United States Bankruptcy Appellate Panel of the Eighth Circuit
Submitted: September 21, 2018
from United States Bankruptcy Court for the District of
Minnesota - Minneapolis
SCHERMER, NAIL, and SHODEEN, Bankruptcy Judges.
SCHERMER, BANKRUPTCY JUDGE
Christopher Dykes and Sharon Luster Dykes (Debtors) appeal
the bankruptcy court's judgment denying their discharge. We
have jurisdiction over this appeal from the final judgment of
the bankruptcy court. See 28 U.S.C. § 158(b).
For the reasons that follow, we affirm.
issue on appeal is whether the bankruptcy court properly
denied the Debtors' discharge under Bankruptcy Code
§ 727(a). We hold that it did.
26, 2016, the Debtors filed a petition for relief under
Chapter 7 of the United States Bankruptcy Code. Debtor Daryll
Dykes (Mr. Dykes) is trained as a physician and a surgeon,
and holds a law degree and a Ph.D. Sharon Dykes (Mrs.
Dykes) is also trained as a physician and
surgeon. As of the petition date, or shortly prior to that
time, the Debtors were practicing medicine, either
independently or through professional corporations. Mr. Dykes
served as a Robert Wood Johnson Foundation Health Policy
Fellow in Washington, D.C.
Debtors' bankruptcy schedules showed debts exceeding $5
million. Schedule I lists monthly income of approximately $9,
700.00 for Mr. Dykes and approximately $6, 900.00 for Mrs.
Debtors filed their bankruptcy cases due to debts and
judgments owed to creditors including judgments against the
Debtors in excess of $4, 146, 000.00 arising from the
construction of their home. The Debtors lost their home to a
foreclosure in 2011. Mr. Dykes testified that after the
Debtors' banker was convicted of mortgage fraud,
including for the mortgage loan on the Debtors' home, the
bank refused to restructure the Debtors' loan, and a
balloon payment became due. The Debtors were not able to make
the balloon payment or obtain alternate financing to avoid
the foreclosure. The Debtors were forced to move out of their
foreclosed home in 2012.
the Debtors moved out of their home in 2012, they moved their
personal property into three large 30-foot rented storage
bins. The Debtors stopped paying the rent for storage, and
with an amount owing of approximately $10, 000.00, the
property in the bins was forfeited and sold pre-petition. Mr.
Dykes testified that the property in the storage bins was
worth hundreds of thousands of dollars. There has not been an
accounting for the property in the storage bins.
of the foreclosure of their home, Mrs. Dykes rented a house
in Rosemount, Minnesota, and Mr. Dykes resided at an
apartment in Minneapolis. They both moved later to a house in
Minneapolis where Mrs. Dykes resided at the time of trial. At
the time of trial, Mr. Dykes spent most of his time in
Washington, D.C., where his fellowship was located.
Dykes testified that the Debtors' home loan ultimately
led to their bankruptcy filing. After years of litigation
between the bank and the Debtors, the bank obtained a
judgment against the Debtors and levied the interest of Mr.
Dykes in his medical practice. According to Mr. Dykes,
because of this, in 2012 his income dropped from well over a
million dollars a year to "essentially zero."
Although Mr. Dykes began to rebuild his medical practice,
events in 2014 and 2016 caused the practice to suffer.
November 2008 and March 2012, Mr. Dykes purchased dozens of
watches from Bellusso Jewelers in Las Vegas, Nevada and
ultimately accrued a debt of $390, 700.00 to the jeweler. Mr.
Dykes testified that after an initial period during which he
and Ezra Bekhor of Bellusso Jewelers followed a formal
process for the purchase of watches, which included paperwork
for each sale, the process became less formal, and the
jeweler shipped to Mr. Dykes multiple watches worth tens of
thousands of dollars by Federal Express without paperwork
from the jeweler. Mr. Dykes testified that he would return
unwanted watches to the jeweler the same way. According to
Mr. Dykes, he once received a time piece worth approximately
$107, 000.00 without paperwork, payment, or signature, and he
returned the timepiece the same way. By the end of his
relationship with the jeweler, Mr. Dykes had little to no
paperwork concerning many of the watches still in his
to Mr. Dykes, the watches he collected were not as valuable
without their original boxes or paperwork. At trial Mr. Dykes
no longer had the ...