FILED JUL 09 2013 1 SUSAN M SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. AZ-12-1297-TaAhJu ) 6 HOWARD FLETCHER THRUSTON, ) Bk. No. 10-27593-RTB ) 7 Debtor. ) Adv. No. 10-02156-RTB ______________________________) 8 ) HOWARD FLETCHER THRUSTON, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) DAVID M. REAVES, Chapter 7 ) 12 Trustee, ) ) 13 Appellee. ) ) 14 Argued and Submitted on June 21, 2013 15 at Phoenix, Arizona 16 Filed - July 9, 2013 17 Appeal from the United States Bankruptcy Court for the District of Arizona 18 Honorable Redfield T. Baum, Sr., Bankruptcy Judge, Presiding 19 20 Appearances: Howard Fletcher Thruston, appellant, argued pro se; Misty W. Weigle of Reaves Law Group argued for 21 appellee David M. Reaves, Chapter 7 Trustee. 22 Before: TAYLOR, AHART,** and JURY, Bankruptcy Judges. 23 24 25 * This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may 26 have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1. 27 ** The Honorable Alan M. Ahart, Bankruptcy Judge for the 28 Central District of California, sitting by designation. 1 INTRODUCTION 2 David M. Reaves, chapter 7 trustee (“Trustee”), moved for 3 summary judgment (“MSJ”) on his adversary complaint objecting to 4 the discharge of Howard Fletcher Thruston (“Debtor”) pursuant to 5 § 727(a)(2), (a)(3), and (a)(4).1 The bankruptcy court granted 6 the MSJ and subsequently entered a judgment denying the Debtor’s 7 discharge. The Debtor appeals pro se from that judgment. We 8 VACATE the summary judgment order and judgment and REMAND to the 9 bankruptcy court for further proceedings consistent with this 10 memorandum. 11 FACTS 12 The Debtor is married to Morgen Thruston (“Mrs. Thruston”) 13 and has been since at least 1986. During the course of their 14 marriage (and prior to the petition date), Mrs. Thruston acquired 15 title to various real properties in Iowa and Arizona (the “Iowa 16 Property,” the “Citrus Property,” the “Northridge Property”, and 17 the “Wagon Wheel Property”) (collectively hereafter, the 18 “Properties”). On the petition date, Mrs. Thruston also owned a 19 2008 Hummer, leased a 2007 GMC truck, and possessed a 100% 20 membership interest in Rosemont, LLC. In turn, Rosemont, LLC 21 separately owned commercial real property in Arizona. Finally, 22 the Debtor and Mrs. Thruston are or were the sole officers of 23 Dynasty Homes, Inc. (“Dynasty Homes”). 24 On August 30, 2010, the Debtor filed a skeletal chapter 7 25 bankruptcy petition; he did not file schedules or a statement of 26 financial affairs (“SOFA”). Mrs. Thruston did not join in the 27 1 Unless otherwise indicated, all chapter and section 28 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
- 2 - 1 Debtor’s bankruptcy petition. 2 Following extensions of the time to file the requisite 3 documents, the Debtor filed his schedules and SOFA in October of 4 2010. His schedules were essentially blank; the Debtor listed 5 one checking account, a real estate license, and a contractor’s 6 license on his Schedule B. On his Schedule I, he indicated that 7 he was a self-employed real estate broker/general contractor in 8 Dynasty Homes and that his wife was a homemaker. The Debtor 9 disclosed Dynasty Homes on his SOFA, but erroneously listed 10 himself as “President” (and his wife with a “?” next to her name) 11 in response to Item 21. He also attached a list of 12 lawsuits, 12 in which he identified the name of the opposing party, the case 13 number, the name of the court, and the nature of the lawsuit. 14 The Debtor, however, did not schedule any real properties, 15 vehicles, or creditors. In executing his Declaration Concerning 16 Debtor’s Schedules, the Debtor typed “[i]ncomplete–need help” 17 next to his signature. 18 The Trustee filed an adversary complaint objecting to the 19 Debtor’s discharge under § 727(a)(2), (a)(3), and (a)(4). The 20 complaint alleged that the Debtor failed to disclose significant 21 assets held by Mrs. Thruston and to provide a number of items of 22 information, including bank statements, tax returns, and real 23 property deeds. 24 The Debtor subsequently amended2 his schedules and SOFA; he 25 disclosed a few more personal property assets, identified 26 27 2 This was not based on the Debtor's own volition, but rather, in response to the bankruptcy court’s express instruction 28 to the Debtor at a hearing.
