FILED APR 14 2014 SUSAN M. SPRAUL, CLERK 1 NO FO PUBL A IO T R IC T N 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. CC-13-1407-KiTaD ) 6 YOUNG W. KONG, ) Bk. No. 2:11-48629-BR ) 7 Debtor. ) Adv. No. 2:12-01007-BR ) 8 ) ) 9 YANG JIN CO., LTD., a Korean ) Corporation, ) 10 ) Appellant, ) 11 ) v. ) M E M O R A N D U M1 12 ) YOUNG W. KONG, ) 13 ) Appellee. ) 14 ______________________________) 15 Argued and Submitted on March 20, 2014, at Pasadena, California 16 Filed - April 14, 2014 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Barry Russell, Bankruptcy Judge, Presiding 20 Appearances: David B. Lally, Esq. argued for appellant, Yang 21 Jin. Co., Ltd.; Shi Young Lim, Esq. of Park & Lim argued for appellee, Young W. Kong. 22 23 Before: KIRSCHER, TAYLOR and DUNN, Bankruptcy Judges. 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 8013-1. 1 Appellant, creditor Yang Jin Co., Ltd. ("YJ"), appeals an 2 order finding in favor of appellee, chapter 72 debtor Young W. 3 Kong ("Mr. Kong"), on YJ's claims seeking to deny Mr. Kong's 4 discharge under § 727(a)(2), (a)(3), (a)(4) and (a)(5). YJ also 5 appeals the bankruptcy court's ruling that the deposition 6 testimony of Mr. Kong's wife would be allowed in lieu of her live 7 testimony under Civil Rule 32(a)(4)(C). We AFFIRM. 8 We begin by noting the troubling inadequacies with YJ's 9 excerpts of record and appellate brief. As appellant, YJ has the 10 responsibility to provide an adequate record on appeal. Kritt v. 11 Kritt (In re Kritt), 190 B.R. 382, 387 (9th Cir. BAP 1995). YJ's 12 record fails to include a copy of its complaint, Mr. Kong's 13 answer, any of the parties' trial briefs, copies of Mr. Kong's 14 admitted trial exhibits, and the notice of appeal — all in 15 violation of Rule 8009. YJ's excerpts of record are also not 16 continuously paginated, in violation of 9th Cir. BAP 17 Rule 8009(b)-1(b)(2), which perhaps explains why its brief utterly 18 fails to cite to the record as required by Rule 8010(1)(E). 19 While Mr. Kong provided some of these missing items,3 his 20 brief and excerpts of record suffer from their own shortcomings. 21 His record includes trial exhibits expressly disallowed by the 22 23 2 Unless specified otherwise, all chapter, code and rule references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and 24 the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure are referred to as “Civil Rules.” 25 3 For those documents neither party submitted on appeal, we 26 exercised our discretion to review them from the bankruptcy court's electronic docket. See O'Rourke v. Seaboard Sur. Co. 27 (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989); Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 28 233 n.9 (9th Cir. BAP 2003).
-2- 1 bankruptcy court (rulings which he has not cross-appealed), and 2 his opening brief inappropriately refers to paragraphs of his 3 declaratory testimony that were excluded at trial. Needless to 4 say, the parties have made it difficult for the Panel to address 5 the merits of this appeal, such as they are. 6 Most importantly, while YJ asserts fourteen issues on appeal 7 in its statement of the issues presented, the argument portion of 8 its opening brief, which consists of a mere three pages, provides, 9 at best, argument relating to only two of them — the bankruptcy 10 court's decision to allow Mrs. Kong's deposition testimony in lieu 11 of her live testimony and the court's decision to deny YJ's claim 12 under § 727(a)(2)(A). Accordingly, we address only these issues. 13 All other issues raised but not properly briefed have been 14 abandoned. Branam v. Crowder (In re Branam), 226 B.R. 45, 55 (9th 15 Cir. BAP 1998), aff'd, 205 F.3d 1350 (9th Cir. 1999)(an issue not 16 adequately addressed by appellant in its opening brief is deemed 17 abandoned).4 18 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 19 A. Prepetition events 20 1. Royal Liquor Mart 21 Mr. Kong and his non-debtor wife, Minshin Clara Kong fka Soon 22 Ouk Kong, immigrated to the United States from Korea in 1987. 23 They were married in 1980. It is undisputed that the Kongs have 24 never entered into any agreement regarding ownership of assets. 25 In 1988, the Kongs purchased a liquor store called Royal 26 27 4 For this same reason, we also disregard the oral argument counsel for YJ presented regarding the bankruptcy court's decision 28 in favor of Mr. Kong on YJ's claim under § 727(a)(4).
