Opinion
Case No. 17-12858 Adv. No. 18-1043
10-09-2019
In re: MARY J. FARRIER Debtor DANIEL M. McDERMOTT Plaintiff v. MARY J. FARRIER Defendant
Chapter 7
MEMORANDUM DECISION GRANTING SUMMARY JUDGMENT TO THE UNITED STATES TRUSTEE [Docket Number 21] -AND- DENYING DEBTOR-DEFENDANT MARY J. FARRIER'S DISCHARGE
This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the standing General Order of Reference in this District.
This matter is before this Court on the Motion of the United States Trustee for Summary Judgment and Memorandum in Support ("Motion") [Docket Number 21] filed on June 11, 2019 and the Affidavit of Benjamin A. Sales [Docket Number 26] filed as a supplement to the Motion on July 8, 2019. Debtor-Defendant Mary J. Farrier ("Ms. Farrier") did not file a response to the Motion. The deadline for a timely response has now expired and this matter is ripe for determination.
On July 22, 2019, Ms. Farrier filed a document with this Court captioned Answer and Notice with references in the caption to her bankruptcy case and two adversary proceedings including this one [Case Number 17-12858, Docket Number 226]. Neither the caption nor the text of the document, consisting only of a District Court Complaint, indicate the proceeding in which the document was intended to be filed or to what document it was intended to answer or respond. This Court entered an order requiring Ms. Farrier to supplement the record with the missing information about the document by August 20, 2019 [Id., Docket Number 223]. No supplement was filed. Accordingly, this Court treats the Answer and Notice as public correspondence. Even if this Court were to treat it as a response to the UST's Motion in this adversary proceeding, the document includes no evidence or arguments relevant to the Motion.
I. FACTUAL AND PROCEDURAL BACKGROUND
Ms. Farrier filed a chapter 7 bankruptcy petition on August 3, 2017. On August 20, 2018, Plaintiff United States Trustee Daniel M. McDermott ("UST") filed a Complaint to Deny Discharge ("Complaint") against Ms. Farrier. In the Complaint, the UST asserts that Ms. Farrier engaged in certain pre- and postpetition transfers of her interest in real property on North Bend Road, as well as other postpetition conduct, intended to hinder the Chapter 7 Trustee's administration of the property on behalf of creditors. Based on these acts, the UST requests the denial of Ms. Farrier's discharge pursuant to various provisions of Bankruptcy Code Section 727(a).
Unless otherwise indicated, the terms "Bankruptcy Code," "Section" and "§" refer to Title 11 of the United States Code, 11 U.S.C. § 101 et seq.
Following the filing of Ms. Farrier's answer, and this Court's entry of an order setting the deadline for filing dispositive motions [Docket Number 19], the UST filed the Motion [Docket Number 21] requesting summary judgment. The evidentiary materials provided with the Motion and supplement thereto [Docket Number 26] establish the following undisputed facts.
On November 8, 2018, the UST served the United States Trustee's First Request for Admissions ("Request for Admissions") by ordinary U.S. Mail to Ms. Farrier [Docket Number 26, (Aff. of Benjamin Sales), ¶ 3]. Ms. Farrier failed to timely respond to the Request for Admissions nor had the UST received a response by the date the UST supplemented its motion for summary judgment [Id., ¶¶ 4-5]. The Request for Admissions asked Ms. Farrier to admit the following with respect to the real property located at 1095 North Bend Road, Cincinnati, Ohio 45224 (the "North Bend Road Property"):
1. [Y]ou purchased the North Bend Road Property on or about November 26, 2007;[Docket Number 21, Ex. A].
2. [Y]ou transferred title to the North Bend Road Property to your daughter, Brandi A Jorden, for no consideration on March 30, 2017;
3. [Y]ou transferred title to the North Bend Road Property to Brandi A Jorden to prevent the North Bend Road Property from being liquidated in your chapter 7 bankruptcy;
4. Brandi A Jorden transferred title to the North Bend Road Property to you on or about October 30, 2017;
5. You transferred title to the North Bend Road Property to Frank Brooks on February 15, 2018 for $1,000;
6. [Y]ou transferred title to the North Bend Road Property to Frank Brooks to prevent the chapter 7 trustee from liquidating the North Bend Road Property for the benefit of creditors;
7. On at least one occasion since the filing of the bankruptcy, you or someone directed by you has changed the locks to the North Bend Road Property to prevent the chapter 7 trustee from gaining access to the property.
In addition, the UST provides the affidavit of Chapter 7 Trustee George Leicht ("the Chapter 7 Trustee") who administered Ms. Farrier's bankruptcy estate [Id., Ex. B]. In the affidavit, the Chapter 7 Trustee attests to the following:
1. I conducted the § 341 meeting of creditors in the above-captioned [Ms. Farrier's] case on September 12, 2017.[Docket Number 21, Ex. B].
