Retz v. Samson (In Re Retz)

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

In re: BRENDON KEITH RETZ, 
Debtor,

BRENDON KEITH RETZ, No. 08-60023
Appellant, BAP No.
v. MT-07-1443-DJuPa
RICHARD J. SAMSON, Chapter 7  Bk. No.
04-60302-7-RBK
Trustee; DONALD G. ABBEY; Adv. No.
THOMAS TORNOW; AMERICAN 05-00018
EXPRESS CENTURION BANK;
WHITEFISH CREDIT UNION; GLACIER OPINION
BANK OF WHITEFISH; UNITED STATES
TRUSTEE/GREAT FALLS,
Appellees.

Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Pappas, Dunn, and Jury, Bankruptcy Judges, Presiding

Argued and Submitted
March 3, 2010—Portland, Oregon

Filed June 4, 2010

Before: Richard A. Paez, Richard C. Tallman, and
Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Tallman

8055
 IN RE RETZ 8059

COUNSEL

Ward E. Taleff (argued), Taleff Law Offices, P.C., Great
Falls, Montana; Harold Dye, Dye & Moe, PLLP, Missoula,
Montana, for debtor-appellant Brendon Keith Retz.
8060 IN RE RETZ
Michael G. Black (argued), Black Law Office, Missoula,
Montana; Edward A. Murphy, Murphy Law Offices, PLLC,
Missoula, Montana, for appellee Donald G. Abbey.

OPINION

TALLMAN, Circuit Judge:

Debtor-Appellant Brendon Keith Retz (“Retz”) filed for
Chapter 7 bankruptcy on February 12, 2004. On March 8,
2005, Bankruptcy Trustee Richard J. Samson (“Trustee”) and
Retz’s former business partner Donald G. Abbey (“Abbey”),
along with several banks, filed this adversary proceeding in
bankruptcy court seeking to stop Retz’s discharge. After a
five-day trial, the bankruptcy court found for the plaintiffs and
denied Retz’s discharge under 11 U.S.C. § 727(a)(2)(A),
(a)(2)(B), (a)(4)(A), and (a)(5). Retz then appealed to the
Ninth Circuit Bankruptcy Appellate Panel (“BAP”), which
affirmed on all four grounds, any of which would have been
sufficient to deny the discharge.

Retz now appeals, arguing that the bankruptcy court and
BAP erred in denying him a general discharge because: (1)
there is insufficient evidence of his intent to hinder, delay, or
defraud his creditors because he relied in good faith on the
advice of counsel in his actions during the bankruptcy pro-
ceeding; (2) any missing documents were easily obtainable by
the Trustee; (3) one of the improper transfers did not involve
an asset of the debtor; and (4) Retz’s failure to file his tax
returns was not his fault. We affirm the bankruptcy court’s
denial of Retz’s discharge.

I

Retz formed Timberland Construction, Inc. (“TCI”) in
1994 soon after graduating from college with a degree in busi-
 IN RE RETZ 8061
ness management. He was the sole shareholder of TCI, which
performed development and construction work in the White-
fish, Montana, area. For the first few years of operations Retz
kept the books for TCI and became proficient with the busi-
ness’s accounting software, Master Builder.

Abbey has been a successful California real estate investor
for over thirty-five years. He has taken part in approximately
10,000 real estate transactions and has interests in over sixty
companies. In 2001, Abbey decided to build a multi-million
dollar residence in Montana (the “Shelter Island Project”).1 In
order to maintain control of the construction process and save
money on the project, Abbey decided to form a new construc-
tion and development company with Retz.

In early 2001, Retz and TCI entered into an oral agreement
with Abbey to form Timberland Construction, LLC
(“TCLLC”). TCLLC began operations in 2001. The TCLLC
Operating Agreement, which had an effective date of July 1,
2001, was finalized and executed in March 2002 after exten-
sive negotiations. Abbey and TCI were the governing mem-
bers of TCLLC. The Operating Agreement provided that
Abbey would contribute $300,000 to TCLLC, while TCI
would contribute all its assets and liabilities. Abbey provided
the first $100,000 in approximately March 2001 and provided
the remaining $200,000 upon the execution of the Operating
Agreement in 2002.

Abbey testified that he would not have provided the final
$200,000, and in fact would have demanded the return of the
original $100,000, if the Operating Agreement had not been
signed. In contrast, Retz testified that Abbey told him the
Operating Agreement was “only for the file,” and that they
did not actually have to operate within its parameters.2 Abbey
1
Shelter Island is located in Flathead Lake, approximately forty miles
south of Whitefish, Montana.
2
Retz admitted later that he thought the Operating Agreement was
enforceable at least to the extent of the tax consequences of the transac-
tion.
8062 IN RE RETZ
insists that he never told Retz that he did not have to abide by
the terms of the Operating Agreement.

In May 2003, Abbey ran into Retz on the “comp” floor of
the Bellagio Resort & Casino in Las Vegas, Nevada. Abbey
testified that he was shocked that someone who earned only
$40,000 a year had been given a complimentary room at the
Bellagio, and became suspicious about Retz’s behavior. He
traveled to Montana in July 2003 and spoke with representa-
tives at several local banks about Retz and TCLLC. Abbey
discovered that TCLLC had entered into partnerships and loan
agreements in violation of the Operating Agreement, which
required Abbey’s written permission.