-3- 1 Liquor Mart, located on W. Adams Blvd. in Los Angeles, California. 2 The Kongs testified that Royal Liquor Mart was purchased with 3 funds given as gifts from Mrs. Kong's father who lives in Korea. 4 Initially, the Kongs owned and operated Royal Liquor Mart together 5 as a partnership under the fictitious business name Royal Liquor 6 Mart. The Kongs continued to own Royal Liquor Mart as a 7 partnership until about January 2007, but Mr. Kong ceased managing 8 the store with Mrs. Kong in about 1990, when he opened a mortgage 9 brokerage business. Mr. Kong testified at trial that after 1990, 10 he helped Mrs. Kong with the store on weekends, running errands, 11 etc. 12 2. Mr. Kong's business ventures 13 In 1995, Mr. Kong began operating his first garment business. 14 By 2006, Mr. Kong owned FSI Greenwest Activewear, Inc. ("FSI"), a 15 garment production business, and Fashion Solutions Guatemala, S.A. 16 ("FSG"), a Guatemalan entity that owned and operated a sewing 17 factory in Guatemala. 18 In 2006, YJ agreed to invest $1 million in Mr. Kong's 19 businesses. YJ and Mr. Kong formed the entity Greenwest, LLC 20 ("Greenwest"), which was jointly owned by Mr. Kong, FSI and YJ's 21 wholly owned subsidiary, YJ West Corp. Mr. Kong invested 99% of 22 his FSG shares into Greenwest, FSI invested all of its assets into 23 Greenwest, and YJ through YJ West Corp. invested $1 million into 24 Greenwest. 25 In mid-2006, Mr. Kong learned that a Guatemalan dyeing 26 factory known as World Fama was for sale. In late 2006/early 27 2007, Greenwest, YJ, and Lekos Dye & Finishing, Inc., another 28 entity in which Mr. Kong held a 33% ownership interest ("Lekos"),
-4- 1 formed a California entity called LA Guatemala Partnership, LLC 2 ("LAG"),5 and a Guatemalan entity called LA USA Dyeing & 3 Finishing, S.A. ("D&F"). LAG was the 100% shareholder of D&F, and 4 D&F purchased the assets of World Fama. 5 Due to disputes with YJ, Mr. Kong resigned from his positions 6 as CEO of D&F and as manager of LAG in June 2008. Since June 7 2008, Mr. Kong has not been involved in any of the operations of 8 D&F or LAG. 9 FSG and Greenwest ceased operations in June and August 2008, 10 respectively. In November 2009, a Guatemalan bank sold the real 11 property owned by FSG and applied the sale proceeds to FSG's 12 outstanding portion of the loan. FSG's remaining assets were also 13 sold and disposed of by the Guatemalan bank. 14 On September 9, 2008, Mr. Kong formed a new entity called 15 GGFB, LLC ("GGFB"). He is the sole owner. In lieu of a salary, 16 GGFB pays for Mr. Kong's monthly living expenses. 17 Sometime in mid- to late 2008, Greenwest's business loans 18 with Nara Bank went into default. On December 31, 2008, Nara Bank 19 and Greenwest entered into a forbearance agreement, under which 20 Nara Bank agreed to forbear from seeking to enforce its rights 21 under two promissory notes in exchange for Greenwest agreeing to 22 pledge the additional collateral of the assets of Royal Liquor, 23 LLC and GGFB (and other entities) for the loans. Greenwest also 24 executed two new promissory notes in the principal amounts of 25 26 5 The jury in the state court action YJ filed against Mr. Kong found that Mr. Kong individually was a member of the 27 joint venture LAG. Mr. Kong disputed this and maintains that his company, Greenwest, as opposed to him individually, was a member 28 of LAG.
-5- 1 $3,463,340.11 and $738,809.87. The $738,809.87 note required 2 Greenwest to make 72 monthly payments of $2,500, plus one last 3 payment of the remaining balance. 4 At the foreclosure sale of Greenwest's remaining assets, 5 GGFB, the only bidder, acquired the assets for $10,000. As part 6 of the asset purchase, GGFB took over the obligation of making 7 Greenwest's $2,500 monthly payments to Nara Bank. Some of these 8 payments were initially made by Mrs. Kong, but the rest have since 9 been paid by GGFB. 10 In August 2009, YJ and Lekos agreed to terminate LAG. On 11 August 12, 2009, Insang Grant Won, manager of LAG, filed a 12 Certificate of Cancellation of LAG, thereby causing LAG to become 13 a cancelled limited liability company. Mr. Kong alleged this was 14 done without the consent of Greenwest. 15 3. Formation of Royal Liquor, LLC by Mrs. Kong 16 On January 4, 2007, Mrs. Kong formed Royal Liquor, LLC, which 17 now owns Royal Liquor Mart. Mr. Kong testified both in his 18 declaration and at trial that since January 4, 2007, Mrs. Kong has 19 been the sole owner of Royal Liquor, LLC, and that as of that 20 date, he has had no community interest in the entity. Mrs. Kong 21 testified at her deposition that she was the sole owner of Royal 22 Liquor, LLC. The bankruptcy court admitted into evidence the 23 couple's federal joint tax returns for the years 2007-2009; they 24 indicate that Royal Liquor, LLC was solely Mrs. Kong's business. 25 In 2010, Mr. and Mrs. Kong began to file separate federal tax 26 returns, and Mr. Kong's 2010 tax return did not include any income 27 from Royal Liquor, LLC. 28 ////
