Hobbs v. Roberts (In re Roberts)

• Decision Date: 24 January 2020
• Docket Number: Case No. 18-50444-CAG,Adv. No. 18-05260-CAG
• Citation: 611 B.R. 261
• Parties: IN RE: June Alice Willene ROBERTS, Debtor. Henry G. Hobbs, Jr., Acting United States Trustee. Plaintiff, v. June Alice Willene Roberts, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Texas

611 B.R. 261

IN RE: June Alice Willene ROBERTS, Debtor.

Henry G. Hobbs, Jr., Acting United States Trustee. Plaintiff,

v.June Alice Willene Roberts, Defendant.

Case No. 18-50444-CAG

Adv. No. 18-05260-CAG

United States Bankruptcy Court, W.D. Texas, San Antonio Division.

Signed January 24, 2020

Kevin M. Epstein, San Antonio, TX, for Plaintiff.

C. Daniel Roberts, C. Daniel Roberts & Associates, P.C., Austin, TX, for Defendant.

MEMORANDUM OPINION GRANTING IN PART AND DENYING IN PART THE COMPLAINT OBJECTING TO DISCHARGE OF JUNE ALICE WILLENE ROBERTS

CRAIG A. GARGOTTA, UNITED STATES BANKRUPTCY JUDGE

This Memorandum Opinion resolves adversary proceeding Henry G. Hobbs, Jr. v. June Alice Willene Roberts , Adv. No. 18-05260-CAG. On October 18, 2019, this Court concluded a two-day trial before taking the matter under advisement. The Court has reviewed the entire record before it, including all admitted exhibits. The Court also considered the testimony and credibility of all witnesses. Additionally, the Court has considered all evidentiary objections raised and sustained in making its findings of fact.

JURISDICTION

As an initial matter, the parties have stipulated to, and Court finds it has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 157 and 1334. (ECF No. 23, at ¶¶ 2, 5.1–5.4). This matter is a core proceeding as defined under 28 U.S.C. § 157(b)(2)(J). Venue is proper under 28 U.S.C. § 1409(a). This matter is referred to the Court pursuant to the District's Standing Order of Reference. The Court makes findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.

BACKGROUND

On March 2, 2018 (the "Petition Date"), June Alice Willene Roberts ("Debtor", "Defendant", or "Roberts") filed a voluntary Chapter 7 petition for relief with her initial Schedules ("Initial Schedules"), and Statement of Financial Affairs ("Initial SOFA"). (Case No. 18-50444-CAG, ECF No. 1). On May 15, 2018, Defendant filed amended versions of her petition, Schedules B, D, E/F, I, J, and Statement of Financial Affairs ("Amended SOFA"). (Case No. 18-50444-CAG, ECF No. 7). On October 29, 2018, Defendant filed further amended, Schedules A/B, C, D, E/F, G, H, I, J, and a Second Amended Statement of Financial Affairs ("Second Amended SOFA"). (Case No. 18-50444-CAG, ECF Nos. 26, 27). As noted herein, Trustee seeks a denial of Debtor's discharge under 11 U.S.C. §§ 727(a)(2)(A), (a)(3), (a)(4)(a), (a)(5).¹

FINDINGS OF FACT

I. Stipulated Facts

On August 20, 2019, the Parties submitted a Joint Pre-Trial Order with their statement of stipulated facts which the Court now adopts. See (ECF No. 23, §§ 5.1–5.73).

II. The Parties' Contentions

Trustee contends this case is about June and Jason Roberts' attempt to "stay one step ahead of creditors." Trustee argues Defendant should be denied discharge due to conduct related to: (1) undisclosed income from Green Energy Xperts; (2) undisclosed income from Large Loss Consulting; (3) transfers from Large Loss Consulting; (4) the financial records of Large Loss Consulting; (5) the transfer of assets to Mike Sanders; (6) the purchase and transfer of Roger Roberts' RV; (7) and undisclosed gifts to Defendant's father-in-law. (ECF No. 1, at ¶¶ 7–66). These specific disputed factual issues are set out below and addressed more fully under their respective counts.

First, Plaintiff alleges that Large Loss Consulting was created to do consulting on construction projects. (ECF No. 23, at ¶ 6.1). Defendant asserts that it was created only to complete the roofing projects on eight contracts previously held by Green Energy Xperts. (Id. )

Second, Plaintiff asserts that Defendant was the owner of Large Loss Consulting. Defendant denies that allegation. (ECF No. 23, at ¶ 6.2).

