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ORDERED in the Southern District of Florida on February 11, 2022.
Erik P. Kimball, Judge
United States Bankruptcy Court
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
WEST PALM BEACH DIVISION
In re:
CHAPTER 7
MARTIN A. TABOR and ABBY TABOR, CASE NO.:14-20731-EPK
Debtors.
HEARTWOOD 4, LLC and DEBORAH C.
MENOTTE, Chapter 7 Trustee,
Plaintiffs,
v. ADV. PROC. NO.:15-01616-EPK
MARTIN A. TABOR and ABBY TABOR,
Defendants.
ee
MEMORANDUM OPINION
The Court held trial in this adversary proceeding on March 2, 3, 9, and 13, 2020, and
July 22 and 23, 2021.! The parties presented lengthy closing arguments on August 5, 2021.
1 Because of the pandemic, trial in this adversary proceeding was delayed for a significant period.
The plaintiffs had nearly completed presentation of their case in chief in March 2020 when the Court
At the Court’s direction, the parties filed post-trial briefs. ECF Nos. 599, 612, 620. The
Court carefully reviewed the record in light of the post-trial briefs.2 The following
constitutes the Court’s findings of fact and conclusions of law pursuant to Fed. R. Bankr. P.
7052.
SUMMARY OF RULING
Plaintiffs Heartwood 4, LLC, an unsecured creditor with claims based on commercial
loan guarantees, and Deborah C. Menotte, chapter 7 trustee, seek denial of discharge for both
debtors, Martin and Abby Tabor. Although the chapter 7 trustee remains a plaintiff in this
case, Heartwood took the laboring oar at trial and in post-trial briefing.
In the operative Third Amended and Supplemental Complaint Objecting to Discharge
[ECF No. 437] (the “Third Amended Complaint”), the plaintiffs allege that Mr. and Mrs.
Tabor concealed material assets (counts I and II under section3 727(a)(2)(A) and count III
under section 727(a)(2)(B)), failed to preserve appropriate records relating to their assets
(count IV under section 727(a)(3)), made false statements under oath (count V under section
727(a)(4)), and failed to satisfactorily explain a loss of assets (count VI under section
727(a)(5)).
The plaintiffs allege that Mr. Tabor orchestrated a Machiavellian series of
transactions, using an irrevocable spendthrift trust set up years before, over which Mr. Tabor
ceased in-person hearings and transitioned to hearings and trials by video conference. The parties
repeatedly asked the Court not to conclude the trial by video conference as they perceived this to be
unfair to the defendants. As a result, the Court did not complete the trial until summer 2021 when
infection rates appeared to recede and the Court resumed in-person trials for a time. Post-trial
briefing was completed on November 8, 2021.
2 In the briefing order, the Court directed the parties to file briefs in the form of proposed findings of
fact and conclusions of law. The Court advised the parties that each statement of fact in the
proposed findings of fact must be supported by a specific reference to documentary evidence admitted
or testimony given at trial or the Court may disregard the statement of fact and the party will be
deemed to have waived the right to rely on such statement of fact. ECF No. 599.
3 The words “section” or “sections” refer to the stated provisions of the United States Bankruptcy
Code, 11 U.S.C. §§ 101 et seq.
allegedly maintained control, and transfers through Mr. Tabor’s sister, the Tabors’ adult
daughter and sons, and one son’s former mother-in-law, all aimed at hiding the Tabors’ assets
from their creditors and funneling such assets for the Tabors’ personal benefit. Each of the
claims in counts I, II, and III require the plaintiffs to convince the Court that Mr. and/or Mrs.
Tabor acted with actual intent to hinder, delay, or defraud a creditor.
Stories such as this are common in adversary proceedings challenging the discharge.
For two reasons this case is unique.
First, Mr. and Mrs. Tabor’s defense is overwhelmingly supported by their own
testimony and that of their three adult children, Mr. Tabor’s sister, the trustee of the family
trust, and the former mother-in-law of one of the Tabors’ sons. The plaintiffs ask the Court
to find none of these witnesses credible. Indeed, for the plaintiffs to be successful, the Court
would need to disbelieve each of these witnesses to some extent and, in certain instances,
would need to find a great deal of their testimony deceitful. But the Court found all of them
consistently credible. The plaintiffs attempt to shoot holes in certain of the testimony by
pointing to seeming inconsistencies, both during trial and in testimony prior to trial. Having
observed the live testimony, having carefully reviewed the record after trial, and taking into
account the explanations provided by the Tabors during trial, during closing argument, and
in their brief, the Court finds that each of the alleged inconsistencies was adequately
explained or was not material. The testimony elicited by the plaintiffs during their own case
in chief indicated the Tabors have the benefit of an honorable and loving family who
consistently did their best to assist Mr. and Mrs. Tabor, using assets they could use for any
purpose they wished, and not the complex conspiracy imagined by the plaintiffs. Likewise,
the Court believed Mrs. Tabor’s testimony that when she took a loan on her aging but
previously unencumbered car, she did so only to support the household finances in a time of
need. Indeed, she had already sold her valuable engagement ring and other jewelry for the
cause and had little else to offer.
Second, in cases presenting similar claims, it is typically apparent that the hidden
assets were used to facilitate the continued extravagant lifestyle of the debtor to the
detriment of creditors. In this case, the evidence tells a very different story. The majority of
the assets supposedly funneled away from creditors were used by Mr. Tabor’s remaining real
estate projects. A significant portion of those funds went to pay lenders who were also
creditors of Mr. and Mrs. Tabor under personal guarantees. In other words, much of the
funds the plaintiffs allege that Mr. and Mrs. Tabor concealed actually went to pay their
creditors -- including Heartwood’s predecessor. Tellingly, the plaintiffs do not argue that the
Tabors hid assets in order to support excessive personal spending. This is because the Tabors
did not live a lavish lifestyle, particularly after it was clear that Mr. Tabor’s business was
suffering. Instead, they focused on trying to keep Mr. Tabor’s real estate deals alive in hopes
they would be able to pay all their creditors and on covering their basic expenses. None of
this is consistent with the plaintiffs’ view that Mr. and Mrs. Tabor facilitated a scheme
harmful to creditors. The Tabors lacked the intent necessary for the plaintiffs to obtain relief
under counts I, II, and III.
During closing argument, the plaintiffs explicitly waived relief under count IV for
failure to preserve appropriate records. Even if they had not, the Tabors maintained
appropriate records regarding the disposition of the assets that were the focus of the claims
in count IV. On count V, the evidence indicates that the alleged false statements made under
oath were not actually false, were not knowingly false when made, were not material, or a
combination of these. On count VI, the Tabors adequately explained to the satisfaction of the
Court why they did not have the subject assets at the time they filed their bankruptcy
petition.
The plaintiffs failed to meet their burden of proof on counts I, II, III, V, and VI, waived
relief under count IV, and did not meet their burden under count IV even if they had not
waived those claims. In the Court’s view, after careful consideration, the evidence presented
did not come close to satisfying the plaintiffs’ burden on any of the claims presented. As more
fully discussed below, the Court will deny all relief under the Third Amended Complaint (as
amended post-trial herein) and will enter separate judgment in favor of the defendants,
Martin and Abby Tabor.