-6- 1 4. State court litigation with YJ 2 On December 4, 2008, YJ filed a lawsuit against Mr. Kong, 3 Greenwest and others relating to its investment in and the 4 operations of their joint venture LAG and D&F. Among other 5 claims, YJ asserted claims for breach of contract, fraud, 6 negligent misrepresentation, breach of fiduciary duty and 7 conversion. YJ alleged that Mr. Kong had devised a scheme to 8 defraud YJ and convert its investments made in his related 9 companies. 10 After a two-week trial in February 2011, the jury returned a 11 verdict in favor of YJ for $4.7 million. A judgment was entered 12 by the state court on April 20, 2011. 13 5. Operations of GGFB 14 Fineman West & Company, LLP is GGFB's accountant. According 15 to GGFB's financial statements prepared by Harold West, CPA, and 16 admitted through the declaration of Stella K. Park, Esq., counsel 17 for YJ, in 2009 GGFB had net sales of $991,284 and a net loss of 18 $46,936, in 2010 GGFB had net sales of $4,373,700 and net income 19 of $18,252, and in 2011 GGFB had net sales of $4,147,821 and a net 20 loss of $43,675. 21 6. Formation of Adams LLC by Mrs. Kong 22 At her deposition, Mrs. Kong testified that Royal Liquor, LLC 23 had an agreement with its landlord, that in the event the landlord 24 decided to sell the real property where the liquor store was 25 located, Royal Liquor, LLC would have the first right of refusal 26 to purchase it. In late 2010, the landlord informed Mrs. Kong 27 that he intended to sell the real property (“Adams Property”) for 28 $530,000. Because her lease was about to expire and she feared a
-7- 1 new landlord would raise her rent, Mrs. Kong decided to purchase 2 the Adams Property. 3 To facilitate the purchase of the Adams Property, on 4 October 1, 2010, Mrs. Kong formed 5472 Adams, LLC ("Adams LLC"). 5 The Statement of Information filed with the California Secretary 6 of State reflects that Mrs. Kong is the manager of Adams LLC. 7 On or about February 17, 2011, Adams LLC purchased the Adams 8 Property for $530,000. Mrs. Kong testified at her deposition that 9 she provided a down payment of about $130,000, which consisted of 10 money from her family in Korea and funds from her money market 11 account. Mr. Kong testified in his declaration that he had no 12 community property interest in Adams LLC or the Adams Property; he 13 further asserted that the money used to purchase the Adams 14 Property was Mrs. Kong's personal funds and funds from an SBA 15 loan, for which she and Royal Liquor, LLC are the sole guarantors. 16 7. Filing of the divorce petition 17 Due to the financial burdens caused by Mr. Kong's business 18 ventures, the Kongs began to have marital problems in 2008. On 19 September 13, 2011, Mrs. Kong, with the assistance of counsel, 20 filed a petition for dissolution of marriage. The separation date 21 was listed as March 2, 2011. Notably, the petition lists only two 22 assets — Royal Liquor, LLC and Adams LLC — both of which Mrs. Kong 23 claimed were her separate property. The petition did not list any 24 community assets belonging to the marital estate. Mr. Kong 25 testified that he moved out of their marital home ("Residence") in 26 March 2011. 27 In or about February 2013, Mrs. Kong was diagnosed with 28 stage 4 lung cancer. Mr. Kong testified in his declaration that
-8- 1 due to Mrs. Kong's health problems, the divorce proceedings have 2 been put on hold. Mr. Kong has never filed a response to the 3 dissolution petition. However, Mr. Kong at trial, and Mrs. Kong 4 at her deposition, testified that based on Mrs. Kong's filing of 5 the dissolution petition, they thought the divorce was final. 6 B. Postpetition events 7 1. The chapter 7 filing 8 Mr. Kong filed an individual chapter 7 bankruptcy case on 9 September 23, 2011. In his Schedule A, Mr. Kong listed a fee 10 interest in the Residence valued at $0, with a secured claim for 11 $4,554,729. His Schedule D reflected that Citimortgage, Inc. held 12 a first deed of trust against the Residence for $554,729, and that 13 Nara Bank held a second deed of trust against the Residence for $4 14 million.6 15 In his Schedule B, Mr. Kong listed his 78% interest in 16 Greenwest and his 100% interest in FSI, valuing both interests at 17 $0. 18 Mr. Kong stated in his Schedule I that his monthly income 19 from GGFB was $2,500. However, he later testified that GGFB did 20 not pay him a fixed monthly salary of $2,500, but instead pays for 21 his living expenses; $2,500 was an estimate of the amount GGFB 22 paid him as of September 2011. He further testified that since 23 filing his petition in September 2011, GGFB's business had 24 improved, and the amount of current monthly expenses provided to 25 him by GGFB had increased to $4,500 per month, which paid for 26 27 6 The chapter 7 trustee later filed a notice of intent to abandon the Residence because of its inconsequential value to the 28 estate.
