Dunker et al v. Bachman

Filing 17

MEMORANDUM AND ORDER: The order of the bankruptcy court is affirmed. This action is dismissed. Ordered by Senior Judge Joseph F. Bataillon. (ADB)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA

DANIEL H. DUNKER, and RICHARD W.
HILL,
Plaintiffs/Appellees,

8:17CV284
BK 15-80069
ADV 15-08043

vs.
MEMORANDUM AND ORDER

JAMES E. BACHMAN,
Defendant/Appellant.
BK 15-80069

This matter is before the court on Appellant James E. Bachman’s (hereinafter,
“Bachman” or “the debtor”) appeal of an order of the United States Bankruptcy Court in
the matter of Dunker and Hill v. Bachman, 15 BK-80069, 15AP8043 (Bankr. D. Neb.)
(hereinafter, “Adv. P.”).

Bachman appeals the bankruptcy court’s order denying a

discharge of his debts under 11 U.S.C. § § 727(a)(2)(A) and subsequent denials of
motions to reconsider that order.1 Adv. P. Filing Nos. 102, 104, 108. The bankruptcy
court found that certain judgment debt owed to the appellees Dunker and Hill was

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Bachman also challenges the denial of his motions for extensions of time to respond to
Dunker’s and Hill’s motion for summary judgment. He contends that the bankruptcy court abused its
discretion, failed to construe 11 U.S.C. § 727 liberally in favor of the debtor, and violated due process in
“failing to even consider the evidence filed by a debtor who is facing severe financial difficulties which
directly affected his ability to do the necessary research and comply with the time limits imposed by the
court.” Filing No. 12, Brief at 8. Bachman received two lengthy extensions of time to respond to the
summary judgment motion and the last such extension clearly stated that no further extensions would be
granted. Adv. P., Filing No. 96.
The bankruptcy court has considerable discretion in managing its docket. See Chorosevic v.
MetLife Choices, 600 F.3d 934, 946 (8th Cir. 2010); In re Sheppard, 532 B.R. 672, 674 (B.A.P. 6th Cir.
2015). The court finds no error or abuse of discretion in the bankruptcy court’s actions. Furthermore, the
record shows the bankruptcy court considered Bachman’s arguments that the funds from Drs. Dunker
and Hill were equity investments in Eran, not loans; Dunker’s and Hill’s judgments were subordinate to
Eran’s pre-existing debt; and he made the transfers to benefit the corporation. Adv. P., Filing No. 102,
Order at 6.

excepted from discharge in Bachman’s bankruptcy. For the reasons set forth below, the
court affirms the decision of the bankruptcy court.
I.

BACKGROUND

The record shows that Appellees Daniel H. Dunker and Richard W. Hill (“the
creditors”) each received judgments against Bachman and his company Eran
Industries, Inc., (“Eran”) in State Court Litigation in 2014 for amounts due on certain
promissory notes and loan guarantees.

Hill obtained a judgment in the amount of

$175,589.04 and Dunker obtained a judgment in the amount of $213,354.79, plus postjudgment interest. Those judgments were final and unappealable at the time Bachman
filed his petition in bankruptcy on January 19, 2015.
Dunker and Hill filed an adversary complaint against Bachman in bankruptcy
court seeking a determination of dischargeability of debt and objecting to a discharge.
In the parties’ Joint Pretrial Statement, Bachman admitted to making the following
transfers during the months leading up to his bankruptcy filing: (1) on August 21, 2014,
Mr. Bachman deeded his interest in his residence, located at 1138 South 185th Circle,
Omaha, Nebraska, to his wife Adella Bachman; (2) in August, 2014, he transferred his
interest in a 2002 Chevrolet Trailblazer; his 50 percent interest in a 2003 Chevrolet
Suburban; and his 50 percent interest in a 2005 Cobalt Boat to his wife Adella
Bachman; (3) in August or September, 2014, the Defendant removed his name from the
First Westroads Bank Checking Account held with his wife Adella Bachman thereby
relinquishing any ownership interest in that account; and (4) in October, 2014, the
Defendant transferred Berkshire B stock or the proceeds from sale of such stock that he
owned to his wife Adella Bachman. See Adv. P., Filing No. 49. There is no dispute that
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all of these transfers were made just a couple of months before he filed bankruptcy and
that all were transfers of property that was owned or controlled solely by Bachman prior
to the transfers.
The bankruptcy court found Dunker and Hill had established by a preponderance
of the evidence that Bachman transferred his interests in property to his wife within one
year before filing his bankruptcy petition, with the intent to hinder, delay, or defraud
creditors, and was thus not entitled to discharge the debt.

The bankruptcy court’s

decision was based on stipulated facts and on evidence from a hearing held on
December 18, 2014, in Douglas County, Nebraska, District Court. In that hearing, a
proceeding to determine garnishee liability, Bachman testified as follows:
Q. I’ll rephrase my question. Did you intend to thwart the plaintiffs’ efforts
to recover assets by transferring them out of your immediate name?
A. Absolutely.
Adv. P., Filing No. 83-5, Declaration of Lauren R. Goodman, Ex. C at 23. Finding an
explicit statement of intent to defraud creditors, supported by the weight of
circumstantial evidence, the bankruptcy court stated that “[t]he evidence before the
court overwhelmingly indicates [Bachman’s]

actions were intended to benefit and

protect himself and his family’s lifestyle at the expense of Dr. Dunker and Dr. Hill.” Adv.
P., Filing No. 102, Order at 6. In denying Bachman’s motion for reconsideration of that
order, the bankruptcy court stated:
The motion to reconsider/motion for new trial (Fil. #105) is denied.
Defendant's argument that he did not have fraudulent intent in making the
transfers because he was purportedly trying to protect other creditors rings
quite hollow. Defendant clearly and unequivocably on several occasions
admitted to making the transfers to prevent the plaintiffs from executing on
the assets. Having fraudulent intent as to some creditors but not others is
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simply not a defense. It is difficult to imagine a more clear case for denial
of discharge.
Adv. P., Filing No. 108 (text order).
On appeal, Bachman, who is an attorney and is representing himself, argues that
the transfers were made in good faith without the intent to defraud creditors. He also
argues that Dunker and Hill suffered no injury by his conduct, because there was little
value in the assets he allegedly fraudulently conveyed. He states that his intent was not
fraudulent because he had a “subjective belief” that a bank had a security interest on all
of his personal property and that the transferred property was fully encumbered and of
no value to the creditors. He argues that his underlying motive for the transfers “was
not to preserve the assets for himself or his wife, but to prevent a voracious creditor
from causing immediate and severe harm to other creditors.” Filing No. 14, Reply Brief
at 7.
II.

DISCUSSION
A.

Standard of review

In an appeal from a bankruptcy court proceeding, this Court acts as an appellate
court. See 28 U.S.C. § 158(a). Section 158(a)(1) grants the Court appellate jurisdiction
“from final judgments, orders, and decrees,” whereas §§ 158(a)(2)–(3) confers appellate
jurisdiction from certain interlocutory orders. See In re M & S Grading, Inc., 526 F.3d
363, 368 (8th Cir. 2008).
On appeal, the bankruptcy court's legal conclusions are reviewed de novo and its
findings of fact are reviewed for clear error. Tri–State Fin., LLC v. First Dakota Nat'l
Bank, 538 F.3d 920, 923–24 (8th Cir. 2008).

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The finding of the bankruptcy court

regarding whether the debtor acted with the intent to hinder, delay or defraud creditors
is a factual one, and may set aside only if clearly erroneous. Korte v. United States (in
re Korte), 262 B.R. 464, 470 (B.A.P. 8th Cir. 2001).

“Under the clearly erroneous

standard, [the court] will overturn a factual finding only if it is not supported by
substantial evidence in the record, if it is based on an erroneous view of the law, or if we
are left with the definite and firm conviction that an error was made.” Roemmich v.
Eagle Eye Dev., LLC, 526 F.3d 343, 353 (8th Cir. 2008) (citation and internal quotation
marks omitted).
B.

Applicable Law

Summary judgment is proper if, drawing all reasonable inferences in favor of the
non-moving party, there is no genuine issue as to any material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Morriss v. BNSF
Ry. Co., 817 F.3d 1104, 1107 (8th Cir. 2016). The party moving for summary judgment
bears the burden of showing that the material facts in the case are undisputed. Id. at
1112. However, a party opposing summary judgment “‘may not rest upon the mere
allegation or denials of his pleading, but . . . must set forth specific facts showing that
there is a genuine issue for trial,’ and ‘must present affirmative evidence in order to
defeat a properly supported motion for summary judgment.’” Ingrassia v. Schafer, 825
F.3d 891, 896 (8th Cir. 2016) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
256–57 (1986)).
Under 11 U.S.C. § 727(a)(2)(A) a discharge is disallowed if “the debtor, with
intent to hinder, delay, or defraud a creditor or an officer of the estate charged with
custody of property under this title, has transferred . . . or concealed” the debtor's
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property within one year prior to the petition. To prevail under section 727(a)(2)(A), a
creditor must prove: (1) the act serving as the basis for the claim took place within one
year before the petition date; (2) the act was that of the debtor; (3) the act amounted to
a transfer, removal, destruction, mutilation or concealment of debtor's property; and (4)
the debtor committed the act with an intent to hinder, delay or defraud a creditor or the
trustee. See City Nat'l Bank of Ft. Smith v. Bateman (In re Bateman), 646 F.2d 1220,
1222 (8th Cir. 1981); Georgen–Running v. Grimlie (In re Grimlie), 439 B.R. 710, 716
n.11 (B. A. P. 8th Cir. 2010).
“[T]he objecting party must prove each element under § 727 by a preponderance
of the evidence.” Kaler v. Charles (In re Charles), 474 B.R. 680, 683–84 (B.A.P. 8th Cir.
2012). To meet that standard, the court must believe the existence of a fact is more
probable than its nonexistence. Northland Nat'l Bank v. Lindsey (In re Lindsey), 443
B.R. 808, 812 (B.A.P. 8th Cir. 2011). Factors to consider in determining whether a
debtor acted with intent to hinder, delay or defraud are: (1) lack or inadequacy of
consideration; (2) family, friendship or other close relationship between the transferor
and transferee; (3) retention of possession, benefit or use of the property in question;
(4) financial condition of the transferor prior to and after the transaction; (5) conveyance
of all of the debtor's property; (6) secrecy of the conveyance; (7) existence of trust or
trust relationship; (8) existence or cumulative effect of pattern or series of transactions
or course of conduct after the pendency or threat of suit; (9) instrument affecting the
transfer suspiciously states it is bona fide; (10) debtor makes voluntary gift to family
member; and (11) general chronology of events and transactions under inquiry. MWI

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Veterinary Supply Co. v. Rodgers (In re Rodgers), 315 B.R. 522, 531 (Bankr. D.N.D.
2004).
There is a presumption of fraud in § 727(a)(2) cases when a debtor transfers
valuable property without payment. Cadlerock Joint Venture II, L.P. v. Sandiford (In re
Sandiford), 394 B.R. 487, 490 (B.A.P. 8th Cir. 2008). “Once a gratuitous transfer is
shown, the burden then shifts to the debtor to prove his intent was not to hinder, delay,
or defraud his creditors.” Id.; see Kelly v. Armstrong, 141 F. 3d 799, 802-803 (8th Cir.
1998). Thus, the defendant must demonstrate the absence of a fraudulent motive.
Schilling v. Heavrin (In re Triple S Restaurants, Inc.), 422 F. 3d 405, 414 (6th Cir. 2005),
Village of San Jose v. McWilliams, 284 F. 3d 785, 791 (7th Cir. 2002).
C.

Analysis

The court finds no error in the bankruptcy court’s finding that Bachman acted with
intent to hinder or delay his creditors in making the subject transfers. The bankruptcy
court properly found that Bachman possessed the intent to defraud his creditors when
he admitted that intent, under oath, in the state court litigation. The bankruptcy court’s
finding is amply supported by the record.
Bachman has not established the absence of a fraudulent motive.

He has

presented nothing to rebut the strong evidence of intent presented by his testimony in
the state court action. The basis for the denial of discharge is supported by substantial
evidence in the record and the bankruptcy court’s decision is not based on any
erroneous view of the law. Accordingly, the court finds the order of the bankruptcy court
should be affirmed.
IT IS ORDERED:
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1.

The order of the bankruptcy court is affirmed.

2.

This action is dismissed.

Dated this 17th day of May, 2018.

BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge

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