In re Parker
| Citation | 85 BR 384 |
| Decision Date | 25 March 1988 |
| Docket Number | Bankruptcy No. 86-00701-R,Adv. P. No. 86-0454-R. |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — Eastern District of Virginia |
| Parties | In re Catherine Tyree PARKER, fka Catherine Anne Tyree, Debtor. SECOND NATIONAL BANK and Douglas C. Carter, Plaintiffs, v. Catherine Anne Tyree PARKER and Robert E. Hyman, as (interim) trustee herein, and his successors in office,[1] Defendants. |
David C. Dickey, Stanardsville, Va., for plaintiffs.
Robert A. Canfield, Richmond, Va., for defendants.
On the motion of Second National Bank and Douglas C. Carter, plaintiffs in a related adversary proceeding numbered 86-0454-R, and the Trustee, Charles R. Jaeger ("Trustee"), plaintiff in a related adversary proceeding numbered 87-0106-R, and the defendant in both such proceedings not objecting, it was Ordered that the two adversary proceedings be consolidated into one proceeding recognized by the Adversary Proceeding Number 86-0454-R. The plaintiffs in this adversary proceeding have objected to the discharge of the debtor, Catherine Tyree Parker ("Tyree"), under 11 U.S.C. § 727(a)(2), (3) and (4) and after a trial having been convened on the matter on September 15, 1987 and oral arguments presented on January 12, 1988, the Court now makes the following findings of fact and conclusions of law.
The testimony from the trial reflects that the bulk of the debt owed by the debtor, $44,000, was incurred as a consequence of Tyree having co-signed several notes held with her husband, C. Waverly Parker, Jr. ("Parker"). The arrangements for receiving the loans were made by Parker's father and the loans were used to pay for Parker's education expenses, as well as, the living expenses of the couple that exceeded Tyree's salary. Tyree first became liable for a portion of the debt, some of which had already been incurred by Parker, in 1983 before their marriage and after Parker's father conditioned his guaranteeing additional financing for his son's education on Tyree's becoming a co-signor on the notes. The amounts of the loans increased while Parker attended school and were renewed until 1986 when the couple separated.
The plaintiffs cite numerous areas of alleged wrong-doing as grounds for denying the debtor a discharge in her bankruptcy case. The first area concerns Tyree's failure to include her mother's checking account, which she had access to, in her statement of affairs and her subsequent failure to reveal it when later asked about unlisted assets. Two sets of checks were available on the mother's account, one with only the mother's name and another with only Tyree's name. Tyree had her own checkbook and wrote over 400 checks on the account. However, she alleges that whenever a check was written, it was with her mother's permission. Tyree did not recall making any deposits into the account herself.
Another ground the plaintiff cites for denying a discharge concerns Tyree's failure to mention as assets of her bankruptcy estate the rental deposits made for the house on New Kent Avenue shared with Parker and her current residence at Oakhurst Manor Apartments. Tyree's failure to include the rent deposits on her schedules occurred despite the existence of a section of the official bankruptcy forms requiring information on any rental deposits that were being held. Tyree claims that she was unaware of the need to report such deposits and did not consider the deposits to be assets. The evidence reflects that at the time Tyree had filed her bankruptcy petition, she had not made a deposit on the Oakhurst apartment.
The plaintiffs also charge that Tyree destroyed and mutilated recorded information from which the debtor's financial condition might have been ascertained. The information in question concerns ledger sheets containing Tyree's planned expenditures for a four month period. The records were produced as a result of the Trustee's request for documents reflecting the debtor's financial transactions. In responding to the Trustee's request, the debtor submitted the ledgers she had maintained until April of 1986. The records reflecting her bills for the months of May and June were torn from the last four month ledger that was submitted. The defendant's reason for tearing off the last two months, she testified, resulted from the Trustee limiting his request for documents for the period up until the filing of her bankruptcy, which occurred in April of 1986. After removing her expenditures for the months of May and June from the ledger tendered to the Trustee, the defendant transcribed her payments onto a new sheet. The new sheet was subsequently turned over to the plaintiffs.