-9- 1 rent, gas, utilities, food, legal fees, health insurance and other 2 personal expenses. 3 On December 6, 2011, Mr. Kong filed an amended Schedule B to 4 report his previously omitted 100% interest in GGFB, which he 5 valued as "unknown." In his amended statement of financial 6 affairs, Mr. Kong stated that GGFB was currently suffering a 7 $150,000 loss for 2011. 8 2. YJ's adversary complaint and discovery 9 YJ filed a complaint against Mr. Kong on January 3, 2012, 10 seeking to except its debt from discharge under § 523(a)(2), 11 (a)(4) and (a)(6), and seeking to deny Mr. Kong's discharge under 12 § 727(a)(2), (a)(3), (a)(4) and (a)(5). The claims were 13 bifurcated, and the bankruptcy court ordered that trial on YJ's 14 § 727 claims would proceed first. 15 In response to YJ's subpoena, Mrs. Kong appeared for her 16 deposition on August 14, 2012, at the offices of YJ's counsel. 17 The record shows that all questioning of Mrs. Kong was conducted 18 by counsel for YJ. 19 3. The Trial Procedures Order and the Joint Pretrial Order 20 The bankruptcy court entered a Trial Procedures Order ("TPO") 21 on February 7, 2013. Per the TPO, all direct testimony from 22 witnesses had to be submitted by declaration and, for the 23 declaration to be admissible, the declarant had to be present at 24 trial and subject to cross-examination. See Section 1(e). 25 Section 1(d) of the TPO stated that if a party was unable to 26 obtain the declaration of a witness, counsel for that party was 27 required to file a declaration providing the name of the witness, 28 a detailed summary of the expected testimony, and why counsel was
-10- 1 unable to obtain the witness's declaration. Section 1(d) further 2 stated that if a party intended to present the witness's testimony 3 by his or her deposition transcript, only those portions of the 4 transcript intended to be offered were to be attached to its 5 counsel's declaration. 6 Also on February 7, 2013, the parties filed their Revised 7 Joint Pretrial Order. Notably, no facts asserted by either side 8 were agreed admitted. Rather, each party "reserved" objections to 9 the other party's asserted facts. The only witnesses to be called 10 at trial were Mr. and Mrs. Kong. 11 4. The trial briefs and learning of Mrs. Kong's illness 12 For its claim under § 727(a)(2)(A), YJ contended that 13 Mr. Kong: (1) concealed his community property interest in Royal 14 Liquor, LLC and Adams LLC; (2) failed to produce any books and 15 records for Adams LLC or the Adams Property; (3) concealed the 16 real value of GGFB; and (4) concealed and failed to disclose his 17 interest in Lekos, FSG, D&F and LAG. 18 Sometime in February or March 2013, the Kongs informed their 19 counsel that Mrs. Kong was suffering from stage 4 lung cancer. 20 David Lally, Esq., counsel for YJ, admitted that he learned of 21 Mrs. Kong's illness in March 2013. Trial Tr. (May 29, 2013) 22 169:10-12. In an email dated April 9, 2013, Ms. Park, co-counsel 23 for YJ, informed counsel for the Kongs, Shi Young Lim, Esq., that 24 she wanted to take a preservation deposition of Mrs. Kong in the 25 event that she became unavailable to withstand trial in May 2013. 26 In response, Mr. Lim stated that he was willing to stipulate as to 27 Mrs. Kong's unavailability for trial pursuant to Civil Rule 32(a) 28 and, in accordance with Civil Rule 32(a)(4)(C), he authorized YJ
-11- 1 to use Mrs. Kong's deposition testimony in lieu of her live 2 testimony. Mr. Lim declined, however, Ms. Park's request for a 3 second deposition of Mrs. Kong. No further emails are in the 4 record, but Mr. Lally, co-counsel for YJ, stated at trial that his 5 firm had served Mrs. Kong with a subpoena on April 10, 2013, for 6 her to appear at trial. Id. at 9:16-21. YJ apparently took no 7 further action to depose Mrs. Kong. 8 Mr. Kong filed his trial brief on April 17, 2013. To refute 9 YJ's claim under § 727(a)(2)(A), Mr. Kong argued the evidence 10 showed that both Royal Liquor, LLC and Adams LLC were Mrs. Kong's 11 separate property. Further, YJ had failed to prove that any 12 community interest Mr. Kong may have had in Royal Liquor, LLC was 13 transferred within one year of the filing of his bankruptcy 14 petition. 15 As for his alleged failure to produce books for Adams LLC or 16 the Adams Property, Mr. Kong argued that YJ never asked for any 17 documents relating to Adams Property. Even if it had, Mr. Kong 18 argued that failure to produce these documents did not support 19 denial of his discharge under § 727(a)(2)(A). Mr. Kong also 20 argued that he did not "conceal the real value of GGFB" as YJ 21 alleged. Not knowing the value of GGFB and listing it as 22 "unknown" was not the same as concealing an ownership interest in 23 it, which is required for a claim under § 727(a)(2)(A). 24 Finally, as for his alleged concealment of his interest in 25 Lekos, FSG, D&F and LAG, Mr. Kong admitted that he inadvertently 26 failed to disclose his 33% interest in Lekos, but this was only 27 because he had pledged his stock certificates to Nara Bank as 28 additional collateral for the loans, and he considered Nara Bank
