in re: erkan ereren and aylin ereren, 9th cir. bap (2013)

7/25/2019 In re: Erkan Ereren and Aylin Ereren, 9th Cir. BAP (2013)

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* Thi s di sposi t i on i s not appr opr i at e f or publ i cat i on.Al t hough i t may be ci t ed f or what ever per suasi ve val ue i t mayhave ( see Fed. R. App. P. 32. 1) , i t has no pr ecedent i al val ue.See 9t h Ci r . BAP Rul e 8013- 1.

1

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP No. CC- 12- 1542- TaDKi)

ERKAN EREREN and AYLI N ) Bk. No. 10- bk- 22580- CBEREREN, )

) Adv. No. 10- ap- 01600- CBDebt or s. )

______________________________))

ERKAN EREREN; AYLI N EREREN, ))

Appel l ant s, ))

v. ) MEMORANDUM*

)RI CHARD A. MARSHACK, )Chapt er 7 Tr ust ee; UNI TED )STATES TRUSTEE, )

)Appel l ees. )

)

Ar gued and Submi t t ed on May 15, 2013at Pasadena, Cal i f or ni a

Fi l ed May 28, 2012

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di str i ct of Cal i f or ni a

Honor abl e Cat her i ne E. Bauer , Bankrupt cy J udge, Pr esi di ng

Appear ances: Mi chael Har vey Rai chel son of t he Law Of f i ces ofMi chael H. Rai chel son argued on behal f ofAppel l ant s; Mel i ssa Davi s Lowe of Shul man Hodges &Bast i an LLP ar gued on behal f of Appel l ee Ri char dA. Marshack, Chapt er 7 Trust ee.

Bef ore: TAYLOR, DUNN, and KI RSCHER, Bankr upt cy J udges.

FILED

MAY 28 2013

SUSAN M SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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1 Unl ess ot her wi se i ndi cat ed, al l chapt er and sect i onr ef er ences ar e t o t he Bankrupt cy Code, 11 U. S. C. 101- 1532.Rul e r ef er ences ar e t o t he Feder al Rul es of Bankrupt cyPr ocedur e, and Ci vi l Rul e r ef er ences ar e t o t he Feder al Rul esof Ci vi l Pr ocedur e.

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INTRODUCTION

Debt or s Er kan Er er en ( Mr . Er er en) and Ayl i n Er er en

( Mr s. Er er en and j oi nt l y, Debt or s) appeal f r om t he bankrupt cy

cour t ' s j udgment denyi ng t hei r chapt er 7 di schar ge pur suant t o

727( a) ( 2) , ( a) ( 4) , and ( a) ( 5) 1 and i t s or der on f i ndi ngs of

f act and concl usi ons of l aw f ol l owi ng t r i al . We AFFI RM t he

bankrupt cy cour t s deni al of di schar ge under 727( a) ( 2) and

(a)(4) .

FACTS

Pre-Bankruptcy

The Debt or s ar e a mar r i ed coupl e and i mmi grant s f r om Tur key.Mr . Er er en i s a sur geon, but i n 1996 he was i nj ur ed i n a ski

acci dent t hat l ef t hi m per manent l y di sabl ed. I n addi t i on t o $800

i n mont hl y gr oss i ncome, Mr . Er er en r ecei ves appr oxi mat el y

$14, 400 per mont h i n di sabi l i t y payment s.

I n J anuar y 2008, Mr . Er er en obt ai ned $3, 000, 000 i n mar ker s

f r omMGM Gr and Hotel , LLC ( MGM) i n Las Vegas and i n

appr oxi mat el y 24 hour s suf f er ed subst ant i al l osses. MGM

subsequent l y sued Mr . Er er en i n Nevada st at e cour t t o col l ect on

hi s gambl i ng debt . On J anuary 28, 2010, i t obt ai ned a j udgment

agai nst Mr . Ereren i n t he amount of $2, 379, 350. On March 9,

2010, MGM obt ai ned a si st er - st at e j udgment agai nst Mr . Er er en

i n Cal i f or ni a i n t he amount of $3, 317, 625. 66.

At t he t i me of t he domest i cat i on of j udgment , t he Debt or s


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2 The f i r st t r ansf er was made on J ul y 26, 2010 i n t he amountof $87, 000 and t he second t r ansf er was made the f ol l owi ng day i nt he amount of $91, 681.

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owned t wo Mercedes- Benzes ( t he Vehi cl es) . On March 16, 2010,

however , Mr . Er er en t r aded- i n the Vehi cl es at a Mer cedes- Benz

deal er shi p and r ecei ved $59, 000 i n pr oceeds. Mr . Er er en t hen

ent er ed i nt o l eases f or t wo 2010 Mer cedes- Benzes.

MGM began t o f ur t her r at chet up i t s col l ect i on ef f or t s

agai nst Mr . Ereren dur i ng t he summer of 2010. On J une 16, 2010,

i t obt ai ned a Wr i t of Execut i on on t he si st er - st at e j udgment i n

Cal i f or ni a st at e cour t , and a Not i ce of Levy was i ssued by t he

Or ange Count y Sher i f f . MGM al so conduct ed t wo j udgment debt or

exami nat i ons of Mr . Er er en, and, on August 23, 2010, i t obt ai ned

an or der f or a j udgment debt or exami nat i on of Mr s. Er er en.On J ul y 26 and J ul y 27, 2010, and whi l e col l ect i on ef f or t s

i nt ensi f i ed, Mr s. Er er en made t wo2 t r ansf er s of f unds i n t he

t ot al amount of $178, 681 ( t he Funds) t o her br other Huseyi n

Chai t Ber k ( Ber k) . Ber k l i ves i n Tur key.

Chapter 7 Filing and the Adversary Proceeding

On Sept ember 7, 2010, t he Debt ors f i l ed a vol unt ary

chapt er 7 bankrupt cy pet i t i on. Ri char d A. Mar shack was appoi nt ed

as t he chapt er 7 t r ust ee ( Tr ust ee) .

