Nelson v. Jackson, Civil Action No. ELH-18-2473
| Decision Date | 12 July 2019 |
| Docket Number | Civil Action No. ELH-18-2473 |
| Parties | RAYMON K. NELSON Appellant, v. CLINTON A. JACKSON Appellee. |
| Court | U.S. District Court — District of Maryland |
This bankruptcy matter is before the Court for the third time.1 In this instance, Raymon Nelson, M.D., the debtor and appellant, challenges an Order of the United States Bankruptcy Court issued on August 3, 2018 (ECF 1-1), denying Nelson's discharge, pursuant to 11 U.S.C. §§ 727(a)(4) and (a)(7). See ECF 1 (the "Notice of Appeal"); see also ECF 1-2 (Bankruptcy Court docket); ECF 17 (Nelson's Brief). The Order followed a two-day trial held in July 2018 (Lipp, J. presiding). See ECF 25-1 (Transcript of July 23, 2018); ECF 25-2 (Transcript of July 24, 2018).
The case is rooted in an adversary proceeding filed by Clinton Jackson against Nelson, the debtor in a related Chapter 7 bankruptcy proceeding. Jackson opposes the appeal. ECF 23 (Jackson's Brief).2 Although Jackson is pro se, he is an attorney. See ECF 25-2 at 93-94. Nelsonhas not replied to Jackson's brief, and the time to do so has expired. See Fed. R. Bankr. P. 8018(a)(3); Local Rule 105.2(a).
For the reasons that follow, I shall affirm the Bankruptcy Court's Order (ECF 1-1) denying Nelson's discharge.
Nelson, a cardiologist, has an ownership interest in three businesses: Raymon K. Nelson, Classic Cardiology, MD, P.A., Inc. ("Classic Cardiology"); All About the Heart, LLC ("AAH"); and All About the Property, LLC ("AAP"). See ELH-15-3978 ("Appeal I"), ECF 25 at 2 (citing Appeal I, ECF 11 at 10, 12). Between June 2005 and April 2010, Nelson employed Jackson as a consultant to perform various services, including the securing of corporate financing. Appeal I, ECF 25 at 2 (citing Appeal I, ECF 22 at 9-10, ¶ 3).
Jackson, a creditor of Nelson, ceased working for Nelson in April 2010. Appeal I, ECF 25 at 2 (citing Appeal I, ECF 22 at 9, ¶ 3). He subsequently filed suit against Nelson and Classic Cardiology in the Circuit Court for Anne Arundel County for breach of contract. Clinton A.Jackson v. Raymon K. Nelson M.D., P.A. Classic Cardiology, et al., Case No. 02-C-11-159529. On September 24, 2013, that court entered judgment in favor of Jackson in the amount of $135,363.72. Appeal I, ECF 25 at 2 (citing Appeal I, ECF 2-4 at 36). The circuit court also awarded Jackson attorney's fees in the amount of $64,147. Id. Nelson appealed to the Maryland Court of Special Appeals. Appeal I, ECF 25 at 2 (citing Appeal I, ECF 11 at 10). On May 7, 2019, the appeal was stayed, see Jackson, Case No. 02-C-11-159529 (Order of May 7, 2019), pending the resolution of Chapter 11 bankruptcy proceedings of Coastal Cardiology, LLC, a garnishee. In re: Coastal Cardiology, LLC, TJC-19-15398, ECF 1 (Bankr. D. Md.).
On November 7, 2013, Classic Cardiology filed a voluntary petition for bankruptcy relief pursuant to Chapter 11 of the United States Bankruptcy Code (the "Corporate Case"). In re: Raymon K. Nelson, M.D., P.A. Classic Cardiology, Inc., WIL-13-28961, ECF 1 (Bankr. D. Md.). A week later, on November 14, 2013, Nelson filed a voluntary petition for bankruptcy relief pursuant to Chapter 11 of the United States Bankruptcy Code (the "Individual Case"). In re: Raymon Kevin Nelson, WIL-13-29248, ECF 1 (Bankr. D. Md.). Both petitions were subsequently converted to petitions under Chapter 7. See Appeal I, ECF 25 at 3 (citing Corporate Case, ECF 180, and Individual Case, ECF 149).
In both cases, Nelson and creditors participated in several meetings mandated under 11 U.S.C. § 341. In the Individual Case, the § 341 meeting was held on December 18, 2013, and continued on March 21, 2014, and April 21, 2014. Individual Case, ECF 7; ECF 49; ECF 57. In the meeting of April 21, 2014, the Trustee directed Nelson to amend his schedules to disclose that he was formerly the trustee of his brother's trust, the Ralph K. Nelson Trust. ECF 23 at A0025-A0026 (Transcript of April 21, 2014 Meeting). After the Individual Case was converted to aChapter 7 proceeding on January 26, 2015, a § 341 meeting was held on March 6, 2015. Individual Case, ECF 150.
The Section 341 meeting in the Corporate Case was conducted on December 16, 2013, and continued on March 6, 2014. Corporate Case, ECF 21; ECF 63. Following conversion to Chapter 7 on January 27, 2015, a § 341 meeting was held on March 24, 2015, and continued on April 21, 2015. Corporate Case, ECF 206. In the final meeting of April 21, 2015, Nelson represented to the Trustee that as of January 28, 2015, there were no outstanding accounts receivable in connection with Medicare services. ECF 23 at A0046 (Transcript of April 21, 2015 Meeting).
