Opinion
CASE NO. 05-54849 (MBK), ADVERSARY NO. 06-1932 (MBK).
January 30, 2007
Thomas A. Waldman, Esq., Goldstein Isaacson, PC, Springfield, New Jersey, Attorneys for Plaintiff, Nancy Isaacson, Chapter 7 Trustee.
James A. Kridel, Jr., Esq., Kridel Law Group, Clifton, NJ, Attorney for Defendant, Rachelle Castiglione.
MEMORANDUM DECISION
I. INTRODUCTION
In this Adversary Proceeding, Plaintiff Nancy Isaacson ("Plaintiff"), Chapter 7 Trustee for the Bankruptcy Estate of Debtor Rachelle Castiglione ("Mrs. Castiglione"), seeks an order denying Mrs. Castiglione a discharge in her Bankruptcy case, alleging two separate bases: (1) pursuant to 11 U.S.C. § 727(a)(2), because Mrs. Castiglione with intent to hinder, delay or defraud her creditors, transferred her interest in real property located at 222 Madison Avenue, Hasbrouck Heights, New Jersey (the "Property") within one year of the filing of her Chapter 7 Bankruptcy Petition (First Count); and (2) pursuant to 11 U.S.C. § 727(a)(4)(A), because Mrs. Castiglione knowingly and fraudulently made a false oath in connection with said transfer in her Chapter 7 Bankruptcy case (Second Count). Plaintiff files the within Motion for Summary Judgment on both counts of the complaint ("Motion"). For the reasons set forth below, the Court denies Plaintiff's Motion with respect to Count I of the Complaint, and grants Plaintiff's Motion with respect to Count II of the Complaint.
II. JURISDICTION
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334. This is a "core proceeding" pursuant to 28 U.S.C. § 157(b)(2)(J). Venue is proper in this Court pursuant to 28 U.S.C. § 1409(a).
The Court notes that both parties have complied with L.Civ. R. 56.1 of the District Court, made applicable herein pursuant to D. N.J. LBR 1001-1, requiring the filing of separate statements of material facts as to which there exists or does not exists a genuine issue. The Court has adopted and incorporated in its opinion certain non-controverted facts set forth in the Affidavit of Nancy Isaacson ("Isaacson Aff.") and Affidavit of Rachelle Castiglione (Castiglione Aff.), and Exhibits annexed thereto, as well as the parties' respective statements of undisputed material facts.
1. Debtor and Defendant Rachelle Castiglione ("Debtor" or Mrs. Castiglione") filed a voluntary petition ("Chapter 7 Petition") for relief under Title 11, Chapter 7 of the United States Code (the "Bankruptcy Code") on October 15, 2005 (the "Petition Date"). (Isaacson Aff. ¶ 2.)
2. On or about November 10, 2005, Plaintiff was appointed as Chapter 7 Trustee pursuant to 11 U.S.C. § 701. (Isaacson Aff. ¶ 1.)
3. In her Chapter 7 Petition, Mrs. Castiglione disclosed in the Statement of Financial Affairs ("SFA") that on October 5, 2005, she had transferred real property located at 222 Madison Avenue, Hasbrouck Heights, New Jersey to her husband, Joseph Castiglione (" Mr. Castiglione") and that she received no value in exchange for this transfer. (Isaacson Aff. ¶ 3 and Exhibit A thereto). Mrs. Castiglione resides at the Property with Mr. Castiglione and her step children, Alexander and Stephanie, who are the children of Mr. Castiglione and his former deceased spouse, Sherry Truex. (Castiglione Aff. ¶ 1.)
4. By Deed dated November 19, 2004, made by Mr. Castiglione as Grantor and Mr. Castiglione and Mrs. Castiglione as Grantee, Mrs. Castiglione became a record owner of the Property. (Isaacson Aff. ¶ 8 and Exhibit B thereto.)
5. Prior to Mrs. Castiglione having filed her Petition, Schedules and SFA, on or about October 5, 2005, she signed various documents which she believed purported to transfer any interest she had in the Property, in connection with her husband's refinance of the premises. (Castiglione Aff. ¶¶ 3, 5.)
6. Mrs. Castiglione's Chapter 7 Petition bears her electronic signature which constitutes a declaration and an oath that, under penalty of perjury, the information disclosed in the Chapter 7 Petition and the answers in the SFA contained therein are true and correct. (Isaacson Aff. ¶ 4.) Prior to Mrs. Castiglione having filed her Petition, she reviewed same for accuracy and completeness. (Castiglione Aff. ¶¶ 2, 3.)