Af t er t wo 341( a) meet i ngs of credi t or s, t he Tr ust ee f i l ed

an adver sar y compl ai nt obj ect i ng t o the Debt or s di schar ge under

727( a) ( 2) , ( a) ( 4) , and ( a) ( 5) . The compl ai nt al l eged t hat t he

Debt or s t r ansf er r ed t he Funds and t he Vehi cl es wi t h t he i nt ent t o


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3 Al t hough t he Tr ust ee does not speci f i cal l y i dent i f y thecr edi t or s, i t appear s t hat , at a mi ni mum, he r ef ers t o MGM.

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hi nder , del ay, or def r aud t hei r credi t or s; 3 t hat t hey knowi ngl y

and f r audul ent l y omi t t ed t he t r ansf er of t he Vehi cl es f r om t hei r

st at ement of f i nanci al af f ai r s ( SOFA) ; and t hat t hey f ai l ed t o

sat i sf act or i l y expl ai n t he l oss or def i ci ency of t he asset s t o

meet t he Debt or s l i abi l i t i es.

The bankrupt cy cour t schedul ed a t r i al f or September 4,

2012. I n advance of t r i al , t he Debt or s each f i l ed a decl ar at i on

i n l i eu of di r ect t r i al t est i mony.

Mr . Er eren decl ared t hat between 2003 and 2004, hi s f ather

( who l i ved i n Tur key) became i l l . Bet ween t he l at t er hal f of

2004 unt i l t he el der Er er en' s deat h i n J anuar y 2005, Mr . Er er enal l egedl y bor r owed appr oxi mat el y $157, 500 f r om Berk t o pay f or

t he el der Er er en s medi cal bi l l s, expenses, and f uner al i n

Tur key. Mr . Erer en st at ed t hat based on Ber k s r equest , i n

J anuar y 2005, Mr s. Erer en and he executed a promi ssor y not e i n

f avor of Ber k ( Ber k Not e) , evi denci ng t hei r pr omi se t o r epay

t he money l oaned by Berk. He st ated t hat t he t ot al amount owed

under t he Berk Note was $178, 681 and that i t matured on or bef ore

August 1, 2010.

Mr . Er er en f ur t her decl ar ed t hat he di d not l ear n of t he MGM

si st er - st at e j udgment unt i l l at e Mar ch/ ear l y Apr i l 2010 and t hat

he di scl osed t o MGM hi s t r ade- i n of t he Vehi cl es dur i ng hi s

j udgment debtor exami nat i on. Mr . Erer en st at ed t hat t he Debt or s

di d not bel i eve t hey wer e r equi r ed t o l i st t he t r ade- i n of t he

Vehi cl es on t hei r SOFA, as i t was Mr . Er er en s r egul ar pr act i ce


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4 The Debt or s wer e r epr esent ed by di f f er ent counsel i nf i l i ng t hei r chapt er 7 bankr upt cy pet i t i on.

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t o upgr ade t he coupl e s car s ever y f our t o f i ve year s, whi ch t he

Debt or s di scl osed t o t hei r bankrupt cy counsel . 4 Fi nal l y,

Mr . Er er en decl ar ed that bankr upt cy counsel advi sed t he Debt or s

as t o t he possi bl e pr ef er ence i ssue and at t empt ed t o r ecover t he

Funds f r om Ber k, but t o no avai l .

Mr s. Er er en decl ar ed t hat she was not i nvol ved i n t he

coupl e' s f i nanci al af f ai r s. She st at ed t hat she t r avel ed t o

Tur key dur i ng t he summer of 2010, wher e Ber k cont i nuousl y

demanded payment on t he not e. Consequent l y, she st at ed t hat she

merel y pai d t he Berk Note when she t r ansf er r ed t he Funds.

Bot h of t he Debt or s f ur t her t est i f i ed at t he Sept ember 2012t r i al . Mr . Er er en t est i f i ed on cross- exami nat i on t hat t he

Debt ors pai d t he Berk Note based on moral and cul t ur al r easons.

On her cr oss- exami nat i on, Mr s. Er er en t est i f i ed t hat she

unsuccessf ul l y request ed an extensi on f r om her br ot her and

advi sed her husband of her i nt ent t o t r ansf er t he Funds. She

st ated t hat whi l e she knew t hat her husband gambl ed, she was not

awar e of t he extent of hi s l osses or t he MGM j udgment s. At t he

concl usi on of t r i al , t he bankrupt cy cour t t ook t he mat t er under

submi ss i on.

The bankrupt cy cour t subsequent l y ent er ed i t s j udgment

( J udgment ) denyi ng t he Debt or s di schar ge under 727( a) ( 2) ,

( a) ( 4) , and ( a) ( 5) . The J udgment was br i ef , but i ncl uded an

expr ess st at ement t hat t he bankrupt cy cour t di d not f i nd t he

Debt or s cr edi bl e.


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5 The Debt ors concur r ent l y moved t o al t er or amend t hef i ndi ngs of f act and concl usi ons of l aw under Ci vi l Rul e 52, f ora new t r i al under Ci vi l Rul e 59, and t o amend t he J udgment underCi vi l Rul e 59. As di scussed i n not e 6, i nf r a, t he bankrupt cycour t di d not r ul e on t hei r mot i on.

6 Af t er ent er i ng t he Or der , i t appear s t hat t he bankrupt cycour t di d not r ul e on t he Debt or s mot i on or t he Tr ust ee sr equest f or j udi ci al not i ce. We do not consi der t he Debt or sr equest s r el at i ng t o t hei r mot i on, as i ssues as t o t hedi sposi t i on of t hei r mot i on ar e not bef or e us i n t hi s appeal .

7 Whi l e t he Fi ndi ngs of Fact and Concl usi ons of Law asent er ed does not pr ovi de t hat i t i s an or der , i t was ent er ed ont he Tr ust ee s mot i on under Ci vi l Rul e 52 and, t hus, we t r eat i tas an or der . Under Rul e 8002, t he Tr ust ee s mot i on t ol l ed t het i me f or appeal and, t her ef or e, t he Debt or s appeal of bot h t heJ udgment and Or der i s t i mel y. See Fed. R. Bankr . P. 8002( b) ( 1) .