In August 2003, Abbey brought William Matteson, an
accountant with whom Abbey had worked in California, to
Montana for the purpose of assessing TCLLC’s financial con-
dition and operations, ensuring Retz’s compliance with the
Operating Agreement, verifying that TCI had made the
required contributions to TCLLC, and investigating a draft
audit report prepared by Deloitte & Touche regarding poten-
tial overcharges on the Shelter Island Project. Matteson found
numerous accounting irregularities in the TCLLC books and
suspicious transfers between Retz and TCLLC. Retz testified
that the transfers were short term loans that he made to
TCLLC so that the company could meet its payroll obliga-
tions, followed by repayment of the loans. However, the loans
and repayments were not clearly identified in the accounting
system, and Matteson could not confirm that the amounts in
and out of the business account matched. Due to Matteson’s
discoveries, Abbey began withdrawing financial support from
TCLLC and shutting down the Shelter Island Project.

Soon thereafter, Retz learned that Abbey was planning to
file litigation against him and decided to preemptively file a
lawsuit against Abbey in state court. Abbey countersued Retz
and his brother Ryan.3 The state court appointed a receiver for
3
Several members of the Retz family are involved in the events underly-
ing this adversary proceeding. We refer to them by their first names to
avoid confusion with the Debtor-Appellant Brendon Retz.
 IN RE RETZ 8063
TCLLC, effective September 3, 2003. The state court litiga-
tion was stayed when Retz filed a voluntary Chapter 7 bank-
ruptcy petition on February 12, 2004.

Following the filing of his bankruptcy petition, Retz filed
what purported to be the required financial Schedules and
Statement of Financial Affairs (“SOFA”). Retz acknowledged
at trial that the Schedules and SOFA he filed were incom-
plete, but explained that he intended to amend them at some
point, when he obtained additional information about his
debts and assets. He attended the first Meeting of Creditors
mandated by 11 U.S.C. § 341 (“§ 341 Creditors’ Meeting”)
on March 19, 2004, and answered questions posed by the
Trustee and the attending creditors. The second § 341 Credi-
tors’ Meeting took place on July 8, 2004. Retz again attended
and answered some questions posed by the Trustee and other
creditors.

On March 8, 2005, the Trustee and Abbey filed an adver-
sary proceeding in bankruptcy court seeking denial of Retz’s
discharge pursuant to various subsections of 11 U.S.C. §§ 523
and 727. The bankruptcy court held a five-day trial, April 10
and 11, and June 1, 4, and 5, 2007. Many witnesses testified,
including Retz, Abbey, the Trustee, Ryan, David Schultz (the
Retz family accountant), Matteson, and Retz’s bankruptcy
attorneys Bruce Measure and Harold Dye. At the time of trial,
nearly three years after Retz filed his bankruptcy petition,
Retz still had not filed amendments to either the Schedules or
the SOFA.4

In its written memorandum of decision the bankruptcy
court found, “after observing [Retz’s] demeanor while testify-
ing under oath and cross examination, and examination of the
4
Retz finally amended the Schedules and SOFA on August 7, 2007,
after the end of the bankruptcy court trial. The amended Schedules and
SOFA are, therefore, not part of the trial record in the adversary proceed-
ing.
8064 IN RE RETZ
transcripts of the state court hearing . . . that [Retz] is not a
credible witness.” The court then denied Retz’s discharge on
four independent grounds: (1) Retz “knowingly and fraudu-
lently, in or in connection with the case[,] made a false oath
or account” on his Schedules and SOFA by failing to disclose
income, assets, and transfers in violation of § 727(a)(4)(A);
(2) Retz sold a house allegedly belonging to TCLLC to his
brother Ryan for $60,000 under market value within one year
before filing for bankruptcy, with the intent to hinder, delay,
or defraud a creditor in violation of § 727(a)(2)(A); (3) Retz
participated in the transfer, after the date of the filing of the
bankruptcy petition, of North Forty Resort Corp. (“NFRC”)
assets to North Forty Resort, LLC, which greatly reduced the
value of the bankruptcy estate’s 6% ownership of the Corpo-
ration, with the intent to hinder, delay, or defraud a creditor
in violation of § 727(a)(2)(B); and (4) Retz “failed to explain
satisfactorily . . . any loss of assets or deficiency of assets to
meet [his] liabilities” in violation of § 727(a)(5).5 The BAP
affirmed on all four grounds. Retz timely appealed. We have
jurisdiction pursuant to 28 U.S.C. § 158(d), and we affirm.

II

We review decisions of the BAP de novo and apply the
standard of review applied by the BAP to the bankruptcy
court’s decision. Boyajian v. New Falls Corp. (In re Boya-
jian), 564 F.3d 1088, 1090 (9th Cir. 2009). The BAP
reviewed the bankruptcy court decision in this case using the
following standards:
5
These statutory bases for denial correspond with the adversary pro-
ceeding’s second amended complaint: Count 9 (false oaths), Count 13
(transfer of assets before filing), Count 14 (transfer of assets after filing),
and Count 11 (failure to explain). The remaining counts under § 727 were
dismissed. Counts 1 through 8 were brought under § 523; however, the
bankruptcy court found it unnecessary to reach those counts because it
denied Retz’s discharge under § 727. Only § 727 is at issue in this appeal.
 IN RE RETZ 8065
(1) the [bankruptcy] court’s determinations of the
historical facts are reviewed for clear error; (2) the
selection of the applicable legal rules under § 727 is
reviewed de novo; and (3) the application of the
facts to those rules requiring the exercise of judg-
ments about values animating the rules is reviewed
de novo.

Searles v. Riley (In re Searles), 317 B.R. 368, 373 (B.A.P. 9th
Cir. 2004) (relying upon Murray v. Bammer (In re Bammer),
131 F.3d 788, 791-92 (9th Cir. 1997) (en banc)). A court’s
factual determination is clearly erroneous if it is illogical,
implausible, or without support in the record. United States v.
Hinkson, 585 F.3d 1247, 1261-62 & n.21 (9th Cir. 2009) (en
banc) (quoting Anderson v. City of Bessemer City, 470 U.S.
564, 577 (1985)) (explaining that the clearly erroneous stan-
dard of review is an element of the clarified abuse of discre-
tion standard).