- 3 - 1 Mrs. Thruston as a codebtor, added numerous creditors to his 2 Schedule F, and listed a few executory contracts. But his 3 schedules A, C, D, and E remained blank. 4 Nine months after filing the adversary complaint objecting 5 to discharge, the Trustee moved for summary judgment. He stated 6 that as of the date of petition, the Debtor or Mrs. Thruston 7 owned the Properties and that Mrs. Thruston possessed an interest 8 in Rosemont, LLC, the Wagon Wheel Property, and both vehicles. 9 Consequently, the Debtor possessed a community property interest 10 in all of these properties but failed to disclose the assets on 11 his schedules or SOFA. He also asserted that Mrs. Thruston 12 transferred her membership interest in Rosemont, LLC postpetition 13 without authorization from the bankruptcy court and that her 14 membership interest was extremely valuable. 15 The Trustee pointed out that during the pendency of the 16 Debtor’s bankruptcy case, secured creditors moved for relief from 17 the automatic stay as to the Properties. In each instance, the 18 Debtor opposed the stay relief motion and asserted an interest in 19 the property at issue. He also pointed out that Mrs. Thruston, 20 Dynasty Homes, and Rosemont, LLC all filed for bankruptcy relief 21 after Debtor initiated his bankruptcy case. The Trustee asserted 22 that those bankruptcy cases were plagued by the same maladies as 23 the Debtor's bankruptcy case: a bare bones petition, no initial 24 schedules or SOFA's, and a litany of emergency motions in lieu of 25 responsive documents. As such, the Trustee argued that the 26 Debtor concealed or transferred property of the estate, concealed 27 records relating to his financial condition and business 28 transactions, and knowingly and fraudulently omitted assets from
- 4 - 1 his schedules and SOFA.3 2 In support of the MSJ, the Trustee submitted a statement of 3 facts, a number of exhibits, and his affidavit. Among other 4 things, the exhibits included deeds related to the various real 5 properties. These deeds evidenced title in the name of 6 Mr. Thruston. At least one exhibit was a disclaimer deed wherein 7 Mr. Thruston affirmatively disavowed any interest in the Wagon 8 Wheel Property. 9 Rather than respond to the MSJ, the Debtor instead filed an 10 emergency motion to extend the response deadline, which the 11 bankruptcy court granted. 12 The Debtor subsequently submitted his response to the MSJ 13 and attached several exhibits; but he did not file a declaration 14 or affidavit. First, he contested the assertion that he never 15 scheduled his creditors, stating that he submitted a list of 16 creditors one week after filing his bankruptcy petition. He also 17 contested the assertion that he hid or concealed assets, arguing 18 that the real and personal properties identified by the Trustee 19 were Mrs. Thruston’s sole and separate property. The Debtor 20 argued that, in any event, the banks foreclosed on the Citrus 21 Property and Northridge Property approximately eight months prior 22 to the petition date. In support of this assertion, he attached 23 two trustee's deeds of sales with respect to those properties. 24 The Debtor further argued that Mrs. Thruston sold the Wagon Wheel 25 Property and that the remaining properties lacked equity. 26 3 The Trustee also objected to discharge under 27 § 523(a)(3)(B). That basis was not expressly included in the Judgment and neither party discusses it on appeal. Thus, we do 28 not consider it.
- 5 - 1 In reply, the Trustee reiterated that the Debtor was 2 required to disclose all assets. The Trustee maintained that, 3 notwithstanding the prepetition foreclosures, the Debtor 4 affirmatively asserted interests in the Citrus and Northridge 5 properties when he opposed the stay relief motions. He also 6 reiterated that regardless of title, the community property 7 presumption applied to the properties and, thus, that the Debtor 8 concealed property of the estate by failing to properly disclose 9 the various assets held by Mrs. Thruston. Finally, the Trustee 10 maintained that whether the properties contained equity or 11 whether creditors were injured by the Debtor’s nondisclosure was 12 irrelevant given the Debtor’s obligations and duties under the 13 Bankruptcy Code. 14 The parties presented arguments to the bankruptcy court on 15 March 22, 2012. The Trustee argued that the pattern of delay and 16 nonfeasance in the Debtor's bankruptcy case – in conjunction with 17 the bankruptcy cases of Mrs. Thruston and their related 18 entities – demonstrated an abuse of the bankruptcy system that 19 precluded discharge. He also called attention to the fact that, 20 even if the Debtor executed disclaimer deeds on the real 21 properties, no such deeds existed with respect to the membership 22 interest in Rosemont, LLC or the vehicles. 23 The Debtor relied, in part, on his pro se status. He 24 emphatically argued that he disclosed everything required of him 25 and contested that he concealed or acted to defraud anyone. The 26 Debtor conceded, however, that he and his wife continued to 27 reside in the Northridge Property. At the conclusion of 28 arguments, the bankruptcy court took the matter under submission.
