In re Jennings
| Decision Date | 11 July 2008 |
| Docket Number | No. 07-12910.,07-12910. |
| Parties | In Re: Bruce Lee JENNINGS, Debtor. Bruce Lee Jennings, Plaintiff-Appellant, v. Brandon James Maxfield, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Raymond R. Magley, Smith, Hulsey & Busey, Jacksonville, FL, for Jennings.
William L. Roelke, Jr., Richard R. Thames, Stutsman Thames Markey, P.A., Jacksonville, FL, for Maxfield.
Appeal from the United States District Court for the Middle District of Florida.
Before BIRCH and FAY, Circuit Judges, and RODGERS,* District Judge.
Bruce Lee Jennings ("Jennings") appeals from a 13 June 2007 order in which the district court affirmed the bankruptcy court's judgment and order under 11 U.S.C. § 727(a)(2)(A) denying Jennings's discharge. After he was found liable in a California civil action, but before damages had been awarded, Jennings transferred $130,000 to a builder in anticipation of improvements to be made on a hangar located on his Florida property. The bankruptcy court and district court found that Jennings made the transfer with the intent to hinder, delay, or defraud creditors. Jennings argues that the courts below erred in denying his discharge because he lacked the requisite fraudulent intent, and because the legislative history of the Bankruptcy Code states that a debtor may convert non-exempt assets to exempt assets prior to filing bankruptcy in order to make full use of available exemptions. After a review of the record and the parties' briefs, and having the benefit of oral argument, we conclude that the bankruptcy court and the district court did not clearly err in finding that Jennings made this payment with the intent to hinder, delay, or defraud his creditors. Accordingly, we AFFIRM.
Jennings is the sole shareholder of B.L. Jennings, Inc. ("B.L.Jennings"), a firearms distributor. He also served as a consultant to Bryco Arms ("Bryco"), a handgun manufacturer, and was involved in Bryco's daily operations. Bryco primarily sold its handguns to B.L. Jennings. On 6 April 1994, plaintiff-appellant Brandon James Maxfield ("Maxfield") was paralyzed in an accidental shooting involving a handgun designed by Jennings, manufactured by Bryco, and distributed by B.L. Jennings. The accident occurred several days after Bryco's insurance policy lapsed; neither Jennings nor B.L. Jennings maintained insurance.
Maxfield filed a civil action in California Superior Court against Bryco and B.L. Jennings in May 2001, and he added Jennings as a defendant in October 2001, alleging that Jennings had defectively designed the handgun that injured him. The California court divided the case into three phases, the first to determine liability, the second to establish damages, and the third to address joint venture, enterprise, partnership, and alter ego issues. The liability phase was set to begin on 17 March 2003.
In January 2002, Jennings met with a bankruptcy attorney in Boca Raton, Florida. Jennings testified that the purpose of this meeting was to obtain estate-planning advice, but he conceded that no wills or trust agreements were prepared during the first three months of 2002.1 R.Exhs.7 Pl.'s Exh. 146 at 173. On 29 January 2002, Jennings made an offer to purchase a property in Spruce Creek, a community in Daytona Beach, Florida, for $925,000. The property contained both a house and a hangar adjacent to the house. The offer was accepted, and the transaction closed on 15 February 2002. Thereafter, Jennings spent over $84,000 refurbishing his house.2
In November or December 2002, Jennings decided to expand the hangar adjacent to his house. He hired Baker Builders to perform the construction. On 10 March 2003, Jennings signed a notice of commencement to enlarge the hangar. The next day, Frank Baker ("Baker"), the president of Baker Builders, prepared a construction cost summary sheet, which he gave to Jennings to explain the expenses to be incurred during the construction of the hangar. The construction summary sheet described and estimated the cost of each aspect of the project and estimated the total cost of the project at approximately $202,000. Jennings and Baker Builders signed a contract on 31 March 2003, which provided, in part, that "capital for the construction expenses will be paid in increments of Fifty Thousand Dollars ($50,000) and a complete accounting of those funds will be presented before any additional capital will be funded." R.Exhs.5, Pl.'s Exh. 85 at 2. A few days later, Jennings gave Baker Builders a check in the amount of $5,000 as a prepayment on the first $50,000 due under the contract. That amount was sufficient to allow Baker Builders begin initial work on the project. R.Exhs.5, Pl.'s Exh. 91 at 32.
