FILED JUN 09 2014 1 NO FO PUBL A IO T R IC T N 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. EC-13-1171-TaKuJu ) 6 MOHAMMAD REZA SALEHI, ) Bk. No. 12-26790 ) 7 Debtor. ) Adv. Proc. No. 12-02251 ______________________________) 8 ) MOHAMMAD REZA SALEHI, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) GLOBAL AUTOMOTIVE GROUP, INC.,) 12 ) Appellee. ) 13 ______________________________) 14 Argued and Submitted on May 15, 2014 at Sacramento, California 15 Filed - June 9, 2014 16 Appeal from the United States Bankruptcy Court 17 for the Eastern District of California 18 Honorable Thomas C. Holman, Bankruptcy Judge, Presiding ________________________________ 19 Appearances: Sasha F. Ganji argued for appellant Mohammad Reza 20 Salehi; Mark A. Serlin of Serlin & Whiteford, LLP, argued for appellee Global Automotive Group, Inc. 21 __________________________________ 22 Before: TAYLOR, JURY, and KURTZ, Bankruptcy Judges. 23 24 25 26 * 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. 28 See 9th Cir. BAP Rule 8013-1. 1 INTRODUCTION 2 Appellant, chapter 71 debtor Mohammad Reza Salehi, appeals 3 the bankruptcy court’s summary judgment in favor of Global 4 Automotive Group, Inc. (“Global Automotive”)2 denying Salehi’s 5 discharge under § 727(a)(3) and (a)(5). Because Global 6 Automotive failed to demonstrate the absence of genuine disputes 7 of material fact, we REVERSE. 8 FACTS 9 Salehi filed his bankruptcy petition on April 6, 2012, and 10 obtained waiver of the filing fee.3 He scheduled assets of 11 $2,150 and liabilities of $1,137,949. The liabilities consisted 12 of two judgments in favor of Tanl Investment Group totaling 13 $1,118,000, medical expenses, and unpaid utilities. Salehi 14 disclosed that he had no current income, but that a few days 15 prior to filing bankruptcy he reapplied for unemployment 16 1 Unless specified otherwise, all chapter and section 17 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal Rules of Bankruptcy 18 Procedure, Rules 1001-9037. 19 2 Salehi filed a motion in this appeal seeking, among other things, to quash all pleadings, motions, briefs, and legal 20 documents filed on behalf of Global Automotive on the grounds that Global Automotive’s corporate powers, rights, and privileges 21 were suspended on December 3, 2013, by the California Franchise Tax Board for failure to remit taxes. A motions panel denied the 22 motion after reviewing Global Automotive’s opposition thereto, which included a Certificate of Revivor that resulted in 23 reinstatement of Global Automotive’s corporate rights, even to the extent of validating otherwise invalid prior proceedings. 24 3 The excerpts of the record on appeal consist primarily of 25 argument and incomplete excerpts of testimony taken outside this adversary proceeding. To facilitate our analysis and disposition 26 of this appeal, we have drawn some of our facts from items referenced in the bankruptcy court’s case docket. See O’Rourke 27 v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989) (appellate court may take judicial notice 28 of the record in the underlying bankruptcy case).
