Vucurevich v. U.S. Bank, N.A.

• Decision Date: 13 February 2015
• Docket Number: CIV. 14-4115-KES
• Court: U.S. District Court — District of South Dakota
• Parties: KENT A. VUCUREVICH, Appellant, v. U.S. BANK, N.A., Appellee.

KENT A. VUCUREVICH, Appellant, v. U.S. BANK, N.A., Appellee.

CIV. 14-4115-KES

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA SOUTHERN DIVISION

February 13, 2015

MEMORANDUM OPINION AND ORDER AFFIRMING BANKRUPTCY COURT'S DECISION

Appellant, Kent A. Vucurevich, appeals from the July 9, 2014, decision issued by the United States Bankruptcy Court for the District of South Dakota,¹ granting appellee U.S. Bank, N.A.'s motion for summary judgment in part and denying Vucurevich a general discharge of debts. Bankr. Docket 52.² For the following reasons, the court affirms the bankruptcy court's decision.

BACKGROUND

The pertinent, undisputed facts of this appeal are as follows: Vucurevich was placed into bankruptcy on June 27, 2011, following an involuntary petition filed by several creditors. See 4:11-bk-40501. On August 1, 2011, the bankruptcy court granted the petition and entered an order for relief under Chapter 7 of U.S.C. title 11. U.S. Bank subsequently filedan adversary complaint against Vucurevich on February 2, 2012, arguing that Vucurevich was not entitled to a discharge of indebtedness. Bankr. Docket 1. The case was held in abeyance pending resolution of other adversary proceedings until the bankruptcy court issued an order on November 7, 2013, which allowed the case to resume. Bankr. Docket 28.

U.S. Bank moved for summary judgment on December 27, 2013, arguing Vucurevich was not entitled to a discharge of debts pursuant to 11 U.S.C. §§ 727(a)(3), (a)(4), and (a)(5). See Bankr. Docket 29-4. Accompanying its motion and brief for summary judgment, U.S. Bank submitted a statement of undisputed material facts and a number of evidentiary exhibits. See Bankr. Docket 29-1 to -3. Vucurevich timely responded, raised several objections to U.S. Bank's motion, and argued that summary judgment was inappropriate. See Bankr. Docket 37.

In its motion for summary judgment, U.S. Bank's statement of undisputed material facts set forth the following:

25. Debtor does not have a bank account but runs everything on a cash basis.

32. Neither Debtor's original [Statement of Financial Affairs] nor Amendments, disclose transfers within the last 2 years of Debtor's interest in KCC One Real Estate, LLC for $250,000.00 nor transfer as security Debtor's interest in 57th and Louise Partners, LLC.

47. Debtor only deals in cash.

57. Debtor considers himself a sophisticated business person and has been a banker.³

64. When asked where all the funds went from all the sales of his business entities, Debtor[']s only response was that a lot went to reinvesting, debt payments and distributions to himself.⁴

Bankr. Docket 29-1 at ¶¶ 25, 32, 47, 57, 64. Vucurevich did not object to these statements. Bankr. Docket 37-1 at ¶¶ 25, 32, 47, 57, 64.

With respect to certain assets or records of assets that U.S. Bank argued Vucurevich had not sufficiently accounted for, U.S. Bank identified as undisputed facts that:

62. Debtor sold a watch for $16,000.00 and furnishings for $25,000.00, within a year before the Petition was filed, and is unable to account for any of the $41,000.00.

63. Debtor's only explanation for the use of the $41,000.00 in sales was he probably paid off creditors.

65. Debtor admits, under oath, that he does not have accurate records to account for his business entity sales.

Bankr. Docket 29-1 at ¶¶ 62-63, 65. These statements were accompanied by a transcript citation from Vucurevich's depositions. See id. (citing 29-3 (Exhibits 34a; 34b)). Vucurevich objected to ¶¶ 62-63, contending instead that the money from those sales went to pay for the living expenses of his estranged wife and his children. Bankr. Docket 37-1 at ¶¶ 62-63. Regarding records from the entity sales, Vucurevich "clarifie[d] that accurate records would exist once files were reviewed by an accountant."⁵ Id. at ¶ 65 (citing 29-3 (Exhibit 34b)).

With respect to other business and financial records which U.S. Bank alleged that Vucurevich had not kept or preserved, U.S. Bank's statements of undisputed material facts stated that:

42. Debtor has very limited business records, admitting he threw away records.

43. Debtor failed to maintain business records but instead allowed previous employees to take computers, with all business records on them, while Debtor did not retain a copy.

44. Debtor uses emails extensively in business transactions.

45. Debtor has set up his email system to automatically purge all emails after 2 weeks, starting in the year 2008.

46. After lawsuits started against Debtor, and after discovery requests, Debtor made the decision that no records or emails would be saved. Debtor decided everything was to be deleted even from the hard drive.