FINDINGS OF FACT
The Tabor Family
Mr. and Mrs. Tabor were married in 1966. At the time of their bankruptcy filing, they
were both retirement age. They have three adult children: Tracy Shelowitz, Scott Tabor, and
Brett Tabor. Mr. Tabor has a sister, Shelley Kirschenbaum, who at all relevant times lived
with her spouse, Gene, in Connecticut.4
The Tabors have a reputation for generosity toward family, both their immediate
family and extended members of their family. For example, when Mr. Tabor’s brother-in-law
Gene was in medical school, the Tabors sent money to Shelley to help them make ends meet.
When the Tabors later learned that Gene had applied for a residency in Miami, they bought
a condo for Shelley and Gene’s use, even though in the end Gene took a residency in
California. In 2007, when their son Scott’s first wife, Yahel, had surgery for a brain tumor,
they assisted Scott’s mother-in-law, Mercedes Guzman, then living in Mexico, by finding her
a home and work in Florida so that she could be with her daughter. The Tabors lent Mercedes
funds to purchase her Florida home and hired her to perform maintenance work for one of
Mr. Tabor’s real estate projects. In turn, Mercedes assisted in caring for Mr. Tabor’s aging
4 For ease of reference, the Court refers to persons other than Mr. and Mrs. Tabor by their first
names.
mother, Bernice Tabor, without pay. Mercedes continued to do so for more than 7 years until
Bernice’s death in 2015, even after Scott and Yahel divorced in 2012. The testimony was
replete with stories such as these, which the Court found both credible and useful to
understanding the motivations of Mr. and Mrs. Tabor and other persons relevant to this case.
Mr. Tabor’s Real Estate Business
Over a period of decades, Mr. Tabor had a successful career as a real estate developer
and broker, working on large commercial and residential projects in Florida. Mr. and Mrs.
Tabor amassed a net worth that peaked over $40 million. Mrs. Tabor was not involved in
Mr. Tabor’s development projects and had no knowledge of the operations or finances of his
business. Mrs. Tabor’s only exposure was to join Mr. Tabor in personally guaranteeing
certain commercial loans.
As of 2008, 6 years before this bankruptcy case was filed, Mr. Tabor was involved in
several real estate projects in Florida. These are referred to in the record as Port Mayaca
Plantation, Bent Pine, MT Vero Holdings, and Vero 95. Port Mayaca Plantation involved
redeveloping thousands of acres of former sugar cane plantation in Martin County into large
home sites for a polo and equestrian community. Mercantil Commerce Bank was the primary
lender on Port Mayaca Plantation. Bent Pine involved development of a 90-acre parcel in
Vero Beach, Florida as a gated residential community. Banco Popular was the primary
lender on Bent Pine. MT Vero Holdings involved development of a 180-acre parcel, also in
Vero Beach, Florida, for large lot residential development aimed at owners of motor coach
RVs who would winter in Florida and be able to store their RVs on site. Banco Popular was
also the primary lender on MT Vero Holdings. Vero 95 involved development of several
parcels adjacent to an existing outlet mall, again in Vero Beach, Florida, as an RV park
among other potential uses. Bank Atlantic was the primary lender on Vero 95. Heartwood
is the successor to Bank Atlantic, having purchased the loan immediately after Bank Atlantic
obtained a foreclosure judgment but prior to this bankruptcy case.
In 2008, the United States experienced a significant financial crisis which had a
severe negative impact on the real estate market in Florida. As Mr. Tabor testified,
commercial lending became essentially unavailable. Development ground to a halt. Mr.
Tabor was unable to move forward on his existing projects, each of which carried significant
debt that he and Mrs. Tabor had personally guaranteed.
Mr. Tabor spent several years attempting to maintain his existing real estate projects,
in hopes that the market would rebound and he could bring them to fruition. He continued
to make debt service payments as long as he could. Eventually, it became clear that the
market would not recover in time to facilitate successful completion of the projects. The
lenders pursued foreclosure and collection on their guarantees, and litigation ensued. At that
point, Mr. Tabor turned his efforts to negotiation with the lenders, Banco Popular, Mercantil
Commerce Bank, and Bank Atlantic (Heartwood’s predecessor). In certain instances, Mr.
Tabor offered to assist in marketing the properties.
The Tabors’ Primary Creditors
Eventually, all of the commercial lenders realized on their real estate collateral.
Banco Popular did not file a claim in this bankruptcy case. Mercantil Bank and Heartwood5
filed unsecured claims. Mercantil Bank’s claim was settled and its successor withdrew the
claim. Only Heartwood continues to pursue claims based on personal guarantees. Although
this adversary proceeding seeks to deny the discharge in its entirety, in reality Heartwood is
the only creditor attempting to collect from Mr. and Mrs. Tabor.
5 In their post-trial brief, Mr. and Mrs. Tabor argue that Heartwood is not a “creditor” with the
ability to bring the claims presented here. However, Heartwood filed proof of claim number 11 in
this case, holds a “claim” within the meaning of section 101(5), and so is a “creditor” under section
101(10).
The Port Mayaca Family Trust
In 2005, several years before the economic downturn in 2008, and about 9 years prior
to this bankruptcy case, Mr. Tabor settled the Port Mayaca Family Trust with an initial
deposit of $119,000. The Trust is an irrevocable spendthrift trust for the benefit of the Tabors’
children, Tracy, Scott, and Brett, and Mr. Tabor’s sister, Shelley. William Gassan acts as
trustee. William was employed by Mr. Tabor’s development company since the early 1990s.
With the $119,000, the Trust purchased three options in connection with the Port Mayaca
Plantation project. The Trust exercised one of those options in 2008, netting approximately
$1.7 million. As of 2008, the Trust held the net proceeds from the exercise of that first option
and the two remaining, unexercised options. The two remaining options were never
exercised.
Use of Trust Assets
During the roughly 7-year period from July 2008 through May 2015, the Trust
distributed a net of about $1,506,000. About $953,000 was distributed directly to
beneficiaries, meaning to Tracy, Brett, Scott, and Shelley. About $369,000 was paid in taxes.
About $29,500 was paid to the Tabor Agency (an entity discussed below), with about $16,750
of that being made available to Mr. Tabor. About $994,000 was loaned to Mr. Tabor’s real
estate businesses, for which loans the Trust was later repaid about $844,000, leaving a net
loss on the loans of about $150,000. The remainder, about $5,000, represents losses on
transactions involving a home used by Scott’s family.
Of the approximately $953,000 that the Trust distributed to beneficiaries during that
7-year period, the beneficiaries made available to Mr. and Mrs. Tabor about $498,000, or an
average of about $71,000 per year. None of this sum was paid directly to Mr. or Mrs. Tabor.
For example, Tracy and Shelley used about $345,000 of their distributions to make loans and
gifts to Mercedes, and Mercedes used about $285,000 of that to repay Mr. and Mrs. Tabor on
the loan they had given her to buy her home. In other words, of the $498,000 in Trust assets
that made it to Mr. and Mrs. Tabor, $285,000 of that sum came via Mercedes and in turn
from Tracy and Shelley.
The Tabors’ income for the roughly 6-year period from July 2008 to the petition date
in May 2014 came from funds ultimately sourced from the Trust, social security, proceeds
from the sale of Mrs. Tabor’s engagement ring and certain other jewelry, and from Mrs. Tabor
borrowing against her previously unencumbered, aging vehicle. The Court found credible
the testimony of Mr. and Mrs. Tabor, William, Tracy, and Shelley that Mr. and Mrs. Tabor
did not realize that Trust assets were being used to assist them in their time of need. They
did not learn the truth until later.
