test”). He read all of these documents before signing them (R2 at 88) and signed them attesting to their accuracy under penalty of perjury (R1 at 7, 34, 42, 55; R2 at 88).

         On Schedule A of the Petition, debtor listed both of his properties as real property in which he held a legal interest but indicated that there was $0.00 in secured claims on 1705 North Gardiner. (R1 at 12; R2 at 88.) On Schedule B, he indicated that he maintained a business checking account at New York Commercial Bank with a balance of $100. (R1 at 13.) He listed only Nationstar Mortgage as a creditor holding a secured claim on Schedule D. (R1 at 17.) Creditor was not listed on this schedule as a secured creditor. (Id.; R2 at 88.) Instead, it was listed on Schedule F as a creditor holding an unsecured priority claim in the form of a Money Judgment in the amount of $150, 175.14. (R1 at 24.) With respect to his income, debtor indicated on Schedule I that he was self-employed, earned $1, 995.58 in net income from operating a business, and received $925.00 a month in food stamps, for a total monthly income of $2, 920.58. (R1 at 30.) He noted on Schedule J that his monthly expenses were $2, 927.80, for a net monthly income of -$7.22. (Id. at 33.)

         On his SOFA, debtor indicated that his sole source of income was the operation of his business and that his income from that business was $22, 255 in 2012, $23, 000 in 2013, and $3, 100 in 2014 prior to the Petition Date. (Id. at 35.) He noted that creditor's lawsuit had been “[s]ettled per [s]tipulation” (id. at 36), that none of his property had been attached, garnished, or seized within one year of the Petition Date (id.), and that he had no ownership interest in any business (id. at 40). Debtor listed small business checking and savings accounts with Capital One as closed financial accounts, with $200 in checking and $50 in savings as of March 2013. (Id. at 38.)

         Finally, on debtor's Means Test, he indicated that the monthly gross receipts from the operation of his business were $3, 353.17, monthly expenses were $1, 390.50, for a total income of $1, 962.67, or $23, 552.05 per year. (Id. at 50-51.)

         2. Creditor's Complaint and Debtor's Amendments to the Petition

         Creditor filed a complaint in the Bankruptcy Court on October 2, 2014, asserting that debtor's discharge should be denied due to debtor's failure to keep adequate records and false statements he made in the Petition that violated 11 U.S.C. § 727(a). (R2 at 4.) Creditor alleged that debtor made the following false statements, among others:

• Creditor was listed as an unsecured creditor when debtor knew creditor's debt was secured.
• Debtor's year-to-date income for 2014 was listed as $2, 920.58 and $3, 100 despite a bank deposit of $8, 621.00 during that period.
• The SOFA reported that debtor had no income other than from employment or operation of a business even though debtor also collected rental income.
• The SOFA stated that debtor had no interest in any business, despite his ownership of Advance Graphics.
• The SOFA stated that none of debtor's real property had been attached, garnished, or seized in the past year, even though creditor obtained a lien during that period.

(R2 at 7-18.)

         On October 28, 2014, following the filing of the complaint, debtor amended Schedules A, D, F, I, and J, the SOFA, and the Means Test (the “First Amended Schedules”), signing the amendments under penalty of perjury and attesting to their accuracy. (R1 at 350.) He amended Schedule A to reflect that there was a secured claim on 1705 North Gardiner in the amount of $150, 175.14 (id. at 352) and Schedules D and F to reflect that creditor held a secured claim for that amount (id. at 353, 354-59). On Schedule I, debtor amended the following entries:

(1) employment information, to show debtor was not employed (id. at 360);
(2), (4), and (7), to show a monthly income of $1, 760.24 rather than ...

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