Those objecting to discharge “bear[ ] the burden of proving
by a preponderance of the evidence that [the debtor’s] dis-
charge should be denied.” Khalil v. Developers Sur. & Indem.
Co. (In re Khalil), 379 B.R. 163, 172 (B.A.P. 9th Cir. 2007),
aff’d, 578 F.3d 1167, 1168 (9th Cir. 2009) (expressly adopt-
ing the BAP’s statement of applicable law). “In keeping with
the ‘fresh start’ purposes behind the Bankruptcy Code, courts
should construe § 727 liberally in favor of debtors and strictly
against parties objecting to discharge.” Bernard v. Sheaffer
(In re Bernard), 96 F.3d 1279, 1281 (9th Cir. 1996). This
does not alter the burden on the objector, but rather means
that “actual, rather than constructive, intent is required” on the
part of the debtor. In re Khalil, 379 B.R. at 172. When factual
findings are based on determinations regarding the credibility
of witnesses, we give great deference to the bankruptcy
court’s findings, because the bankruptcy court, as the trier of
fact, had the opportunity to note “variations in demeanor and
tone of voice that bear so heavily on the listener’s understand-
ing of and belief in what is said.” Anderson, 470 U.S. at 575.
8066 IN RE RETZ
III

A

[1] Section 727(a)(4)(A) states: “The court shall grant the
debtor a discharge, unless . . . the debtor knowingly and
fraudulently, in or in connection with the case[,] made a false
oath or account.” 11 U.S.C. § 727(a)(4)(A). “A false state-
ment or an omission in the debtor’s bankruptcy schedules or
statement of financial affairs can constitute a false oath.” In
re Khalil, 379 B.R. at 172. “The fundamental purpose of
§ 727(a)(4)(A) is to insure that the trustee and creditors have
accurate information without having to conduct costly investi-
gations.”6 Id. (quoting Fogal Legware of Switz., Inc. v. Wills
(In re Wills), 243 B.R. 58, 63 (B.A.P. 9th Cir. 1999)).

To prevail on this claim, a plaintiff must show, by a pre-
ponderance of the evidence, that: “(1) the debtor made a false
oath in connection with the case; (2) the oath related to a
material fact; (3) the oath was made knowingly; and (4) the
oath was made fraudulently.” Roberts v. Erhard (In re Rob-
erts), 331 B.R. 876, 882 (B.A.P. 9th Cir. 2005) (citing In re
Wills, 243 B.R. at 62). A finding of fraudulent intent is a find-
ing of fact reviewed for clear error. First Beverly Bank v.
Adeeb (In re Adeeb), 787 F.2d 1339, 1342 (9th Cir. 1986).

1

[2] The first element that must be proven to deny discharge
under § 727(a)(4)(A) is the existence of a false oath in con-
nection with the bankruptcy case. In re Roberts, 331 B.R. at
6
We note that this purpose is alone sufficient to rebut Retz’s argument
on appeal that the Trustee could have obtained the missing documents and
tracked the missing funds on his own. Retz essentially dumped 28,000
pages of largely unorganized documents on the Trustee after repeated
requests to explain his convoluted financial affairs. The Trustee should not
have to conduct his own costly and ultimately fruitless investigation with-
out the debtor’s help.
 IN RE RETZ 8067
882; see also 11 U.S.C. § 727(a)(4)(A). The bankruptcy court
found numerous errors and omissions in Retz’s Schedules and
SOFA, which can qualify as false oaths under § 727(a)(4)(A).
See In re Khalil, 379 B.R. at 172. The parties are familiar with
the facts of the case and both the lengthy bankruptcy court
opinion and the BAP opinion contain more complete discus-
sions of the false oaths in the Schedules and SOFA. We dis-
cuss only some of the more significant errors and omissions
here.

[3] There is no real dispute in this case that at the time
Retz signed his incomplete Schedules and SOFA declaring,
under penalty of perjury, that they were true and correct, he
well knew that they were not true and correct. Retz admitted
that he knew the Schedules and SOFA were incomplete when
they were signed and filed, as did his attorney. Further, he did
not even read the Schedules and SOFA before signing them.

Retz omitted from his Schedules valuable watches, a bank
account, a 1984 Cadillac, a 2002 Audi purchased through
TCI, and the sale of a helicopter and hangar. He also failed
to list any income from 2003 or the beginning of 2004. Retz
argues on appeal that he was unable to establish his income
for 2003 and 2004 because TCLLC had yet to complete its tax
returns for those years. As this issue is not dispositive, we
have not considered the missing income information in our
decision.

Retz conceded at trial that, three years later, he still had not
made a complete response to the Trustee with respect to
SOFA Question 3a, payments to creditors, Question 3b, pay-
ments to insiders, and Question 10, other transfers. Informa-
tion that should have been listed in response to Question 3a
includes the disclosure of Retz’s prepayment of his home
mortgage with the proceeds from the sale of his helicopter and
hangar just before he petitioned for bankruptcy. In response
to Question 3b, Retz should have listed at least two pre-
petition transactions involving his father, Robert Retz: a
8068 IN RE RETZ
check to Robert dated March 17, 2003, for $38,287.30; and a
check to Robert dated September 23, 2003, in the amount of
$12,181.00.

There were also a series of transfers in September 2003
from Retz’s credit cards to NFRC, a corporation owned and
operated by the Retz family, totaling approximately $160,000.
Retz later took this money from the NFRC account for his
personal and business use, was advised by counsel that such
an action was likely in violation of the credit card companies’
merchant agreements, and paid the money back with the help
of his father, who loaned him $80,000 to make up the amount
that Retz had apparently already spent. Retz was unable to
explain where the missing $80,000 went. He testified that he
may have written a $30,000 check to himself, and that he
“might have cashed it, or something.” He also speculated that
some of the money went into TCI for payroll and business
expenses, while some of it likely went to his and his wife
Misty’s monthly expenses, which were high. The Trustee tes-
tified that to the extent these transfers might have been prefer-
ential, the failure to timely disclose them permitted the statute
of limitation to run on the Trustee’s ability to attempt to avoid
those actions.