- 6 - 1 The bankruptcy court subsequently entered a minute 2 entry/order (“SJ Order”) granting the MSJ. It determined that 3 the Debtor asserted interests in the Properties in his objections 4 to the stay relief motions. Based on that and the Debtor’s 5 failure to disclose other assets, the bankruptcy court determined 6 that the Debtor concealed and failed to disclose significant 7 assets within one year from filing bankruptcy. It also found 8 that the Debtor made a false oath as to real and personal 9 properties. The bankruptcy court, however, made no express 10 findings as to the Debtor’s state of mind and made no reference 11 to the § 727(a)(3) claim. 12 The Debtor next filed an emergency motion for 13 reconsideration on the SJ Order. Before the bankruptcy court 14 ruled on the Debtor’s emergency motion, however, it entered a 15 judgment (“Judgment”) denying the Debtor’s discharge under 16 § 727(a)(2), (a)(3), and (a)(4). The Debtor timely filed his 17 notice of appeal. 18 JURISDICTION 19 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 20 §§ 1334 and 157(b)(2)(J). If the judgment is final, then 21 we have jurisdiction under 28 U.S.C. § 158(b). 22 Because the Debtor filed his notice of appeal after moving 23 for reconsideration, the BAP Clerk issued an order requiring 24 clarification regarding jurisdiction. The order provided that 25 the motion for reconsideration tolled the time to appeal until 26 entry of an order disposing of that motion. The order, thus, 27 directed that the Debtor respond and provide a copy of the order 28 from the bankruptcy court ruling on his motion for
- 7 - 1 reconsideration or explain the steps taken to obtain an order. 2 The Debtor responded and provided a minute entry/order from the 3 bankruptcy court denying the Debtor’s motion for reconsideration. 4 Therefore, we have jurisdiction over this appeal. 5 ISSUE4 6 Did the bankruptcy court err in denying the Debtor’s 7 discharge under § 727(a) when it granted summary judgment in 8 favor of the Trustee? 9 STANDARD OF REVIEW 10 In an action for denial of discharge, we review: (1) the 11 bankruptcy court's determinations of the historical facts for 12 clear error; (2) its selection of the applicable legal rules 13 under § 727 de novo; and (3) its application of the facts to 14 those rules requiring the exercise of judgments about values 15 animating the rules de novo. Searles v. Riley (In re Searles), 16 317 B.R. 368, 373 (9th Cir. BAP 2004) (citation omitted), aff'd, 17 212 Fed. Appx. 589 (9th Cir. 2006). 18 We review an order granting summary judgment de novo, and, 19 thus, we are bound by the same principles as the bankruptcy 20 court. Marciano v. Fahs (In re Marciano), 459 B.R. 27, 35 (9th 21 Cir. BAP 2011), aff'd, 708 F.3d 1123 (9th Cir. 2013). 22 23 4 We do not address other issues identified by the Debtor on 24 appeal, such as whether the Trustee committed fraud and perjury during the course of the proceedings; whether the bankruptcy 25 court erred in permitting the Trustee to retain his own law firm as counsel; whether the bankruptcy court showed “substantial 26 favoritism” to the Trustee; or whether the bankruptcy court permitted violations of the Debtor’s constitutional rights. 27 These issues were not raised before the bankruptcy court, not properly raised or addressed in the Debtor’s opening brief, or 28 simply lack a cognizable legal basis.