2. On September 15, 2017, I sent a letter to Brandi Jordan stating that the transfer of the property located at 1095 North Bend Road, Cincinnati, OH 45224 (the "North Bend Road Property") was recoverable by the chapter 7 trustee under 11 U.S.C. § 548 and that Ms. Jordan should contact the chapter 7 trustee.
3. I did not receive any response from Ms. Jordan after sending the September 15, 2017 letter. As a result, I initiated adversary proceeding case number 17-01047 on October 5, 2017 to recover the North Bend Road property pursuant to 11 U.S.C. § 548.
4. In December of 2017, I secured and winterized the property located at 1095 North Bend Road, Cincinnati, OH 45224.
5. By July 31, 2018, someone changed the locks to the North Bend Road Property, placed a no trespassing sign in the window, and removed the realter's (sic.) sign. As a result, I was prevented from gaining access to the property.
6. On or about October 18, 2018, I re-secured the North Bend Road Property.
7. I sold the North Bend Road Property for $21,500 on or about March 22, 2019.
A copy of the Chapter 7 Trustee's September 15, 2017 letter sent to Ms. Jordan informing her of his intent to recover the North Bend Road Property is attached to the UST's motion for summary judgment [Docket Number 21, Exhibit C].
II. LEGAL ANALYSIS
A. Summary Judgment Standard
The UST requests summary judgment pursuant to Federal Rule of Civil Procedure ("Rule") 56 incorporated in bankruptcy adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56 provides that summary judgment is to be granted by the court "if 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" using appropriate citations to materials in the record. Fed. R. Civ. P. 56(a) and (c). In order to prevail, the moving party, if bearing the burden of persuasion at trial, must establish all elements of its claim. Celotex Corp. v. Catrett, 477 U.S. 317, 331 (1986). Thereafter, the opposing party "must come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). All inferences drawn from the underlying facts must be viewed in a light most favorable to the party opposing the motion. Matsushita, 475 U.S. at 587.
The UST's Motion is unopposed in this case. Nonetheless, this Court may grant summary judgment only when the motion and supporting materials show that the moving party has established a right to relief as a matter of law and that no genuine issue of material fact exists. See Fed. R. Civ. P. 56(e); Rance v. Datavantage, Corp., 2008 U.S. Dist. LEXIS 34598, at *7-8, 2008 WL 1899986, at *3 (N.D. Ohio April 28, 2008). Significantly, in a situation where the nonmoving party fails to respond, "the trial court is under no obligation to 'search the entire record to establish that it is bereft of a genuine issue of material fact.'" Rabin v. Delacruz (In re St. Clair Clinic, Inc.), 73 F.3d 362 (Table), 1996 U.S. App. LEXIS 1416, at *5, 1996 WL 6531, at *2 (6th Cir. Jan. 8, 1996) (further citation omitted). See also Rance, 2008 U.S. Dist. LEXIS 34598, at *8, 2008 WL 1899986, at *3. "Rather, the trial court may rely upon the 'facts presented and designated by the moving party.'" Rabin, 1996 U.S. App. LEXIS 1416, at *5, 1996 WL 6531, at *2 (further citation omitted). See also Rance, 2008 U.S. Dist. LEXIS 34598, at *8, 2008 WL 1899986, at *3.
B. Matters within the Request for Admissions Are Deemed Admitted and Conclusively Established
This Court turns to the preliminary argument made by the UST on summary judgment: that Ms. Farrier failed to timely respond to the UST's Request for Admissions and, accordingly, the facts sought therein should be deemed admitted.
Relevant to the issue is Rule 36(a)(3) and (b), applicable via Federal Rule of Bankruptcy Procedure 7036, which addresses requests for admissions:
(a) Scope and Procedure.
* * *
(3) Time to Respond; Effect of Not Responding. A matter is admitted unless, within 30 days after being served, the party to whom the request is directed serves on the requesting party a written answer or objection addressed to the matter and signed by the party or its attorney. A shorter or longer time for responding may be stipulated to under Rule 29 or be ordered by the court.
* * *
Fed. R. Civ. P. 36. Pursuant to Rule 36, matters within a request for admissions are deemed admitted if a party does not answer the request within 30 days of being served. The matters deemed admitted are conclusively established absent a motion to withdraw or amend. An admitted matter can serve as a basis for a summary judgment motion. See, e.g., Paulino v. Edmondson (In re Edmondson), 2007 Bankr. LEXIS 1560, at *7-8, 2007 WL 1302574, at *3-4 (Bankr. N.D. Ohio May 1, 2007); Davis v. North Am. Mortg. Co. (In re Kenny), 276 B.R. 579, 581 (Bankr. S.D. Ohio 2002).
