Vara v. CrawfordVara v. Crawford
MEMORANDUM OF OPINION AND ORDER GRANTING THE U.S. TRUSTEE‘S MOTION FOR SUMMARY JUDGMENT
This adversary proceeding is before the Court on a Motion for Summary Judgment (the “Motion“) filed by Plaintiff Andew R. Vara, the United States Trustee (the “U.S. Trustee“) (ECF No. 26). Defendants Jeffrey Michael Crawford (“Mr. Crawford“) and Christine Ann Crawford (Mrs. Crawford) (together “the Crawfords“) filed a Reply (the “Response“), which the Court construes as a brief in opposition. ECF No 41. The U.S. Trustee filed a Reply. ECF No. 45.
For the following reasons, the Court determines that there are no genuine issues of material fact under either
BACKGROUND
The following facts are presented in the light most favorable to the Crawfords as the non-moving party and are undisputed unless otherwise noted.1 During all relevant times, the Crawfords lived, and continue to live at 34418 Saint Maron Boulevard, Avon, Ohio 44011 (the “Residence“). ECF No. 26, Ex. G (“April 9 Depo. Tr.“) 9:1; Ch. 7 Case No. 24-11690 (the “Main Case“) ECF No. 1.2 According to Mr. Crawford, the “County records show” the Residence value to be “around $585,000.” ECF No. 36, Ex. B. (“341 Meeting Tr.“). 20:1-2.
Mr. Crawford has worked in the home construction business for years. He began his career working for Ryan Homes, (April 9 Depo. Tr. 24:23-24) before moving on to business ownership. From around 2014-2023 (about nine years), he owned and operated Cleveland Custom Homes, a luxury home design company. 341 Meeting Tr. 16:12-17; April 9 Depo Tr. 10:21. Mr. Crawford also owned a number of other companies, none of which are presently in operation: Cleveland Custom Home Design Build, LLC (341 Meeting Tr. 13:21); Avon Development Group (Id. at 14:9-10); Red Tail Number 14, LLC (Id. at 14:14); and JCM Distribution, LLC (Id. at 14:19). Most recently, he has been doing subcontracting work (Id. at 18:8-11). He earned a four year degree from Baldwin Wallace University. April 9 Depo Tr. 10:6-13.
Mr. Crawford explained that Cleveland Custom Homes was “a luxury home builder that identified our customers according to what they wanted to build, we designed it with them and then we built it. And we utilized a number of subcontractors and vendors to do that.” April 9 Depo. Tr. 16:9-13. He further explained that they had “like 20-some customers we were talking to, all 800,000, a million-plus customers. And we were a really sound company.” Id. at 32:2-5. Yet, when a customer would pay a 10% deposit, Mrs. Crawford testified that “No, I don‘t think we provided any receipts, ever.” Id. at 22:23-24.
The Crawfords did, though, pay for personal expenses out of the Cleveland Custom Homes bank accounts. Mr. Crawford explained, “I‘m sure we did, yes.” 341 Meeting Tr. 40:25.
The record does not discuss Mrs. Crawford‘s work history in detail. Since 2023, Mrs. Crawford has owned and operated Ned‘s Maintenance Plus, a maintenance company doing trash removal, parking lot repairs, handyman work (341 Meeting Tr. 39:9-11), demo, landscaping, and consulting (April 9 Depo. Tr. 13:13-15.). Mrs. Crawford explained that she took out about $10,000 per month from Ned‘s Maintenance Plus. Id. at 9:3. Mrs. Crawford was certified as a cardiac technician by a local community college. Id. at 12:1-6.
From 2021 to 2023, “in order to continue to keep up with what was going on and bring in business” for Cleveland Custom Homes, Mr. Crawford took out several “hard money loans.” Id. at 28:13-24. On February 18, 2023, the Crawfords granted a mortgage, secured by the Residence, to Danny M. Properties (341 Meeting Tr. 20: 3-5) to secure a loan of $300,000 (Id. at 20: 20-21). According to Mr. Crawford, the owner of Danny M. Properties (Hani Muntaser) physically transferred the $300,000 to him in a “bag full of cash.”3 Id. at 21:7-11. Mrs. Crawford described it as a “big bag of cash.” April 9 Depo. Tr. 32:22-23. The bag of cash was “kept in the morning room of [the Residence] next to a small wicker cabinet. . . .” 341 Meeting Tr. 22:25, 23:1. Regarding the $300,000 in casе, in deposition, Mrs. Crawford testified:
Well when I received the money I said to them, “I‘m going right to the bank to take the money to the bank.” And he said, “No, no, you can‘t do that.” I said, “Why? I don‘t feel comfortable with all this.” And so he convinced me and said, “Just pay off your trades here and there and you‘ll be fine.” And I did that.
