Leonid Shifrin v. United States Bankruptcy Court for the District of Colorado ( 2017 )

FILED
U.S. Bankruptcy Appellate Panel
of the Tenth Circuit
NOT FOR PUBLICATION *
September 20, 2017
UNITED STATES BANKRUPTCY APPELLATE PANEL
Blaine F. Bates
OF THE TENTH CIRCUIT Clerk
_________________________________
IN RE LEONID SHIFRIN, BAP No. CO-17-012
Debtor.
__________________________________
HARVEY SENDER, Chapter 7 Trustee Bankr. No. 12-22722
and STATE OF COLORADO ex rel. Adv. No. 14-01169
CYNTHIA H. COFFMAN, ATTORNEY Chapter 7
GENERAL,
Plaintiffs - Appellees,
OPINION
v.
LEONID SHIFRIN,
Defendant - Appellant.
_________________________________
Appeal from the United States Bankruptcy Court
for the District of Colorado
_________________________________
Submitted on the briefs. **
_________________________________
Before CORNISH, SOMERS, and JACOBVITZ, Bankruptcy Judges.
_________________________________
*
This unpublished opinion may be cited for its persuasive value, but is not
precedential, except under the doctrines of law of the case, claim preclusion, and issue
preclusion. 10th Cir. BAP L.R. 8026-6.
**
The parties did not request oral argument, and after examining the briefs and
appellate record, the Court has determined unanimously that oral argument would not
materially assist in the determination of this appeal. See Fed. R. Bankr. P. 8019(b).
CORNISH, Bankruptcy Judge.
_________________________________
The debtor appeals the bankruptcy court’s denial of a request for relief from an
order pursuant to Federal Rule of Bankruptcy Procedure 9024. 1 We conclude the
bankruptcy court did not abuse its discretion in denying the requested relief, and therefore
we affirm.
I. BACKGROUND
Leonid Shifrin (the “Appellant”) filed his Chapter 7 bankruptcy case on June 17,
2012 (the “Petition”). Prior to filing the Petition, Appellant operated a mortgage
brokerage and lending business. The State of Colorado (the “State”) obtained a judgment
against Appellant in District Court for the City and County of Denver (the “State Court”)
for violating the Colorado Consumer Protection Act. 2 After Appellant allegedly violated
the terms of the judgment prohibiting him from conducting a mortgage business, the State
Court entered an order imposing civil sanctions and freezing all joint bank accounts held
by Appellant and several family members (the “Sanctions Order”). 3 Of relevance to this
appeal is the State Court’s determination as to the ownership of several entities over
which Appellant maintained financial control (the “Entities”). In the Sanctions Order, the
State Court found “the assets and property of [the Entities] . . . , and joint accounts of
1
Fed. R. Bankr. P. 9024 makes Fed. R. Civ. P. 60 applicable to bankruptcy cases.
2
Colo. Rev. Stat. §§ 6-1-101 to -115 (2008).
3
Order and Amendment to Judgment at 2, in Appellant’s App. at 243.
2
Mark Shifrin, Sofia Shifrin, and Qully Shifrin with [Appellant] are the property of
[Appellant].” 4
Appellant filed the Petition approximately one month after entry of the Sanctions
Order. Harvey Sender was appointed as trustee (the “Trustee”) in Appellant’s bankruptcy
case. After numerous requests for documents from Appellant went unanswered, 5 the
Trustee and the State (together the “Appellees”) filed an adversary proceeding, seeking a
denial of Appellant’s discharge pursuant to 11 U.S.C. § 727(a). 6 The Appellees moved
for summary judgment and the bankruptcy court entered an order denying Appellant’s
discharge pursuant to §§ 727(a)(2)(A) and (B), (a)(4)(A) and (D), (a)(3), and (a)(5) on
October 19, 2015 (the “Summary Judgment Order”). 7 The Appellant did not appeal the
Summary Judgment Order.
Subsequently, Sofia Shifrin, Appellant’s mother and a defendant in the State Court
matters, sought relief from the Sanctions Order for improper service. When the State
Court denied Mrs. Shifrin’s request for relief, she appealed to the Colorado Court of
Appeals. On appeal, the Colorado Court of Appeals reversed and remanded the matter to
the State Court, holding Mrs. Shifrin was improperly served with notice of the State
4
Id., in Appellant’s App. at 243.
