Jones v. Coan

          RULING AND ORDER ON APPEAL OF BANKRUPTCY COURT

          VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE.

         Ruth Jones (“Debtor” or “Appellant”) filed for bankruptcy under Chapter 11 of 11 U.S.C. §§ 101 et seq. (“Chapter 11”). Because the United States Bankruptcy Court for the District of Connecticut (“Bankruptcy Court”) found that Ms. Jones willfully and intentionally failed to comply with an order to pay $11, 250, the Bankruptcy Court denied discharge of the debtor under 11 U.S.C.§ 727(a)(6). In Re Jones, No. 09-bk-51596, ECF No. 1251.

         This appeal raises whether the Bankruptcy Court erred in (1) finding that Ms. Jones willfully and intentionally failed to comply with its order and (2) ordering that Ms. Jones be denied a discharge of the debt.

         For the reasons discussed below, the Court AFFIRMS the judgment of the Bankruptcy Court.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         On August 14, 2009, Ms. Jones filed a voluntary petition for relief under Chapter 11. In re Jones, No. 09-bk-51596, ECF No. 1. On February 25, 2011, The Bankruptcy Court appointed Mr. Coan to serve as the Chapter 11 trustee. In Re Jones, No. 09-bk-51596, ECF No. 631-34. On April 23, 2013, the Bankruptcy Court converted the case to one under Chapter 7, rather than under Chapter 11, and retained Richard Coan as the Chapter 7 trustee. In Re Jones, No. 09-bk-51596, ECF No. 1032.

         On June 4, 2013, the Bankruptcy Court ordered Ms. Jones to turn over $11, 250 to Richard Coan to replace rents “collected by the debtor but not deposited in the estate bank account nor delivered to the Trustee.” In Re Jones, No. 09-bk-51596, ECF No. 1057 (“Turnover Order”). The Bankruptcy Court ordered Ms. Jones to make the payment within fourteen days of the Order. Id. But Ms. Jones failed to do so.

         Ms. Jones argues instead that she paid Mr. Coan $7, 500 twice before the adversary proceedings started. Appellant Br., ECF No. 14, at 7. Ms. Jones claims that Mr. Coan kept the first payment, because he alleged the funds belonged to the bankruptcy estate. Id. And Mr. Coan returned the second payment to Ms. Jones. Id. Ms. Jones also argues that another payment of $3, 750 made in February 2015, which Mr. Coan accepted, should apply to the Turnover Order. Id. at 9. Ms. Jones argues that, although untimely, she made the total payment amount of $11, 250 required in the Bankruptcy Court's Turnover Order. Id.

         Mr. Coan asserts that the funds were either late or misappropriated bankruptcy estate funds. On October 29, 2015, when questioned at trial, Ms. Jones admitted not paying the disputed $11, 250 on time. Appellee Br., ECF No. 15, at 3-4 (citing October 29, 2015 Trial Tr., at 86-88) (“Q: Okay. Now if you'd look at the last page of Exhibit 5 it calls for you to pay $11, 250 within 14 days of the entry of the order. Did you do that? A: No, I did not.”).

         Mr. Coan argues that “the uncontroverted evidence established that the Debtor lied to convince the Trustee not to pursue her for $11, 250 even though she received a check for more than $400, 000 while the turnover Motion was pending.” Id. at 6-7. Mr. Coan declares that Ms. Jones first tried to satisfy the Turnover Order six weeks late with $7, 500 that “was the satisfaction of the Trustee's separate demand that the Debtor deliver settlement funds related to a real-estate commission that the bankruptcy estate-not the Debtor-had received while the bankruptcy case was pending under Chapter 11.” Id. at 7. In other words, the “Debtor first attempted to pay the bankruptcy estate with the bankruptcy estate's own money.” Id.

         Then, on February 9, 2015, Ms. Jones paid $3, 750 to Mr. Coan, which he argues “was $7, 500 too little and was paid twenty months after payment was due.” Id. at 9. Moreover, “the Trustee had commenced the discharge action, the parties had filed witness and exhibit lists, and a scheduled trial date was approaching.” Id. Finally, on October 15, 2015, more than two years after the Court entered the Turnover Order, Ms. Jones paid the Trustee $7, 500. Id. But Mr. Coan returned the payment. Id.

         On November 19, 2015, the Bankruptcy Court issued an order denying discharge of the debtor under § 727(a)(6). In Re Jones, No. 09-bk-51596, ECF No. 1251.

         On November 25, 2015, Ruth Jones appealed the order denying the debtor's request for discharge and judgment ...