In re Self

325 B.R. 224

In re Tommie L. SELF, Debtor Structured Asset Services, L.L.C. f/k/a Stone Street Services, Inc., Plaintiff, v. Tommie L. Self, Defendant.

Bankruptcy No. 02 B 19018.

Adversary No. 02 A 01193.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

May 23, 2005.

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Juliet Boyd, Esq., for Plaintiff.

Ross Weisman, Esq., for Debtor/Defendant.

Gus A. Paloian, Esq., trustee.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the amended complaint filed by Structured Asset Services, L.L.C. f/k/a Stone Street Services, Inc. (the "Creditor") objecting to the discharge of Tommie L. Self (the "Debtor") pursuant to 11 U.S.C. § 727(a)¹ and requesting a judgment in its favor in the sum of $145,776.01. For the reasons set forth herein, the Court grants judgment in favor of the Creditor and sustains the objections to discharge under § 727(a)(2)(A), (a)(3), (a)(4) and (a)(5). The Debtor's discharge is denied. The Court declines to liquidate the Creditor's debt and enter a money judgment in its favor.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. It is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (J), and (O).

II. FACTS AND BACKGROUND

Many of the facts in this matter are undisputed. On December 22, 1990, the Debtor won $1,000,000.00 from the Illinois State Lottery. See Debtor Ex. No. 2. He was to receive twenty annual payments of $50,000.00 commencing in 1991. Id. The Debtor testified that he was employed by the Chicago Transit Authority as a bus maintenance worker for approximately thirty-three years and recently retired. He has a high school diploma, but no other higher education.

On September 30, 1997, the Debtor borrowed money from Stone Street Capital, Inc. ("Stone Street"). See Creditor Ex. No. 2. The Debtor executed, among other documents, a loan agreement, secured installment note, security agreement, and escrow agreement with Stone Street whereby the Debtor borrowed the sum of $103,198.02. Id. The loan had accruing annual interest of approximately twenty-three percent per year and was for a ten year period. Id. The first installment of $25,000.00 was due on February 22, 1998, and then $25,000.00 was due every February 22nd thereafter until 2008. Id. The Debtor's remaining lottery prize, including the annual payments of $50,000.00, was the agreed upon security and collateral for the loan. Id. Pursuant to the security agreement, the Debtor agreed not to sell, encumber, transfer or dispose of the collateral in any way. Id. In addition, pursuant to the escrow agreement, as well as a letter sent to the Illinois State Lottery, the $50,000.00 annual payment was to be sent directly by the Illinois State Lottery to Republic National Bank of New York as escrow agent for Stone Street. Id. The Debtor also executed a confession of judgment in which the Debtor agreed to the entry of judgment against himself in the event of a default of the loan. Id. Stone Street paid and the Debtor received the loan amount of $103,198.02. The loan was subsequently assigned from Stone Street to the Creditor.

In early 2000, the Debtor contacted the Illinois State Lottery and requested that the annual check be sent to his home address in Olympia Fields, Illinois (the "Olympia Field Property"), instead of to Republic National Bank of New York, in derogation of the loan documents. The Debtor's request was confirmed by a letter from the Illinois State Lottery on April 6, 2000. See Debtor Ex. No. 4; Creditor Ex. No. 3, at p. 3.

On April 3, 2000, the Illinois State Lottery sent a letter offering the Debtor the option to liquidate his lottery prize. See Debtor Ex. No. 3; Creditor Ex. No. 3. The Debtor was given the option to take the remainder of the prize money in one lump sum in a vastly reduced amount. Id. On April 10, 2000, the Illinois State Lottery liquidated the Debtor's discounted lottery prize, and after payment of federal and state taxes, the Debtor's net proceeds were $252,095.90. See Debtor Ex. No. 5; Creditor Ex. No. 3, at p. 4. On April 27, 2000, the Debtor received the sum of $252,095.90, which was deposited into his checking account at Pullman Bank, Chicago, Illinois. See Debtor Ex. No. 8, at p. 2. The Debtor did not contact Stone Street or its assignee, the Creditor, to inform them that he had received the discounted remainder of the lottery prize in a lump sum.

On May 6, 2000, the Debtor purchased a Cadillac automobile from Shirley Cadillac in the amount of $46,301.94. See Creditor Ex. No. 4ii. The Debtor had the use and benefit of the automobile from 2000 until the present. The Debtor allegedly purchased the vehicle in the name of his spouse, Mrs. Tommie L. Self ("Mrs.Self"),² but failed to produce any records to corroborate her ownership of the Cadillac. Shortly thereafter, on June 10, 2000, the Debtor purchased a Hyundai automobile in sum of $6,331.97. See Creditor Ex. No. 4iv. The Hyundai was purchased in the name of the Debtor, and he has enjoyed the use and benefit of the automobile from 2000 until the present.