5
The Trustee requested documents from Appellant at the § 341 meeting of creditors
and through “a Rule 2004 subpoena for documents.” Appellant never produced any
documents in response to these requests. Affidavit of Harvey Sender at 1-2, in Appellant’s
App. at 371-72.
6
All future references to “Code,” “Section,” and “§” are to the Bankruptcy Code,
Title 11 of the United States Code, unless otherwise indicated.
7
Order, in Appellant’s App. at 615.
3
Court’s hearing on sanctions. 8 In light of the Colorado Court of Appeal’s reversal,
Appellant filed a motion in the State Court for partial relief from the Sanctions Order, 9
which the State Court granted. 10
Armed with the rulings from the Colorado Court of Appeals and State Court,
Appellant filed the Request for Relief from Court Order on Plaintiffs’ Motion for
Summary Judgment Dated October 9, 2015 Pursuant to F.R.C.P. 60(b) 11 (the “60(b)
Motion”) a year and two months after the bankruptcy court entered the Summary
Judgment Order. Appellant argued the bankruptcy court should grant relief from the
Summary Judgment Order pursuant to Federal Rule of Civil Procedure 60(b)(5) and (6). 12
Appellant stated that the bankruptcy court relied on the determination the Entities
belonged to Appellant in the Sanctions Order as the basis for the denial of Appellant’s
discharge.
8
Order Reversed and Case Remanded with Directions, in Appellant’s App. at 657.
9
Motion to Reconsider Pursuant to Rule 60(b) and Order from the Colorado Court
of Appeals Case 14CA2157 to Partially Set Aside Courts Order Entered October 8, 2012,
in Appellant’s App. at 671.
10
Order: Motion to Reconsider Pursuant to Rule 60(b) and Order from the
Colorado Court of Appeals Case 14CA2157 to Partially Set Aside Courts Order Entered
October 8, 2012, in Appellant’s App. at 627. The State filed a motion in the State Court
to clarify this order because it is unclear from the order what orders Appellant is granted
relief from. Motion for Clarification, in Appellees’ App. at 935.
11
Appellant’s App. at 649.
12
All future references to “Civil Rule” are to the Federal Rules of Civil Procedure.
All future references to “Bankruptcy Rule” are to the Federal Rules of Bankruptcy
Procedure. Civil Rule 60 is made applicable to cases under the Code pursuant to
Bankruptcy Rule 9024.
4
The bankruptcy court entered the Order (the “60(b) Order”), 13 denying the 60(b)
Motion on March 10, 2017. In the 60(b) Order, the bankruptcy court stated it “did not
consider the purported ownership of entities or assets in denying [Appellant’s]
discharge.” 14 The bankruptcy court concluded that it “specifically made no findings as to
the substance of any non-bankruptcy actions pending against [Appellant], and pointed out
the non-bankruptcy proceedings were not relevant to the issues raised in the adversary
case.” 15 Appellant filed a timely notice of appeal of the 60(b) Order on March 22, 2017,
which is the subject of this appeal.
II. JURISDICTION AND STANDARD OF REVIEW
This Court has jurisdiction to hear timely filed appeals from “final judgments,
orders, and decrees” of bankruptcy courts within the Tenth Circuit, unless one of the
parties elects to have the district court hear the appeal. 16 Appellant appeals an order
denying a motion for relief from an order or judgment pursuant to Civil Rule 60(b),
which is a final order of the bankruptcy court, provided the order or judgment the Civil
Rule 60(b) motion challenged was a final order. 17 Appellant did not file a valid election
13
Appellant’s App. at 674.
14
60(b) Order at 2, in Appellant’s App. at 675.
15
Id. at 4, in Appellant’s App. at 677.
16
28 U.S.C. § 158(a)(1), (b)(1), & (c)(1); Bankruptcy Rule 8005; 10th Cir. BAP
L.R. 8005-1.
17
Stubblefield v. Windsor Cap. Grp., 74 F.3d 990, 993 (10th Cir. 1996). The 60(b)
Motion sought relief from a judgment finally resolving an adversary proceeding seeking
denial of Appellant’s discharge and therefore was a final order.
