Casamatta v. Dunlop (In re Dunlop)
| Decision Date | 05 June 2019 |
| Docket Number | ADV. PROCEEDING NO. A17-4035,ADV. PROCEEDING NO. A17-4037,CASE NO. BK16-41913 |
| Parties | IN THE MATTER OF: N. CURTIS DUNLOP and CYNTHIA L. DUNLOP, Debtor(s). DANIEL J. CASAMATTA, Acting United States Trustee, Plaintiff, v. N. CURTIS DUNLOP and CYNTHIA L. DUNLOP, Defendants. ADAMS BANK & TRUST, Plaintiff, v. N. CURTIS DUNLOP and CYNTHIA L. DUNLOP, Defendants. |
| Court | U.S. Bankruptcy Court — District of Nebraska |
A trial on the complaints in these adversary proceedings was held by video conference on March 28, 2019. James Bocott appeared for the debtors, Michael Samuelson appeared for Adams Bank & Trust, and Jerry Jensen appeared for Acting United States Trustee Daniel Casamatta. The court received witness testimony and documentary evidence. The parties were given time to file written closing arguments; those have been submitted. The matter is now ready to be decided.
Having considered the evidence and the law, I find that judgment should be entered in favor of the debtors in both cases.
Both complaints contain allegations of missing assets, discrepancies between the value of assets listed by the debtors on pre-petition financial statements and those listed on the bankruptcy schedules, and errors and omissions in the bankruptcy schedules and statement of financial affairs. Both complaints seek denial of discharge for the debtors pursuant to 11 U.S.C. § 727(a)(2) for concealing property of the bankruptcy estate, § 727(a)(4)(A) for making false oaths on the bankruptcy schedules and statement of financial affairs and at their § 341 meeting, and § 727(a)(5) for failing to adequately explain the loss or deficiency of assets. Adams Bank & Trust also requests a determination that the debtors' obligation to it is not dischargeable under 11 U.S.C. § 523(a)(2)(B) because the debtors made materially false representations regarding their financial condition in written financial statements upon which the bank relied to its detriment.
The basic and uncontested facts are as follows:
1. Debtor N. Curtis Dunlop is a Nebraska-licensed chiropractor doing business in North Platte, Lincoln County, Nebraska.
2. On December 9, 2016, the debtors formed INNATUS PC. N. Curtis Dunlop continues his employment as a chiropractor with INNATUS P.C.
3. INNATUS P.C. is wholly owned by the debtors.
4. Prior to employment with INNATUS P.C., N. Curtis Dunlop was employed as a chiropractor with JNAC Limited.
5. N. Curtis Dunlop has done business under both JNAC Limited and the more recently formed entity INNATUS P.C. as Chiropractic Life Center.
6. Daniel Casamatta is the Acting United States Trustee for the District of Nebraska.
7. Adams Bank & Trust is a banking corporation duly organized and existing under and by virtue of the banking laws of the State of Nebraska, with its principal place of business located in Ogallala, Keith County, Nebraska.
8. The debtors' current debt to Adams Bank is based upon the following transactions and documents:
9. Adams Bank has maintained the balance sheets referenced above.
10. Adams Bank renewed notes for the Dunlops in May/June of 2015, prior to the Dunlops' executing updated balance sheets.
11. On December 22, 2016, the Dunlops jointly filed a voluntary petition under Chapter 7 of the United States Bankruptcy Code which was docketed as Case No. BK16-41913 in this court.
12. Philip M. Kelly was appointed as the Chapter 7 trustee for the case.
13. These adversary proceedings also arise under and are related to the Chapter 7 case.
14. On January 6, 2017, the debtors filed their schedules of assets and liabilities, more particularly described as Schedules A through J ("the Schedules"), in the bankruptcy case.
15. On January 6, 2017, the debtors also filed a Statement of Financial Affairs in the bankruptcy case.
16. The debtors signed a declaration dated January 6, 2017, declaring under penalty of perjury that they had read the Schedules and Statement of Financial Affairs in the bankruptcy case and that they were true and correct.
17. The debtors' Schedule A/B totals $330,437.93 and consists of real estate valued at $195,635.00 and personal property valued at $134,802.93. The personal property consists of automobiles with a value of $48,000.00; household goods and furnishings valued at $2,000.00; electronics valued at $250.00; collectibles and valuables valued at $250.00; and jewelry valued at $2,400.00.
18. Question 4 of Schedule A/B asks debtors to describe any watercraft, aircraft, motor homes, ATVs and recreational vehicles, other vehicles, and accessories they own. The Dunlops reported owning a 2008 Malibu 19-foot boat with trailer and a 2014 Kawasaki jet ski.
19. Question 9 of Schedule A/B asks debtors to describe any sports and hobby equipment they own. The Dunlops reported owning a treadmill, golf clubs and bag.
20. The debtors' Schedule A/B does not disclose that they own a boat dock.
21. Question 23 of the Statement of Financial Affairs asks debtors whether they hold or control any property owned by someone else, including any property they are storing for someone. In their response, the Dunlops did not disclose that they were storing automotive equipment and tools for someone else in their warehouse/storage unit.
22. After the bankruptcy case was filed, the initial meeting of creditors pursuant to 11 U.S.C. § 341 was held on February 9, 2017. Following adjournment, a continued § 341 meeting of creditors was held on March 22, 2017. Both meetings are referred to collectively hereafter as "the § 341 meeting."
23. The Dunlops testified under oath at the § 341 meeting that they had listed all of their assets on their schedules and that their bankruptcy schedules and statements were true and correct.
24. Trustee Kelly conducted an on-site inspection of the Dunlops' property in North Platte and a warehouse/storage unit rented by the Dunlops. The Chapter 7 Trustee discovered that the debtors owned a boat dock that was not listed on the schedules. At the inspection of the storage unit, N. Curtis Dunlop represented that the automotive equipment and tools in the warehouse/storage unit belonged to someone other than the debtors.
25. N. Curtis Dunlop provided a personal financial statement to Western Nebraska Bank dated February 1, 2016. That financial statement stated that the Dunlops owned jewelry and furniture with a value of $95,000.00 and personal property other than vehicles separately listed with a value of $196,000.00. The personal financial statement indicated that the total value of all assets owned by the Dunlops as of February 1, 2016, was $686,000.00.
26. The United States Trustee requested the Dunlops to provide an explanation of what happened to the jewelry, furniture, and personal property listed on the financial statements provided to Adams Bank and Western Nebraska Bank. The Dunlops provided the United States Trustee with a joint affidavit dated March 15, 2017, which included an itemization of the jewelry and furniture assets. The total value of the itemized jewelry was $28,300.00 to $30,300.00. The total value of the itemized furniture was $56,300.00. The itemization further indicated that furniture valued at $39,500 had been sold in 2015 and furniture valued at $11,150.00 was sold with their former house. Additionally, the itemization indicated that a washer/dryer valued at $2,500.00 was given away in 2015.
Under these facts, the issues for trial were:
1. Whether the Dunlops, with the intent to hinder, delay, or defraud a creditor or officer of the estate, concealed property of the estate by failing to disclose on their bankruptcy schedules that they owned a boat dock.
2. Whether the Dunlops, with the intent to hinder, delay, or defraud a creditor or officer of the estate, made a false oath when they failed to disclose on their bankruptcy schedules and statements that they owned a boat dock and failed to disclose that they were storing...
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