FILED JUN 30 2015 SUSAN M. SPRAUL, CLERK 1 NOT FOR PUBLICATION U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 2 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. AZ-14-1309-KiPaJu ) 6 HOWARD FLETCHER THRUSTON, ) Bk. No. 10-27593 ) 7 Debtor. ) Adv. No. 10-2156 ) 8 ) HOWARD FLETCHER THRUSTON, ) 9 ) Appellant, ) 10 ) v. ) M E M O R A N D U M1 11 ) DAVID M. REAVES, Chapter 7 ) 12 Trustee, ) ) 13 Appellee. ) ______________________________) 14 Argued and Submitted on June 19, 2015, 15 at Phoenix, Arizona 16 Filed - June 30, 2015 17 Appeal from the United States Bankruptcy Court for the District of Arizona 18 Honorable Eddward P. Ballinger, Jr., Bankruptcy Judge, Presiding 19 20 Appearances: Appellant Howard Fletcher Thruston argued pro se; Misty Weniger Weigle of Reaves Law Group argued for 21 appellee, David M. Reaves, Chapter 7 Trustee. 22 Before: KIRSCHER, PAPPAS and JURY, Bankruptcy Judges. 23 24 25 26 1 This disposition is not appropriate for publication. 27 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th 28 Cir. BAP Rule 8024-1. 1 Howard Fletcher Thruston ("Debtor") appeals a judgment 2 denying his discharge. Chapter 72 trustee, David M. Reaves 3 ("Trustee"), objected to Debtor's discharge under § 727(a)(2), 4 (a)(3) and (a)(4). The bankruptcy court later granted Trustee's 5 motion for summary judgment and entered a judgment denying 6 Debtor's discharge on all counts. On appeal, we vacated and 7 remanded the summary judgment order and judgment because a genuine 8 dispute existed as to whether Debtor acted with the intent 9 necessary for denial of his discharge under § 727(a)(2) or (a)(4). 10 After a two-day trial, the bankruptcy court determined that Debtor 11 made a number of false oaths in connection with his bankruptcy 12 case and denied his discharge under § 727(a)(4)(A).3 We AFFIRM. 13 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 14 A. Events leading to Trustee's discharge objection and motion for summary judgment 15 Debtor is a licensed contractor and real estate broker. He 16 has been married to Morgen Thruston since 1986. During the course 17 of their marriage and prior to the petition date, Mrs. Thruston 18 acquired title to various real properties in Iowa and Arizona (the 19 20 21 2 Unless specified otherwise, all chapter, code and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 22 the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. 23 3 The bankruptcy court stated at the beginning of its Memorandum Decision that it was denying Debtor's discharge under 24 § 727(a)(4) because "Debtor knowingly and fraudulently made a false oath or account, or withheld from an officer of the estate 25 recorded information relating to the Debtor's property and financial affairs," which implicates both § 727(a)(4)(A) and (D). 26 However, later in the decision the court referred only to Debtor's false oaths and omissions, and the judgment denying discharge 27 states only that Debtor "made a number of false statements under oath in connection with this case[.]" Therefore, we conclude 28 Debtor's discharge was denied under § 727(a)(4)(A) only.
-2- 1 "Iowa Property," the "Citrus Property," the "Northridge Property" 2 and the "Wagon Wheel Property"). On the petition date, 3 Mrs. Thruston also owned a 2008 Hummer, leased a 2007 GMC truck, 4 and possessed a 100% membership interest in Rosemont, LLC, which 5 owned a commercial building in Arizona. Debtor was the sole 6 shareholder of his construction company, Dynasty Homes, Inc. 7 ("Dynasty Homes"). Dynasty Homes operated out of the building 8 owned by Rosemont, LLC. Mrs. Thruston was employed by Dynasty 9 Homes as a designer for about twenty years, with her most recent 10 salary being $100,000 annually. She left her position there 11 sometime between 2005 and 2008, after the birth of their eighth 12 child. 13 Debtor filed a skeletal chapter 7 bankruptcy petition on 14 August 30, 2010; Mrs. Thruston did not join in the petition. 15 Several days later, Debtor filed a "Declaration" listing numerous 16 creditors but not specifying the nature of the debts. Debtor 17 attended a continued § 341(a) meeting of creditors on October 19, 18 2010. When Trustee informed him that the couple’s community 19 assets were property of Debtor's bankruptcy estate even though 20 Mrs. Thruston did not file, Debtor stated "Right. I know that." 21 § 341(a) Hr’g Tr. (Oct. 19, 2010) 8:6. 22 After receiving several extensions of time to file the 23 requisite documents, Debtor filed his original schedules and 24 statement of financial affairs (“SOFA”) on October 19, 2010, just 25 minutes before the continued § 341(a) meeting. In his summary of 26 schedules, Debtor listed real property assets of "1,150,000?" and 27 current income of $339.50. In his Schedule B, Debtor listed one 28 Chase checking account containing $50.00 and real estate and
