Schindler v. Milliron (In re Milliron)

629 B.R. 893

IN RE: Garth and Kimberly MILLIRON, Debtors.

Jay Schindler and Jeanne Schindler, Plaintiffs,

v.Garth Milliron and Kimberly Milliron, Defendants.

In re: Jarred and Jennifer Milliron, Debtors.

Jay Schindler and Jeanne Schindler, Plaintiffs,

v.Jarred Milliron and Jennifer Milliron, Defendants.

Bankruptcy Case No. 18-00357-GS

Adversary Proceeding No. 19-90001-GS

Bankruptcy Case No. 18-00358-GS

Adversary Proceeding No. 19-90002-GS

United States Bankruptcy Court, D. Alaska.

Signed March 31, 2021

Jason A. Gazewood, Gazewood & Weiner, PC, Fairbanks, AK, for Defendant Garth Milliron.

Erik LeRoy, Erik LeRoy, P.C., Anchorage, AK, for Plaintiff Jay Schindler.

MEMORANDUM DECISION RE: JUDGMENT AFTER TRIAL ON § 727 ACTION

GARY SPRAKER, United States Bankruptcy Judge

Plaintiffs Jay and Jeanne Schindler filed separate adversary proceedings against debtors Garth Milliron and Jarred Milliron, together with their spouses Kimberly and Jennifer, respectively, to deny their discharges under 11 U.S.C. § 727(a)(4), and to except various debts owed by them under § 523(a)(2). Because the actions of Garth Milliron and Jarred Milliron are largely intertwined, the court conducted a combined trial in the two adversary proceedings and took the matter under submission. In keeping with the combined nature of the trial, this memorandum addresses the § 727(a)(4)(A) claims and shall be entered in both adversary proceedings. The court shall also issue a separate memorandum in both adversary proceedings discussing the Schindlers' claims under § 523(a)(2). This memorandum, therefore, is intended to be interlocutory pending full adjudication of all claims submitted at trial.

A. BACKGROUND

1. Prepetition

Garth and Kimberly Milliron reside in the Living Word Ministries (Living Word) community outside Delta Junction, Alaska (Alaska Highway Property).¹ Garth is a pastor in the Living Word church, and is a member of the church's board.² Their son, Jarred, and his wife Jennifer also live in the Living Word community.³ Jarred serves on the board of Dry Creek Community Corporation,⁴ an entity which manages the community's infrastructure.⁵ The church owns all of the real property in the community, which consists of 20-30 houses that church members are allowed to reside in so long as they remain members of the church.⁶

It is in this community that the Millirons started their construction business, Dry Creek Construction, LLC (DCC). Garth and Kimberly own 50% of the business.⁷ Jarred and Jennifer own the other 50%.⁸ Because banks were initially reluctant to lend directly to the business, Garth testified that he and Jarred frequently titled the personal property acquired for the business in their own names as they believed it was needed.⁹ Multiple vehicles, trailers, and tools were purchased for, and used by, the business.

In the mid-2000s, DCC acquired two parcels of real property in Delta Junction: 1770 and 1746 Miltan Road (the Miltan Properties).¹⁰ Shortly thereafter, Garth purchased a building from the local school district and moved it to 1770 Miltan.¹¹ Over the course of several years, Jarred and Garth devoted their personal time to renovating the building, which was completed in 2017.¹² On September 11, 2018, Garth, Kimberly, Jarred, and Jennifer executed a quitclaim deed on behalf of DCC, transferring the Miltan Properties to Garth.¹³ The quitclaim deed was recorded that same day.¹⁴

On or about October 18, 2018, Garth obtained a $110,000.00 line of credit on the Miltan Properties from Mt. McKinley Bank (McKinley).¹⁵ McKinley recorded a deed of trust against the Miltan Properties on October 19, 2018.¹⁶ The Millirons never drew on the line of credit.¹⁷

In 2012, DCC was hired to do a large construction project for the Schindlers, who purchased a parcel of raw land in Delta Junction in January 2012.¹⁸ From 2012 to 2017, DCC worked to construct a farmstead and a home on the Schindlers' property. The Schindlers, dissatisfied with the work performed by the Millirons, brought suit against them in Alaska Superior Court in 2017. Trial was set to commence on October 22, 2018.

2. The Millirons and DCC File Bankruptcy

On October 22, 2018, the day their state court trial with the Schindlers was set to begin, DCC, Garth and Kimberly Milliron, and Jarred and Jennifer Milliron filed voluntary chapter 7 bankruptcy petitions.¹⁹ Attorney Jason Gazewood represents all of the debtors in their respective bankruptcies.²⁰ Nacole Jipping was appointed the chapter 7 trustee of DCC's bankruptcy estate. Kenneth Battley was appointed the chapter 7 trustee in each of the Millirons' bankruptcy cases.

