John Paul H. Cournoyer, U.S. Bankruptcy Administrator v. David Wayne Schamens

Summary

The United States Bankruptcy Court for the Middle District of North Carolina grants the Bankruptcy Administrator’s motion to strike David Wayne Schamens’s answer and enters default judgment denying him a discharge. The court finds that Schamens persistently and willfully failed to comply with discovery obligations and multiple court orders, despite repeated warnings and extensions. The opinion addresses claims for denial of discharge under 11 U.S.C. § 727(a)(2), (3), (4), and (6), including alleged omissions and misrepresentations concerning assets, liabilities, litigation, and property interests.

Holdings

1. Default judgment was warranted because the debtor acted in bad faith, his noncompliance substantially prejudiced the plaintiff, deterrence was necessary, and lesser sanctions would not secure compliance or permit resolution on the merits.
2. After the answer was stricken and default judgment entered, the factual allegations in the complaint, other than allegations concerning damages, were admitted, and the debtor's deficient responses to requests for admission could be stricken and deemed admitted; the court nevertheless had to determine whether the admitted facts stated a legally sufficient claim.
3. The debtor's discharge was denied under § 727(a)(2) because the admitted allegations established that he transferred, removed, or concealed estate property with the requisite actual intent to hinder, delay, or defraud creditors or the estate representative.
4. The debtor's discharge was denied under § 727(a)(3) because the admitted allegations established that he concealed, falsified, or failed to preserve recorded information from which his financial condition and business transactions could be ascertained.
5. The debtor's discharge was denied under § 727(a)(4) because the admitted allegations established that he knowingly and fraudulently made material false oaths, presented or used a false claim, and withheld information concerning his property and financial affairs.

Questions Presented

1. Whether the debtor's repeated and willful failure to comply with discovery requests and court orders warranted striking his answer and entering default judgment under Federal Rule of Civil Procedure 37(b)(2)(A) and Federal Rule of Bankruptcy Procedure 3037.
2. Whether the complaint's allegations and the deemed admissions, taken as true after default, established grounds to deny the debtor's discharge under 11 U.S.C. § 727(a)(2), (3), and (4).
3. Whether the court needed to reach the claim under 11 U.S.C. § 727(a)(6).

Disposition

default judgment