During the roughly 7-year period from July 2008 through May 2015, the Trust
beneficiaries -- meaning Tracy, Scott, Brett, and Shelley -- received about $470,000 from the
Trust, none of which directly or indirectly benefitted Mr. or Mrs. Tabor. Thus, while the trust
beneficiaries allowed a substantial portion of the Trust assets to be used for the eventual
benefit of Mr. and Mrs. Tabor, they also received significant funds for their own benefit. The
sums received by the beneficiaries and used for their own benefit are comparable to the
aggregate eventually used for the benefit of Mr. and Mrs. Tabor. In addition to distributions,
the Trust served other important roles for beneficiaries during this period. For example, the
Trust facilitated the acquisition of a home for Scott under circumstances where he would
have been unable to obtain similar housing on his own.
Mortgage Loan to Mercedes and Repayment
Mercedes moved to the United States in early 2007 to help care for Yahel while Yahel
recovered from brain surgery. Mr. and Mrs. Tabor offered to assist Mercedes in finding work
and a home in Florida while she studied and secured a work permit. In 2009, to facilitate
Mercedes’ purchase of a home in Jensen Beach, Florida, Mr. Tabor loaned her roughly
$312,000 secured by a mortgage. Yahel and Briana, Scott’s daughter, lived in the home with
Mercedes.
Mercedes became friendly with Bernice Tabor, Mr. Tabor’s aging mother, who died
during the pendency of this bankruptcy case in 2015. Mercedes provided significant
assistance to Bernice, on a nearly daily basis for more than 7 years, without compensation.
When the mortgage loan came due, Mercedes was unable to pay the principal owed
and did not want to sell her home. At the same time, she sensed that Mr. and Mrs. Tabor
were experiencing financial difficulty. Mercedes asked Tracy and Shelley for assistance.
They gave Mercedes a total of $345,000 in loans and gifts. Both Tracy and Shelley testified
that they gladly provided the funds, without taking a mortgage, partly out of gratitude for
the care Mercedes provided to their mother. Tracy and Shelley obtained those funds from
the Trust, in part so that they would not need to use marital funds for that purpose. Mercedes
used $285,000 of the money she obtained from Tracy and Shelley to make payments to Mr.
Tabor on the mortgage loan. Mr. Tabor forgave the remainder of the loan in consideration of
work Mercedes had done on Mr. and Mrs. Tabor’s homes without prior compensation. Mr.
and Mrs. Tabor did not know that Mercedes had obtained the funds to pay off the mortgage
loan from Tracy and Shelley or that Tracy and Shelley had obtained the funds from the Trust.
The plaintiffs ask the Court to conclude that this is both an example of Mr. Tabor
controlling and using the Trust for his own purposes and an example of his hiding an asset,
meaning the forgiven portion of Mercedes’ mortgage loan, to the detriment of creditors.
Having viewed the testimony of all involved persons, the Court is convinced that Mr. Tabor
did not know that funds he received from Mercedes had come ultimately from the Trust until
later. The Court finds that Mr. Tabor believed the remainder of Mercedes’ mortgage loan
was more than offset by work she had done without prior compensation.
Trust Loans to Mr. Tabor’s Real Estate Projects
In 2009, Mr. Tabor’s real estate projects no longer had access to funds to meet debt
service or pay other legitimate business expenses. William, as trustee of the Trust, suggested
that the Trust could make loans to the businesses. Both Mr. Tabor and William testified that
the real estate projects had no ability to acquire capital elsewhere, unsurprising testimony
given the state of the financial markets at the time. William testified credibly that making
loans to Mr. Tabor’s real estate enterprise made sense for the Trust in part because the Trust
still held two options in connection with the Port Mayaca Plantation project. He believed it
appropriate for the Trust to try to protect those investments from complete loss. No one knew
at that time how long the real estate market would remain stagnant. It was clear from the
testimony of all the Trust beneficiaries that they had no objection to this use of Trust assets.
Three years before, in 2006, Mr. Tabor loaned Scott $1,325,000 to purchase a home in
Sailfish Point, a neighborhood in Stuart, Florida, and received a note and mortgage. Mr.
Tabor advanced additional funds for improvements. At the time, Mr. Tabor and Scott agreed
that when Scott sold the house, Mr. Tabor would recover his investment first and they would
split any profits.
In 2009, when the Trust considered making loans to Mr. Tabor’s real estate enterprise,
William expressed a need for collateral to protect the Trust. As security for advances made
by the Trust for the benefit of his businesses, Mr. Tabor agreed to assign to the Trust the
note and mortgage on Scott’s Sailfish Point home. The plaintiffs argue that the informality
of the documentation for the agreement, and the delay in assigning the mortgage to the Trust,
which occurred much later in the year, indicate Mr. Tabor’s intent to conceal from his
personal creditors the asset represented by that mortgage loan. But the evidence, as a whole,
does not support that conclusion. Both William and Mr. Tabor testified credibly regarding
the timeline of the agreement to have the mortgage loan serve as collateral and its eventual
assignment. In the context of the overall economic circumstances, the intention of the parties
to try to weather the storm of the real estate downturn with the expectation that Mr. Tabor’s
real estate projects would eventually yield profits, and William’s reasonable expectation that
the Trust should not make loans without appropriate collateral, their testimony was credible.
The plaintiffs argue that William did not act appropriately as trustee in causing the
Trust to make loans to Mr. Tabor’s business enterprise. They argue that he had personal
conflicts, as he was a 5% owner of the real estate projects and a longtime employee and friend
of Mr. Tabor. They argue that the Trust had no real business purpose in making the loans
as it held options in only one of the projects and the loans benefitted all three. They argue
that the Trust did not need the collateral in the form of assignment of the Sailfish Point
mortgage loan as there was equity in the real estate projects which received the loans. These
arguments are not supported by the evidence and are internally inconsistent. William held
a minor equity interest in Mr. Tabor’s real estate projects, essentially the tie-breaker position
in the entities that owned rights in the projects. That Mr. Tabor selected a personal friend
to act as trustee for his family trust is completely unsurprising. There is no evidence that
William was swayed to breach his fiduciary duty by his longstanding relationship with Mr.
Tabor. Under the circumstances, these facts did not give rise to a real conflict of interest.
When testifying at trial, William did not say that the goal of protecting the remaining options
was the sole reason for the Trust loans, as the Plaintiffs suggest, but that it was among the
reasons the Trust made the loans. The beneficiaries of the Trust, all adults, certainly did not
object to the Trust attempting to preserve their father’s business enterprise, potentially for
their benefit if the remaining options had value. The plaintiffs’ argument that the Trust did
not need collateral for the loans clearly is untrue as the Trust in fact realized on that
collateral and still suffered a $150,000 loss. William properly obtained collateral for the
loans. If William had failed to obtain collateral, as the plaintiffs suggest was appropriate,
that would likely have been a breach of his fiduciary duty as trustee.
During 2009, the Trust advanced a total of about $994,000 to Mr. Tabor’s real estate
enterprise. Mr. Tabor hoped the new capital would give him time to find buyers or
replacement financing. While the Trust made advances directly to the account of the Vero
95 project, those advances were used in connection with all of Mr. Tabor’s then existing
projects. Of the advances made by the Trust, about $180,000 was used to pay Bank Atlantic,
Heartwood’s predecessor.
