Provident Bank v. Antonucci (In re Antonucci)

602 B.R. 618

IN RE: Marc S. ANTONUCCI, Debtor.

Provident Bank, Plaintiff,

v.Marc S. Antonucci, Defendant.

Bankruptcy No. 16-16702-MDC

Adversary No. 16-00447-MDC

United States Bankruptcy Court, E.D. Pennsylvania.

Signed July 25, 2019

Prince Altee Thomas, Fox, Rothschild, O'Brien & Frankel, Philadelphia, PA, for Plaintiff.

Jon M. Adelstein, Penn's Court, Doylestown, PA, for Defendant.

MEMORANDUM

By: Magdeline D. Coleman, Chief United States Bankruptcy Judge

I. INTRODUCTION

Before the Court for disposition are two separate matters in the bankruptcy case of Marc S. Antonucci (the "Debtor"). First, the Debtor seeks to avoid a judgment lien (the "Lien Avoidance Motion")¹ in favor of Provident Bank ("Provident," and together with the Debtor, the "Parties") in the amount of $7,391,404.88 pursuant to § 522(f) of the Bankruptcy Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code"), which permits a debtor to avoid a judicial lien that impairs an exemption to which the debtor may be entitled.

Second, Provident seeks a determination (i) that the Debtor is not entitled to a general discharge pursuant to § 727(a)(2) of the Bankruptcy Code, which in general prohibits a debtor's discharge where the debtor has engaged in misconduct with respect to property of the debtor or of the estate in an attempt to hinder, delay or defraud a creditor, and (ii) that the Debtor's judgment debt to Provident cannot be discharged pursuant to §§ 523(a)(2)(A) and (a)(2)(B) of the Bankruptcy Code, which except from a debtor's general discharge debts either (a) incurred by false pretenses, false representations, or actual fraud, or (b) incurred through a materially false written statement a debtor made with intent to deceive respecting the debtor's financial condition on which a creditor reasonably relied (the "Nondischargeability Action").²

For the reasons set forth below, the Court finds Provident has established that the Debtor is not entitled to a general discharge pursuant to § 727(a)(2), and therefore will rule in favor of Provident in the Nondischargeability Action. With respect to the Lien Avoidance Motion, the Court will allow the Parties the opportunity to address the legal issue of whether the denial of the Debtor's discharge precludes the Debtor from avoiding Provident's judgment lien.

II. RELEVANT PROCEDURAL AND FACTUAL BACKGROUND³

A. Provident's Pre-Petition Funding and the Debtor's Personal Guaranties

Provident is a New Jersey chartered stock capital savings bank. The Debtor was, at all times relevant here, a shareholder and officer of Specialty Flooring Systems, Inc. ("Specialty Flooring") and a managing member of Antar Realty, L.L.C. ("Antar"). Specialty Flooring was a flooring contractor headquartered in South Plainfield, New Jersey. Antar was a real estate company established to buy the building out of which Specialty Flooring was operating.

On or about February 5, 2010, Provident provided a working line of credit facility to Specialty Flooring in the amount of $3,000,000.00 (the "Revolving Credit Loan"). On November 5, 2010, Provident made (i) a term loan to Specialty Flooring in the amount of $2,000,000.00 (the "Specialty Flooring Term Loan," and together with the Revolving Credit Loan, the "Specialty Flooring Loans"), and (ii) a mortgage loan to Antar in the amount of $1,893,750.00 (the "Antar Loan"). In connection with the Specialty Flooring Loans, the Debtor executed a Guaranty of Payment (the "Specialty Flooring Guaranty") dated November 5, 2010, by which the Debtor unconditionally guaranteed Specialty Flooring's full payment and performance obligations with respect to the Specialty Flooring Loans. Likewise, in connection with the Antar Loan, the Debtor executed a Guaranty of Payment (the "Antar Guaranty," and together with the Specialty Flooring Guaranty, the "Personal Guaranties") dated November 5, 2010, by which the Debtor unconditionally guaranteed Antar's full payment and performance obligations with respect to the Antar Loan.

Each of the Personal Guaranties included the following term, whereby the Debtor warranted the accuracy of information and completeness of material disclosures contained in all documents provided to Provident in connection with the extensions of credit Provident gave to Specialty Flooring and Antar, respectively:

12. Accuracy of Information; Full Disclosure. Guarantor represents that neither this Guaranty nor any documents, financial statements, reports, notices, schedules, certificates, statements or other writings furnished by or on behalf of Guarantor to Lender in connection with the negotiation of the Loan Documents or the consummation of the transactions contemplated thereby, or required herein or by the other Loan Documents to be furnished by or on behalf of Guarantor, contains any untrue or misleading statement of a material fact; there is no fact that Guarantor has not disclosed to Lender in writing that materially affects adversely any of the Collateral covered by the Loan Agreement or the business affairs or financial condition of Guarantor, or the ability of Guarantor to perform this Guaranty and the other Loan Documents to which Guarantor is a party.

