Scarfia v. Travelers Indemnity Co. (In re Scarfia)

178 B.R. 857, 1995 U.S. Dist. LEXIS 2914
CourtDistrict Court, M.D. Florida
DecidedMarch 2, 1995
DocketNo. 94-148-CIV-T-17; Bankruptcy No. 86-1642-BKC-8B7
StatusPublished

This text of 178 B.R. 857 (Scarfia v. Travelers Indemnity Co. (In re Scarfia)) is published on Counsel Stack Legal Research, covering District Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scarfia v. Travelers Indemnity Co. (In re Scarfia), 178 B.R. 857, 1995 U.S. Dist. LEXIS 2914 (M.D. Fla. 1995).

Opinion

ORDER

KOVACHEVICH, District Judge.

This cause is before the Court on appeal from the Amended Final Judgment of Default entered on December 2,1993, by United States Bankruptcy Judge Thomas E. Baynes, Jr. Jurisdiction over appeals from the final judgments, orders, and decrees of the Bankruptcy Court is vested in the Federal District courts. 28 U.S.C. § 158(a).

STANDARD OF APPELLATE REVIEW

Findings of fact by the Bankruptcy Court will not be set aside unless clearly erroneous. Bankruptcy Rule 8013; In re Downtown Properties, Ltd., 794 F.2d 647 (11th Cir. 1986). However, Appellant is entitled to an independent, de novo review of all conclusions of law and the legal significance accorded to the facts. In re Owen, 86 B.R. 691 (M.D.Fla.1988).

FACTS

Michael J. Scarfia, Appellant, declared himself and C.M. Systems, the company over which he presided, bankrupt on or about April 25, 1986. In October 1986, Appellant voluntarily converted his Chapter 11 case to a Chapter 7 case. In the pending adversary proceeding, Appellant testified freely about his own affairs up until sometime after October 13, 1986, when he learned that he had become the subject of a criminal investigation. Thereafter, he sought to invoke his Fifth Amendment right against self-incrimination as to all questions and requests propounded in regard to the pending bankruptcy case.

On March 11, 1987, Travelers Indemnity Company, Appellee, filed its Second Amended Complaint Objecting to Dischargeability of Debt in the adversary proceeding. In its complaint, Appellee sought damages from Appellant for: (1) fraud allegedly committed by him in connection with the issuance of surety bonds to C.M. Systems and (2) a determination of the non-dischargeability of the debts incurred to Appellee. Appellee was the issuer of construction bonds, as surety, for C.M. Systems, which was a Florida corporation in the general contracting business. Appellee issued bonds between November 1983 and December 1986 at the request of various agents of C.M. Systems, including Appellant who was president and a shareholder of C.M. Systems.

On May 1,1987, Appellant filed his Answer and Affirmative Defenses to Appellee’s Second Amended Complaint. On July 13, 1987, Appellee attempted to take Appellant’s discovery deposition. Appellant refused to answer any questions by invoking his Fifth Amendment privilege. Thereafter, Appellee sought the entry of an order compelling Appellant to answer Appellee’s deposition questions. On March 23, 1988, the Bankruptcy Court entered an order on Appellee’s motion [859]*859to compel. The court directed Appellant to file in camera his sworn affidavit stating separately for each of Appellee’s questions why responding to the question would cause him to apprehend danger of self-incrimination.

Appellant filed the affidavit in camera with the court and the court held an in camera hearing on August 25, 1988, to consider Appellant’s affidavit and to consider his testimony with regard to Appellee’s questions at the July 1987 deposition. The court entered an order on September 20, 1988, continuing the in camera hearing and specifying that Appellee’s counsel was not allowed to be present at the in camera hearing because of the Fifth Amendment issues.

On October 6, 1988, the Bankruptcy Court entered an additional order scheduling an in camera hearing on Appellee’s motion to compel. That order ultimately became the subject of an interlocutory appeal to the District Court on the issue of whether a court reporter should be present at the in camera hearing. The District Court denied Appellant’s appeal on November 30, 1989. The Bankruptcy Court then entered an order to show cause requiring Appellant to show why the court should not enter an order compelling Appellant to comply with Appellee’s discovery demands regarding Appellant’s deposition.

