In re Hendrix

• Decision Date: 13 October 2006
• Docket Number: Adversary No. 06-04103.,Bankruptcy No. 05-47089.
• Citation: 352 B.R. 200
• Parties: In re Karen Dana HENDRIX, Debtor. v. Dana R. Towle, M.D., P.C. and Dana R. Towle, M.D., Plaintiffs, v. Karen Dana Hendrix, Defendant.
• Court: U.S. Bankruptcy Court — Western District of Missouri

352 B.R. 200

In re Karen Dana HENDRIX, Debtor. v. Dana R. Towle, M.D., P.C. and Dana R. Towle, M.D., Plaintiffs, v. Karen Dana Hendrix, Defendant.

Bankruptcy No. 05-47089.

Adversary No. 06-04103.

United States Bankruptcy Court, W.D. Missouri.

October 13, 2006.

COPYRIGHT MATERIAL OMITTED

David R. Barlow, Kansas City, MO, for Debtor/Defendant.

MEMORANDUM OPINION

DENNIS R. DOW, Bankruptcy Judge.

Before the Court for determination in this adversary proceeding is a motion for partial summary judgment on certain of the claims asserted in the complaint filed by plaintiffs Dana R. Towle, M.D., P.C. and Dana R. Towle, M.D. (collectively "Plaintiffs") for denial of discharge to debtor Karen Dana Hendrix ("Debtor"), pursuant to 11 U.S.C. §§ 727(a)(2), (a)(3), (a)(4), (a)(5) and (a)(6). This Court has jurisdiction over the complaint under 28 U.S.C. § 1334(b) and § 157(a) and (b). This is a core proceeding which this Court may hear and determine pursuant to 28 U.S.C. § 157(b)(2)(J). The following constitutes my Findings of Fact and Conclusions of Law in accordance with Rule 52 of the Federal Rules of Civil Procedure, made applicable to these proceedings by Rule 7052 of the Federal Rules of Bankruptcy Procedure. For the reasons set forth below, I find that Plaintiffs have satisfied their burden of demonstrating that there is no genuine issue of material fact as to their claim that Debtor has made false oaths and should be denied a discharge pursuant to § 727(a)(4)(A).¹

I. UNCONTROVERTED FACTS AND PROCEDURAL BACKGROUND

Debtor was Plaintiffs' office manager for approximately 5 years between 1998 and 2004.² After Debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code on September 26, 2005, Plaintiffs filed a complaint objecting to discharge based on assertions of numerous statutory violations. One such alleged violation is that Debtor made numerous false oaths by failing to disclose material information in her bankruptcy documents. Although Debtor signed the Schedule of Assets and Liabilities and the Statement of Financial Affairs filed with her petition, swearing that the information contained therein was true and correct to the best of her knowledge, she later admitted they did not accurately reflect her true assets. Debtor's Schedule B indicates that her household goods have a total fair market value of $1,760.00.³ Interestingly, however, she made $4,195.60 in purchases from Benchmark in February 2005 and $3,223.26 in purchases from Nebraska Furniture Mart in May 2005.⁴ Contrary to the information contained in her Statement of Financial Affairs, Debtor left some of her household furnishings with Rich Gray, a person with whom she previously co-habited, and she received payment from Mr. Gray for said furniture post-petition.⁵ Debtor denied any interest in a business or that any liquidated claims were owed to her, however, Debtor presented Plaintiffs an invoice, in the name of "H, K & A", dated October 12, 2004, for work performed between July and August 2004.⁶ She also received some income from her work with Dan Dana/Mediation Training Institute, Inc., although neither this income or her affiliation with Dan Dana were disclosed in her bankruptcy documents.⁷ In her Schedule B, she denied any interest in office equipment, furnishings and supplies.⁸ However, at her Rule 2004 exam, Debtor admitted that she possesses a computer, printers, a computer monitor, a laptop and fax machine.⁹ She also made purchases from various electronic and office supply stores between July 2001 and February 2005 in excess of $30,000.¹⁰

Debtor scheduled Citifinancial as an unsecured creditor, but admitted that she pledged a Sony 36D computer with a fair market value of $5,000 and a Sony laptop with a fair market value of $2,500 as security for a loan on June 8, 2004.¹¹ She obtained a second loan from Citifinancial on December 29, 2004 after pledging a Sony 25" TV with a fair market value of $800, and a Sony laptop computer, with a fair market value of $5,000.¹²

On April 5, 2036, Plaintiffs filed a Complaint to Determine Dischargeability of Debt or in the Alternative to Deny Discharge in which Plaintiffs sought an order determining that certain claims against Debtor are nondischargeable and denying Debtor a discharge. Debtor's only amendment to her schedules was to Schedule F. One of Plaintiffs' allegations in the Complaint is that Debtor made a false oath by having failed to disclose certain business affiliations of Debtor, failing to disclose income from a business affiliation, failing to schedule numerous items of personal property and office equipment and failing to disclose that she collected on a claim post-petition. Plaintiffs allege that Debtor should therefore be denied a discharge pursuant to § 727(a)(4)(A).