7. On January 13, 2006 Mrs. Castiglione appeared at the Meeting of Creditors held pursuant to 11 U.S.C. Section 341(a) in her Chapter 7 bankruptcy proceeding. At this Meeting of Creditors, Mrs. Castiglione took an oath and gave testimony under oath. (Isaacson Aff. ¶ 5.)
8. During the Meeting of Creditors held on January 13, 2006, Mrs. Castiglione testified under oath that she never owned an interest in any real property. Further, when she was asked questions specifically about the ownership of the Property, Mrs. Castiglione testified that she never owned an interest in the Property, and that she did not transfer any interests in real property within the last four years. (Isaacson Aff. ¶ 6.)
9. Prior to the bankruptcy filing, Mrs. Castiglione had operated her own business (a beauty salon) and accumulated business debts which included business loans, trade debt and lease obligations. (Castiglione Aff. ¶ 2 and Exhibit A thereto.)
IV. DISCUSSION
Summary judgment is appropriate where "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "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 issue of material fact. Huang v. BP Amoco Corp., 271 F.3d 560, 564 (3d Cir. 2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Once the moving party establishes the absence of a genuine issue of material fact, however, the burden shifts to the non-moving party to "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citations omitted). 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 issue of material fact for trial. 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 issue 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). 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. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
With respect to the Second Count of the Complaint, Plaintiff seeks to deny Mrs. Castiglione's discharge for having made a knowing and fraudulent false oath with respect to her case. Plaintiff contends that because the Debtor admits in her question #10 of her SFA that she had transferred certain property to her husband, while also stating under oath in her 341(a) meeting that she never owned an interest in any real property, she has provided a false oath. Section 727(a)(4)(A) bars a debtor's discharge where "the debtor knowingly and fraudulently, in or in connection with the case, made a false oath or account." A plaintiff objecting to a debtor's discharge under Section 727(a)(4)(A) must prove two elements: (1) the debtor knowingly and fraudulently made a false oath; and (2) the false oath related to a material fact. Scimeca v. Umanoff, 169 B.R. 536, 542 (D.N.J. 1993). In order for a falsehood or omission to be material, it need not result in detriment to creditors. Id. at 543.
In her submissions, Mrs. Castiglione does not deny that she made the statement in her SFA regarding the transfer of her interest in the Property; nor does she dispute that she made any of the statements at her § 341(a) meeting attributed to her by the Plaintiff. Rather, Mrs. Castiglione contends that she was unaware of the fact that she had been placed previously on the deed of the Property by her husband and that on October 5, 2005, she simply signed the deed, as well as other documents required for the refinance, at the direction of her husband and title company (Castiglione Aff. ¶¶ 2 and 5). Mrs. Castiglione further reaffirms the accuracy of her testimony at the § 341(a) meeting that she never owned "an interest in what I thought was my husband's property" (Castiglione Aff. ¶ 8).
In her submissions, the Debtor discusses at length the fact that a title search of the Property by her attorney, undertaken subsequent to the filing of the instant adversary proceeding, reveals that her step children may have a claim to the Property and that in fact her husband may never have been the rightful owner prior to deeding the property to them both in November of 2004. This Court views the issues raised as to proper ownership of the Property as irrelevant to the issues at hand since Debtor admits that the title search was procured after both the bankruptcy filing and her § 341(a) meeting. Clearly, the Debtor had no knowledge of such facts at the time she gave testimony under oath.
The evidence demonstrates that the Debtor has inconsistently maintained two positions: (1) that she never had any ownership interest in real property [§ 341(a) testimony], but that (2) she transferred an interest in the property at issue to her husband [Statement of Financial Affairs]. Thus, it is clear that the Debtor has made a materially false oath somewhere in this case. Since neither party disputes that a transfer of the Property did in fact occur, it would appear that the answer to question # 10 in the SFA is accurate. However, this Court cannot reconcile said answer with the Debtor's testimony at the § 341(a) meeting less than 90 days later. No where in Debtor's submissions does she indicate that she made a mistake in her testimony at the § 341(a) hearing or that her testimony is inaccurate or unclear. Moreover, Debtor does not suggest at all that she had not understood any of the trustee's questions or had relied upon a third party for the answers. Indeed, the Court notes that the Debtor cannot be viewed as financially unsophisticated, having operated her own business and having the capacity to incurred personal bank loans, equipment lease debt, and trade debt. Finally, at no point in Debtor's affidavit does she indicate that she sought to expand upon her testimony at the § 341(a) meeting, or subsequent thereto.
