Opinion
NOT FOR PUBLICATION
Argued and Submitted at Pasadena, California: March 18, 2009
Appeal from the United States Bankruptcy Court for the Central District of California. Bk. No. LA 07-13315-EC, Adv. No. LA 07-01567-EC. Hon. Ellen Carroll, Bankruptcy Judge, Presiding.
Before: MONTALI, MARKELL and HOLLOWELL, Bankruptcy Judges.
MEMORANDUM
Appellant-Creditors, James Ward and Gloria Ward (" Wards"), appeal a judgment in favor of Appellee-Debtor, Joseph Thompson, Jr. (" Thompson") on their objection to discharge under section 727. Because the bankruptcy court did not commit clear error on this record, we AFFIRM.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037, as enacted and promulgated after the effective date of The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, 119 Stat. 23.
I. FACTS
Prepetition Facts
Thompson and his wife (collectively " the Thompsons") purchased a residence in Los Angeles on August 22, 2000, with a loan from World Savings Bank (" World Savings") for $144, 000.00. A grant deed was recorded on that same date. Thereafter, the Thompsons refinanced the World Savings loan at least once, and also took out a $60, 000.00 line of credit with World Savings against the residence.
On March 2, 2006, in connection with an October 31, 2005, arbitration award in favor of the Wards, the state court entered a judgment in the Wards' favor for $40, 244.24, together with interest at the legal rate of 10% per annum calculated from October 31, 2005, and costs of $355.00. The Wards recorded the judgment with the Los Angeles County Recorder's Office on June 14, 2006.
The Wards conducted two judgment debtor examinations of Thompson on February 15, 2007, and April 25, 2007. At the February 15 examination, Thompson testified that the amount of debt secured by the residence was approximately $260, 000.00.
On or around March 7, 2007, the Thompsons refinanced again, this time with Countrywide Home Loans, Inc. (" Countrywide"), increasing the secured debt to $410, 000.00. The Countrywide refinance effectively reduced the amount of the Thompsons' equity in the residence from $240, 000.00 to $90, 000.00. After Countrywide paid various judgment liens against the residence, approximately $105, 000.00 to $110, 000.00 in cash proceeds went to the Thompsons, $52, 500.00 to $55, 000.00 of which went to Thompson as joint tenant. The Wards were not paid out of the proceeds because apparently the recording of their judgment was defective under California law. Countrywide recorded a deed of trust in connection with the refinance on March 15, 2007.
At the April 25 debtor's examination, held 48 days after the Countrywide refinance, Thompson testified that approximately in 2004 he took out a line of credit, or what Wards' counsel referred to as the " second mortgage, " with World Savings.
Postpetition Facts
Also on April 25, 2007, Thompson filed a voluntary petition for relief under chapter 7. On that date, the value of the residence was $500, 000.00 as noted in Thompson's Schedule A. In his Schedule D, Thompson listed Countrywide with a secured claim of $410, 000.00 and a lien incurred date of 2004, although the actual date was 2007.
On June 20, 2007, Thompson filed Amended Schedules A and D. The Amended Schedule D still reflected the same lien amount and incorrect date for Countrywide, and also showed an additional secured creditor, Shirley Redmon (" Redmon"), with a total claim of $150, 000.00 incurred in 2006, with $60, 000.00 being unsecured and $90, 000.00 secured. Redmon is Thompson's sister who lent him money over the years to assist him financially in his business.
The Wards filed a complaint objecting to Thompson's discharge on July 24, 2007, alleging causes of action under sections 727(a)(2)(A), (a)(3), (a)(4), and (a)(5). The initial Joint Pre-trial Order was filed on March 7, 2008, with a final Joint Pre-trial Order (" PTO") entered on September 29, 2008. In the PTO's " Issues of Law" portion, the only matters remaining to be litigated were the Wards' claims under sections 727(a)(2)(A) and 727(a)(5). However, the " Issues of Fact" portion appears to include a claim under section 727(a)(4)(B). The PTO makes no mention of, or implied reference to, a claim under section 727(a)(3).