Even with advances from the Trust, Mr. Tabor could not keep his projects alive. In
hindsight this seems inevitable, but at the time no one had experienced similar financial
market disarray. Between 2009 and 2011, creditors issued default letters and initiated
proceedings to collect on over $40 million of debt the Tabors had personally guaranteed.
Mr. Tabor’s business was unable to repay the advances it obtained from the Trust.
Consistent with his agreement with the Trust, Mr. Tabor assigned the Sailfish Point
mortgage to the Trust in December 2009. William, as trustee of the Trust, asked Scott to put
the house on the market. Scott listed the home for sale in early 2010. The property
eventually sold in January 2012 for about $844,000, which the Trust accepted in satisfaction
of the mortgage. The plaintiffs are suspicious of the fact that the Trust failed to pursue Scott
for the deficiency, about $481,000 on the original mortgage loan and possibly more if
advances for improvements are included. But the Trust had no reason to believe Scott had
any ability to pay that deficiency and, indeed, Scott himself was a beneficiary of the Trust.
After accepting $844,000 from the sale of its collateral, the Trust retained a loss of about
$150,000 on its advances to Mr. Tabor’s business. The Trust made no further advances to
Mr. Tabor’s real estate projects.
The Spiral to Bankruptcy
Mr. and Mrs. Tabor’s personal finances continued to suffer. From January 2012 to
the bankruptcy filing in May 2014, the Tabors relied on loan repayments made by Mercedes,
gifts from Tracy and Shelley, and a mortgage loan from Shelley. Unbeknownst to Mr. and
Mrs. Tabor, all of those funds other than the mortgage loan from Shelley ultimately came
from the Trust. The plaintiffs ask the Court to disbelieve the testimony of essentially all
parties involved and, instead, conclude that Mr. and Mrs. Tabor always knew that these
funds came ultimately from the Trust. Not only was their testimony credible on this issue,
there was no reason for Mr. or Mrs. Tabor to question the ability of Mercedes and Shelley, in
particular, to provide those funds. They believed that Mercedes was selling assets in Mexico
and knew that Shelley had means of her own. While it appears that Mercedes did not hold
significant net assets in Mexico that she could liquidate for purposes of paying off her
mortgage, Mr. and Mrs. Tabor did not know this.
In the end, Mr. and Mrs. Tabor were unable to pay the substantial debts represented
primarily by guaranteed commercial loans. They were forced to file chapter 7 petitions with
this Court in May 2014.
Mr. Tabor Retained No Interest in the Trust
The plaintiffs ask the Court to conclude that Mr. Tabor retained continuous control
over the Trust for his personal benefit and thus had an equitable interest in the Trust that
he hid from creditors. Among other things, they point to the fact that William, Mr. Tabor’s
long-time employee and friend, acted as trustee, that the Trust made significant advances to
support Mr. Tabor’s businesses, which the plaintiffs contend was not in the interests of the
Trust, and that the Trust made distributions aggregating nearly $500,000 that were paid by
the Trust beneficiaries to or for the eventual benefit of Mr. and Mrs. Tabor. The plaintiffs
allege that Mr. Tabor orchestrated these payments through the Trust beneficiaries in order
to hide his interest in the Trust from his creditors.
The plaintiffs’ suspicions are not supported by the evidence admitted in this case.
There is no evidence that Mr. or Mrs. Tabor ever requested funds from the Trust. Several
witnesses, all credible, testified that the ultimate source of funds was hidden from Mr. and
Mrs. Tabor. In addition to Mr. and Mrs. Tabor themselves, five separate witnesses testified
on these issues – Shelley, Scott, Brett, Mercedes, and William – and they presented a
consistent and believable story. During their testimony, the Court was repeatedly struck
with the impression that these are good people who were trying to do the right thing for Mr.
and Mrs. Tabor, using assets that they could have used for their own benefit.
Importantly, the Trust aided its beneficiaries in ways that had nothing to do with Mr.
or Mrs. Tabor. During the period covered by the documentary evidence, the Trust distributed
about $470,000 to beneficiaries that did not in any way benefit Mr. or Mrs. Tabor. The Trust
also assisted Scott in acquiring a home that he could not have otherwise obtained at that
time. While the plaintiffs challenge William’s decisions as trustee, particularly in connection
with advances made to Mr. Tabor’s businesses, William testified credibly that he made those
decisions with the best interests of the Trust and its beneficiaries in mind.
In cases where it is alleged that a debtor created a trust facially for the benefit of
others, but actually retained complete control over the corpus for the debtor’s own benefit,
the beneficiaries often are the debtor’s spouse and/or minor children. In other words, in many
such cases the beneficiaries are unlikely to object, or not in a position to object, to the use of
the trust for purposes beneficial only to the debtor/settlor. In this case, each of the Trust
beneficiaries was an adult at all relevant times. They all testified at trial and were
consistently credible. The Court did not get the impression that any of the trust beneficiaries
were shrinking violets. Not once did any of them suggest that the Trust was used in a way
contrary to their wishes.
The Trust is a valid, irrevocable spendthrift trust, established at a time when Mr. and
Mrs. Tabor had no inkling that their financial lives would ever be at risk. Mr. Tabor retained
no control over the Trust. Considering all of the evidence in this case, the Court concludes
that Mr. Tabor had no interest of any kind in the Trust. Mr. Tabor could not have hidden his
interest in the Trust as he did not have one.
The Tabor Agency, the Palm City Commission, and the Porsche
Mr. Tabor’s father founded the Tabor Agency decades ago in connection with a luggage
sales business. When he died, Bernice became the sole owner of the Tabor Agency, which
was essentially dormant until 2013. When Bernice died in 2015, Shelley became the sole
owner of the Tabor Agency. Mr. Tabor has never been an equity owner of the Tabor Agency.
In October 2013, Mr. Tabor was added as a signatory on the Tabor Agency’s bank
account, and he registered the entity as a real estate broker. Mr. Tabor served as the
qualifying broker for the Tabor Agency. Mr. Tabor hoped that Shelley would join the Tabor
Agency, as she had experience in residential brokerage, so they could start a boutique retail
brokerage. In the end, Shelley was not interested. Mr. Tabor and Scott considered pursuing
marketing and selling air purifiers using the corporate form of the Tabor Agency. They
commissioned and considered several prototype machines, but the enterprise never got off
the ground. When this bankruptcy case was filed, the Tabor Agency still had no business
operations.
In 2012, after the sale of the Sailfish Point house, Scott leased a modest home in Palm
City, Florida, for the benefit of Yahel and Briana. Scott and Yahel were in the process of
divorcing. The lease included an option to purchase that Scott was financially unable to
execute. To assist Scott, the Trust purchased the Palm City home and leased it to Yahel.
Two years later in 2014, when Yahel determined to move to Mexico, she located a third-party
buyer for the home. However, in order to permit Briana to remain in the home, Scott agreed
to purchase the home from the Trust. The Trust entered into a lease with a purchase option
and Scott exercised the option soon thereafter when he could obtain financing. The Trust
agreed to pay a commission of $25,500 on the sale because Yahel had located the initial buyer.
Yahel was an agent, but not herself a broker, so the Trust paid the commission to the Tabor
Agency which split the commission with Yahel, who received $12,750. Both Scott’s purchase
of the property and the payment of the commission occurred after this bankruptcy case was
filed.