Bankr. Docket 29-1 at ¶¶ 42-46 (citations omitted). Each of these facts was also accompanied by a citation to portions of Vucurevich's deposition testimony. See id. Vucurevich disputed these statements because he "stopped maintaining records for entities that were foreclosed upon and were no longer doing business. At the time this decision was made Debtor had no intention for filing for bankruptcy." Bankr. Docket 37-1 at ¶ 42.

The bankruptcy court issued its decision on July 9, 2014, and ruled in U.S. Bank's favor. Specifically, the court concluded that Vucurevich was not entitled to a general discharge of debts pursuant to 11 U.S.C. §§ 727(a)(3) and (a)(5). See Bankr. Docket 52 at 6, 9. The court did not, however, grant summary judgment under 11 U.S.C. § 727(a)(4). Id. at 11.

With respect to § 727(a)(5), the bankruptcy court found that Vucurevich's "schedules, as amended, show Debtor has personal property assets valued at $2,061,245.00 and secured and unsecured claims against him of$45,180,164.21." Id. at 10. Based on this finding, the court concluded that U.S. Bank's burden of demonstrating a deficiency of assets had been met, and that the burden shifted to Vucurevich to provide a satisfactory explanation. Id. Vucurevich's proffered explanation was that,

The assets Plaintiff discusses in his brief were used to provide living expenses for the Debtor and his estranged wife and kids. Debtor also used the funds to service debt and reinvest in other projects. Debtor has repeatedly and consistently maintained that this is where these funds went. Debtor['s] explanation creates a disputed question of material fact. Whether Debtor's explanations are adequate is not appropriate for summary judgment.

Bankr. Docket 37-2 at 7. Vucurevich's reference and argument regarding "[t]he assets Plaintiff discusses in his brief" appears to be directed at U.S. Bank's contention that Vucurevich had not properly accounted for the $41,000 from the watch and furnishing sales, or the proceeds from the sales of several of his business entities. See Bankr. Docket 29-4 at 15.

The bankruptcy court then considered Vucurevich's deposition testimony where he stated his records from 2009 to the date of filing were poor, if not missing. Bankr. Docket 52 at 10. The court also surveyed statements Vucurevich made in depositions and answers to interrogatories in other adversary disputes wherein Vucurevich admitted that some of his schedules and statements were incomplete or inaccurate. Id. The court stated it was "left with only Debtor's sweeping explanation that he used some assets to provide for his estranged wife and children, service debt, and reinvest in other projects." Id. The court found this explanation to be "vague, indefinite, and unsatisfactory." Id. (citing In re Carter, 203 B.R. 697, 707 (Bankr. W.D. Mo.1996)). Thus, because Vucurevich offered only "his own unsubstantiated, uncorroborated, and undocumented general statements" and a general "prospect of an accountant's aid at some unknown time" regarding the whereabouts of his assets, the bankruptcy court concluded Vucurevich had not met his burden and that there was no remaining triable issue of fact. Id. (citing in re Vilhauer, 458 B.R. 511, 514 (B.A.P. 8th Cir. 2011)). Consequently, the court summarily denied Vucurevich a discharge pursuant to § 727(a)(5).

Regarding § 727(a)(3), the bankruptcy court found, based on Vucurevich's admissions that he does not have a bank account and operates on a cash-only basis, that he "depriv[ed] the case trustee and his creditors of account records as a critical source of information regarding his transactions." Id. at 8. Further, the court took issue with Vucurevich's decision to "systematically have his e-mails deleted after two weeks." Id.⁶ The bankruptcy court concluded that, based on the circumstances, U.S. Bank had met its initial burden under § 727(a)(3) and therefore the burden shifted to Vucurevich to justify his failure to keep or preserve records. Id.

In his brief and supporting documentation filed in opposition to U.S. Bank's motion for summary judgment, Vucurevich did not address whether he "concealed, destroyed, mutilated, falsified, or failed to keep or preserve" anyrecords relating to his financial condition or business transactions. Rather, Vucurevich's position was that any such failure on his part would be ultimately justified under the circumstances. See Bankr. Docket 37-2 at 5. Thus, Vucurevich explained that,

The majority of Debtor's assets were real estate investments. When the real estate market crashed in 2008, Debtor's investments lost their value and creditors foreclosed on the investments. This resulted in 39 lawsuits being filed against the Debtor between 2009 and 2011. Unable to defend against these lawsuits and foreclosures, most of the various entities the Debtor had [] interests in lost their value. Debtor saw no need to maintain records for these now defunct entities that held no assets. Debtor was overwhelmed by the sheer volume of lawsuits and foreclosures and was unable to maintain clear, up-to-date records of assets, liabilities, and judgments.

Id. at 6. After explaining that his foray into bankruptcy was not undertaken voluntarily, Vucurevich went on to state that,

Debtor was overextended with real estate investments and was

...