- 2 - 1 compensation; his income in both 2010 and 2011 consisted solely 2 of unemployment benefits. The chapter 7 trustee filed a no 3 distribution report in May 2012. 4 Global Automotive, assignee of the two judgments against 5 Salehi, examined him under Rule 2004 and thereafter filed a 6 timely complaint seeking denial of his discharge pursuant to 7 § 727(a)(3), (a)(4), and (a)(5). The complaint, which is barely 8 three pages long, contains three, 2-sentence, substantive 9 paragraphs: 10 • Paragraph 7 first paraphrases § 727(a)(3), which bars 11 discharge based on the failure to keep or preserve recorded 12 information regarding debtor’s financial condition or 13 business transactions, and then states: “Specifically, 14 notwithstanding a Bankruptcy Rule 2004 subpoena and related 15 examination on June 5, 2012, the Debtor did not and could 16 not produce numerous financial and business records.” 17 Adv. ECF #1 at 2:11-13. 18 • Paragraph 8 first paraphrases § 727(a)(5), which bars 19 discharge where a debtor fails to explain a loss of assets, 20 and then states: “For instance, the Debtor cannot 21 satisfactorily explain, and had few or no records to 22 indicate, how and where tens of thousands of dollars of 23 proceeds of automobiles owned by Debtor’s corporation, 24 Fulton Auto Depot, Inc. dba Sacramento Auto Plaza (“SAP”) 25 were expended.” Id. at 2:15-18. 26 • In Paragraph 9, Global Automotive generally alleges that 27 Salehi’s testimony at the Rule 2004 examination contained 28 false oath(s) or accounts within the meaning of
- 3 - 1 § 727(a)(4)(A), and then states: “Specifically, the Debtor 2 testified falsely at his 2004 examination regarding the 3 disposition of money and property of SAP and the proceeds 4 thereof.” Id. at 2:21-23. 5 Salehi answered the complaint, generally denying the 6 allegations in paragraphs 7, 8, and 9. Thereafter, Global 7 Automotive filed a Motion for Summary Judgment (“MSJ”) nominally 8 on all three of the alleged statutory grounds for denial of 9 discharge set forth in the complaint. 10 In the MSJ, Global Automotive asserted that Salehi produced 11 virtually no documents at the Rule 2004 examination and admitted 12 that he kept no financial records. It also asserted that Salehi 13 demonstrated conclusively that he had no documents or records of 14 a car dealership that he owned with his brother in 2009 and he 15 failed to explain and produce records of the “hundreds of 16 thousands of dollars” that Global Automotive alleged Salehi used 17 in 2010 for start up of a dealership with Omar Casas called Coast 18 to Coast. Global Automotive, however, did not specifically argue 19 or identify prepetition assets that Salehi personally owned for 20 which he failed to account. It also asserted, as fact, that 21 Salehi committed perjury: (1) by not disclosing in his schedules 22 money and income that he must have had to be able to invest in 23 the new dealership and to pay his own living expenses; and (2) at 24 his Rule 2004 examination as to the disposition of hundreds of 25 thousands of dollars from liquidation in 2009 of vehicles owned 26 by a prior dealership. 27 Global Automotive supported the MSJ with its attorney’s 28 declaration (“Counsel’s Declaration”) and a Separate Statement of
- 4 - 1 Undisputed Facts. Exhibits to Counsel’s Declaration consisted 2 of: (1) a copy of a subpoena to Salehi for the Rule 2004 3 examination with a document request; (2) excerpts of Salehi’s 4 Rule 2004 examination testimony; (3) excerpts of the November 30, 5 2011 deposition of Silva M. Maadarani (Salehi’s ex-spouse) in 6 case no. 34-2008-00009041 titled Tanl Investment Group, Inc. v. 7 Fulton Auto Depot, LLC, et al. in California Superior Court in 8 Sacramento County (“2008 State Court Action”); (4) a copy of a 9 subpoena to The Golden 1 Credit Union for business records in 10 case number 34-2010-00091338 in Superior Court in Sacramento 11 County (“2010 State Court Action”), titled Global Automotive, 12 Inc. and TANL Investment Group, Inc. v. Anosheh Satvat, et al. 13 (“Credit Union Subpoena”); and (5) copies of six checks produced 14 in response to the Credit Union Subpoena, none of which was 15 issued to or remitted by Salehi. 16 In its Separate Statement of Undisputed Facts, Global 17 Automotive listed six paragraphs of “Undisputed Facts,” supported 18 solely by Counsel’s Declaration. Two paragraphs consist of the 19 following: “[Salehi] produced almost no documents at all [at the 20 Rule 2004 examination]” (Adv. ECF #21 at 1); and “[Salehi] hid 21 the proceeds of the SAP vehicles in his mother’s deposit account, 22 which proceeds were then used for the Coast to Coast dealership.” 23 Adv. ECF #21 at 2. Global Automotive phrased the balance of 24 undisputed facts as “claims” made by Salehi, apparently during 25 the Rule 2004 examination: 26 [Salehi] [ ] claimed he had no documents pertaining to the disposition of about 60 or so automobiles owned by Fulton 27 Auto Depot, Inc. dba Sacramento Auto Plaza (“SAP”), a car dealership he owned with his brother. 28