April 9 Depo. Tr. 33:4-10. Ultimately, the $300,000 was “used to keep [Cleveland Custom Homes] running, pay contractors, material, vendors, trades.” 341 Meeting Tr. 20:24, 21:1.
Mr. Crawford explained that the $300,000 was spent within a month. Id. at 22:5. Mrs. Crawford said the money was spent between February and June of 2023, and that Mr. Crawford “dealt with the money for the most part.” April 9 Depo. Tr. 34:4-11.
A more detailed summary of the accounting for how the Crawfords spent the $300,000 follows, but Mrs. Crawfоrd explained that on at least one occasion, even though “she had nothing to do with it quite frankly” (April 9 Depo. Tr. 34: 10-11), she put $29,000 in cash on her front porch and “[Tom Caruso] would come and get it” (Id. at 46:2-3), adding, “Yeah. I‘m not going to leave that kind of money out there.” Id. at 46:5-6.
1. The Petition
On April 30, 2024, the Crawfords filed a Petition for Relief (the “Petition“) under
On the petition date, the Crawfords also filed schedules of debts and liabilities and the Official Form 107: Statement of Financial Affairs for Individuals Filing for Bankruptcy. The Crawfords signed the Statement of Financial Affairs on April 30, 2024. Upon signing the Statement of Financial Affairs, the Crawfords “declare under penalty of perjury that the answers are true and correct.”
On the petition date, the Crawfords signed and filed a Declaration re: Electronic Filing of Documents and Statement of Social Security Number (“ECF Declaration“). Main Case, ECF No. 7. In signing the ECF Declaration, the Crawfords swore that the information provided in the electronically filed petition, statements, and schedules, as well as in any other documents that must contain signatures, was true, correct, and complete.
2. The 341 Meetings
In accordance with
The 341 Meeting was adjourned from its original date to July 1, 2024. Main Case, ECF No. 19. The Chapter 7 Trustee took testimony of the Crawfords at the July 1, 2024 Meeting. Mr. Crawford testified that he received $300,000 in cash from Danny M. Properties for the mortgage the Crawfords granted to Danny M. Properties. 341 Meeting Tr. 22:17-19. He further testified that the Crawfords kept the cash in a bag in the morning room in their Residence. Id. at 22:25, 23:2.
On July 16, 2024, the U.S. Trustee made a second request for the Crawfords to produce documents and requested an accounting of the $300,000 cash proceeds. ECF No. 1. ¶ 30. The Chapter 7 Trustee again took testimony of the Crawfords on
3. The Adversary Proceeding
On October 3, 2024, the U.S. Trustee filed his Complaint, requesting that the Crawfords be denied a discharge pursuant to
4. How the bag of $300,000 cash was spent
The United States Trustee filed a Notice on July 10, 2025 at ECF No. 24, advising the Court that the U.S. Trustee was unable to secure the Defendants’ agreement regarding proposed stipulations in this case. A careful review of the United States Trustee‘s Exhibit C to the Motion (ECF No. 26-4) and the Affidavit of Mr. Crawford (ECF No. 26-6 and ECF No. 41-1) shows very few differences in the listing of payees and amounts of how the bag of $300,000 cash was spent. A chart comparing the parties’ submissions follows.
| | Amount submitted by Debtor | Amount as submitted by UST | Evidence |
|---|---|---|---|
| Tom Caruso | $49,000 | $75,000 | Text message screen shots |
| New Phase Electric | $28,000 | $28,000 | Photograph of money |
| Carter Lumber | $60,420 | $60,420 | Invoice |
| Parkhill Roofing | $30,000 | $30,000 | Text message screen shots and email |
| ST Carpentry | $32,000 | $32,000 | none |
| Cleveland Custom Homes Deposits | $27,000 | $26,000 | none |
| Cash on hand | $20,000 | $20,000 | none |
| Incentives to Employees | $5,000 | $5,000 | none |
| Deposit to Personal Checking | $10,800 | $10,080 | none |
| Scott Davis | $7,500 | $13,500 | none |
| Unaccounted for | $22,780 | $0 | N/A |
| Total | $292,500 | $300,000 | N/A |
Even though Defendants would not previously stipulate as to any facts, Defendants now concede that the United States Trustee‘s submission is accurate. Response, ECF No. 41 at p. 6. The Court thus uses the United States Trustee‘s submission (the “Allocation“) as Defendants have conceded it is accurate.