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The Tr ust ee moved f or f i ndi ngs of f act and concl usi ons of

l aw under Ci vi l Rul e 52 and Rul e 7052. He al so r equest ed t hat

t he bankrupt cy cour t t ake j udi ci al not i ce of cer t ai n document s i n

suppor t of hi s opposi t i on t o t he Debt or s i ndependent mot i on

under Ci vi l Rul e 52. 5

On Oct ober 15, 2012, t he bankr upt cy cour t ent ered an order

on i t s f i ndi ngs of f act and concl usi ons of l aw f ol l owi ng t r i al

( Or der on Fi ndi ngs of Fact s and Concl usi ons of Law) . 6 I n doi ng

so, t he bankrupt cy cour t adopt ed t he Tr ust ee s pr oposed f i ndi ngs

of f act , as wel l as hi s pr oposed concl usi ons of l aw save t wo

al t er at i ons.The Debt or s t i mel y appeal ed f r om t he J udgment and Or der on

Fi ndi ngs of Fact s and Concl usi ons of Law. 7

JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on pur suant t o 28 U. S. C.

1334 and 157( b) ( 2) ( J ) . We have j ur i sdi ct i on under 28 U. S. C.


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158.

ISSUES

1. Di d t he bankr upt cy cour t er r i n denyi ng t he Debt or s

di schar ge under 727( a) ( 2) ?

2. Di d t he bankr upt cy cour t er r i n denyi ng t he Debt or s

di schar ge under 727( a) ( 4) ?

STANDARD OF REVIEW

I n an act i on f or deni al of di schar ge, we r evi ew: ( 1) t he

bankr upt cy cour t ' s det er mi nat i ons of t he hi st or i cal f act s f or

cl ear er r or ; ( 2) i t s sel ecti on of t he appl i cabl e l egal r ul es

under 727 de novo; and ( 3) i t s appl i cat i on of t he f act s t ot hose rul es r equi r i ng t he exer ci se of j udgment s about val ues

ani mat i ng t he r ul es de novo. Sear l es v. Ri l ey ( I n r e Sear l es) ,

317 B. R. 368, 373 ( 9t h Ci r . BAP 2004) ( ci t at i on omi t t ed) , af f ' d,

212 Fed. Appx. 589 ( 9t h Ci r . 2006) .

Factual f i ndi ngs ar e cl ear l y er r oneous i f i l l ogi cal ,

i mpl ausi bl e, or wi t hout suppor t i n t he r ecor d. Ret z v. Samson

( I n r e Ret z) , 606 F. 3d 1189, 1196 ( 9t h Ci r . 2010) ( ci t at i on

omi t t ed) . We gi ve gr eat def erence t o t he bankrupt cy cour t s

f i ndi ngs when t hey ar e based on i t s det er mi nat i ons as t o t he

cr edi bi l i t y of wi t nesses. I d. ( not i ng t hat as t he t r i er of f act,

t he bankrupt cy cour t has t he oppor t uni t y t o not e var i at i ons i n

demeanor and t one of voi ce t hat bear so heavi l y on t he l i st ener ' s

under st andi ng of and bel i ef i n what i s sai d. ") ( ci t at i on and

quotat i on marks omi t t ed) . Where t here are t wo permi ss i bl e vi ews

of t he evi dence, t he bankrupt cy cour t s choi ce between t hem

cannot be cl ear l y er r oneous. Ng v. Far mer ( I n r e Ng) , 477 B. R.

118, 132 ( 9t h Ci r . BAP 2012) ( ci t at i on omi t t ed) . We may af f i r m


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on any basi s i n t he r ecor d. See Cavi ata At t ached Homes, LLC v.

U. S. Bank, N. A. ( I n r e Cavi at a At t ached Homes, LLC) , 481 B. R. 34,

44 ( 9t h Ci r . BAP 2012) .

Notwi t hst andi ng, when t he bankr upt cy cour t adopt s pr oposed

f i ndi ngs of f act and concl usi ons of l aw, we r evi ew i t s deci si on

wi t h speci al scr ut i ny i n det er mi ni ng whet her i t s f i ndi ngs wer e

cl ear l y er r oneous. See Al cock v. Smal l Bus. Admi n. ( I n r e

Al cock) , 50 F. 3d 1456, 1459 n. 2 ( 9t h Ci r . 1995) ( Fi ndi ngs of

f act pr epar ed by counsel and adopt ed by t he t r i al cour t ar e

subj ect t o gr eat er scr ut i ny t han t hose aut hor ed by t he t r i al

j udge. ) ; see al so Ander son v. Ci t y of Bessemer Ci t y, 470 U. S.564, 572 ( 1985) .

DISCUSSION

I n gener al , t he bankrupt cy cour t must gr ant a di schar ge t o

an i ndi vi dual chapt er 7 debt or unl ess one of t he twel ve

enumer at ed gr ounds i n 727( a) i s sat i sf i ed. I n t he spi r i t of

t he f r esh st ar t pr i nci pl es t hat t he Bankrupt cy Code embodi es,

cl ai ms f or deni al of di schar ge ar e l i ber al l y const r ued i n f avor

of t he debt or and agai nst t he obj ect or t o di schar ge. Khal i l v.

Devel oper s Sur . & I ndem. Co. ( I n r e Khal i l ) , 379 B. R. 163, 172

( 9t h Ci r . BAP 2007) , af f ' d, 578 F. 3d 1167 ( 9t h Ci r . 2009)

( ci t at i on omi t t ed) . The obj ect or t o di schar ge bear s t he bur den

t o pr ove by a pr eponderance of t he evi dence that t he debt or ' s

di scharge shoul d be deni ed under an enumerat ed ground of

727( a) . I d. ( ci t at i on omi t t ed) .

A. Preliminary Matters

1. Joint Pre-Trial Order

Pr i or t o t r i al , t he par t i es appar ent l y ent er ed i nt o a j oi nt


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pr e- t r i al or der ( J PTO) , whi ch nar r owed t he di sput ed i ssues of

l aw and f act f or t r i al . I n hi s openi ng br i ef , t he Tr ust ee

i dent i f i es an addi t i onal i ssue on appeal ; namel y, whet her cer t ai n

i ssues of l aw and f act not i dent i f i ed i n t he J PTO shoul d have

been l i t i gat ed at t he t r i al , speci f i cal l y wi t h r espect t o t he

727( a) ( 5) cl ai m. The Tr ust ee di d not f i l e a cr oss- appeal and,

t hus, i s not a cr oss- appel l ant on appeal .

The Debt or s obj ect and cont end t hat t he J PTO i s not par t of

t he recor d because i t was not ent er ed by t he bankr upt cy cour t .

