In re Barman
| Decision Date | 21 August 2000 |
| Docket Number | Bankruptcy No. 99-45133-R. Adversary No. 99-4992. |
| Citation | 252 BR 403 |
| Parties | In re Norman BARMAN, Debtor. Charles J. Taunt, Trustee, Plaintiff, v. Norman Barman, Kimberly Barman, Bruce Carson, and Doe Defendants 1-25, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Michigan |
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Charles Bullock, Southfield, MI, for Plaintiff.
Frank Fortescue, Detroit, MI, Arthur Brauer, Birmingham, MI, for Defendants.
Amended
Defendant Norman Barman's motion to suppress evidence raises interesting and novel issues about the processes that are constitutionally required in connection with a trustee's inspection of a debtor's residence. Because of the close nexus between government authority and a chapter 7 trustee, the Court concludes that the fourth amendment does apply to such an inspection. However, because in this case the trustee's conduct in obtaining a court order authorizing the inspection was "reasonable" under prevailing fourth amendment standards, the motion to suppress is denied.
On March 30, 1999, Norman Barman filed a petition for chapter 7 relief. The only asset that the debtor disclosed was wearing apparel worth $500. On December 20, 1999, the trustee filed this adversary proceeding complaint. In Count I, the trustee alleges that the debtor fraudulently transferred funds to his wife, Kimberly Barman, for the purchases of homes, first in Warren, Michigan and then later in Milford, Michigan. Count II alleges that the bankruptcy estate is the actual owner of a business named "Miss Q Billiards." Count III alleges that the ownership of Miss Q Billiards was fraudulently transferred from Norman Barman to the other defendants. Count IV alleges that Norman Barman fraudulently concealed assets of the estate and requests revocation of the discharge.
Contemporaneous with the filing of this adversary complaint, the trustee filed an ex parte motion for an order authorizing the trustee to enter Norman and Kimberly Barman's residence in Milford and to inspect, inventory and appraise personal property. The motion set forth in detail the legal and factual grounds for the relief requested and was granted in an order entered by Bankruptcy Judge Walter Shapero.1 The trustee then carried out the inspection of the Milford residence. Later, the debtor filed this motion to suppress and the trustee responded. The issues raised in the motion to suppress require a detailed review of the allegations in the trustee's verified motion for the inspection order.
Initially, the motion notes that under 11 U.S.C. § 542, a debtor has a duty to account for and deliver property of the bankruptcy estate to the trustee and that under 11 U.S.C. § 704, the trustee has the duty to investigate a debtor's financial affairs and to account for, collect and reduce to money, property of the bankruptcy estate. (Trustee's ex parte motion, ¶¶ 5 and 6.) The motion then alleges that the trustee has been hindered in investigating the debtor's several vending and video machine businesses because the debtor had thrown away the financial records relating to these businesses. The trustee cites pages 37-39 of the transcript of the debtor's testimony at the meeting of creditors, which is attached to the motion as exhibit B, as support for his allegation. (Motion, ¶ 7.) When questioned at both the meeting of creditors and at a deposition, the debtor was reluctant to discuss the placement and removal of these machines, especially the video poker machines, which are illegal in Michigan, as reflected in the transcripts of his depositions attached to the motion as exhibits C, D and E. (Motion, ¶ 8.) The trustee alleges that he is investigating the debtor's interests in four parcels of real estate, which may have been purchased in the names of others to avoid creditors. Again, the trustee cites the transcript of the debtor's deposition attached as exhibit F as support for his allegation. (Motion, ¶ 9.)
Using his parents' names, the debtor purchased a home in Troy, Michigan, which he sold in February, 1997. That sale allowed him to receive, through his parents, cash in the amount of $157,939.79, citing exhibit F. (Motion, ¶ 10.) The debtor also owned $40,000 worth of furniture at that home, according to his deposition testimony, exhibit F. (Id.) After that sale, the debtor arranged, again through his parents, to purchase a home in Georgetown, South Carolina for $680,000, with $160,000 down, according to his testimony at his meeting of creditors, attached as exhibit G. (Motion, ¶ 11.) Some of the furniture from the Troy, Michigan home was moved to the Georgetown, South Carolina home, according to exhibit F. (Motion, ¶ 12.)
