In Re: Walter N. Stumpf

Decision Date09 February 2011
Docket NumberNO: 1:08-bk-02127 MDF,NO: 1:08-ap-00126 MDF,: 1:08-bk-02127 MDF,: 1:08-ap-00126 MDF
PartiesIn re: WALTER N. STUMPF, JR., Debtor GLENDA FOX, Plaintiff v. WALTER N. STUMPF, JR., Defendant
CourtU.S. Bankruptcy Court — Middle District of Pennsylvania
OPINION1
I. Procedural History

Before the Court is the Complaint of Glenda Fox ("Fox") seeking an order denying a discharge to Debtor Walter N. Stumpf, Jr. ("Debtor") under 11 U.S.C. § 727(a)(2) and (3).2Debtor filed his voluntary Chapter 7 bankruptcy petition on June 13, 2008. He initially omitted Fox as a creditor on Schedule F although she had obtained a judgment against him pre-petition.3In his Statement of Financial Affairs ("SOFA"), Debtor disclosed that he had been named as the defendant in two state court civil actions initiated by Fox. He filed his voluntary Chapter 7 petition a few weeks after Fox obtained the judgment. On July 29, 2008, the Chapter 7 trustee assigned to the case issued his final report indicating that no funds were available for distribution to creditors.

Fox filed the instant Complaint on September 19, 2008. The first cause of action alleges that Debtor concealed his interest in certain assets, including various firearms, a gun safe, and a 1996 Fleetwood mobile home, with the intent to hinder, delay, and/or defraud his creditors, including Fox. The second cause of action alleges that Debtor failed to keep or maintain records from which his financial condition or transactions might be ascertained, thereby hindering, delaying, or defrauding his creditors.

Debtor filed an answer to Fox's complaint generally denying the allegations. Trial of the matter was held on September 23, 2010, and the parties submitted post-trial briefs. The matter is now ripe for adjudication. For the reasons set forth below, the Court finds in favor of Fox and against Debtor on both counts. The Court also finds that Debtor's discharge should be denied under § 727(a)(4)(A).

II. Factual Findings

Debtor and Fox cohabited from 1998 until Debtor vacated Fox's residence in November 2007. There was conflicting testimony regarding the exact date upon which the relationship ended, but it can be assumed that it effectively terminated when the Debtor moved out. During the period Debtor and Fox were living together they co-signed a note and placed a mortgage on Fox's house located at 18 Bull Frog Road, Grantville, Dauphin County, Pennsylvania. The loan originated with Waypoint Bank (now Sovereign Bank), and the principal amount was $75,000. While this loan originally was intended to finance construction costs of a barn, the proceeds of the loan were used in part to satisfy Debtor's credit card bills and to pay off a purchase money loan on a 1996 Fleetwood mobile home that Debtor had purchased in 1998 for $28,000. Debtor lived in the mobile home until he moved in with Fox. Debtor's sister, who lived with him in themobile home before he moved in with Fox, continued to live there with her children for an unspecified period of time until she vacated the premises. At some point while Debtor and Fox were cohabiting, Debtor's son moved into the mobile home. Debtor testified that he transferred the mobile home into joint names with his son, but no documentary evidence was provided to substantiate this allegation. He also asserted that he added his son's name to the title so that his son could obtain insurance on the property in his own name. Debtor explained that he did not list the mobile home as an asset on his schedules because his son was living in the home when the petition was filed. At trial Debtor admitted that he retained an interest in the mobile home from the date it was purchased in 1998 until it was sold in January 2009.

After Debtor filed his petition in July 2008, he attended the creditors' meeting and was examined by the Chapter 7 trustee. After the trustee filed a final report stating that there were no assets available for distribution to creditors, Debtor offered the mobile home for sale. He placed "for sale" signs on the mobile home itself and near the entrance of the park where the home is located. He did not otherwise advertise or market the property. Debtor testified that he sold the home in January 2009 for $2,000 to two parties unrelated to Debtor.

While cohabiting with Fox, Debtor actively bought firearms at various auctions and gun shows. Debtor acknowledged that he would attend auctions at least once or twice a month where he would purchase firearms, ammunition, and other items. The guns collected by Debtor included "curios and relics" ("C & R") as those terms are defined at 27 C.F.R. § 478.11. From 2005 until November 1, 2008, Debtor was licensed by the federal Bureau of Alcohol, Tobacco Firearms and Explosives ("ATF") as a C & R collector.4 Debtor acquired a C & R license so he would not be required to go through a background check every time he purchased a weapon. During the time he lived with Fox, Debtor stored his gun collection in various locations around Fox's home including inside a gun safe, which could hold forty-two firearms. While Debtor stated that he took numerous pictures of his firearms and exchanged information on these items with other collectors, he stated that he did not maintain a comprehensive record of firearms he purchased or sold.

