The Cadle Co. v. Anderson (In re Anderson)

In re: WILLIAM M. ANDERSON, Debtor

THE CADLE COMPANY, Plaintiff v. WILLIAM M. ANDERSON, Defendant

No. AP-ECF No. 1^[1]

No. 15-30458 (AMN)

Adv. Pro. No. 16-03033 (AMN)

United States Bankruptcy Court, D. Connecticut, New Haven Division

February 23, 2023

For the Plaintiff: C. Donald Neville, Esq. Kroll, McNamara, Evans &Delehanty, LLP

For the Defendant: George C. Tzepos, Esq. Law Offices of George C. Tzepos

MEMORANDUM OF DECISION AFTER TRIAL

ANN M NEVINS, UNITED STATES BANKRUPTCY JUDGE

I. INTRODUCTION

Before the court is a complaint filed by The Cadle Company ("Cadle" or "plaintiff") seeking a determination that defendant and debtor William M. Anderson ("Mr. Anderson" or "defendant") is not entitled to a discharge pursuant to 11 U.S.C. §§ 727(a)(2)(A), (a)(3), (a)(4)(A), and (a)(5).^[2] AP-ECF No. 1. The plaintiff asserts the defendant should be denied a Chapter 7 discharge under Bankruptcy Code § 727(a)(3) because he failed to preserve any personal or business financial documentation whereby his true financial condition could be ascertained. The plaintiff also asserts the defendant should be denied a discharge pursuant to Bankruptcy Code §§ 727(a)(5), (a)(4)(A), and (a)(2)(A) for not proffering a reasonable account of a loss or deficiency of assets, knowingly and fraudulently making a false representation under oath regarding his personal property, income, and business interests, and intending to hinder, delay, or defraud a creditor by concealing property within one year before his bankruptcy filing.

Following a trial, after consideration of the record, and for the reasons stated herein, the court concludes the plaintiff met its burden under § 727(a)(3) and the defendant will be denied a discharge. The plaintiff's claims under §§ 727 (a)(4)(A), (a)(5) and (a)(2)(A) fail.

II. JURISDICTION

Jurisdiction arises pursuant to 28 U.S.C. §§ 1334(b), 157(a), 157(b)(1), and the United States District Court for the District of Connecticut's General Order of Reference dated September 21, 1984. This adversary proceeding is a "core proceeding" pursuant to 28 U.S.C. § 157(b)(2)(J). This adversary proceeding arises under the defendant's Chapter 7 case pending in this District and venue is proper pursuant to 28 U.S.C. § 1409(a).

This memorandum constitutes the court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, applicable here pursuant to Rules 7052 and 9014(c) of the Federal Rules of Bankruptcy Procedure.

III. RELEVANT PROCEDURAL HISTORY

a. Defendant's Bankruptcy Case

On March 27, 2015 (the "Petition Date"), the defendant filed a voluntary Chapter 7 bankruptcy petition commencing the underlying case here ("Chapter 7 Case"). ECF No. 1. The defendant disclosed in his bankruptcy schedules that he had no current income and did not possess any interest in real property. ECF No. 1, p. 9. The defendant disclosed personal property totaling $7,500.00, including $7,300.00 in cash, clothing valued at $200.00 and a fifty percent (50%) ownership interest in an entity named Front Street Properties, LLC ("Front Street, LLC") valued at $0.00. ECF No. 1, p. 12. In his Schedule F, the defendant listed an undisputed claim of $4,424,347.00 held by the plaintiff, Cadle. ECF No. 1, p. 20. On May 6, 2015, the Chapter 7 Trustee (the "Trustee") submitted a report of no distribution, finding no property available for distribution from the defendant's estate over and above exempt property. The Trustee later withdrew that report. ECF No. 125.

During the defendant's bankruptcy proceeding, the plaintiff conducted examinations of the defendant and several others seeking to uncover the financial condition of the defendant pursuant to Fed.R.Bankr.P. 2004. See ECF Nos. 14, 23-25, 32, 33, 59-66, 80. On August 4, 2015, the plaintiff filed a timely proof of claim against the defendant for $4,424,347.99. See Proof of Claim 1-1 ("POC 1-1"), claims register for the Chapter 7 Case.

b. Adversary Proceeding

On August 5, 2016, the plaintiff commenced this adversary proceeding objecting to the defendant's discharge pursuant to Bankruptcy Code §§ 727(a)(2)(A) (Count One), (a)(3) (Count Two), (a)(4)(A) (Count Three), and (a)(5) (Count Four). ECF No. 88, 123; AP-ECF No. 1.

Summons service was executed on the defendant on September 20, 2016. AP-ECF Nos. 6, 7. The defendant did not timely respond, and the plaintiff moved for and received a default against the defendant. AP-ECF Nos. 8, 9. The plaintiff subsequently filed a motion for judgment, and the defendant responded to the complaint on October 24, 2016. AP-ECF Nos. 10, 13. The court entered an order denying the plaintiff's motion for default judgment. AP-ECF No. 21.