The Schindlers' § 727 nondischargeability claims chiefly arise from what the Millirons listed, and omitted, on their bankruptcy schedules and statements. The Millirons filed their original statements and schedules, and two amendments. Their statements and schedules presented conflicting and confusing claims of ownership as to the Miltan Properties and various construction equipment that was consistently listed on DCC's schedules and ultimately sold within DCC's bankruptcy. This confusion was only compounded by their testimony at the various meetings of creditors conducted in their individual cases, especially when compared to their testimony in DCC's meeting of creditors. The Schindlers contend that the Millirons made false oaths in their schedules and statements, while Garth and Jarred also gave false testimony at their creditors' meetings. The court addresses each in turn.

a. DCC Bankruptcy

i. Initial Schedules and Statements

Each of the debtors filed their original schedules together with their petitions on October 22, 2018. In Schedule A/B, DCC listed no real property.²¹ This is wholly consistent with the September 11, 2018 quitclaim deed from DCC to Garth Milliron. Yet, DCC attested in response to item 13 of the Statement of Financial Affairs that it had made no "transfers of money or property by sale, trade, or any other means by the debtor ... within 2 years before the filing of this case to another person, other than property transferred in the ordinary course of business or financial affairs."²² In response to item 4 of its Statement of Financial Affairs, DCC disclosed no "[p]ayments or other transfers of property made within 1 year before filing this case that benefitted any insider."²³

DCC did, however, list numerous vehicles and values in response to item 47:

            2017 Dodge Ram                        $42,000.00
            2015 Chevy Silverado                  $25,000.00
            2015 Polaris Ranger                   $6,200.00
            2012 Snowmachine                      $2,500.0024

[Editor's Note: The preceding image contains the reference for footnote ²⁴ ]

Under item 48 of Schedule A/B, DCC listed and valued the following equipment as additional personal property:

            1991 Dutchman Camper Trailer          $800.00
            2004 Wells Cargo Trailer              $18,000.00
            2004 Haulmark Tool Trailer            $1,000.00
            2002 Gortzen Materials Trailer        $800.00
            2007 Snake River Eq. Trailer          $1,000.00
            Trencher                              $2,146.00
            CAT Skidsteer                         $10,000.00
            Excavator                             $30,000.00
            Excavator Attachments                 $3,500.00
            Misc. Tools and Equipment             $4,450.0025

[Editor's Note: The preceding image contains the reference for footnote ²⁵ ] DCC's Schedule H listed Garth and Jarred Milliron as codebtors only on a $25,000.00 debt owed to Western Surety, which was related to the entity's unsecured claim. The basis for the claim and codebtor listing was stated as "[i]ndemnifier for litigation."²⁶ DCC's chapter 7 bankruptcy petition was signed by Garth Milliron.²⁷

ii. The § 341(a) Meeting of Creditors

Nacole Jipping, the chapter 7 trustee for DCC's bankruptcy estate, conducted DCC's initial § 341(a) meeting of creditors on November 29, 2018.²⁸ All four Millirons appeared to provide testimony for the debtor.²⁹ DCC's initial meeting of creditors took place before the meetings of creditors for either Garth and Kimberly, or Jarred and Jennifer, which were both held on December 27, 2018.

Both Garth and Jarred stated that they carefully read over DCC's schedules and statements, and believed the information contained therein to be true and correct to the best of their knowledge.³⁰ When asked by Ms. Jipping whether anything had changed after the schedules were filed that she should know about, Garth replied that just a few creditor additions had been submitted to DCC's counsel, Mr. Gazewood.³¹

Next, Ms. Jipping admitted to some confusion regarding ownership of the personal property assets, because "[DCC] had listed ... some of the same things in [the Millirons'] personal bankruptcies that [DCC] did in the business."³² Garth explained that, with the exception of the Skidsteer,³³ the vehicles were titled to him or Jarred because initially DCC had no credit, but those vehicles were used by DCC in the course of its business.³⁴ Jarred stated that "a lot of the equipment is titled in [DCC]."³⁵

Jarred added a caveat that because he and Garth personally guaranteed everything they bought, "[e]verything Dry Creek Construction owns, we own; and everything we own, Dry Creek Construction owns."³⁶ Garth later clarified that he also owned some tools that were left to him after his father's death, as well as some tools that were purchased for a prior construction business he owned.³⁷ Mr. Gazewood concluded the discussion with the statement, "Jarred's testified that the machinery, equipment, tools are all bought by Dry Creek, owned by Dry Creek."³⁸

Ms. Jipping's counsel, Cabot Christianson, then inquired about the Miltan Properties.³⁹ He noted the quitclaim deed recorded on September 11, 2018,⁴⁰ and asked about the deed of trust recorded in favor of McKinley on October 19, 2018.⁴¹ When asked why that...