In re Maynard, Bankruptcy No. 92-2115-8P7. Adv. No. 92-403.
| Decision Date | 30 November 1993 |
| Docket Number | Bankruptcy No. 92-2115-8P7. Adv. No. 92-403. |
| Parties | In re Gordon E. MAYNARD, Debtor. The OHIO COMPANY, Plaintiff, v. Gordon E. MAYNARD, Defendant. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Richard C. Prosser, Tampa, FL, J. Kevin Cogan, Columbus, OH, for plaintiff.
Guillermo A. Ruiz, St. Petersburg, FL, for defendant.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION
THIS IS a highly fact intensive controversy and without doubt one might, even after a cursory reading of the facts, raise eyebrows and suspect that what occurred in this instance is just not right. However, a careful analysis of the facts as established by the record leaves serious doubt whether or not any of the grounds plead in the Complaint filed by the Ohio Company (Plaintiff) warrant the denial of the discharge of Gordon E. Maynard (Debtor).
The Plaintiff's challenge to the Debtor's right to a discharge is presented in a five-count Complaint. In Count I, the Plaintiff alleges that the Debtor transferred the following property to his wife:
In addition, the Plaintiff alleges in Count I that the Debtor concealed certain loan receivables due to him totalling approximately $100,000.00, resulting from loans made by the Debtor to certain of his customers in order to enable them to meet "margin" calls on brokerage accounts maintained by the clients with the brokerage house. The Plaintiff alleges that these actions were done with the intent to hinder, delay or defraud creditors, and that they were accomplished by the Debtor within one year of the filing of the Petition. According to the Plaintiff, these acts by the Debtor are sufficient to deny his general discharge pursuant to § 727(a)(2) of the Bankruptcy Code.
In Count II, the Plaintiff alleges that the Debtor destroyed or failed to keep or preserve books, records or documents relating to the following transactions or property:
Therefore, the Plaintiff alleges that the Debtor's discharge should be denied pursuant to § 727(a)(3) of the Bankruptcy Code.
Count III is based upon § 727(a)(4) of the Bankruptcy Code. In this Count, the Plaintiff alleges that the Debtor made a false oath by failing to disclose in his Schedule of Assets and Liabilities his ownership interests in the Public Service of New Hampshire (PSNH) bonds and the transfer of the tax refund check to his wife. In addition, the Plaintiff also allege that the Debtor falsely testified at the § 341 Meeting of Creditors with regard to the following: that the PSNH bonds were owned by his wife; that the yacht, the tax refund, and the Honda Civic were transferred for adequate consideration, in satisfaction of a debt or as a gift; and that the transfers made to his wife were not to hinder, delay or defraud creditors.
Finally, in Count IV the Plaintiff's claim is related to the property discussed earlier and charges that the Debtor failed to satisfactorily explain the loss of these assets and the deficiency of his assets to meet his liabilities. Therefore, according to the Plaintiff, he is not entitled to a discharge pursuant to § 727(a)(5) of the Bankruptcy Code.
These are the claims which form the basis to deny the Debtor's discharge. In addition, the Plaintiff in its Complaint also sought, in the alternative, a determination by this Court that the debt owed by the Debtor to the Plaintiff is nondischargeable pursuant to § 523(a)(4) of the Bankruptcy Code. At the pre-trial conference, the Court bifurcated the claims set forth in the Complaint in order to resolve the threshold issues relating to the Debtor's right to a general discharge. Subsequently, this Court entered an Order and dismissed the claim set forth in Count V, a claim of non-dischargeability based on § 523(a)(4) of the Bankruptcy Code.