- 5 - 1 [He] claimed not to know where any of the records of SAP were located. 2 [He] claimed to have no banking records whatsoever. 3 [He] claimed to be “borrowing” funds for living expenses, 4 but refused to state the name of the lender. 5 [He] claimed to have provided no capital to a dealership by the name of Coast to Coast with which he was working. 6 7 Id. 8 Salehi opposed the MSJ and filed his declaration,4 but he 9 did not file a responsive statement of undisputed facts. He 10 included a list of documents that he testified he provided 11 (through his now-deceased prior counsel) before the Rule 2004 12 examination. He argued that these documents were sufficient, 13 considering that he had not been a part of the business at issue 14 for six years – since October 31, 2006. He declared that he had 15 no additional documents for Sacramento Auto Plaza because a third 16 party, Amir Razavi, was the business manager and responsible for 17 maintaining the records. He further argues that he was merely 18 the sales manager, although he omits this assertion from his 19 sworn statement. Moreover, Salehi testified that his brother 20 oversaw Salehi’s business during 2008 and 2009, when Salehi 21 himself was in an immigration detention center. 22 Salehi stated that he had answered questions to the best of 23 his ability at the Rule 2004 examination and did not commit 24 perjury. He argued further that he produced documents at the 25 26 4 Salehi was represented by counsel when he filed his answer, however, his counsel passed away prior to Global 27 Automotive’s filing of its MSJ. Salehi’s new counsel substituted into the adversary proceeding shortly after filing Salehi’s 28 documents in response to the MSJ.
- 6 - 1 Rule 2004 examination and that this created a genuine dispute as 2 to a material fact. Salehi did not specifically address the 3 § 727(a)(5) claim in his opposition, but Global Automotive, 4 similarly, did not include § 727(a)(5) assertions in the MSJ 5 itself. 6 The bankruptcy court held a hearing on the MSJ. Only 7 counsel for Global Automotive appeared. In its Disposition After 8 Oral Argument (formerly its Tentative Ruling), the bankruptcy 9 court granted summary judgment on the § 727(a)(3) and (a)(5) 10 claims, but denied it as to the § 727(a)(4)(A) claim.5 11 The bankruptcy court found it to be undisputed that Salehi 12 failed to produce “business records pertaining to the disposition 13 of approximately sixty (60) automobiles owned by Fulton Auto 14 Depot Inc., dba Sacramento Auto Plaza (“SAP”), a corporation 15 [Salehi] owned with his brother and failed to produce his own 16 personal banking records.” Civil Minutes (Feb. 19, 2013) (Adv. 17 ECF #34). It found that Salehi admitted he “did not have the 18 requested documents and did not know where to locate such 19 documents, and offered no justification for his failure to keep 20 and preserve such documents and records.” Id. 21 The bankruptcy court cited the following as evidence of 22 undisputed facts: Salehi’s testimony under oath that he did not 23 contribute capital to Coast to Coast Motors; the deposition 24 testimony of Salehi’s ex-spouse in the 2008 State Court Action 25 that proceeds of automobiles sold by Sacramento Auto Plaza were 26 27 5 The record does not contain a transcript of the MSJ hearing. The bankruptcy court docketed the Disposition After 28 Oral Argument as its Civil Minutes of the hearing.
- 7 - 1 transferred to Salehi’s mother’s account(s) and later used by 2 Salehi to purchase inventory to be sold by Coast to Coast Motors; 3 a copy of a cashier’s check purchased by Sacramento Auto Plaza 4 and made payable to Salehi’s mother, Anosheh Satvat6; and copies 5 of checks from The Golden 1 Credit Union remitted by Salehi’s 6 mother to Coast to Coast Motors. 7 Specifically as to § 727(a)(3), the bankruptcy court found 8 the evidence showed that Salehi: was “a co-owner in a business 9 that maintained substantial assets”; “failed to preserve any 10 records related to the business”; and “failed to keep or preserve 11 his own personal banking account information.” Id. 12 As to § 727(a)(5), the bankruptcy court found that Salehi 13 “failed to satisfactorily explain the disposition of the proceeds 14 of the sale of vehicles by SAP” and that Salehi caused such 15 proceeds “to be transferred to Anosheh Satvat and then to Coast 16 to Coast Motors for his own personal purposes.” Id. 17 The bankruptcy court determined that it could not rule in 18 Global Automotive’s favor on the § 727(a)(4)(A) claim, because 19 the testimony as to whether Salehi knowingly and fraudulently 20 made a false oath or statement was in conflict. The bankruptcy 21 court recognized that Salehi’s testimony regarding the 22 “disposition of proceeds from the sale of vehicles by SAP 23 conflict[ed] with the testimony of his ex-spouse Silva 24 Maadarani.” Id. 25 Thereafter, Global Automotive obtained approval to amend its 26 27 6 Global Automotive’s counsel and Salehi’s ex-wife provided declaratory and deposition testimony, respectively, that Anosheh 28 Satvat is Salehi’s mother; a fact not disputed by Salehi.
