In re: Steven Carl Gronlund and Gina Marie Gronlund

FILED AUG 19 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-13-1566-KiTaPa ) 6 STEVEN CARL GRONLUND and ) Bk. No. 6:12-14417 GINA MARIE GRONLUND, ) 7 ) Adv. No. 6:12-1173 Debtors. ) 8 ) ) 9 STEVEN CARL GRONLUND, ) ) 10 Appellant, ) ) 11 v. ) M E M O R A N D U M1 ) 12 KARL T. ANDERSON, Chapter 7 ) Trustee, ) 13 ) Appellee. ) 14 ______________________________) 15 Argued and Submitted on July 25, 2014, at Pasadena, California 16 Filed - August 19, 2014 17 Appeal from the United States Bankruptcy Court 18 for the Central District of California 19 Honorable Deborah J. Saltzman, Bankruptcy Judge, Presiding 20 Appearances: Andrew Edward Smyth, Esq., argued for appellant 21 Steven Carl Gronlund; Thomas J. Polis, Esq., of Polis & Associates, APLC, argued for appellee, Karl 22 T. Anderson, Chapter 7 Trustee. 23 Before: KIRSCHER, TAYLOR and PAPPAS, 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, Steven Carl Gronlund ("Debtor"), appeals the 2 bankruptcy court’s decision to deny his discharge at the request 3 of Appellee, chapter 72 trustee Karl T. Anderson ("Trustee"). The 4 bankruptcy court denied Debtor's discharge under § 727(a)(2)(A) 5 and (B) and § 727(a)(4)(A) because he concealed and failed to 6 disclose a material asset in his bankruptcy schedules and 7 statement of financial affairs. We AFFIRM. 8 I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY 9 Debtor has twenty years of experience owning and operating 10 businesses, including mortgage and real property rental 11 businesses. On February 23, 2012, Debtor and Gina Gronlund, his 12 wife and co-debtor, filed their chapter 7 bankruptcy case. 13 Debtor's initial Schedule B was very detailed, even listing pots 14 and pans and where they were located in Debtor's residence. 15 However, Debtor did not list a note related to Mexican real 16 property (“Mexican property”), which he eventually valued at 17 $450,000 (the "Mexican Note"). Pursuant to the terms of the 18 Mexican Note, Debtor received a $2,500 "interest-only" payment 19 each month. Debtor had been receiving payments on the Mexican 20 Note since May 2008. The interest income was not specifically and 21 separately listed in his initial Schedule I, nor was it listed in 22 his initial Schedule G. Debtor testified, however, that the 23 $2,500 payments might be included in the $9,000 per month gross 24 income listed in his initial Schedule I. 25 Debtor signed his bankruptcy schedules under penalty of 26 2 Unless specified otherwise, all chapter and code 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all rule references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037. -2- 1 perjury. He appeared at the § 341(a) meeting of creditors 2 ("§ 341(a) meeting") and answered the Trustee’s questions under 3 oath. At the beginning of the meeting, Debtor reaffirmed that his 4 bankruptcy schedules were accurate and needed no corrections. 5 During the meeting, however, Trustee reviewed Debtor’s tax return 6 and noticed a large amount of earned interest income. Trustee 7 asked Debtor about it. Debtor accurately stated that the earned 8 interest income on his tax return reflected a $2,500 monthly 9 payment he received on a note secured by Mexican property he sold 10 to Sayed Rezai ("Rezai"). Trustee noted that this asset and 11 income were not reflected in Debtor’s schedules; Debtor agreed. 12 When Trustee first asked about Rezai, Debtor responded, “Sayed 13 Rezai, he is a -- somebody who bought my -- bought a property down 14 in Big Bear.” § 341(a) Tr. (Mar. 30, 2012) at 24:5-6. Later, 15 Debtor corrected himself, stating the property in question was 16 located in Mexico, not Big Bear, California. Debtor testified 17 that Rezai lived in Mexico, that he was not sure whether Rezai had 18 a place in the United States and that “[s]ometimes he doesn’t pay 19 me.” Id. at 26:3. However, moments later when Trustee asked 20 about the timing of the $2,500 payments, Debtor testified that 21 they "just come[] in every month." Id. at 28:8-9. Debtor also 22 testified that he "didn't even think about" the Mexican Note 23 because he had sold the Mexican property years before. Id. at 24 24:15-22. Trustee continued the meeting to allow Debtor to amend 25 his schedules to include the Mexican Note. Id. at 30:13-14. 