On 21 April 2003, the California court concluded the liability phase of the trial and found Jennings 15 percent liable, B.L. Jennings 10 percent liable, and Bryco 10 percent liable. R.Exhs.4, Pl.'s Exh. 22 at 5. On 23 April 2003, Jennings traveled to Europe, aware of the liability verdict against him. He returned from Europe on 4 May 2003 and expected to see that the site preparation work for the hangar expansion project was complete, but it was not. Jennings was "very anxious" to move the project along, so either that evening or the next day, Jennings called Baker to ask why the work had not been done. R6-80 at 69. Baker told Jennings that "[Baker] hadn't obligated himself and that I hadn't given him the funds to go forward." Id. Based upon their telephone conversation, Jennings concluded "the reason [] that [Baker] hadn't done work on the house while I was gone, or should I say the hangar project, was because he hadn't received moneys sufficient to start doing the concrete work." Id. at 69-70.
On 5 May 2003, Jennings withdrew $130,000 from his account at Bank of America to purchase a $130,000 cashier's check payable to Baker Builders. The contract did not require payments to be made using cashier's checks, but Jennings explained that he hand-delivered the cashier's check to Baker, because he wanted to "save a week or so of waiting for checks to clear." Bankr.Ct. Dkt. No. 75 at 82. As of that date, Baker Builders had spent less than $700 on the hangar project, leaving untouched most of the $5,000 prepayment Jennings delivered previously in April. R.Exhs.5, Pl.'s Exh. 89 at 1. In fact, Baker Builders would not begin clearing the hangar property until June, at a cost of approximately $3,000.
On 7 May 2003, the California court entered a damages verdict of approximately $50 million. On 13 May 2003, the California court entered a judgment against Jennings in the amount of $21,250,650.31.3 On 14 May 2003, Jennings, Bryco, and B.L. Jennings, and other defendants in the California litigation filed voluntary Chapter 11 bankruptcy petitions.
On 9 April 2004, the bankruptcy court held a hearing on Maxfield's objection to Jennings's claimed exemptions. According to Jennings's testimony at the hearing, he and Baker negotiated the $130,000 payment as a way for Jennings "to save money and move the project forward." R.Exhs.7, Pl.'s Exh. 147 at 91. Jennings testified that:
[Baker] and I had a meeting, and ... it was decided that, if I would pay him the money that he was about ready to spend, he could ... get the project going if he had the money in his hand, and he could negotiate better pricing and be prepared to move the project forward faster, and possibly even get some discounts on our work because we were well funded and ready to go.
Id. at 91-92. When Jennings was asked why he did not pay any more than $130,000, he said that "what [Baker] and I negotiated was only 130." Id. at 92.
Baker was deposed on 27 July 2004, and his deposition testimony directly contradicted Jennings's testimony at the April hearing before the bankruptcy court. Baker testified that Jennings independently determined the $130,000 figure, with no input from Baker.4 R.Exhs.5, Pl.'s Exh. 91 at 36-38. In contrast to Jennings's testimony that he and Baker negotiated the $130,000 payment, Baker testified that, after the initial $50,000 payment called for by the contract, he expected to receive additional money only after he had spent the first $50,000 and provided an accounting of the expenditures to Jennings. Yet before the site had been cleared and the permit had been issued, Jennings paid Baker the first two installments in full and more than half of the third installment. According to Baker, Jennings told Baker: "`Hey, I got — I'm going to California, I might not be back for two months, I'm going to give you $130,000.'" Id. at 37. As to Jennings's rationale for paying $130,000, Baker surmised: Id. at 37-38. Baker denied that he ever suggested to Jennings that Jennings would save any money by prepaying the $130,000 and denied that he requested Jennings to pay $130,000 for any reason. Id. at 45-46.
The bankruptcy court held a trial on Maxfield's objection in July and August 2005. At trial, Jennings testified that he knew that the contract with Baker Builders required only an initial payment of $50,000, but he gave Baker $130,000 because he "did not want to be burdened with the management of costs and supervision of a hangar" while preparing for the damages phase of the California trial. Bankr.Ct. Dkt. No. 75 at 83. He also wanted to indicate to Baker that he was "sincere in getting [the] hangar started" and to ensure that Baker would be able to begin construction on the hangar. Id. at 82. The bankruptcy court denied Jennings's request for a discharge under 11 U.S.C. § 727(a)(2)(A) based on his $130,000 transfer to Baker Builders. The district court affirmed, and this appeal followed.
On appeal, the parties dispute whether Jennings made the $130,000 transfer to Baker...
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