They, i n t urn, r ef er ence t hei r opposi t i on t o t he Tr ust ee s

r equest f or j udi ci al not i ce bef or e t he bankr upt cy cour t ; i n t hatopposi t i on, t he Debt or s ar gued t hat j udi ci al not i ce of t he J PTO

was i mpr oper because t he par t i es submi t t ed t he pr oposed order

ni ne mont hs bef or e t r i al , and t he Debt or s subsequent l y request ed

changes t o t he J PTO bef or e t r i al , whi ch wer e never addr essed.

The Tr ust ee i s not a cr oss - appel l ant and cannot present

addi t i onal i ssues on appeal . See Fed. R. Bankr. P. 8006; Leavi t t

v. Al exander ( I n r e Al exander ) , 472 B. R. 815, 824 ( 9t h Ci r . BAP

2012) . Fur t her , as di scussed bel ow, we t ake no posi t i on on t he

727( a) ( 5) r ul i ng. Consequent l y, we do not consi der t he J PTO i n

t hi s appeal .

2. Statutory Basis for Denial of Discharge

The adver sar y compl ai nt sought deni al of di schar ge under ,

among ot her gr ounds, 727( a) ( 2) and ( a) ( 4) . Based on t he br i ef s

and t he recor d on appeal , we assume that t he pr eci se deni al of

di schar ge was under 727( a) ( 2) ( A) and ( a) ( 4) ( A) .

/ / /

/ / /


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B. The bankruptcy court did not err in denying the dischargeunder 727(a)(2)(A).

Sect i on 727( a) ( 2) ( A) pr ovi des t hat t he bankr upt cy cour t may

deny a debt or s di schar ge i f t he debt or di sposed of or per mi t t ed

t he di sposal of hi s or her pr oper t y, wi t h t he i nt ent t o hi nder ,

del ay, or def r aud a credi t or or an of f i cer of t he est at e, wi t hi n

one year pr i or t o t he dat e of pet i t i on. The obj ect or t o

di schar ge under 727( a) ( 2) ( A) must pr ove t wo thi ngs: ( 1) a

di sposi t i on of pr oper t y, whet her by t r ansf er , r emoval ,

dest r uct i on, mut i l at i on, or conceal ment ( wi t hi n t he st at ut or y

t i me per i od) ; and ( 2) t he debt or s subj ect i ve i nt ent t o hi nder ,del ay or def r aud a cr edi t or t hr ough t he act of di sposi ng of t he

pr oper t y. I n r e Ret z, 606 F. 3d 1189, 1200 ( 9t h Ci r . 2010)

( ci t at i on and quot at i on mar ks omi t t ed) .

The bankrupt cy cour t deni ed di schar ge under 727(a) ( 2) ( A)

based on t he pr epet i t i on di sposi t i on of t he Funds and t he

Vehi cl es. The Debt or s do not cont est t hat t he Funds and t he

Vehi cl es wer e t hei r pr oper t y pr i or t o f i l i ng bankrupt cy. They

al so cannot cont est t hat Mr s. Er er en t r ansf er r ed t he Funds and

t hat Mr . Er er en t r aded- i n t he Vehi cl es wi t hi n t he stat ut or y

pr epet i t i on t i me per i od. Ther ef or e, our r evi ew f ocuses on t he

Debt or s i nt ent t o hi nder , del ay, or def r aud a cr edi t or .

The i ntent t o hi nder , del ay, or def r aud i s a quest i on of

f act t hat r equi r es t he t r i er of f act t o del ve i nt o t he mi nd of

t he debt or and may be i nf er r ed f r om surr oundi ng ci r cumst ances.

I n r e Sear l es, 317 B. R. at 379 ( ci t at i on omi t t ed) . Si mi l ar l y,

t he debt or ' s cour se of conduct may be pr obat i ve of t he

quest i on. I d. at 380 ( ci t at i on omi t t ed) . The basi s of i nt ent


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i s di sj unct i ve and, t hus, a f i ndi ng of i nt ent t o hi nder or del ay

or def r aud i s suf f i ci ent t o deny di schar ge under 727( a) ( 2) .

I n r e Ret z, 606 F. 3d at 1200 ( ci t at i on omi t t ed) .

On appeal , t he Debt or s ar gue t hat t he Tr ust ee f ai l ed to meet

hi s bur den of showi ng t hat t he Debt or s i nt ended t o hi nder , del ay,

or def r aud. The Debt or s cont est t he bankrupt cy cour t s f i ndi ng

as t o Mr s. Er eren s knowl edge of her husband' s gambl i ng pr obl em

and t he MGM j udgment s at t he t i me t hat she t r ansf err ed t he Funds.

They r ei t er at e t hat Mr s. Erer en t r ansf er r ed t he Funds as payment

on t he Berk Note and t hat t he Debt ors r egul ar l y upgr aded t hei r

car s ever y f our t o f i ve year s. Thus, t he Debt or s ar gue t hat t hebankrupt cy cour t er r ed i n f i ndi ng t hat one or bot h of t he Debt or s

i nt ended t o hi nder , del ay, or def r aud a cr edi t or . At oral

argument , t he Debt ors f ur t her emphasi zed t hat t he Or der on

Fi ndi ngs of Fact and Concl usi ons of Law f ai l ed t o cont ai n a

f i ndi ng as t o Mr s. Er er en s i nt ent t o hi nder , del ay, or def r aud.

The Tr ust ee asser t s t hat he i nt r oduced si gni f i cant evi dence

at t r i al f r om whi ch t he bankrupt cy cour t i nf er r ed t he Debt or s

i nt ent . He ci t es t o evi dence such as MGM s col l ect i on ef f or t s

pr i or t o t he t r ansf er s; t he Debt or s f ai l ur e t o pr esent adequat e

evi dence of consi der at i on f or t he Funds t r ansf er ; t he f act t hat

Ber k was an i nsi der ; Mr s. Er eren s t est i mony t hat she was awar e

of Mr . Er er en s gambl i ng pr obl em; and t he f act t hat Mr . Er er en

di d not make hi s set t l ement of f er t o MGM unt i l af t er t he

t r ansf er s.