[4] As to Question 10, numerous contributions Retz made
to, and distributions he received from, TCI and TCLLC were
not listed. As discussed above, it was impossible to determine
whether the amounts Retz had received from TCI and TCLLC
matched the amounts he had provided to the companies. This
evidence is sufficient to support the bankruptcy court’s find-
ing that Retz made false oaths on his Schedules and SOFA.

2

[5] Section 727(a)(4)(A) requires that the relevant false
oath relate to a material fact. In re Roberts, 331 B.R. at 882;
see also 11 U.S.C. § 727(a)(4)(A). “A fact is material ‘if it
bears a relationship to the debtor’s business transactions or
 IN RE RETZ 8069
estate, or concerns the discovery of assets, business dealings,
or the existence and disposition of the debtor’s property.’ ” In
re Khalil, 379 B.R. at 173 (quoting In re Wills, 243 B.R. at
62). An omission or misstatement that “detrimentally affects
administration of the estate” is material. In re Wills, 243 B.R.
at 63 (citing 6 Lawrence P. King et al., Collier on Bankruptcy
¶ 727.04[1][b] (15th ed. rev. 1998)).

[6] Retz’s errors and omissions in his Schedules and SOFA
related to his assets, property, and business dealings. Further,
the Trustee testified that Retz’s incomplete and erroneous
Schedules and SOFA interfered with administration of the
estate, making it almost impossible to reconstruct his financial
affairs. The bankruptcy court correctly concluded that Retz’s
false oaths related to material facts.

3

[7] The third element required by § 727(a)(4)(A) is that the
debtor act knowingly in making the false oath. In re Roberts,
331 B.R. at 882; see also 11 U.S.C. § 727(a)(4)(A). “A debtor
‘acts knowingly if he or she acts deliberately and conscious-
ly.’ ” In re Khalil, 379 B.R. at 173 (quoting In re Roberts, 331
B.R. at 883). Retz deliberately and consciously signed the
Schedules and SOFA knowing that they were incomplete.
Furthermore, he admitted at trial that even if all the informa-
tion from his worksheets had been included in the Schedules
and SOFA they still would have been incomplete.7 This is suf-
ficient to support the bankruptcy court’s finding that Retz
acted knowingly.

4

Finally, the bankruptcy court found that Retz’s fraudulent
7
Retz’s attorney acknowledged that some items that were listed in
Retz’s worksheets did not make it to the Schedules and SOFA through
clerical error.
8070 IN RE RETZ
intent, establishing the fourth element of a § 727(a)(4)(A) vio-
lation, was shown “by a pattern of falsity, his reckless indif-
ference to and disregard of the truth, and demonstrated by his
course of conduct.” Retz challenges this finding, arguing that
he did not intend to defraud his creditors and that his good
faith reliance on the advice of his counsel demonstrates his
lack of fraudulent intent.

[8] To demonstrate fraudulent intent, Abbey and the
Trustee bore the burden of showing that: “(1) [Retz] made the
representations [e.g., a false statement or omission in bank-
ruptcy schedules]; (2) . . . at the time he knew they were false;
[and] (3) . . . he made them with the intention and purpose of
deceiving the creditors.” In re Khalil, 379 B.R. at 173 (quot-
ing In re Roberts, 331 B.R. at 884) (second and third alter-
ations in original). Intent is usually proven by circumstantial
evidence or by inferences drawn from the debtor’s conduct.
Devers v. Bank of Sheridan, Mont. (In re Devers), 759 F.2d
751, 753-54 (9th Cir. 1985); see also In re Roberts, 331 B.R.
at 884. Reckless indifference or disregard for the truth may be
circumstantial evidence of intent, but is not sufficient, alone,
to constitute fraudulent intent. In re Khalil, 379 B.R. at
173-75.

[9] “Generally, a debtor who acts in reliance on the advice
of his attorney lacks the intent required to deny him a dis-
charge of his debts.” In re Adeeb, 787 F.2d at 1343. “How-
ever, the debtor’s reliance must be in good faith.” Id. The
advice of counsel is not a defense when the erroneous infor-
mation should have been evident to the debtor. Boroff v. Tully
(In re Tully), 818 F.2d 106, 111 (1st Cir. 1987). “A debtor
cannot, merely by playing ostrich and burying his head deeply
enough in the sand, disclaim all responsibility for statements
which he has made under oath.” Id.

[10] Retz argues that he was unaware of many of the errors
and omissions in his Schedules and SOFA because he signed
the forms in blank and relied upon his attorney to fill in the
 IN RE RETZ 8071
correct information. Retz cannot escape the bankruptcy
court’s finding of fraudulent intent by his reliance on the
advice of his counsel. First, Retz’s attorney, Harold Dye, tes-
tified that he did not advise Retz to sign the Schedules and
SOFA without reading them. Retz’s argument highlights the
reason that the debtor is required to attest that he has read the
Schedules and SOFA: to ensure to the greatest extent possible
that the information turned over to the bankruptcy court is
accurate. See In re Searles, 317 B.R. at 378 (“The continuing
nature of the duty to assure accurate schedules of assets is
fundamental because the viability of the system of voluntary
bankruptcy depends upon full, candid, and complete disclo-
sure by debtors of their financial affairs.”).