-3- 1 contractor licenses with no value. Debtor left Schedules A, C, D, 2 E, F, G and H blank; he did not schedule any real properties, 3 vehicles, creditors or codebtors. In his Schedules I and J, 4 Debtor listed monthly income of $339.50 and monthly expenses of 5 $2,869.53. In executing his Declaration Concerning Debtors' 6 Schedules, Debtor typed "[i]ncomplete-need help." 7 Debtor's SOFA was similarly bare. He did, however, disclose 8 Dynasty Homes in Item 21, listing himself as "President" with a 9 "?" percentage of stock ownership (and his wife with a "?" next to 10 her name). He also attached a list of twelve lawsuits, in which 11 he identified the name of the opposing party, the case number, the 12 name of the court and the nature of each lawsuit. Some suits 13 clearly involved real property and other possible estate assets, 14 but none were specifically identified or itemized anywhere in 15 Debtor's schedules. He also did not list any foreclosures of real 16 property within one year of the bankruptcy filing in Item 5. As 17 with his schedules, Debtor declared under penalty of perjury that 18 the information contained in his SOFA was true and correct. 19 In light of the deadline under Rule 4004 and Debtor's 20 essentially blank schedules, Trustee filed an adversary complaint 21 on December 1, 2010, objecting to Debtor's discharge under 22 § 727(a)(2), (a)(3) and (a)(4). Trustee alleged that Debtor 23 failed to disclose significant assets held by Mrs. Thruston and to 24 provide information on a number of items, including any real 25 properties owned by her or Debtor, bank accounts owned by 26 Mrs. Thruston and tax returns for either of them. Debtor denied 27 Trustee's allegations. 28 As ordered by the bankruptcy court, Debtor filed amended
-4- 1 schedules and SOFA on January 31, 2011. He disclosed a few more 2 personal property assets in his Schedule B, including his wedding 3 ring, clothing, Dynasty Homes machinery valued at $30,000 and his 4 interest in "lawsuits" of "unknown" value. But Schedules A, C and 5 D remained blank. To Schedule F, Debtor attached a spread sheet 6 listing over 100 unsecured creditors. Debtor disclosed four 7 leases on Schedule G by name only and provided no descriptions or 8 identifying details of the leases. Debtor listed Mrs. Thruston as 9 a codebtor in his Schedule H, but failed to provide the name of 10 any creditors or debts for which she was a codebtor. Unlike his 11 original schedules, Debtor's avowal to the accuracy of his amended 12 schedules was unconditional. 13 In his motion for summary judgment, Trustee argued that as of 14 the petition date Debtor or Mrs. Thruston owned the Iowa Property 15 (valued between $500,000 and $700,000), the Citrus Property 16 (valued at $1.5 million) and the Northridge Property (valued at 17 approximately $1 million), and further argued that Mrs. Thruston 18 possessed an interest in Rosemont, LLC, the Wagon Wheel Property, 19 the Hummer and the GMC truck. Trustee contended these assets were 20 acquired during the marriage and therefore were community assets, 21 even if Mrs. Thruston held title to them. Consequently, Debtor 22 possessed a community property interest in all of these assets yet 23 failed to disclose them in his schedules or SOFA. Trustee further 24 contended that Mrs. Thruston's membership interest in Rosemont, 25 LLC was valued at over $2.3 million, and that she had transferred 26 27 28
-5- 1 it postpetition to a Stephen Trice without court authorization.4 2 Trustee pointed out that during the pendency of Debtor's 3 bankruptcy case, secured creditors had moved for relief from the 4 automatic stay as to three of the subject real properties. In 5 each instance, Debtor opposed stay relief and asserted a legal or 6 equitable interest in the property at issue. He also pointed out 7 that Mrs. Thruston, Dynasty Homes and Rosemont, LLC all filed for 8 bankruptcy relief after Debtor initiated his bankruptcy case. 9 However, those cases suffered from the same maladies as did 10 Debtor's: a bare bones petition, no initial schedules or SOFA, 11 and numerous emergency motions in lieu of responsive documents.5 12 Debtor spent much time in his opposition to Trustee's motion 13 calling him a liar, a fraud and a bully. As for the motion's 14 merits, Debtor contended he never hid or concealed estate assets, 15 arguing that the real and personal properties identified by 16 17 4 On the same day Mrs. Thruston transferred her 100% 18 membership interest in Rosemont, LLC to Mr. Trice, Rosemont, LLC filed a chapter 11 bankruptcy case. According to its schedules, 19 the building owned by Rosemont, LLC was valued at $2.3 million. 20 5 All three of Mrs. Thruston's cases were ultimately dismissed, her last chapter 11 case being dismissed with prejudice 21 and barring her from filing any bankruptcy cases until September 19, 2012. In that case, Judge Nielsen said in his Order 22 to Show Cause that "there is reason to believe debtor and her husband are engaged in a calculated practice of filing uncompleted 23 bankruptcy cases to avoid their secured creditors' collection efforts." 24 Thereafter, Mrs. Thruston filed a chapter 11 case in Iowa, which was dismissed on June 20, 2012. It also appears that an 25 individual named Philip Howard Trice (not to be confused with Stephen Trice) filed a chapter 7 bankruptcy case in Arizona on 26 October 4, 2012, listing his residence as the Northridge Property, where Debtor and Mrs. Thruston resided from the petition date 27 until the property was foreclosed and they were forcibly evicted. The bankruptcy court dismissed that case for failure to file 28 schedules and statements.