JURISDICTION
The Court hаs jurisdiction over the Crawfords’ Main Case and this adversary proceeding pursuant to
DISCUSSION
I. SUMMARY JUDGMENT STANDARD
Under
The moving party can meet its initial burden of proof by either coming forward with evidence showing the absence of a genuine issue of material fact, or by “showing” that there is no such issuе by demonstrating that there is an absence of evidence to support the non-moving party‘s case. Id. at 325. Where the moving party has met its initial burden, the adverse party must provide significant probative evidence to support its position. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (“[The non-moving party] may not rest upon the mere allegations or denials of his pleading but . . . must set forth specific facts showing that there is a genuine issue for trial.“). A genuine issue exists if the evidence is such that a reasonable factfinder could find in favor of the nonmoving party. Id.
II. DISCHARGE UNDER 11 U.S.C. § 727
The primary policy goal of the Bankruptcy Code is to afford a debtor a fresh start. Local Loan Co. v. Hunt, 292 U.S. 234 (1934). The bankruptcy discharge serves as a cornerstone of this policy. The importance attached to the fresh-start policy of the Bankruptcy Code is expressed in
In this case, the U.S. Trustee requests denial of the Crawfords’ Chapter 7 discharge pursuant to
Here, there is no question that there is insufficient documentation to provide an accounting of how the Crawfords spent $300,000 in cash; instead, the Crawfords argue that their explanations, in lieu of documentation, are sufficient.
III. 11 U.S.C. § 727(a)(3)
In support of his Motion, the U.S. Trustee first cites to
(a) The court shall grant the debtor a discharge, unless— (3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor‘s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case[.]
The purpose of this provision of the statute is to provide creditors “with enough information to ascertain the debtor‘s financial condition and track his financial dealings with substantial completeness and accuracy for a reasonable time past to present.” United States Trs. v. Zhang (In re Zhang), 463 B.R. 66, 91 (Bankr. S.D. Ohio 2012) (quoting Turoczy Bonding Co. v. Strbac (In re Strbac), 235 B.R. 880, 882 (B.A.P. 6th Cir. 1999) (additional quotation and quotation marks omitted); see also Caneva v. Sun Cmtys. Operating Ltd. P‘ship (In re Caneva), 550 F.3d 755, 761 (9th Cir. 2008) (quoting Burchett v. Myers, 202 F.2d 920, 926 (9th Cir. 1953)) (“The disclosure requirement removes the risk to creditors of ‘the withholding or concealment of assets by the bankrupt under cover of a chaotic or incomplete set of books or records.‘“).
Ultimately, “Section 727(a)(3) prevents debtors from receiving a discharge if the falsified or mutilated financial records keеp creditors from understanding a debtor‘s financial condition or business transactions in the context of a bankruptcy case, but the statute is not designed to address every instance in which records have been mutilated or falsified.” Vara v. Motil (In re Motil), No. 22-1084, 2023 Bankr. LEXIS 1541, at *78 (Bankr. N.D. Ohio June 13, 2023).
A. Failure to keep or preserve any recorded information, including books, documents, records, and papers.
In order to deny the Crawfords’ discharge under
The U.S. Trustee also states that the Crawfords “failed to produce, and therefore have failed to keep or preserve, statements for the First Federal Lakewood account ending in x9933, the 2023 tax return for Ned‘s Maintenance Plus,” and information relating to the source of income disclosed in the Crawfords’ documentation. ECF No. 26.
i. The $300,000 Cash Payment
The U.S. Trustee concedes that for purposes of summary judgment, the Crawfords “provided sufficient documentation to substantiate the dissipation of $88,420 of the $300,000 Cash Proceeds” (ECF No. 26), but they “failed to keep or preserve records to explain the dissipation of the remaining $211,580 of the Cash Proceeds.” ECF No. 26. The U.S. Trustee asserts that while Mr. Crawford “provided text message screenshots, email exchanges, and an
In their Response, the Crawfords contend that there is enough documentation for the $300,000 in cash, claiming they “provide[d] sufficient documentation to substantiate paying $60,420 to Carter Lumber on February 24, 2023 and $28,000 to New Phase Electric on February 23, 2023” and that they provided “еnough evidence in text messages and emails that document the payment of $257,220 to creditors. . . .” ECF No. 41. The Crawfords concede, however, that “they cannot account for the sum of $20,000 representing cash on hand” and that “the disbursement of the sum of $22,780 [of the $300,000 in cash] could not be explained or documented.” ECF No. 41. Moreover, the Crawfords acknowledge that they “did not provide receipts to support all of the disbursements of the $300,000.” ECF No. 41. In summary, regarding the Allocation, the Crawfords argue that “they provided reasonable explanation to how they spent the $300,000 of cash” and the U.S. Trustee‘s Motion “should fail.” ECF No. 41.
