CNR Holdings, LLC v. Coffey (In re Coffey)

647 B.R. 365

IN RE: Leslie Dwight COFFEY, Debtor.

CNR Holdings, LLC, Plaintiff

v.Leslie Dwight Coffey, Defendant

United States Trustee, Plaintiff

v.Leslie Dwight Coffey, Defendant

Case No. 3:16-bk-16337

AP Case No. 3:19-ap-01055

AP Case No. 3:19-ap-01059

United States Bankruptcy Court, E.D. Arkansas, Northern Division.

Signed October 20, 2022

Jeannette A. Robertson, Robertson Law Firm, Jonesboro, AR, for Plaintiff CNR Holdings, LLC.

Joseph Anthony DiPietro, Office of the United States Trustee, Little Rock, AR, for Plaintiff U.S. Trustee.

MEMORANDUM OPINION

Phyllis M. Jones, United States Bankruptcy Judge

CNR Holdings, LLC ("CNR ") and Daniel J. Casamatta, Acting United States Trustee for Region 13 (the "UST "), filed separate adversary proceedings against Leslie Dwight Coffey ("Mr. Coffey "), seeking to have Mr. Coffey's discharge denied. In CNR's complaint (AP Case No. 19-1055), CNR seeks to deny Mr. Coffey's discharge based on Mr. Coffey's conduct in the present case. CNR asserts that Mr. Coffey's discharge should be denied pursuant to 11 U.S.C. § 727(a)(2)(A), (a)(3), (a)(4)(A), (a)(4)(D), (a)(5), and (a)(6)(A). The complaint filed by the UST (AP Case No. 19-1059) alleges these same grounds for denying Mr. Coffey's discharge. Considering the overlap between CNR's complaint and the UST's complaint, all the parties consented to the adversary proceedings being tried together.

A consolidated trial on the merits was held over four days in Jonesboro, Arkansas, on March 2–3, 2022, April 18, 2022, and April 20, 2022. Jeannette Robertson appeared on behalf of CNR, Joseph DiPietro appeared on behalf of the UST, and Mr. Coffey appeared pro se. At the consolidated trial, CNR, the UST, and Mr. Coffey agreed that all the evidence introduced would apply and could be considered in determining the disposition of each adversary proceeding. At trial, Mr. Coffey was called as a witness by CNR and the UST, and he testified on his own behalf. In addition, Ms. Rene Kimery ("Ms. Kimery ") was called as a witness and testified on behalf of CNR and the UST. After the trial, the Court took the matter under advisement.

I. JURISDICTION

The Court has jurisdiction over these matters pursuant to 28 U.S.C. §§ 1334 and 157. The matters are core proceedings pursuant to 28 U.S.C. § 157(b)(2)(J). The following shall constitute the Court's findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.

II. FACTS

Mr. Coffey is not new to the bankruptcy court system and has had experience in both bankruptcy court and federal district court. Prior to his current bankruptcy case, he filed a Chapter 11 individual bankruptcy case in Tennessee in 2005; a Chapter 11 individual bankruptcy case in Georgia in 2008; a Chapter 11 business case in Georgia in 2009 for Peerless Self Storage, LLC ("Peerless Storage "), an entity owned 100% by Mr. Coffey; an involuntary petition in Tennessee in 2011 against The Truman Landscaper, Inc. ("Truman Landscaper "), an entity owned 100% by Mr. Coffey; a Chapter 13 individual bankruptcy case, pro se, in Arkansas in 2013; a civil action in the United States District Court for the Eastern District of Arkansas in 2016, pro se, against CNR and others; and the current Chapter 13 bankruptcy case, pro se, in Arkansas in 2016. (UST's Ex. 1). In addition to evidence concerning all these cases, CNR and the UST also introduced evidence concerning issues that arose from their requests for production of documents from Mr. Coffey. Evidence introduced concerning the various legal proceedings, as well as the issues arising from the production of documents, will be summarized below.

A. Legal Proceedings

(1) 2005 Chapter 11 Case, Case No. 1:05-bk-14721-NWW

Mr. Coffey's first bankruptcy case was a Chapter 11 case filed in the Eastern District of Tennessee on August 1, 2005 (the "2005 Case "). Mr. Coffey was represented by counsel in the 2005 Case. The summary of schedules introduced by CNR and the UST reflects assets of $5,928,926.92 and liabilities of $3,829,314.84. Mr. Coffey testified that this bankruptcy case was filed to save certain properties from foreclosure, including two pieces of commercial real estate and a lake house that he owned at the time with Paula Sue Coffey. Mr. Coffey testified that the creditor holding the secured claim against the properties would not renew the line of credit loan secured by the properties unless Paula Sue Coffey signed the loan documents. According to Mr. Coffey, she refused to sign.

