Simon v. Harrison et al

Filing 17

RULING AND ORDER: Having considered the arguments of Jules Anthony Simon and applied the appropriate standard of review, this Court affirms the Ruling and Judgment of the Bankruptcy Court. Simon's Appeal is hereby dismissed, and this matter shall be terminated by the Clerk of Court. Signed by Chief Judge Shelly D. Dick on 9/27/2023. (EDC)

Case 3:22-cv-00805-SDD-EWD

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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA
JULES ANTHONY SIMON
Appellant

APPEAL CIVIL ACTION
No. 3:22-cv-00805-SDD-SDJ
No. 3:22-cv-00867-SDD-SDJ

VERSUS
ANDREW J. HARRISON, JR.
Appellee
RULING AND ORDER
Before the Court is an Appeal from the United States Bankruptcy Court for the
Middle District of Louisiana, Judge Douglas D. Dodd, as supported by the Brief1 tendered
by Appellant, Jules Anthony Simon (hereinafter “Simon”). Countering the appeal is the
Brief2 of Andrew J. Harrison (“Harrison”), to which Simon filed a Reply.3 For the reasons
set forth below, the Ruling and Judgment of the Bankruptcy Court is AFFIRMED.
I.

BACKGROUND
Simon appeals the Bankruptcy Court’s decision to deny Simon a chapter 7 debtor’s

discharge. Simon, his brother Denis Simon (“Denis”), and a third party formed D Squared,
LLC (“D Squared”) to buy land for a hunting camp in 2010.4 The members agreed that
each would make one-third of the quarterly mortgage payments.5 In 2016, Simon became
unable to make his share of the payments, and his brother Denis made payments for

1

Rec. Doc. 11.
Rec. Doc. 13.
3
Rec. Doc. 15.
4
See Rec. Doc. 11, p. 9; 11.
5
Rec. Doc. 11-1, p. 10.
2

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him.6 The two orally agreed that Denis would receive Simon’s interest in D Squared in
return for the debt.7
Simon filed chapter 7 in 2019 and listed his one-third interest in D Squared as
having no value.8 D Squared sold the property in March 2021 and divided the proceeds
(a total of about $168,000) so that one-third went to the third member, two-thirds went to
Denis, and Simon received nothing.9 Simon signed the document allowing the property
to be sold.10
Without knowing of the sale, Harrison propounded document requests to Simon
regarding D Squared.11 Harrison learned of the sale when Simon supplemented discovery
in May 2021.12 Following a four-day bench trial, the Bankruptcy Court sustained
Harrison’s objection to Simon’s discharge under section 727(a)(2)(B) of the Bankruptcy
Code on grounds that Simon transferred his share of the sale proceeds to Denis postpetition with the intent to hinder, delay, or defraud his creditors.13 Simon now appeals this
decision.
II.

LAW & ANALYSIS
This Court reviews the legal standards employed by the Bankruptcy Court de

novo.14 The Bankruptcy Court’s findings of fact are reviewed for clear error.15 Simon
argues that the Bankruptcy Court erred in its conclusion that “Simon allowed his financial

6

See Rec. Doc. 11, p. 9.
See Rec. Doc. 11, p. 9; see also Rec. Doc. 11-1, p. 10.
8
See Rec. Doc. 11, p. 11.
9
See Rec. Doc. 11, p. 12.
10
Rec. Doc. 11-1, p. 99–103.
11
See Rec. Doc. 13, p. 8; see also Rec. Doc. 11-1, p. 18.
12
See Rec. Doc. 13, p. 8; see also Rec. Doc. 11-1, p. 18.
13
Rec. Doc. 11-1.
14
Matter of Cmty. Home Fin. Servs. Corp., 32 F.4th 472, 481 (5th Cir. 2022); Lear v. Little, 613 B.R. 872,
875 (M.D. La. 2020).
15
Id.
7