The bankrupt cy cour t gener al l y det er mi ned t hat t he Debt or s'


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8 Thi s f i ndi ng i s cont ai ned i n t he J udgment and i t i s t hesol e f i ndi ng made by t he bankr upt cy cour t i n t he J udgment . Ci vi lRul e 58, i ncor por at ed i nt o adver sary pr oceedi ngs by Rul e 7058,

pr ovi des t hat every j udgment must be set i n a separ ate document .Fed. R. Ci v. P. 58( a) . Thi s Panel has st at ed t hat [ a] separ at edocument means one that i s separat e f r om an opi ni on, memorandum,or f i ndi ngs of t he cour t . Boggan v. Hof f For d, I nc.( I n r e Boggan) , 251 B. R. 95, 98 n. 2 ( 9t h Ci r . BAP 2000)( const r ui ng a f ormer ver si on of Rul e 9021( a) , whi ch was amendedi n 2009 i n connect i on wi t h t he addi t i on of Rul e 7058) . Thesepar at e document r ul e, however , i s i nt ended t o cal cul at e t het i me f or an appeal ; i t i s not j ur i sdi ct i onal and may be wai ved.I d. Ci vi l Rul e 58 was recent l y amended t o pr ovi de t hat i f asepar ate document i s r equi r ed, t he j udgment i s deemed ent ered

when a separat e document i s ent ered or 150 days f r om ent r y of t heor der or opi ni on on t he docket , whi chever i s ear l i er . Fed. R.Ci v. P. 58( c) ( 2) .

Nei t her par t y r ai ses t hi s i ssue on appeal . To t he ext entt he J udgment cont ai ned one f i ndi ng, t he 150- days expi r ed onFebr uar y 3, 2013. Thus, t he J udgment does not vi ol at e t hesepar at e document r ul e f or t he pur poses of t hi s appeal .

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t est i mony was not cr edi bl e. 8 I t af f i r mat i vel y f ound t hat

Mr . Er er en knew t hat hi s wi f e i nt ended t o t r ansf er t he Funds, but

di d nothi ng t o di ssuade her and t hat Mr s. Er eren knew t hat her

husband had a gambl i ng pr obl em, at l east at t he t i me that she

t r ansf err ed t he Funds. The bankr upt cy cour t di d not make

addi t i onal expr ess f i ndi ngs as t o t he Debt or s st at es of mi nd

when t hey t r ansf er r ed t he Funds or t he Vehi cl es. But based on

t he evi dence bef or e i t , t he bankrupt cy cour t ul t i mat el y

det er mi ned t hat t he Debt or s i nt ended t o hi nder , del ay, or def r aud

a credi t or ( s) i n maki ng t hese t r ansf er s.

I n so det er mi ni ng, t he bankrupt cy cour t necessar i l ydi sr egar ded t he Debt or s' expl anat i ons t hat t hei r di sposi t i on of

t he Funds or t he Vehi cl es wer e neut r al deci si ons. That i s, i t

di d not bel i eve t hat Mr . Er er en t r aded i n t he Vehi cl es i n Mar ch


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2010 si mpl y because i t was hi s r egul ar pr act i ce t o do so. To t he

extent t he bankrupt cy cour t di d or di d not bel i eve t hat t her e was

a val i d obl i gat i on owed t o Ber k, on whi ch we do not opi ne, i t di d

not bel i eve t hat Mr s. Er er en t r ansf er r ed t he Funds s i mpl y because

t he Berk Note was set t o matur e or even sol el y because of soci al

or cul t ur al r easons. The bankrupt cy cour t s f i ndi ngs and

det er mi nat i ons are suppor t ed by the r ecor d, whi ch r eveal s t hat

t he t r ansact i ons conspi cuousl y f ol l owed t he MGM j udgment , r oughl y

coi nci ded wi t h MGM s domest i cat i on of i t s j udgment i n Cal i f or ni a

and i t s accel er at i on of i t s col l ecti on ef f or t s agai nst

Mr . Er eren, and pr eceded a set t l ement of f er t o MGM.As t he Debt or s asser t ed at or al ar gument , mi nor di scord

exi st s between the J udgment and the Or der on Fi ndi ngs of Fact and

Concl usi ons of Law wi t h r espect t o Mr s. Er er en s i nt ent under

727( a) ( 2) ( A) . Speci f i cal l y, t he Or der does not cont ai n an

expr ess f i ndi ng as t o Mr s. Er er en s i nt ent t o hi nder , del ay, or

def r aud a cr edi t or under 727( a) ( 2) ( A) . Rat her , t he bankrupt cy

cour t concl uded t hat Mr . Er er en, wi t h t he i nt ent t o hi nder ,

del ay, or def r aud, al l owed hi s wi f e t o t r ansf er t he Funds. Thi s

l ack of pr eci si on, however , i s of no moment under t hese

ci r cumst ances. The J udgment provi des f or deni al of di schar ge

under 727( a) ( 2) agai nst bot h of t he Debt or s. Fur t her , even i f

t her e was a val i d obl i gat i on t o Ber k, t he t i mi ng and

ci r cumst ances of Mr s. Er er en s t r ansf er wer e such t hat i t

war r ant ed an i nf er ence of i nt ent t o hi nder , del ay, or def r aud

MGM. The Debt ors repeat edl y r epr esent ed t hat Mr s. Ereren had

mi ni mal i nvol vement i n t he Debt or s f i nances l eadi ng up t o t he

dat e of t he pet i t i on; yet , she caused t he t r ansf er of a


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9 Even i f t he r ecor d di d not suppor t deni al of di schar geunder 727( a) ( 2) as t o Mr s. Er er en, as di scussed i n sect i on C,t he Panel af f i r ms t he deni al of di schar ge under 727( a) ( 4) as t oboth Debt ors.

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si gni f i cant amount of money, r oughl y congr uent wi t h MGM s

i ncreasi ng ef f or t s t o col l ect on i t s j udgment . Thus, t he r ecor d

suppor t s t he bankrupt cy cour t s ul t i mat e concl usi on as t o

Mr s. Er er en not wi t hst andi ng t he absence of an expr ess f i ndi ng. 9

See I n re Cavi ata At t ached Homes, LLC, 481 B. R. at 44 (we may

af f i r m on any basi s i n t he r ecor d) .