- 8 - 1 complaint to omit its claim under § 727(a)(4)(A) and amended the 2 complaint accordingly. The bankruptcy court then entered a 3 judgment denying Salehi’s discharge under § 727(a)(3) and (a)(5) 4 on March 25, 2013, and Salehi timely appealed. 5 JURISDICTION 6 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 7 §§ 1334 and 157(b)(2)(J). We have jurisdiction under 28 U.S.C. 8 § 158. 9 ISSUES 10 1. Did the bankruptcy court err when it granted summary 11 judgment and denied Salehi’s discharge under § 727(a)(5)? 12 2. Did the bankruptcy court err when it granted summary 13 judgment and denied Salehi’s discharge under § 727(a)(3)? 14 STANDARD OF REVIEW 15 We review a summary judgment de novo. Bamonte v. City of 16 Mesa, 598 F.3d 1217, 1220 (9th Cir. 2010). De novo review 17 requires that we consider a matter afresh, as if no decision had 18 been rendered previously. United States v. Silverman, 861 F.2d 19 571, 576 (9th Cir. 1988); B-Real, LLC v. Chaussee 20 (In re Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008). Viewing 21 the evidence in the light most favorable to the non-moving party, 22 we must determine whether there are any genuine disputes of 23 material fact that remain for trial and whether the prevailing 24 party is entitled to judgment as a matter of law. New Falls 25 Corp. v. Boyajian (In re Boyajian), 367 B.R. 138, 141 (9th Cir. 26 BAP 2007). 27 DISCUSSION 28 “[A] party seeking summary judgment always bears the initial
- 9 - 1 responsibility of informing the [trial] court of the basis for 2 its motion, and identifying those portions of the pleadings, 3 depositions, answers to interrogatories, and admissions on file, 4 together with the affidavits, if any, which it believes 5 demonstrate the absence of a genuine [dispute] of material fact.” 6 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal 7 quotation marks omitted). 8 A claim for denial of a discharge under § 727 is construed 9 liberally in favor of the discharge and strictly against the 10 objector. Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th 11 Cir. 2010). A creditor who asks the court to deny a debtor a 12 discharge bears the burden of proving each of the elements of the 13 applicable provision. Id. Thus, our review here is necessarily 14 technical and focuses on whether Global Automotive presented 15 undisputed evidence as to each element of each of its claims for 16 denial of discharge.7 Both in its papers and at oral argument 17 Global Automotive argued very broadly and, in so doing, failed to 18 carry its heavy burden on summary judgment. 19 A. Global Automotive failed to argue or support denial of Salehi’s discharge under § 727(a)(5). 20 21 Section 727(a)(5) provides that the court shall grant the 22 23 7 At oral argument, Global Automotive’s counsel argued that Salehi’s failure to comply with a Local Bankruptcy Rule that 24 required him to file a responsive statement of undisputed facts must be viewed as conceding the lack of disputed facts. We 25 disagree. Even a complete lack of opposition to a motion for summary judgment does not relieve the moving party of its 26 obligation to meet its burden of showing entitlement to judgment as a matter of law. See North Slope Borough v. Rogstad 27 (In re Rogstad), 126 F.3d 1224, 1227 (9th Cir. 1997) (it is error to grant summary judgment simply because the opponent failed to 28 oppose).