Although the Wards' Third Claim for Relief is titled as " 11 U.S.C. § 727(a)(4), " the statutory language quoted within clearly refers only to subparagraph (a)(4)(B):
Section 727(a), in relevant part, provides: The court shall grant the debtor a discharge, unless-
Despite the PTO, in their trial brief submitted on September 19, 2008, the Wards once again asserted objection to discharge claims under sections 727(a)(2)(A), (a)(3), (a)(4)(B), and (a)(5). To support their claim under section 727(a)(2)(A), the Wards argued that Thompson, with the intent to hinder, delay, or defraud the chapter 7 trustee or his creditors, intentionally misrepresented the Countrywide refinance date as 2004 instead of the actual date of 2007, thereby effectively concealing the recent $150, 000.00 in proceeds and keeping such funds out of reach of the trustee or Thompson's creditors. In other words, the Wards alleged that had Thompson correctly stated the refinance date as 2007, the trustee would have been placed on notice of the recent refinance and proceeds and had the opportunity to either recover them for the benefit of creditors or add them to Thompson's estate for distribution to creditors. Instead, Thompson's misstatement, they contended, led the trustee to erroneously conclude Thompson's was a " no asset" case. As to the section 727(a)(4)(B) claim, the Wards asserted that Redmon was not a secured creditor, she had no such lien recorded against Thompson's residence for $90, 000.00, and therefore Thompson made a false claim by listing her as such on his Amended Schedule D. Finally, the Wards argued that Thompson should be denied a discharge under section 727(a)(5) because he failed to satisfactorily explain the disposition of the $90, 000.00 surplus that existed after the refinance but prior to his chapter 7 filing, a time frame of 48 days.
Although a claim under section 727(a)(3) reappeared in their trial brief, it was not argued in the brief, not litigated, and not determined at trial. In any event, this claim is not at issue on appeal.
Their trial brief expressly says section 727(a)(4)(B) and quotes that section's language.
The Wards have asserted Thompson's refinance proceeds in several different amounts. In pretrial pleadings they alleged that Thompson had $150, 000.00 or $90, 000.00. On appeal, they assert the amounts of $150, 000.00 or $110, 000.00 or $90, 000.00. Thompson testified at trial that he and his wife received $105, 000.00 in refinance proceeds, with his share being $52, 500.00. Therefore, we are not clear as to the amount the Wards assert was unsatisfactorily explained.
See footnote 7.
A trial was held on September 29, 2008. Thompson appeared pro se and was the only testifying witness. Apparently, the chapter 7 trustee was not asked to and did not appear. Regarding Countrywide's lien date, Thompson admitted that the refinance for $410, 000.00 occurred on March 7, 2007, and asserted that listing the date as 2004 in his Schedule D and Amended Schedule D was a typographical error. As to Redmon's $150, 000.00 claim, Thompson testified that at one point he gave her a " written claim to file" for the $90, 000.00 portion, which appeared to be a deed of trust given in exchange for monies she had lent him over a period of eight years; there was no " written note." Finally, Thompson testified that he spent his $52, 500.00 share of the Countrywide refinance proceeds on three specific individuals who performed work on the residence, and on the mortgage, and the remainder went to pay other bills since he was unemployed for a period of time.
At the end of trial, the bankruptcy court issued an oral ruling finding that the Wards failed to meet their burden of proof on all claims. It entered a judgment in favor of Thompson on October 23, 2008. This timely appeal followed.
The Wards filed a premature Notice of Appeal on October 9, 2008, after the oral ruling on September 29, 2008. A final judgment was entered on October 23, 2008, and the Wards filed a timely Amended Notice of Appeal on October 28, 2008. Filing the Amended Notice of Appeal was not necessary because the premature Notice of Appeal was adequate under Rule 8002(a).
On March 17, 2009, the day before oral argument, counsel for the Wards submitted a letter to this Panel advising us of a previously undiscovered letter from Thompson to the chapter 7 trustee, which stated that the Countywide refinance date was actually 2007, not 2004, and the date of 2004 on his Schedule D was a typo (the " Thompson Letter"). Counsel did not learn of the Thompson Letter until after filing the Wards' opening brief, and felt an ethical obligation to alert the Panel of this newly discovered evidence. However, at oral argument, he requested that we not consider it.