(b) Effect of an Admission; Withdrawing or Amending It. A matter admitted under this rule is conclusively established unless the court, on motion, permits the admission to be withdrawn or amended. Subject to Rule 16(e), the court may permit withdrawal or amendment if it would promote the presentation of the merits of the action and if the court is not persuaded that it would prejudice the requesting party in maintaining or defending the action on the merits. An admission under this rule is not an admission for any other purpose and cannot be used against the party in any other proceeding.
In this case, the UST served its Request for Admissions on Ms. Farrier by ordinary mail on November 8, 2018. Ms. Farrier did not respond to the requests within the deadline established by Rule 36 nor had the UST received a response from Ms. Farrier as of the filing of its supplemental affidavit on July 8, 2019. Furthermore, Ms. Farrier did not file a motion to withdraw or amend the admissions.
Accordingly, matters within the UST's First Request for Admissions are deemed admitted and conclusively established on summary judgment pursuant to Rule 36.
C. Denial of Discharge: Bankruptcy Code Sections 727(a)(2)(A) and (a)(2)(B)
The UST contends that the factual evidence presented on summary judgment, including Ms. Farrier's deemed admissions, supports denial of her discharge pursuant to Bankruptcy Code Sections 727(a)(2)(A) and 727(a)(2)(B).
Section 727(a) of the Bankruptcy Code contains twelve enumerated grounds for denying a debtor's discharge. See 11 U.S.C. § 727(a)(1) - § 727(a)(12). Section 727(a)(2)(A) provides that the bankruptcy court shall grant the debtor a discharge unless "the debtor, with intent to hinder, delay, or defraud a creditor or an officer of the estate charged with custody of property under this title, has transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed . . . property of the debtor, within one year before the date of the filing of the petition[.]" 11 U.S.C. § 727(a)(2)(A). Section 727(a)(2)(B) applies the same standard as subsection (A) to actions taken postpetition against property of the estate. 11 U.S.C. § 727(a)(2)(B). Thus, subsection (a)(2)(A) addresses a debtor's prepetition conduct to transfer, dispose of, or conceal assets from the debtor's creditors or a bankruptcy trustee, specifically within a year of the bankruptcy filing, while subsection (a)(2)(B) addresses a debtor's postpetition conduct to transfer, dispose of, or conceal estate assets from creditors or a bankruptcy trustee. The exceptions to discharge found in § 727(a)(2) are to be "liberally construed in favor of the debtor and the party objecting to discharge bears the burden of proof by a preponderance of the evidence." Buckeye Retirement Co., LLC, Ltd. v. Swegan (In re Swegan), 383 B.R. 646, 653 (B.A.P. 6th Cir. 2008) (citing Keeney v. Smith (In re Keeney), 227 F.3d 679, 683 (6th Cir. 2000)).
Other than the timing of the conduct, the requirements of paragraphs (a)(2)(A) and (B) are the same, requiring proof of: a) conduct taken by the debtor to transfer, dispose of or conceal property of the debtor; and b) a subjective intent to hinder, delay or defraud a creditor or the bankruptcy trustee through that conduct. United States Trustee v. Zhang (In re Zhang), 463 B.R. 66, 78 (Bankr. S.D. Ohio 2012) (citing Keeney, 227 F.3d at 683).
Because the phrase "intent to hinder, delay, or defraud" in § 727(a)(2) is written in the disjunctive, fraud need not be proven if an intent to hinder or delay is established. Wise v. Wise (In re Wise), 590 B.R. 401, 431-34 (Bankr. E.D. Mich. 2018); Cuervo v. Snell (In re Snell), 240 B.R. 728, 730 (Bankr. S.D. Ohio 1999) (citing Huntington Nat'l Bank v. Schwartzman (In re Schwartzman), 63 B.R. 348, 360 (Bankr. S.D. Ohio 1986)). While determining a debtor's intent or state of mind generally requires a trial, such intent may be determined on summary judgment "when the evidence is so one sided that reasonable minds could not differ" such as when no contradictory evidence is presented to raise a genuine issue of fact or intent is conclusively established through deemed admissions. Carter-Jones Lumber Co. v. Beatty (In re Beatty), 583 B.R. 128, 138 (Bankr. N.D. Ohio 2018). See also Friedly v. Niswonger (In re Niswonger), 116 B.R. 562, 566-67 (Bankr. S.D. Ohio 1990) (granting summary judgment on debtor's intent to defraud while signing an affidavit established through deemed admissions under Rule 36).