26 A. Trustee's adversary complaint 27 Debtor did not file amended schedules in the six weeks 28 following the § 341(a) meeting, so on May 17, 2012, Trustee filed -3- 1 an adversary complaint seeking to deny Debtor's discharge. 2 Trustee’s complaint alleged Debtor affirmatively concealed the 3 beneficial interest he held in the Mexican Note and made a false 4 oath. The complaint pled claims for relief under § 727(a)(2)(A) 5 and (a)(4)(A). 6 One week after Trustee filed the adversary proceeding, Debtor 7 filed amended schedules. The Mexican Note, valued at $450,000, 8 and the $2,500 monthly income were added. However, the amended 9 schedules also asserted that the Mexican Note was over-encumbered 10 by debts owed to Debtor’s mother, his in-laws and the federal 11 government of Mexico for Maritime Zone Taxes. These encumbrances 12 were not listed in the original schedules. Further, Debtor had 13 not mentioned these debts at the § 341(a) meeting when the Mexican 14 Note was discussed. The Debtor alleged that the value of the 15 insider claims secured by the Mexican Note totaled $390,000 and 16 the tax liability totaled $80,000. No proofs of claim on any of 17 these purported encumbrances were ever filed. Although the record 18 is missing certain exhibits admitted at trial, Debtor introduced 19 documents that he believed established the purported encumbrances 20 against the Mexican Note. It is clear, however, that the 21 bankruptcy court did not find these exhibits to be credible. 22 In Trustee's Trial Brief, Trustee argued that Debtor's 23 discharge should be denied because he made a false oath in 24 connection with the case and concealed the Mexican Note. Trustee 25 argued that the combined evidence of Debtor failing to list the 26 Mexican Note on his schedules, failing to disclose it during the 27 first 30 minutes of examination at the § 341(a) meeting and, after 28 disclosing it, claiming it was over-encumbered by insider claims -4- 1 without documentary proof, proved Debtor's false oath under 2 § 727(a)(4)(A) and concealment under § 727(a)(2)(A) and (B). 3 In his trial declaration, Trustee testified: that Debtor 4 received 48 payments on the Mexican Note during the four years 5 preceding his filing bankruptcy; that the 48 payments amounted to 6 approximately $130,000, which the Trustee considered an 7 “economically significant” asset; and that the checks Debtor 8 received from Rezai arrived “each and every month,” despite 9 Debtor’s claim at the § 341(a) meeting that sometimes he was not 10 paid. Although Trustee stated in his declaration that a copy of 11 the cancelled checks were attached as Exhibit #3, they were not, 12 and we do not have a copy of them in the record. In any event, 13 the checks were offered at trial and admitted. Trustee also 14 testified that the checks Rezai sent to Debtor came from Rezai’s 15 personal residence in Escondido, California, despite Debtor’s 16 claim at the § 341(a) meeting that Rezai lived in Mexico. 17 Mauricio Leon de la Barra ("de la Barra") testified for 18 Trustee as Special Mexican Real Estate Counsel. In his trial 19 declaration, de la Barra testified: that what was being referred 20 to as a "promissory note," the Mexican Note, throughout the 21 adversary proceeding was more accurately described as a beneficial 22 interest in a Mexican trust; that under Mexican law, an 23 encumbrance in real property is perfected by recording the 24 corresponding lien in the Public Registry of Property in the 25 locality in which the real property is located; that he conducted 26 a public records search for the Mexican property in January 2013; 27 and that he found no encumbrances recorded against the Mexican 28 property. Importantly, de la Barra further testified that the -5- 1 value of the Mexican Note was approximately $530,000. 2 In Debtor’s Trial Brief he argued that he lacked the 3 requisite intent to satisfy the elements of both the false oath 4 claim and the concealment claim because his omission of the 5 Mexican Note in his initial schedules was inadvertent and not 6 purposeful. 