The Debt or s suggest t hat , at wor st , t he t r ansf er of t he

Funds was a pr ef er ence t o Ber k. Pref er ence of one cr edi t or does

not per se r esul t i n a f i ndi ng of i nt ent t o hi nder , del ay, or

def r aud anot her cr edi t or . See Mur phey v. Cr at er ( I n r e Cr at er ) ,

286 B. R. 756, 761- 62 ( Bankr. D. Ar i z. 2002) ( col l ect i ng cases) ;see al so Foxmeyer Dr ug Co. v. Gen. El ec. Capi t al Cor p.

( I n r e Foxmeyer Cor p. ) , 296 B. R. 327, 337 ( Bankr . D. Del . 2003)

( col l ect i ng cases) . But a debt or ' s pr ef er ence of one credi t or

does not pr ecl ude a f i ndi ng of i nt ent t o hi nder , del ay, or

def r aud hi s or her ot her credi t or s. See Cox v. Vi l l ani

( I n r e Vi l l ani ) , 478 B. R. 51, 61 ( 1st Ci r . BAP 2012) ; War chol v.

Bar r y ( I n r e Bar r y) , 451 B. R. 654, 662 ( 1st Ci r . BAP 2011) .

Thus, a debt or ' s al t er nat i ve mot i vat i ons f or t he di sposi t i on of

pr oper t y ar e i r r el evant when t he debt or har bor s an i nt ent t o

hi nder , del ay, or def r aud anot her credi t or . Fi r st Bever l y Bank

v. Adeeb ( I n r e Adeeb) , 787 F. 2d 1339, 1343 ( 9t h Ci r . 1986) .

Her e, once agai n, Mr s. Er er en s t r ansf er of t he Funds ( coupl ed

wi t h t he t i mi ng of MGM s col l ect i on ef f or t s) pr ovi de a st r ong


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10 At or al ar gument , t he Debt or s al so rai sed an i ssue as t ot he f or m of t he Or der on Fi ndi ngs of Fact and Concl usi ons of Law,asser t i ng, among ot her t hi ngs, t hat t he bankrupt cy cour t sf i ndi ngs on i nt ent wer e cont ai ned under i t s concl usi ons of l aw.I t i s unf or t unat e t hat t he bankrupt cy cour t adopt ed ( essent i al l y

ver bat i m) t he Tr ust ee s pr oposed f i ndi ngs of f act and concl usi onsof l aw, whi ch cont ai ned t hi s i naccur acy. I t i s al so unf or t unat et hat t he bankrupt cy cour t s sol e al t er at i ons t o t he pr oposedf i ndi ngs of f act and concl usi ons of l aw was wi t h r espect t oMr s. Er er en s i nt ent under 727( a) ( 2) ( A) , creat i ng a f aci alambi gui t y. Nonet hel ess, t hese ar e di st i nct i ons wi t hout adi f f er ence and, t hus, of no moment t o t hi s appeal .

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i nf er ence as t o her i nt ent t o hi nder , del ay, or def r aud a

cr edi t or . Thus, whet her t he t r ansf er of t he Funds was al so a

pr ef er ence i s essent i al l y i r r el evant .

On t hi s r ecor d, t he bankrupt cy cour t s f i ndi ngs are not

i l l ogi cal , i mpl ausi bl e, or wi t hout suppor t f r om t he r ecor d. 10 I t

di d not er r i n f i ndi ng t hat bot h of t he Debt or s i nt ended t o

hi nder , del ay, or def r aud a cr edi t or , namel y, MGM. See

I n r e Sear l es, 317 B. R. at 379- 80 ( bankrupt cy cour t may i nf er

i nt ent by t he sur r oundi ng ci r cumst ances, i ncl udi ng a debt or s

cour se of conduct ) . I t f ound t hat t he Debt or s' t est i mony was not

cr edi bl e, whi ch we accor d gr eat def er ence. See I n r e Ret z,606 F. 3d at 1203- 04. And where t here are t wo permi ss i bl e vi ews

of t he evi dence, t he bankrupt cy cour t s choi ce between t hem

cannot be cl ear l y er r oneous. See I n r e Ng, 477 B. R. at 132.

Ther ef or e, t he bankrupt cy cour t di d not er r i n denyi ng t he

Debt or s' di schar ge under 727( a) ( 2) ( A) .

C. The bankruptcy court did not err in denying the dischargeunder 727(a)(4)(A).

To obt ai n a deni al of di schar ge under 727( a) ( 4) ( A) , t he


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obj ect or must show t hat : ( 1) t he debt or made a f al se oat h i n

connect i on wi t h t he case; ( 2) t he oat h r el at ed t o a mat er i al

f act ; ( 3) t he oath was made knowi ngl y; and (4) t he oat h was made

f r audul ent l y. I n r e Ret z, 606 F. 3d at 1197 ( ci t at i on omi t t ed) .

A f al se st at ement or omi ssi on i n t he debt or ' s schedul es or

st at ement of f i nanci al af f ai r s may const i t ut e a f al se oat h f or

t he pur poses of 727( a) ( 4) ( A) . I n r e Khal i l , 379 B. R. at 172;

Fogal Legwar e of Swi t z. , I nc. v. Wi l l s ( I n r e Wi l l s) , 243 B. R.

58, 62 ( 9t h Ci r . BAP 1999) .

The Debt or s ar gue t hat t hey wer e onl y r equi r ed t o di scl ose

t r ansact i ons out si de of t he or di nar y cour se of t hei r f i nanci alaf f ai r s. They cont end t hat because upgr adi ng t hei r cars (by

t r adi ng- i n or sel l i ng) ever y f our t o f i ve year s was i n t he

or di nar y cour se of t hei r f i nanci al af f ai r s, t hei r omi ssi on of t he

t r ade- i n on t hei r SOFA di d not const i t ut e a f al se oat h. By

f ai l i ng t o det er mi ne whet her t he t r ansf er was out si de t he cour se

of t hei r or di nar y f i nanci al af f ai r s, t he Debt or s ar gue t hat t he

bankrupt cy cour t er r ed i n f i ndi ng t hat t her e was an omi ssi on on

t hei r SOFA.