II. ISSUES
1. Did the bankruptcy court err in determining that Thompson lacked the requisite intent to hinder, delay, or defraud the trustee or his creditors under section 727(a)(2)(A)?2. Did the bankruptcy court err in determining that Thompson satisfactorily explained the disposition of the Countrywide refinance proceeds under section 727(a)(5)?3. Did the bankruptcy court err in determining that Thompson did not knowingly and fraudulently present a false claim in connection with his bankruptcy case under section 727(a)(4)(B)?
III. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and 28 U.S.C. § 157(b)(2)(J). We have jurisdiction under 28 U.S.C. § 158.
IV. STANDARD OF REVIEW
We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Hansen v. Moore (In re Hansen), 368 B.R. 868, 874-75 (9th Cir. BAP 2007). A factual finding is clearly erroneous if the appellate court, after reviewing the record, has a definite conviction that a mistake has been made. Anderson v. Bessemer City, 470 U.S. 564, 573-75, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). We give findings of fact based on credibility particular deference. See Rule 8013 (on appeal, " due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses"). If two views of the evidence are possible, the trial judge's choice between them cannot be clearly erroneous. Anderson, 470 U.S. at 574.
V. DISCUSSION
A claim for denial of a discharge under section 727 is construed liberally in favor of the discharge and strictly against a person objecting to the discharge. First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339, 1342 (9th Cir. 1986). A creditor who asks the court to deny a debtor a discharge bears the burden of proving each of the elements of the applicable denial-of-discharge provision. Watman v. Groman (In re Watman), 458 F.3d 26, 32 (1st Cir. 2006); Cadle Co. v. Pratt (In re Pratt), 411 F.3d 561, 565 (5th Cir. 2005); Rule 4005.
A. The Bankruptcy Court Did Not Clearly Err When It Found That Thompson Lacked The Requisite Intent Under Section 727(a)(2)(A).
The Wards argue that the bankruptcy court applied an incorrect legal standard of materiality when it determined Thompson's misstatement of the refinance date was not evidence of an intent to " hinder, delay, or defraud either a creditor or an officer of the estate" because had the trustee ordered a preliminary title report he would have discovered that the refinance occurred in 2007, not 2004. As a result, this incorrect standard caused the bankruptcy court to erroneously conclude the Wards did not meet their burden of proof with regard to Thompson's actual intent.
The court must deny a discharge if " the debtor, with intent to hinder, delay, or defraud a creditor . . . has . . . concealed . . . property of the debtor, within one year before the date of the filing of the petition . . . ." 11 U.S.C. § 727(a)(2)(A). There is no dispute that the Thompsons refinanced with Countrywide within one year before the date of petition, and that at least a portion of the proceeds belonged to Thompson. Thus, the question is whether Thompson concealed the proceeds when he listed the Countrywide refinance date as 2004 instead of 2007 in his Schedule D and Amended Schedule D, and if so, that he did so with the intent to hinder, delay, or defraud the chapter 7 trustee or Thompson's creditors.
We fail to see how misstating a date, or even concealing the proper date as the Wards suggest, equates to a " concealment" of property under section 727(a)(2)(A). Classic examples of concealment include: concealing a beneficial interest in real property equity ( Hughes v. Lawson (In re Lawson), 122 F.3d 1237 (9th Cir. 1997)); transferring a deed of trust but concealing retention of a right to place a superior encumbrance on the property ( Id .); and placing title to property in another's name while retaining a beneficial interest ( Village of San Jose v. McWilliams, 284 F.3d 785 (7th Cir. 2002)).
Here, although Thompson misstated the date, he never concealed the secured debt to Countrywide; it was on his Schedule D and Amended Schedule D for the trustee and any creditors to see and investigate. The bankruptcy court correctly recognized this fact when it noted that an experienced trustee would have ordered a title report and discovered the incorrect date. In other words, misstating a date for something that is a matter of public record does not equate to a concealment under section 727(a)(2)(A). Further, the Wards focus on only part of the bankruptcy court's findings. It also found:
" With regard to 727(a)(2), first of all, I don't think there has been any evidence that there was an intent on the part of the Debtor to hinder, delay or defraud either a creditor or an officer of the estate. Sloppiness, yes. Intent to defraud, no."
