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In re Strong

United States District Court, D. Delaware

April 20, 2018

IN RE EARL STRONG, Debtor.
v.
JEOFFREY L. BURTCH, Trustee, and ANDREW R. VARA, Acting United States Trustee for Region 3, Appellees. EARL STRONG, Appellant, Adv. No. 17-50646 (BLS)

         Chapter 7

          MEMORANDUM

         I. INTRODUCTION

         This appeal arises from the Chapter 7 case of pro se appellant Earl Strong, in which he was denied a discharge.[1] The Bankruptcy Code provides that a Chapter 7 case trustee, a creditor, or the United States Trustee may object to a debtor's discharge. See 11 U.S.C. § 727(c)(1).[2] Jeoffrey L. Burtch, the Chapter 7 trustee appointed in Appellant's case ("Trustee"), filed, on behalf of all creditors, two motions to extend the deadline for filing a complaint objecting to discharge, pursuant to Bankruptcy Rule 4004(b)[3] (Bankr. D.I. 45 & 69)[4] (together, the "Extension Motions"). Prior to the Bankruptcy Court's ruling on those motions, the United States Trustee ("UST") filed a complaint objecting to Appellant's discharge. (Adv. D.I. 1). Appellant moved to dismiss the UST's complaint on the basis that the complaint was untimely under Bankruptcy Rule 4004(a). At a hearing on August 23, 2017, the Bankruptcy Court found cause to grant the Extension Motions, determined that the UST's complaint was timely, and set a trial date in the adversary proceeding. (Bankr. D.I. 91). Thereafter, the Bankruptcy Court entered orders memorializing its rulings (Bankr. D.I. 79, Bankr. D.I. 103, Adv. D.I. 49) (together, the "Orders"). Appellant appealed the order granting Trustee's second Extension Motion. (D.I. 1). For the reasons that follow, the court will affirm the Bankruptcy Court's Orders granting the Extension Motions and denying the motion to dismiss.

         II. BACKGROUND

         A. Appellant's Chapter 7 Filing

         On January 13, 2017, Appellant filed a voluntary petition under chapter 7 of the Bankruptcy Code. (Bankr. D.I. 1). The record reflects that Appellant's initial schedules and statement of financial affairs filed under 11 U.S.C. § 521(a)(1)(B) stated that he: (i) owned no real property; (ii) received no rental income; (iii) transferred real property (the "Property") worth $190, 000 to his wife for no consideration on March 3, 2016; (iv) owed an unsecured judgment to Wells Fargo Bank, N.A. ("Wells Fargo"); and (v) owned one vehicle and two bank accounts. (Bankr. D.I. 10 & 16). Appellant later amended his schedules to claim an exemption on the Property, despite stating he did not own it. (Bankr. D.I. 15). On January 24, 2017, the Bankruptcy Court Clerk issued a notice that the § 341(a) meeting would be held on February 22, 2017 and setting April 24, 2017, as the deadline for filing a complaint objecting to discharge under 11 U.S.C. § 727(a). (Bankr. D.I. 14).

         On February 9, 2017, Wells Fargo moved to lift the automatic stay with respect to the Property. (Bankr. D.I. 21). Wells Fargo claimed to hold a mortgage and note on the Property, and sought stay relief "to exercise its non-bankruptcy rights and remedies" against the Property in state court. Id. In response, Appellant filed documents stating that the Property was "not in my Name, " was "in Wife name the in Tenancy in Entirety Rules, " and was "my Wife Lillie Home also, Deeds in her Name." (Bankr. D.I. 23, 24, 29). Appellant then amended his schedules to reflect an ownership interest in the Property as "Tenancy by the entireties" and to disclose another vehicle and bank account. (Bankr. D.I. 36, 43).

         B. Trustee's Extension Motions

         On April 6, 2017, the Trustee filed the first Extension Motion seeking to extend the time to file a complaint objecting to Appellant's discharge under § 727 until July 24 (in the motion) or July 27 (in the proposed order). (Bankr. D.I. 45). The Trustee sought to extend not only his time, but also that of the UST and creditors. (See Id. & 45-2 (proposed order)). The Trustee noted that the meeting of creditors had not yet been concluded, that motion practice between Wells Fargo and Appellant was ongoing, and that these facts affected the determination of whether a complaint objecting to discharge was warranted. (Id. at 1-2)

         On May 11 and 17, 2017, the Bankruptcy Court held hearings on several matters, including Trustee's Extension Motion and Wells Fargo's stay relief motion. (See Bankr. D.I. 61, 64). Trustee argued that the requested extension was warranted because, until the discrepancy regarding Appellant's ownership or transfer of the Property was resolved, a question remained as to whether he had made knowing and fraudulent false oaths for purposes of § 727(a)(4) on his schedules and statement of financial affairs, and whether his transfer of the Property to his wife had been made with the intent to hinder, delay, or defraud creditors or the Case Trustee for purposes of § 727(a)(2)(A). (5/17/17 Hr'g. Tr. at 51:14-52:22). The Bankruptcy Court took the matters under advisement. (Id. at 54:9-11). The Bankruptcy Court ultimately granted Wells Fargo's stay relief motion on August 18, 2017, finding that Appellant's arguments had been rejected by the Delaware state courts. (Bankr. D.I. 72).

         C. UST's Complaint Objecting to Discharge

         On June 16, 2017 - prior to the extended deadline requested by the Trustee's - the UST filed a complaint objecting to Appellant's discharge pursuant to §§ 727(a)(2) and (a)(4). (See Adv. D.I. 1). The complaint was based on Appellant's testimony at the § 341 (a) meeting that he had transferred his interest in the Property to his wife for no consideration during the year preceding his bankruptcy petition; and also on the bank accounts, at least one vehicle, and rental income which were not disclosed in the initial schedules filed in support of Appellant's bankruptcy petition. (Id., ¶¶ 17 & 54). The complaint further sought to deny Appellant's discharge under § 727(a)(4) on the basis of false oaths in Appellant's schedules and statement of financial affairs and in his testimony at the § 341 meeting, including false statements regarding his residence, his ownership of the Property, his ownership of an undisclosed vehicle and bank account, and receipt of undisclosed rental income. (Id., ¶¶ 15, 17, 20, 22, 23, 43, 44 & 57).

         D. Motion to Dismiss

         On June 20, 2017, Appellant filed a motion to dismiss the UST's complaint, and, thereafter, an amended version of same. (Adv. D.I. 6, 7). Appellant argued that the complaint was filed after the Bankruptcy Rule 4004(a) 60-day deadline and that the Trustee's Extension Motion did not extend the ...


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