-6- 1 Trustee were Mrs. Thruston's sole and separate property and so he 2 was not required to list them in his bankruptcy case. In any 3 event, argued Debtor, the banks had foreclosed on the Citrus 4 Property and the Northridge Property in January 2010, eight months 5 prior to his petition date, and had foreclosed on the Rosemont, 6 LLC building in January 2011, which was underwater and sold for 7 only $712,000. Further, Trustee had since abandoned the Iowa 8 Property and Dynasty Homes as having no value for the estate. As 9 for the vehicles, Debtor argued that the GMC truck lacked equity 10 and was returned when the lease expired and the Hummer, which also 11 had no equity, had since been repossessed. In short, Debtor 12 maintained he had no interest in the assets identified by Trustee 13 or, even if he did, they had no value for the estate. 14 The bankruptcy court granted summary judgment on all counts. 15 On appeal, the Panel vacated and remanded the judgment, concluding 16 that a genuine issue of fact existed as to whether Debtor acted 17 with the requisite intent under § 727(a)(2) or (a)(4). 18 B. Trial on Trustee's claims under § 727(a)(2) and (a)(4) 19 The bankruptcy court held a trial on Trustee's § 727(a)(2) 20 and (a)(4) claims on March 5 and 6, 2014.6 Both parties filed 21 pretrial statements. Debtor's position remained unchanged, with 22 the exception of his contention that on January 2, 2011, before he 23 filed his amended schedules and SOFA, he met with bankruptcy 24 attorney Clint Smith, who Debtor claimed told him that he was not 25 required to list his non-filing spouse's sole and separate 26 27 6 Trustee ultimately withdrew his § 727(a)(3) claim, and based on its ruling under § 727(a)(4)(A), the bankruptcy court 28 opted to not address Trustee's claim under § 727(a)(2).
-7- 1 property. Mr. Smith's affidavit confirmed Debtor's contention. 2 However, on cross-examination, Mr. Smith admitted that he never 3 discussed any specific assets with Debtor or reviewed any of the 4 couple’s records to determine how any particular asset was held 5 and whether it was Mrs. Thruston's sole and separate property. 6 Debtor further claimed that in ruling on a prior stay relief 7 motion, Judge Baum had ruled that Mrs. Thruston's sole and 8 separate property was not part of his bankruptcy estate. 9 Four witnesses testified: Debtor; Mrs. Thruston; Trustee and 10 Mr. Smith. Mrs. Thruston testified that the reason she held title 11 to various assets as her sole and separate property was to ensure 12 that if her credit was negatively affected, Debtor could still 13 purchase investment properties with his good credit. She conceded 14 this arrangement benefitted their family. 15 With respect to each asset Trustee contended Debtor failed to 16 disclose, the evidence was as follows: 17 1. Real properties not disclosed 18 a. Iowa Property 19 Exhibits for this property included a 2006 warranty deed 20 reflecting that Mrs. Thruston took title as her sole and separate 21 property, Trustee's February 2011 notice of intent to abandon the 22 property and a sheriff's deed recorded August 8, 2012. While 23 Mrs. Thruston could not recall certain specifics of the Iowa 24 Property (when she bought it, how she financed the purchase, how 25 many loans were on it or the home's square footage), she testified 26 that she held title to it from day one. The mortgage for the Iowa 27 Property, however, contained both her and Debtor's signature. 28 When questioned about this, Mrs. Thruston explained that the bank
-8- 1 required both of their signatures on the mortgage, which explained 2 why Debtor's name was added later in a different type. 3 Debtor testified that he was not a co-borrower for the Iowa 4 Property, but that the bank required him to sign the mortgage 5 document acknowledging that Mrs. Thruston was the borrower. 6 Debtor further testified that he thought he held an interest in 7 the Iowa Property when he opposed the bank's motion for relief 8 from stay. When asked why he did not list it in his Schedule A, 9 Debtor had no plausible explanation, but did admit that if it was 10 a community asset, it should have been listed. 11 b. Citrus Property 12 Exhibits for this property included a 1997 warranty deed 13 indicating that Mrs. Thruston took title as her sole and separate 14 property, a disclaimer deed with the same date signed by Debtor 15 and a trustee's deed upon sale dated January 7, 2010. 16 Mrs. Thruston testified that she purchased the property with funds 17 she received from a prior home sale. 18 Debtor testified that, despite his execution of a disclaimer 19 deed, when the bank sought relief from stay for the Citrus 20 Property in November 2010 he believed he held an interest in it. 21 He further admitted that at the related hearing in December 2010, 22 he affirmatively argued that he held a community interest in the 23 property and that it had significant equity. However, Debtor 24 later clarified his testimony, stating that he thought he held a 25 "lawsuit" interest in the Citrus Property at the time of the stay 26 relief hearing due to the lender's fraud, not an ownership 27 interest, and that he had disclosed this interest in his list of 28 court actions. Debtor testified that he did not list the Citrus
-9- 1 Property in Schedule A because it had been foreclosed prior to his 2 bankruptcy. And he did not list the foreclosure in Item 5 of his 3 SOFA because the property was not his. 4 c. Northridge Property 5 Exhibits for this property included a 2001 warranty deed 6 reflecting that Mrs. Thruston took title as her sole and separate 7 property, a disclaimer deed with the same date signed by Debtor, a 8 quitclaim deed dated November 2002 from Mrs. Thruston purporting 9 to convey her interest to both her and Debtor, a quitclaim deed 10 dated April 2007 from Debtor purporting to convey his interest 11 back to Mrs. Thruston, and a trustee's deed upon sale dated 12 January 26, 2010. Mrs. Thruston had little recollection as to why 13 the quitclaim deeds were executed, but believed it was done for 14 financing purposes. Debtor testified that when the bank sought 15 relief from stay in March 2011, he believed he held a possessory 16 interest in the Northridge Property as well as a "lawsuit" 17 interest. Debtor testified that he did not list the foreclosure 18 in Item 5 of his SOFA because the property was not his. 19 d. Wagon Wheel Property 20 Exhibits for this property included a 2007 warranty deed 21 showing that Mrs. Thruston took title as her sole and separate 22 property and a disclaimer deed with the same date signed by 23 Debtor. Mrs. Thruston testified that she had never been to this 24 property, which consisted of an old trailer in a trailer park. 25 She testified that she had sold it, but could not remember when. 26 She could also not recall what she paid for it, if anything, but 27 did recall receiving $35,000 when she sold it and using the 28 proceeds to pay bills.
