Mark Jacobs v. Carol A. Marcus-Rehtmeyer
784 F.3d 430
| 7th Cir. | 2015Background
- Jacobs and Chivalry Consulting obtained an Illinois state-court judgment for ~$168,000 against debtor Carol Marcus‑Rehtmeyer for breach of contract; Chivalry served a citation to discover assets (Oct 2010).
- The citation and its rider required production of all documents relating to the debtor’s property and income and created a lien on personal property acquired or coming due during the citation.
- At the Nov 4, 2010 citation examination Marcus‑Rehtmeyer denied ownership of real estate, stock, bank accounts, and electronic equipment and produced only tax returns for 2006–2009.
- Repeated state-court orders compelled broader production through Feb 24, 2011; Marcus‑Rehtmeyer produced limited documents and later filed Chapter 7 bankruptcy on June 29, 2011.
- In bankruptcy proceedings Chivalry objected to discharge under 11 U.S.C. § 727(a)(2)(A), alleging Marcus‑Rehtmeyer concealed (1) ownership of her Wheaton residence, (2) 100% stock in Lorac & Cire, (3) SciTech employment income, and (4) computer equipment. Bankruptcy and district courts found no intent to hinder, delay or defraud; the Seventh Circuit reversed as to concealment of SciTech income.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether debtor concealed assets with intent to hinder, delay, or defraud under 11 U.S.C. § 727(a)(2)(A) | Chivalry: debtor concealed employment income received from SciTech during the citation period and failed to disclose bank account and W‑2s, showing intent | Marcus‑Rehtmeyer: she lacked intent; she did not know payments were due or that she had to disclose employment income; confusion and counsel’s actions explain discrepancies | Held: Reversed — debtor concealed SciTech income with requisite intent; lower courts erred by focusing only on assets existing at the date of the initial citation examination rather than the entire citation period |
| Whether the citation’s scope and Illinois law required disclosure of income and post‑service acquisitions during the pendency of the citation | Chivalry: citation and 735 ILCS 5/2‑1402 require disclosure of income and assets acquired up to disposition of the citation | Marcus‑Rehtmeyer: citation rider did not specifically list employment/income categories; she had no obligation to disclose uncertain or not‑yet‑received payments | Held: The citation and Illinois law required continuing disclosure of income and assets acquired or coming due during the citation’s pendency; lower courts misapplied state law by narrowing the time frame |
| Whether late disclosures and counsel correspondence excused nondisclosure | Marcus‑Rehtmeyer: letters from counsel and later disclosures (deed, stock explanations) meant no fraudulent intent | Chivalry: late, inconsistent, and incomplete disclosures after multiple court orders support inference of concealment and intent | Held: Court found the late/inconsistent disclosures insufficient; concealment of SciTech income supports denial of discharge reversal |
| Whether post‑trial affidavits about bank‑account timing affected the outcome | Marcus‑Rehtmeyer: affidavits show account opened after petition, undermining concealment claim | Chivalry: affidavits contradict trial testimony and are improper attempt to reopen proofs | Held: Court did not resolve post‑trial affidavit disputes because concealment of SciTech income independently required reversal; remanded for denial of discharge |
Key Cases Cited
- Anderson v. City of Bessemer City, 470 U.S. 564 (credibility findings of a factfinder are entitled to deference)
- In re Generes, 69 F.3d 821 (seventh circuit defers to bankruptcy court credibility where uncontradicted)
- In re Pearson Bros. Co., 787 F.2d 1157 (conflicting testimony reviewed for coherence and documentary contradiction)
- In re Davis, 638 F.3d 549 (intent under § 727(a)(2)(A) is a factual question reviewed for clear error)
- In re Mississippi Valley Livestock, Inc., 745 F.3d 299 (standard of review for bankruptcy appeals)
- First Weber Group, Inc. v. Horsfall, 738 F.3d 767 (appellate deference to bankruptcy credibility determinations)
- In re Scott, 172 F.3d 959 (concealment includes withholding information required by law to be made known)
- Shipley v. Hoke, 22 N.E.3d 469 (Ill. App. Ct. 2014) (purpose and scope of citation to discover assets)
- City of Chicago v. Air Auto Leasing Co., 697 N.E.2d 788 (Ill. App. Ct. 1998) (prohibition on transfers after citation without court permission)