[11] More importantly, the bankruptcy court explicitly
found that Retz did not rely on Dye’s advice in good faith.
This finding is not clearly erroneous. The court properly noted
that the significant number of falsehoods and omissions,
together with the failure to amend the Schedules and SOFA
in the three years between the petition and trial, can constitute
reckless indifference to the truth, which is evidence of fraudu-
lent intent. See In re Khalil, 379 B.R. at 173-75; see also Mar-
tin Marietta Materials Sw., Inc. v. Lee (In re Lee), 309 B.R.
468, 477 (Bankr. W.D. Tex. 2004). The fact that Retz signed
the forms in blank reflects this same reckless indifference to
the truth, which adds to the circumstantial evidence of fraudu-
lent intent. See Kavanagh v. Leija (In re Leija), 270 B.R. 497,
504 (Bankr. E.D. Cal. 2001) (finding that signing of forms in
blank was “at best, recklessly indifferent”). Considering the
significant number of omissions and errors, the large mone-
tary value of many of the omitted transfers, and the fact that
Retz signed the Schedules and SOFA without reading them,
the bankruptcy court’s finding that Retz had the requisite
fraudulent intent was not illogical, implausible, or without
support in the record. See Anderson, 470 U.S. at 577.

[12] The bankruptcy court correctly held that Retz made
many false oaths on his Schedules and SOFA, that the false
8072 IN RE RETZ
oaths related to material facts, and that they were made know-
ingly and fraudulently. See 11 U.S.C. § 727(a)(4)(A); see also
In re Roberts, 331 B.R. at 882. We, therefore, affirm the
bankruptcy court’s denial of Retz’s discharge pursuant to
§ 727(a)(4)(A).

B

[13] The bankruptcy court also denied Retz’s discharge
under both subsections of § 727(a)(2). That section states:

The court shall grant the debtor a discharge, unless
. . . the debtor, with intent to hinder, delay, or
defraud a creditor or an officer of the estate charged
with custody of property under this title, has trans-
ferred, removed, destroyed, mutilated, or concealed,
or has permitted to be transferred, removed,
destroyed, mutilated, or concealed[,] (A) property of
the debtor, within one year before the date of the fil-
ing of the petition; or (B) property of the estate, after
the date of the filing of the petition.

11 U.S.C. § 727(a)(2). A party seeking denial of discharge
under § 727(a)(2) must prove two things: “(1) a disposition of
property, such as transfer or concealment, and (2) a subjective
intent on the debtor’s part to hinder, delay or defraud a credi-
tor through the act [of] disposing of the property.” Hughes v.
Lawson (In re Lawson), 122 F.3d 1237, 1240 (9th Cir. 1997).

A debtor’s intent need not be fraudulent to meet the
requirements of § 727(a)(2). Because the language of the stat-
ute is in the disjunctive it is sufficient if the debtor’s intent is
to hinder or delay a creditor. In re Bernard, 96 F.3d at 1281.
Furthermore, “lack of injury to creditors is irrelevant for pur-
poses of denying a discharge in bankruptcy.” Id. at 1281-82
(quoting In re Adeeb, 787 F.2d at 1343).
 IN RE RETZ 8073
In examining the circumstances of a transfer under
§ 727(a)(2), certain “badges of fraud” may support a finding
of fraudulent intent.

These factors, not all of which need be present,
include (1) a close relationship between the trans-
feror and the transferee; (2) that the transfer was in
anticipation of a pending suit; (3) that the transferor
Debtor was insolvent or in poor financial condition
at the time; (4) that all or substantially all of the
Debtor’s property was transferred; (5) that the trans-
fer so completely depleted the Debtor’s assets that
the creditor has been hindered or delayed in recover-
ing any part of the judgment; and (6) that the Debtor
received inadequate consideration for the transfer.

Emmett Valley Assocs. v. Woodfield (In re Woodfield), 978
F.2d 516, 518 (9th Cir. 1992).

1

The bankruptcy court held that Retz’s sale of the house at
650 Woodside Lane, Whitefish, Montana, to his brother Ryan
constituted a transfer of property, within one year prior to the
filing of the bankruptcy petition, with an intent to hinder,
delay, or defraud creditors sufficient to deny discharge under
§ 727(a)(2)(A). Retz argues that he arranged the sale more
than a year before filing for bankruptcy and that he had no
intent to defraud his creditors.

The facts surrounding the transfer of 650 Woodside are rel-
atively complex and support the bankruptcy court’s finding
that Retz’s actions regarding TCLLC, his creditors, and his
properties evidenced Retz’s fraudulent intent. Lot 6 of the
Woodside subdivision, commonly referred to as 650 Wood-
side, was one of the properties that TCI should have contrib-
uted to TCLLC pursuant to Retz’s business arrangement with
Abbey and the TCLLC Operating Agreement. Retz testified
8074 IN RE RETZ
that although he did not transfer the deed from TCI to
TCLLC, the property was placed on TCLLC’s books in July
2001.

In the fall of 2001, once construction was finished on the
house, Retz and Misty moved into 650 Woodside. They did
not pay rent. Retz testified that he spoke with Abbey about
paying rent and Abbey allegedly told him not to worry about
it, stating: “Don’t be ridiculous. Just put a cup at the back
door and stick a quarter in it for your uncle Don every now
and then.” Abbey testified to the contrary that he told Retz
that the house should be sold for a profit and that if Retz
wanted to live in it, he should pay rent.

On July 3, 2002, TCI—not TCLLC, the purported owner of
the property—deeded 650 Woodside to Retz and Misty. Retz
explained that he exchanged 650 Woodside, at cost, for a
piece of property across the street that he owned personally,
665 Woodside. Later, Retz and Misty decided they wanted to
build a house at 665 Woodside so they purchased it back from
TCLLC at the same price for which it had been exchanged a
few months before. Retz testified that Abbey verbally con-
sented to the transfer of 650 Woodside. However, he con-
cedes that Abbey never consented in writing, as required by
the Operating Agreement. Abbey testified that he had no
knowledge of the transfer until long after it was complete.

