Dear Mr. Cho and Ms. Gavin:
This matter was originally brought before the court on September 6, 2016 by Debtor/Defendant Kyong Abdon, through her motion to dismiss (Doc. No. 19) (the "Motion") the Adversary Complaint filed by Plaintiff Kyong Gavin (Doc. 1) as amended by permission of the court on June 23, 2016 (Doc. No. 6) (the "Complaint"). The initial Complaint failed to specify which section of Title 11 of the United States Code (the "Bankruptcy Code") her claim was based on, although it was apparent that Ms. Gavin was objecting to the discharge of Ms. Abdon. On September 27, 2016, the court conducted a lengthy hearing on the Motion at which time the parties or their representative appeared. On September 29, 2016, the court issued a letter opinion (Doc. No. 23) explaining that, based upon the record, Ms. Gavin had failed to state a claim under section 523 of the Bankruptcy Code and granted the Motion in that regard.
In addition, the court further explained that it reviewed each of the factual allegations in Ms. Gavin's complaint in an attempt to determine whether, accepting each factual allegation as true, Ms. Gavin had stated a claim under any subsection of section 727(a) of the Bankruptcy Code that was plausible on its face. The court noted that it was at a loss as to how the Complaint stated a claim for relief. Indeed, several of the allegations appeared completely unrelated to any of the elements of any claim under 727(a) of the Bankruptcy Code. Nevertheless, rather than dismiss a claim the court granted leave to amend the complaint one last time. In doing so, the court cautioned Ms. Gavin that her complaint
Ms. Gavin filed her latest amended complaint on October 12, and 13, 2016 (Doc. Nos. 26 and 27) (collectively, the "Third Complaint"). Ms. Abdon responded. (Doc. No. 29). As of the date of this Decision, Ms. Gavin has not filed any response. This matter is now ripe for disposition.
In her Third Complaint, Ms. Gavin, once again, does not specify which section of 727 her complaint relates to and the allegations in the complaint are very similar to those in her previous complaints. Thus, the court is again left guessing what claims Ms. Gavin might plausibly be trying to bring under the statute. In addition, Ms. Gavin now alleges for the first time, a claim under section 707(b) of the Bankruptcy Code.
Any relevant alleged facts will be included in the legal discussion below.
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). As the Supreme Court has indicated, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy, and inexpensive determination of every action.'" In re Moran-Hernandez, No. 15-17634, 2016 WL 423705, at *2-3 (Bankr. D. N.J. Feb. 2, 2016) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). "In deciding a motion for summary judgment, the judge's function is to determine if there is a genuine issue for trial." Josey v. John R. Hollingsworth Corp., 996 F.2d 632, 637 (3d Cir.1993).
The moving party bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir. 2001) (citing Celotex Corp., 477 U.S. at 323). In determining whether a factual dispute warranting trial exists, the court must view the record evidence and the summary judgment submissions in the light most favorable to the non-movant. Moran-Hernandez 2016 WL at *2-3 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). Disputed material facts are those "that might affect the outcome of the suit under the governing law." Id. at *3 (quoting Liberty Lobby, 477 U.S. at 248). A dispute is genuine when it is "triable," that is, when reasonable minds could disagree on the result. Id. (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)).
Once a party establishes the absence of a dispute over material facts, the burden shifts to the non-moving party. Moran-Hernandez, 2016 WL at *2-3. A party may not defeat a motion for summary judgment unless it sets forth specific facts, in a form that "would be admissible in evidence," establishing the existence of a genuine dispute of material fact for trial. Id. (citing Fed. R. Civ. P. 56(e) (providing that in response to a summary judgment motion the "adverse party may not rest upon the mere allegations or denials of [its] pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine [dispute] for trial"); see also Fireman's Ins. Co. of Newark, N.J. v. DuFresne, 676 F.2d 965, 969 (3d Cir.1982); Olympic Junior, Inc. v. David Crystal, Inc., 463 F.2d 1141, 1146 (3d Cir.1972).
When ruling on a summary judgment motion, bankruptcy courts may only consider that portion of submitted material which would be admissible or useable at trial. In re Chapman, 228 B.R. 899 (Bankr. N.D. Ohio 1998); see also Stelwagon Mfg. Co. v. Tarmac Roofing Sys., 63 F.3d 1267, 1275 n.17 (3d Cir. 1995) and Celotex Corp. 477 U.S. at 324.
Reviewing all of Ms. Gavin's allegations, it is clear that there are only three (3) plausible factual allegations that could give rise to a claim under section 727 of the Bankruptcy Code.