5
to have this appeal heard by the United States District Court for the District of Colorado;
therefore, this Court has jurisdiction to hear the appeal. 18
“Relief under [Civil] Rule 60(b) is discretionary and is warranted only in
exceptional circumstances. Thus, we review the bankruptcy court’s [60(b) Order] for
abuse of discretion.” 19 “An abuse of discretion occurs when the district court’s decision is
‘arbitrary, capricious or whimsical,’ or results in a ‘manifestly unreasonable
judgment.’” 20
III. DISCUSSION
Appellant devotes a great deal of his brief assigning error to the bankruptcy
court’s denial of his discharge pursuant to §§ 727(a)(2)(A) and (B), (a)(4)(A) and (D),
(a)(3), and (a)(5). However, we do not have jurisdiction to review the Summary
Judgment Order on the merits because Appellant did not file an appeal of or seek
reconsideration of the Summary Judgment Order within the time provided by the
18
With his Notice of Appeal, Appellant filed a separate document purporting to elect
to have the appeal heard by the United States District Court for the District of Colorado.
This Court immediately determined the purported election was not valid pursuant to 10th
Cir. BAP L.R. 8005-1(a), which requires that the statement of election be included in the
notice of appeal. Appellant filed an Amended Notice of Appeal, which contained an
election. The Court immediately denied the election contained in the Amended Notice of
Appeal as untimely pursuant to 28 U.S.C. § 158(c)(1)(A). Appellant filed a motion to
reconsider the denial of the election. On March 27, 2017, a motions panel of this Court
denied the motion to reconsider and this appeal continued. Order Denying Motion for
Reconsideration, BAP ECF No. 13.
19
Dimeff v. Good (In re Good), 281 B.R. 689, 699 (10th Cir. BAP 2002) (quoting
Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir. 1991)) (citations omitted).
20
Moothart v. Bell, 21 F.3d 1499, 1504-05 (10th Cir. 1994) (quoting United States v.
Wright, 826 F.2d 938, 943 (10th Cir. 1987)).
6
Bankruptcy Rules. 21 Accordingly, we will not address Appellant’s arguments that the
bankruptcy court erred in entering the Summary Judgment Order and instead consider
only whether the bankruptcy court abused its discretion in denying the 60(b) Motion.
Bankruptcy Rule 9024 makes Civil Rule 60 applicable in bankruptcy cases.
Subparts (5) and (6) of Civil Rule 60(b), upon which Appellant relies, provide:
On motion and just terms, the court may relieve a party . . . from a final
judgment, order, or proceeding for the following reasons:
...
(5) the judgment has been satisfied, released or discharged; it is
based on an earlier judgment that has been reversed or vacated;
or applying it prospectively is no longer equitable; or
(6) any other reason that justifies relief. 22
In determining whether a bankruptcy court abused its discretion, the Court “must be
mindful that relief under Rule 60(b) is extraordinary and may only be granted in
exceptional circumstances.” 23 Accordingly, the bankruptcy court’s decision should only
21
Appellant did not appeal the Summary Judgment Order. A motion under
Bankruptcy Rule 9024 may extend the time to appeal until the disposition of such a
motion, if the Bankruptcy Rule 9024 motion is filed within fourteen days after the
judgment is entered. The 60(b) Motion did not extend the time to appeal the Summary
Judgment Order because it was not filed within fourteen days after entry of the Summary
Judgment Order. In re Blair, No. 16-cv-0202, 2016 WL 8608454, at *4, n.2 (D. Colo.
Aug. 24, 2016) (“A Rule 9024 motion filed within the 14-day appeal window resets that
clock and permits the party to defer its notice of appeal until 14 days after the Bankruptcy
Court resolves the Rule 9024 motion.”).
22
Fed. R. Civ. P. 60(b).
23
In re Karbel, 220 B.R. 108, 113 (10th Cir. BAP 1998) (citing Cashner v. Freedom
Stores, Inc., 98 F.3d 572, 576 (10th Cir. 1996)).
7
be reversed if the Court finds “a complete absence of a reasonable basis and [is] certain
that the [bankruptcy court’s] decision is wrong.” 24
In support of his position that the bankruptcy court erred in not granting relief
under Civil Rule 60(b)(5) and (6), Appellant asserts the bankruptcy court’s entry of
summary judgment denying his discharge was predicated on the State Court’s since
vacated determination in the Sanctions Order that the Entities belonged to Appellant.
