In Re: Robert Leonard Richard Persson, Debtor.
Kip M. Kaler, as Bankruptcy Trustee for the Bankruptcy Estate of Robert Leonard Richard Persson, Plaintiff,
v.
Robert Leonard Richard Persson, Defendant.
No. 21-30038
Adversary No. 21-07015
United States Bankruptcy Court, D. North Dakota
May 16, 2022
Chapter 7
MEMORANDUM AND ORDER
Shon Hastings, Judge United States Bankruptcy Court
I. INTRODUCTION
Kip M. Kaler, Chapter 7 Bankruptcy Trustee, filed an Adversary Complaint seeking denial of Debtor/Defendant Robert Leonard Richard Persson's discharge under 11 U.S.C. § 727(a)(2), (3) and (4). The Trustee alleges Debtor failed to maintain records regarding the disposition of several trailers and a Bobcat skid-steer and attachments, warranting denial of discharge under 11 U.S.C. § 727(a)(3). The Trustee also alleges Debtor failed to disclose $1, 800 in cash; anticipated tax refunds; earned but unpaid compensation; a 2016 tax debt; and the transfer of his interest in Persson Investments LLC to his father, trailers to friends and relatives and a Bobcat skid-steer and attachments to his brother-in-law. Additionally, the Trustee claims Debtor failed to disclose that he stored a trampoline and a hot tub at a location other than his residence,
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and he moved this property from the house he owned in Montevideo, Minnesota, to his parents' storage building. The Trustee claims Debtor concealed some of this property with intent to hinder, delay or defraud the bankruptcy estate or others by failing to disclose it, justifying a denial of discharge under section 727(a)(2). He also claims Debtor's intentional failure to disclose the property listed above in his bankruptcy schedules and statements is a false oath under section 727(a)(4). In addition, the Trustee alleges Debtor provided false or incomplete testimony at the Meetings of Creditors, warranting denial of his discharge under section 727(a)(4). Finally, the Trustee claims Debtor intentionally misrepresented material facts when Debtor sent the Trustee a draft tax return which the Trustee alleges was false.
Debtor filed an Answer to the Complaint, denying many of the factual allegations and providing explanations for the transfer or other disposition of assets. He also denied his conduct shows intent to hinder, delay or defraud creditors or a knowing and fraudulent false oath or claim. Additionally, Debtor denied that he failed to maintain adequate records regarding the disposition of several trailers and a Bobcat skid-steer and attachments and affirmatively alleged that he provided the Trustee with information that refutes these allegations. Debtor also alleged several affirmative defenses and denied that the Trustee is entitled to the remedy he seeks.
The Trustee moved to amend his Adversary Complaint on January 24, 2022, to allege more factual detail regarding the filing of Debtor's 2020 tax returns and the refunds Debtor received. The Trustee also added a cause of action under section 727(a)(2)(B). The parties stipulated to allow the amendment, and the Court granted the Trustee's motion. The Trustee filed his Amended Adversary Complaint on January 25, 2022.
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Debtor did not file an Amended Answer, but he offered evidence at trial refuting the new allegations in the Amended Complaint.
Trial of this adversary proceeding took place on January 27 and 28, 2022. For the following reasons, the Court finds in favor of the Trustee on his cause of action under 11 U.S.C. § 727(a)(4).
II. BACKGROUND
A. Debtor's Work History
Debtor spent a great deal of his professional life working in the automotive sale and repair industry. At the time he petitioned for bankruptcy relief on January 31, 2021, and at the time of trial, Debtor worked as a Sales Manager for Heartland Automotive, also known as Gateway Chevrolet, in Fargo, North Dakota. He began working at Gateway Chevrolet in October 2020. He worked long days, typically leaving his home at 8:00 a.m. and returning at 8:30 p.m. In January 2021, Debtor earned approximately $6, 950 to $8, 000 per month in commissions. At the time, his income at Gateway Chevrolet was based entirely on commissions.