As noted, Ms. Gavin has not specified what subsection of 727 she intends on bringing her action, however, these allegations could give rise to a claim under section 727(a)(2)(A), or 727(a)(4) of the Bankruptcy Code, or possibly both. A claim under section 727(a) of the Bankruptcy Code provides that a debtor shall be granted a discharge unless:
Rosen v. Bezner, 996 F.2d 1527, 1530-31 (3d Cir. 1993); 11 U.S.C. § 727(a) (1988). The section is to be construed liberally in favor of the debtor. Id. at 1530-31 (citing In re Burgess, 955 F.2d 134, 136 (1st Cir.1992); In re Adeeb, 787 F.2d 1339, 1342 (9th Cir.1986); In re Devers, 759 F.2d 751 (9th Cir.1985). Completely denying a debtor his discharge, as opposed to avoiding a transfer or declining to discharge an individual debt pursuant to § 523, is an extreme step and should not be taken lightly. Id. at 1530-31.
Section 727 provides an exception to the general rule that a court must grant a debtor his discharge; that exception consists of two components: an act (i.e. a transfer or a concealment of property) and an improper intent (i.e., a subjective intent to hinder, delay, or defraud a creditor). Rosen, 996 F.2d at 1531. In order to successfully bring a claim under section 727(a)(2)(A), a plaintiff must establish three elements:
In re Spitko, 357 B.R. 272, 299 (Bankr. E.D. Pa. 2006) (citing In re Lawson, 122 F.3d 1237, 1240 (9th Cir.1997); see Rosen v. Bezner, 996 F.2d at 1531.
Similarly, under 11 U.S.C. § 727(a)(4), a debtor will not receive his bankruptcy discharge when he: knowingly and fraudulently, in or in connection with the case — (A) made a false oath or account. Spitko, 357 B.R. at 312. The purpose of this statutory provision is to create an "affirmative duty" for the debtor to completely disclose "all assets [and] liabilities and to answer all questions fully and with the utmost candor." Id. (citing In re Maletta, 159 B.R. 108, 112 (Bankr. D. Conn.1993)). To meet this evidentiary burden, the plaintiffs must prove by a preponderance standard, see In re Georges, 138 Fed. Appx. 471, 472 (3d Cir. 2005), that:
Spitko, 357 B.R. at 312 (quoting Matter of Beaubouef, 966 F.2d at 178; accord, e.g., Williamson v. Fireman's Fund Insurance Co., 828 F.2d 249, 251 (4th Cir.1987).
Thus, in order to bring a successful action under either section 727(a)(2)(A) or 727(a)(4), Ms. Gavin must show, by a preponderance of evidence, each element of the claim she is attempting to bring. Under section 727(a)(2)(A), this will require proof of a concealment of property of the estate and that the concealment was done intentionally to hinder, delay or defraud creditors. Further, under section 727(a)(4) of the Bankruptcy Code, Ms. Gavin will have to prove that Ms. Abdon made a false oath that she knew at the time she made it was false and that she made the false oath at the time with an intent to commit fraud and that the false oath was material to the bankruptcy case.
As to Ms. Gavin's first allegation, a review of the record demonstrates that there is no genuine issue of material fact related to the claim that Ms. Abdon concealed $22,000 from the estate. Ms. Gavin alleges that Mr. Tunney stated he saw $22,000 in Ms. Abdon's possession. Ms. Gavin has submitted several affidavits of individuals who stated they heard Mr. Tunney state he saw $22,000 in Ms. Abdon's possession. However, Ms. Abdon has submitted an affidavit from Mr. Tunney himself in which he swears under oath that he had no knowledge of whether Ms. Abdon possessed $22,000 in cash.
None of the testimony of the witnesses identified by Ms. Gavin is admissible evidence. Each of these witnesses' statements is hearsay, as none of them have personal knowledge of whether Ms. Abdon possessed $22,000 nor who was actually on the phone. Hearsay is a "statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." In re New Jersey Mobile Dental Practice, P.A., No. 05-17772 DHS, 2012 WL 3018052, at *6 (Bankr. D. N.J. July 24, 2012), aff'd sub nom. Gvildys v. Beukas, No. CIV.A. 12-5468 SRC, 2012 WL 5472121 (D. N.J. Nov. 9, 2012) (citing In re CGR Investors Ltd. P'ship, 464 B.R. 678, 681 (Bankr. E.D. Pa.2010)). As such, none of witnesses identified by Ms. Gavin is capable of testifying as to the truth of whether Ms. Abdon in fact possessed $22,000 because none of these witnesses has personal knowledge of this and the only witness who apparently has personal knowledge, under penalty of perjury, denies the fact.