However the bankruptcy court explained in the Rule 60(b) Order that it “did not consider
the purported ownership of entities or assets in denying discharge pursuant to 11 U.S.C.
§ 727(a)(2)(A) and (B) and (a)(4)(A) and (D).” 25 Instead, as the bankruptcy court stated
in both the Rule 60(b) Order and the Summary Judgment Order, its determinations of the
facts not in genuine dispute in the Summary Judgment Order were based on affidavits,
documents, and Appellant’s own statements and schedules. We agree.
Relief from denial of discharge under §§ 727(a)(2)(A), (a)(2)(B),
(a)(4)(A), & (a)(4)(D)
In support of denial of the discharge under § 727(a)(4)(A), the bankruptcy court
determined that Appellant knowingly and fraudulently made false oaths in the form of
false statements in his schedules and statement of financial affairs, executed under oath,
and gave false testimony, including (a) scheduling jewelry as having a value of less than
$36,000 that he insured for over $200,000; (b) failing to disclose in his statement of
financial affairs income from rental properties, which he was required to disclose
24
Id. (citing In re Gledhill, 76 F.3d 1070, 1080 (10th Cir. 1996)).
25
60(b) Order at 2, in Appellant’s App. at 675.
8
regardless of the ownership of the properties; (c) failing to disclose his withdrawal,
within ninety days of the bankruptcy petition date, of over $125,000 from an account in
which Appellant held an interest; (d) failing to disclose prepetition litigation; and (e)
Appellant’s misleading testimony at the § 341(a) meeting of creditors that his schedules
and statements were accurate and his false testimony at a Rule 2004 examination.
In determining that his conduct warranted denial of the discharge, the bankruptcy
court did not rely on the ownership of the Entities or their assets. The bankruptcy court
explained that it
based its decision not on ownership, or lack thereof, of various
assets, but on [Appellant’s] failure . . . to file accurate statements
and schedules. The Court specifically made no findings as to the
substance of any non-bankruptcy actions pending against
[Appellant], and pointed out the non-bankruptcy proceedings were
not relevant to the issues raised in the adversary case. 26
In the Summary Judgment Order, the bankruptcy court found that facts not in
genuine dispute required denial of Appellant’s bankruptcy discharge under
§ 727(a)(4)(A) independent of the State Court’s ruling on ownership of the Entities or
their properties. Accordingly, the bankruptcy court did not abuse its discretion in
declining to reconsider its denial of discharge pursuant to § 727(a)(4)(A). Similarly, the
bankruptcy court relied on facts not in genuine dispute independent of the State Court’s
ruling on ownership of the Entities or their properties to deny Appellant’s discharge
under §§ 727(a)(2)(A), (a)(2)(B), and (a)(4)(D).
26
Id. at 3-4, in Appellant’s App. at 676-77 (citing Summary Judgment Order at 8,
n.25, in Appellant’s App. at 622).
9
Relief from denial of discharge under §§ 727(a)(3) & (a)(5)
Appellant also argues the bankruptcy court erred in finding Appellant failed to
preserve adequate records of the Entities and explain the loss of assets of the Entities.
Appellant asserts he has continuously maintained that the Entities did not belong to him
and that he could not turn over records of transactions for businesses he did not own.
Accordingly, Appellant argues the bankruptcy court based this finding on the Sanctions
Order and the State Court’s assignment of the Entities to him.
Appellant’s argument is flawed for two reasons. First, the records referenced in
§ 727(a)(3) do not pertain only to the Entities, but also to Appellant’s “financial condition
and material business transactions.” 27 The bankruptcy court found Appellant produced
none of the records requested by the Trustee and used cash to avoid creation of records. 28
Thus, there are sufficient facts in the record to support denial of Appellant’s discharge
pursuant to § 727(a)(3) independent of the Sanctions Order.
Second, the bankruptcy court noted Appellant failed to adequately disclose or
explain the disposition of assets as required by § 727(a)(5). 29 Appellant did not explain
27
Gullickson v. Brown (In re Brown), 108 F.3d 1290, 1295 (10th Cir. 1997) (citing
In re Folger, 149 B.R. 183, 188 (D. Kan. 1992)).
28
Summary Judgment Order at 10-11, in Appellant’s App. at 624-25.
29
Appellant argues his lack of ownership of any related entities explains his failure
to disclose or explain transactions—because he did not have access to them. However, in
the Summary Judgment Order, the bankruptcy court referenced Appellant’s affidavit
stating many of the records were in “moving vaults, and [Appellant] has received
permission to show the vaults to the Trustee.” Summary Judgment Order at 10, in
Appellant’s App. at 624. This contradicts Appellant’s argument that he had no access to
such records.
10
over $12 million in deposits and withdrawals from postpetition bank accounts connected
to “various business entities with which he was affiliated” and failed to explain what
happened to funds he received from various real properties. 30 The bankruptcy court
stated, “the question is not, as [Appellant] appears to believe, whether [Appellant] owned
the numerous entities, real properties, and items of personal property . . . . Rather, it is the
failure to disclose any interest in these assets.” 31
These findings suggest the bankruptcy court based the Summary Judgment Order
on Appellant’s failure to comply with his duties as a debtor, not on the State Court’s
determination of ownership of the Entities. Even if the bankruptcy court had relied on the
Sanctions Order, the Colorado Court of Appeal’s reversal was based solely on the
improper service of Sofia Shifrin and did not comment on the substantive findings of the
trial court. Accordingly, the bankruptcy court’s conclusion that Appellant “failed to
maintain and preserve adequate business and financial records, and failed to disclose or
explain information reasonably required by . . . [his] obligations under the Bankruptcy
Code,” was not an abuse of discretion. 32
Inconsistent holdings
Appellant also argues the bankruptcy court’s denial of the 60(b) Motion was
inconsistent with the bankruptcy court’s denial of a motion for summary judgment in a
30
Id. at 11, in Appellant’s App. at 625.
31
Id., in Appellant’s App. at 625.
32
60(b) Order at 4, in Appellant’s App. at 677.
11
separate adversary proceeding against Appellant, his mother, father, and related entities.
In that adversary proceeding, the bankruptcy court held the Rooker-Feldman doctrine,
collateral estoppel, and res judicata did not prevent the bankruptcy court from relitigating
matters addressed in the Sanctions Order because several of the defendants were not
parties in the State Court action. 33 Furthermore, the bankruptcy court found genuine
issues existed as to other defendants’ interests in the Entities and whether Appellant was
an alter ego of the Entities. 34
While an order of the bankruptcy court in a case other than the one on appeal is
outside the scope of our review, 35 Appellant’s argument fails even were we to consider it.
First, the adversary proceeding Appellant references involved additional defendants and
issues not covered by the Sanctions Order. Additionally, the 60(b) Order clearly
identified grounds independent of the Sanctions Order justifying the denial of Appellant’s
discharge. We hold the bankruptcy court did not abuse its discretion in denying Appellant
33
Order at 4 n.14, in Appellant’s App. at 647 (referencing order dated September 1,
2016 Bankr. ECF No. 93, Adversary No. 14-0306, which explains parties in present
action must have been parties in action where prior order was entered for it to have
preclusive effect); see Mo’s Express, LLC v. Sopkin, 441 F.3d 1229, 1234-35 (10th Cir.
2006) (holding the Rooker-Feldman doctrine does not apply against nonparties to the
prior state court judgment); Lowell Staats Mining Co. v. Philadelphia Elec. Co., 878 F.2d
1271, 1274 (10th Cir. 1989) (explaining res judicata prevents parties, or their privies,
from relitigating issues).
34
Order at 5, in Appellant’s App. at 648.
35
See In re Frontier Airlines, Inc., 108 B.R. 277, 279 (D. Colo. 1989) (requiring
separate notice of appeal for each final order appealed); 10th Cir. BAP L.R. 8003-1.
12
relief from the 60(b) Order, and therefore, must also hold it did not abuse its discretion in
failing to consider an order entered in a separate adversary proceeding.
IV. CONCLUSION
In reviewing the 60(b) Motion, the bankruptcy court reevaluated each criteria
considered in finding grounds under § 727(a) for denial of Appellant’s discharge and
noted findings made independently from the Sanctions Order. The bankruptcy court’s
decision was not arbitrary, capricious, or whimsical and did not result in a manifestly
unreasonable judgment. The bankruptcy court did not abuse its discretion. Therefore, we
affirm the 60(b) Order.
13