On May 9, 2000, a check in the amount of $26,803.70 was made payable to Tommie L. Self from the account at Pullman Bank. See Creditor Ex. No. 4iii. The Debtor testified that Mrs. Self wrote this check payable to herself in order to purchase a cashier's check. According to the Debtor, the mortgage on the Olympia Fields Property was in arrears, and Mrs. Self was going to pay the mortgage holder, Ameriquest, that sum. However, the Debtor did not produce any written documentation to show that Ameriquest was in fact paid that amount.

On January 16, 2001, the Debtor transferred $90,000.00 out of the checking account at Pullman Bank by way of a check made payable to Mrs. Self. See Creditor Ex. 4i. Mrs. Self admittedly held the $90,000.00 for the use and benefit of the Debtor. Mrs. Self testified that she used this money to make the mortgage payments on the Olympia Fields Property, pay college tuition for her children, and pay other household expenses.

The Debtor did not make the February 2001 payment to the Creditor pursuant to the loan documents. Andrew Savysky ("Savysky"), the president of the Creditor, testified that he contacted the Debtor in March 2001 about the default under the loan. After several conversations with the Debtor, Savysky stated that in late March 2001, the Creditor received a personal check from the Debtor in the amount of $25,000.00. Savysky testified that at this point in time he did not know that the Debtor had taken a discounted lump sum from the Illinois State Lottery. On December 13, 2001, the Creditor filed a two-count complaint against the Debtor in the Circuit Court of Cook County, Illinois, alleging breach of contract and unjust enrichment. See Debtor Ex. No. 6. The Creditor did not receive the February 2002 payment or any subsequent payment from the Debtor due under the loan documents.

The Debtor filed a voluntary Chapter 7 petition on May 15, 2002. See Debtor Ex. No. 1; Creditor Ex. No. 1. On his ScheduleA — Real Property, the Debtor listed the Olympia Fields Property. Id. He listed no other real property on the Schedule A. Id. On ScheduleB — Personal Property, the Debtor listed a 1996 Honda Accent automobile. Id. He listed no other vehicles. Id. On May 15, 2002, however, the Debtor had an interest in real property located at 659 East 105th Street, Chicago, Illinois (the "Chicago Property"), see Creditor Ex. No. 5, and in the Hyundai automobile he purchased on June 10, 2000. The Debtor failed to list the Chicago Property or the Cadillac and Hyundai on his Schedules A and B, respectively. See Debtor Ex. No. 1; Creditor Ex. No. 1.

The Debtor testified that he never owned a Honda automobile. Rather, he stated that the Schedule B should have reflected a 1996 Hyundai Accent. However, the Debtor never amended his Schedules to change the reference therein from the Honda to the Hyundai. As for the Chicago Property, the Debtor testified that he did not think he owned it because a judicial deed of sale had been entered. See Creditor Ex. No. 6.

Further, on the ScheduleD — Creditors Holding Secured Claims, the Debtor listed Illinois Title Loan as having a lien on the 1996 Honda Accent vehicle. Id. In addition, on the Statement of Intention, the Debtor indicated that he intended to reaffirm the debt on the 1996 Honda Accent automobile. Id. On the ScheduleF — Creditors Holding Unsecured Nonpriority Claims, the Debtor listed Stone Street as a claimant in the amount of $168,058.31. Id.

On his Statement of Financial Affairs, the Debtor stated that he received no income other than from his employment or operation of business during the two years preceding the commencement of the bankruptcy case. Id. Moreover, the Debtor stated that he made no gifts or charitable contributions within one year prior to the case filing, except ordinary and usual gifts to family members aggregating less than $200.00 in value per individual. Id.

Pursuant to 11 U.S.C. § 341, a meeting of creditors was held and the Debtor testified at that meeting. See Creditor Ex. No. 9. The Debtor did not disclose the transfer of the $90,000.00 to Mrs. Self, nor did he disclose the existence of the Cadillac and Hyundai automobiles. In fact, he testified at the § 341 meeting that he did not use any of the proceeds from the lottery prize to purchase any automobiles. Id. at p. 26.

On August 26, 2002, the Creditor filed the instant adversary proceeding. The Creditor filed an amended complaint on March 17, 2005, which seeks the denial of the Debtor's discharge as well as a judgment...