- 10 - 1 debtor a discharge, unless – “the debtor has failed to explain 2 satisfactorily, before determination of denial of discharge under 3 this paragraph, any loss of assets or deficiency of assets to 4 meet the debtor’s liabilities; . . . .” The objector must first 5 prove a disappearance of substantial assets, then the burden 6 shifts to the debtor to explain. Kistler v. Fader (In re Fader), 7 414 B.R. 640, 645 (Bankr. N.D. Cal 2009) (citing Chalik v. 8 Moorfield (In re Chalik), 748 F.2d 616 (11th Cir. 1984)). 9 Here, Global Automotive alleged in its complaint that Salehi 10 failed to explain “where tens of thousands of dollars of proceeds 11 of automobiles owned by [Salehi’s] corporation, Fulton Auto 12 Depot, Inc. dba Sacramento Auto Plaza (‘SAP’) were expended.” 13 Adv. ECF #1 at 2. In its MSJ, however, Global Automotive does 14 not pursue relief based on this allegation. In fact, the MSJ 15 contains no specific argument directed to denial of discharge 16 under § 727(a)(5); it merely recites § 727(a)(5) as grounds for 17 relief. 18 On appeal, Salehi argues that Global Automotive made no 19 evidentiary showing that Salehi controlled any funds or 20 transferred them to his mother and, thus, failed to carry its 21 burden on summary judgment.8 Global Automotive argues in 22 response that Salehi’s failure to dispute the request for relief 23 under § 727(a)(5) in his opposition to the MSJ bars Salehi’s 24 argument against such relief on appeal. We disagree. As Global 25 8 Salehi also argues on appeal that all the checks offered 26 by Global Automotive were generated during the period of time that Salehi was in immigration detention. As Global Automotive 27 points out in its Responsive Brief on appeal, this argument is not supported by the record. We, thus, do not consider it in our 28 analysis.
- 11 - 1 Automotive failed to specifically address § 727(a)(5) in its MSJ, 2 Salehi had no obligation to respond. And even absent opposition, 3 Global Automotive failed to carry its burden on summary judgment. 4 See North Slope, 126 F.3d at 1227. Global Automotive was 5 required to clearly identify the elements required to establish 6 its claim under § 727(a)(5) and to tie each to the evidence. The 7 record shows that it did not do so. 8 As a threshold issue under § 727(a)(5), Global Automotive 9 failed to argue or establish that “debtor at one time, not too 10 remote from the bankruptcy petition date, owned identifiable 11 assets.” See In re Retz, 606 F.3d at 1205 (quoting Olympic Coast 12 Invest., Inc. v. Wright (In re Wright), 364 B.R. 51, 79 (Bankr. 13 D. Mont. 2007)). Global Automotive’s submission of a copy of a 14 cashier’s check remitted by Fulton Auto Depot, Inc. in 2009 and 15 made payable to Anosheh Satvat’s account and copies of checks 16 issued out of Anosheh Satvat’s account to Coast to Coast in 2010, 17 on their face, fail to establish that any funds represented 18 thereby were either Salehi’s assets or assets controlled by 19 Salehi. Global Automotive offered nothing else to support such 20 an argument or finding. 21 Global Automotive generally asserted that Salehi held an 22 ownership interest in Fulton Auto Depot, Inc. dba Sacramento Auto 23 Plaza with his brother. And Global Automotive’s counsel argued 24 that Salehi failed to produce records relating to the 25 dispositions of “60 or so” Sacramento Auto Plaza vehicles, thus 26 implying that Salehi was somehow responsible for their 27 disposition. None of the cited excerpts from Salehi’s Rule 2004 28 examination testimony, however, support this implication; and
- 12 - 1 Global Automotive fails to argue when such dispositions allegedly 2 occurred. Salehi provided declaratory evidence that he had not 3 been a partner in Sacramento Auto Plaza9 for six years; that is 4 since 2006. The existence and disposition of “60 or so” vehicles 5 (at some unknown point in time) are not established by the mere 6 statements of counsel, even when echoed in Global Automotive’s 7 Separate Statement of Undisputed Facts. As to timing, which was 8 not addressed in the MSJ, Salehi testified at his Rule 2004 9 examination that he was subject to immigration detention for a 10 period of time and, thus, was incapable of active involvement in 11 vehicle sales. In his declaration he testified that his 12 detention was in 2008 and 2009. He was released in April 2009, 13 three months before Sacramento Auto Plaza ceased business 14 entirely, which, significantly, was three years before Salehi 15 filed bankruptcy. Thus, Global Automotive fails to establish an 16 absence of disputed material facts: the existence of substantial 17 assets not too remote in time from the 2012 petition date. 18 Nor can we discern from the record that Salehi himself ever 19 owned or disposed of “60 or so” vehicles at any point in time. 20 Salehi’s bankruptcy schedules, filed under penalty of perjury, 21 disclose that his sole source of income in the two years pre- 22 9 The offered evidence and argument made by both sides 23 regarding Sacramento Auto Plaza itself are ambiguous at best. It appears possible that the dba was initially used by either a 24 partnership or a limited liability company and later by a corporate entity. Neither side presented evidence of the 25 ownership or structure to resolve this ambiguity. And other than Salehi’s testimony that Sacramento Auto Plaza ceased business in 26 July 2009, Global Automotive presented no evidence to provide any temporal reference points in connection with the alleged 27 disposition of “60 or so” automobiles. And it bears repeating, Global Automotive presented no evidence of any specific vehicles, 28 much less “60 or so” vehicles.