In addition to determining that misstating a refinance date does not give rise to a claim under section 727(a)(2)(A), the bankruptcy court independently found that Thompson was sloppy about statements made in his Schedule D and Amended Schedule D, but such statements did not rise to a level of actual intent to defraud.
A court's finding on whether a debtor acted with intent to hinder, delay or defraud his creditors is reviewed for clear error. Lawson, 122 F.3d at 1240. We are not convinced on this record that the bankruptcy court made a mistake in its findings, and thus it did not clearly err when it found in favor of Thompson under section 727(a)(2)(A).
B. The Bankruptcy Court Did Not Clearly Err When It Found That Thompson Satisfactorily Explained The Disposition Of The Countrywide Proceeds Under Section 727(a)(5).
The Wards argue that the bankruptcy court applied an incorrect legal standard of materiality under section 727(a)(5), which led it to erroneously conclude that the Wards did not meet their burden of proof. Overall, they argue that Thompson failed to account for the Countrywide proceeds. In particular, they question his testimony that some money went to pay the mortgage even though the refinance had just occurred. Consequently, the Wards argue that the deference given to the trial court on credibility of witnesses should not apply.
" Section 727(a)(5) is broadly drawn and gives the bankruptcy court broad power to decline to grant a discharge in bankruptcy when the debtor does not adequately explain a shortage, loss, or disappearance of assets." Aoki v. Atto Corp. (In re Aoki), 323 B.R. 803, 817 (1st Cir. BAP 2005). See In re D'Agnese, 86 F.3d 732, 734 (7th Cir. 1996)(citing First Fed. Life Ins. Co. v. Martin (In re Martin), 698 F.2d 883, 886 (7th Cir. 1983)).
The objecting party bears the initial burden of proof under section 727(a)(5). Once the objecting party has met this initial burden by producing evidence establishing the basis for the objection, it then shifts to the debtor to provide a satisfactory explanation for the disposition of the assets. Chalik v. Moorefield (In re Chalik), 748 F.2d 616, 619 (11th Cir. 1984); Aoki, 323 B.R. at 817.
Section 727(a)(5) does not require that the loss or other disposition of the asset be proper; it requires only that the explanation satisfactorily describe or account for the disposition. See Rawlings v. Tapp (In re Tapp), 339 B.R. 420, 427 (Bankr. W.D. Ky. 2006), Peoples State Bank of Mazeppa, Mn. v. Drenckhahn (In re Drenckhahn), 77 B.R. 697, 709 (Bankr. D. Minn. 1987)(both citing Great Am. Ins. Co. v. Nye (In re Nye), 64 B.R. 759, 762 (Bankr. E.D. N.C. 1986)). However, vague, indefinite, and uncorroborated explanations are unsatisfactory. Bell v. Stuerke (In re Stuerke), 61 B.R. 623, 626 (9th Cir. BAP 1986); Aoki, 323 B.R. at 817.
Whether a debtor satisfactorily explains a loss of assets is a question of fact. Stuerke, 61 B.R. at 626; Chalik, 748 F.2d at 619. The bankruptcy court has a great deal of discretion in determining whether an explanation is satisfactory so as to defeat the objection. Aoki, 323 B.R. at 817. See D'Agnese, 86 F.3d at 734 (citing Martin, 698 F.2d at 886)(same).
At trial, Thompson's testimony as to how he spent his share of the Countrywide refinance proceeds went as follows:
And what bills did you pay? Thompson: I paid - well, I had a list of bills that my attorney helped with me, but I don't have them with me right now. I had work that was done on my house that was ongoing at the time, my rear garage, materials, labor, et cetera.
And who was that to?
Thompson: Several people.
Do you recall any of their names?
Thompson: Henry Smith, William Bryant, Fred Gain.
Did all of the 52, 500 go to them?
Thompson: Well, no, some of it I also utilized, because I was out of work, to help pay my mortgage until I got work.
As to the section 727(a)(5) claim, the bankruptcy court stated:
[T]here's been pretty clear testimony here this morning what amount of money the Debtor received from the Countrywide refinance and what he did with that money. He paid bills. He was out of work. He made mortgage payments. So, I don't think there has been a failure to explain what happened to the proceeds of the refinance.