The facts as established at the final evidentiary hearing, and which are relevant to resolution of the relevant issues under consideration are as follows:
At the time relevant, the Debtor was a stockbroker employed as a registered representative of the Plaintiff in its offices located in Port Huron, Michigan, and Clearwater, Florida. During 1987 and 1988, prior to the filing his Petition for Relief under Chapter 7 of the Bankruptcy Code, the Debtor was involved in litigation initiated by several of his clients (Clients). The Clients, in their suit, alleged that the Debtor, together with the Plaintiff and others, violated numerous federal and state securities laws, the rules and regulations promulgated by the National Association of Securities Dealers (NASD), and provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq. The Clients also asserted claims based on common law fraud, breach of fiduciary duty and negligence. The Plaintiff settled the Customer Litigation with the Clients, in July, 1990. In conjunction with the settlement, the Debtor and the Clients executed Mutual Release and Settlement Agreements (Settlement). In the Settlement, the Plaintiff reserved its right to seek indemnification and contribution from the Debtor based upon the Settlement. The claims pursued currently before this Court by the Plaintiff are based upon the Plaintiff's right to indemnification and contribution pursuant to the Settlement.
The record established at the trial reveals that the Debtor and his wife, Constance (Mrs. Maynard), were married in 1982. Mrs. Maynard is a housewife, who was last employed in 1990. The Debtor's income for the years 1985 through 1991 was as follows:
1985 $181,056.00
1986 263,903.00
1987 222,093.00
1988 92,778.00
1989 173,327.00
1990 108.719.00
1991 129,763.00
In contrast, Mrs. Maynard's income for those same years was as follows:
1985 $11,419.00
1986 2,952.00
1987 2,000.00
1988 0.00
1989 6,380.00
1990 3,950.00
1991 0.00
(Plaintiff's Exhibits # 9-15). Both the Debtor and Mrs. Maynard, individually, maintained securities accounts through Advest Investment Corp. (Advest), the Debtor's current employer.
During the relevant time, the Debtor owned or held interests in a variety of investments. These investments included interests in Amrecorp II and Amrecorp III, two limited partnership investments offered by the Plaintiff to its clients; Aspen Grove, Inc., a closely-held corporation in which the Debtor was a stockholder; WEK, Inc., a sub-S corporation formed by the Debtor and his associate William E. Krieger, and; A/C Chatfield, Ltd., an Adult-Congregate Care Facility (ACCF). In addition, the Debtor and Mrs. Maynard, either individually or jointly, owned a 1974 Hatteras Inboard 38 foot boat, a 1987 Mercedes-Benz automobile, a 1987 Mercury automobile, a 1990 Honda Civic automobile and a 1990 Acura Legend automobile. Finally, the Debtor also loaned to WEK, Inc., and Aspen Grove of Marysville, Ltd., as well as to some of his clients, substantial sums of money, all of which were still due and owing to the Debtor at the time of the commencement of this Chapter 7 case.
In the two years preceding the commencement of the case, the Debtor experienced a severe decline in his financial condition. Between July, 1991 and December, 1991, the Debtor transferred the following items to his wife: (1) title to the 1990 Honda Civic; (2) interest in Amrecorp Realty Fund II and Amrecorp Realty Fund III; (3) interest in A/C Chatfield Ltd.; (4) a tax refund in the amount of $11,634.83; and (5) title to the 1990 Acura. The decline of the Debtor's financial condition was due, in part, to his failure to file his tax returns during the years 1985 through 1990. In 1991, the Debtor and Mrs. Maynard, were assessed by the Internal Revenue Service (IRS), taxes due and owing in the amount of $93,865.77. According to the Debtor, in order to pay the delinquent taxes, the Debtor borrowed money from his wife's securities account. Before Mrs. Maynard would permit the use of money from her individual securities account to pay the back taxes, she required the Debtor to transfer certain assets to her. The Debtor conceded to her request and did transfer his interest in Aspen Grove, Inc., WEK, Inc. and all receivables due to him by WEK, Inc. and Aspen Grove Apartments of Marysville, Ltd. These transfers were memorialized by the execution of a Memorandum Agreement between the Debtor and Mrs. Maynard dated September 30, 1991. (Plaintiff's Exhibit # 7).
On February 18, 1992, the Debtor filed his voluntary Petition for Relief under Chapter 7 of the Bankruptcy Code. In connection with the filing of the Petition, the Debtor also filed his Schedule of Assets and Liabilities, together with his Statement of Financial Affairs, which he had signed under the penalty of perjury.
In his Statement of Financial Affairs,...
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