II. DISCUSSION AND LEGAL ANALYSIS

A. Summary Judgment

Summary judgment is appropriate when the matters presented to the Court "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Fed. R. Bankr.P. 7056; Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Dulany v. Carnahan, 132 F.3d 1234, 1237 (8th Cir.1997); In re Marlar, 252 B.R. 743, 750 (8th Cir. BAP 2000). The party moving for summary judgment has the initial burden of proving that there is no genuine issue at to any material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Nelson v. Kingsley (In re Kingsley), 238 B.R. 918, 920 (8th Cir. BAP 1997). Once a moving party has met this initial burden of proof, the non-moving party must set forth specific facts sufficient to raise a genuine issue for trial, and may not rest on its pleadings or mere assertions of disputed facts to defeat the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 103 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Celotex, 477 U.S. at 324, 106 S.Ct. 2548.

Courts have generally been reluctant to grant summary judgment on causes of action under § 727(a)(4) because the element of fraudulent intent usually involves questions of fact regarding the debtor's state of mind. First Nat'l Bank v. Davison, (In re Davison), 296 B.R. 841, 847 (Bankr.D.Kan. 2003); Hunter v. Sowers (In re Sowers), 229 B.R. 151, 159 (Bankr.N.D.Ohio 1998). However, "there is no per se rule that state of mind issues are inappropriate for disposition on summary judgment." Sowers, 229 B.R. at 151, see also e.g. In re Chavin, 150 F.3d 726 (7th Cir.1998) (granting summary judgment under § 727(a)(4) where debtor failed to reveal valuable stock options and a partnership interest); Meeks v. Trammell (In re Trammell), 197 B.R. 309 (Bankr.W.D.Ark.1996) (granting summary judgment under § 727(a)(2) on the basis of debtor's prepetition transfer of two vehicles and concealment of wages); Najjar v. Kablaoui (In re Kablaoui), 196 B.R. 705, 708 (Bankr.S.D.N.Y.1996) (determining summary judgment was appropriate under § 727(a)(2) where the debtor failed to offer sufficient rebuttal evidence). If the movant produces sufficient evidence to support its asserted inference, and the respondent fails to produce significantly probative evidence to counter the inference, disposition by summary judgment may be appropriate even though subjective factors such as motive or intent are the fact issues in question. United Mortgage Corp. v. Mathern, 137 B.R. 311, 322 (Bankr.D.Minn.1992); see also e.g. First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 279, 88 S.Ct. 1575, 20 L.Ed2d 569 (1968); Barnes v. Arden Mayfair, Inc., 759 F.2d 676, 681 (9th Cir. 1985); American Isuzu Motors, Inc. v. George's Comet Motorcars, Ltd. (In re George's Comet Motorcars, Ltd.), 100 B.R. 403, 405-406 (Bankr.N.D.Ill.1989).

General Principles and Burden of Proof

Obtaining a discharge is the key component of the "fresh start" a bankruptcy proceeding is designed to give a debtor. Accordingly, denying a discharge to a debtor is considered to be a "harsh and drastic penalty." American Bank of Spickard-Trenton v. Ireland (In re Ireland), 49 B.R. 269, 271 n. 1 (Bankr. W.D.Mo.1985). For that reason, the grounds for denial of discharge listed in § 727 are strictly construed in the favor of the debtor. Floret, L.L.C. v. Sendecky (In re Sendecky), 283 B.R. 760, 763 (8th Cir. BAP 2002); Gray v. Gray (In re Gray), 295 B.R. 338, 343 (Bankr.W.D.Mo.2003); Rouse v. Stanke (In re Stanke), 234 B.R. 449, 456 (Bankr.W.D.Mo.1999). A trustee or creditor requesting that the court deny a debtor a discharge bears the burden of proving each of the elements of the applicable claim, by a preponderance of the evidence. Sendecky, 283 B.R. at 763; Gray, 295 B.R. at 343; Kirchner v. Kirchner, II (In re Kirchner, II), 206 B.R. 965, 973 (Bankr.W.D.Mo.1997).

C. Making of a False Oath or Account

A debtor may be denied a discharge, pursuant to § 727(a)(4)(A), if the debtor knowingly and fraudulently, in or in connection with a case, made a false oath or account. The Debtor's signature on the Petition, the Schedules of Assets and Liabilities and Statement of Financial Affairs, verified and made under penalty of perjury pursuant to Rule 1008, are declarations which have the force and effect of oaths of the kind encompassed by the discharge exception for making a false oath. In re Bren, 303 B.R. 610, 613 (8th Cir. BAP 2004), rev'd on other grounds, In re Bren, 331 B.R. 797 (8th Cir. BAP 2005). The proper functioning of the entire bankruptcy process is dependent upon the debtors providing complete, accurate and reliable information in the petition and other documents submitted with the filing of the case, so that parties in interest may evaluate the debtor's assets and liabilities and appropriately administer the case. Bren, 303 B.R. at 613. A debtor's omission of assets from his bankruptcy schedules or statement of financial affairs may constitute a false oath under § 727(a)(4)(A). Davison, 296 B.R. at 847.

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