Although it is not clear whether Ms. Gavin is bringing this claim under section 727(a)(2) or 727(a)(4) of the Bankruptcy Code, the outcome of this adversary proceeding does not hinge on which statutory provision is invoked. Rather, on a motion for summary judgment the outcome depends on the existence or non-existence of evidence in support of the plaintiff's factual contentions. In re Burke, 523 B.R. 765, 770-71 (Bankr. E.D. Pa. 2015). A nonmoving party may not rely on bare assertions nor rest on the allegations in the pleadings. Rather, the nonmoving party must go beyond the pleadings and either by affidavits, depositions, answers to interrogatories, or admissions on file, designate specific facts showing that there is a genuine issue for trial. Id. at 772. It was Ms. Gavin's burden to come forward with proof, (e.g., affidavits or other evidence that could be admitted at trial) in support of the factual contentions underlying her claim. See Id. On the other hand, Ms. Abdon has submitted ample evidence through various witnesses that leads the court to conclude that no genuine issue of material fact exists as to Ms. Gavin's allegations about the $22,000. Having failed to place any evidentiary matter in the summary judgment record, Ms. Gavin has not met the burden necessary to defeat the motion for summary judgment. Accordingly, with respect to any claim regarding the issue of Ms. Abdon's concealment of the $22,000 or her failure to list those funds on her Petition, the motion for summary judgment is granted.
However, other factual allegations brought by Ms. Gavin do raise disputed issues of material fact. Ms. Gavin has presented evidence that Ms. Abdon did have an interest in pension funds, and did omit this asset from her Petition. Ms. Abdon's prior tax returns are admissible evidence. Ms. Abdon's response to these allegations falls woefully short of resolving this issue. It is not clear what type of pension fund this is, whether it is ERISA qualified and thus excluded or otherwise exempt from the estate under non-bankruptcy law and so there is a genuine issue of dispute for trial.
Similarly, although the evidence is less strong, Ms. Gavin has presented evidence that Ms. Abdon underestimated the value of Elegance Cleaners in the form of her personal knowledge of the business from having operated it prior to the transfer of ownership. Neither party presented sufficient evidence regarding the value of the business, and as a result, the value of Elegance Cleaners is a material issue of fact in dispute.
These allegations may give rise to a claim under section 727(a)(2)(A) or (a)(4), and there are issues of material fact in dispute. Although there is very little evidence presented regarding Ms. Abdon's intent in failing to list these assets, the issue of intent and credibility are rarely determined at the summary judgment stage. Burke, 523 B.R. at 770 (citing Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007) ("Issues such as intent and credibility are rarely suitable for summary judgment"); In re Coley, 433 B.R. 476, 493 (Bankr. E.D. Pa. 2010) ("proof of fraudulent intent is not especially susceptible to disposition by summary judgment"). As such, at this time, summary judgment as to these two precise issues is not warranted.
Ms. Gavin's 707(b) claim is time barred. See Fed. R. Bankr. P. 1017. The time limit for filing motions to dismiss for abuse (whether under the means test or totality of the circumstances) is 60 days from the "first date set" for the meeting of creditors. In re Jasper, 414 B.R. 83, 88 (Bankr. E.D. Va. 2009) (citing Fed. R. Bankr. P. 1017); see also In re Persaud, 486 B.R. 251, 262 (Bankr. E.D.N.Y. 2013). In this case, the meeting of creditors was first set for February 18, 2016 and was concluded on March 31, 2016. Ms. Gavin did not file her first adversary complaint until June 8, 2016, more than 60 days after the first date set for the meeting of creditors. Further, Ms. Gavin did not even make any allegation related to a 707(b) action until her Third Complaint. As such, that claim is dismissed with prejudice.
Additionally, the remainder of Ms. Gavin's allegations are flawed for one reason or another and the court is through guessing what is and why it is being asserted. Ms. Gavin makes several references to the debt owed to her, and whether the transfer of the business was a loan or a gift. However, as noted, this court has already dismissed all claims related to any action under section 523 of the Bankruptcy Code. Even assuming Ms. Gavin is correct in these allegations, these do not sufficiently state a claim under section 727 of the Bankruptcy Code. Ms. Gavin further alleges that Mr. Tunney (the landlord) and Ms. Abdon both falsely state Ms. Abdon signed her lease in 2010, but that she has a copy of the lease signed back in 2007. Even assuming this is true; the court cannot fathom how this fits into any claim under section 727 of the Bankruptcy Code. As such, except for the precise allegations in Part 2, above, summary judgment is granted in favor of Ms. Abdon on all remaining claims.
In sum, the court will grant summary judgment in favor of Ms. Abdon and against Ms. Gavin as to all claims with the exception of Ms. Gavin's claim under 727(a)(2)(A) regarding whether Ms. Abdon intentionally with appropriate malice concealed her pension asset from the estate and under 727(a)(4) regarding whether Ms. Abdon knowingly and fraudulently committed a false oath in failing to list her pension income and/or underestimating the value of Elegance Cleaners. In addition, Ms. Gavin's new allegations related to section 707(b) of the Bankruptcy Code are time barred and the claim is dismissed. To be clear, the court will not consider any further any other allegations asserted by Ms. Gavin.
Ms. Abdon will have fourteen (14) days from the date of this Decision to file an Answer pertaining to the surviving allegations and then the court will issue an appropriate scheduling Order.
An appropriate judgment has been entered consistent with this decision.
The court reserves the right to revise its findings of fact and conclusions of law.