-10- 1 2. Personal property not disclosed 2 a. Rosemont, LLC 3 Several exhibits were admitted regarding this entity, 4 including: (1) Articles of Organization dated November 15, 2000, 5 which indicated that its original members were Stephen and Carol 6 Trice; (2) Articles of Amendment dated October 17, 2006, and 7 recorded February 7, 2007, reflecting the Trices' resignation as 8 members and Mrs. Thruston appointment as the entity's sole member; 9 and (3) Articles of Amendment dated December 6, 2010, removing 10 Mrs. Thruston as the sole member and adding Mr. Trice as the sole 11 member and statutory agent. Also admitted were numerous deeds of 12 trust for the building owned by Rosemont, LLC, recorded between 13 May 2005 and February 2009. 14 Mrs. Thruston could not recall what, if anything, she paid 15 Mr. Trice for Rosemont, LLC in 2006, but believed that when she 16 purchased the entity she was also purchasing the building it 17 owned. She testified that she did not know whether Dynasty Homes 18 ever operated out of the Rosemont, LLC building or leased it, but 19 then later testified that she could not remember when Dynasty 20 Homes eventually vacated the building. In relation to any lease 21 agreement with Dynasty Homes, Mrs. Thruston testified that 22 although she collected the monthly lease checks, she could not 23 remember what the amounts were. Mrs. Thruston could also not 24 recall who managed Rosemont, LLC once she obtained ownership or 25 whether she took over the entity's bank accounts, or what the 26 monthly income and expenses were for the building or what she did 27 with the net income if any was available. 28 Mrs. Thruston admitted encumbering the Rosemont, LLC building
-11- 1 with four deeds of trust during the time she owned it for the 2 purpose of obtaining $1.475 million in loans, but testified that 3 she was not sure what the funds were used for or whether she even 4 received the $1 million loan for one of them. Mrs. Thruston 5 testified that the building was underwater when she transferred 6 her interest in the entity to Mr. Trice, and that the intent for 7 the transfer was so that Mr. Trice could obtain refinancing. She 8 could not recall, however, if she ever informed Mr. Trice about 9 the multiple deeds of trust. She could also not recall any 10 details about Rosemont, LLC's bankruptcy filing on the day of the 11 transfer to Mr. Trice. 12 Debtor testified that Dynasty Homes paid no rent to Rosemont, 13 LLC, but rather occupied the space on a trade basis. Debtor 14 testified that Mr. Trice had transferred his interest in Rosemont, 15 LLC to Mrs. Thruston in 2006, because he could no longer service 16 the debt on the building and he owed Mrs. Thruston money. Debtor 17 admitted to preparing the documentation for the 2006 transfer. He 18 testified that he did not list Rosemont, LLC in his schedules 19 because he had no interest in it; it was Mrs. Thruston's sole and 20 separate property. Debtor testified that he was not required to 21 seek court approval when Mrs. Thruston transferred her interest in 22 Rosemont, LLC back to Mr. Trice in December 2010, as it was not 23 his property. 24 b. 2008 Hummer and 2007 GMC truck 25 Exhibits for these vehicles included titles reflecting 26 Mrs. Thruston's ownership, a deficiency letter from the lender for 27 the Hummer, and a letter from the lender for the GMC truck showing 28 that Mrs. Thruston owed a balance of $763.35 for excess tire wear.