ii. First Federal Lakewood account x9933
Regarding the First Federal of Lakewood account x9933, the U.S. Trustee argues that thе Crawfords’ failure to produce bank statements for “the First Federal Lakewood account ending in x9933 from (i) January 1, 2022 through May 31, 2023, (ii) July 1, 2023 to July 31, 2023, and (iii) September 30, 2023 to present” justifies denial of discharge under
The Crawfords argue that, at the April 9 Deposition, “[Mr.] Crawford testified that $27,000 in cash was deposited in [the Cleveland Custom Homes] account at First Federal of Lakewood” and he further testified that “he deposited $10,800 of the cash into a personal account with KeyBank ending x9542 on February 21, 2023.” ECF No. 41.
iii. Tax Returns
Regarding tax returns, the U.S. Trustee argues that the Crawfords’ failure to provide “documentation substantiating the source of the $29,167 in income as disclosed on line 1a of the [Crawfords] personal 2023 federal tax return; and [] the tax return for Ned‘s Maintenance Plus for 2023” warrants the denial of discharge under
The Crawfords counter that they “provided their last filed tax return” for tax year 2022. ECF No. 41. The Crawfords “concede that they did not file a 2023 tax return for [] Ned‘s Maintenance Plus. . . .” ECF No. 41.
Based on the Crawfords’ own concessions and acknowledgements regarding their inability to present documents pertinent to the $300,000 in cash, bank accounts, and tax returns, the Court finds that the U.S. Trustee has met his evidentiary burden with regards to the Crawfords’ “fail[ure] to keep or preserve any recorded information,” in the form of “documents, records, and papers. . . .”
B. The lack of financial records makes the Crawfords’ financial condition unascertainable.
Now that the Court has found the U.S. Trustee has shown that the first condition to deny discharge under
Courts enjoy “‘wide discretion‘” in determining whether the plaintiff established a prima facie case under
Courts pay special consideration to the financial records of entities when they are “substantially intertwined with the debtor‘s personal capacity” in determining whether a debtor‘s discharge should be denied under
In support of his position, the U.S. Trustee argues that the Crawfords’ assertion that Mrs. Crawford has insufficient knowledge relating to the use of the $300,000 “does not relieve her of her obligation to produce records from which her financial condition can be ascertained pursuant to section 727(a)(3). Mrs. Crawford was a mortgagor on the mortgage and therefore the $300,000 Cash Proceeds are assets that she was entitled to. Even if Mr. Crawford solely dissipated the $300,000 Cash Proceeds, Mrs. Crawford has an independent duty to provide documents as to its dissipation.” ECF No. 26. The Crawfords do not contest this assertion.
Having considered the Crawfords’ education, business experience, and sophistication, as well as the admitted commingling of business and personal finances, the Court finds that the U.S. Trustee has demonstrated that the Crawfords did not provide enough information for their creditors to ascertain their financial condition and track their financial dealings with substantial completeness and accuracy such that the U.S. Trustee established a prima facie case under
C. Whether the failure to act was justified under the circumstances.
The Crawfords could show that their “act or failure to act was justified under all of the circumstances of the case[.]” In re Strbac, 235 B.R. at 883. In оther words, the burden of proof now shifts to the Crawfords. It is worth noting, ”
Regarding the $300,000 in cash, the Crawfords state that “they provided reasonable explanation to how they spent the $300,000 of cash they received from Danny M. Properties. . . .” ECF No. 41.
As for justification for the failure to provide bank account documentation, the Crawfords assert that they “consistently and constantly went [sic] their banks and culled bank statements as requested by the [U.S. Trustee].” ECF No. 41. Mr. Crawford also testified that First Federal of Lakewood account ending in x-1559 was “hacked” in June 2023, and “the bank opened account ending in x-4493.” ECF No. 41. The Crawfords further claim that they did not produce statements for the First Federal of Lakewood account ending
Regarding the tax returns, the Crawfords contend that they were “told that their personal 2023 Tax Returns, and [] Cleveland Custom Homes and Ned‘s Maintenance were completed but could not be filed until they paid for them.” ECF No. 41. The Crawfords argue that they “did provide the [U.S. Trustee] copy of their 2023 Personal and Business Federal Income Tax returns after they paid their accountant.” ECF No. 41.