- 8 - 1 DISCUSSION 2 On appeal, the Debtor argues that the bankruptcy court erred 3 in granting the MSJ and, consequently, in denying his chapter 7 4 discharge.5 Based on the Debtor’s pro se status – both before 5 the bankruptcy court and on appeal – we liberally construe his 6 pleadings and other documents. See Nilsen v. Neilson 7 (In re Cedar Funding, Inc.), 419 B.R. 807, 816 (9th Cir. BAP 8 2009). 9 In general, the bankruptcy court must grant a discharge to 10 an individual chapter 7 debtor unless one of the twelve 11 enumerated grounds in § 727(a) is satisfied. In the spirit of 12 the “fresh start” principles that the Bankruptcy Code embodies, 13 claims for denial of discharge are liberally construed in favor 14 of the debtor and against the objector to discharge. Khalil v. 15 Developers Sur. & Indem. Co. (In re Khalil), 379 B.R. 163, 172 16 (9th Cir. BAP 2007), aff'd, 578 F.3d 1167 (9th Cir. 2009). The 17 objector to discharge, thus, bears the burden to prove by a 18 preponderance of the evidence that the debtor's discharge should 19 be denied under an enumerated ground of § 727(a). Id. 20 Summary judgment is appropriate when there is no genuine 21 dispute of material fact, and, when viewing the evidence most 22 favorably to the non-moving party, the movant is entitled to 23 prevail as a matter of law. Fed. R. Civ. P. 56 (incorporated 24 into adversary proceedings by Fed. R. Bankr. P. 7056); Celotex 25 5 The Debtor spends a significant amount of his opening 26 brief discussing his lengthy litigation with National Bank of Arizona and includes documents related to that litigation in his 27 excerpts of record. While that litigation is clearly important to the Debtor, it bears little to no relevance to the present 28 appeal, and, therefore, we do not address it in this memorandum.
- 9 - 1 Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Substantive law 2 governs the materiality of a fact; thus, a fact is material if, 3 under applicable substantive law, it may affect the outcome of 4 the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 5 (1986). All justifiable inferences are to be drawn in favor of 6 the non-moving party. Id. at 255. 7 The movant must first identify "those portions of the 8 pleadings, depositions, answers to interrogatories, and 9 admissions on file, together with the affidavits, if any, which 10 it believes demonstrate the absence of a genuine [dispute] of 11 material fact.” Caneva v. Sun Cmtys. Operating Ltd. P’ship 12 (In re Caneva), 550 F.3d 755, 761 (9th Cir. 2008) (citing Celotex 13 Corp., 477 U.S. at 323)). Once the movant meets its burden, the 14 burden shifts to the non-moving party to "set out specific facts 15 showing a genuine issue for trial." Id. (citing Fed R. Civ. P. 16 56(e)(2)). 17 The non-moving party, however, cannot rest on mere 18 allegations or denials in his or her pleadings. Rather, the 19 non-moving party must present admissible evidence showing that 20 there is a genuine dispute for trial. Fed. R. Civ. P. 56(e). As 21 such, “[b]riefs and oral argument do not constitute evidence.” 22 In re Hill, 450 B.R. 885, 892 (9th Cir. BAP 2011); see also 23 British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir. 24 1978) ("[L]egal memoranda and oral argument are not evidence, and 25 they cannot by themselves create a factual dispute sufficient to 26 defeat a summary judgment motion"). It is error, however, to 27 grant summary judgment simply because the opponent failed to 28 oppose. N. Slope Borough v. Rogstad (In re Rogstad), 126 F.3d
- 10 - 1 1224, 1227 (9th Cir. 1997). Again, the movant must meet its 2 initial burden as to all elements of the cause of action. 3 Here, in order to establish that he was entitled to summary 4 judgment, the Trustee needed to show that there were no material 5 factual disputes regarding the denial of the Debtor's discharge 6 under § 727(a)(2), (a)(3), or (a)(4). We first address 7 § 727(a)(3). 8 Section 727(a)(3) 9 Section 727(a)(3) provides that denial of discharge is 10 warranted where, among other things, the debtor concealed or 11 falsified recorded information, including books, documents, 12 records, and papers, from which the debtor's financial condition 13 or business transactions might be ascertained. 14 The objector to discharge states its prima facie case under 15 § 727(a)(3) by showing: (1) that the debtor failed to maintain 16 and preserve adequate records; and (2) that this failure rendered 17 it impossible to ascertain the debtor's financial condition and 18 material business transactions. In re Caneva, 550 F.3d at 761 19 (citation and quotation marks omitted). Once the objector shows 20 inadequate or nonexistent records, the burden shifts to the 21 debtor to justify the inadequacy or nonexistence. Id. (citation 22 and quotation marks omitted). 23 Here, the Trustee argued that the Debtor’s multiple delays 24 in filing schedules and SOFA’s in his bankruptcy case and in the 25 bankruptcy cases of Mrs. Thruston and related entities was 26 tantamount to concealing information regarding the Debtor’s 27 financial condition and business transactions. In the adversary 28 complaint, however, the Trustee asserted that the Debtor failed