On Schedule B, Debtor reported that on the date of the petition he owned eight firearms, including two rifles, one shotgun, and five pistols. However, he failed to disclose on the same schedule that he owned the gun safe, which was purchased in 2005 for $955.82. Debtor admitted that he owned more than forty firearms when he moved out of Fox's residence in November 2007, which he said were sold at various gun shows in November and December of 2007. No evidence was produced as to the number of firearms sold, their manufacturer or model, or the amount of consideration Debtor received through those transfers. Debtor admitted that prior to being deployed with the National Guard in August 2007, he took photos of and made a record of all firearms he owned. However, only one photograph depicting eight firearms was produced through discovery. See Exhibit Fox-5.

III. Discussion

Adjudicating a complaint in which the denial of a debtor's discharge hangs in the balance is a weighty task for a court. "A denial of discharge imposes an extreme penalty and should not be taken lightly." Stapleton v. Yanni (In re Yanni), 354 B.R. 708, 712 (citing Rosen v. Bezner, 996 F.2d 1527, 1531 (3d Cir. 1993)). Consequently, objections to discharge under § 727 should be liberally construed in favor of debtors and strictly against objectors. Rosen, 996 F.2d at 1531. However, there is no constitutional right to a bankruptcy discharge; the "fresh start" is reserved for the "honest but unfortunate" debtor. Grogan v. Garner, 498 U.S. 279, 286-86 (1991).

The plaintiff has the burden of proving an objection to discharge by a preponderance of the evidence. See Grogan, 498 U.S. at 289-90; Wachovia Bank, N.A. v. Spitko (In re Spitko), 357 B.R. 272 (Bankr. E.D. Pa. 2006); Bohm v. Dolata (In re Dolata), 306 B.R. 97, 146 (Bankr. W.D. Pa. 2004); Fed. R. Bankr. 4005. "Once sufficient evidence is presented by the plaintiff to satisfy the burden of going forward with the evidence, the burden thereafter shifts to the debtor to provide evidence to rebut the plaintiff's prima facie case." Adams v. Zembko (In re Zembko), 367 B.R. 253, 256 (Bankr. D. Conn. 2007) (quoting PaineWebber, Inc. v. Gollomp (In re Gollomp), 198 B.R. 433, 440 (S.D. N.Y. 1996)).

A. Section 727(a)(2)

Fox objects to Debtor's discharge pursuant to § 727(a)(2), which reads as follows:

(a) The court shall grant the debtor a discharge, unless-
(2) the debtor, with the intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of the property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, mutilated, or concealed-
(A) property of the debtor, within one year before the date of the filing of the petition; or(B) property of the estate, after the date of the filing of the petition.

11 U.S.C. § 727(a)(2).

In order to sustain an objection to a debtor's discharge under § 727(a)(2), a plaintiff must prove that there has been: (1) a transfer, removal, destruction, mutilation, or concealment; (2) involving property of (a) the debtor, one year prior to the filing of the petition, or (b) the bankruptcy estate, after the filing; (3) whereby a debtor intended to hinder, delay, or defraud his creditors. See Applebaum v. Henderson (In re Henderson), 134 B.R. 147 (Bankr. E.D. Pa. 1991); see also Exner v. Schultz (In re Schultz), 71 B.R. 711, 715 (Bankr. E.D. Pa. 1987). "Harm to a creditor is not an element required by § 727(a)(2)." Baum v. Baum (In re Baum), 2005 Bankr. LEXIS 514, *19 (Bankr. N.D. Tex. 2005).

Fox asserts that Debtor concealed the gun safe, numerous firearms, and the mobile home by failing to include these assets on his bankruptcy petition. Further, Fox alleges that Debtor transferred the mobile home after the petition was filed for inadequate consideration. Debtor does not deny that gun safe and the mobile home were assets of the estate, but argues that they were of limited value and that their omission from the schedules was inadvertent. As to the firearms, Debtor testified that he sold most of his collection after he moved from Fox's residence.

This Court must determine whether Debtor, with the intent to defraud creditors or the Chapter 7 trustee, concealed the mobile home, the gun safe, and numerous firearms. Further, the Court must determine whether Debtor defrauded creditors and the trustee by sellingapproximately forty guns within a year prior to the filing of the petition5 or by transferring the mobile home after the petition was filed.

The Third Circuit Court of Appeals has "defined concealment to include preventing the discovery of or withholding knowledge of the property."...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT