Hauge v. Moore

In re
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF WYOMING
ALLAN IRVIN MOORE,
Debtor.
)
)
)
)
)
)
Case No. 	07-20217
Chapter 7
BARBARA HAUGE, 	)
)
Plaintiff: 	)
v. 	) 	Adv. No. 07-2043
)
ALLAN IRVIN MOORE, 	)
)
Defendant. 	)
ORDER ON MOTION FOR SUMMARY JUDGMENT
On May 8, 2008, the Plaintiffs Adversary Complaint objecting to the Debtor's
discharge came before the court on the Plaintiffs Motion for Summary Judgment. The
court considered the facts and submissions of the parties and the applicable law and is
prepared to rule.
Jurisdiction
The court has jurisdiction over this complaint pursuant to 28 U.S.C. § 157(a) &
1334(a). This is a core proceeding under §) 57(b)(2)(J). A motion for summary
judgment pursuant to 	Fed. R. Civ. P. 56, is made applicable in adversary proceedings by
Fed. R. Bankr. P. 7056.
Findings of Fact
The Debtor earned his income as a cattle buyer and breeder and, at one time,
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operated his business under the name of Moore Land & Cattle Company. 	Barbara Hauge
("Hauge") obtained a default judgment against the Debtor in the Western District of
Oklahoma on July 24, 200 I, in the amount of $625,791.00 plus interest. The Debtor
stopped acting as Moore Land & Cattle after Hauge obtained the judgment because "she
had a lien on me.'" 	Subsequently, the Debtor ceased using his own bank accounts and
began to have his income deposited into the accounts of others and used for his benefit to
pay his debts and provide him income. 	Hauge, attempted to and did collect on the
judgment by garnishing Debtor's bank account "last November:'2
On April 13, 2007. the Debtor filed for Chapter 7 bankruptcy protection
scheduling more than $728.000 of non-priority unsecured debt of which Hauge was the
largest creditor in the amount of nearly $626,000. 	Ms. Hauge filed an adversary
complaint on July 23, 2007, requesting that the court deny the Debtor's discharge
pursuant to II U.S.C. § 727 (a)(2)(A). In a series of transactions that occurred within at
least one year prior to the Debtor tiling his bankruptcy petition, the Debtor directed
payments from cattle transactions be deposited into accounts of others and used for his
expenses and income. The Debtor knew that Ms. Hauge was attempting to collect on the
judgment obtained in the Western District of Oklahoma, as he stated, "yeah ... I knew
'See Deposition of Allan Irvin Moore. By Telephone, Thursday, December 20,
2007. ("'Deposition") at Page 9.
2Deposition at P. 17.
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from 200 I up until a year ago that she (Ms. Hauge) was trying to seek it." 3 The Debtor
also had cases pending regarding other collection actions.
Conclusions of Law
Summary judgment is appropriate only if the pleadings. discovery and disclosure
materials on file, and any affidavits show that there is no genuine issue as to any material
fact and the moving party is entitledto a jUdgment as a matter oflaw.4 A party claiming
relief may move, with or without supporting affidavits, for summary judgment. 5 A fact is
"material" if. under the governing law. it could have an effect on the outcome of the
lawsuit.6 A dispute over a material tact is "genuine" if a rational jury could find in favor
of the nonmoving party on the evidence presented. 7
The moving party has the burden of showing that no genuine issue of material fact
exists. S In considering a motion for summary jUdgment, the court draws all reasonable
inference in favor of the nonmoving party.9 An opposing party may not rely merely on
JDeposition at P. II, Line 13-15.
4Fed. R. Civ. P. 56, made applicable by Fed. R. Bankr. P. 7056.
5Fed. R. Bankr. P. 7056.
6Anderson v. Liberty Lobby, Inc .. 477 U.S. 242, 248 (1986).
7Id at 249.
SAdler v. Wal-Mart Stores. Inc., 144 F.3d 664, 670 (10th Cir. 1998).
9See Curtis v. Oklahoma City Public Sch. Bd. of Ed., 147 F.3d 1200, 1214 (lOth
Cir. 1998).
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allegations or denials in its own pleading: rather, its response must set out specific facts
showing a genuine issue for trial.
Ms. Hauge seeks a denial of the Debtor's discharge pursuant to 11 U.S.C. §
727(a)(2)(A), that states:
The court shall grant the debtor a discharge, unless 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, removed, destroyed,
mutilated, or concealed, or has permitted to be transferred, removed,
destroyed, mutilated or concealed property of the debtor, within one year
before the date of the filing of the petition.
To sustain an objection to discharge under 11 U.S.c. § 727(a)(2)(A), the evidence
must establish: (1) that the debtor transferred, removed, or concealed the property; (2) that
such property belonged to the debtor; (3) that the transfer, removal or concealment
occurred within one year before the petition in bankruptcy was filed; and (4) the act was
done with the intent to hinder, delay or defraud a creditor. 10 Intent to hinder, delay or
defraud a creditor may be proved by circumstantial evidence. I I The intent required must
be actual intent. l :; Fraudulent intent may be established by circumstantial evidence, or by
inferences drawn frolTi a course of conduct. 13 Subsequent conduct is often probative of
lOIn re Martin, 88 B.R. 319, (D. Colo. 1988).
IIId at 322.
IlIn re Booth, 70 B.R. 391,395 (Bankr. Colo. 	1987).
13Farmers Coop. Ass 'n of Talmage, Kan. v. Strunk, 671 F.3d 391, 395 (10th Cir.
1982) (Citing In re Vecchione, 407 F. Supp. 609,615 (E.D. N.Y. 1976».
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one's intent on a prior occasion. Courts have established certain "badges of fraud," the
existence of which establishes the intent element required under Section 727. 	These arise
from debtor's acts and include, "'a 'reckless indifference' to the truth" by the debtor. This
"reckless inditference" is to be the same as fraud under Section 727. N 	The Tenth Circuit
also expressly requires that the debtor's intent must be coupled with the transfer of the
debtor's property which reduces assets available to other creditors. 15 The party objecting
to the debtor's discharge has the burden of proving that the acts complained of actually
occurred. In Creditor is defined as an "entity that has a claim against the debtor that arose
at the time of or before the order tor relief concerning the debtor. I? "Claim" is the right
to payment. whether or not such right is reduced to judgment, liquidated. unliquidated,
fixed, contingent. matured, unmatured. disputed, undisputed, legal, equitable, secured, or
unsecured. IS As an attack on dischargeability under § 727 is much more severe in its
effect than excepting a single debt from discharge under §523, the grounds must be
established by clear and convincing evidence. 19 Clear and convincing evidence indicates
14Booth at 395 (Citing Diorio v. Kreisler-Borg Const. Co .• 407 F.2d 1330 (2nd
Cir. 1969».
15 Rutter v. General Motors Acceptance Corp. 70 F.2d 479 (lOth Cir. 1934).
16Fed. R. Bankr. P. 4005.
1711 U.S.c. § I09(9)(A).
18 11 U.S.C. § IOl(4)(A),
19Booth at 394.
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that the issue to be proved is highly probably or reasonably certain.20
Ms. Hauge meets the definition of "creditor" as the judgment entered against the
Debtor was entered in the Western District of Oklahoma court on July 24, 2001,
substantially prior to the date the Debtor filed for bankruptcy protection on April 13,
2007. The judgment was a claim on Hauge's right to payment.
The uncontroverted facts present clear and convincing evidence that the Debtor
transferred and concealed property. The Debtor admitted in his deposition that after the
judgment was entered against him in the Oklahoma court, he did not deposit funds owed
to him in his own account but directed the payments to be held by others, including: Geri
Mathews, his ex-wife; various livestock companies; and, Terah Murphy. These
individuals or companies held funds for the Debtor until he needed money. 	He would let
them know that he wanted funds by calling them on the telephone or driving by to collect
the funds.
The funds were the Debtor's property. He testified that the funds held by his ex-
wife, the various livestock companies, and Terah Murphy, were the result of cattle deals.
The Debtor's practice of having others keep his funds began shortly after Ms.
Hauge obtained the judgment and continued through the end of 2006. The Debtor
testified during his deposition that:( I) he was actively engaged in the cattle business in
2006, (2) that he would sometimes use Burlington Livestock's checkbook or Wally
2°Black's Law Dictionary, 577 (8th ed. 2004).
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Jassman's or Max Wise's; and, (3) that specifically, Burlington Livestock. Wally Jassman
or (Jasmer), and the Debtor's ex-wife would hold funds for the Debtor until he needed the
funds. 	The Debtor admitted that this was an atypical business practice within the cattle
buying industry's regular course of business. The Debtor continued this practice when he
conducted business with Terah Murphy through the end of 2006. within one year before
the Debtor's bankruptcy petition was filed on April. 2007. The Debtor estimated that he
made "somewhere between $20,000 and 3 million dollars" over the time frame that Terah
Murphy was handling his funds through late 2006. 	He also testified that he bought and
sold the cattle and the money was sent to Ms. Murphy. 	Ms Murphy. after receiving the
checks, would give him half the cash of at least part of the checks.
