Gaff Kleven v. Roberts

Filing 8

OPINION AND ORDER: The judgment of the bankruptcy court is AFFIRMED. Signed by Judge Joseph S Van Bokkelen on 11/14/2014. (lhc) Modified on 11/14/2014 (cc: Judge Grant; Bankruptcy Ct.)(lhc).

United States District Court
Northern District of Indiana
RACHEL ELIZABETH ROBERTS,
Appellant-Debtor/Defendant
v.
YVETTE GAFF KLEVEN

Appellee-Trustee/Plaintiff

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Appeal from the United States
Bankruptcy Court, Northern District
of Indiana, Fort Wayne Division
Case No. 1:14-CV-82 JVB

Bankruptcy Case No. 11-10940
Adversary Proceeding No. 13-1098

OPINION AND ORDER
This matter is before the Court on the appeal of Defendant/Appellant and bankruptcy
debtor Rachel Elizabeth Roberts (“Debtor”) from a final judgment of the Bankruptcy Court for
the Northern District of Indiana, Fort Wayne Division.

A.

Facts
Debtor filed for Chapter 7 bankruptcy on March 18, 2011. In the course of her duties,

Plaintiff-Appellee and bankruptcy trustee Yvette Kleven (“Trustee”) asked Debtor to turn over to
her: (1) a bank statement showing the balance in Debtor’s savings account on March 18, 2011,
and all transactions from February 18 through March 18, 2011; (2) copies of Debtor’s 2010 state
and federal income tax returns; and (3) receipts or other documentation verifying how Debtor
spent her 2010 income tax refunds. The Trustee first requested these items at the first meeting of
creditors—the 341 meeting—conducted on April 29, 2011. When they were not received, she
sent a letter dated August 5, 2011, requesting them, without results.
On May 9, 2012, still not having received the information, the Trustee filed a motion to

turn over property, requesting the three items listed above, as well as $99.33, representing the
non-exempt pre-petition portion of her income tax refund for 2011. A hearing was held on the
motion on June 25, 2012, but just before the hearing, Debtor’s attorney told the Trustee that he
agreed she was entitled to what she had asked for and would enter into an agreed order for the
turnover of the items. On June 29, 2012, the bankruptcy judge ordered the parties to file the
agreed order within twenty-one days. The Trustee prepared an agreed order and sent it to
Debtor’s attorney on July 5, 2012. When he had not responded by November 16, 2012, she
wrote to Debtor’s attorney again. Once again, she received no response, and on May 9, 2013,
she once again asked that the turn over motion be set for a hearing. This time the Trustee and
Debtor signed an agreed order that Debtor would provide the Trustee with all the items
requested, which was filed on May 21, 2013, and approved by the bankruptcy judge on June 27,
2013.
When Debtor had not complied with the agreed order by August 12, 2013, the Trustee
filed an adversary proceeding to revoke Debtor’s discharge pursuant to 11 U.S.C. § 727(d)(3),
which provides that the trustee request revocation of a discharge if the debtor has refused to obey
a lawful order of the court. The Trustee also sought a money judgment of $99.33. After the
adversary proceeding was filed, Debtor sent the Trustee a check for $99.33 and copies of her
2010 tax returns. However, she did not provide a bank statement showing the balance of her
savings account as of March 18, 2011, and showing the transactions in that account from
February 18, 2011, through March 18, 2011, until the day before the trial on the Trustee’s
adversary proceeding.
The bank statement showed that Debtor had received a tax refund of $6,569.10 on March

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4, 2011, before her March 18 bankruptcy filing, and that she had made four separate withdrawals
from the account between March 8 and March 17, 2011, totaling $6,400.
The matter was tried to the bankruptcy judge on January 15, 2014. The Trustee testified
as to the efforts she had made to secure the requested items and as to Debtor’s withdrawals from
her savings account. She asked the bankruptcy judge to revoke Debtor’s discharge for requiring
her to spend three years and much time and energy chasing after information she should have
received before or at the first meeting of creditors. She also asked for a money judgment of
$6,400.
Debtor testified that she had only been able to get a copy of the requested bank statement
in the past few weeks because her credit union had absolutely refused to give her the
information. She claimed the bank manager was upset with her because she had defaulted on a
loan. She explained that she withdrew the money from her account because she believed the
credit union was stealing from her to cover the loan she had defaulted on. She transferred most
of the money to her stepfather’s account and used it to live on and for repairs on a new home she
had recently moved into. She stated that she might have some receipts showing how the money
was spent. The money was in her stepfather’s account on March 18, 2011, when she filed
bankruptcy. She testified that she did not believe she had to turn the money over to the Trustee
because she was advised that it was exempt. She never listed her tax refund on her bankruptcy
schedules.
In his closing argument, the attorney for the trustee moved the court to amend the
pleadings to conform to the evidence to allege 28 U.S.C. § 727(d)(1) as grounds for revoking
Debtor’s discharge. Under § 727(d)(1), a discharge must be revoked if the discharge was

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obtained through the fraud of the debtor.
Following the presentation of evidence and argument by the parties, the bankruptcy judge
ruled from the bench, revoking Debtor’s discharge and awarding the Trustee a money judgment
of $6,400. In addition to relying on 28 U.S.C. § 727(d)(3)—refusal to obey a lawful order of the
court—the bankruptcy judge found that the evidence supported revoking Debtor’s discharge
under § 727(d)(1) and (d)(2). Section 727(d)(2) requires revocation if the debtor acquired
property of the estate and knowingly and fraudulently failed to report the property or deliver it to
the estate.