-12- 1 Mrs. Thruston testified that she drove the Hummer and their son 2 drove the GMC truck; Debtor drove a Cadillac Escalade borrowed 3 from Mrs. Thruston's father. Debtor confirmed this. 4 Mrs. Thruston testified that she alone made all of the payments on 5 the two vehicles. Trustee testified that according to Debtor's 6 bank statements, vehicle payments had been made from a bank 7 account belonging to Debtor. 8 c. Bank accounts 9 Debtor admitted he did not disclose all of his bank accounts 10 in his original Schedule B, but testified that he provided all of 11 his bank statements from six different accounts to Trustee at the 12 § 341(a) meeting. Debtor testified that he did not list all of 13 the accounts in his original Schedule B because they had zero 14 balances. His answer was the same with respect to his amended 15 Schedule B. He also did not list any of Mrs. Thruston's bank 16 accounts because she had no money. 17 Trustee testified that on the petition date, the Chase 18 account disclosed by Debtor had a balance of about $4,000, not the 19 $50.00 Debtor claimed. The Chase account exhibit indicated that 20 Debtor's balance on the petition date was $4,224.51. 21 C. The bankruptcy court's ruling 22 The parties submitted post-trial briefing; the bankruptcy 23 court took the matter under submission. Trustee maintained that 24 the evidence established that the assets at issue were community 25 assets, not separate property of Mrs. Thruston, and should have 26 been disclosed by Debtor. Trustee argued that Debtor's course of 27 conduct, including his failure to disclose significant properties 28 with millions of dollars in secured debt, his failure to disclose
-13- 1 his and his wife's interests in Rosemont, LLC and its subsequent 2 transfer, and his failure to disclose their vehicles, among other 3 things, demonstrated Debtor’s intent to conceal the assets. 4 Debtor's conduct further demonstrated that he was very much aware 5 of the omitted properties, asserting or denying an interest in 6 them depending upon which position best served his immediate 7 purposes. Trustee maintained that it was irrelevant the omitted 8 assets ultimately proved to have little or no value to the estate. 9 The bankruptcy court issued its Memorandum Decision and 10 judgment denying Debtor's discharge under § 727(a)(4)(A). It 11 first analyzed whether the assets identified by Trustee were 12 community assets requiring disclosure by Debtor. The court found 13 that, at a minimum, the Iowa Property, Rosemont, LLC, the Hummer 14 and the GMC truck were community assets and therefore should have 15 been disclosed in Debtor's schedules and SOFA. However, based on 16 the disclaimer deeds executed by Debtor, the court found that the 17 Citrus Property and the Wagon Wheel Property were Mrs. Thruston's 18 sole and separate property and therefore did not have to be 19 disclosed. The court further found that Debtor had acted with the 20 requisite intent in failing to disclose the identified community 21 assets, among other things. It specifically found Mrs. Thruston's 22 testimony "less than credible," and that the couple had "engaged 23 in a pattern of delay to put off the inevitable." Debtor timely 24 appealed the judgment. 25 II. JURISDICTION 26 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 27 and 157(b)(2)(J). Unlike final orders, interlocutory orders 28 decide merely one aspect of the case without disposing of the case
-14- 1 in its entirety on the merits. See United States v. 475 Martin 2 Ln., 545 F.3d 1134, 1141 (9th Cir. 2008). Because the bankruptcy 3 court granted Trustee relief under § 727(a)(4)(A), it decided not 4 to address his § 727(a)(2) claim. However, despite this 5 interlocutory ruling, the judgment contains a Civil Rule 54(b) 6 certification. Thus, it is a final judgment. See Civil Rule 7 54(b)(incorporated by Rule 7054); see also Belli v. Temkin 8 (In re Belli), 268 B.R. 851, 855-56 (9th Cir. BAP 2001). 9 Accordingly, we have jurisdiction under 28 U.S.C. § 158. 10 III. ISSUE 11 Did the bankruptcy court err when it denied Debtor's 12 discharge under § 727(a)(4)(A)? 13 IV. STANDARDS OF REVIEW 14 In an action for denial of discharge, we review: (1) the 15 bankruptcy court's determinations of the historical facts for 16 clear error; (2) its selection of the applicable legal rules under 17 § 727 de novo; and (3) its application of the facts to those rules 18 requiring the exercise of judgments about values animating the 19 rules de novo. Searles v. Riley (In re Searles), 317 B.R. 368, 20 373 (9th Cir. BAP 2004), aff'd, 212 F. App'x 589 (9th Cir. 2006). 21 Factual findings are clearly erroneous if they are illogical, 22 implausible or without support in the record. Retz v. Samson 23 (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010). We give great 24 deference to the bankruptcy court's findings when they are based 25 on its determinations as to the credibility of witnesses. Id. 26 (noting that as the trier of fact, the bankruptcy court has "the 27 opportunity to note variations in demeanor and tone of voice that 28 bear so heavily on the listener's understanding of and belief in
-15- 1 what is said."). If two views of the evidence are possible, the 2 trial judge's choice between them cannot be clearly erroneous. 3 Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573-75 4 (1985). 5 V. DISCUSSION7 6 A. Community assets 7 Section 541 provides that a bankruptcy estate consists of 8 "all legal or equitable interests of the debtor in property of the 9 debtor as of the commencement of the case," including "[a]ll 10 interests of the debtor and the debtor's spouse in community 11 property," either under the debtor's sole, equal, or joint 12 management and control, or liable on an allowable claim against 13 the debtor. § 541(a)(1) & (2)(emphasis added). 14 Arizona is a community property state; a presumption of 15 community property arises as to property acquired during marriage 16 regardless of the form of title. See A.R.S. § 25–211(a); Carroll 17 v. Lee, 712 P.2d 923, 929 (Ariz. 1986)(presumption of community 18 property "applies to property acquired during marriage even though 19 title is taken in the name of only one spouse.")(emphasis added). 20 Because Debtor and his wife live in Arizona, the presumption of 21 community property automatically arises as to all property and 22 assets acquired during their marriage, even those solely titled in 23 Mrs. Thruston's name. See A.R.S. § 25–211(a); Carroll, 712 P.2d 24 at 929. To the extent Debtor possessed a community property 25 interest in the assets identified by Trustee, those interests 26 7 As with his prior appeal, Debtor spends significant time 27 discussing his disdain for Trustee and his lengthy litigation with the National Bank of Arizona. Unfortunately, these matters have 28 no relevance to the issue before us, so we do not address them.