Specialty Flooring Guaranty, at ¶12;⁴ Antar Guaranty, at ¶12.⁵

On November 16, 2012, Provident filed suit against the Debtor in the United States District Court for the District of New Jersey (the "New Jersey District Court"), alleging breach of the Personal Guaranties. On February 6, 2015, the New Jersey District Court entered an order granting final judgment to Provident in the amount of $7,391,404.88 (the "Personal Guaranties Judgment").⁶ On March 24, 2015, the Personal Guaranties Judgment was registered with the United States District Court for the Eastern District of Pennsylvania,⁷ and on June 12, 2015, it was certified to the Court of Common Pleas of Bucks County, Pennsylvania (the "State Court").⁸ Provident subsequently sought an order from the State Court compelling the Debtor's responses to post-judgment interrogatories and requests for production of documents, which the State Court entered on March 11, 2015 (the "Post-Judgment Discovery Order").⁹ On April 15, 2016, Provident sought an order from the State Court compelling the Debtor's compliance with the Post-Judgment Discovery Order and for sanctions (the "Second Motion to Compel").¹⁰ On July 18, 2016, the Debtor filed a motion for a protective order (the "Protective Order Motion"), and on August 22 and 23, 2016, Provident filed opposition papers to the Protective Order Motion.¹¹

On September 22, 2016 (the "Petition Date"), prior to the State Court's resolution of the Second Motion to Compel and Protective Order Motion, the Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code.¹²

B. The Debtor's Original Schedules

On October 5, 2016, the day before they were due to be filed, Debtor sought a 14-day extension to file, inter alia , his Schedules and Statements, and on October 13, 2016, the Debtor filed his Schedules and Statements.¹³ Because, as discussed below, Provident argues that the Debtor's Schedules provide a basis for finding that he is not entitled to a general discharge under § 727(a)(2), it is necessary to summarize certain aspects of those Schedules.

With respect to his assets, the Debtor represented in his Schedule A/B that he owns a property located at 3525 Wellsford Lane, Doylestown, Pennsylvania (the "Doylestown Property") in fee simple, with "another."¹⁴ The Debtor valued the Doylestown Property at $1,700,000.00.¹⁵ The Debtor represented that he owned or had an equitable interest in household goods and furnishings valued at $12,500.00, electronics valued at $1,500.00, and watches valued at $7,500.00.¹⁶ The Debtor also represented that he did not own or have a legal or equitable interest in any financial assets, including cash, deposits of money, securities, retirement or pension accounts or other retirement investments.¹⁷ In his Schedule C, the Debtor stated that he was claiming state and federal exemptions pursuant to § 522(b)(3) of the Bankruptcy Code and listed certain property as exempt, but did not list the Doylestown Property.¹⁸ However, in his Form 108 Statement of Intention (the "Statement of Intention"), the Debtor did state that he was claiming the Doylestown Property as exempt and intended to retain it and "pay as agreed."¹⁹

With respect to his liabilities, the Debtor identified Provident as having a $7,391,404.88 unsecured claim based on a "guarantee of corporate obligation."²⁰ The Debtor also identified the Trustees of Mosaic and Terrazzo Welfare Fund as having a $317,005.66 unsecured claim based on "union benefits."²¹

With respect to his income and expenses, the Debtor represented in his Schedule I that he was employed by Platinum Maintenance Services ("Platinum Maintenance") and had gross monthly wages of $19,184.88, which after deductions totaled $13,902.10.²² The Debtor represented in his Schedule J that his ongoing monthly expenses totaled $14,623.33, or $721.23 more than his net monthly income.²³

C. The Debtor's Lien Avoidance Motion and Amended Schedules

On November 30, 2016, the Debtor filed the Lien Avoidance Motion, seeking to avoid Provident's judicial lien pursuant to § 522(f) of the Bankruptcy Code because the Debtor "claimed [the Doylestown Property] as exempt under the state exemptions of 11 U.S.C. Section 522(b)(3)(B) as the property is held jointly with the Debtor's spouse as tenants by the entireties."²⁴ On December 14, 2016, Provident filed a response to the Lien Avoidance Motion (the "Lien Avoidance Response"), arguing that the Debtor's assertion that Provident's judicial lien impaired his exemption with respect to the Doylestown Property was contradicted by his Schedule A/B, which did not claim such an exemption, and that the Debtor's assertion that the Doylestown Property was owned jointly with the Debtor's spouse as tenants by the entireties was contradicted by his Schedule A/B, which stated that he owned the...