- 11 - 1 to provide information relating to real properties, bank 2 accounts, and tax returns. 3 In connection with the MSJ, the bankruptcy court made no 4 findings as to inadequate or nonexistent documents. With one 5 exception,6 the record is devoid of a discussion of specific 6 allegedly inadequate or nonexistent documents. Aside from the 7 adversary complaint, the Trustee did not further advance a clear 8 theory or supportive evidence that the Debtor concealed or failed 9 to maintain records or documents. 10 When prompted at oral argument to articulate the basis for 11 his § 727(a)(3) claim, the Trustee could not specifically 12 identify any documents or records that the Debtor allegedly 13 failed to maintain other than the Debtor’s failure to timely file 14 his schedules and SOFA. Then, when prompted for case authority 15 that supported this proposition, the Trustee cited Retz v. 16 Sampson (In re Retz), 606 F.3d 1189, 1197 (9th Cir. 2010). 17 It is true that, after several extensions, the Debtor filed 18 his initial schedules and SOFA one day late. But it is also true 19 that the bankruptcy court granted the Debtor’s requests for 20 extensions of the time to file his requisite documents. The 21 Trustee’s dependance on these extensions is, thus, improper. 22 The Trustee’s reliance on In re Retz is also misplaced. In 23 Retz, the bankruptcy court found that the debtor’s schedules and 24 SOFA contained a number of significant inaccuracies and 25 26 6 The record shows that at a hearing in the adversary proceeding on September 20, 2011, there was a colloquy in regards 27 to bank statements. In particular, the Trustee stated that he was unwilling to agree that the Debtor had, in fact, produced all 28 relevant bank statements.
- 12 - 1 omissions. Id. This determination, however, was made in the 2 context of an action under § 727(a)(4) and (a)(5), see id. at 3 1197-1200, 1205-06, and not in connection with a § 727(a)(3) 4 cause of action. In fact, the opinion contains no reference to 5 § 727(a)(3). Contrary to the Trustee’s assertion, a debtor’s 6 schedules and/or SOFA are not the types of records contemplated 7 by § 727(a)(3). See Depue v. Cox (In re Cox), 462 B.R. 746, 762 8 (Bankr. D. Idaho 2011) (debtor’s failure to properly complete his 9 or her schedules or SOFA does not address the inquiry required 10 under § 727(a)(3)); see also Berger & Assocs. Att’ys, P.C. v. 11 Kran (In re Kran), --- B.R. ----, 2013 WL 1809768, at *5-6 12 (S.D.N.Y. Apr. 30, 2013) (Section 727(a)(3) “extends to only 13 certain types of record-keeping deficits, and only back to a 14 reasonable period past to present.”) (citation and quotation 15 marks omitted). 16 In sum, we reject the Trustee’s argument that the Debtor's 17 schedules or SOFA, in and of themselves, constituted inadequate 18 recorded information for the purposes of § 727(a)(3). The 19 Trustee does not otherwise sufficiently identify records that the 20 Debtor allegedly failed to maintain or produce. Nor does the 21 Trustee articulate how the Debtor failed to meet the disclosure 22 standard set forth in In re Caneva, as discussed above. We 23 cannot clearly ascertain this information from the record. As 24 such, the Trustee did not meet his burden of showing that the 25 Debtor failed to maintain or preserve adequate records pursuant 26 to § 727(a)(3) at summary judgment. Therefore, we reverse and 27 remand as to the § 727(a)(3) claim. 28