7 In his trial declaration, Debtor testified: that at the time 8 he filed for bankruptcy his personal life and business dealings 9 were chaotic; that his elderly in-laws lived with him and were 10 failing in health; that he was supporting his severely injured 11 brother-in-law and his family; that he was recovering from having 12 to testify as a witness in a trial prosecuting his friend for 13 murder, which depressed him; and that he was delinquent and 14 defaulting on loans which led to eleven separate foreclosures of 15 income-producing real properties. Debtor further testified that 16 his income decreased during this time, that he was being sued by 17 several lenders and that a restaurant he owned failed. He 18 testified that historically he paid little attention to the 19 details of his business transactions, but that “during this 20 period[,] [he] paid virtually no attention to the everyday 21 financial aspects of [his] businesses.” 22 Debtor hired attorney Gary Quackenbush ("Quackenbush") to 23 prepare and file his bankruptcy petition. Debtor directed his 24 business bookkeeper, Laurie Provost ("Provost"), and business 25 employee, Linda Meyer ("Meyer"), to "assist in the preparation and 26 transmission of the necessary information to Quackenbush" rather 27 than doing it himself. He asked Provost and Meyer to do this 28 because of "[his] personal situation, the complexity of [his] -6- 1 finances and because of their knowledge of [his] financial 2 affairs." Debtor testified that Quackenbush received all the 3 information necessary to accurately fill out his bankruptcy forms 4 by February of 2012. Quackenbush gave Debtor a first draft of the 5 petition and schedules later that month, which Debtor testified, 6 were “replete with errors of all kind[s]”; Debtor, Provost and 7 Meyer corrected them. Debtor stated he saw a second draft that 8 also contained errors. Debtor testified he signed the third draft 9 prepared by Quackenbush trusting that the petition and schedules 10 were complete and accurate. Debtor terminated Quackenbush on 11 July 24, 2012, shortly after Trustee filed his adversary 12 complaint. 13 Provost testified in her trial declaration: that it was her 14 duty as “point person” to be the primary contact with 15 Quackenbush’s office during the preparation of Debtor’s bankruptcy 16 petition and schedules; that Meyer was responsible for gathering 17 information regarding Debtor’s real properties and related 18 matters; and that completing information requests from 19 Quackenbush’s office was challenging because of the fluctuating 20 nature of Debtor’s financial affairs. 21 Meyer testified in her trial declaration: that she supplied 22 Provost a list of Debtor’s real properties; and that her property 23 list included the Mexican property as she received the monthly 24 payments related to it. 25 B. The trial on Trustee's adversary complaint 26 The bankruptcy court held a three-day trial in October 2013. 27 Several witnesses testified, including Trustee, Debtor, de la 28 Barra, Provost, Meyer and Gina Gronlund. -7- 1 At trial, a transcript of the § 341(a) meeting was admitted 2 into evidence and an audio recording of it was played. 3 Provost testified that she gathered the necessary information 4 for Debtor’s bankruptcy, including information about Debtor’s real 5 properties that she had received from Meyer, and transmitted it to 6 Quackenbush’s office. However, she testified it was not her job 7 to review and correct the information. She testified that only 8 Debtor reviewed and corrected the information supplied to 9 Quackenbush. 10 Meyer testified that she also never reviewed drafts of the 11 bankruptcy forms and that her only role was to gather information 12 and give it to Provost. Meyer also reaffirmed her declaratory 13 testimony that the Mexican property was included on the list of 14 Debtor’s real properties she supplied to Provost. After closing 15 argument, the bankruptcy court took the matter under submission. 16 The bankruptcy court recited its oral findings of fact and 17 conclusions of law on the record on October 16, 2013. After 18 observing Debtor’s demeanor while testifying under oath and 19 examining the transcript of the § 341(a) meeting and audio 20 recording of it, the court found that Debtor was not a credible 21 witness because of inconsistencies in his testimony. The court 22 denied Debtor’s discharge for intentionally concealing the Mexican 23 Note before and after filing bankruptcy in violation of 24 § 727(a)(2)(A) and (B) and for knowingly and fraudulently, in 25 connection with the case, making a false oath or account in 26 violation of § 727(a)(4)(A) by omitting the Mexican Note from his 27 schedules. 28 The bankruptcy court entered a judgment consistent with its -8- 1 oral ruling on October 31, 2013. This timely appeal followed. 