-12- 1 to be the owner of the Lekos stock. Nonetheless, argued Mr. Kong, 2 YJ had failed to present any evidence that he disposed of his 3 ownership interest in Lekos through a transfer or concealment 4 within one year of the filing of his bankruptcy petition. 5 Further, YJ was fully aware of Mr. Kong's interest in Lekos, so 6 failing to disclose it could not have been to hinder, delay or 7 defraud YJ. As for FSG, Mr. Kong contended that YJ had not 8 presented any evidence that he disposed of his ownership interest 9 in FSG through a transfer or concealment within one year of filing 10 for bankruptcy. Moreover, FSG's real property was sold at a 11 foreclosure sale and it no longer conducted any business. As for 12 D&F and LAG, Mr. Kong contended that he had zero interest in D&F 13 because it was wholly owned by LAG and that he never had an 14 interest in LAG, but, even if he did, that entity had not existed 15 since 2009. In any event, argued Mr. Kong, YJ had no evidence 16 that he disposed of these interests within one year of the filing 17 of his bankruptcy petition. 18 Along with his trial brief, Mr. Kong offered his declaration 19 and a declaration from Mr. Lim. Mr. Lim's declaration purported 20 to introduce certain portions of the deposition transcript of 21 Mrs. Kong and to describe her testimony. Mr. Lim's declaration 22 failed to explain why he was offering Mrs. Kong's deposition 23 testimony and why no trial declaration was filed on her behalf, as 24 required by the TPO. 25 YJ filed its evidentiary objections to the declarations of 26 Mr. Kong and Mr. Lim on May 8, 2013. For Mr. Lim, YJ argued that 27 he was not on the witness list and that his attempt to introduce 28 portions of Mrs. Kong's deposition transcript violated the local
-13- 1 rules and the TPO, because Mrs. Kong was required to file a 2 declaration and appear for testimony if evidence from her was to 3 be presented. Therefore, argued YJ, none of Mrs. Kong's 4 deposition testimony could be introduced. 5 5. Trial on the 727 claims 6 The bankruptcy court held a two-day trial on YJ's § 727 7 claims on May 29 and 30, 2013. As a preliminary matter, the court 8 discussed YJ's evidentiary objections to Mr. Lim's declaration and 9 opined that Mrs. Kong's deposition transcript was inadmissible 10 hearsay. Mr. Lim informed the court that Mrs. Kong had cancer and 11 was being treated with chemotherapy. The court noted that no 12 evidence as to Mrs. Kong's unavailability was before it so that 13 her deposition could be used per Civil Rule 32. Mr. Lim then 14 informed the court about the April 9 email between counsel 15 discussing Mrs. Kong's unavailability and the offer to use her 16 deposition testimony at trial. Ms. Park explained that since 17 Mr. Lim would not stipulate to the preservation deposition of 18 Mrs. Kong so that YJ could cross-examine her, YJ would not 19 stipulate to Mrs. Kong's unavailability. The court noted the 20 dilemma, but stated that if her deposition testimony was going to 21 be used, the court would have to find that she was unavailable, 22 and it could not make that finding based on the record. For the 23 moment, the court decided to sustain YJ's objection. Mr. Kong was 24 then called to testify. 25 After a brief recess, Mr. Lim informed the bankruptcy court 26 that Mrs. Kong was on her way to the courthouse with the help of a 27 third party, and that she would authenticate records and testify 28 about her chemotherapy treatment. However, Mr. Lim stated that he
-14- 1 was not sure how Mrs. Kong's memory would be, due to the 2 medications she was taking. Mr. Lally reserved his objections for 3 when Mrs. Kong arrived. Mr. Kong was then recalled to the stand 4 for further testimony. 5 Mrs. Kong arrived at the court and Mr. Lim proceeded to call 6 her to the stand. Mr. Lim stated that he wanted Mrs. Kong to 7 testify as to her unavailability based on the medications she was 8 taking, which affected her memory. The court noted that Mr. Lim 9 was in a "catch 22" because Mrs. Kong was at least "somewhat 10 available" to testify that she was "unavailable." And if she was 11 available, then she should have filed a declaration, but since she 12 did not, then her testimony would not be allowed. Trial Tr. 13 (May 29, 2013) 131:22-132:18. Mr. Lally noted YJ's objection to 14 allowing Mrs. Kong's deposition testimony into evidence, saying 15 that it would be a "trial by surprise, which [was] prejudicial to 16 [his] client." Id. at 133:7-134:6. 17 Mrs. Kong was questioned briefly by both Mr. Lim and the 18 bankruptcy court. Mr. Lally declined to ask Mrs. Kong any 19 questions, noting that doing so would violate the TPO. Mrs. Kong 20 was then excused. Mr. Lim explained to the court that Mrs. Kong 21 was not diagnosed with stage 4 lung cancer until after the TPO had 22 been entered, and he felt it was unethical to have her sign a 23 declaration under the penalty of perjury knowing she was on 24 medications affecting her mind. The court decided to "think about 25 this for awhile" and reserved its ruling. Id. at 142:1-5. 26 Testimony continued with Mr. Kong and a rebuttal witness for YJ. 27 After hearing further argument from counsel, the bankruptcy 28 court found that, based on its observation of her, Mrs. Kong was