-16- 1 became property of his bankruptcy estate as of the petition date. 2 Arizona's presumption of community property may be rebutted 3 by clear and convincing evidence. Bender v. Bender, 597 P.2d 993, 4 995-96 (Ariz. Ct. App. 1979). A party may rebut the presumption 5 of community property by establishing, among other things, that 6 one spouse executed a disclaimer deed, which disclaims all 7 interests, claims and rights to real property. See Bell–Kilbourn 8 v. Bell–Kilbourn, 169 P.3d 111, 114 (Ariz. Ct. App. 2007) 9 (disclaimer deed is a contract between the parties and such 10 evidence rebuts the community property presumption). 11 Here, the bankruptcy court found that Debtor had sufficiently 12 rebutted the community property presumption as to the Wagon Wheel 13 Property and the Citrus Property based on the disclaimer deeds 14 executed contemporaneously with Mrs. Thruston taking sole and 15 separate title. However, the court found that Debtor failed to 16 provide sufficient evidence to overcome the community property 17 presumption as to the Iowa Property, the Northridge Property,8 18 Rosemont, LLC, the Hummer and the GMC truck. We must give great 19 deference to the bankruptcy court's finding that Mrs. Thruston's 20 testimony about properties she claimed were her sole and separate 21 8 In ruling that the Northridge Property was likely a 22 community asset, the bankruptcy court stated that no argument or evidence was presented that Debtor had executed a disclaimer deed 23 renouncing any interest in this property. This is factually incorrect. A disclaimer deed for the Northridge Property was 24 admitted as Exhibit #132 and is part of the appellate record. Nonetheless, the bankruptcy court did not include the Northridge 25 Property in its list of community assets that Debtor should have disclosed. Therefore, we believe the court's factual error here 26 is harmless and would not change the outcome of this appeal if reversed. In ruling against Debtor, the bankruptcy court 27 identified several other community assets (among other things) that should have been disclosed, providing a sufficient basis to 28 deny his discharge under § 727(a)(4)(A).
-17- 1 property was "less than credible," with the majority of her 2 answers to questions being "I don't know" or "I don't remember." 3 In re Retz, 606 F.3d at 1196. 4 Debtor contends the alleged community assets were 5 Mrs. Thruston's sole and separate property because they were in 6 her name. We reject this argument. Even though Mrs. Thruston 7 held title to the Hummer and GMC truck, other evidence showed that 8 payments for these vehicles were being made from Debtor's bank 9 account, which Debtor did not dispute. Debtor also did not 10 provide any evidence to show that Rosemont, LLC was not a 11 community asset. The court specially found that Mrs. Thruston's 12 testimony regarding her ownership of Rosemont, LLC "lacked 13 credibility." Finally, besides taking title to the Iowa Property 14 as Mrs. Thruston’s sole and separate property, Debtor presented no 15 evidence of a disclaimer deed (or some equivalent). To the 16 contrary, the mortgage for the Iowa Property reflected both 17 Debtor's and Mrs. Thruston's signatures. Although both of them 18 testified that the bank required Debtor to sign acknowledging that 19 Mrs. Thruston was the borrower, the bankruptcy court apparently 20 found this testimony did not rebut the presumption that the Iowa 21 Property was community property. 22 Despite his claim of ignorance, Debtor's calculated execution 23 of disclaimer deeds clearly shows that he knows holding title to 24 property in one spouse's name does not make it that spouse's sole 25 and separate property under Arizona law. He knows that additional 26 steps must be taken to disclaim the other spouse's community 27 property interest. 28 Debtor further contends he relied on the advice of his
-18- 1 counsel that anything solely owned by Mrs. Thruston was not part 2 of his bankruptcy estate and therefore did not have to be listed 3 in his schedules and statements. The bankruptcy court rejected 4 this argument. Mr. Smith testified that he and Debtor did not 5 discuss any particular assets and whether they qualified as 6 community or sole and separate property. Instead, the 7 conversation was very general in nature — that a spouse's sole and 8 separate property is not property of the estate and need not be 9 disclosed. We agree with the bankruptcy court. 10 We also reject Debtor's contention that Judge Baum had 11 previously ruled he had no interest in any property Mrs. Thruston 12 owned as her sole and separate property. Debtor here refers to a 13 comment Judge Baum made at a stay relief hearing for the Citrus 14 Property on December 28, 2010, after Debtor had filed his original 15 schedules and SOFA with no mention of the Citrus Property. The 16 colloquy between Debtor and Judge Baum follows: 17 DEBTOR: As far as the house goes, obviously Arizona is a community property state. I have an interest in the 18 property because of that and --- 19 JUDGE BAUM: Not if you sign a disclaimer, [sic] deed. 20 Hr’g Tr. (Dec. 28, 2010) 4:14-17. Judge Baum's comment on the 21 record was not a ruling that assets titled in Mrs. Thruston's name 22 were in fact her sole and separate property as Debtor contends; he 23 was telling Debtor generally what the law is in Arizona. Debtor 24 has already raised this argument before the Panel in his prior 25 appeal, which was rejected. 26 On this record, we discern no clear error in the bankruptcy 27 court's finding that the Iowa Property, Rosemont, LLC, the Hummer 28 and the GMC truck were community property assets that Debtor