Again, the arguments asserted by the Wards are problematic. First, no standard of materiality applies to section 727(a)(5). We found no authority for this proposition, and the Wards cited none. In fact, they cited no legal authority whatsoever to support their argument under section 727(a)(5). Under section 727(a)(5), presuming the objecting party has met its initial burden of proof, either the debtor explains the disposition of the asset to the court's satisfaction, or the debtor does not; no " materiality" is involved. Second, the debtor's disposition of the asset need not be proper; the debtor need only describe or account for the asset's disposition to the court's satisfaction. Here, the bankruptcy court believed that Thompson adequately explained, to its satisfaction, of how he spent the proceeds. Whether the expenditures could be subject to a preference or some other action is irrelevant on a claim under section 727(a)(5).
Although the Wards appear to rest this claim on Thompson's " dishonest" testimony about making mortgage payments that could not have existed, even if propriety of the expenditure could be considered, it seems plausible that a mortgage payment came due in the 48 days between the refinance and Thompson's filing of his bankruptcy petition. Consequently, we reject the Wards' argument that Thompson's allegedly dishonest testimony should defeat the deference given to the trial court on credibility of witnesses.
We will not overturn a bankruptcy court's decision to grant or deny a discharge under section 727(a)(5) unless it is clearly erroneous. Aoki, 323 B.R. at 816; D'Agnese, 86 F.3d at 734. We see no clear error here. Thompson explained in sufficient detail how he spent the proceeds, and, more importantly, he did so to the bankruptcy court's satisfaction. We therefore conclude that it did not err in finding that Thompson offered a satisfactory explanation for the disposition of the Countrywide refinance proceeds under section 727(a)(5).
C. The Bankruptcy Court Did Not Clearly Err Under Sections 727(a)(4)(A), (a)(4)(B), and (a)(4)(D).
In their " Issues on Appeal, " the Wards argue that the bankruptcy court applied an incorrect legal standard of materiality under section 727(a)(4)(A), which led it to erroneously conclude that the Wards did not meet their burden of proof with regard to Thompson's intent. Specifically, they assert Thompson's testimony that a " writing" existed between Thompson and Redmon as to her secured claim, and his later contradictory testimony that there was no such writing, evidences that Thompson presented a false claim. Consequently, they say, he should not have been granted a discharge.
The Wards' stated " Issues on Appeal" says section 727(a)(4)(A), but we assume they meant (a)(4)(B) since subparagraph (a)(4)(A) was never pled or litigated at trial. However, the bankruptcy court for whatever reason made findings under subparagraphs (a)(4)(A) and (a)(4)(D), in addition to (a)(4)(B). The Wards have cited and discussed section 727(a)(4)(A) within their brief, so we will assume they are appealing the rejection of both the subparagraph (a)(4)(A) and (a)(4)(B) claims.
Before we address the merits of their argument, we must clear up several procedural irregularities that occurred in this case.
1. The Bankruptcy Court's Findings Under Section 727(a)(4)(A) And Section 727(a)(4)(D), And Wards' Appeal On Section 727(a)(4)(A).
First, the Wards never pled or litigated a claim under section 727(a)(4)(A) - debtor knowingly and fraudulently made a false oath or account. Their complaint, the PTO, and their trial brief asserted a claim only under subparagraph (a)(4)(B) - false claim. However, as noted above, their stated " Issues on Appeal" refer to subparagraph (a)(4)(A). And, within their opening brief they cite legal authority and assert arguments under both subparagraphs (a)(4)(A) and (a)(4)(B).
In closing argument at trial, counsel for the Wards argued that the evidence submitted supported a denial of discharge under " (a)(4), " no subparagraph mentioned, in addition to their claims under sections 727(a)(2)(A) and 727(a)(5). Upon this statement, the bankruptcy court interrupted:
" The pretrial order that was submitted and has been entered only makes a claim under (a)(2) and (a)(5)."
Nonetheless, counsel proceeded to discuss what the Wards had proven under all three sections - 727(a)(2), 727(a)(4), and 727(a)(5). At the end of counsel's argument, the court again stated:
All right, let me first note that the pretrial order that has been entered in this adversary proceeding states that, " The order shall supercede the pleadings and govern the course of the trial of this cause." As I noted a moment ago, the only issues of law that the pretrial order states remain to be litigated are issues regarding whether or not the Debtor's discharge should be denied under Section 727(a)(2) and Section 727(a)(5).