The bankruptcy court found that Abbey did not tell Retz he
could live at 650 Woodside without paying rent and that
Abbey had not consented to the transfer of 650 Woodside
from TCLLC to Retz. In rejecting Retz’s version of the facts,
the bankruptcy court observed that the “testimony by [Retz]
regarding Abbey’s nonchalance about his business affairs is
fantastic, and wholly inconsistent with the evidence of
Abbey’s business practices in dozens of companies.” The
bankruptcy court also noted that Retz’s testimony that the two
men had a verbal agreement not to abide by the Operating
 IN RE RETZ 8075
Agreement was in direct contradiction to the Agreement’s
integration clause.8

In May 2002, Retz invited his brother Ryan to move back
to Whitefish from Boise, Idaho, to work for TCLLC. As an
inducement for Ryan to accept the job, Retz promised to sell
him 650 Woodside for a good price. Ryan moved into 650
Woodside in July 2003. Retz ordered an appraisal so that
Ryan could secure financing; the appraised value as of July
25, 2003, was $220,000. Retz and Ryan then executed a buy-
sell agreement for 650 Woodside in November 2003, which
they backdated to July 20, 2003. The sale price was $160,000.

The bankruptcy court made several adverse findings of fact
relating to the sale of 650 Woodside. First, the court found
that the sale was within one year of Retz filing his petition for
bankruptcy, relying on the date of the buy-sell agreement,
rather than the date Retz told Ryan he could get him a good
deal on the house. Relying on the date of the buy-sell agree-
ment is rational and supported by the record, particularly
because the bankruptcy court found Retz’s testimony gener-
ally not credible. Second, the bankruptcy court held that the
sale was unquestionably a transfer within the meaning of
§ 727(a)(2). Retz does not appear to challenge this finding on
appeal. Third, the court described four badges of fraud present
in the transaction: that Retz (1) had a close relationship with
the transferee, Ryan; (2) sold the house during pending state
court litigation involving one of his most significant creditors,
Abbey; (3) was in poor financial condition at the time of the
sale; and (4) received inadequate consideration by selling the
house for $60,000 less than the appraised value. See In re
Woodfield, 978 F.2d at 518.
8
The integration clause reads: “This Agreement and the other written
agreements entered into concurrently herewith constitute the complete and
exclusive statement of agreement among the Members and Governing
Members with respect to the subject matter herein and therein and replace
and supercede all prior written and oral agreements or statements by and
among the Members and Governing Members or any of them.”
8076 IN RE RETZ
Retz’s reliance on attorney Dye’s advice that the sale was
legally proper is insufficient to vitiate the fraudulent intent
evidenced by these badges of fraud. Dye testified that Retz
told him the state court had authorized the sale to go forward,
but Retz failed to tell Dye that the state court did not know
that the sale was to Retz’s brother for $60,000 under market
value. Furthermore, although Dye was aware that Ryan was
purchasing 650 Woodside, he did not know that it had been
appraised at $60,000 over the sale price. Reliance on the
advice of counsel is not a viable defense to a claim of fraud
when the debtor has not made full disclosure of the relevant
facts to counsel. See Adell v. John Richards Homes Bldg. Co.
(In re John Richards Homes Bldg. Co.), 439 F.3d 248, 260
(6th Cir. 2006) (“[A] client reasonably relies on an attorney’s
advice only when the client provides to the attorney all of the
pertinent facts in the client’s possession.”). The bankruptcy
court’s decision is also supported by Retz’s lack of candor
with the state court and with his own attorney regarding the
sale of 650 Woodside, which is further evidence of his fraud-
ulent intent.

[14] The bankruptcy court’s determination that the sale of
650 Woodside was a transfer within a year before filing for
bankruptcy, made with the intent to hinder, delay, or defraud
a creditor is not clearly erroneous. The record demonstrates
that Retz improperly purchased 650 Woodside from TCLLC
for cost, rather than selling it for profit to benefit the business.
He then sold it to his brother for $60,000 under market value
only a few months before he filed for bankruptcy. Retz failed
to inform the state court investigating the propriety of the
transfer of 650 Woodside that the arranged sale was to his
brother for well below market value. It is hard to believe that
an educated and experienced business owner like Retz would
have found this information irrelevant to the state court’s con-
cerns regarding TCLLC’s financial losses related to the
house. Retz also failed to tell his attorney that the sale was for
well below market value. This evidence supports a finding of
fraudulent intent in the transfer of 650 Woodside, and we
 IN RE RETZ 8077
affirm the bankruptcy court’s denial of Retz’s discharge under
§ 727(a)(2)(A).

2

The bankruptcy court also denied Retz’s discharge under
§ 727(a)(2)(B) due to his participation in the transfer of
NFRC assets belonging to the bankruptcy estate, without
notice to the Trustee, with the intent to hinder, delay, and
defraud creditors.

The Retz family owned a bed and breakfast resort called
North Forty Resort, which was owned by NFRC. Retz’s par-
ents, Robert and JoEllen, owned 82% of NFRC, and Retz,
Ryan, and their brother Eric each owned 6%. Retz was a
director and vice president of NFRC from its inception in
1993. When they first opened the resort, Retz performed the
bookkeeping, maintained the ledger, wrote checks, paid bills,
and compiled financial statements and balance sheets for its
operation. Although he claimed that he later had no role in the
finances of the resort, Retz had access to NFRC’s bank
accounts in September 2003 when he removed cash from the
accounts for his personal use.