- 13 - 1 filing was unemployment benefits. The excerpts of Salehi’s 2 Rule 2004 examination testimony are consistent on this point. He 3 testified that Sacramento Auto Plaza closed down in July 2009, 4 nearly three years before he filed bankruptcy, and that he had no 5 idea what happened to proceeds of any vehicles from Sacramento 6 Auto Plaza. 7 The bankruptcy court found, in connection with its grant of 8 summary judgment under § 727(a)(5), that Salehi caused the 9 proceeds of the sale of vehicles “to be transferred to Anosheh 10 Satvat and then to Coast to Coast Motors for his own personal 11 purposes.” Civil Minutes (Feb. 19, 2013) at 2. To make this 12 finding the bankruptcy court necessarily had to determine that 13 Salehi’s testimony to the contrary was not credible and, instead, 14 give credit to Salehi’s ex-spouse’s testimony.10 In addition, 15 the bankruptcy court had to make an adverse inference based on 16 Global Automotive’s unsupported argument, that Salehi controlled 17 both Sacramento Auto Plaza and Coast to Coast Motors. Both the 18 credibility determination and the adverse inference were 19 inappropriately made on summary judgment.11 See Oswalt v. 20 Resolute Indus., 642 F.3d 856, 861 (9th Cir. 2011) (“‘Credibility 21 determinations, the weighing of the evidence, and the drawing of 22 legitimate inferences from the facts’ are inappropriate at the 23 24 10 The bankruptcy court found the testimony in connection with Global Automotive’s § 727(a)(4)(A) claim in conflict, thus 25 requiring denial of summary judgment. This conflicting testimony likewise failed to support summary judgment under § 727(a)(5). 26 11 The scant evidence submitted by Global Automotive was 27 open to possible evidentiary objections; Salehi, however, did not make any and we do not consider evidentiary objections that were 28 not preserved.
- 14 - 1 summary judgment stage.”) (internal citation omitted). Thus, the 2 bankruptcy court erred – Global Automotive was not entitled to 3 summary judgment under § 727(a)(5) – and we must reverse. 4 B. The bankruptcy court erred by granting summary judgment to Global Automotive under § 727(a)(3). 5 6 Section 727(a)(3) provides, in relevant part, that a debtor 7 is not entitled to a discharge if he fails “to keep or preserve 8 any recorded information, including books, documents, records, 9 and papers, from which the debtor’s financial condition or 10 business transactions might be ascertained, unless such act or 11 failure to act was justified under all of the circumstances of 12 the case.” To succeed on its objection to discharge under 13 § 727(a)(3), Global Automotive must show “‘(1) that [Salehi] 14 failed to maintain and preserve adequate records, and (2) that 15 such failure makes it impossible to ascertain [Salehi’s] 16 financial condition and material business transactions.’” 17 Lansdowne v. Cox (In re Cox), 41 F.3d 1294, 1296 (9th Cir. 1994) 18 (quoting Meridian Bank v. Alten, 958 F.2d 1226, 1232 (3d Cir. 19 1992)). Adequate records should enable creditors to follow a 20 debtor’s transactions “for a reasonable period in the past.” 21 Caneva v. Sun Cmtys. Operating Ltd. P’ship (In re Caneva), 22 550 F.3d 755, 761 (9th Cir. 2008)(quoting Rhoades v. Wikle, 23 453 F.2d 51, 53 (9th Cir. 1971)). 24 Here, Global Automotive argued that Salehi admitted that he 25 kept no financial records and failed to maintain records for 26 Sacramento Auto Plaza. It also argued that Salehi could not 27 produce records pertaining to his investment in 2010 in the Coast 28 to Coast dealership. To find in Global Automotive’s favor on