2 II. JURISDICTION 3 The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 4 and 157(b)(2)(J). We have jurisdiction under 28 U.S.C. § 158. 5 III. ISSUES 6 1. Did the bankruptcy court err when it denied Debtor’s 7 discharge under § 727(a)(2)(A) and (B)? 8 2. Did the bankruptcy court err when it denied Debtor’s 9 discharge under § 727(a)(4)(A)? 10 IV. STANDARDS OF REVIEW 11 In an action for denial of discharge, we review: (1) the 12 bankruptcy court's determinations of the historical facts for 13 clear error; (2) its selection of the applicable legal rules under 14 § 727 de novo; and (3) its application of the facts to those rules 15 requiring the exercise of judgments about values animating the 16 rules de novo. Searles v. Riley (In re Searles), 317 B.R. 368, 17 373 (9th Cir. BAP 2004), aff’d, 212 F. App’x 589 (9th Cir. 2006). 18 Factual findings are clearly erroneous if they are illogical, 19 implausible or without support in the record. Retz v. Samson 20 (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010). We give great 21 deference to the bankruptcy court’s findings when they are based 22 on its determinations as to the credibility of witnesses. Id. 23 (noting that as the trier of fact, the bankruptcy court has “the 24 opportunity to note variations in demeanor and tone of voice that 25 bear so heavily on the listener's understanding of and belief in 26 what is said.")(citation and quotation marks omitted). If two 27 views of the evidence are possible, the trial judge’s choice 28 between them cannot be clearly erroneous. Anderson v. City of -9- 1 Bessemer City, N.C., 470 U.S. 564, 573-75 (1985). 2 V. DISCUSSION 3 Debtor argues that the evidence does not support the 4 bankruptcy court’s decision that he violated § 727(a)(2) or 5 (a)(4)(A). Specifically, Debtor argues the bankruptcy court’s 6 denial of discharge was in error because it "ignored" that he 7 voluntarily disclosed the omitted Mexican Note at the § 341(a) 8 meeting. Debtor also argues the bankruptcy court erred in finding 9 he attempted to conceal it when he testified that the $2,500 10 monthly interest payments he received were sometimes late or 11 missed. In addition, Debtor argues that claiming the existence of 12 encumbrances against the Mexican Note, even if not recorded, 13 cannot be considered a "concealment." 14 In short, Debtor disputes the bankruptcy court’s findings of 15 fact. He does not argue that the court applied an incorrect 16 standard of law. Therefore, our review is limited to determining 17 whether the bankruptcy court’s findings are illogical, implausible 18 or without support in the record. 19 A. The bankruptcy court did not err in denying Debtor's discharge under § 727(a)(2). 20 21 The bankruptcy court denied Debtor’s discharge under both 22 subsections of § 727(a)(2). That section states: 23 The court shall grant the debtor a discharge, unless . . . the debtor, with intent to hinder, delay, or 24 defraud a creditor or an officer of the estate charged with custody of property under this title, has 25 transferred, removed, destroyed, mutilated, or concealed, or has permitted to be transferred, removed, destroyed, 26 mutilated, or concealed[,] (A) property of the debtor, within one year before the date of the filing of the 27 petition, or (B) property of the estate, after the date of the filing of the petition. 28 -10- 1 § 727(a)(2)(A), (B). A party seeking denial of discharge under 2 § 727(a)(2) must prove two things: "(1) a disposition of 3 property, such as transfer or concealment, and (2) a subjective 4 intent on the debtor's part to hinder, delay or defraud a creditor 5 through the act [of] disposing of the property." Hughes v. Lawson 6 (In re Lawson), 122 F.3d 1237, 1240 (9th Cir. 1997). 7 1. Concealment 8 Debtor argues the evidence does not support his intentional 9 concealment of the Mexican Note. Specifically, Debtor disagrees 10 that his testimony “[s]ometimes [Rezai] doesn’t pay me,” should 11 have been considered an act of concealment. Additionally, Debtor 12 argues that the insider encumbrances included in his amended 13 schedules should not be considered evidence of concealment. 