Following a hearing on April 19, 1990, the Bankruptcy Court ruled that there would be no in camera hearing as the District Court had already ruled in Scarfia v. Holiday Bank, 129 B.R. 671 (M.D.Fla.1990), that Appellant had waived his Fifth Amendment privilege. Shortly thereafter, on May 17, 1990, the Bankruptcy Court entered its order discharging the Order to Show Cause and granting Appellee’s October 1987 Motion to Compel.

On May 25,1990, Appellant sought leave to appeal the Bankruptcy Court’s Order Discharging the Order to Show Cause. Appellant asserted that he had not waived his Fifth Amendment privilege and was entitled to an in camera hearing on the Fifth Amendment issue. The District Court denied the filing of an interlocutory appeal, on the grounds that it would not advance the litigation and that it would not establish a controlling question of law. On June 26, 1990, Appellee deposed Appellant who again refused to answer all questions on Fifth Amendment grounds. Thereafter, on July 23, 1990, Appellee moved for the entry of sanctions and a default judgment as a result of Appellant’s failure to respond to the deposition questions.

On September 25, 1991, the Bankruptcy Court heard Appellee’s motion for sanctions. The court denied the motion for sanctions, directed the rescheduling of Appellant’s deposition, and advised Appellant that if he continued to assert the Fifth Amendment privilege the court would enter a final judgment of default upon the filing of the appropriate motion by Appellee. On October 18, 1991, Appellee deposed Appellant who again refused to answer any questions on the basis of the Fifth Amendment privilege. Thereafter, on November 18, 1991, Appellee filed its Motion for Entry of Final Judgment of Default in response to Appellant’s refusal to answer any questions.

On March 9, 1992, the Bankruptcy Court entered an order granting a Final Judgment of Default in favor of Appellee. The court struck Appellant’s pleadings, determined that Appellant’s obligation to Appellee is non-dis-ehargeable, and required Appellee to file an affidavit as to damages. Appellant appealed the Bankruptcy Court’s Final Judgment of Default. The District Court affirmed the Bankruptcy Court’s decision and the matter is currently on appeal to the Eleventh Circuit Court of Appeals.

On or about April 13, 1992, Appellee submitted the Affidavit of one Scott D. Stewart setting forth the Appellee’s losses at $3,757,-944.00 with additional outstanding claims in excess of $5,000,000.00. On April 21, 1992, Appellant filed an objection to the Affidavit and Entry of Final Judgment. On December 21, 1992, the Bankruptcy Court entered an order sustaining Appellant’s objections without prejudice and allowing Appellee to file a supplemental affidavit. Thereafter, Appellee filed its Supplemental Affidavit in Support of Final Judgment of Default, its Affidavit of Attorneys’ Fees and Other Dis[860]*860bursements, and its Affidavit as to the NonMilitary Status of Appellant.

On March 31, 1993, the Bankruptcy Court entered its Order Amending Final Judgment of Default. The court reiterated the earlier finding that Appellee’s claim is non-dis-chargeable pursuant to 11 U.S.C. § 523. The court further determined that Appellee’s non-dischargeable claim against Appellant is $6,271,411.87.

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Related

Mills v. Green
159 U.S. 651 (Supreme Court, 1895)
In Re Downtown Properties, Ltd.
794 F.2d 647 (Eleventh Circuit, 1986)
Owen v. Owen (In Re Owen)
86 B.R. 691 (M.D. Florida, 1988)
Scarfia v. Holiday Bank
129 B.R. 671 (M.D. Florida, 1990)

Cite This Page — Counsel Stack

Bluebook (online)
178 B.R. 857, 1995 U.S. Dist. LEXIS 2914, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scarfia-v-travelers-indemnity-co-in-re-scarfia-flmd-1995.