The bankrupt cy cour t di d not make expr ess f i ndi ngs as t o

whet her t he t r ade- i n was i n t he or di nar y cour se of t he Debt or s'

f i nanci al af f ai r s. Compar e Tow v. Henl ey ( I n r e Henl ey) ,

480 B. R. 708, 766- 67 ( Bankr . S. D. Tex. 2012) ( debt or s i mpr oper l y

omi t t ed on SOFA t he sal es of asset s at gar age sal es) , wi t h

Maxf i el d v. J enni ngs ( I n r e J enni ngs) , 349 B. R. 897, 913 ( Bankr .

M. D. Fl a. 2006) ( debt or s omi ssi on on hi s SOFA of t he sal e of hi s

boat was mat er i al , but not f al se when debt or underst ood t he sal e

t o be i n t he or di nar y cour se of hi s af f ai r s) . Nonet hel ess, t he


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bankrupt cy cour t br oadl y det ermi ned t hat t he Debt or s' t est i mony

was not cr edi bl e. And gi ven i t s ul t i mat e concl usi on, t he

bankrupt cy cour t necessar i l y di sr egar ded t he Debt or s expl anat i on

t hat t he t r ansf er of t he Vehi cl es was i n t he or di nar y cour se of

t hei r f i nanci al af f ai r s. The r ecor d suppor t s t hi s concl usi on.

The Debt or s next ar gue t hat t he Tr ust ee f ai l ed t o prove t hat

t he Vehi cl es sal es hi nder ed or i mpeded t he admi ni st r at i on of t he

bankrupt cy est at e and, t hus, f ai l ed t o pr ove t hat t he f al se oat h

was mat er i al . Whet her a f act i s mat er i al i s br oadl y def i ned:

[ a] f act i s mat er i al i f i t bear s a r el at i onshi p t o t he debt or ' s

busi ness t r ansact i ons or est at e, or concer ns t he di scover y ofasset s, busi ness deal i ngs, or t he exi st ence and di sposi t i on of

t he debt or ' s pr oper t y. I n r e Khal i l , 379 B. R. at 173 ( ci t at i on

omi t t ed) . The bankr upt cy cour t concl uded t hat t he omi ss i on was

mat er i al . I t i s undi sput ed t hat t he Vehi cl es pr evi ousl y bel onged

t o the Debt or s and t hat t hey obt ai ned $59, 000 f r om t he sal e.

Thi s i nf or mat i on cl ear l y r el at ed t o t he exi st ence and di sposi t i on

of si gni f i cant asset s. See i d. Thus, t he r ecor d suppor t s t he

bankrupt cy cour t s concl usi on t hat t he Debt or s omi ssi on was

mat er i al .

The Debt or s f ur t her cont est t hat t hey act ed knowi ngl y or

f r audul ent l y. At or al ar gument , t he Debt or s emphasi zed t hat t hey

di d not act knowi ngl y or f r audul ent l y because ever yone knew

about t he t r ansf er of t he Vehi cl es. That i s, t hey di scl osed t he

t r ansf er t o MGM dur i ng Mr . Er er en s j udgment debt or exami nat i ons,

t o t hei r bankr upt cy counsel at t he t i me of f i l i ng, and t o t he

Tr ust ee dur i ng t hei r 341(a) meet i ng of cr edi t or s.

A debt or act s knowi ngl y i f he or she act s del i ber at el y and


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consci ousl y. I n r e Ret z, 606 F. 3d at 1198 ( ci t at i on and

quot at i on mar ks omi t t ed) . A debt or ' s i nt ent t o hi nder , del ay, or

def r aud under 727( a) ( 2) may be pr obat i ve of t he knowi ng and

f r audul ent el ement s under 727( a) ( 4) ( A) . Pal mer v. Downey

( I n r e Downey) , 242 B. R. 5, 14 n. 10 ( Bankr . D. I daho 1999)

( ci t at i on omi t t ed) .

The bankrupt cy cour t f ound a knowi ng f ai l ure t o di scl ose.

I t s f i ndi ng i s suppor t ed by t he r ecor d. Once agai n, t he

bankrupt cy cour t br oadl y det ermi ned t hat t he Debt or s' t est i mony

was not cr edi bl e. I n so f i ndi ng, t he bankr upt cy cour t i mpl i ci t l y

decl ar ed t hat i t di d not f i nd t he Debt or s expl anat i ons f or t hei romi ssi on bel i evabl e.

Mor eover , t he f undament al pur pose of 727( a) ( 4) ( A) i s t o

i ncent i vi ze a debt or t o pr ovi de t he t r ust ee and cr edi t or s wi t h

accur at e i nf or mat i on so that t hey do not need t o conduct cost l y

i nvest i gat i ons. I n r e Wi l l s, 243 B. R. at 63 ( ci t at i on omi t t ed) .

As a r esul t , whet her MGM was awar e of t he t r ansf er t hr ough a

separ at e, nonbankr upt cy pr oceedi ng i s i r r el evant . Si mi l ar l y, t he

Debt or s appar ent di scl osur e t o t he Tr ust ee at t hei r 341( a)

meet i ng of cr edi t or s i s i nadequat e as a def ense. See

I n r e Sear l es, 317 B. R. at 377 ( obser vi ng t hat i n l i eu of an

amended schedul e or st at ement , [ a] n unf i l ed l et t er t o t he

t r ust ee does not suf f i ce because i t i s not i n t he pl ai n vi ew of

al l par t i es i n i nt er est who shoul d be ent i t l ed t o r el y on t he

accur acy of t he cour t ' s of f i ci al f i l e. ) ; Beauchamp v. Hoose

( I n r e Beauchamp) , 236 B. R. 727, 732 ( 9t h Ci r . BAP 1999) , af f ' d,

5 Fed. Appx. 743 ( 9t h Ci r . 2001) ( debt or who omi t s asset s f r om

schedul es and st atement s and t hen r epent s at or bef ore t he


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341( a) meet i ng of cr edi t or s pi t s t he f undament al f r esh st ar t

pur pose of t he [ Bankrupt cy] Code . . . agai nst t he cl ean hands

maxi m. ) ( ci t at i on and quot at i on mar ks omi t t ed) . Thus, t he

r ecor d suppor t s t he bankrupt cy cour t s f i ndi ng t hat t he Debt or s

omi ssi on was knowi ngl y made.