On July 6, 2004, the Trustee requested by letter that Retz
provide him with information regarding NFRC. Retz
responded more than three months later in a letter dated Octo-
ber 27, 2004, that the Trustee’s request was very broad and
that he would respond only to more specific questions the
Trustee might have about NFRC. In the interim, NFRC sold
all of its assets on September 17, 2004, to North Forty Resort,
LLC. Retz’s mother, JoEllen, is the sole member of North
Forty Resort, LLC. As a result of the transfer, NFRC now
holds as its only asset a promissory note in the amount of
$850,000, payable in thirty years with interest at 6%. The
Trustee learned of the transfer on September 20, 2004, even
though the estate held Retz’s 6% of NFRC, and should have
been consulted before the transfer.
8078 IN RE RETZ
Retz and several of his family members testified that the
purpose of the NFRC sale was to protect his father’s capital
loss carryover that would be lost on his father’s death.
Because Robert was suffering from terminal cancer, the time
for completing the transfer was necessarily short. However,
the Retzes did hire an accountant, David Schultz, to advise
them regarding the transfer. Schultz prepared a draft docu-
ment discussing the financial and tax goals of the Retz family
related to the transfer. At trial, he testified that Retz was
involved in the discussions regarding the memorandum. One
of the listed goals of the transfer was to: “Minimize exposure
to possible creditors of Brendon that survive the bankruptcy.”

The bankruptcy court acknowledged that the transfer of the
NFRC assets included a legitimate purpose, preserving Rob-
ert’s tax loss benefits. However, the court stated that Retz’s
6% interest in NFRC was unquestionably property of the
estate and the sale was a disposition of property.

Finally, the court found that Retz had the requisite intent to
hinder, delay, or defraud his creditors. Both Schultz and Eric
testified that Retz was involved in the discussions leading up
to Schultz’s memorandum, which listed as a goal of the trans-
fer minimizing NFRC’s exposure to Retz’s creditors. The
court found that this goal alone was sufficient to satisfy the
intent requirement.

The bankruptcy court also found that Retz’s delay in
responding to the Trustee’s questions regarding NFRC and his
evasiveness in giving the Trustee full information regarding
NFRC was evidence of fraudulent intent. The court found
three badges of fraud in the NFRC transaction: (1) Retz’s
close relationship with the transferee, an entity owned and
controlled by his mother; (2) the transfer occurred during the
pendency of Retz’s bankruptcy; and (3) Retz was insolvent at
the time of the transfer. See In re Woodfield, 978 F.2d at 518.

[15] Retz presents several arguments on appeal contesting
the bankruptcy court’s findings. First, Retz argues that he was
 IN RE RETZ 8079
not involved in the transfer of the NFRC assets, which was
spearheaded by his father Robert. Second, he contends that it
was NFRC’s attorney, not Retz, who had a duty to inform the
Trustee, a minority shareholder, of the sale. Third, Retz states
that the Trustee lost no value after the transfer because NFRC
retained assets equal in value to those it transferred. Finally,
he argues that he no longer held an interest in NFRC at the
time of the transfer because the shares belonged to the estate.
This argument appears to relate to the requirement under
§ 727(a)(2) that the relevant property have been transferred.
However, as discussed more fully below, § 727(a)(2)(B) spe-
cifically governs transfers of property belonging to the estate.

[16] Retz’s effort to disclaim responsibility for the transfer
is unavailing. Two witnesses testified that Retz was involved
in planning the transfer with his father. Only Retz’s self-
serving testimony rebutted the adverse evidence presented at
trial. The bankruptcy court found his testimony not credible,
and we give great deference to the bankruptcy court’s deter-
minations regarding the credibility of witnesses. See Ander-
son, 470 U.S. at 575. The evidence, thus construed against
him, supports the bankruptcy court’s determination that Retz
was involved in the transfer.

[17] Regarding Retz’s responsibility to inform the Trustee
of the transfer of NFRC assets, it is true that NFRC’s attorney
likely had a duty to inform the Trustee, as a minority share-
holder, of the transfer. However, the Trustee had specifically
asked Retz for information regarding NFRC, which Retz
failed to provide in a timely fashion. As a debtor in bank-
ruptcy proceedings, Retz had a duty to share full information
with the Trustee, completely separate from any duty owed to
the Trustee as a minority shareholder. See generally Grogan
v. Garner, 498 U.S. 279, 286-87 (1991) (stating that the
Bankruptcy Act “limits the opportunity for a completely
unencumbered new beginning to the honest but unfortunate
debtor” (internal quotation marks omitted)); see also In re
Wills, 243 B.R. at 63 (“[T]he opportunity to obtain a fresh
8080 IN RE RETZ
start is . . . conditioned upon truthful disclosure.” (quoting
Aubrey v. Thomas (In re Aubrey), 111 B.R. 268, 274 (B.A.P.
9th Cir. 1990))). Further, Retz’s failure to inform the Trustee
of the transfer is circumstantial evidence of his intent to hin-
der, delay, or defraud creditors, because there is no other rea-
sonable explanation for Retz’s delay.

Retz’s argument that the Trustee lost no value as a result
of the transfer of NFRC’s stock is unrelated to whether there
was a transfer and whether Retz intended to hinder, delay, or
defraud the Trustee and his creditors by engaging in the trans-
fer. Furthermore, “lack of injury to creditors is irrelevant for
purposes of denying a discharge in bankruptcy.”9 In re Ber-
nard, 96 F.3d at 1281-82 (quoting In re Adeeb, 787 F.2d at
1343).