Despite these statements, the bankruptcy court proceeded to make findings under sections 727(a)(4)(A), 727(a)(4)(B), and 727(a)(4)(D).
Fed.R.Civ.P. 16, as incorporated by Rule 7016, governs pretrial orders (once the [pretrial] order is entered it controls the scope and course of the trial). Generally, a claim or issue omitted from the pretrial order is deemed abandoned or waived. Valley Ranch Dev. Co., Ltd. v. F.D.I.C., 960 F.2d 550, 554 (5th Cir. 1992). However, a pretrial order should be liberally construed to permit any issues at trial that are embraced within its language, even issues only implicitly included. DP Aviation v. Smiths Ind. Aerospace and Defense Sys. Ltd., 268 F.3d 829, 841 (9th Cir. 2001). Further, an issue not raised in the pretrial order but nonetheless litigated at trial deems the order amended by the consent of the parties. Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 515 n.9 (9th Cir. 1985).
When the bankruptcy court recognized that according to the PTO the only " Issues of Law" remaining to be litigated were those under sections 727(a)(2) and 727(a)(5), technically this was correct. However, in the PTO's remaining " Issues of Fact" to be litigated it states:
" Whether, in his Chapter 7 Petition, Joseph Thompson, Jr. falsely claimed that Shirley Redmon held a lien in the amount $150, 000.00 against the subject property."
Therefore, the Wards' section 727(a)(4)(B) claim was implicitly included in the PTO. Furthermore, questions regarding it were asked at trial with no objection from Thompson. Thus, it was proper for the bankruptcy court to consider it. However, it went beyond this:
" And there was argument this morning that there should also be a claim under Section 727(a)(4) which provides that the Debtor's discharge should be denied if the Debtor knowingly and fraudulently made a false oath or account . . . ."
" And I don't also believe there's been any evidence that the Debtor knowingly and fraudulently made a false oath or account. The mortgage to Countrywide is listed in the schedules. Yes, the date is wrong. Is that sloppy? Yes. Is it fraudulent? I don't think so."
We are unclear why the bankruptcy court made findings under section 727(a)(4)(A) when no such claim was ever pled by the Wards or litigated at trial. When it decided to amend the PTO and make findings under section 727(a)(4), to which questions were posed to Thompson with no objection, it only needed to make findings under subparagraph (a)(4)(B) since that was the only section 727(a)(4) claim ever raised. However, to the extent it did make findings under section 727(a)(4)(A), such error was harmless.
Now, turning to the merits of the Wards' claim under section 727(a)(4)(A), generally we will not consider issues raised for the first time on appeal. Franchise Tax Bd. v. Roberts (In re Roberts), 175 B.R. 339, 345 (9th Cir. BAP 1994). However, the Wards are not appealing the fact that the bankruptcy court erred by making a finding under subparagraph (a)(4)(A), but rather that it did so incorrectly. In any event, even assuming the Wards can raise this issue on appeal since the bankruptcy court addressed it, we reject their argument. First, they provide no explanation as to how the bankruptcy court applied an incorrect legal standard of materiality. Further, whether a debtor knowingly and fraudulently made a false oath is a finding of fact, and we see no clear error on this record. Thompson disclosed the Countrywide refinance with an incorrect date that he testified was a typographical error. Thompson was found to be sloppy, but his sloppiness did not rise to the level of fraud.
As noted above, the bankruptcy court also made a finding under section 727(a)(4)(D):
Section 727(a)(4)(D), in relevant part, provides:
And there was argument this morning that there should also be a claim under Section 727(a)(4) which provides that the Debtor's discharge should be denied if the Debtor knowingly and fraudulently . . . withheld from an officer of the estate any recorded information, including books, documents, records, et cetera. There's been no evidence that the Debtor withheld any kind of books and records from the Trustee.
Again, we are unclear why it made this finding when no such claim was ever pled or litigated by the Wards. Further, the Wards do not raise this issue on appeal. However, to the extent the bankruptcy court made findings under section 727(a)(4)(D), such error was harmless.
