Hernandez v. Shove (In re Shove), Case No. 17-31052
| Decision Date | 10 May 2021 |
| Docket Number | Adversary Proceeding No. 18-03009,Case No. 17-31052 |
| Citation | 629 B.R. 96 |
| Parties | IN RE: Richard M. SHOVE, Kathleen E. Shove, Debtors Jose R. Hernandez, Plaintiff v. Richard M. Shove, Kathleen E. Shove, Defendants |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Kenneth P. Ferris, Cynthia A. Spinola, Hashim & Spinola, Pittsfield, MA, for Plaintiff.
Carrie Naatz, Naatz Law Office, West Springfield, MA, James P. Ehrhard, Ehrhard & Associates, P.C., Worcester, MA, for Defendants.
Before the Court, after trial, is a complaint filed by judgment creditor Jose R. Hernandez ("Hernandez") against Richard M. Shove ("Shove"), a debtor in the underlying joint Chapter 7 bankruptcy case. In this adversary proceeding, Hernandez seeks (1) a ruling that a judgment entered in favor of Hernandez against Shove is nondischargeable pursuant to 11 U.S.C. § 523(a)(6) as a debt incurred on account of a willful and malicious injury or (2) in the alternative, a denial of Shove's discharge under 11 U.S.C. § 727 (a)(2), (a)(3), and (a)(4)(A).1
Pursuant to Bankruptcy Rule 7052, the following constitute the Court's findings of fact and conclusions of law.
The factual findings contained in this Memorandum are based on trial testimony, the admitted evidence, and the Court's own records. See LeBlanc v. Salem (In re Mailman Steam Carpet Cleaning Corp.), 196 F.3d 1, 8 (1st Cir. 1999). The following is a brief summary of the relevant facts; more detailed findings of fact are incorporated in the Discussion section, Part II, below.
Shove operated a landscaping and lawn care business referred to in the bankruptcy schedules and statements as both "Rick's Complete Lawn and Landscaping Service" and "Rick's Complete Lawn Care" ("Rick's Complete"), employing 3 to 4 employees per year, for at least 25 years prior to the business's demise in 2015. During that time, from 1996 to the present, Shove has also owned a total of approximately 90 rental units. On February 11, 2015, Hernandez was severely injured during the course of his employment by Shove and Rick's Complete.2 Shove did not have a workers' compensation policy in effect at the time of the injury. Hernandez filed suit against Shove in the Massachusetts Superior Court (the "Superior Court") and received a $965,201.53 verdict in his favor on September 20, 2017 ("the Hernandez judgment"). Meanwhile, on May 6, 2016, while the Superior Court case was pending and after Hernandez had moved for a real estate attachment, Kathleen Shove ("Kathleen"), Shove's spouse (together, the "Shoves"), executed three promissory notes and mortgages on properties jointly owned by Shove and Kathleen in favor of Kathleen's father, Thomas McDowell ("McDowell"), ostensibly to document and secure prepetition debts on account of moneys lent to the Shoves prepetition.3
On December 15, 2017, the Shoves filed a joint voluntary petition under Chapter 7 of the Bankruptcy Code and Jack E. Houghton was appointed the Chapter 7 trustee on December 18, 2017 (the "Trustee"). Although Shove acknowledged understanding the importance of providing accurate information in his bankruptcy documents and the fact that the documents were signed under the pains and penalty of perjury, Shove testified that he did not read his bankruptcy documents "word for word" before filing his case. Trial Tr. 169:11-20, Feb. 24, 2020 ("Feb. 24 Tr.").
In the schedules and statements, the Shoves indicated that their debts were not primarily consumer debts.4 On Schedule A/B, the Shoves disclosed joint ownership of their primary residence located in Lenox, Massachusetts (the "Residence"), 5 jointly owned multi-unit properties located in Lenox, a jointly owned single family home located in Lee, Massachusetts, and 2 multi-unit properties owned solely by Shove located in Pittsfield, Massachusetts. Schedule D indicates that the secured claims against the properties exceed $1.7 million, and approximately $540,000 of the unsecured debt listed on Schedule E/F is described as "mortgage" or "mortgage deficiency" debt.
On Schedule I, Shove indicated that he was employed by Cut-N-Edge Property Maintenance as a manager, grossing $747.50 per month, and that he also received unemployment compensation. In addition, on Schedule I, the Shoves listed combined net monthly rental income of $1,056.59, based on aggregate monthly rental income of $4,625 less expenses of $3,568.41. Notably, the Shoves did not list the rental income on line 8a of Schedule I, which asks for "[n]et income from rental property and from operating a business, profession or farm" and instructs the debtor to attach a statement for each rental property showing gross receipts, ordinary and necessary business expenses, and the total monthly net income. Instead, the rental income is listed on line 8h ("other income"), which does not require a separate supporting attachment.