Finally, Retz’s statement that he no longer owned an inter-
est in NFRC and that the transfer, therefore, cannot be held
against him, is nonsensical. Section 727(a)(2)(B) allows a
court to deny discharge when a debtor “has permitted to be
transferred . . . property of the estate.” 11 U.S.C. § 727(a)(2).
Thus, it makes no difference that the NFRC stock belonged
to the estate, rather than to Retz. Retz can be held responsible
for any transfer of that property that is accomplished in order
to hinder, delay, or defraud the Trustee or a creditor.10 See id.
9
The transfer likely did cause NFRC’s stock to lose value, because the
only property held by NFRC after the transfer was an unsecured promis-
sory note on which no principal payment was due for thirty years, and on
which interest was due, beginning at the end of the sixth year, “only as
Buyer’s net profits allow.”
10
A single sentence in Retz’s opening brief on appeal implies that the
transfer of NFRC’s assets to the North Forty Resort, LLC, was not a trans-
fer of property under Hansen v. Moore (In re Hansen), 368 B.R. 868
(B.A.P. 9th Cir. 2007). The only explication of this argument is that “Han-
sen did not hold a transfer of the assets of a corporation in which a debtor
is a minority shareholder is a transfer of the debtor’s property.” The fact
that Hansen dealt with a different factual scenario than the current case is
hardly support for an argument that there was no transfer of assets in this
 IN RE RETZ 8081
[18] Considering all the evidence presented at trial regard-
ing the transfer of NFRC assets, the bankruptcy court’s find-
ing that Retz intended to hinder, delay, or defraud his
creditors by completing the transfer is not illogical, implausi-
ble, or without support in the record. See Anderson, 470 U.S.
at 577.

C

[19] The final ground upon which the bankruptcy court
rested its denial of Retz’s discharge is § 727(a)(5). Section
727(a)(5) states: “The court shall grant the debtor a discharge,
unless . . . the debtor has failed to explain satisfactorily,
before determination of denial of discharge under this para-
graph, any loss of assets or deficiency of assets to meet the
debtor’s liabilities.” 11 U.S.C. § 727(a)(5).

Under § 727(a)(5) an objecting party bears the initial
burden of proof and must demonstrate: (1) debtor at
one time, not too remote from the bankruptcy peti-
tion date, owned identifiable assets; (2) on the date
the bankruptcy petition was filed or order of relief
granted, the debtor no longer owned the assets; and
(3) the bankruptcy pleadings or statement of affairs
do not reflect an adequate explanation for the dispo-
sition of the assets.

Olympic Coast Invest., Inc. v. Wright (In re Wright), 364 B.R.
51, 79 (Bankr. D. Mont. 2007); see also In re Devers, 759
F.2d at 754 (concluding that debtors could be denied dis-
charge under § 727(a)(5) where they failed to offer a “satis-

case. In fact, the briefing itself describes the actions taken by NFRC as a
transfer of assets. We are satisfied, based on the facts found by the bank-
ruptcy court, that Retz was sufficiently involved in the transfer of the
NFRC assets for this transaction to qualify as a disposition of estate prop-
erty under § 727(a)(2).
8082 IN RE RETZ
factory explanation” for the “disappearance” of a tractor they
had owned that they did not produce for repossession). Once
the creditor has made a prima facie case, the debtor must offer
credible evidence regarding the disposition of the missing
assets. In re Devers, 759 F.2d at 754.

Whether a debtor has satisfactorily explained a loss of
assets is a question of fact for the bankruptcy court, over-
turned only for clear error. Hawley v. Cement Indus., Inc. (In
re Hawley), 51 F.3d 246, 248 (11th Cir. 1995) (per curiam)
(citing Chalik v. Moorefield (In re Chalik), 748 F.2d 616, 619
(11th Cir. 1984) (per curiam)). “A debtor’s failure to offer a
satisfactory explanation when called on by the court is a suffi-
cient ground for denial of discharge under [§] 727(a)(5).” In
re Devers, 759 F.2d at 754.

The inadequacy of Retz’s Schedules and SOFA is dis-
cussed above. In particular, large amounts of money were
transferred into and out of Retz’s personal bank accounts, and
he very rarely had any explanation for where the money went.
There is also evidence in the record that Retz went on a
spending spree just before filing for bankruptcy to benefit
both himself and TCI, purchasing computers, office furniture,
servers, luxury cars, a helicopter and hangar, and making
gambling trips where he lost thousands of dollars. The pur-
chases for TCI are particularly troubling, because Retz indi-
cated at the first § 341 Creditors’ Meeting that the company
was essentially inactive once his business relationship with
Abbey broke down. Furthermore, after describing the pur-
chases made on behalf of TCI at trial, Retz stated that he did
not know where excess loan proceeds and credit card funds
purportedly used to effect these purchases went.

Retz argues that he should not be penalized for the lack of
records because all the documents were in the hands of the
Receiver or Trustee, or were readily obtainable by them. Retz
is essentially contending that the Trustee is obligated to inves-
tigate complex financial transactions and unfinished books
 IN RE RETZ 8083
without any help from the debtor. He also implies that he was
unable to obtain documents held by the Receiver and Trustee.
However, he had the right to compel production of any neces-
sary documents under Federal Rule of Bankruptcy Procedure
2004(c).

[20] Retz fails to explain how the Trustee should have
found the relevant information, if Retz himself was unable to
discover it in the 28,000-plus pages of records he provided to
the Trustee. “A petitioner cannot omit items from his sched-
ules, force the trustee and the creditors, at their peril, to guess
that he has done so—and hold them to a mythical requirement
that they search through a paperwork jungle in the hope of
finding an overlooked needle in a documentary haystack.” In
re Tully, 818 F.2d at 111. As the BAP so succinctly noted, “In
the end, there simply is no basis in the voluminous but never-
theless woefully incomplete record before the bankruptcy
court from which anyone could explain satisfactorily Retz’s
deficiency of assets to meet his liabilities. Retz certainly has
not done so.” The record amply supports the judgment entered
against Retz.

IV

The decision of the bankruptcy court and the BAP to deny
Retz’s discharge is AFFIRMED.