-15- 1 "unavailable" and unable to withstand any serious cross- 2 examination. Id. at 171:8-18. Mr. Lally argued that Mrs. Kong's 3 deposition testimony should not be allowed, and that Mr. Lim had 4 other alternatives. For example, he could have moved to amend the 5 TPO. The court replied, that is what Mr. Lim was essentially 6 doing now. Id. at 171:24-25. 7 After considering additional argument from YJ, the bankruptcy 8 court changed its ruling and overruled YJ's objection to admitting 9 Mrs. Kong's deposition testimony into evidence: 10 Well . . . I'm going to rule on two things. That’s why I have run this through of my own mind. I never had this 11 happen before and I hope for various reasons it never happens again. But I'm going to allow the – I'm going to 12 overrule those objections to the deposition. 13 The reason is that talk about fairness. It's not – it was not perfect. It was not done perfectly well by 14 counsel here, but I understand why you didn't have her sign the declaration knowing full well that under 15 medication she might not be accountable for it and also the high likelihood that she wouldn't – that she would 16 not be able to testify in any case. So even if there had been technical compliance with the rule we'd be in the 17 same position now. 18 So now I have to balance the fact that Rule 32 is Rule 32. People die. They get in accidents. All sorts 19 of things happen and it's not uncommon at all. And particularly 32 is what we're talking about. The witness 20 is unavailable, that that's – you know, as long as there is full opportunity to cross examine – and clearly there 21 was – that that's admissible. So I have never heard of the term, you know, preservation. The concept you might 22 want to add something. But in all fairness, that's what Rule 32 is all about and indeed that had already 23 occurred. 24 So I have to weigh here a situation where – a very unfortunate personal situation for Mrs. Kong and she's 25 clearly unavailable at this point even if she had filed a declaration. And so let's say . . . even if she had 26 filed one it wouldn't be admissible because she could not be here to be cross examined. So if that were the case 27 – if counsel had filed a declaration we'd be right back where we are now. Okay, that's not admissible because 28 she can't testify. Is there any other evidence that is?
-16- 1 And that's what Rule 32 is. 2 So it seems to me in running it through, I don't see any great unfairness to the plaintiff in this case. You 3 already had the opportunity and no one suggested it's not admissible under Rule 32. There's a fair opportunity 4 with the same motives. I mean, that's what this deposition was all about. So I am going to change my 5 ruling on that and this will be really – I said it's never happened before. I'm repeating myself, but I think 6 in all fairness I don't see the unfairness to the plaintiff and Rule 32 is what it is, so I'm going to 7 allow . . . we're only talking about those portions. 8 Id. at 173:12-175:5. Accordingly, the portions of Mrs. Kong's 9 deposition attached to Mr. Lim's declaration were admitted. 10 Mr. Lally then introduced into evidence the portions of her 11 deposition transcript YJ had submitted with Ms. Park's 12 declaration. 13 After summation on May 30, 2013, the bankruptcy court gave 14 its oral ruling from the bench, finding in favor of Mr. Kong on 15 all of YJ's § 727 claims. As for YJ's § 727(a)(2)(A) claim, the 16 court found that Mr. Kong did not fail to disclose a community 17 property interest in Royal Liquor, LLC. That entity became 18 Mrs. Kong's separate property in 2006, so Mr. Kong had no interest 19 in it at the time he filed his bankruptcy petition. Trial Tr. 20 (May 30, 2013) 74:10-18. The court noted that the "only [claim] 21 that would actually qualify potentially under 727(a)(2) is the 22 actual transfer. That would be Adams[.]" Id. at 74:18-20. 23 However, the court found that, based on the evidence, the money 24 used to buy the Adams Property was Mrs. Kong's. As for Mr. Kong's 25 nondisclosure of his 33% interest in Lekos, the court found that 26 while Mr. Kong did not list it, he is not in control of Lekos, and 27 that he did not intend to deceive YJ by not listing it. As for 28 Mr. Kong's alleged failure to list the actual value of GGFB, the
-17- 1 court found that providing a value of "unknown" was not a lie. 2 "I'm not sure anybody, including myself here, after listening to 3 the testimony, could figure out what in the world [GGFB] is 4 actually worth but it was disclosed." Id. at 75:24-76:1. 5 After filing its notice of appeal on August 21, 2013, YJ 6 stipulated to dismiss its § 523 claims with prejudice. The 7 bankruptcy court entered an order approving the stipulation on 8 September 4, 2013. On September 12, 2013, the bankruptcy court 9 entered an order ruling that Mr. Kong was entitled to discharge. 10 YJ's notice of appeal was deemed timely upon entry of the 11 discharge order on September 12. Rule 8002(a). 12 II. JURISDICTION 13 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 14 and 157(b)(2)(J). We have jurisdiction under 28 U.S.C. § 158. 15 III. ISSUES 16 1. Did the bankruptcy court abuse its discretion when it 17 determined that Mrs. Kong was unavailable and allowed her 18 deposition testimony in lieu of her live testimony? 19 2. Did the bankruptcy court deny YJ due process when it allowed 20 Mrs. Kong's deposition testimony despite the TPO? 21 3. Did the bankruptcy court err when it determined that YJ had 22 not proved its claim under § 727(a)(2)(A)? 23 IV. STANDARDS OF REVIEW 24 We review for abuse of discretion the bankruptcy court's 25 decision to admit deposition testimony under Civil Rule 26 32(a)(4)(C). See Nationwide Life Ins. Co. v. Richards, 541 F.3d 27 903, 909 (9th Cir. 2008)(analyzing Civil Rule 32(a)(4)(B)). 28 A trial court’s evidentiary rulings are reviewed for abuse of