B.

Standard of Review
The standard of review on appeal from a bankruptcy court judgment is set out in Federal

Rule of Bankruptcy Procedure 8013:
On appeal the district court . . . may affirm, modify, or reverse a bankruptcy
judge’s judgment, order, or decree or remand with instructions for further
proceedings. Findings of fact, whether based on oral or documentary evidence,
shall not be set aside unless clearly erroneous, and due regard shall be given to the
opportunity of the bankruptcy court to judge the credibility of the witnesses.

C.

Discussion
The issues on appeal the Debtor identifies are whether the bankruptcy judge erred in

revoking her discharged on the basis of her failure to comply with an order that did not specify a
deadline for compliance and whether he erred in revoking the discharge on grounds other than
those stated in the Trustee’s complaint in the adversary proceeding. In her brief, she also
requests that the money judgment be reversed.

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Debtor has presented no pertinent authority for her claim that she did not refuse to
comply with a Bankruptcy Court order because the agreed order did not include a deadline. In
the absence of a deadline, Debtor had a reasonable time within which to comply with the agreed
order, which she refused to do.
In explaining his ruling, the bankruptcy judge pointed out that debtors are obligated to
provide the trustee with bank statements and certain tax returns before the first meeting of
creditors is even held. See Fed. R. Bankr. P. 4002(b)(2)(B) and (3). In this case Debtor was
reminded at the 341 meeting, but the documents were not produced. The Trustee sent a letter
that was apparently ignored. She then filed a motion for turnover. At the hearing on that
motion, the bankruptcy judge was told the parties had settled the matter and would submit an
agreed order for turnover of the items. The bankruptcy judge ordered them to submit the agreed
order within twenty-one days, but Debtor’s attorney did not sign the agreed order for more than a
year after he had promised to do so and still the requested items were not produced. Forty-six
days after the agreed order was finally submitted and approved, the Trustee filed the adversary
proceeding to revoke Debtor’s discharge. At some unspecified time after that, Debtor turned
over her 2010 tax returns and the $99.33, but did not produce the bank statement until the day
before the trial, and never produced the receipts.
The record amply supports the bankruptcy judge’s finding that Debtor refused to obey a
lawful order of the bankruptcy court. In light of the history of this case, taking more than fortysix days to comply with the agreed order is unreasonable. The requested items were long
overdue before Debtor’s attorney signed the agreed order. Given the fact that the order was an
agreed order, Debtor should have been prepared to comply with it promptly upon signing it. If

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she couldn’t comply she should not have agreed to provide the items. It may be inferred from
Debtor’s testimony that she did almost nothing to get a copy of her bank statement from the
credit union. The record is devoid of any evidence as to when she asked for the statement, how
she asked, or how often she asked. Debtor did not submit any evidence that she or her attorney
did so much as send a letter to the credit union, much less attempt to subpoena the records or
move for a Bankruptcy Rule 2004 examination of the credit union. As the bankruptcy judge
found, her lack of effort to secure the statement constitutes a refusal to do so. The fact that
Debtor ultimately gave the Trustee the bank statement—the day before the adversary hearing—
does not excuse her refusal to provide it within a reasonable time after the approval of the agreed
order. Moreover, the bankruptcy judge did not believe her explanation that the credit union
manager had it in for her and wouldn’t give her the bank statement. Furthermore, as the
bankruptcy judge noted, even if she could not get the bank statement, she always had the ability
to explain to the Trustee the basic facts that she had received a tax refund, deposited it in her
credit union account, withdrew the funds, and transferred them to her stepfather’s account.
Finally, while Debtor cited her credit union’s lack of cooperation for not producing the bank
statement earlier, she offered no explanation for why, forty-six days after the approval of the
agreed order, she had still not produced the other items.
Because the bankruptcy judge’s decision to revoke Debtor’s discharge on the basis of 28
U.S.C. 727(d)(3) as alleged in the Trustee’s complaint is supported by the evidence, the Court
will not reach the other statutory provisions he relied on in support of the revocation.
The Court finds no error with regard to the bankruptcy judge’s award of a money
judgment for $6,400. Debtor’s only argument is that it was not the amount the Trustee asked for

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in her complaint. The Trustee’s testimony regarding the amount came in without objection from
Debtor. Federal Rule of Civil Procedure 54(c), made applicable to adversary proceedings by
Bankruptcy Rule 7054, provides that a final judgment should grant the relief to which each party
is entitled, even if the party has not demanded that relief in the pleadings. The evidence
admitted at trial justifies the conclusion that $6,400, representing Debtor’s 2010 federal tax
refund, was property of the bankruptcy estate to which the Trustee is entitled. Accordingly, the
award is affirmed.

D.

Conclusion
For the foregoing reasons, the judgment of the bankruptcy court is AFFIRMED.

SO ORDERED on November 14, 2014.
s/ Joseph S. Van Bokkelen
Joseph S. Van Bokkelen
United States District Judge
Hammond Division

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