Another area that is presented as a ground for denying the defendant's discharge concerns the failure to disclose payments made to Tyree's mother on a $2,200 loan within one year of her filing her petition in bankruptcy. Tyree asserts that only a couple of hundred dollars was ever paid to her mother and she states that her failure to report the transfers was caused by an oversight on her part, however, Tyree did schedule the debt as an unsecured liability on her bankruptcy petition.
Further charges raised by the plaintiffs consist of a litany of alleged misconduct by the defendant with regard to her bankruptcy case. One of the accusations involved the defendant's asserted misrepresentation of the value of her car on her bankruptcy petition. On her petition, Tyree stated the value of her car to be $400. Tyree testified that she based this value on what the City of Richmond had assessed the car for that year. In a subsequent trade-in of the car, Tyree was told that she would be paid $500 for her trade-in and that she would receive a $500 discount on her new car. The plaintiffs allege that the defendant misrepresented the value of the automobile because the papers associated with the purchase reflected that Tyree received $1,000 as the trade-in allowance for her old car.
Additional objections raised by the plaintiffs concern the possession of various articles of furniture, china and silverware reported on the debtor's schedules as being owned by another person but no evidence was ever presented that refutes the debtor's assertion. Final questions were raised about items such as a wastebasket, wall ornaments, pictures, and various other minor household appliances and decorations that the defendant failed to include in her schedules as being her property or having been given to her former husband. The defendant testified that the reason she left these items from her schedules resulted from the fact that they had been in storage and were not in front of her where she could itemize them. With regard to the items given to her former husband, the defendant stated that she made what she felt to be a fair division of the couple's property. It should be noted that all of the said items left off the debtor's schedules were capable of being treated as exempt property and that $2,100 of the debtor's $5,000 homestead exemption remained after she exempted those household articles she included in her schedules as personal property.
Bankruptcy Rule 4005 states that the plaintiff has the burden of proof in a complaint objecting to a debtor's discharge under § 727. A split of authority exists, however, over whether only a preponderance of the evidence (see Francis v. Riso, (In re Riso) 74 B.R. 750 (Bankr.D.N.H. 1987); Conti-Commodity Services, Inc. v. Clausen, (In re Clausen) 44 B.R. 41 (Bankr.D.Minn.1984)) is necessary to sustain this burden or whether clear and convincing evidence must be shown. Booth v. Booth, (In re Booth) 70 B.R. 391 (Bankr.D. Colo.1987); Taylor v. Lineberry, (In re Lineberry) 55 B.R. 510 (Bankr.W.D.Ky. 1985). The Fourth Circuit Court of Appeals' recent decision in Combs v. Richardson, 838 F.2d 112, 116 (4th Cir.1988), however, held that the standard of proof necessary to establish an exception to the dischargeability of a debt under § 523 was a preponderance of the evidence. The Court stated that because the Code does not state a level of proof, "in the face of this silence, courts may not imply a higher standard than the preponderance standard normally applied in civil proceedings." Since the Code similarly does not state the level of proof necessary under § 727, based on the Fourth Circuit's reasoning in Combs, this Court must find that a complaint objecting to the discharge of a debtor must also be proven by a preponderance of the evidence.
The first basis the plaintiffs assert for denying the defendant a discharge is that the debtor, with intent to hinder, delay, or defraud a creditor of the estate, has transferred, removed, and concealed property both after the filing of her bankruptcy petition, as well as within one year before such filing. 11 U.S.C. § 727(a)(2)(A) and (B). The cases interpreting § 727(a)(2) have held that actual intent to hinder, delay, or defraud must be shown and that actual intent may be established by circumstantial evidence, or by inferences drawn from a course of conduct. Devers v. Bank of Sheridan, Mont., (In re Devers) 759 F.2d 751 (9th Cir.1985); Bank of Penn. v. Adlman, (In re Adlman) 541 F.2d 999, 1003 (2d Cir.1976). The statute is to be liberally construed in favor of the debtor and strictly against the objector. Id.
The plaintiffs allege that the debtor intentionally concealed and transferred various household articles in an attempt to defraud creditors. The items the plaintiffs are concerned with involve such articles as wastebaskets, curtains, games, a popcorn popper, etc. The defendant testified that she failed to include all such items in her bankruptcy schedules because some of her possessions were in storage and, therefore, she was unable to remember everything she had. The defendant also testified that other items were not included on her schedules because they were left with her husband as part of a...
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