-19- 1 should have disclosed in his schedules and SOFA. 2 B. The bankruptcy court did not err when it denied Debtor's discharge under § 727(a)(4)(A). 3 4 Construing liberally Debtor's pro se brief, which fails to 5 cite to the record, he disputes only the bankruptcy court's 6 findings of fact; he does not contend the court applied an 7 incorrect standard of law. Therefore, our review is limited to 8 determining whether the bankruptcy court's findings are illogical, 9 implausible or without support in the record. 10 The party objecting to a debtor's discharge under § 727(a) 11 bears the burden of proving by a preponderance of the evidence 12 that the debtor's discharge should be denied. In re Retz, 13 606 F.3d at 1196. Courts are to "'construe § 727 liberally in 14 favor of debtors and strictly against parties objecting to 15 discharge.'" Id. (quoting Bernard v. Sheaffer (In re Bernard), 16 96 F.3d 1279, 1281 (9th Cir. 1996)). 17 Section 727(a)(4)(A) states: "The court shall grant the 18 debtor a discharge, unless . . . the debtor knowingly and 19 fraudulently, in or in connection with the case made a false oath 20 or account." “A false statement or an omission in the debtor's 21 bankruptcy schedules or statement of financial affairs can 22 constitute a false oath." Khalil v. Developers Sur. & Indem. Co. 23 (In re Khalil), 379 B.R. 163, 172 (9th Cir. BAP 2007). To obtain 24 a denial of discharge under § 727(a)(4)(A), the objector must 25 show: "(1) the debtor made a false oath in connection with the 26 case; (2) the oath related to a material fact; (3) the oath was 27 made knowingly; and (4) the oath was made fraudulently." 28 In re Retz, 606 F.3d at 1197.
-20- 1 1. False Oath 2 The bankruptcy court found that Debtor had omitted multiple 3 items of important information from his schedules and SOFA, which 4 Debtor admitted at trial. His original schedules and SOFA were 5 "essentially blank." In addition to the community assets that he 6 should have disclosed, the court observed that Debtor failed to 7 list even minimal personal property such as clothing, furniture or 8 the like in his first attempt. The court rejected Debtor's 9 defense that his original schedules and SOFA should be excused 10 because he acknowledged they were "incomplete" and that he needed 11 help. This is because Debtor's amended schedules and SOFA, filed 12 two months later, were "little improvement" and he "did not make 13 the same plea then." The court found Debtor's suggestion that the 14 disclosed pieces of information in certain parts of his schedules 15 could have led Trustee to make certain assumptions about various 16 assets was also insufficient. Finally, while Debtor presented 17 several bank statements from his various accounts to Trustee at 18 the § 341(a) meeting, only one — the Chase account — was ever 19 disclosed in his schedules. Other than Trustee, no one else knew 20 of these accounts, including Debtor's creditors. The court found 21 that Debtor offered no explanation for these missing accounts, 22 other than to say they contained no funds. 23 The evidence in this case established that Debtor made a 24 false oath. Therefore, the bankruptcy court did not clearly err 25 in finding that Debtor made a false oath in both his original and 26 amended schedules and SOFA. 27 2. Materiality 28 A fact is material "'if it bears a relationship to the
-21- 1 debtor's business transactions or estate, or concerns the 2 discovery of assets, business dealings, or the existence and 3 disposition of the debtor's property.'" In re Khalil, 379 B.R. at 4 173; see also In re Retz, 606 F.3d at 1198. An omission or 5 misstatement that "detrimentally affects administration of the 6 estate" is material. Wills v. Wills (In re Wills), 243 B.R. 58, 7 63 (9th Cir. BAP 1999)(citing 6 Lawrence P. King et al., COLLIER ON 8 BANKRUPTCY ¶ 727.04[1][b] (15th ed. rev. 1998)). 9 The bankruptcy court found that Debtor's omissions were 10 material "in that they relate[d] to the existence and disposition 11 of his property." It is without question that the undisclosed 12 community assets and bank accounts concerned the discovery of 13 assets and the existence and disposition of Debtor's property. 14 The only argument Debtor appears to make here is that his failure 15 to disclose these items was immaterial because the assets had no 16 equity for the benefit of the estate. However, the fact these 17 undisclosed assets may have lacked value is of no consequence for 18 purposes of § 727(a)(4)(A). A false statement or omission may be 19 material even if it does not cause direct financial prejudice to 20 creditors. In re Wills, 243 B.R. at 63. And a lack of realizable 21 value for creditors certainly does not negate a debtor's duty of 22 full and candid disclosure of his or her financial condition. 23 Palmer v. Downey (In re Downey), 242 B.R. 5, 17 (Bankr. D. Idaho 24 1999). Debtor was obligated to disclose all assets in which he 25 held an interest, valuable or not. 26 The evidence in this case established that Debtor's false 27 oaths related to material facts. We see no clear error with the 28 bankruptcy court's finding of materiality.
