Bromberger v. Peburn (In re Peburn), CASE NO. 06–30835 ASD

539 B.R. 632

In re: Dominick T. Peburn, Debtor.

Samuel Bromberger, Plaintiff

v.Dominick T. Peburn, Defendant.

Henry Bromberger, Plaintiff

v.Dominick T. Peburn, Defendant.

CASE NO. 06–30835 ASD

ADV. PRO. NO. 08–3003

ADV. PRO. NO. 08–3004

United States Bankruptcy Court, D. Connecticut.

Signed October 26, 2015

Entered October 27, 2015

Peter L. Ressler, Esq., Groob Ressler & Mulqueen, 123 York Street, Ste 1B, New Haven, Connecticut 06511–0001, Attorney for the Debtor

Samuel Bromberger, 2744 Mid Lane, Houston, Texas, 77027–4933, Plaintiff Pro Se

Henry Bromberger, 14 Kettle Creek Road, Weston, Connecticut 06883, Plaintiff Pro Se

MEMORANDUM OF DECISION FOLLOWING JOINT TRIAL ON COMPLAINTS OBJECTING TO DISCHARGE

ALBERT S. DABROWSKI, United States Bankruptcy Judge

I. INTRODUCTION

The captioned jointly-tried and consolidated adversary proceedings were commenced by Samuel Bromberger and Henry Bromberger (hereinafter, together, the “Plaintiffs”) through the filing of complaints (hereinafter, together, the “Complaints”) objecting to the Debtor's discharge. Through the Complaints the Plaintiffs collectively assert five statutory predicates for denial of discharge under Bankruptcy Code Section 727(a).

The Court, having now reviewed and considered the evidence presented at trial, and the parties' respective briefs, determines the Debtor is not entitled to a discharge as more fully explained and particularized hereinafter.

II. JURISDICTION

The United States District Court for the District of Connecticut has subject matter jurisdiction over the instant adversary proceeding by virtue of 28 U.S.C. § 1334(b) ; and this Court derives its authority to hear and determine this matter on reference from the District Court pursuant to 28 U.S.C. §§ 157(a), (b)(1). This is a “core proceeding” pursuant to 28 U.S.C. § 157(b)(2)(J).

III. BACKGROUND

A. Bankruptcy Case No. 06–30835¹

On June 7, 2006, the Debtor commenced Bankruptcy Case No. 06–30835 by the filing of a voluntary petition under Chapter 11 of the United States Bankruptcy Code staying pursuant to the automatic stay of 11 U.S.C. § 362(a) a State Court Action² against the Debtor commenced by the Plaintiffs here. On April 30, 2007, the Debtor filed the Disclosure Statement, ECF No. 212, and Chapter 11 Plan of Reorganization, ECF No. 211, required by § 1125(b) to which the Plaintiffs, as creditors, timely and vehemently objected³ in their Creditors Consolidated Objection to Approval of Debtor's Disclosure Statement (hereinafter, the “Consolidated Objection”),⁴ ECF No. 235. Hearings scheduled for June 13 and June 27, and July 25, 2007, to consider the whether the Disclosure Statement contained “adequate information” as required by § 1125(a)(1) were continued to August 1, 2007, to, inter alia, provide the Debtor an opportunity to file an amended disclosure statement on or before July 30, 2007.

On July 30, 2007, the Debtor filed a First Amended Disclosure Statement, ECF No. 257, and an Amended Chapter 11 Plan of Reorganization, ECF No. 256, to which Colduct Partners, as unsecured creditors, vehemently objected in their Objection of Colduct Partners, to the First Amended Disclosure Statement of Dominic Peburn (hereinafter, the “Colduct Objection”), ECF No. 258.⁵ Following a hearing held August 1, 2007, the Court entered an Order converting the case to a case under Chapter 7, and a Chapter 7 Trustee (hereinafter, the “Trustee”) was appointed. ECF No. 259.

B. The Adversary Proceedings

1. Adversary Proceeding No. 08–3003 (Plaintiff Samuel Bromberger)

On January 9, 2008, Plaintiff Samuel Bromberger commenced Adversary Proceeding No. 08–3003. Specifically, through his complaint Samuel Bromberger seeks an order denying the Debtor a discharge under § 727(a)(2)(A) (pre-petition transfer of property with intent to hinder, delay or defraud creditors) (Count One), § 727(a)(2)(B) (post-petition transfer of property with intent to hinder, delay or defraud creditors) (Count Two), § 727(a)(3) (concealment or failure to keep or preserve information related to financial condition or business transactions) (Count Three), § 727(a)(4) (false oaths and accounts) (Count Four), and § 727(a)(5) (failure to account for loss of assets) (Count Five).⁶

2. Adversary Proceeding No. 08–3004 (Plaintiff Henry Bromberger)

On January 10, 2008, Plaintiff Henry Bromberger commenced Adversary Proceeding No, 08–3004. Specifically, through his complaint Henry Bromberger seeks an order denying the Debtor a discharge under § 727(a)(2)(B) (Count One) and § 727(a)(2)(A) (Count Two).

