Hilton v. Hale
Filing
13
MEMORANDUM OPINION AND ORDER affirming the Final Judgment rendered May 5, 2021, by the United States Bankruptcy Court for the Western District of Texas, Austin Division. Signed by Judge Lee Yeakel. (lt)
Case 1:21-cv-00438-LY Document 13 Filed 12/20/21 Page 1 of 4
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION
Hf2
IN RE: LEANN MARIE HILTON,
DEBTOR,
LEANN MARIE HILTON,
APPELLANT,
V.
CAUSE NO. 1 :21-CV-43 8-LY
BANKRUPTCY NO. 19-11101
ADVERSARY PROCEEDING
NO. 19-01081
SAMANTHA HALE,
APPELLEE.
MEMORANDUM OPINION AND ORDER
This cause arises from an appeal of the Final Judgment rendered May 5, 2021, by the
United States Bankruptcy Court for the Western District of Texas, Austin Division. Before the
court are Appellant LeAnn Hilton's Brief filed September 17, 2021 (Doe. #10), Appellee
Samantha Hale's Brief filed October 18, 2021 (Doe. #11), and Appellant's Reply Brief filed
November 9, 2021 (Doe. #12). On December 3, 2021, the court heard oral argument. Hilton
appeared by attorney and Hale appeared in person and by attorney. Having carefully considered
the briefs, arguments of counsel, applicable law, and record in this case, the court will affirm the
bankruptcy court's order for the reasons to follow.
Background
Hilton filed a petition under Chapter 7 of the United States Bankruptcy Code on August
20, 2019. Chapter 7 authorizes a bankruptcy court to discharge certain debts, thereby releasing
the debtor from personal liability. A creditor may, however, file objections to the debtor's
discharge.
See 11
U.S.C.
§
727 (describing reasons why bankruptcy court may deny discharge).
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Case 1:21-cv-00438-LY Document 13 Filed 12/20/21 Page 2 of 4
HaleHilton's former business partnerfiled an adversary suit on November 22, 2019, objecting
to the discharge of Hilton's debts.
Hilton filed a combined motion to dismiss, motion for judgment on the pleadings, and
motion for partial summary judgment on July 24, 2020, arguing in part that Hale did not
sufficiently plead her nondischargeability claims. The Bankruptcy Court denied Hilton's motion.
The Bankruptcy Court later granted Hale leave to amend the complaint, and Hale filed an amended
complaint November 11, 2020.
The Bankruptcy Court tried the case on March 1 and 2, 2021. After post-trial briefing and
closing arguments, the Bankruptcy Court ruled in Hale's favor on one of the nondischargeability
claims. See
11
U.S.C.
§
727(a)(3) (the "Recordkeeping Claim"). The Bankruptcy Court entered
judgment denying discharge on May 5, 2021.
Standard of Review
On appeal, this court reviews the Bankruptcy Court's findings of fact under a clearly
erroneous standard and reviews conclusions of law de novo. See In re Heartland Fed. Say. & Loan
Assn.
v.
Briscoe Enters., Ltd. II (In re Briscoe Enters., Ltd. II), 994 F.2d 1160, 1163 (5th Cir.
1993). Mixed questions of fact and law are subject to de novo review. See In re CPDC, Inc., 337
F.3d 436, 441 (5th Cir. 2003).
Analysis
Hilton designates one issue on appealwhether the Bankruptcy Court properly denied
Hilton's motion for judgment on the pleadings on Hale's Recordkeeping Claim.
The Bankruptcy Code provides that a court cannot grant discharge under Chapter 7 if "the
debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded
information, including books, documents, records, and papers, from which the debtor's financial
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Case 1:21-cv-00438-LY Document 13 Filed 12/20/21 Page 3 of 4
condition or business transactions might be ascertained, unless such act or failure to act was
justified under all of the circumstances of the case."
11
U.S.C. § 727(a)(3). In the original
complaint, Hale pleaded that "Hilton failed to keep or preserve recorded information, including
documents, from which Hilton's financial condition or business transactions might be
ascertained." Hilton argues that because Hale merely recited the elements of the statute, the
Bankruptcy Court should have dismissed the claim on Hilton's motion instead of allowing the
claim to proceed to trial.
Hale argues that the Bankruptcy Court's ruling on the merits on the Recordkeeping claim
moots Hilton's argument. See Bennett
v.
Pippin, 74 F.3d 578, 585 (5th cir. 1996) ("When the
plaintiff has prevailed after a full trial on the merits, a district court's denial of a Rule 1 2(b)(6)
dismissal becomes moot. The plaintiff has proved, not merely alleged, facts sufficient to support
relief.").' Additionally, Hale argues that even if Hilton's motion had merit, the Bankruptcy Court
would have properly allowed Hale to amend the complaint instead of dismissing the claim outright.
Hale also argues that the factual allegations in the complaint and Hilton's failure to produce records
during the discovery process provided sufficient justification for the Bankruptcy Court's denial of
the motion for judgment on the pleadings.
In response, Hilton argues that the circuit decided the Bennett case before the United States
Supreme Court rendered its Iqbal and Twombly decisions, which elaborated on the federal pleading
standard. See Ashcrofi
v.
Iqbal, 556 U.S. 662, 662 (2009); Bell At!. Corp.
v.
Twomb!y, 550 U.S.
544, 545 (2007). Hilton argues that the Jqbal and Twombly decisions effectively overrule the
Hale notes that although the Bennett case involved a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6), the holding also applies to Hilton's motion for judgment on the
pleadings because courts review both types of motions under the same standard. See Jackson v.
City of Cleveland, 925 F.3d 793, 806 (6th Cir. 2019) ("We review de novo a judgment on the
pleadings under Federal Rule of Civil Procedure 12(c), applying the same standard we apply to
review the grant of a motion to dismiss under Rule 12(b)(6)"), cert. denied, 140 5. Ct. 855 (2020).
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Case 1:21-cv-00438-LY Document 13 Filed 12/20/21 Page 4 of 4
circuit's Bennett decision. Hilton further argues that the rule in Bennett leaves no effective review
for the requirement that a plaintiff file adequate pleadings.
Assuming without deciding that Iqbal and Twombly affect the circuit's ruling, this court is
nonetheless bound by Bennett. See, e.g., In re Bonvillian Marine Serv., Inc., No. 20-30767, 2021
WL 5708449, at *1(5th Cir. Dec. 2, 2021) (district court "was not free to overturn" rule from
circuit case even when "subsequent Supreme Court decisions have effected an intervening change
in the law"). Because Hale prevailed on the merits at trial on the Recordkeeping Claim, Hilton's
challenge to the adequacy of the pleadings it moot. See Bennett, 74 F.3d at 585. Hilton's appeal
cannot succeed, and the court will affirm the Bankruptcy Court's Final Judgment.
Conclusion
IT IS THEREFORE ORDERED that the Final Judgment rendered May 5, 2021, by the
United States Bankruptcy Court for the Western District of Texas, Austin Division is
AFFIRMED.
A Final Judgment shall be filed subsequently.
SIGNED
thislay of
December, 2021.
ITED S
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