- 13 - 1 Sections 727(a)(2) and (a)(4) 2 Section 727(a)(2) provides that denial of discharge is 3 warranted where the debtor disposed of or permitted the disposal 4 of his or her property, with the intent to hinder, delay, or 5 defraud a creditor or an officer of the estate, within the 6 applicable statutory period. Section 727(a)(4) provides that 7 denial of discharge is warranted where, among other things: 8 (1) the debtor made a false oath in connection with the 9 bankruptcy case; (2) the oath related to a material fact; (3) the 10 oath was made knowingly; and (4) the oath was made fraudulently. 11 In re Retz, 606 F.3d at 1197 (citation omitted). 12 A necessary element of an action under either § 727(a)(2) or 13 (a)(4) is the debtor’s intent; the objector to discharge must 14 show that a debtor harbored a subjective intent to hinder, delay, 15 or defraud a creditor or trustee under § 727(a)(2) or a 16 fraudulent intent under § 727(a)(4). Intent is a factual 17 question that requires the bankruptcy court “to delve into the 18 mind of the debtor and may be inferred from surrounding 19 circumstances . . . [or a debtor’s] course of conduct . . . .” 20 In re Searles, 317 B.R. at 379. Nonetheless, “[s]ummary judgment 21 is ordinarily not appropriate in a § 727 action where there is an 22 issue of intent,” Fogal Legware of Switz., Inc. v. Wills 23 (In re Wills), 243 B.R. 58, 65 (9th Cir. BAP 1999), since summary 24 judgment is based on the evidence before the court, without 25 determination as to the weight of evidence or credibility of 26 witnesses. See Anderson, 477 U.S. at 249 (“[A]t the summary 27 judgment stage the judge's function is not himself to weigh the 28 evidence and determine the truth of the matter but to determine
- 14 - 1 whether there is a genuine [dispute] for trial.”). 2 Under § 541, commencement of a bankruptcy case creates an 3 estate comprised of all the debtor’s legal or equitable interests 4 in property. 11 U.S.C. § 541(a)(1). This includes “[a]ll 5 interests of the debtor and the debtor's spouse in community 6 property,” either under the debtor’s sole, equal, or joint 7 management and control, or liable on an allowable claim against 8 the debtor. Id. § 541(a)(2) (emphasis added). Arizona is a 9 community property state; consequently, a presumption of 10 community property arises as to property acquired during marriage 11 regardless of the form of title. See A.R.S. § 25-211(a); Carroll 12 v. Lee, 148 Ariz. 10, 16 (1986) (presumption of community 13 property “applies to property acquired during marriage even 14 though title is taken in the name of only one spouse.”) (emphasis 15 added). 16 Because the Debtor and his wife live in Arizona, the 17 presumption of community property automatically arises as to all 18 property and assets acquired during their marriage, even those 19 solely titled in Mrs. Thruston’s name. See A.R.S. § 25-211(a); 20 Carroll, 148 Ariz. at 16. To the extent the Debtor possessed a 21 community property interest in those assets, in turn, those 22 interests became property of his bankruptcy estate as of the 23 petition date. The Trustee’s case under § 727(a)(2) and (a)(4) 24 is based on the community property presumption and the argument 25 that the Debtor was required to disclose all such interests. 26 The Debtor vociferously protested against the assertion that 27 he acted with obstructive or fraudulent intent and that he was 28
- 15 - 1 required to include his wife’s separate property.7 Like many 2 pro se debtors, however, the Debtor made the mistake of not 3 responding to the MSJ with evidence by way of, at a minimum, an 4 affidavit or a declaration made under the penalty of perjury. 5 This is typically fatal to a nonmoving party in showing that a 6 genuine and material factual dispute exists for trial. See 7 generally In re Hill, 450 B.R. at 892; British Airways Bd., 8 585 F.2d at 952. Even so, the failure to properly respond does 9 not automatically result in summary judgment for the movant. See 10 2010 Amendments, Fed. R. Civ. P. 56(e) (“[S]ummary judgment 11 cannot be granted by default even if there is a complete failure 12 to respond to the motion, much less when an attempted response 13 fails to comply with [Civil] Rule 56(c) requirements.”). 14 In other words, there can be no default summary judgment. 15 Id. A court thereby errs when it grants summary judgment simply 16 because the non-movant failed to properly respond. See 17 In re Rogstad, 126 F.3d at 1227. As discussed further below, 18 here, we conclude that based on the Debtor’s pro se status, the 19 bankruptcy court’s failure to make specific findings as to the 20 Debtor’s intent, and the particular circumstantial evidence in 21 this case, the Debtor’s failure to advance evidence in response 22 to the MSJ was not fatal. 23 The record contains no evidence showing that the Debtor 24 admitted to acting with obstructive or fraudulent intent. Thus, 25 7 At oral argument, the Debtor asserted that he received 26 some form of legal assistance from an attorney through his church. The Debtor, however, never provided evidence in 27 connection to this representation. Thus, to the extent he attempts to advance good faith reliance on the advice of counsel, 28 we decline to consider the argument on appeal.