Because intent is rarely admitted, intent may be demonstrated through the traditional "badges of fraud." Zhang, 463 B.R. at 78-79. Badges of fraud may include: (1) concealment of transfers; (2) gratuitous transfers or inadequacy of consideration; (3) the family, friendship or close associate relationship between the parties; (4) the retention of possession, benefit or use of the property in question; (5) the financial condition of the transferor before and after the transaction in question; (6) the pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties, or pendency or threat of suits by creditors; and (7) the general chronology of the events and transactions under inquiry. See Adar 980 Realty LLC v. Sofer (In re Sofer), 519 B.R. 28, 37 (Bankr. E.D.N.Y. 2014); Zhang, 463 B.R. at 79. In this case, because the deemed admissions conclusively establishing the required intent, this Court need not rely on the badges of fraud.
1. The Debtor's Prepetition Transfer of the North Bend Road Property to Ms. Jordan Meets the Elements for Denial of Discharge Under Section 727(a)(2)(A)
To meet the elements of § 727(a)(2)(A), the UST presents the deemed admissions conclusively establishing that Ms. Farrier owned the North Bend Road Property but then transferred title to her daughter, Brandi Jordan, on March 30, 2017 [Docket Number 21, Ex. A, ¶¶ 1-2]. That transfer occurred approximately four months prior to the August 3, 2017 filing of Ms. Farrier's bankruptcy petition. Furthermore, the deemed admissions conclusively establish that Ms. Farrier transferred the North Bend Road Property to Ms. Jordan for no consideration and with an intent to prevent the North Bend Road Property from being liquidated in Ms. Farrier's Chapter 7 bankruptcy case [Id., ¶¶ 2-3].
These undisputed facts establish that Ms. Farrier transferred the North Bend Road Property to Brandi Jordan within a year of the bankruptcy filing with the intent to hinder the liquidation of the property by the bankruptcy trustee meeting the requirements of 11 U.S.C. § 727(a)(2)(A). Ms. Farrier failed to respond to the UST's motion for summary judgment with any defense. Accordingly, summary judgment will be granted to the UST on this issue.
2. The Debtor's Postpetition Transfer of the North Bend Road Property to Frank Brooks Meets the Elements for Denial of Discharge Under Section 727(a)(2)(B)
Next, the UST argues that Ms. Farrier's postpetition conduct warrants a denial of discharge pursuant to § 727(a)(2)(B). Again, the UST presents the deemed admissions which conclusively establish that subsequent to Ms. Farrier's August 3, 2017 bankruptcy filing, Ms. Brandi Jordan transferred the North Bend Road Property back to Ms. Farrier on October 30, 2017 [Docket Number 21, Ex. A, ¶ 4]. Once the property was again titled in Ms. Farrier's name, and was property of the bankruptcy estate, Ms. Farrier transferred title to the North Bend Road Property to Frank Brooks on February 15, 2018 for $1,000 [Id., ¶ 5]. The deemed admissions conclusively establish that Ms. Farrier transferred the property to Frank Brooks to prevent the Chapter 7 Trustee from liquidating the North Bend Road Property for the benefit of creditors [Id., ¶ 6].
Again, Ms. Farrier failed to respond to the UST's motion for summary judgment with any defense. Accordingly, the undisputed facts establish that Ms. Farrier transferred the North Bend Road Property to Mr. Brooks after the bankruptcy filing with the intent to hinder the Chapter 7 Trustee's liquidation of the property. These undisputed facts presented by the UST on summary judgment establish the elements to deny Ms. Farrier's discharge pursuant to 11 U.S.C. § 727(a)(2)(B).
Although the deemed admissions conclusively establish Ms. Farrier's intent to hinder the Chapter 7 Trustee's liquidation of the North Bend Road Property for the benefit of creditors, other undisputed facts presented on summary judgment further support that intent. Specifically, on at least one occasion following the bankruptcy filing, Ms. Farrier, or someone directed by Ms. Farrier, changed the locks to the North Bend Road Property to prevent the Chapter 7 Trustee from gaining access [Docket Number 21, Ex. A, ¶ 7; Ex. B, ¶ 5].
III. CONCLUSION
For the reasons stated above, the United States Trustee's Motion [Docket Number 21] is GRANTED. Debtor-Defendant Mary J. Farrier is denied a bankruptcy discharge pursuant to 11 U.S.C. § 727(a)(2)(A) and § 727(a)(2)(B).
SO ORDERED.
This document has been electronically entered in the records of the United States Bankruptcy Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/_________
Beth A. Buchanan
United States Bankruptcy Judge
Dated: October 9, 2019
Distribution List:
Benjamin A. Sales, Esq.
George Leicht, Esq.
Mary J. Farrier
P.O. Box 19361
Cincinnati, OH 45219