Del Rosario v. Legenza (In re Legenza)
- Summarized by David Treacy , U.S. Bankruptcy Court, Eastern District of Kentucky
- 8 months 12 hours ago
- Case Type:
- Consumer
- Case Status:
- Affirmed
- Citation:
- 23-1322-bk (2nd Circuit, Jun 30,2025) Not Published
- Tag(s):
-
- Ruling:
- The U.S. Court of Appeals for the Second Circuit upheld a bankruptcy court's summary judgment ruling against a debtor, denying him a discharge pursuant to 11 U.S.C. §727(a)(3). The bankruptcy court did not err in concluding, based on the record, that there was no genuine dispute of material fact that the debtor (1) failed to keep and preserve sufficient records from which his financial condition and business transactions could be ascertained, and (2) lacked a valid justification for this failure.
- Procedural context:
- The Second Circuit reviewed the bankruptcy court's summary judgment ruling on the § 727(a)(3) claim under a de novo standard. In a footnote, the circuit court noted: "We have held that, at least in some circumstances, a 'bankruptcy court's decision to deny a discharge [under section 727] is reviewed for abuse of discretion.'" But the court did not explain whether the circumstances allowed it to apply the more deferential standard of review in this case, stating: "Whether we apply de novo or abuse of discretion review here, the outcome is the same."
- Facts:
- Plaintiff/Appellee/Creditor Gina Del Rosario loaned funds to Defendant/Appellant/Debtor Richard Joseph Legenza to develop a casino-based blackjack game pursuant to a “Loan and Royalty Agreement.” Debtor breached the agreement, leading Creditor to assert her right to cancel it and request the return of her funds. When Debtor did not return the funds, Creditor filed a Nevada state court lawsuit against him. Before entry of a judgment in that case, Debtor moved his residence and filed a bankruptcy petition in the U.S. Bankruptcy Court for the Western District of New York. Creditor then commenced an adversary proceeding to bar Debtor's receipt of a discharge pursuant to, inter alia, 11 U.S.C. §727(a)(3). There was no dispute that Debtor did not have records relating to the funds Creditor loaned to him; he "'chose to keep the proceeds of [Creditor]’s loan in the form of cash' even though he did maintain bank accounts for other purposes; as a result, there were no statements to track the funds." Debtor also "lost his cash journal and other records when he moved from Las Vegas to New York, entrusting those materials to a moving company. [Debtor] contend[ed] that it was reasonable to entrust the papers to a moving company, and that under all the circumstances, his failure to maintain adequate records was justified." The parties filed cross-motions for summary judgment. Based on the record, the bankruptcy court granted a summary judgment to Creditor on the § 727(a)(3) claim, finding Debtor failed to justify the absence of all pertinent financial records and could not rely solely on his mental reconstruction of his transactions as a substitute. Debtor appealed the bankruptcy court's ruling to the U.S. District Court for the Western District of New York, which affirmed. Debtor then filed a timely appeal to the Second Circuit.
- Judge(s):
- Chin, Merriam, Kahn
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