On June 9, 2022, a trial for this adversary proceeding was held. AP-ECF No. 197. Two witnesses testified: Rick Anthony Rice ("Insurance Agent") and the defendant. AP-ECF No. 208, pp. 1-2. The documentary evidence admitted in this case was voluminous. Any piece of evidence not admitted during trial and referenced in the parties' briefs was not considered by the court. Similarly, any argument by counsel relying on facts for which there is no citation to the record fails. See, e.g., AP-ECF No. 207, Section D, pp. 8-9.

IV. FACTUAL BACKGROUND AND FINDINGS

As an initial matter, the court finds much of the defendant's testimony was not credible. The defendant testified he borrowed money with business partners to start a business constructing houses in 1987 though the initiative was financially unsuccessful, and on August 17, 1993, a deficiency judgment entered against Mr. Anderson for approximately $1,473,000.00. AP-ECF No. 205, pp. 167, 180-81. The plaintiff here, Cadle, bought the judgment after 1993 and claims the debt now totals approximately $4,473,544.70, including interest. AP-ECF Nos. 1, 205, pp. 182-83; POC 1-1.

To fend off Cadle's assault on his bankruptcy discharge, Mr. Anderson asked the court to believe he had no source of income for the last twenty (20) years, had not held employment since 1971, and had not possessed a bank account for the last forty (40) years. AP-ECF No. 205, pp. 43, 42. The defendant's own testimony later contradicted at least two of these claims when he stated he has a TD Bank account where social security checks are deposited. AP-ECF No. 205, p. 186. The defendant stated the last time he owned a business - a junkyard located in New Haven, Connecticut - was in 1990. AP-ECF No. 205, p. 43. Further, he maintains his life's work has consisted of repairing automobiles and he has never dealt well with paperwork. AP-ECF No. 205, p.166-67. The defendant last filed tax returns in 1990. AP-ECF No. 205, pp. 189-90.

The defendant asserted he has difficulty reading and achieved no more than a fifth-grade education. AP-ECF No. 205, pp. 166-67. At one point during his testimony, the defendant asserted he suffers from dementia, though he introduced no medical or other records to support this. AP-ECF No. 205, p. 139.

During Mr. Anderson's testimony, he had trouble remembering when he was incarcerated, claiming multiple times he was in prison from 1985 through 1990, and later claiming it was 1995 through 2000. AP-ECF No. 205, pp. 47, 54. The actual prison term appears to have been from 1995 through 2000. AP-ECF No. 205, p. 54. In any case, Mr. Anderson testified he gave his brother approximately $7,700.00 to hide (the "hidden money") before he went to prison, and his brother gave it back when he was released.^[3]AP-ECF No. 205, pp. 178, 53-55. The defendant asserted this hidden money from 2000 is the same cash he reported in his bankruptcy petition in 2015 and that he has subsisted since his release from prison in 2000 on that cash and on the goodwill of his sibling, who has provided housing and food. AP-ECF No. 205, p. 55, 178. Specifically, he testified he lived at his brother's house in Florida and never had to pay for food, but later said he lives in a house with his friend in Connecticut and contributes to food costs through his social security income. AP-ECF No. 205, p. 55, 185.

The defendant obtained and used credit cards after his release from prison, but produced no records regarding the debts incurred on those credit cards. AP-ECF No. 205, pp. 99-100. The defendant alleged he made misrepresentations about his income to obtain these lines of credit and asserted he did not take issue with being untruthful to do so. AP-ECF No. 174-2, p. 120-21. The defendant further alleged his credit card balance payments were made by his ex-wife with cash he gave to her. AP-ECF No. 174-2, pp. 61-62. No records or corroborating testimony supporting this story were provided.

As for alleged businesses of the defendant, in 2006, the Insurance Agent's company procured insurance for a business named Classic Car Restoration ("Classic Car"). AP-ECF No 174-14. The defendant asserted he never owned or operated Classic Car, never provided the Insurance Agent with information concerning insurance for that business, and stated his brother and son have businesses under the Classic Car name. AP-ECF No. 205, pp. 46, 118, 119-20, 170, 173. The Insurance Agent testified he believed the defendant owned Classic Car because the defendant sought the insurance company's services for Classic Car and made amendments to its insurance policy. AP-ECF No. 205, pp. 18, 19-20; 64. Further, the Insurance Agent asserted the defendant communicated there was $500,000.00 in personal property to be insured, and he noticed a lot of cars, as many as forty (40), on the property during an on-site visit of Classic Car. AP-ECF No. 205, p. 68. Because the Insurance Agent testified several times that his memory of the events in question was unclear because they had occurred so long ago, his testimony is entitled to...