In their Response, the Crawfords themselves acknowledge that “[m]ere testimony from the debtors regarding their version of their financial transactions is insufficient to satisfy the duty imposed by
For business owners who testified at deposition that “everything went through the bank,” the Crawfords did not show that their failure to maintain records was justified.9 The U.S. Trustee has a prima facie case under
IV. 11 U.S.C. § 727(a)(5)
Section 727(a)(5) deals with a debtor‘s ability to explain any substantial loss of assets incurred during the lead-up to filing a petition.
Like
A. The assets which the Crawfords at one time owned and claim to no longer possess.
The U.S. Trustee claims that the Crawfords “failed to provide sufficient, credible, reasonable explanation for the loss[]” of the $300,000 in cash. ECF No. 26. The U.S. Trustee admits that while the Crawfords “have provided sufficient documentation to account for the dissipation of $88,420” the documentation that the Crawfords provided as to the $79,000 purportedly paid to Caruso Cabinets and Parkhill is “uncоrroborated” and “still requires the Court to speculate and draw conclusions based only on Mr. Crawford‘s uncorroborated statements.” ECF No. 26.
Moreover, the U.S. Trustee claims, “there is no dispute of material fact that the [Crawfords] have failed to offer a sufficient explanation to account for the use of the remaining $132,580 of the $300,000 Cash Proceeds.” ECF No. 26. In support of his claim, the U.S. Trustee argues that the Crawfords:
provided no documentation to substantiate Mr. Crawford‘s conclusory statements as to the dissipation of the remaining $132,580. And . . . the [Crawfords‘] own explanations contain inconsistencies as to how the $300,000 Cash Proceeds were dissipated, particularly when comparing Mr. Crawfоrd‘s response to the First Discovery Requests to the 7.29.24 Cash Proceeds Breakdown. Such inconsistencies show that the [Crawfords‘] explanations do not eliminate the need for the Court and the [U.S.] Trustee to speculate as to what happened to the $300,000 Cash Proceeds.
ECF No. 26.
The U.S. Trustee has adequately identified the specific asset in question ($300,000 in cash) and has therefore met his initial burden under
B. No satisfactory explanation for loss of the assets.
The Crawfords contend that they “provided sufficient documentation to show that they paid creditors no less than
The Crawfords have failed to provide sufficient documentation. The Alloсation, supported mainly by Mr. Crawford‘s Affidavit, is not satisfactory. A “satisfactory explanation” for the loss of assets “must contain more than vague guesses and conclusory statements.” McDonald, 29 F.4th at 823. Moreover, an important component in ascertaining the reasonableness of any explanation is its capacity for verification. Id.
The Court is not satisfied with the explanations provided as to how nearly all the $300,000 was allocated. The Crawfords’ satisfactorily explained how $60,420 was spent, as evidenced by an invoice produced by Carter Lumber, dated February 24, 2023. ECF No. 26, Ex. G. The Crawfords submission of unauthenticated screen shots of purported text message conversations regarding cash transactions with New Phase Electric and Parkhill Roofing (ECF No. 26, Ex. G) are vague, conclusory, and unverifiable, and thus, unsatisfactory. The Crawfords’ Response included an Affidavit. ECF No. 41, Ex. A. Therein, Mr. Crawford outlined his recollection of how the $300,000 of cash was allocated. Aside from Mr. Crawford‘s Affidavit, there is no evidence or means to verify the alleged: $32,000 paid to ST Carpentry; $27,000 deposited in Cleveland Custom Homes First Federal of Lakewood acct #1559; $5,000 in incentive paid to Cleveland Custom Homes’ employees; $15,000 paid to Scott David; and $10,800 in the Crawfords’ personal checking account. In his Affidavit, Mr. Crawfords concedes that he cannot account for an additional $22,780.
The Court finds that due to the failure to рrovide adequate explanations or documentation, the Crawfords’ accounting of how they spent $300,000 in cash are conclusory and constitute the kind of “vague, indefinite and uncorroborated assertions” that courts deem unsatisfactory explanations under
CONCLUSION
Having reviewed the record in this case, including the Motion, Response, Reply and all exhibits, for the foregoing reasons and pursuant to
IT IS ORDERED that Plaintiff‘s Motion for Summary Judgment (ECF No. 26) be, and hereby is, GRANTED.
IT IS FURTHER ORDERED that the Debtors’ discharge be, and hereby is, denied.
A separate judgment shall issue consistent with this memorandum.
Suzana Krstevski Koch
United States Bankruptcy Judge