14 The bankruptcy court outlined what it found as evidence of 15 Debtor’s concealment of the Mexican Note. The evidence included 16 failing to list the asset on the initial schedules, failing to 17 list the $2,500 monthly payments from it, failing to disclose it 18 "in response to several questions at the [§] 341(a) meeting of 19 creditors," and Debtor’s "evasive" and "contradict[ory]" answers 20 concerning when Rezai makes payments on the Mexican Note. Trial 21 Tr. (Oct. 16, 2013) 3:11-4:2. The court also found that Debtor’s 22 later claim that the Mexican Note was over-encumbered was evidence 23 of concealment. Although the court included the timing of Rezai’s 24 payments to Debtor and the purported insider encumbrances in its 25 analysis, the court also based its finding on two other 26 circumstances of concealment that Debtor does not dispute: he 27 failed to list the Mexican Note, and he failed to disclose it in 28 response to questions during the beginning of the § 341(a) -11- 1 meeting. 2 Debtor argues that because he voluntarily disclosed the 3 $2,500 monthly interest payments when directly asked about the 4 Mexican Note at the § 341(a) meeting, his discharge should not be 5 denied because it shows the omission was inadvertent. Based on 6 the above evidence, the bankruptcy court disagreed and described 7 Debtor as “less than credible.” Id. at 10:8-13. The record shows 8 that Debtor’s testimony was contradictory on several points. Even 9 if Debtor volunteered the information about the $2,500 monthly 10 interest payments when asked about it at the § 341(a) meeting, the 11 bankruptcy court was free to consider all of the relevant evidence 12 on this point and conclude that his omission of the Mexican Note 13 was not inadvertent. Anderson, 470 U.S. at 573-75. 14 Further, Debtor’s voluntary disclosure of the Mexican Note at 15 the § 341(a) meeting does not overcome Debtor’s failure to 16 schedule it. Schedules are paramount for disclosure to creditors 17 in chapter 7. Creditors rely on accurate schedules to determine 18 whether to file a proof of claim. Revealing a valuable asset 19 during the § 341(a) meeting is not sufficient to notify creditors 20 because they rarely attend. 21 The evidence shows the timing of Debtor’s concealment of the 22 Mexican Note was both before and after filing bankruptcy. 23 Prepetition, Debtor concealed the Mexican Note by failing to list 24 it in his schedules and statement of financial affairs. He blamed 25 his staff, his attorney, and his chaotic life for his failure to 26 list the property. However, he signed the petition, schedules, 27 and statement of financial affairs under penalty of perjury. 28 Postpetition, Debtor failed to disclose the Mexican Note until -12- 1 directly asked about it at the § 341(a) meeting. He was evasive 2 in his answers about where the property was located, where Rezai 3 lived, when he sold the property to Rezai, and how much Rezai 4 still owed him and claimed he forgot about it. After disclosing 5 the Mexican Note, he claimed he sometimes did not receive the 6 payments on it. Finally, once he amended his schedules to reflect 7 the Mexican Note, Debtor asserted that it was fully pledged to pay 8 insider claims and, therefore, had no value. However, while 9 Debtor attempted to substantiate these encumbrances at trial by 10 submitting various documents (which are not included in the 11 record), the bankruptcy court found the purported encumbrances 12 were “nonexistent.” Trial Tr. (Oct. 16, 2013) 9:10-11. 13 The evidence presented supports the bankruptcy court’s 14 finding that Debtor concealed the Mexican Note both before and 15 after filing bankruptcy within the meaning of § 727(a)(2)(A) and 16 (B). Therefore, the court's finding that Debtor concealed it is 17 not illogical, implausible or without support in the record. 18 2. Intent to hinder, delay or defraud 19 Debtor also argues the evidence does not support the 20 bankruptcy court's finding that he had the requisite intent to 21 hinder, delay or defraud. Specifically, he argues “[t]here is no 22 actual fraud in this case.” Debtor's argument on this point is 23 misplaced because actual fraud is not required. 