- 16 - 1 determining whether such intent exists is dependant on 2 circumstantial evidence. The Trustee relied on several cases in 3 support of his argument as to the inference of intent under 4 § 727(a)(4). Only one of those cases, Sholdra v. Chilmark 5 Financial LLP (In re Sholdra), 249 F.3d 380, 383 (5th Cir. 2001), 6 however, involved a summary judgment. And In re Sholdra is 7 distinguishable. There the debtor did not admit intent, but 8 admitted to a knowing failure to schedule significant assets. 9 Id. at 382. Here, in contrast, the Debtor consistently defended 10 his failure to list what he characterized as his wife’s assets. 11 On this record – and viewing all the facts and evidence in 12 the light most favorable to the Debtor, as we must on summary 13 judgment – there remains a genuine dispute as to whether the 14 Debtor acted with the requisite state of mind under § 727(a)(2) 15 or (a)(4) necessary to deny his discharge. 16 There is no serious dispute that the Debtor failed to 17 schedule or disclose the assets identified by the Trustee. The 18 pertinent inquiry here, however, is whether he did so with the 19 requisite intent under § 727(a)(2) or (a)(4). While the record 20 certainly raises questions, it is far from dispositive as to the 21 issue of intent with respect to all of the allegedly undisclosed 22 assets identified by the Trustee and expressly relied upon by the 23 bankruptcy court. The failure of the bankruptcy court to make 24 findings in this area complicates the issue. 25 The Debtor argued that he was not required to disclose the 26 assets at issue because these assets were his wife's sole and 27 separate property. In particular, he argued that he executed 28 “disclaimer deeds” on the real properties acquired during the
- 17 - 1 marriage and titled in Mrs. Thruston’s name. In Arizona, a party 2 may rebut the presumption of community property by establishing, 3 among other things, that one spouse executed a disclaimer deed, 4 which disclaims all interests, claims, and rights to real 5 property. See Bell-Kilbourn v. Bell-Kilbourn, 216 Ariz. 521, 524 6 (Ariz. Ct. App. 2007) (disclaimer deed is a contract between the 7 parties and such evidence rebuts the community property 8 presumption). 9 The Debtor's argument alone could be insufficient to rebut 10 an inference of improper intent given the Trustee’s prima facie 11 showing of the Debtor’s nondisclosure and the circumstantial 12 evidence. See In re Wills, 243 B.R. at 65 (denial of summary 13 judgment demands “credible evidence beyond mere self-serving 14 statements of intent which creates a genuine issue of material 15 fact” as to whether a debtor acted with the requisite intent) 16 (emphasis added). Our review of the record, however, shows that 17 one of the Trustee’s own MSJ exhibits included a copy of a 18 disclaimer deed to the Wagon Wheel Property. The disclaimer deed 19 rebutted the presumption of community property as to that 20 property, and, thus, the Debtor was not clearly required to 21 schedule the Wagon Wheel Property. Further review of the record 22 also shows that at the Citrus Property stay relief hearing, the 23 secured creditor asserted that the Debtor executed a disclaimer 24 deed with respect to that property, and, thus, that the Citrus 25 Property was Mrs. Thruston’s sole and separate property. This 26 evidence goes beyond self-serving statements and creates 27 ambiguity as to whether the Debtor actually executed disclaimer 28 deeds on the other real properties or similar agreements as to
- 18 - 1 other assets. And, ultimately, it goes to the Debtor’s state of 2 mind in failing to disclose his wife’s assets. 3 The Debtor also provided evidence that two of the allegedly 4 undisclosed real properties – the Citrus Property and the 5 Northridge Property – were foreclosed on prepetition. Our review 6 of the record additionally shows that, in seeking stay relief, 7 the secured creditor movants attached copies of trustee’s deeds 8 with respect to the same properties in support of requested 9 relief. These prepetition foreclosure sales extinguished any 10 ownership interest that Mrs. Thruston or the Debtor (either 11 directly or as community property) had therein. See A.R.S. 12 § 33-811(c) (unless trustor obtains an injunction prior to a 13 scheduled trustee’s sale, the trustor waives all defenses and 14 objections to the sale); id. at § 33-811(e) (trustee's deed of 15 sale conveys the trustor's title, interest and claims in the 16 subject property to the purchaser without right of redemption). 17 Essentially, the Debtor was a squatter in the Northridge 18 Property. A failure to schedule such an alleged interest does 19 not form an unambiguous basis for the inference of obstructive or 20 fraudulent intent. 21 And while the Debtor never directly scheduled the disputed 22 real properties, the Debtor identified litigation related to the 23 Properties on his SOFA; his disclosure identified pending 24 litigation and indicated that the actions related to “forcible 25 detainer judgment,” “deficiency action,” and “foreclosure.” 26 Again, while improperly disclosed, this is inconsistent with a 27 determination of intentional concealment. Here, the combination 28 of the oblique reference to the Properties through the listing of