- 15 - 1 these points would require us to accept counsel’s argument as 2 fact and make inferences and credibility determinations in Global 3 Automotive’s favor – none of which is appropriate on summary 4 judgment. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 5 (1986) (all justifiable inferences must be drawn in favor of the 6 non-moving party); Oswalt v. Resolute Indus., 642 F.3d at 861 7 (credibility determinations, weighing of evidence, and the 8 drawing of legitimate inferences from the facts are inappropriate 9 on summary judgment); and British Airways Bd. v. Boeing Co., 10 585 F.2d 946, 952 (9th Cir. 1978) (“Legal memoranda and oral 11 argument are not evidence”). And, the nonmovant’s “evidence is 12 to be believed.” McSherry v. City of Long Beach, 584 F.3d 1129, 13 1133 (9th Cir. 2009). 14 1. Sacramento Auto Plaza business records 15 During Salehi’s Rule 2004 examination, he testified that he 16 did not know the location of business records for Sacramento Auto 17 Plaza. Global Automotive implicitly argues that Salehi not only 18 should know where the records were, presumably based on his 19 alleged ownership interest in Sacramento Auto Plaza, but that he 20 should have produced them in advance of the Rule 2004 21 examination; and, it then asserts that, having failed on both 22 accounts, he should not be entitled to a discharge. 23 First, as discussed above, Global Automotive failed to 24 establish that Salehi recently held any ownership interest in 25 Sacramento Auto Plaza entitling him to access to, or 26 responsibility for, Sacramento Auto Plaza’s business records. 27 Second, the only evidence in the record reflects that Sacramento 28 Auto Plaza ceased operating nearly three years before Salehi
- 16 - 1 filed bankruptcy. Third, Salehi testified at his Rule 2004 2 examination that “Amir was in charge for all that stuff, . . . .” 3 Depo. Tr. (June 5, 2012) at 26:22-24 (Adv. ECF #20). And in his 4 declaration in opposition to the MSJ, Salehi expanded on this 5 point when he testified that Amir Razavi “made and maintained all 6 business records for Sacramento Auto Plaza.” Adv. ECF #28 at 7 2:10-11. Global Automotive offered only excerpts of Salehi’s 8 Rule 2004 examination testimony as evidence on these points; and 9 as the non-moving party on summary judgment, Salehi was entitled 10 to have his evidence and Rule 2004 examination testimony 11 believed. 12 Global Automotive next argues that Salehi’s argument 13 regarding control of Sacramento Auto Plaza’s documents conflicted 14 with Salehi’s Rule 2004 examination testimony that he did not 15 know where Sacramento Auto Plaza’s business documents were. We 16 disagree. In Salehi’s Rule 2004 examination testimony he stated 17 that he did not know what happened to the records and that Amir 18 Razavi was in charge of the business records. Salehi’s 19 statements were not facially inconsistent. Thus, Global 20 Automotive did not establish the absence of a genuine dispute of 21 material fact necessary to support judgment under § 727(a)(3) 22 based on a lack of business records for Sacramento Auto Plaza. 23 2. Coast to Coast automobile dealership records 24 Global Automotive argued on summary judgment that Salehi’s 25 discharge should be denied because Salehi lacked records 26 regarding funds he allegedly used in 2010 to start Coast to 27 Coast. Global Automotive’s evidence consisted solely of Salehi’s 28 Rule 2004 examination testimony and Salehi’s ex-wife’s deposition
- 17 - 1 testimony in the 2008 State Court Action. 2 Salehi’s testimony was that at some point prepetition he 3 tried to help his friend Omar Casas open a car dealership in 4 Sacramento called Coast to Coast. He testified that he 5 contributed no capital and no vehicles; he only contributed his 6 knowledge to the effort. Coast to Coast itself lasted only a 7 couple of months. 8 Salehi’s ex-wife testified to the contrary, based on 9 conversations in Farsi that she overheard. She also testified, 10 however, that she is Lebanese, did not speak Farsi, but had taken 11 some classes. From such overheard conversations, she testified 12 that she found out that Salehi put some money in his mother’s 13 account from the sale of Sacramento Auto Plaza vehicles and then 14 used the funds to help buy cars for Coast to Coast. And she 15 finally testified that she believed the money went back into 16 Salehi’s mother’s account, when Coast to Coast failed, because: 17 “[w]here else would it go.” Depo. Tr. (November 30, 2011) at 18 34:9 (Adv. ECF #20). 