-18- 1 discretion. United States v. Waters, 627 F.3d 345, 351 (9th Cir. 2 2010). To reverse an evidentiary ruling, we must conclude both 3 that there was an abuse of discretion and that the error was 4 prejudicial. Johnson v. Neilson (In re Slatkin), 525 F.3d 805, 5 811 (9th Cir. 2008)(citation omitted). A bankruptcy court abuses 6 its discretion if it applies the wrong legal standard or its 7 factual findings are illogical, implausible or without support in 8 the record. TrafficSchool.com v. Edriver Inc., 653 F.3d 820, 832 9 (9th Cir. 2011). 10 Due process issues are reviewed de novo. In re Brooks- 11 Hamilton, 400 B.R. 238, 245 (9th Cir. BAP 2009). 12 In an action for denial of discharge, we review: (1) the 13 bankruptcy court's determinations of the historical facts for 14 clear error; (2) its selection of the applicable legal rules under 15 § 727 de novo; and (3) its application of the facts to those rules 16 requiring the exercise of judgments about values animating the 17 rules de novo. Searles v. Riley (In re Searles), 317 B.R. 368, 18 373 (9th Cir. BAP 2004)(citation omitted), aff'd, 212 F. App’x. 19 589 (9th Cir. 2006). Factual findings are clearly erroneous if 20 illogical, implausible, or without support in the record. Retz v. 21 Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010)(citation 22 omitted). 23 V. DISCUSSION 24 A. The bankruptcy court did not abuse its discretion or deny YJ due process when it allowed Mrs. Kong's deposition testimony 25 in lieu of her live testimony. 26 Civil Rule 32, made applicable here by Rule 7032, governs the 27 use of deposition testimony during trial. Civil Rule 32(a)(4) 28 allows any party to use the deposition of a witness, whether or
-19- 1 not a party, in lieu of live testimony, in certain specified 2 circumstances relating to the unavailability of a witness or the 3 inability to compel attendance. Under Civil Rule 32(a)(4)(C), a 4 party may use the deposition of a witness at a hearing or trial if 5 the court finds "that the witness cannot attend or testify because 6 of age, illness, infirmity, or imprisonment." 7 Due to the nature of its brief, we are unclear whether YJ 8 disputes the bankruptcy court's finding that Mrs. Kong was 9 "unavailable" for purposes of Civil Rule 32(a)(4)(C) or whether 10 YJ's focus is more on the court's decision to modify its TPO by 11 allowing the deposition transcript. In any event, we see no abuse 12 of discretion with the court's finding that she was "unavailable." 13 After questioning Mrs. Kong and observing her behavior in the 14 courtroom, the court determined that Mrs. Kong was unavailable for 15 trial on the ground that she was ill, and therefore her deposition 16 testimony would be allowed in lieu of live testimony. 17 YJ contends that allowing Mrs. Kong's deposition testimony, 18 without notice to YJ, violated its due process rights and was 19 contrary to the bankruptcy court's own procedures set forth in the 20 TPO. YJ asserts that it was impossible for it to have known that 21 the court would have allowed any testimony from Mrs. Kong since 22 she did not file the required declaration for trial. 23 Arguably, this situation may only occur because of conducting 24 trials by using testimonial declarations. While it may be a time- 25 saving device and creates no issues in most cases, it has the 26 potential of obviating a party's ability to use deposition 27 testimony under Civil Rule 32. If a witness is unable to file a 28 declaration just prior to trial due to illness or some other
-20- 1 specified reason enumerated in Civil Rule 32(a)(4), the witness's 2 testimony — either direct or cross-examination — will not be 3 allowed into evidence, pursuant to Section 1(e) of the TPO, unless 4 a party’s counsel complies with Section 1(d) of the TPO and files 5 a declaration for the witness giving a detailed summary of the 6 expected testimony and stating why counsel was unable to obtain 7 the witness's declaration. 