In order to warrant a denial of discharge the Court must also determine whether the Debtor possessed the requisite intent. While the Debtor's actual intent is difficult to glean, as to the intent element of Section 727(a)(4)(A), the court in Office of the United States Tr. v. Zimmerman (In re Zimmerman), 320 B.R. 800 (Bankr. M.D. Pa. 2005) held that the "requisite degree of fraudulent intent is shown if the debtor engaged in behavior which displayed a reckless and cavalier disregard for the truth.In re Dolata, 306 B.R. 87 (Bankr. W.D. Pa. 2004), citing Rafool v. Wilson (In re Wilson), 290 B.R. 333 (Bankr. C.D. Ill. 2002). `A reckless disregard of both the serious nature of the information sought and the necessary attention to detail and accuracy in answering may rise to the level of fraudulent intent necessary to bar a discharge.' In re Mazzola, 4 B.R. 179, 182 (Bankr. D. Mass. 1980). `Extreme carelessness of the debtor in filling out the Petition will not excuse a false oath.' Scimeca, 169 B.R. at 543." Zimmerman, 320 B.R. at 810-811. The court also went on to note that "`a sworn statement filed in any court must be regarded as serious business. In bankruptcy administration, the system will collapse if debtors are not forthcoming.'" Id. at 811. While not argued in Debtor's reply papers, the fact that the Trustee was not deterred by the testimony from pursuing the transfer of the Property is of no moment and does not undercut the "materiality" of the factual misstatement. In In re Hooper, 274 B.R. 210 (Bankr.D.S.C. 2001), the Court responded to the debtors' argument that errors in their schedules did not benefit them or harm their creditors. "The Court rejects these specious defenses that would require the Court to relax standards for persons who are unfamiliar with these documents despite having assistance of counsel. Bankruptcy is a give-and-take process, and, in order for Debtors to receive the benefits and protections of the Bankruptcy Code, they must fulfill their role of complete disclosure to their creditors and the Trustee." Id. at 220.
The evidence in this case demonstrates that the Debtor was at least reckless or extremely careless in paying attention to details during the bankruptcy process. If she truly thought that she did not possess an interest, at any time, in the Property, then there would have been no reason to reference the transfer in the SFA. Moreover, her blanket assertion that she never owned any interest in the Property is clearly at odds with her execution of a deed at the closing on the refinance and her answer to Question #10 on the SFA. Indeed, the Debtor acknowledges that she had verified the truthfulness and accuracy of the SFA prior to signing the document. (Castiglione Aff. ¶¶ 2, 3) At a bare minimum, candor at the § 341(a) meeting warranted a more detailed explanation than simple negative response to the trustee's inquiry.
The Debtor herein has not set forth any specific facts, in a form that would be admissible in evidence, establishing the existence of a genuine issue of material fact for trial on the Second Count of the Complaint. Under these circumstances, Section 727(a)(4) precludes the instant Debtor from receiving a discharge and the Court grants Plaintiff's Motion with respect to the Second Count.
With regard to the First Count, the Court notes that under 11 U.S.C. Section 727(a)(2)(A), a discharge in bankruptcy is to be granted to a debtor unless:
(2) 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, concealed, or has permitted to be transferred, removed, destroyed, mutilated, or concealed — (A) property of the debtor, within one year before the date of the filing of the petition.
Section 727(a)(2)(A) has two components: a transfer or concealment of property and an improper subjective intent to hinder, delay or defraud a creditor. Rosen v. Bezner, 996 F.2d 1527, 1531 (3d Cir. 1993). In light of the factual disputes raised as to the extent of the Debtor's knowledge of her ownership interest in the Property and the legal ramifications relative to the transfer of the Property, this Court cannot rule on the Debtor's "intent" for purposes of Section 727(a)(2)(A) on summary judgment. Accordingly, the Motion is denied with respect to the First Count.
As a practical matter, the denial of summary judgment on the First Count may be irrelevant in light of the Court's prior ruling with respect to the Second Count of the Complaint.
Appropriate orders will be entered.