24 A debtor's intent need not be fraudulent to meet the 25 requirements of § 727(a)(2). Because the language of the statute 26 is in the disjunctive, it is sufficient if the debtor's intent is 27 to hinder or delay a creditor. Bernard v. Sheaffer 28 (In re Bernard), 96 F.3d 1279, 1281 (9th Cir. 1996). -13- 1 The bankruptcy court found that, based on Debtor's conduct 2 and the circumstances surrounding the filing of the petition and 3 conduct after the petition was filed, Debtor had the requisite 4 intent to hinder, delay or defraud. Important to the court was 5 Debtor’s twenty years of work experience and sophistication in 6 real estate matters and the mortgage industry. With that in mind, 7 the court found that “[Debtor’s] assertion that he just forgot to 8 schedule this property and its income or relied on his employees 9 or counsel[,] don’t relieve [him] of his obligations and, in fact, 10 are just not credible.” Trial Tr. (Oct. 16, 2013) 4:21-5:2. The 11 court found that Debtor’s employees did include the Mexican Note 12 in a list they prepared. The court then discussed the testimony 13 of these same employees confirming that, although they gathered 14 information for the preparation of the bankruptcy schedules, it 15 was understood by everyone that Debtor was responsible for what 16 the schedules contained. Another fact showing Debtor's intent was 17 his omission of the only asset he owned of any value — the Mexican 18 Note — as all of his other assets “were of no value or were 19 underwater.” Id. at 8:14-19. 20 The combination of Debtor’s business sophistication and the 21 fact that the “only asset of value” was omitted support the 22 bankruptcy court’s finding that Debtor's concealment of the 23 Mexican Note was to hinder, delay or defraud his creditors within 24 the meaning of § 727(a)(2). The record also supports the court's 25 finding that Debtor, at minimum, acted with reckless indifference 26 to the truth, thereby establishing that his discharge could be 27 denied under § 727(a)(2). Id. at 10:25-11:2. 28 Accordingly, the bankruptcy court did not err in denying -14- 1 Debtor’s discharge under § 727(a)(2)(A) and (B). 2 B. The bankruptcy court did not err in denying Debtor's discharge under § 727(a)(4)(A). 3 4 Section 727(a)(4)(A) states: “The court shall grant the 5 debtor a discharge, unless . . . the debtor knowingly and 6 fraudulently, in or in connection with the case made a false oath 7 or account.” § 727(a)(4)(A). “A false statement or an omission 8 in the debtor's bankruptcy schedules or statement of financial 9 affairs can constitute a false oath.” Khalil v. Developers Sur. & 10 Indem. Co. (In re Khalil), 379 B.R. 163, 172 (9th Cir. BAP 2007). 11 To obtain a denial of discharge under § 727(a)(4)(A), the 12 objector must show: “(1) the debtor made a false oath in 13 connection with the case; (2) the oath related to a material fact; 14 (3) the oath was made knowingly; and (4) the oath was made 15 fraudulently.” In re Retz, 606 F.3d at 1197. 16 1. False Oath 17 The bankruptcy court found that Debtor omitted the Mexican 18 Note from his schedules and statement of financial affairs, failed 19 to list the $2,500 payments he received from Rezai in his monthly 20 income, and failed to disclose the Mexican Note in response to 21 several questions at the § 341(a) meeting. The court also found 22 that Debtor's answers were evasive once he disclosed its 23 existence. Further, after disclosing the Mexican Note in his 24 amended schedules, Debtor claimed, without any documentary 25 evidence in support, it was over-encumbered and valueless. 26 Debtor does not dispute that he omitted the Mexican Note. 27 Nor does he dispute that he represented the Mexican Note was over- 28 encumbered in his amended schedules. The evidence in this case -15- 1 established that Debtor made a false oath. Therefore, the 2 bankruptcy court did not clearly err in finding that Debtor made a 3 false oath in his original schedules, statement of financial 4 affairs and his amended schedules. 5 2. Materiality 6 A fact is material "'if it bears a relationship to the 7 debtor's business transactions or estate, or concerns the 8 discovery of assets, business dealings, or the existence and 9 disposition of the debtor's property.'" In re Khalil, 379 B.R. at 10 173. An omission or misstatement that “detrimentally affects 11 administration of the estate” is material. Wills v. Wills 12 (In re Wills), 243 B.R. 58, 63 (9th Cir. BAP 1999)(citing 13 6 Lawrence P. King et al., COLLIER ON BANKRUPTCY ¶ 727.04[1][b] (15th 14 ed. rev. 1998)). 