On January 29, 2018, the Trustee conducted an initial meeting of creditors as required by § 341 of the Bankruptcy Code ("meeting of creditors") and a continued meeting of creditors in May 2018. The Trustee requested and received additional information from the Shoves related to their financial affairs, but the Shoves have filed no further amendments to their bankruptcy schedules and statements. On December 16, 2020, the Trustee noted on the docket of the main bankruptcy case that there were no assets available for distribution to creditors.
On March 23, 2018, Hernandez commenced this adversary proceeding, and later filed a five count amended complaint (the "Complaint"). Through Counts I-IV, Hernandez seeks a ruling that the Hernandez judgment is nondischargeable pursuant to § 523(a)(6) and that the Shoves' discharge should be denied pursuant to § 727(a)(2), (3), and (4). Count V of the Complaint, which sought the avoidance of the mortgages granted by Kathleen to McDowell as fraudulent transfers, was dismissed by the Court. Hernandez agreed to the dismissal of the Complaint in its entirety as to Kathleen.
A trial was conducted over 5 days in February and March 2020 and, as requested by the Court, the parties have both filed post-trial briefs. Seven witnesses testified at trial – Hernandez, Shove, Kathleen, Mychal Shove ("Mychal," the Shoves' son), Andrew Farrell ("Farrell," a former tenant of the Shoves), the Trustee, and William Barry ("Barry," the attorney that represented Shove in the Superior Court case and assisted Kathleen with drafting the promissory notes and mortgages to McDowell).
The testimony provided by Hernandez, Farrell, and Barry was credible and forthright, as was the Trustee's testimony to the extent the Trustee had a clear memory of the facts in relation to the presented questions. When applicable, the Trustee readily indicated particular facts he was unable to recall. Mychal's testimony was largely credible, although some responses seemed rehearsed and contrived to adhere to a "script."5 Both Shove and Kathleen at times appeared condescending and visibly frustrated by Hernandez's counsel. Their testimony was, as described below, credible in some respects, but often incomplete or evasive by way of opportunistic purported confusion. During direct examination by Hernandez's counsel, Kathleen often responded to a question with "okay" or "I guess" or by presenting a retorting question.
In the Complaint and his post-trial brief, Hernandez contends that, because Shove willfully and maliciously caused Hernandez's injury, the Hernandez judgment should be excepted from discharge pursuant to § 523(a)(6). In addition, Hernandez argues that Shove's discharge should be denied in its entirety (1) pursuant to § 727(a)(2)(A) because Shove concealed property within the year preceding the bankruptcy filing with the intent to hinder, delay, or defraud Hernandez; (2) pursuant to § 727(a)(3) on account of Shove's concealment, destruction, or failure to keep financial records; and (3) pursuant to § 727(a)(4)(A) as a result of various false oaths Shove made in or in connection with his bankruptcy case. Not surprisingly, Shove denies that the injury incurred by Hernandez was on account of any willful or malicious action taken by Shove, that Shove concealed or destroyed property or records, that Shove failed to keep adequate financial records, or that Shove knowingly and intentionally made any false representations in connection with the bankruptcy case.
Hernandez was periodically employed by Shove to perform landscaping and other related work for several years prepetition. On February 11, 2015, Shove instructed Hernandez to go to a property located at "the Condos"6 to shovel snow off of a customer's roof. According to Hernandez, who had never previously performed such a task, Shove insisted that Hernandez shovel from the roof despite Hernandez's resistance due to his expressed fear of falling, reassuring Hernandez that two employees would later join Hernandez to assist him. Shove testified that he would not send someone up on a roof alone due to the obvious danger of falling and said that his practice was to use a snow rake from the ground to remove snow from a roof. Hernandez testified, however, that Shove pressured him into performing the work on the roof alone. The Court credits Hernandez's testimony and finds that Shove instructed Hernandez to shovel snow from a client's roof. Because he needed to keep his job to support his family, Hernandez obliged.
According to Hernandez, he used a map hand drawn by Shove to drive to the Condos by himself and locate the property. When there, Hernandez used a ladder to get onto the metal roof and began shoveling snow without a harness or rope to prevent him from falling. Unfortunately, Hernandez's trepidation was warranted; Hernandez fell from the roof into an outside area enclosed by a fence, where he was non-ambulatory, in substantial...
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Hernandez v. Shove (In re Shove)
...justified the wholesale failure to keep records regarding his financial affairs for the post-Fire period." Hernandez v. Shove (In re Shove), 629 B.R. 96, 113 (Bankr. D. Mass. 2021). The court elaborated:Shove owned and managed a total of approximately 90 rental properties since 1996 and ope......
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Hernandez v. Shove (In re Shove)
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