A few months before Mr. and Mrs. Tabor filed this bankruptcy case, Mr. Tabor and
the Tabor Agency co-leased a 2014 Porsche Panamera for Mr. Tabor’s use. Mr. Tabor’s
company, Martin Tabor & Associates, traded in a 2009 Mercedes-Benz valued at $6,000 as
part of the transaction. The Tabor Agency paid monthly lease and insurance payments of
$1,409.09 and $270.05, respectively. Prior to this bankruptcy case, Shelley asked William,
as trustee of the Trust, to pay $4,000 to the Tabor Agency for this purpose. The Tabor Agency
also used the $12,750 obtained from the Palm City commission to make payments related to
the Porsche.
The parties stipulated that Mr. Tabor co-leased the Porsche along with the Tabor
Agency. However, at the time he filed this bankruptcy case and completed his schedules, Mr.
Tabor believed that the Tabor Agency was the sole lessee, that he signed the lease for the
Porsche only in a representative capacity, and so he did not list the car as an asset or
otherwise schedule the lease. Mr. Tabor’s testimony on this matter was credible and is
supported by documentary evidence. The lease agreement in evidence shows Mr. Tabor’s
signature as the representative of the Tabor Agency while the space for Mr. Tabor’s signature
in a personal capacity is crossed out. At the start of this bankruptcy case, in 2014, Mr. Tabor
freely disclosed that he drove the Porsche and that it was leased by the Tabor Agency. The
plaintiffs argue that Mr. Tabor intentionally concealed his interest in the Porsche.
Considering Mr. Tabor’s credible testimony on the issue, the Court finds that Mr. Tabor did
not intend to conceal or hide his interest in the Porsche because he did not realize he had
such an interest to disclose.
The plaintiffs also allege that Mr. Tabor concealed an equitable interest in the Tabor
Agency itself when he filed this bankruptcy case. He was not an owner of the Tabor Agency,
which at that time was solely owned by Bernice. Mr. Tabor, Scott, and Shelley all testified
credibly that ultimate control of the Tabor Agency remained with Bernice until her death
during this bankruptcy case, at which point Shelley became the sole owner. When this
bankruptcy was filed, Mr. Tabor was, at most, the qualifying broker for the Tabor Agency
and a signatory on its bank account, at a time when it had no ongoing business. That the
Trust determined, after this case was filed, that Yahel was entitled to a commission on the
sale of the Palm City home and paid that commission to the Tabor Agency does not magically
create a pre-bankruptcy business opportunity owned by Mr. Tabor, personally. The windfall,
if any, was for the ultimate benefit of Bernice, who permitted the funds to be used in part to
pay the expenses of the Porsche. To be sure, having the Porsche was a benefit to Mr. Tabor,
but it was Bernice’s benefit to convey. Mr. Tabor did not have an interest in the Tabor
Agency, itself, that he could hide from creditors.
Mrs. Tabor’s Jaguar
Mrs. Tabor owned a 2008 Jaguar that was unencumbered. In November 2013, she
obtained a loan secured by the vehicle in the approximate amount of $15,000. At the time
this case was filed, the Jaguar had more than 120,000 miles and the Tabors represented that
it was worth less than the balance of the loan. Mrs. Tabor had spent her adult life caring for
her family and her household. Mrs. Tabor testified credibly that she took out the car loan
because it was a way she could obtain funds to assist the couple in meeting their daily needs.
Contrary to the plaintiffs’ suggestion, the balance in the couple’s bank account on any
particular date is not relevant. It was obvious that Mr. and Mrs. Tabor were having trouble
meeting their necessary expenses. Mrs. Tabor also testified credibly that they had attempted
to reduce their regular expenses as much as they could. The Court finds Mrs. Tabor did not
have the intent to hinder, delay, or defraud creditors when she obtained a loan on and granted
a security interest in her Jaguar.
Jewelry and Furnishings
Six years prior to filing this bankruptcy case, in a September 2008 financial
statement, the Tabors listed $850,000 under the description “jewelry and furnishings.” The
plaintiffs argue that when the Tabors filed this case they listed an aggregate of less than
$7,000 in value for the same categories of assets. The plaintiffs claim that the Tabors failed
to adequately explain the “loss” of the $850,000 in jewelry and furnishings.6
From the Tabors’ schedules, it is not entirely clear which items overlap with the
category of “jewelry and furnishings” on the 2008 financial statement. The plaintiffs’
suspicion stems primarily from the difference between the total value shown on the 2008
financial statement and the significantly smaller values shown for similar personal property
in the Tabors’ schedules.
Mr. and Mrs. Tabor testified credibly that most of the jewelry Mrs. Tabor had in 2008
had been sold, and some of it was stolen, prior to their filing this bankruptcy case. In support
of these statements, they produced sales receipts. Mr. Tabor testified that it was Mrs. Tabor
who provided the figure for “jewelry and furnishings” on the 2008 financial statement, and
6 The evidence includes an additional personal financial statement issued by the Tabors in 2007
which states a $600,000 value for “jewelry and furnishings.” The Court focuses on the 2008 personal
financial statement as it indicates a larger difference in value compared with the values shown in
the Tabors’ schedules filed in this case.
they testified that she included in that sum the value of substantial renovations completed
on a condominium they owned at the time. The plaintiffs argue that it was not appropriate
for Mrs. Tabor to include the cost of renovations as they claim that sum should have been
included in the value of the condominium itself, and not included with items of personal
property. Whether such value was appropriately included in the category “jewelry and
furnishings” is beside the point as the credible testimony supports the conclusion that it was.
The Tabors no longer owned the condominium when they filed their bankruptcy petition.
The Court notes that the $850,000 entry on the 2008 financial statement for “jewelry
and furnishings,” while a large sum, was only 1.34% of the Tabors’ indicated total assets at
the time. It is unlikely anyone preparing or reviewing the financial statement paid much
attention to that item.
The Tabors satisfactorily explained what happened to the assets that they no longer
had when they filed this bankruptcy case in 2014. There are no assets that are not accounted
for by their testimony and/or documents in evidence. The Court received no material
evidence that would cause it to doubt those conclusions.
Alleged False Oaths
The plaintiffs claim that the Tabors made false oaths by failing to properly reflect in
their schedules of assets and liabilities, and their statement of financial affairs (“SOFA”),
interests in the Porsche, the Tabor Agency, and the proceeds from the mortgage on the
Sailfish Point house. As is apparent from the discussion of these matters above, the Tabors
made no false oaths.
When Mr. Tabor made his initial filings with this Court, he did not realize that he had
personally co-signed the Porsche lease. Because he did not then know that he had an interest
in the Porsche, he did not knowingly omit the car or related payments from his disclosures.
Mr. Tabor did not have an equitable interest in the Tabor Agency. There was no
interest to disclose and so he could not have made a false oath by failing to list it.
Mr. Tabor assigned the mortgage on the Sailfish Point house to the Trust as collateral
for loans made by the Trust to Mr. Tabor’s business enterprise. Because the loans made by
the Trust were intended to preserve pending real estate projects for the ultimate benefit of
the Tabors’ creditors, it was appropriate for Mr. Tabor to use the Sailfish Point mortgage loan
as collateral. When the Trust was unable to collect on those loans, it properly realized on its
collateral and received the proceeds from the sale of the Sailfish Point home. The Trust did
not pursue Scott for a deficiency on the Sailfish Point mortgage as Scott was unable to pay
it, and he was a beneficiary of the Trust in any case. When the Tabors filed this bankruptcy
case, they had no interest in the mortgage loan proceeds and so their failure to list any such
interest was not a false oath.