Third, Plaintiff alleges that Defendant cannot satisfactorily explain all her financial transactions. (ECF No. 23, at ¶ 6.3). Specifically, Plaintiff alleges that Defendant cannot satisfactorily explain all the financial transactions of Large Loss Consulting. Defendant denies that she cannot satisfactorily explain all of her financial transactions. (Id. ) Defendant asserts that she cannot explain all of the financial transactions of Large Loss Consulting agreement because it was not her business and she had nothing to do with its operation. (Id. )

Fourth, Plaintiff alleges that Defendant failed to keep, maintain, or preserve adequate books and records of Large Loss Consulting's business transactions. (ECF No. 23, at ¶ 6.4). Defendant denies this allegation and asserts that it was not her business, she had nothing to do with its operation, and had no obligation to keep, maintain or preserve its books and records. (Id. )

Fifth, Plaintiff alleges that by failing to ensure Large Loss Consulting kept, maintained, or preserved adequate books and records of its business transactions, Defendant failed to keep, preserve, or maintain records necessary from which her financial condition and business transactions might be ascertained. (ECF No. 23, at ¶ 6.5). Defendant denies this allegation and asserts that Large Loss Consulting was not her business and she had no obligation to keep, preserve or maintain records for that entity. (Id. )

Sixth, Plaintiff alleges that Defendant concealed and transferred assets with the intent to hinder, delay, or defraud creditors. Defendant denies this allegation. (ECF No. 23, at ¶ 6.6).

Seventh, Plaintiff alleges that Defendant made false oaths in this case with the requisite intent to deceive or with reckless indifference to the truth. Defendant denies these allegations. (ECF No. 23, at ¶ 6.7).

Eighth, Plaintiff asserts that the payments of the mortgage of Gerald Dean Roberts through Green Energy Xperts and through Defendant's personal bank account constitute gifts that Defendant did not disclose on her Statement of Financial Affairs. (ECF No. 23, at ¶ 6.8). Defendant denies that allegation. Defendant asserts that prior to Defendant's sale of the stock in Green Energy Xperts, Green Energy Xperts made payments on Gerald Dean Roberts' home mortgage as compensation for services rendered by him to Green Energy Xperts. (Id. ) For nine months after Defendant sold the stock in Green Energy Xperts, Defendant and her husband continued to make payments on the mortgage, which they considered to be compensation for his help with the Roberts' three children and not as a gift. (Id. )

Ninth, Plaintiff asserts that Defendant should have either listed ownership of an RV on her Schedules or transfer of an RV on her Original Statement of Financial Affairs. (ECF No. 23, at ¶ 6.9). Defendant denies this allegation and asserts that Jason Roberts purchased the RV and moved it to Odessa, Texas to use for housing while Large Loss Consulting was doing work there. (Id. ) Several months later, the RV was sold to one of Large Loss Consulting's roofing contractors for services provided by the contractor. (Id. ) Because Roger Roberts had never been paid for the RV, Large Loss Consulting issued the check to him after the RV was transferred to the contractor. (Id. )

Tenth, Plaintiff alleges that Defendant's 2017 tax return is inconsistent with every version of Defendant's Statement of Financial Affairs. (ECF No. 23, at ¶ 6.10). Defendant asserts that the 2017 tax return was prepared and filed 6 months after the petition and schedules were filed and was prepared from information not available to Defendant at the time the bankruptcy case was filed. (Id. ) Further, she relied on the services of a reputable accounting firm for preparation of the 2017 tax return. (Id. )

Eleventh, Plaintiff alleges that Defendant has testified falsely during her meetings of creditors and in her deposition. Defendant denies this allegation. (ECF No. 23, at ¶ 6.11).

Twelfth, Defendant further asserts that the $20,000.00 used by Mike Sanders to purchase the boat, jet ski and golf cart and which came from the account of Your Roof Warranty, LLC was a draw or distribution from Your Roof Warranty to Mike Sanders. (ECF No. 23, at ¶ 6.12).

Each area of scrutinized conduct relates to one or more code provisions allowing a denial of discharge as set forth below.

A. 11 U.S.C. § 727(a)(2)(A) —Transfers from Large Loss Consulting; the transfer of assets to Mike Sanders.

Trustee contends that Defendant is not entitled to a discharge of her debts because she transferred or concealed assets with an intent to defraud creditors. Specifically, Trustee alleges Defendant: (1) transferred more than $215,575.73 from Large Loss Consulting to Your Roof Warranty, LLC for no consideration in order to keep money away from Creditors; and (2) sold a boat, jet ski, and golf cart to Mike Sanders in a sham transaction. Defendant denies these allegations.

B. 11 U.S.C. § 727(a)(3) —The Financial Records of Large Loss Consulting.

Additionally, Trustee contends that Defendant's debts are not dischargeable because Defendant unjustifiably concealed, falsified, or failed to keep or preserve documentation of her financial condition and business transactions. Specifically, Trustee alleges Defendant did not keep adequate books and records for Large Loss Consulting because: (1) she did not keep a general ledger, and the ledger contained with the company checkbook was thrown away or misplaced; (2) the spreadsheets produced to explain company transactions are unreliable;² (3) the profit and loss statements do not match the bank statements; (4) the spreadsheets were not used in completing the 2017 tax return; (5) the records show Jason Roberts received approximately $93,000 in commissions but the tax returns show none; (6) the 2017 tax returns do not include a Schedule C; and (7) although Mike Sanders received $31,000 he never received a Form 1099. Defendant denies these allegations.

C. 11 U.S.C. § 727(a)(4)(A) —Undisclosed income from Green Energy Xperts; undisclosed income from Large Loss Consulting; transfers from Large Loss Consulting; the transfer of assets to Mike Sanders; failure to list an RV; and undisclosed gifts...