-22- 1 3. Knowingly and Fraudulently Made with Intent to Deceive 2 A debtor "'acts knowingly if he or she acts deliberately and 3 consciously.'" In re Khalil, 379 B.R. at 173 (quoting Roberts v. 4 Erhard (In re Roberts), 331 B.R. 876, 883 (9th Cir. BAP 2005)); 5 see also In re Retz, 606 F.3d at 1198. A debtor acts with 6 fraudulent intent when: (1) the debtor makes a misrepresentation; 7 (2) that at the time he or she knew was false; and (3) with the 8 intention and purpose of deceiving creditors. Id. at 1198-99. 9 Fraudulent intent is typically proven by circumstantial evidence 10 or by inferences drawn from the debtor's conduct. In re Retz, 11 606 F.3d at 1199. Circumstantial evidence may include showing a 12 reckless indifference or disregard for the truth. Id.; 13 In re Wills, 243 B.R. at 64 (intent may be established by a 14 pattern of falsity, debtor's reckless indifference, or disregard 15 of the truth). 16 The bankruptcy court found that Debtor knew his schedules and 17 SOFA were false. It rejected Debtor's argument that he had a good 18 faith belief he had no interest in many of the assets. In 19 rejecting this defense, the court pointed to Debtor's objections 20 to various lender's motions for relief from stay. Debtor filed an 21 objection to a stay relief motion for the Iowa Property on October 22 1, 2010, claiming an interest in it. Yet, eighteen days later 23 when he filed his original schedules and SOFA, Debtor omitted this 24 interest. Debtor maintained at trial that he genuinely believed 25 at the time he had an interest in the Iowa Property. The court 26 found that if that were the case, Debtor should have listed it in 27 his original schedules filed on October 19, 2010. 28 The same was true for the Citrus Property and the Northridge
-23- 1 Property. Debtor objected to stay relief for the Citrus Property 2 on November 15, 2010, claiming significant equity and a "community 3 property interest" in it, yet he omitted this interest in his 4 original schedules and SOFA filed one month before and in his 5 later-filed amended schedules and SOFA. The lender on the 6 Northridge Property sought stay relief on February 17, 2011. By 7 this time, Debtor had filed his amended schedules and SOFA. 8 Nevertheless, he still objected to stay relief on March 15, 2011, 9 arguing that he had a right to protect his interests by filing 10 bankruptcy and that the home was foreclosed upon illegally. To 11 the extent Debtor claims he meant he had a "lawsuit" interest in 12 this property and not an ownership interest, he is mistaken. As a 13 chapter 7 debtor, any such "lawsuit" interest belonged to Trustee. 14 With respect to the Hummer and GMC truck, Debtor had no 15 explanation for why they were not listed, other than he did not 16 drive them and they were titled in Mrs. Thruston's name. As for 17 Rosemont, LLC, the bankruptcy court found that Debtor controlled 18 the entity and its sole asset, and that ownership was held by 19 Mrs. Thruston for "convenience sake." The court rejected Debtor's 20 "no harm no foul" argument for not disclosing Rosemont, LLC 21 because it lacked value for creditors. The same was true for 22 Debtor's failure to disclose all of his bank accounts which he 23 claimed lacked funds. 24 The bankruptcy court also rejected Debtor's contention that 25 he relied on Mr. Smith's legal advice about sole and separate 26 property as a reason for not disclosing the identified assets. We 27 further observe that even if Mr. Smith's advice could negate 28 Debtor's intent for failing to disclose the assets titled in
-24- 1 Mrs. Thruston's name, this does not explain why Debtor's schedules 2 were almost entirely blank, failing to disclose even his own 3 personal property or a community interest in any books, furniture 4 or other household goods, which Debtor admitted he had. 5 Debtor declared under the penalty of perjury that the 6 information contained in his schedules and SOFA was true and 7 correct. Clearly, it was not. While good faith errors are 8 acceptable and understandable, the bankruptcy court found that is 9 not what occurred here: 10 This is not a case where the sole issue is the nondisclosure of any one piece of property. The evidence 11 shows numerous nondisclosures, all of which collectively paint an inaccurate picture of the Debtor's finances and 12 conduct. 13 Mem. Dec. (May 13, 2014) 9 n.6. Debtor had plenty of opportunity 14 to amend his original schedules and SOFA to correct any 15 deficiencies. Even after speaking to Mr. Smith and after the 16 bankruptcy court ordered him to do so, it still took Debtor almost 17 a month to file his amended ones. The amendments were of marginal 18 improvement. His conduct suggests that he was clearly aware of 19 the omitted assets; he asserted or denied an interest in them 20 depending upon which position best served his immediate needs. At 21 minimum, this conduct demonstrates his reckless indifference or 22 disregard for the truth. 23 We do not perceive any clear error with the bankruptcy 24 court's finding that Debtor's false oath was made knowingly and 25 fraudulently and with intent to deceive. Accordingly, the 26 bankruptcy court did not err when it denied Debtor's discharge 27 under § 727(a)(4)(A). 28
-25- 1 VI. CONCLUSION 2 For the reasons stated above, we AFFIRM. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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