Shelley had provided the Tabors with a loan secured by a mortgage on their
homestead. In the SOFA, the Tabors failed to list mortgage payments to her in the proper
place for payments to insiders. But they did list the mortgage loan obligation with Shelley’s
name and also listed the monthly payment amount. The Tabors testified credibly that they
relied on their prior bankruptcy counsel when preparing these documents and that they
provided him with all relevant documentation. The Court concludes that in failing to list the
mortgage loan payments to Shelley in one place, the Tabors did not intentionally do so and
so did not make a false oath.
The plaintiffs also argue that Mr. and Mrs. Tabor failed to list as income loan
payments received from Mercedes and gifts received from Shelley and Tracy. Mr. and Mrs.
Tabor testified that they believed those items were not income as contemplated in the
relevant schedule. The Court found that testimony credible and concludes that the Tabors
did not intend to deceive creditors by not listing those amounts as income.
At trial, Mrs. Tabor testified that she signed the schedules and SOFA without
reviewing them, instead relying on her counsel to have filled out the documents properly
based on information the Tabors provided. The plaintiffs argue that this indicates a reckless
disregard for the truth tantamount to an intent to deceive. In light of all the relevant
evidence, including the credible testimony of both Mr. and Mrs. Tabor, the Court finds that
neither of them intended to deceive the Court, the trustee, or creditors.
At an examination under Fed. R. Bankr. P. 2004 earlier in the bankruptcy case, Mr.
Tabor testified that the lease and insurance payments for the Porsche came from his mother,
Bernice. In reality, the Tabor Agency obtained funds from the Trust at the request of Shelley
and part of the brokerage commission from the sale of the Palm City property, which funds
were used to make those payments. When he testified at the Bankruptcy Rule 2004
examination, Mr. Tabor then believed that the Tabor Agency was the sole lessee of the vehicle
and viewed the Tabor Agency as Bernice’s entity. Mr. Tabor did not know at that time that
the Trust provided the Tabor Agency with funds to make payments relating to the Porsche.
In their post-trial brief, the plaintiffs ask the Court to consider certain of the Tabors’
testimony during the trial itself as additional false oaths. As discussed below, the Court will
not deem the Third Amended Complaint to be further amended to include these allegations.
Even if the Court were to consider the plaintiffs’ false oath allegations relating to testimony
during the trial itself, the evidence taken as a whole does not indicate that Mr. or Mrs. Tabor
knowingly testified falsely during the trial. Having carefully observed their testimony, and
considering all of the other evidence, the Court concludes that Mr. and Mrs. Tabor believed
what they were saying when testifying at trial and that they testified truthfully.
CONCLUSIONS OF LAW
Motion to Amend Third Amended Complaint under Fed. R. Civ. P. 15(b)(2)
In their post-trial brief, the plaintiffs seek to amend multiple counts of the Third
Amended Complaint under Fed. R. Civ. P. 15(b) made applicable here by Fed. R. Bankr. P.
7015. Rule 15(b)(2) permits a party to amend its pleadings to conform to the evidence “when
an issue not raised by the pleadings is tried by the parties’ express or implied consent.”
Implied consent arises when a party fails “to object to evidence raising issues outside of the
pleadings … as long as the evidence is not relevant to issues already within the pleadings.”7
If evidence is presented at trial without objection, and that evidence supports a new theory
for relief not addressed in the complaint, the complaint may be amended to reflect the new
theory for relief because the defendant is deemed to have consented. But if the evidence
presented at trial was relevant to any theory already presented in the complaint, it would be
unfair to deem the failure to object a consent because the defendant would have no reason to
object to evidence relevant to a claim presented in the complaint. In such an instance, the
complaint will not be deemed amended to add the new theory for relief.
In their post-trial brief, Mr. and Mrs. Tabor objected to most of the plaintiffs’ requests
to amend the Third Amended Complaint to conform to the evidence. In each instance where
the Tabors objected, the Court finds that the evidence pointed to by the plaintiffs was relevant
to issues already raised in the Third Amended Complaint. In those instances, the Tabors’
failure to object during trial does not amount to their consent to those requested
amendments. To the extent the Tabors objected to amendment under Rule 15(b)(2), the
plaintiffs’ requests to amend will be denied. Where the Tabors did not object, the Third
7 United States ex rel. Seminole Sheet Metal Co. v. SCI, Inc., 828 F.2d 671, 677 (11th Cir. 1987).
Amended Complaint will be deemed amended. This issue is addressed as appropriate in
connection with each count, below.
Counts I, II, and III: 11 U.S.C. § 727(a)(2)
11 U.S.C. § 727(a)(2)(A) requires denial of discharge if the objecting party establishes
(1) that the act complained of was done within one year prior to
the date the petition was filed, (2) with actual intent to hinder,
delay, or defraud a creditor, (3) that the act was that of the
debtor, and (4) that the act consisted of transferring, removing,
destroying, or concealing any of the debtor’s property.8
Section 727(a)(2)(B) requires denial of discharge as a result of the same acts concerning
property of the estate after the petition date. Transfers outside the one-year period before
the bankruptcy petition can lead to denial of discharge if the debtor continues to conceal the
property within the one-year period before the petition date or after filing.9 The objecting
party must prove actual intent to hinder, delay, or defraud creditors. Constructive fraud does
not satisfy section 727(a)(2).10
Considering the evidence as a whole, taking into account the consistently credible
testimony of Mr. Tabor, Mrs. Tabor, Shelley, Tracy, Scott, Brett, Mercedes, and William, the
Court concludes that the plaintiffs failed to meet their burden of proof on the issue of intent
under counts I, II, and III of the Third Amended Complaint. This is the case even if the Court
granted the plaintiffs’ motions to amend the Third Amended Complaint under Rule 15(b)(2)
in their entirety. The plaintiffs ask the Court to question the reliability of each of these
witnesses, pointing to alleged inconsistencies at trial and in certain of their testimony prior
to trial. Having observed their testimony at trial and having closely reviewed the plaintiffs’
and the Tabors’ arguments on these issues, the Court is satisfied that the claimed
8 Jennings v. Maxfield (In re Jennings), 533 F.3d 1333, 1339 (11th Cir. 2008).
9 See Coady v. D.A.N. Joint Venture III, L.P. (In re Coady), 588 F.3d 1312, 1316 (11th Cir. 2009).
10 See Equitable Bank v. Miller (In re Miller), 39 F.3d 301, 306 (11th Cir. 1994).
inconsistencies are adequately explained by the context of the questions and the witness’s
knowledge and understanding at the time of the testimony. The plaintiffs’ attempts to pick
apart their statements did not cause the Court to doubt the trial testimony of any of Mr.
Tabor, Mrs. Tabor, Shelley, Tracy, Scott, Brett, Mercedes, or William.
In count I, seeking denial of discharge under section 727(a)(2)(A), the plaintiffs allege
that Mr. Tabor concealed interests in the Trust, the proceeds from the mortgage on the
Sailfish Point home, the Porsche, and the Tabor Agency. Mr. Tabor established the Trust
more than a year before the bankruptcy filing. Likewise, the satisfaction of the Sailfish Point
mortgage occurred more than a year before the petition date. The plaintiffs allege that Mr.