C. The Trial

Trial on the Complaints commenced on July 22, continued on August 26 and November 3, and concluded the evening of November 6, 2014. At the commencement of the trial, the parties estimated they required only that morning for the presentation of evidence. However, at the end of that day, the Plaintiffs expressed their need for at least another day. The protracted nature of the trial was, in part, the product of the pro se nature of the Plaintiffs. During the trial they marked numerous documents for identification, less were actually offered, and far less were actually admitted in evidence, many for a lack of simple authentication (e.g ., failure to offer certified records otherwise admissible). In addition, a significant cause of the prolonged nature of the trial, as discussed in more detail hereinafter, was the Debtor's non-responsive, evasive and intentionally obstructive answers to the Plaintiffs' questions which repeatedly derailed their inquiries, as was obviously intended.

During the trial the Court heard testimony from eight witnesses: the Debtor Dominic Peburn, Attorney Anthony Fraulo, Robert Jaquish, Joline Peburn, Kenneth Lathrop, Yong Suk Seo, Debra Seipmann, and Eric Shields.⁷ The parties submitted their respective brief's on January 8 and 9, 2015. No trial transcript was ordered.⁸

IV. DISCUSSION

“One of the central purposes of the Bankruptcy Code and the privilege of discharge is to allow the “honest but unfortunate debtor” to begin a new life free from debt”. Grogan v. Garner, 498 U.S. 279, 286–87, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). In the interest of protecting creditors, however, § 727 provides for denial of the discharge under twelve enumerated subsections, see 11 U.S.C. § 727(a)(1–12), four of which are asserted in the Plaintiffs' Complaints as a basis for denying entry of a discharge in this case.⁹

Because § 727 imposes an extreme penalty it “must be construed strictly against those who object to the debtor's discharge and ‘liberally in favor of the bankrupt.’ ” State Bank of India v. Chalasani (In re Chalasani), 92 F.3d 1300, 1310 (2d Cir.1996) (quoting Bank of Pa. v. Adlman (In re Adlman), 541 F.2d 999, 1003 (2d Cir.1976) ).

In the instant proceedings, the determination of the Debtor's entitlement to a discharge begins and ends upon a consideration of Count Three of Plaintiff Samuel Bromberger's Complaint requesting a denial of discharge pursuant to Bankruptcy Code Section 727(a)(3) which provides:

(a) The court shall grant the debtor a discharge, unless—

(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;

Distilled to its essence, Count Three alleges the Debtor to be masquerading as an honest and unfortunate debtor when in fact he deliberately concealed, falsified, and failed to keep, preserve and produce without justification documents and records related to his financial condition and business transactions precluding, obstructing and impeding creditors' ability to “disentangle”, his financial affairs. See Samuel Bromberger Complaint, ¶¶ 149–180 (incorporating by reference ¶¶ 1–148).

In In Re Cacioli, 463 F.3d 229, 234 (2d Cir.2006),¹⁰ a panel of the Second Circuit, addressing the purpose and intent of § 727(a)(3), stated:

The purpose and intent of [§ 727(a)(3) ] of the Bankruptcy Act is to make the privilege of discharge dependent on a true presentation of the debtor's financial affairs.” In re Underhill, 82 F.2d 258, 260 (2d Cir.1936) ; see also Meridian Bank v. Alten, 958 F.2d 1226, 1230 (3d Cir.1992) (stating that the purpose of § 727(a)(3) is “to give creditors and the bankruptcy court complete and accurate information concerning the status of the debtor's affairs and to test the completeness of the disclosure requisite to a discharge”); In re Martin, 554 F.2d 55, 57–58 (2d Cir.1977) (stating that “[t]he denial of discharge serves both to deter inadequate record-keeping and to protect creditors whenever a failure to preserve records may have been motivated by fraud”). Section 727(a)(3) also ensures that “creditors are supplied with dependable information on which they can rely in tracing a debtor's financial history.” Meridian Bank, 958 F.2d at 1230.

The Circuit Panel then discussed the two-step approach bifurcating the burden of proof under § 727(a)(3) as follows:

To implement this record-keeping requirement § 727(a)(3) provides a two-step approach. The initial burden lies with the creditor to show that the debtor failed to keep and preserve any books or records from which the debtor's financial condition or business transactions might be ascertained. White v. Schoenfeld, 117 F.2d 131, 132 (2d Cir.1941). If the creditor shows the absence of records, the burden falls upon the bankrupt to satisfy the court that his failure to produce them was justified. White, 117 F.2d at 132 ; see also, In re Sandow, 151 F.2d 807, 809 (2d Cir.1945) (“The statute puts the burden squarely upon the bankrupt who produces no financial records to produce at least a satisfactory explanation of their absence.”); Underhill , 82 F.2d at 260 (“[Each] case must stand upon its own facts with the inquiry always as to whether the bankrupt has sustained [the] burden of

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