19 The conflicting testimony excerpts presented by Global 20 Automotive cannot serve as the basis for summary judgment. 21 Determination of the facts required assessment of the witnesses’ 22 credibility, which, as already stated, is inappropriate on 23 summary judgment. Therefore, the bankruptcy court erred in 24 determining the absence of a genuine dispute as required to 25 support judgment under § 727(a)(3) based on lack of records for 26 Coast to Coast. 27 3. Debtor’s personal financial records 28 Global Automotive also argued that Salehi should be denied
- 18 - 1 his discharge because he produced no personal banking records for 2 his Rule 2004 examination and admitted to keeping no records. It 3 is undisputed that Salehi was unemployed when he filed bankruptcy 4 and had been unemployed the two years prior to filing. Global 5 Automotive argued in its MSJ, however, that it was implausible 6 that Salehi could have no income for over a year but still pay 7 personal expenses, and implicitly that Salehi, thus, must have 8 banking records. 9 Again, the only evidence offered by Global Automotive 10 consists of Salehi’s Rule 2004 examination testimony in which he 11 testified that he went to Bank of America to obtain his bank 12 statement, obtained a copy of it, but did not bring it to the 13 Rule 2004 examination because it was negative for the prior two 14 to three years. He also testified that he had a second account 15 at Bank of America that was set up for direct deposit of his 16 unemployment benefits, accessible with an ATM card. He alleged, 17 however, that he never received any written statements on either 18 account and did not write checks. He also testified that he 19 either paid cash on his few monthly bills, like his cell phone, 20 or paid using a friend’s credit card and that he lived with his 21 parents. 22 A debtor must only "present sufficient written evidence 23 which will enable his creditors reasonably to ascertain his 24 present financial condition and to follow his business 25 transactions for a reasonable period in the past." In re Caneva, 26 550 F.3d at 761. A debtor's "duty to keep records is measured by 27 what is necessary to ascertain [his] financial status." Moffett 28 v. Union Bank, 378 F.2d 10, 11 (9th Cir. 1967); see also United
- 19 - 1 States Tr. v. Hong Minh Tran (In re Hong Minh Tran), 464 B.R. 2 885, 893 (Bankr. S.D. Cal. 2012) (type of debtor, as well as 3 debtor's sophistication, informs the bankruptcy court's 4 determination). Here, Global Automotive does not argue that 5 Salehi had no banking records. Instead, it implicitly argues 6 that Salehi had no hard copies of bank records or, at best, that 7 he failed to produce any at his Rule 2004 examination. Salehi’s 8 undisputed testimony, if believed (as it must be on summary 9 judgment), is consistent with electronic access to paperless 10 accounts, one set up for automatic deposit of unemployment 11 benefit payments, and the foregoing of paper records in this era 12 of electronic accessibility. 13 Moreover, failure to produce documents in response to a 14 discovery request, alone, does not justify denial of discharge 15 under § 727(a)(3). Global Automotive could have obtained written 16 copies of Salehi’s bank records through formal discovery in the 17 adversary proceeding if it was not satisfied with what Salehi 18 produced in response to his Rule 2004 examination. 19 Drawing justifiable inferences in favor of Salehi, which we 20 must on summary judgment, and construing evidence liberally in 21 favor of the discharge, we determine that the bankruptcy court 22 erred when it granted summary judgment in favor of Global 23 Automotive under § 727(a)(3) based on an alleged lack of personal 24 financial records. 25 CONCLUSION 26 Based on the foregoing, we REVERSE the bankruptcy court’s 27 grant of summary judgment. 28
- 20 -