620 B.R. 432
Bankr. D.R.I.2020Background
- Debtor Antonio G. Portunato, III filed bankruptcy (petition Sept. 18, 2017; schedules filed Nov. 15, 2017) listing several pieces of heavy Equipment and an interest in a 2007 Peterbilt truck.
- Case converted from chapter 13 to chapter 11 (Dec. 2017) and then to chapter 7 (conversion motion granted Mar. 26, 2018). Dakota Financial held liens on most Equipment and obtained stay relief for defaults.
- Portunato entered an Auction Agreement with North Country Auctions (Mar. 23, 2018, backdated to Nov. 3, 2017) to sell the Equipment and a Peterbilt; he represented he had authority to sell and did not disclose the bankruptcy.
- Auctions on Mar. 24 and May 4, 2018 resulted in sales of several equipment items; Peterbilt 357 remained at a repair shop and was not sold. North Country initially retained sale proceeds at Portunato’s insistence.
- Portunato repeatedly misrepresented asset locations to the chapter 7 trustee at § 341 meetings, failed to disclose the sales or proceeds, and refused to authorize release of proceeds to lienholder Dakota; Trustee only learned of the auctions in July 2018.
- UST Harrington filed adversary complaint seeking denial of Portunato’s discharge under 11 U.S.C. § 727(a)(4) (false oath) and § 727(a)(2)(A),(B) (transfer/concealment with intent to hinder, delay, or defraud).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Portunato made a knowingly false oath by omitting a second Peterbilt from schedules (§727(a)(4)) | UST: Schedules and Auction receipt describe different Peterbilt models, proving existence of an undisclosed second truck. | Portunato: Descriptions are minor/ambiguous differences; only one 2007 Peterbilt existed and it was scheduled. | Court: Denied UST on this count — insufficient evidence of a second Peterbilt or a false oath. |
| Whether Portunato concealed interest in Peterbilt and Equipment after petition to hinder creditors/Trustee (§727(a)(2)) | UST: Portunato backdated auction docs, withheld notice of auctions/sales and proceeds, misled Trustee about locations — concealment with intent to hinder. | Portunato: He was a debtor-in-possession in chapter 11 and was arranging liquidation; no intent to defraud; no lack of consideration and no personal profit. | Court: As to the Peterbilt, UST failed. As to the Equipment, held for UST — concealment and misrepresentations showed intent to hinder/delay. |
| Whether Portunato transferred/removed Equipment post-petition with intent to hinder/delay/defraud (§727(a)(2)(B)) | UST: Post-petition transfers to North Country and auction sales, plus concealment of proceeds, are badges of fraud supporting denial of discharge. | Portunato: Sales were legitimate business liquidation; proceeds went to lienholder (no harm); no personal gain. | Court: Held for UST — transfers/sales and concealment of proceeds, refusal to authorize turnover, backdating, and misleading testimony established actual fraudulent intent; denied discharge under §727(a)(2)(B). |
Key Cases Cited
- In re Watman, 301 F.3d 3 (1st Cir. 2002) (defines transfer to include surrender of possession/custody or control).
- In re Schifano, 378 F.3d 60 (1st Cir. 2004) (standards for denying discharge under § 727 and intent requirement).
- Palmacci v. Umpierrez, 121 F.3d 781 (1st Cir. 1997) (narrow construction of discharge exceptions; debtor veracity).
- Boroff v. Tully (In re Tully), 818 F.2d 106 (1st Cir. 1987) (scope and purpose of § 727; full disclosure requirement).
- Marrama v. Citizens Bank (In re Marrama), 445 F.3d 518 (1st Cir. 2006) (actual intent may be proven circumstantially).
- Max Sugarman Funeral Home, Inc. v. A.D.B. Inv’rs, 926 F.2d 1248 (1st Cir. 1991) (substantial transfers support inference of fraudulent intent).
- Hannon v. ABCD Holdings, LLC (In re Hannon), 839 F.3d 63 (1st Cir. 2016) (knowingly and willfully making false oaths under § 727(a)(4)).