Georgia Bankruptcy Blog

The Cradle Company v. Matos (In re Matos), 2008 WL 596744, No. 07-12628 (11th Cir. March 6, 2008).  The creditor sought an order denying the debtors' discharge for failure to comply with a Court Order.  The Bankruptcy Court found that the creditor did not establish the requirements of denial of discharge, and the District Court affirmed.  The creditor appealed to the Eleventh Circuit -

Sections 727(d)(3) and (a)(6)(A) provide for revocation of a discharge where “the debtor has refused, in the case-(A) to obey any lawful order of the court, other than an order to respond to a material question or to testify....” 11 U.S.C. §§ (a)(6)(A), (d)(3). To obtain revocation on this ground, Cadle was required to show that the Debtors willfully and intentionally refused to obey a court order. See Farouki v. Emirates Bank Intern., Ltd., 14 F.3d 244, 249 (4th Cir.1994) (citation omitted). Thus, a mere failure to obey the order, resulting from inadvertence, mistake, or inability to comply, is insufficient; the party seeking revocation must demonstrate some degree of volition or willfulness on the part of the debtor. Id. In considering whether to grant revocation of a discharge, a bankruptcy court should consider these factors: “[1] the detriment to the proceedings and the dignity of the court against the potential harm to the debtor if the discharge is denied ... [;][2] the intent behind the bankrupt's acts-were they wilful or was there a justifiable excuse; [3] was there injury to the creditors; and [4] is there some way the bankrupt could make amends for his conduct.” In re Jones, 490 F.2d 452, 456 (5th Cir.1974) (citation omitted)

… However, the bankruptcy court found that the late production of documents, alone, was insufficient to show a wilful or intentional refusal to follow the August 8th order because Cadle had not shown that the Debtors refused to obey, or simply ignored, the August 8th order. … , Cadle pointed to no action by the Debtors evincing an attempt to avoid production entirely, or to conceal assets, relating to the belated document production. Indeed, the bankruptcy court found that Cadle had not shown some of the late-produced documents were in the Debtors' possession, or control for that matter, when the deadline elapsed. Finally, the bankruptcy court noted that the late production of documents resulted in no injury to creditors or detriment to the bankruptcy proceedings. Simply put, on this record, we cannot say the bankruptcy court's factual findings leave us with “the definite and firm conviction that a mistake has been made” and thus they do not constitute clear error.

Hello,
I am a landlord/owner of a NNN leased building by Company X who filed for reorganization bankruptcy on 11-17-07. They were given until May 13, 2008 to assume the unexpired leases. They made their "effective date" May 20, 2008. The judge decreed and ordered the new entity Company B, a subsidiary of Company C who also was the parent company of Company X. The judge ordered that within 5 days of the effective date, that the undisputed pre petition amounts were to be paid to the unexpired lease holders( me). They owe 1/2 month rent @ $6068 and the property taxes for the entire year as the bill for 2007 is not due until Jan 31, 2008. They paid the post petition taxes, 6 weeks 0f 2007 as well as post petition rent although late every month.
As they have not followed the judge's order and paid us the undisputed amounts owing within 5 days , it has been almost 1 month now, is there anything we can do to plead to the court for relief or threaten to have them pay or vacate? The property taxes have now accrued penalties and interest and we have had to pay 1k last month to stop litigation, and probably another 1k if we dont receive the money by the end of the month. I believe there will also be an additional 18% penalty for the taxes being 6 months late. Company B( our new tenant) is disputing the penalties and interest although the lease specifically states that I am to provide them with the tax assessment in June when I receive it and that they must pay the property taxes for the entire year by Jan 31, 2008 in this instance two weeks prior to that date to give the landlord time to use those funds to pay the taxes to the tax authority. There is now a 25k tax lien on our property, they have encumbered the property, which under the lease they cannot do. They have also breached by not paying property taxes and by entering bankruptcy was also listed in the lease as a default in and of itself unless it was disposed of within 60 days. "They have employees on vacation" as an excuse for their non payment that was due within 5 days of May 20th. They dont follow the judge's order as he knew we had all waited this time. This company had 2200 stores to decide on which leases they would keep, unfortunately they decided to keep ours and our bank is now threatening to call the note or put us in the default rate of 18% on 1,250,000 instead of the 5.78 which we have now. We have also paid 25k in atty fees so far so they owe us well over 60k and they wont follow the judges order to pay us the bare minimum, the property taxes and the pre petition rent. How can they blatantly ignore the judge's order and intent as we continue to be damaged? I have asked our atty what we can do and he says we would have to hire an atty in VA and it would cost 10-15k to fight the fight for the entire amount they owe us. Otherwise we have to reach a settlement on the atty fees, which they claim they dont have to pay???? They dont read or follow leases at all. What can I do? I have been held hostage now for 8 months while they have had right to quiet enjoyment of my property while encumbering it and owing me over 60k. I dont think that reorganization bankruptcy should last 8 months, when the creditors are being severely damaged. Our atty acts like all is just fine, he is getting paid and we are getting screwed. Very frustrated.
Help me please?
Thanks