8 Counsel failed to comply fully with Section 1(d) of the TPO. 9 Mr. Lim provided a detailed summary of Mrs. Kong's testimony in 10 his declaration, but he failed to explain why he was unable to 11 obtain her declaration and why her deposition testimony had to be 12 used. He tried to fix his error by orally moving to modify the 13 TPO at the start of trial. Nonetheless, YJ was on notice that 14 Mrs. Kong was ill at least six weeks (if not more) before trial, 15 and that her deposition transcript would likely be necessary if 16 she were to testify in this case. YJ also had a fairly good 17 understanding as to what her testimony would be because YJ deposed 18 her for an entire day, and Mr. Kong's trial brief and Mr. Lim's 19 declaration, both filed six weeks before trial, set forth 20 precisely what her testimony was. Therefore, we cannot conclude 21 that YJ was "sandbagged and surprised" and denied due process 22 (assuming that legal theory even applies here) when the bankruptcy 23 court modified the TPO and admitted Mrs. Kong's deposition 24 testimony into evidence; YJ was given the opportunity to examine 25 her at her deposition. See Lear v. Equitable Life Assur. Soc’y of 26 U.S., 798 F.2d 1128, 1135 (8th Cir. 1986)(trial court has broad 27 discretion concerning use of depositions under Civil Rule 32 and 28 appellate court will not reverse "unless, in the totality of the
-21- 1 circumstances, its rulings are seen to be a gross abuse of 2 discretion resulting in fundamental unfairness”). 3 More importantly, YJ has failed to show that it was 4 prejudiced. When an appellant offers no evidence of prejudice, 5 any deficiency in providing due process to the appellant is 6 harmless. See Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 7 776 (9th Cir. 2008)(citing Rule 9005). YJ contends that allowing 8 Mrs. Kong's deposition testimony constituted reversible error 9 because the bankruptcy court referenced her transcript in making 10 its ruling. YJ fails to identify which finding or which portion 11 of Mrs. Kong's deposition testimony was relied upon by the court 12 for finding against YJ on any of its claims. The only relevant 13 finding the court could have made based on her testimony is that 14 Adams LLC and the Adams Property were her separate property. 15 While Mrs. Kong presented testimony on this issue, so did 16 Mr. Kong. Although certain paragraphs of his declaration 17 testifying about Adams LLC and the Adams Property and the exhibits 18 supporting that testimony were not allowed into evidence, 19 Paragraph 68 of his declaration was allowed. There, Mr. Kong 20 testified that he had no community property interest in Adams LLC 21 or the Adams Property, that the money used to purchase the Adams 22 Property was a combination of Mrs. Kong's funds and an SBA loan, 23 and that Mrs. Kong and Royal Liquor, LLC were the sole guarantors 24 on the SBA loan. Further, the document submitted by YJ entitled 25 "Real Property Transaction Record" indicates that the Adams 26 Property was purchased by Mrs. Kong. YJ offered no evidence to 27 the contrary, but only legal argument that presumptively Adams LLC 28 and the Adams Property were community property because they were
-22- 1 formed and/or purchased during the marriage. 2 Therefore, even if the bankruptcy court erred by allowing 3 Mrs. Kong's deposition testimony into evidence, the error was not 4 prejudicial because other evidence in the record supported its 5 finding that Adams LLC and the Adams Property were Mrs. Kong's 6 separate property. 7 B. The bankruptcy court did not err when it determined that YJ had not proved its claim under § 727(a)(2)(A). 8 9 In the spirit of the "fresh start" principles that the Code 10 embodies, claims for denial of discharge are liberally construed 11 in favor of the debtor and against the objector to discharge. 12 Khalil v. Developers Sur. & Indem. Co. (In re Khalil), 379 B.R. 13 163, 172 (9th Cir. BAP 2007), aff'd, 578 F.3d 1167 (9th Cir. 2009) 14 (citation omitted). The objector to discharge bears the burden to 15 prove by a preponderance of the evidence that the debtor's 16 discharge should be denied under an enumerated ground of § 727(a). 17 Id. (citation omitted). 18 Section 727(a)(2)(A) provides that the bankruptcy court may 19 deny a debtor's discharge if the debtor disposed of, or permitted 20 the disposal of, his or her property with the intent to hinder, 21 delay, or defraud a creditor, within one year prior to the 22 petition date. The objector to discharge under § 727(a)(2)(A) 23 must prove two things: (1) a disposition of property, whether by 24 transfer, removal, destruction, mutilation, or concealment (within 25 the one-year period); and (2) the debtor's subjective intent to 26 hinder, delay or defraud a creditor through the act of disposing 27 of the property. In re Retz, 606 F.3d at 1200 (citation and 28 quotation marks omitted).
-23- 1 The only argument YJ offers here, at best, is that the 2 bankruptcy court erred in finding that Adams LLC and the Adams 3 Property were Mrs. Kong's separate property, so therefore Mr. Kong 4 could not have transferred any alleged interest he had in either 5 property within one year of the petition date. As we noted above, 6 Mr. and Mrs. Kong's testimony on this issue was uncontroverted. 7 YJ offered only legal argument and speculation to refute it. 8 Therefore, the bankruptcy court's findings are not illogical, 9 implausible or without support in the record. TrafficSchool.com, 10 563 F.3d at 832. 11 VI. CONCLUSION 12 Based on the foregoing, we AFFIRM. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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