The Debtor's course of conduct shows, by clear and convincing evidence, that he
intended to hinder. delay and defraud his creditor. Specifically, the Debtor continued to
buy and sell cattle, while using others' accounts to maintain his funds and distribute his
income. Additionally, he admitted during his deposition that he conducted business under
the name of Moore Land & Cattle, "until Barbara Hauge got her snout in the deal;" that
he stopped acting as Moore Land & Cattle because she (Hauge) "had a lien on me;" that
she (Hauge) "closed down my account in Oklahoma last November, (meaning November
2006); alleged that he lost his dealer's bond in November because of Ms. Hauge when he
lost his checking account~ and that he had used the atypical business practice of using
others' banking accounts for his funds because "Hauge and everybody was looking down
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his throat." The Debtor's conduct and admissions establish that it is highly probable and
reasonably certain that he intended to hinder. delay and defraud Hauge on the collection
of her judgment.
In the case before this court. as in Booth, the Debtor did not keep any tinancial
records. 	He admitted in this deposition that he operated his business with "little white
sheets of paper or something like that" which he threw away after completing sales. 	He
did not have any other paperwork to document cattle transactions. 	He stated he didn't
have to keep records because the buyers of the cattle were "very professional people, very
high class, very wealthy people. And they have the extremely best CP As in the world
keep records for you. I don't have to keep any records." When asked about the books and
records regarding transactions with Terah Murphy through late 2006, he stated that he did
not have the books, alleging that Ms. Murphy had all the books; that the books were
destroyed. that Ms. Murphy had destroyed them by burning them in a ravine between
Duchesne and Vernal;and that this was told to him by a third party that "he met down
there before ... " Throughout the deposition. the Debtor's responses to the questions asked
were evasive and vague. The Debtor insisted he had only one checking account and then
later admitted he had another for "gambling:' 	The Debtor's responses prove the element
of reckless inditference for the truth in providing the court evidence of the Debtor's intent
to commit fraud against creditors.
In detennining if the Debtor's discharge should be denied upon summary
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judgment the court, in this case, considers all inferences in favor on the Debtor to
determine ifthere is a genuine issue as to any material fact and whether Hauge is entitled
to a judgment as a matter of law. The Debtor did not set out specific facts showing that
there is a genuine issue for trial. Debtor's response does not contain any facts in
controversy. 	Instead, Debtor argued that he did not intend to hinder, delay or defraud a
creditor, only that he was depositing his personal earnings into others' accounts "merely
as a desire to survive" but did not provide facts to support his argument. This argument
does not provide the court facts or evidence supporting that there is a genuine issue as to
any material fact in controversy. The court is in the position to determined the issue of
Debtor's discharge as a matter of law.
The uncontroverted facts establish by clear and convincing evidence, that in late
2006, within a year prior to the Debtor filing for bankruptcy protection, he transferred
and concealed his income. 	He did this by directing others, including Terah Murphy, to
hold funds owed to him in their accounts and for his benefit. He obtain funds, as needed,
for his expenses by contacting them and getting the funds directly. He operated in this
atypical fashion for the purpose of hindering, delaying and defrauding his creditors in
general.
One of the Bankruptcy Code's fundamental goals is to relieve the honest but
unfortunate debtor of his indebtedness, allowing him to make a financial fresh start
through the discharge of debt. The Bankruptcy Code provides most debtors with a fresh
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start. It also prevents dishonest debtors from improperly using it as a shield.21 In this
case, the Debtor's conduct throughout the years, and specifically within one year prior to
tiling for bankruptcy protection demonstrates a clear disregard for financial and personal
responsibility . To allow the Debtor to use the Code in this manner, violates the fresh
start policy. 	Plaintiff's complaint requesting that the Debtor's discharge pursuant to 11
U.S.C. § 727(a)(2)(A) be denied, is granted.
The court will issue a judgment in favor of the plaintiff on her complaint.
DATED this ~day of May, 2008.
Service to:
Timothy Stubson
Ken McCartney
By the Court
21/n re Cornelius, 333 B.R. 850 (N.D.Fla. 2005)
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