Tabor continued to conceal his interest in the Trust and the proceeds from the Sailfish Point
mortgage. Note that the Third Amended Complaint alleged that Mr. Tabor concealed the
proceeds from the Sailfish Point mortgage loan, not an interest in the mortgage loan itself.
As discussed in detail in the Court’s findings of fact, none of these claims are supported
by the evidence. Mr. Tabor had no interest in the Trust to conceal. Mr. Tabor properly
assigned his interest in the Sailfish Point mortgage loan to the Trust to secure loans to his
real estate enterprise in hopes of bringing his existing deals to fruition and paying all of his
creditors. When the real estate enterprise was unable to repay those loans, the Trust
accepted the proceeds from the sale of the Sailfish Point home, then its collateral, in partial
satisfaction of the loans. Mr. Tabor had no right to the proceeds and so had nothing to
conceal. In any case, the proceeds from the Sailfish Point home were paid to the Trust more
than 2 years before the bankruptcy filing, so there were no proceeds that could have been
concealed within 1 year before the filing. Mr. Tabor did not realize that he had a personal
interest in the Porsche lease, believing until after his bankruptcy filing that the Tabor Agency
was the only lessee. While Mr. Tabor was listed as the broker for the Tabor Agency and was
a signatory on its bank account, he had no equitable interest in the Tabor Agency, which
remained solely in the control of Bernice until her death after this bankruptcy case was filed.
In their post-trial brief, the plaintiffs seek to amend count I to include continuing
concealment of an interest in the Sailfish Point mortgage loan itself (in addition to the
proceeds as alleged in the Third Amended Complaint). The Tabors objected to this request.
As the relevant evidence also related to allegations Mr. Tabor concealed an interest in the
Trust and the proceeds of the mortgage loan, matters already presented in the Third
Amended Complaint, the issue of continuing concealment of an interest in the Sailfish Point
mortgage was “not tried by the parties’ express or complied consent.” The Court will deny
the plaintiffs’ request to amend count I to include a claim based on continuing concealment
of an interest in the mortgage loan itself. But even if the Third Amended Complaint was
amended to include the requested theory, the evidence does not support relief. As discussed
in detail in the Court’s findings of fact, Mr. Tabor properly assigned his interest in the Sailfish
Point mortgage loan to the Trust to secure loans to his business enterprise. Mr. Tabor did
not retain an interest in the mortgage loan that could have been concealed.
In count III, seeking denial of discharge under section 727(a)(2)(B), the plaintiffs
allege that Mr. Tabor concealed the same interests listed in count I, plus an alleged interest
in the broker’s commission from the sale of the Palm City property, after the bankruptcy
filing. In their post-trial brief, as with count I, the plaintiffs seek to amend count III to add
a claim based on the alleged concealment of an interest in the Sailfish Point mortgage loan
itself. In this instance, however, the Tabors did not object. The Court deems the Third
Amended Complaint further amended to include in count III a claim based on the alleged
post-petition concealment of an interest in the Sailfish Point mortgage loan.
The Court’s analysis of the claims in count I applies equally to the relief requested in
count III with regard to the same alleged property interests. The amended claim relating to
the Sailfish Point mortgage loan itself is covered by the Court’s analysis regarding the
proceeds from that loan. The only alleged interest pointed to in count III not addressed in
count I is the commission from the sale of the Palm City property. The Trust agreed to pay
a commission as a result of work done by Yahel. The commission was paid to the Tabor
Agency because Yahel was not herself a broker, only an agent. The Tabor Agency paid part
of the commission to Yahel and used the remainder to make payments related to the Porsche.
At all relevant times, Bernice was the sole owner of the Tabor Agency. The portion of the
brokerage commission that remained with the Tabor Agency was usable in her discretion.
That Bernice permitted those funds to be used in connection with the Porsche does not mean
that Mr. Tabor had any personal interest in the Palm City commission. Mr. Tabor could not
conceal an interest he did not own. The plaintiffs did not meet their burden of proof on any
aspect of the relief requested in count III, as amended.
In count II, seeking denial of discharge under section 727(a)(2)(A), the plaintiffs allege
that Mrs. Tabor took out a loan on and gave a lien on her previously unencumbered, aging
Jaguar with the intent to hinder, delay, or defraud creditors. This was the least convincing
claim presented in the Third Amended Complaint, and the evidence was unsurprisingly
lacking. Mrs. Tabor has not had a career outside her home. She devoted her adult life to
raising her three children and caring for her household. At the time she took out a loan on
her vehicle, she had already sold all of her valuable jewelry, including her engagement ring,
to assist the couple in meeting their financial needs. She testified credibly that she obtained
the loan because doing so was one way she could help pay their bills. That Mr. and Mrs.
Tabor had consulted with a bankruptcy lawyer prior to her taking out the car loan does not
change the Court’s view on this issue. There was no evidence offered that Mrs. Tabor
obtained advice that she would be better off having an encumbered vehicle if and when they
filed bankruptcy. Indeed, there was no evidence that Mrs. Tabor realized that was the case.
More troubling, the plaintiffs’ suggestion that the timing of the loan raises suspicion casts
aspersions on the Tabors’ initial bankruptcy counsel. The Court will not conclude, without
evidence, that he potentially violated the rules of ethics by providing such advice. The
plaintiffs argue that the balance in the Tabors’ personal bank account does not jibe with Mrs.
Tabor’s testimony. But the balance in their account on any particular date is not persuasive.
It was clear that when Mrs. Tabor took out the car loan the Tabors had few resources to pay
their normal expenses. The plaintiffs did not meet their burden of proof on count II.
Count IV: 11 U.S.C. § 727(a)(3)
Section 727(a)(3) requires denial of discharge where a debtor unjustifiably failed to
keep and preserve records detailing the debtor’s financial condition and business
transactions for a reasonable period before filing.11 Under section 727(a)(3), the objecting
party bears the initial burden of proving deficient recordkeeping. The debtor then bears the
burden of demonstrating adequate justification.12 The complexity of a debtor’s finances, the
debtor’s education, and the debtor’s business sophistication, among other factors, informs
whether the circumstances justify a debtor’s failure to keep and preserve records.13
In Count IV of the Third Amended Complaint, the plaintiffs allege that Mr. and Mrs.
Tabor failed to keep or preserve records “from which [the] disappearance of hundreds of
thousands of dollars in furnishings can be ascertained.”14 The allegations focus only on
records relating to “furnishings” the Tabors had several years before they filed bankruptcy.
In their post-trial brief, the plaintiffs argue that the values given for “jewelry and
furnishings” in the 2008 personal financial statement, compared with the values provided in
their schedules filed in this case, indicate a loss of assets that is not reflected in records
11 See 6 COLLIER ON BANKRUPTCY § 727.03 (16th Ed. 2021).
12 See In re Hahn, 362 B.R. 542, 548 (Bankr. S.D. Fla. 2007).
13 See Id.
14 Cmpl. ¶ 126.
retained by the Tabors. The allegations in the Third Amended Complaint do not align with
the argument presented in the post-trial brief. But even if the Court considers the evidence
offered in connection with both jewelry and furnishings, the Court concludes that the Tabors
retained appropriate records, including records relating to the sale of jewelry, to answer the
plaintiffs’ allegations in count IV.