After the debtor's business, "BHB Enterprises," filed bankruptcy in South Carolina, the trustee there obtained an order prohibiting the debtor, Norman Barman, and others from transferring or encumbering the Georgetown home. The debtor was found in contempt for willfully violating that order by arranging to have the home refinanced to acquire the equity in the home. The contempt order of the South Carolina bankruptcy court reciting these facts is attached to the motion as exhibit H. (Motion, ¶ 13.) The $130,000 proceeds of the refinancing were wire transferred to the account of the debtor's parents in Michigan, and the debtor withdrew those proceeds in cash in increments of $20,000-$30,000, according to his deposition testimony, exhibit F. (Motion, ¶ 14.) The debtor further testified that he spent and gambled this entire sum, as transcribed in exhibit F.2 (Motion, ¶ 15.)
The trustee further alleges that Kimberly Barman, the debtor's wife, testified in depositions that she earned $29,000 in 1998 and expected to earn $70,000 in 1999, and that she had no source of income other than from Miss Q Billiards for the past five years. The depositions are attached as exhibits I and J to the motion. (Motion, ¶ 17.) The trustee then states that on June 11, 1998, Kimberly Barman purchased a home in Warren, Michigan for $130,000, with $40,000 down, which was at the same time that the debtor received $130,000 from the refinancing of the South Carolina home. The transfer documents for the Warren home are attached to the motion as exhibit K. The debtor testified in deposition, exhibit L, that he owned the furniture in storage at the Warren home. (Motion, ¶ 19.)
After the debtor's parents filed bankruptcy, they testified at their own meeting of creditors that on July 23, 1998, they had purchased $5,000 worth of furniture for the debtor as a house warming present for the new Warren home. (Exhibits M and N) (Motion, ¶ 20.)
The only asset disclosed in the debtor's bankruptcy schedules was apparel worth $500. Neither the furniture from South Carolina nor the furniture from the debtor's parents was disclosed. In addition, both the debtor and Kimberly Barman testified that the debtor does not own or possess any video machines. (Exhibits J and O) (Motion, ¶ 21.)
The trustee alleges that on September 16, 1999, the Warren home was sold and Kimberly Barman received the equity of $59,415.49. This allegation is supported by the documents attached in exhibit P. (Motion, ¶ 22.) On September 30, 1999, Kimberly Barman purchased a home in Milford, Michigan for $415,000, with $83,000 down. The trustee believes that this home is property of the bankruptcy estate. The debtor lives with Kimberly Barman in this home according to her testimony. (Motion, ¶ 23.) Kimberly Barman testified that the down payment for this home came from the equity from the Warren home and from savings. (Motion, ¶ 24.) These allegations are supported by Kimberly Barman's testimony attached as exhibit Q.
Exhibit R attached to the motion is a sworn statement from a process server who visited the Milford home on December 6, 1999 and observed between fifteen and twenty video machines in the garage. (Motion, ¶¶ 25 and 26.)
The trustee further alleges that Kimberly Barman was not forthright in his investigation in the case, as demonstrated by three instances of documented false testimony by her. First, her explicit denial of any business interests other than Miss Q Billiards was later retracted. (Exhibits S and T.) Second, she indicated that she did not make the down payment to purchase a business called "Silhouettes," but exhibit U is a copy of a check signed by her for that purpose. Finally, she indicated that the debtor had nothing to do with the purchase of Silhouettes, but exhibit V is a copy of a UCC financing statement for the business signed by the debtor. Thus, the trustee alleges a concern that Kimberly Barman has an apparent proclivity to protect the debtor's interests. (Motion, ¶ 27.)
Kimberly Barman also purchased a 1999 van for $30,000 and a 1999 Cadillac for which she paid $16,000 down, consisting of a cashier's check for $7,000 and cash of $9,000, according to the documents of this transaction, exhibit X. (Motion, ¶ 28.)
The trustee then concludes that "it is highly unlikely that the Debtor's only asset is five hundred ($500.00) dollars in clothing." (Motion, ¶ 29.) The trustee further alleges the "probable existence" of property of the debtor that was not disclosed, including furniture and video machines at the Milford residence. (Motion, ¶ 31.)
Finally, the trustee alleges:
The Trustee\'s counsel was informed, on December 17, 1999 that the Debtor had a trailer at his residence (401 Trotter Trail, Milford, Michigan) that contained personal property of the Debtor and/or the Debtor\'s wife. This information was provided to the Trustee by a party that is involved with post-petition business litigation involving the Debtor and persons/entities related to the Debtor (including Kimberly Barman). In addition to the existence of the trailer, the Trustee was informed that according to what was...
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Listecki v. Official Comm. of Unsecured Creditors (In re Milwaukee)
...government to accomplish a common goal, let alone an unconstitutional one. The Archbishop also relies on Taunt v. Barman (In re Barman), 252 B.R. 403(Bankr.E.D.Mich.2000), but Barman is easily distinguishable. In Barman, the Chapter 7 trustee obtained an ex parte order and went with the U.S......