Fi nal l y, t he Debt or s ar gue t hat t he bankrupt cy cour t er r ed

i n f i ndi ng t hat t hey f r audul ent l y omi t t ed t he t r ansf er . They

asser t t hat i t s f i ndi ng i s i l l ogi cal gi ven t hat t hey di scl osed

t he vehi cl e sal es t o t hei r bi ggest credi t or and t o t he Tr ust ee.

They al so asser t t hat t hey di scl osed t he new car l eases on t hei r

bankrupt cy schedul es. The Debt or s f ur t her cont end t hat t heydi scl osed t he t r ansf er t o bankrupt cy counsel , whi ch negat es any

i nt ent t o def r aud.

A debt or act s wi t h f r audul ent i nt ent when: ( 1) t he debt or

makes a mi sr epr esent at i on; ( 2) t hat at t he t i me he or she knew

was f al se; and ( 3) wi t h t he i nt ent i on and pur pose of decei vi ng

credi t or s. I n r e Ret z, 606 F. 3d at 1198- 99 ( ci t at i on omi t t ed) .

Fraudul ent i nt ent i s t ypi cal l y pr oven by ci r cumst ant i al evi dence

or by i nf er ences dr awn f r om t he debt or s conduct . I d. at 1199

( ci t at i on omi t t ed) . Ci r cumst ant i al evi dence may i ncl ude showi ng

a r eckl ess i ndi f f er ence or di sr egar d f or t he t r ut h. I d.

( ci t at i on omi t t ed) ; I n r e Wi l l s, 243 B. R. at 64 ( ci t at i on

omi t t ed) ; I n r e Downey, 242 B. R. at 14 n. 10. A debt or , however ,

may pr ove l ack of i nt ent by demonst r at i ng good f ai t h r el i ance on

hi s or her at t or ney' s advi ce. I n r e Ret z, 606 F. 3d at 1199

( ci t at i on omi t t ed) .

The bankrupt cy cour t f ound t hat t he Debt or s f r audul ent l y

omi t t ed t he t r ansf er of t he Vehi cl es. The r ecor d suppor t s i t s


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f i ndi ng. Once agai n, t he bankrupt cy cour t broadl y det er mi ned

t hat t he Debt or s' t est i mony was not cr edi bl e. I t , t hus,

i mpl i ci t l y f ound t hat t he qual i t y of t he Debt or s di scl osur es t o

t he var i ous par t i es di d not negat e f r audul ent i nt ent . Thi s was

r easonabl e; gi ven t he 727( a) ( 2) ( A) det er mi nat i ons, i t i s cl ear

t hat t he bankrupt cy cour t di d not bel i eve t hat t he t r ansf er was

an or di nar y cour se t r ansact i on. Thi s f i ndi ng al so r ender s an

at t or neys advi ce r egar di ng di scl osur e of or di nar y cour se

t r ansact i ons i r r el evant .

The bankrupt cy cour t was al so r easonabl e i n f ai l i ng t o

equat e di scl osur e of t he new car l eases i n t he Debt or s schedul eswi t h di scl osur e of t he pr i or sal e yi el di ng subst ant i al cash

pr oceeds. The bankrupt cy cour t ' s f i ndi ng of t he Debt or s' i nt ent

t o hi nder , del ay, or def r aud MGM under 727( a) ( 2) ( A) , t hus, al so

suppor t s i t s f i ndi ng of f r audul ent i nt ent under 727( a) ( 4) ( A) .

See I n r e Downey, 242 B. R. at 14 n. 10. On t hi s r ecor d, t her e ar e

suf f i ci ent pat t er ns of f al s i t i es or r eckl ess i ndi f f er ence t o t he

t r ut h on t he Debt or s par t t o suppor t t he bankrupt cy cour t s

det er mi nat i ons. Thus, t he r ecor d suppor t s t he bankrupt cy cour t s

f i ndi ng t hat t he Debt or s omi ssi on was f r audul ent l y made.

Al t hough t he Debt or s asser t t hat t hey di scl osed t he t r ansf er

t o bankrupt cy counsel such t hat i t negat es i nt ent , t hey pr ovi ded

no addi t i onal evi dence by way of decl ar at i on f r om t he at t or ney

who f i l ed t he chapt er 7 pet i t i on, f or exampl e ot her t han t hei r

t est i moni al evi dence. The r ecor d suppor t s t he bankrupt cy cour t s

appar ent concl usi on t hat t he Debt or s di d not est abl i sh t hat t hey

r el i ed on counsel ' s advi ce when t hey f ai l ed t o di scl ose t he

t r ansf er or t hat t hei r r el i ance on counsel ' s advi ce, i f any, was


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11 Because we af f i r m under 727( a) ( 2) ( A) and ( a) ( 4) ( A) , wedecl i ne t o addr ess t he deni al of di schar ge under 727( a) ( 5) .

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r easonabl e or made i n good f ai t h. See I n r e Ret z, 606 F. 3d at

1199 ( ci t at i on omi t t ed) .

I n sum, t he bankrupt cy cour t di d not er r i n f i ndi ng t hat t he

Debt or s made a f al se omi ssi on on t hei r SOFA, t hat t hei r omi ssi on

r el at ed t o a mat er i al f act , and t hat t hey omi t t ed t he i nf or mat i on

knowi ngl y and f r audul ent l y. The bankrupt cy cour t s f i ndi ngs wer e

not i l l ogi cal , i mpl ausi bl e, or wi t hout suppor t i n t he r ecor d.

Agai n, we gi ve abundant def erence to t he bankr upt cy cour t s

f i ndi ngs based on i t s assessment of t he Debt or s cr edi bi l i t y at

t r i al . See i d. at 1203- 04. And, agai n, wher e t her e ar e t wo

per mi ssi bl e vi ews of t he evi dence, t he bankrupt cy cour t s choi cebetween t hemcannot be cl ear l y err oneous. See I n r e Ng, 477 B. R.

at 132. Ther ef or e, t he bankrupt cy cour t di d not er r i n denyi ng

t he Debt or s di schar ge under 727( a) ( 4) ( A) . 11

CONCLUSION

Based on t he f or egoi ng, we AFFI RM t he bankr upt cy cour t ' s

deni al of di schar ge under 727( a) ( 2) and ( a) ( 4) .

in re: erkan ereren and aylin ereren, 9th cir. bap (2013)

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