576 B.R. 684
Bankr. N.D. Ga.2017Background
- Defendant Brenda K. Robertson guaranteed a $4,162,500 promissory note (FirstCity Loan) and later submitted financial information; the loan changed hands and RGDM (assignee) obtained a $5,489,997 state-court judgment against Robertson; she filed bankruptcy in February 2015 after garnishment efforts.
- In 2009 Robertson transferred multiple Georgia parcels she had owned into four newly formed LLCs (the Robertson LLCs); United Community Bank later sued and a Georgia court entered a partial summary judgment finding those transfers fraudulent under Georgia's UFTA.
- Robertson continued to use/manage some transferred properties (rental receipts, leases, insurance in her name; family use of Hemlock and South Bay properties), and there are disputed transfers of cash among family-related entities (including a $600,000 transfer to ASG and a $537,658 transfer to Branch Group).
- Plaintiff RGDM seeks denial of discharge (11 U.S.C. § 727) and exception to dischargeability (11 U.S.C. § 523) based on alleged fraudulent transfers, concealment of retained interests within the one-year lookback, false oaths/omissions in bankruptcy schedules, inadequate records, and misrepresentations on financial statements.
- Cross-motions for summary judgment. Court: denies RGDM’s motion in full; grants Robertson’s motion in part (Wall Street property, concealment claims as to Lot 2A/proceeds/$537k tracing, certain post-petition transfer allegations, claim about scheduling United debt, and claim based on failure to provide financial statements); all other claims survive to trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Robertson forfeited discharge under §727(a)(2) via continuing concealment of retained interests in property transferred pre-petition | Transfers to LLCs and continued use/benefit show retained, concealed interests within one year; UFTA judgment evidences fraud/intent | Transfers were bona fide, on advice of counsel; rents belong to LLCs; use is insufficient to show retained concealed interest | Genuine disputes as to Transferred Properties and South Bay proceeds — summary judgment denied for both; summary judgment granted to Robertson re: Lot 2A, its proceeds and $537k tracing |
| Whether post- or pre-petition dissipation/transfers warrant denial of discharge under §727(a)(2) (post-petition acts and dissipation) | Rents and transferred funds were used for personal expenses and post-petition asset dissipation | Robertson denies conversion; disputes about tracing and whether funds were debtor’s property | Disputed; summary judgment granted for Robertson where tracing fails (e.g., $250,000 Branch→A-1); other post/prepetition dissipation claims survive |
| Whether Robertson made false oaths/omissions in schedules (§727(a)(4)) (ownership, income, LLC values, United debt, son payments) | Omitted owned properties, rental income, value of LLC interests, and receipts from son/had intent to deceive | Omitted items reflect ownership by LLCs, pass-through tax reporting, counsel advice, inadvertent error as to United debt; some payments were loans or son’s obligations | Summary judgment for Robertson as to listing United debt; remaining alleged omissions/materiality/intent present genuine issues — summary judgment denied for both |
| Whether debt is nondischargeable under §523(a)(2) (actual fraud and misrepresentations on financial statements) | Fraudulent-transfer scheme produced/traceable assets or claims that make RGDM’s claim nondischargeable; alleged omissions on a 2010 personal financial statement caused justifiable reliance | Debt preexisted transfers (guaranty), so it was not "obtained by" the later transfers; assignee-traceability and Georgia law on assignee fraud claims are problematic; factual disputes on omissions/reliance | Court denies RGDM summary judgment on actual fraud and misrepresentation claims; grants Robertson summary judgment on claim for failure to provide financial statements; remainder survive to trial |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (Sup. Ct.) (summary judgment burden-shifting framework)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Sup. Ct.) (standard for genuine issue of material fact at summary judgment)
- Grogan v. Garner, 498 U.S. 279 (Sup. Ct.) (preponderance standard for proving nondischargeability)
- Coady v. D.A.N. Joint Venture III, L.P., 588 F.3d 1312 (11th Cir. 2009) (continuing concealment doctrine in §727(a)(2) context)
- Miller v. Equitable Bank (In re Miller), 39 F.3d 301 (11th Cir.) (actual/constructive fraud distinctions for §727(a)(2) discharge denials)
- Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (Sup. Ct.) (fraudulent conveyance schemes and the "obtained by" requirement under §523(a)(2))