Before accepting employment in Fargo, Debtor owned and managed his own business, Montevideo Auto Center, LLC, in Montevideo, Minnesota, from September 2019 to October 2020. As part of the business initiation process, Debtor entered into an Asset Purchase Agreement with Allan Adams and/or Adams Motor Company for the purchase of real estate (two buildings located at 702 and 705 W Highway 212,
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Montevideo)[1] and other dealership assets for $600, 000.[2] Debtor's friend, Shane Heck, provided Debtor and/or Montevideo Auto Center $400, 000, [3] which Debtor used to make a down payment to Adams. Debtor also borrowed $50, 000 from his father, Dan Persson, in September 2019 for working capital[4] and $200, 000 from Montevideo Industrial Development to finance the purchase of real estate. Debtor opened Montevideo Auto Center in September 2019. Stalled sales resulting from the COVID-19 pandemic compelled Debtor to close his business in September 2020 and to liquidate its assets in September and October 2020. Allan Adams and/or Adams Motor
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Company obtained a judgment in excess of $1, 000, 000 against Debtor.[5] Adams transferred the judgment to Citizens Alliance Bank.[6]
Before opening Montevideo Auto Center, Debtor owned 46.2% of Renville Chevrolet, LLC, also known as H&L Motors, Inc. in Renville, Minnesota.[7] 2021-02-26 341 Mtg. Debtor owned and worked at Renville Chevrolet from March 2019 to June 2019. He and co-owner, Larry Eckhoff, ceased doing business when General Motors restructured its organization and declined to renew Renville Chevrolet's dealership agreement. Additionally, Eckhoff "owed a debt," which ultimately led to the decision to close the business. Id.
From December 2015 to December 2018, Debtor worked at RND Services, LLC. He performed snow removal services for this company until he "ran out of time to do it." In or about December 2018, the company closed. Debtor testified that the company held no assets when it closed and none of the liabilities listed in his bankruptcy schedules arose from debt related to this business.
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B. Debtor's Family
Debtor is married to Kadie Gillette Persson. Ms. Persson earned a nursing degree from Minnesota State Community and Technical College in 2016. She began working part time at Bethany Retirement Living in October 2020 when she, Debtor and their children moved from Montevideo to West Fargo, North Dakota. Ms. Persson works on an "as needed" basis, earning approximately $300 per month according to Debtor's bankruptcy schedules. Ms. Persson was not employed during the two years before the Persson family moved to West Fargo.
Debtor and Ms. Persson have four children, who were ages 7, 5, 2 and 10 months at the time of trial. On January 31, 2021, the day Debtor petitioned for bankruptcy relief, Ms. Persson was expecting their fourth child, who was born on March 4, 2021. Several years before the bankruptcy petition, medical providers diagnosed their daughter-who was 4 years old at the time-with cancer, requiring chemotherapy treatments and periodic scans. Ms. Persson testified that she worries about hospital bills totaling in excess of $8, 000 from 2017, which are currently "in collections," and new bills that "keep racking up" as a result of ongoing medical treatment.
C. Bankruptcy Disclosures
On the same day he petitioned for bankruptcy relief, Debtor filed his schedules and statements. Debtor acknowledged that he read the information on the petition, schedules and statements and testified that it was true and accurate to the best of his knowledge at the time his attorney filed the documents. He also acknowledged that he signed the petition under penalty of perjury.
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Debtor amended his schedules and statements on March 11, 2021, August 6, 2021, and January 13, 2022. At trial, Debtor testified that he amended his schedules frequently to be accurate.
The Trustee conducted the Meeting of Creditors on February 26, 2021, and continued the examination on March 26, 2021, May 6, 2021, May 28, 2021, and July 2, 2021. The Trustee repeatedly continued the Meeting of Creditors because "he had to get the tax returns because those were going to lead to more questions" about Debtor and his business. The Trustee also insisted that he did not receive satisfactory answers to his questions about Debtor's property. Prior to the first Meeting of Creditors, the Trustee sent Debtor a request for documentation relating to property Debtor disclosed in his schedules. Ex. 15. The Trustee sent several other letters seeking supplemental information and answers to new issues that arose at the continued Meetings of Creditors or were prompted by discovery and investigation. See Exs. 17, 18, 19, 20, 28. The Trustee also deposed several witnesses and served written discovery. After this thorough investigation, he maintains Debtor intentionally failed to disclose information related to the assets discussed below.
Debtor emphasized that he never objected to the continuances, he provided the keys to Montevideo Auto Center and he granted the Trustee access to electronically-stored data and boxes of financial information stored at Montevideo Auto Center. Debtor also testified that he did not hesitate to answer all the Trustee's questions, and he believed he answered all the Trustee's questions truthfully and correctly.
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1. Property Stored in a Place Other Than Debtor's Residence
In response to question 22 in the Statement of Financial Affairs, Debtor represented that he had not stored property in a storage unit or place other than his home within one year before he filed his bankruptcy petition. At trial, Debtor testified that he answered correctly at the time he filed his bankruptcy petition, "given his understanding at the time." At the first...