On May 5, 2015, Jackson initiated an adversary proceeding against Nelson in the Individual Case. See Appeal I, ECF 25 at 3.4 Jackson alleged that "[t]he Debtor knowingly and fraudulently made a false oath or account." Case ELH-18-256 ("Appeal II"), ECF 4-3 at 5, ¶ 12. And, he claimed that "[t]he Debtor concealed property that belonged to the estate with the intent to hinder, delay or defraud the Creditors and/or The Chapter 7 Trustee . . . ." Id. ¶ 13. In particular, the complaint alleged, inter alia, that notwithstanding Nelson's amendments to his submissions to the Bankruptcy Court, Nelson failed to disclose income obtained from Classic Cardiology and AAH. See generally id. at 5-11, ¶¶ 14-26. Further, Jackson alleged that Nelson failed to disclose a judgment debt incurred by AAP. See id. at 14-15, ¶ 31. Accordingly, Jackson sought the denial of Nelson's discharge, pursuant to "11 U.S.C. Sections 727(a)(2) and/or (a)(3) and/or (a)(4) and/or (a)(5) and/or (a)(7) . . . ." Id. at 17; see also Appeal II, ECF 4-2 at 1; ECF 1-2; ECF 4-5 (Nelson's Answer, dated June 8, 2015).
Thereafter, Jackson moved for summary judgment in the adversary proceeding. Appeal I, ECF 2-7 at 1-2. In an Order of December 17, 2015, the Bankruptcy Court granted Jackson's summary judgment motion, and denied the debtor's discharge under 11 U.S.C. § 727(a)(4) and § 727(a)(7). Id., ECF 2-28. Nelson challenged that ruling in an appeal to this Court. Id., ECF 1.
By Memorandum and Order of July 20, 2016, I reversed and remanded for further proceedings. Appeal I, ECF 25; ECF 26. In particular, I concluded that there was a dispute of material fact as to whether Nelson intended to omit or mischaracterize information contained in his financial disclosure forms. Id., ECF 25 at 28-29. Additionally, I concluded that the Bankruptcy Court had impermissibly assessed the credibility of evidence submitted in the context of Jackson's summary judgment motion. Id.
Upon remand, Jackson moved for partial summary judgment, asking the Bankruptcy Court, inter alia, to deny Nelson's discharge based upon defendant's conduct in violation of 11 U.S.C. §§ 727(a)(3), 727(a)(5) and/or 727(a)(7). Appeal II, ECF 4-31. In the motion, Jackson averred, inter alia, that Nelson had "concealed" and failed to "explain" assets in financial disclosure forms related to the Corporate Case. Id. at 6-8, 11. Further, Jackson contended that the alleged "concealment" of assets "made it impossible to ascertain the Corporate Debtor's true financial condition." Id. at 20. And, Jackson argued that 11 U.S.C. §§ 727(a)(3), 727(a)(5), and 727(c)(7) "do not require the Court's finding of [Nelson's] fraudulent intent" as to any funds he may have concealed. Id. at 3.
The Bankruptcy Court held a motion hearing on January 23, 2018. Appeal II, ECF 4-1 (hearing transcript); id., ECF 4-65 (same). By Order of the same date, the Bankruptcy Court denied Jackson's summary judgment motion. Id., ECF 4-52.
Jackson challenged that ruling in an appeal to the District Court on January 25, 2018. See Appeal II, ECF 1; ECF 4-53. By Memorandum and Order of June 25, 2018, I dismissed Jackson's appeal as premature. Appeal II, ECF 12; ECF 13. And, I remanded the case to the Bankruptcy Court for further proceedings. Id. at 20.
Judge Lipp subsequently held a two-day trial on July 23, 2018 and July 24, 2018.5 See In re: Raymon Kevin Nelson, WIL-15-228, ECF 247, ECF 248. Nelson, the debtor, was represented by counsel. ECF 25-1 at 5. Jackson, the creditor, proceeded pro se. Id.
At trial, the parties called several witnesses. Jackson called Nelson (ECF 25-1 at 9); Judith Clay, a Certified Public Accountant ("CPA") (ECF 25-1 at 149); and Edward McDuffie, Nelson's part-time bookkeeper (ECF 25-2 at 7). Nelson called himself (ECF 25-2 at 152), as well as Jackson (ECF 25-2 at 96); Cheryl Youngblood, his wife (ECF 25-2 at 120); and Troy Emory, Nelson's tax preparer (ECF 25-2 at 140).
In addition, Judge Lipp considered numerous exhibits that were admitted into evidence in connection with the Individual Case. ECF 25-1 at 6-33. These included Nelson's "Voluntary Petition," dated November 14, 2013 (Individual Case, ECF 1), and Nelson's "Statement of Financial Affairs," amended on June 16, 2014 (id., ECF 80). She also considered Nelson's schedules, as amended: "Schedule B - Personal Property," dated January 29, 2014 (Individual Case, ECF 33 at 1-3), again amended on June 16, 2014 (id., ECF 82; see ECF 25-1 at 15); "Schedule C - Property Claimed as Exempt," dated January 29, 2014 (Individual Case, ECF 33 at 4); "Schedule D - Creditors Holding Secured Claims," dated June 16, 2014 (id., ECF 82 at 1);"Schedule F - Creditors Holding Unsecured Nonpriority Claims," dated June 16, 2014 (id., ECF 82 at 2-6); "Schedule G - Executory Contracts and Unexpired Leases," dated June 16, 2014 (id., ECF 82 at 7); "Schedule H - Codebtors," dated June 16, 2014 (id., ECF 82 at 8); "Schedule I - Current Income of Individual Debtor(s)," dated June 16, 2014 (id., ECF 82 at 9); "Schedule J - Current Expenditures of Individual Debtor(s)," dated June 16, 2014 (id., ECF 82 at 10); and "Summary of Schedules," dated June 16, 2014. Id., ECF 82 at 11-13.
In addition, Judge Lipp considered numerous exhibits related to the Corporate Case. These included Classic Cardiology's ...
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