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interest in D Squared’s sale proceeds, which properly were payable on account of an
interest in the limited liability company belonging to the bankruptcy estate, to be
transferred to his brother.”16
Simon argues that this conclusion is erroneous, first, because under Mississippi
law, he lacked any authority to decide what D Squared did with the proceeds of the sale
of the D Squared property after he filed for bankruptcy. Second, Simon argues that he
lacked the authority to transfer the interest in D Squared because only the Trustee could
exercise the rights once Simon filed for bankruptcy. Finally, he claims that the Bankruptcy
Court erred in finding that Simon acted with intent to hinder, delay, or defraud creditors
because Simon sincerely believed that he was not entitled to the proceeds of the sale.
A. Simon’s Authority
In opposition to the appeal, Harrison asserts that Simon’s first and second
arguments regarding his authority (or lack thereof) to manage D Squared’s property were
not raised before the Bankruptcy Court. Therefore, Harrison claims, the arguments are
waived. It is well established that the Court does not consider claims or arguments that
were not presented to the Bankruptcy Court.17 Simon fails to successfully rebut Harrison’s
argument that the claims raised for the first time in Simon’s appeal are not properly before
the Court. The Court likewise does not see where these issues were addressed before
the Bankruptcy Court. Because a district court considering a bankruptcy appeal cannot

16

Rec. Doc. 11, p. 13–14.
In re Trinh, 210 F.3d 369 (5th Cir. 2000); Matter of Gilchrist, 891 F.2d 559, 561 (5th Cir. 1990) (finding
that when an issue was raised for the first time on a bankruptcy appeal to the district court, the district court
correctly refused to consider the argument. “It is well established that we do not consider arguments or
claims not presented to the bankruptcy court.”); Barron v. Countryman, 432 F.3d 590, 594 (5th Cir. 2005).
17

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consider issues first raised on appeal, the Court will not consider Simon’s first two
arguments.
B. Simon’s Intent to Defraud
As for his third argument, Simon claims that the evidence before the Bankruptcy
Court was insufficient to warrant finding that Simon had the intent to defraud, which
ultimately resulted in the denial of his discharge. Denying a debtor’s discharge is a “harsh
remedy,” and 11 U.S.C. § 727(a) of the Bankruptcy Code is designed to encompass “only
those debtors who have not been honest and forthcoming about their affairs.”18 Under 11
U.S.C. § 727:
(a) The court shall grant the debtor a discharge, unless—
(2) the debtor, with intent to hinder, delay, or defraud a creditor or an
officer of the estate charged with custody of property under this title,
has transferred, removed, destroyed, mutilated, or concealed, or has
permitted to be transferred, removed, destroyed, mutilated, or
concealed—
(A) property of the debtor, within one year before the date of
the filing of the petition.
The Court can consider six circumstances or “badges of fraud” as factors to identify
fraudulent intent. All factors are not required to be present for a positive finding. The
badges of fraud include:
(1) the lack or inadequacy of consideration;
(2) the family, friendship or close associate relationship between the parties;
(3) the retention of possession, benefit or use of the property in question;
(4) the financial condition of the party sought to be charged both before and
after the transaction in question;

18

In re Guillet, 398 B.R. 869, 886-87 (Bankr. E.D. Tex. 2008).

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(5) the existence or cumulative effect of the pattern or series of transactions
or course of conduct after the incurring of debt, onset of financial difficulties,
or pendency or threat of suits by creditors; and
(6) the general chronology of events and transactions under inquiry.19
"[T]he accumulation of several factors indicates strongly that the debtor possessed the
requisite intent."20
After reviewing the exhibits and hearing live testimony presented at a four-day trial,
the Bankruptcy Court found evidence touching on several of the badges that weighed
against Simon. Fraudulent intent was presumed due to the familial relationship between
Simon as transferor and his brother as transferee.21 Simon’s continued use of the property
for hunting purposes also weighed in support of finding intent. Additionally, the financial
difficulties suffered by Simon, which led to the brothers’ oral agreement, also allude to
Simon’s intent. Finally, Simon’s knowledge of the sale beforehand and his failure to
disclose it to the trustee before the closing—though not a badge—was found to support
an inference that Simon intended to conceal the transaction.
Simon claims the Bankruptcy Court erred in presuming that Simon had the intent
to defraud due to the familial relationship between Simon and his brother Denis. A
presumption of fraudulent intent exists for discharge denial purposes when a debtor
transfers property to relatives.22 Simon argues that a familial transfer could not have
occurred because Simon did not act as a transferor. Rather, he claims proceeds were

19

See Soza v. Hill (In re Soza), 542 F.3d 1060, 1067 (5th Cir. 2008); Matter of Wiggains, 848 F.3d 655,

661 (5th Cir. 2017).
20
A&M Investments, LLC v. Kirtley (In re Kirtley), 533 B.R. 154, 163 (Bankr. S.D. Miss. 2015) (quoting FDIC
v. Sullivan (In re Sullivan), 204 B.R. 919, 941 (Bankr. N.D.Tex.1997)); see also Cannella v. Jackson (In re
Jackson), 625 B.R. 648, 652 (Bankr. S.D. Tex. 2021).
21
In re Pratt, 411 F.3d 561, 565 (5th Cir. 2005); see also Schmidt v. Cantu (In re Cantu), 2011 WL 672336,
at *6 (Bankr. S.D. Tex. 2011).
22
Id.

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directly transferred from D Squared as transferor to Denis as transferee, with Simon
lacking authority over the transfer. Additionally, he claims that the presumption based on
a familial relationship cannot apply because the familial transfer must be gratuitous, and,
here, the Bankruptcy Court found that the transfer occurred in consideration for the past
mortgage payments that were made on Simon’s behalf.
The governing law provides that a “presumption of actual fraudulent intent
necessary to bar a discharge arises when property is either transferred gratuitously or is
transferred to relatives.”23 Accordingly, whether the transfer to Denis was gratuitous or
not is irrelevant. Moreover, the Bankruptcy Court directly held that Simon “allowed” or
“permitted” the transfer to his brother Denis within one year of the filing of the petition.24
Section 727 explicitly applies where a debtor has “transferred, removed, destroyed,
mutilated or concealed, or has permitted to be transferred, removed, destroyed, mutilated
or concealed- (A) property of the debtor, within one year before [filing]; or (B) property of
the estate, after the date of [filing the petition].”25 Accordingly, the Court finds no error in
the Bankruptcy Court’s holding.
Finally, on Appeal, Simon claims that he should not have been denied a discharge
because the proceeds at issue were minimal, and the Trustee has yet to make a claim
for the proceeds since their existence was revealed. However, the amount in question—
over $56,000—is not an insignificant sum, and, moreover, the Trustee’s claim to recover
the proceeds is irrelevant; the only pertinent issue is the debtor’s intent, not the effect on

23

Matter of Chastant, 873 F.2d 89 (5th Cir.1989) (citing In re Butler, 38 B.R. 884, 888 (Bankr. D.Kan.1984)
(emphasis added)).
24
Simon’s first two arguments on appeal—which are waived by Simon’s failure to raise the arguments
before the Bankruptcy Court—are further foreclosed by this principle.
25
(emphasis added).

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creditors. The Court finds no clear error. The judgment of the Bankruptcy Court is
affirmed.
III.

CONCLUSION
Having considered the arguments of Jules Anthony Simon and applied the

appropriate standard of review, this Court affirms the Ruling and Judgment of the
Bankruptcy Court.
Simon’s Appeal is hereby dismissed, and this matter shall be terminated by the
Clerk of Court.
IT IS SO ORDERED.
Baton Rouge, Louisiana, this ___
27th day of September, 2023.

S

________________________________
SHELLY D. DICK
CHIEF DISTRICT JUDGE
MIDDLE DISTRICT OF LOUISIANA