- 19 - 1 the litigation coupled with the disclaimer deed as to the Wagon 2 Wheel Property provides circumstantial evidence that is 3 inconsistent with an assertion of improper intent in connection 4 with his failure to schedule the real properties. In short, on 5 this record, it is far from clear that the Debtor acted with the 6 intent to defraud, conceal, hinder, or delay disclosure of the 7 real property assets.8 8 Perhaps acknowledging the quandary arising in relation to 9 the real properties, the Trustee also contended that the Debtor 10 nevertheless failed to disclose his wife's membership interest in 11 Rosemont, LLC and the vehicles. Again, given the evidence of 12 disclaimer deeds as to other property and making all inferences 13 in favor of the Debtor as we must at summary judgment, wrongful 14 intent cannot be inferred solely on this basis. The fact that 15 one of the vehicles is leased only by Mrs. Thruston - a fact that 16 could create a question in the mind of even a sophisticated 17 debtor - further supports the conclusion that the failure to 18 schedule these assets does not provide sufficient unambiguous 19 evidence of wrongful intent. 20 And while we do not suggest that the Debtor’s acknowledgment 21 of the incompleteness of the schedules and SOFA on the face of 22 the document is sufficient to avoid a finding of wrongful intent 23 even at summary judgment, it is another factor that balances 24 against summary judgment as to intent. 25 Finally, the Trustee relied on activity in the bankruptcy 26 27 8 Moreover, it appears that some of the allegedly undisclosed assets were scheduled and disclosed in the other 28 bankruptcy cases.
- 20 - 1 cases of Rosemont, LLC and Mrs. Thruston to support his assertion 2 of wrongful intent. But the fact that these entities filed and 3 submitted assets directly to the jurisdiction of the bankruptcy 4 courts could be viewed as favorable to the Debtor, at least as to 5 his state of mind. Again, at summary judgment, we are not free 6 to weigh the evidence against the Debtor where there are two 7 legitimate ways to view the evidence. At oral argument, the 8 Trustee argued that, in particular, Mrs. Thruston’s postpetition 9 transfer of her interest in Rosemont, LLC (on the same day that 10 Rosemont filed a petition) evidenced the Debtor’s obstructive or 11 fraudulent intent. To use this evidence against the Debtor, 12 however, requires us to make assumptions disfavorable to the 13 Debtor and ignores the fact that according to the record the 14 value of that entity was solely in real property concurrently 15 submitted to the jurisdiction of a bankruptcy court; fraudulent 16 intent is not unambiguously clear based on this transaction. 17 To be clear, we do not hold that the Debtor prevailed on the 18 adversary complaint or determine that he is entitled to his 19 bankruptcy discharge. Nor do we purport to establish that a 20 debtor may use his or her pro se status as a shield to nefarious 21 conduct. As stated, the record contains facts supportive of an 22 abusive filing. The record also shows that the bankruptcy court 23 repeatedly advised the Debtor to seek the assistance of counsel 24 and provided him information regarding free or low cost 25 bankruptcy legal services. The Trustee ultimately may prove that 26 the Debtor is not entitled to a bankruptcy discharge based on the 27 totality of the circumstantial evidence. Of course, the 28 bankruptcy court enjoys substantial discretion in weighing
- 21 - 1 evidence and making determinations as to credibility at trial. 2 But on this record and in the context of a summary judgment, 3 there remains a genuine dispute as to whether the Debtor acted 4 with the intent necessary for denial of his chapter 7 discharge 5 under § 727(a)(2) or (a)(4). 6 CONCLUSION 7 Based on the foregoing, we VACATE the SJ Order and Judgment, 8 and REMAND to the bankruptcy court for further proceedings 9 consistent with this memorandum. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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