573 B.R. 405
Bankr. E.D.N.Y.2017Background
- Cesar Cedillo filed Chapter 7 on April 24, 2013; Carver filed proofs of claim based on three deficiency judgments against Cedillo totaling about $408,030.66.
- Carver seeks (1) a 523(a)(2)(B) nondischargeability ruling based on a 2005 Personal Financial Statement (PFS) that listed Cedillo as 100% owner of several corporations Carver financed, and (2) denial of discharge under 11 U.S.C. § 727 for transfers/false oaths related to a hardware store sale in October 2012.
- In October 2012 Cedillo (individually and/or on behalf of K & R Hardware) transferred hardware store assets to NY Electric (owned/managed by Rosa Vasquez, his longtime companion and later wife) for a $50,000 promissory note and a chattel mortgage; NY Electric made no payments.
- Cedillo’s bankruptcy schedules and SOFA omitted or undervalued interests: did not list an ownership interest in K & R Hardware or 656 Myrtle, did not list the chattel mortgage/security interest as an estate asset, and listed the NY Electric note at $1.00; deposits in 2011 were not disclosed.
- Carver moved for partial summary judgment on three claims: nondischargeability under § 523(a)(2)(B); denial of discharge under § 727(a)(2)(A) (transfer with intent to hinder/delay/defraud within one year); and denial under § 727(a)(4)(A) (knowing and fraudulent false oaths). The court heard argument and denied summary judgment as to all three claims.
Issues
| Issue | Plaintiff's Argument (Carver) | Defendant's Argument (Cedillo) | Held |
|---|---|---|---|
| Whether PFS was a written statement and materially false under § 523(a)(2)(B) | PFS was signed by Cedillo, listed him as sole owner of several corporations; those ownership statements were false and material to Carver’s lending decision | PFS was prepared by a broker; Cedillo believed he was authorized to encumber the corporations and did not intend to deceive; limited English/education | Court: PFS was written, concerned financial condition, was materially false, and Carver reasonably relied — but disputed fact on Cedillo’s intent to deceive; summary judgment denied on § 523 claim. |
| Whether transfer of hardware store assets was a transfer of Cedillo’s property within one year and made with actual intent to hinder/delay/defraud under § 727(a)(2)(A) | Transfer (Oct 1, 2012) was by Cedillo (individually and/or on behalf of dissolved K & R); assets belonged to Cedillo (post‑dissolution operations); transfer to wife’s company, lack of payments, and timing show badges of fraud | Cedillo says assets were corporate, transfer was a wind‑up or legitimate restructuring to address tax debt; alternative innocent explanations and factual disputes exist about possession/benefit and intent | Court: Transfer occurred and at least some assets were Cedillo’s; transfer was within one year — but genuine disputes remain about Cedillo’s fraudulent intent; summary judgment denied on § 727(a)(2)(A). |
| Whether Cedillo made knowingly false oaths with fraudulent intent in schedules/SOFA under § 727(a)(4)(A) | Cedillo failed to disclose ownership interest(s), undervalued the NY Electric note, and omitted 2011 deposits; these omissions were material and indicate knowledge/intent | Cedillo contends omissions were inadvertent, caused by limited English, reliance on counsel/broker, destroyed records (Hurricane Sandy), and plausible innocent explanations; some disclosures were made elsewhere | Court: False statements and materiality established, and Cedillo made statements under oath; but material disputes exist whether he knew the statements were false and whether he acted with fraudulent intent; summary judgment denied on § 727(a)(4)(A). |
Key Cases Cited
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment "genuine issue" standard)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (nonmoving party must present more than metaphysical doubt)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burdens and affidavits)
- State Bank of India v. Chalasani (In re Chalasani), 92 F.3d 1300 (§ 727 construed strictly in favor of debtor)
- Nat’l Union Fire Ins. Co. v. Bonnanzio (In re Bonnanzio), 91 F.3d 296 (intent to deceive is generally an issue of fact)