In any case, the plaintiffs waived relief under count IV. During closing argument,
when addressing the claims in count IV, counsel for the plaintiffs stated: “We won’t be going
forward with the document one.”15 For this independent reason, the plaintiffs are not entitled
to relief under count IV.
Count V: 11 U.S.C. § 727(a)(4)(A)
Section 727(a)(4)(A) requires denial of discharge if a debtor knowingly and
fraudulently made a material false oath or account in or in connection with their bankruptcy
case.16 Omissions from the schedules or SOFA, if knowing and fraudulent, can result in
denial of discharge.17 False oaths are material if they relate to the debtor’s financial situation
and business transactions or to the discovery, disposition, or existence of assets and
property.18
The objecting party must show that the debtor knew the statement was false and
made it with the intent to deceive.19 A series of false statements, evidencing a reckless
disregard for the truth, can support the inference of fraudulent intent.20 A debtor’s failure to
15 Trial Transcript p. 1297 l. 11-13.
16 See Swicegood v. Ginn, 924 F.2d 230 (11th Cir. 1991).
17 Id.
18 See Chalik v. Moorehead (In re Chalik), 748 F.2d 616, 618 (11th Cir. 1984).
19 See In re Kempff, 847 F.3d 444, 449 (7th Cir. 2017).
20 See Stamat v. Neary, 635 F.3d 974, 982 (7th Cir. 2011).
review filings prior to signing them may show a reckless disregard for the truth.21 However,
good faith reliance on the advice of counsel may negate a finding of fraudulent intent.22
In the Third Amended Complaint, the plaintiffs allege that the Tabors made false
oaths as follows: in the schedules, Mr. Tabor did not disclose his interest in the Porsche or
the source of lease and insurance payments; during an examination under Bankruptcy Rule
2004, Mr. Tabor testified that the Porsche lease and insurance payments came from his
mother, Bernice; Mr. and Mrs. Tabor appeared to testify differently about Mrs. Tabor’s
motivation in taking out the loan on her Jaguar; in the schedules and SOFA, Mr. Tabor did
not disclose his equitable interest in the Trust, the Tabor Agency, or the proceeds from the
mortgage on the Sailfish Point home; and the Tabors did not disclose mortgage payments to
Shelley in that part of the SOFA covering payments to insiders.
The evidence does not support any of these claims. When they completed their
schedules, Mr. Tabor did not realize that he had co-signed the Porsche lease. Believing that
the Porsche was leased solely by the Tabor Agency, he did not list the car as his own. Because
Mr. Tabor thought the Tabor Agency was the sole lessee, that the Tabor Agency paid the
lease and insurance payments was not responsive to any component of the schedules or
SOFA. When Mr. Tabor previously testified that Bernice paid the Porsche lease and
insurance, this was consistent with his understanding that her company, the Tabor Agency,
was responsible for those expenses. Any inconsistencies between Mr. and Mrs. Tabor’s
testimony regarding why Mrs. Tabor took out the loan on her Jaguar are not material and,
in any case, the plaintiffs did not argue this component of count V in their post-trial brief.
Mr. Tabor did not have an equitable interest in the Trust, the Tabor Agency, or the proceeds
from the Sailfish Point mortgage, and so his failure to list those items in the schedules was
21 See Retz v. Samson (In re Retz), 606 F.3d 1189 (9th Cir. 2010).
22 See First Beverly Bank v. Adeeb (In re Adeeb) 787 F.2d 1339, 1343 (9th Cir. 1986).
appropriate. In any case, the plaintiffs failed to address those claims under count V in their
post-trial brief. That the Tabors did not list mortgage payments to Shelley in the SOFA as
payments to an insider is not a material misstatement as they disclosed both the existence
of the mortgage claim held by Mr. Tabor’s sister and the amount of the payments. Their
failure to include those payments elsewhere in the SOFA was an oversight.
In their post-trial brief, the plaintiffs allege additional false oaths not included in the
Third Amended Complaint. These include: the alleged failure to disclose payments received
from Mercedes, Shelley, and Tracy; Mr. Tabor’s testimony at a February 2016 deposition
regarding certain payments received from Mercedes; Mrs. Tabor’s testimony at trial
regarding the theft of her jewelry; and Mr. Tabor’s testimony at trial about the Tabor
Agency’s finances. In their post-trial brief, Mr. and Mrs. Tabor objected to the Third
Amended Complaint being amended to reflect these additional claims. Because the evidence
pointed to in support of the new theories for relief was relevant to issues already presented
in the Third Amended Complaint, these issues were not “tried by the parties’ express or
implied consent” under Rule 15(b), and the Court will not consider the proposed additional
claims. But even if the Court considered all of these new theories under count V, the plaintiffs
would not meet their burden of proof. Each of these additional matters was appropriately
responded to by the Tabors and the Court is convinced that Mr. and Mrs. Tabor did not
knowingly and fraudulently mislead anyone on these issues.
Count VI: 11 U.S.C. § 727(a)(5)
Section 727(a)(5) requires denial of discharge to debtors who fail to satisfactorily
explain “any loss of assets or deficiency of assets to meet the debtor’s liabilities.” The
objecting party bears the initial burden of proving a loss of assets. The burden then shifts to
the debtor to provide a satisfactory explanation.23
As with count IV, the plaintiffs point to personal financial statements provided by Mr.
and Mrs. Tabor at least 6 years before the bankruptcy filing as compared with assets
disclosed in their schedules in this case. In count VI of the Third Amended Complaint, the
plaintiffs allege the Tabors failed to satisfactorily explain a loss of “furnishings” reflected in
their financial statements, without mentioning jewelry. In their post-trial brief, the plaintiffs
refer to both “jewelry and furnishings.” Mr. and Mrs. Tabor did not object to this apparent
expansion of the claim presented in count VI, and so the Third Amended Complaint is deemed
further amended to reflect the claim as presented in the plaintiffs’ post-trial brief.
As more fully discussed in the Court’s findings of fact, the Tabors satisfactorily
explained what happened to the assets that they no longer had when they filed this
bankruptcy case in 2014. There are no assets that are not accounted for by their testimony
and/or documents in evidence. The Court received no material evidence that would cause it
to doubt that conclusion. The plaintiffs did not meet their burden on count VI.
Collateral Estoppel
In their post-trial brief, Mr. and Mrs. Tabor argue that certain of the Court’s findings
when it denied a motion to dismiss their bankruptcy case as a bad faith failing are entitled
to collateral estoppel effect in this adversary proceeding. See ECF No. 295, Case No. 14-
20731. In light of the Court’s analysis above, it is not necessary for the Court to address
whether any findings previously made by the Court are binding here.
23 See Hawley v. Cement Indus. (In re Hawley) 51 F.3d 246, 249 (11th Cir. 1995).
CONCLUSION
The plaintiffs did not meet their burden of proof on counts I, II, III, V and VI, and
waived relief under count IV. Even if the plaintiffs had not waived relief under count IV,
they did not meet their burden of proof on count IV. The Court will deny all relief
requested in the Third Amended Complaint (as amended after trial to the extent provided
in this Memorandum Opinion) and will enter separate judgment in favor of the defendants,
Martin Tabor and Abby Tabor, on all counts.
###
Copies furnished to all parties of record by the Clerk.