Johnson v. Meabon (In re Meabon)

535 B.R. 640, 74 Collier Bankr. Cas. 2d 254, 2015 Bankr. LEXIS 2701
CourtUnited States Bankruptcy Court, W.D. North Carolina
DecidedAugust 13, 2015
DocketCase No. 10-30455; Adversary Proceeding No. 12-03218
StatusPublished

This text of 535 B.R. 640 (Johnson v. Meabon (In re Meabon)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. North Carolina primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Johnson v. Meabon (In re Meabon), 535 B.R. 640, 74 Collier Bankr. Cas. 2d 254, 2015 Bankr. LEXIS 2701 (N.C. 2015).

Opinion

ORDER DENYING DEFENDANT’S MOTION FOR RELIEF

J. Craig Whitley, United States Bankruptcy Judge

In this matter, a debtor, Richard P. Meabon, seeks relief under Rule 60(b)(3) and (4) of the Federal Rules of Civil Procedure after his discharge was revoked for attempting to conceal estate assets by willfully making false statements under oath. For the reasons stated below, Meabon’s motion is denied.

The circumstances leading to the revocation of Meabon’s discharge are detailed fully in the Court’s April 8, 2014 order and need not be fully recited at this time. To briefly provide some context, prior to filing [641]*641bankruptcy, Meabon and his wife consulted with attorney Rick Mitchell. During that consultation, Meabon disclosed a beneficial interest in a trust formed by his parents. Mitchell informed Meabon that he would need to disclose his interest in the trust as an asset in his bankruptcy schedules. Upon hearing this, Meabon decided to not hire Mitchell.

Instead, Meabon sought out and consulted with another bankruptcy attorney, Martin Hunter. This time, Meabon intentionally failed to -mention his interest in the trust. Hunter filed the bankruptcy case without knowledge of Meabon’s interest in the trust. Meabon neither corrected his omission during his testimony at his first meeting of creditors on March 31, 2010 nor amended his schedules to note the existence of the trust.

June 1, 2010 was the last day to object to discharge. With the trustee and creditors unaware of Meabon’s trust interest, the deadline passed without incident. Then, on June 2 or 3, Mitchell sent an email to Hunter alerting him to the existence of the trust. Over the objections of his client, Hunter forthrightly alerted the trustee to Meabon’s interest. Meanwhile, the Clerk processed Meabon’s discharge, which was entered on June 11, 2010.

The trustee then obtained a judgment dated January 12, 2012 determining the bankruptcy estate was the owner of Mea-bon’s interest in the trust. Meabon did not appeal that decision.

Instead, on or about March 1, 2012, Meabon’s sister caused the assets of the trust to be transferred into an account at BB & T labeled the “Richard Meabon Trust” account. These monies were immediately transferred from that trust account into the regular checking account of Raymond Meabon, Meabon’s father. The next day, March 2, 2012, an LLC was formed by Meabon and his sister. On March 5, 2012, Raymond Meabon transferred all the assets previously in the trust from his personal banking account to the newly formed LLC. In total, he transferred $425,000. Neither the trustee nor this Court were informed of these steps.

Upon learning of these transfers, on May 15, 2012, the trustee filed an adversary proceeding to recover the $425,000 for the benefit of the bankruptcy estate. During the course of that proceeding, it became apparent that Meabon also held an interest in a second trust that he likewise failed to disclose on his bankruptcy petition or at his first meeting of creditors. Because of Meabon’s repeated attempts to conceal his interest in these trusts, the trustee sought to revoke Meabon’s discharge under Bankruptcy Code subsection 727(d)(1).

As explained in the order revoking discharge, by its terms, subsection 727(d)(1) permits a party to seek revocation of discharge only when that party becomes aware of the fraud after the discharge is granted. Bankruptcy Rule 4004(a), however, sets a period for objecting to discharge, which will always end prior to the entry of discharge. A literal reading of the Code would appear to create an anomalous situation where a debtor could obtain a discharge by fraud that would be insulated from attack as long as the fraud came to light after the deadline for objecting to discharge but before the discharge is granted. In re White, 133 B.R. 206, 209 (Bankr.S.D.Ind.1990). The majority of courts find that the bar date for objecting to discharge is the operative date for purposes of subsection 727(d).

At trial, Meabon argued, inter alia, that the trustee learned of the existence of the trust prior to June 1, 2010, the bar date for objecting to discharge, and was therefore precluded from pursing revocation under subsection 727(d)(1).

[642]*642This Court disagreed and determined that as of June 1, 2010, the trustee had yet to learn of the existence of Meabon’s interest in the trust. It was “unclear when exactly the [tjrustee learned of the trust, but both parties agree[d] that it was after June 1, 2010 and likely before June 11, 2010.” Meabon’s discharge was revoked after it became evident that he “made statements under oath that he knew to be false, about material matters, and that these statements were made willfully and with the intent to defraud.”

Meabon appealed to the United States District Court, reasserting his argument that the trustee knew about Meabon’s interest in the trust prior to June 1, 2010. According to United States District Judge Robert J. Conrad, however, Meabon’s argument was “wholly without merit and lack[ed] evidentiary support.” Judge Conrad concluded that Meabon’s argument was frivolous and dismissed the appeal with prejudice.

In an attempt to take yet another bite at the apple, Meabon now moves under Rule 60 claiming (1) the order revoking discharge was obtained by fraud in that the trustee misrepresented the timing of when he discovered Meabon’s attempt to hide his interest in the trust and (2) the order was void for lack of jurisdiction because the trustee’s claim under subsection 727(d)(1) was untimely.

As an initial note on Meabon’s misrepresentation argument, at the trial, the parties agreed the trustee learned of the trust between June 1, 2010 and June 11, 2010. Meabon’s latest attack contradicts the position he adopted earlier in the case. Moreover, these assertions harken back to those already considered and rejected by this Court and determined to be “frivolous” by Judge Conrad. This line of argument almost appears to be an attempt by Meabon to appeal the District Court’s order to this bankruptcy court.

Even so, the evidence presented at the hearing in this matter, including the affidavit of Martin Hunter, neither discredits this Court’s or the District Court’s conclusions regarding the timing of the trustee’s discovering Meabon’s attempt to conceal estate assets nor indicates the trustee misrepresented — accidentally or otherwise — ■ the date of when he learned of Meabon’s concealed interest in the trust.

Meabon’s attack on this Court’s jurisdiction to revoke his discharge raises an issue that has not yet been definitively determined in this Circuit; however, recent Supreme Court decisions strongly suggest that Meabon waived this argument by failing to previously raise it.

The trustee filed the adversary proceeding to revoke Meabon’s discharge under Code subsection 727(d)(1), which is subject to the time provisions of subsection 727(e)(1). Pursuant to subsection 727(e)(1) a trustee may request revocation of a debt- or’s discharge “within one year after such discharge is granted.”

Meabon’s discharge was entered on June 11, 2010. The trustee filed his complaint on September 24, 2012, outside the one-year time limit imposed by subsection 727(e)(1).

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Cite This Page — Counsel Stack

Bluebook (online)
535 B.R. 640, 74 Collier Bankr. Cas. 2d 254, 2015 Bankr. LEXIS 2701, Counsel Stack Legal Research, https://law.counselstack.com/opinion/johnson-v-meabon-in-re-meabon-ncwb-2015.