Twenty-one pieces of real property were listed in the schedules with a total value of $5,795,000.00, including the properties located at "7041 & 7045 Maplewood Lane, Chattanooga, TN" (the "Maplewood Properties "). (Cr.’s Ex. 6, at 6). Mr. Coffey testified that all the properties listed were deeded in his name except the Maplewood Properties and 3115 Freeman Avenue, Chattanooga, Tennessee (the "Freeman Property "). He testified that he listed the Maplewood Properties and Freeman Property because he was a guarantor on the loans and had an interest in making sure the loans were paid. He also testified that he owned 100% of the companies that owned the Maplewood Properties and the Freeman Property. As to the Maplewood Properties specifically, Mr. Coffey testified that around 2008 the Circuit Court of Hamilton County, Tennessee, awarded him a 100% interest in the two properties.

Mr. Coffey also listed the following interests in "incorporated and unincorporated businesses" in the 2005 Case:

100% Lesco Services of Tennessee, Inc.

40% Flintstone, LLC

29% Lesco Services, Inc.

100% Truman Landscape [sic], Inc., d/b/a Lesco Services

(Cr.’s Ex. 6, at 9). All of the business interests were listed with a current market value of "[u]nknown." (Cr.’s Ex. 6, at 9). All four of the entities listed above did business under the name of "Lesco Services."

Business information from the Georgia Corporations Division was introduced into evidence reflecting that Truman Landscaper was formed on December 31, 1997, and dissolved on September 11, 2010. Mr. Coffey owned 100% of this corporation. As stated above, Truman Landscaper did business under the name "Lesco Services." Between 2000 and 2003, the two entities together grossed over $1,000,000.00 a month in revenue. The address for the principal office was listed as Post Office Box 242, Lookout Mountain, Tennessee. Mr. Coffey testified that this post office box was used for personal mail as well as business mail for all entities associated with the Coffey family. At the time the 2005 Case was filed, Mr. Coffey was living at 203 East Brow Road, Lookout Mountain, Tennessee. He also listed $133,926.92 in personal property in his schedules, which included a $44,921.00 401(k) account and a $38,432.00 profit sharing account.

In the 2005 Case, Mr. Coffey's second amended plan was confirmed, and a final decree was entered on September 21, 2006.

(2) 2008 Chapter 11 Case, Case No. 08-23003-reb

Mr. Coffey filed a second Chapter 11 case in the Northern District of Georgia on October 21, 2008 (the "2008 Case "). Mr. Coffey was represented by counsel in the 2008 Case. Mr. Coffey testified that he listed his assets accurately in his schedules. He also testified that various assets listed in the 2005 Case were sold to pay creditors prior to the filing of the 2008 Case. Mr. Coffey's address was reflected on the petition as "2357 Hwy 197, Clarkesville, Georgia." (Cr.’s Ex. 8, at 1). An amended summary of schedules was filed on December 8, 2008, reflecting $5,027,800.00 in assets and $4,205,292.00 in liabilities.

Mr. Coffey's Schedule A listed a fee simple ownership interest in thirteen pieces of real property valued at $2,850,000.00, including the Maplewood Properties and the Freeman Property. Mr. Coffey testified that, although he had not been deeded the Maplewood Properties, he listed himself as having a fee simple ownership in the properties because he was awarded the properties "free of the marital estate" by the state court. (Tr. at 78). The Maplewood Properties were listed in the schedules with a value of $150,000.00 and First Tennessee Bank was listed as a mortgage lien holder with a secured claim of $62,000.00. The personal property listed in the schedules totaled $2,170,800.00.

The schedules also reflected Mr. Coffey's interest in three entities: Peerless Storage (100 shares) valued at $1,600,000.00, 733 Glendale LLC (300 shares) valued at $90,000.00, and CNR (100 shares) valued at $54,000.00.

Mr. Coffey was the sole member of Peerless Storage in 2008. He believes the $1,600,000.00 valuation that was given on his schedules was taken from the tax assessor's records. Peerless Storage owned a 1.35 million square foot building situated on thirty-five acres of land approximately six miles from downtown Chattanooga, Tennessee.

In response to Question 18 in his statement of financial affairs ("SOFA "), which asked for a list of businesses in which Mr. Coffey held positions such as officer, director, partner, or sole proprietor, Mr. Coffey responded by listing Lesco Services, Inc., Peerless Storage, and Truman Landscaper. The only business that was listed as still operating on the petition date was Peerless Storage.

Rossville Metal Recyclers LLC ("Rossville Metal ") was not originally listed in the schedules or SOFA in the 2008 Case. On December 8, 2008, Mr. Coffey's response to Question 18 on his SOFA was amended to add Rossville Metal. However, the amendment did not state a position held or the nature of his interest. He also added his interest in "Lesco Services, an erosion control company as a sole proprietorship." (UST's Ex. 7, at 1).

The United States Trustee for Region 21 filed a motion to dismiss or convert the 2008 Case in January 2009. The allegations in the motion included that Mr. Coffey failed to list "his ownership interest in [Rossville Metal] and Lesco Services, Inc." (UST's Ex. 9, at 1–2). After a hearing on the motion to dismiss or convert, the court dismissed the 2008 Case, finding that Mr....