15 Debtor’s oath related to a material fact. The existence of 16 the Mexican Note is material because it is a valuable asset worth 17 at least $450,000 based on Debtor’s own testimony or approximately 18 $530,000 based on de la Barra’s testimony. Further, it clearly 19 bears a relationship to Debtor's business transactions or estate 20 and, because of its highly valuable nature, its omission 21 detrimentally affected the administration of the estate. Debtor 22 disputed the overall value of the Mexican Note claiming it was 23 over-encumbered with security interests in connection with several 24 loans he received from his mother and his in-laws. However, after 25 considering Debtor's paltry documentary evidence of this, the 26 bankruptcy court found that the purported security interests 27 claimed by Debtor were “nonexistent.” No evidence existed of any 28 loan payments made to Debtor's mother or his in-laws. No -16- 1 documents existed showing any transfer of the beneficial interest 2 from Debtor to his mother or his in-laws. No recordation of any 3 loan, security interest or beneficial interest transfer existed in 4 the property records in Mexico. 5 The bankruptcy court found that the Mexican Note was worth 6 “at least $300,000, probably closer to $400,000, earning $2,500 7 per month in interest, when at the time the initial schedules were 8 filed, the Debtor’s total income was $9,000.” Trial Tr. (Oct. 16, 9 2013) at 11:17-24. Put simply, because of the value of the 10 Mexican Note, the bankruptcy court found “[t]he omission was 11 material.” Id. at 11:24. We see no clear error in that finding. 12 3. Knowingly Made 13 A debtor "'acts knowingly if he or she acts deliberately and 14 consciously.'" In re Khalil, 379 B.R. at 173 (quoting Roberts v. 15 Erhard (In re Roberts), 331 B.R. 876, 883 (9th Cir. BAP 2005)). 16 The bankruptcy court found Debtor knowingly omitted the 17 Mexican Note because Debtor “consciously signed the schedules and 18 the various declarations related to the schedules and statements 19 of financial affairs, later signed the amended schedules declaring 20 that these documents were true and correct, and the Defendant made 21 the same statements and testified in the same manner at the 22 [§] 341(a) meeting." Trial Tr. (Oct. 16, 2013) 12:2-7. Further, 23 the record shows Debtor revised two initial drafts of his 24 schedules that were both “replete with errors of all kind[s],” but 25 later testified that he signed the third draft believing them to 26 be complete and accurate. The bankruptcy court also found “[t]he 27 asset provided $2500 of interest per month at the time the case 28 was filed.” Id. at 8:20-21. The court went on, “[t]his is a -17- 1 substantial portion of the Debtor’s monthly income of about $9,000 2 a month in the original schedules,” and so “it's not something 3 that someone just forgets.” Id. at 8:21-24. We do not perceive 4 any clear error in the bankruptcy court’s finding that Debtor’s 5 false oath was made knowingly. 6 4. Fraudulent Intent 7 A debtor acts with fraudulent intent when: (1) the debtor 8 makes a misrepresentation; (2) that at the time he or she knew was 9 false; and (3) with the intention and purpose of deceiving 10 creditors. In re Retz, 606 F.3d at 1198-99. Fraudulent intent is 11 typically proven by circumstantial evidence or by inferences drawn 12 from the debtor’s conduct. Id. at 1199. Circumstantial evidence 13 may include showing a reckless indifference or disregard for the 14 truth. Id.; In re Wills, 243 B.R. at 64 (intent may be 15 established by a pattern of falsity, debtor's reckless 16 indifference, or disregard of the truth). 17 The bankruptcy court found that the evidence establishing 18 Debtor's intent and the denial of his discharge under § 727(a)(2) 19 also supported a finding of fraudulent intent under 20 § 727(a)(4)(A). Alternatively, the evidence showed that Debtor 21 had at least acted with a reckless indifference to the truth, 22 which also satisfies the requisite intent under § 727(a)(4)(A). 23 We agree. The evidence supports the bankruptcy court's finding 24 that Debtor acted with fraudulent intent to deceive creditors when 25 he omitted the Mexican Note from his schedules and statement of 26 financial affairs. Thus, it is not clearly erroneous. 27 The bankruptcy court did not err when it determined that 28 Debtor knowingly and fraudulently made a false oath in connection -18- 1 with his case that related to a material fact. Therefore, it did 2 not err in denying Debtor’s discharge under § 727(a)(4)(A). 3 VI. CONCLUSION 4 For the reasons set forth above, we AFFIRM. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -19-