2. The Bankruptcy Court Did Not Clearly Err When It Found That Thompson Did Not Present Or Use A False Claim Under Section 727(a)(4)(B).
Although section 727(a)(4)(B) was not stated explicitly in their " Issues on Appeal, " the Wards argue that Thompson's contradictory testimony regarding Redmon's secured claim evidences that he presented a false claim. Other than questioning his credibility, and a cite to section 727(a)(4)(B), they state no specific error committed by the bankruptcy court for this claim, or provide any legal standards or authority that applies to claims under section 727(a)(4)(B). For sake of argument, we will assume that when the Wards referred to section 727(a)(4)(A) in their " Issues on Appeal, " such reference was a typographical error and they meant to appeal the bankruptcy court's finding under section 727(a)(4)(B).
There is sparse case law applying section 727(a)(4)(B). The term " claim" means the right to payment or a right to an equitable remedy for breach of performance if the breach gives rise to a right to payment. Garcia v. Garcia (In re Garcia), 168 B.R. 403, 407 (D. Ariz. 1994); Flanagan v. Howard (In re Howard), 361 B.R. 20, 25 (D. N.H. 2007); M & I Heat Transfer Prods., Ltd. v. Gorchev (In re Gorchev), 275 B.R. 154, 164 (Bankr. D. Mass. 2002)(all referencing section 101(5) to interpret " claim" under section 727(a)(4)(B)).
To deny a debtor's discharge under section 727(a)(4)(B), the debtor must have presented or used inflated or fictitious claims in his bankruptcy case, with intent to defraud. Hendon v. Oody (In re Oody), 249 B.R. 482, 487 (Bankr.E.D.Tenn. 2000); Perniciaro v. Natale (In re Natale), 136 B.R. 344, 349 (Bankr. E.D. N.Y. 1992). Willful intent to defraud is a crucial element of the cause of action. Natale, 136 B.R. at 349. Omissions, misstatements or inaccuracies in bankruptcy petitions or schedules do not necessarily establish fraudulent intent. Id .
A debtor's listing of a debt to another in his schedules, when false, can constitute a proper cause of action as a presentation or use of a false claim under section 727(a)(4)(B). Keeling v. Ozey (In re Ozey), 172 B.R. 83, 91 (Bankr. N.D. Okla. 1994)(debtor's asserted existence of creditor's " secured claim" that debtor knew was false but done only to discourage inquiry by trustee was proper cause of action under section 727(a)(4)(B)); Oody, 249 B.R. at 487-89; Painewebber Inc. v. Gollomp (In re Gollomp), 198 B.R. 433, 439 (Bankr. S.D.N.Y. 1996).
As to the section 727(a)(4)(B) claim, the bankruptcy court found:
[Thompson] places on his schedules information regarding a loan from his sister, Ms. Redman [sic]. Thinks he gave her a deed of trust which he apparently did not record. So that information was out there for the Trustee to investigate. It would have been clear in a title search that there was no deed of trust recorded in favor of Ms. Redman [sic]. So I don't think there was anything fraudulent or anything being hidden here. Maybe it wasn't accurately described. Yes, it was sloppy, but I don't think that rises to the level of fraud.
Whether a debtor filed a false claim with willful intent to defraud is a question of fact. Here, the bankruptcy court found that although Thompson did not accurately describe Redmon's claim, the inaccuracy was sloppy, and it did not rise to the level of fraud. We see no error here.
Additionally, we point out that the Wards presented no evidence as to the truth or falsity of Redmon's claim against Thompson, only that he was incorrect about its secured status. We also question their contention that Thompson's testimony was contradictory. Thompson testified that he gave Redmon a written deed of trust, and then testified there was no written note. On its face, this testimony is not inconsistent. A deed of trust and a note are two separate documents. A party can give a deed a trust without giving a written note. In fact, even an oral promise to pay is not improper, which is what Thompson said occurred in this case.
We are not convinced on this record that the bankruptcy court made a mistake in its findings, and therefore conclude it did not err when it found that Thompson did not present or use a false claim under section 727(a)(4)(B).
CONCLUSION
For the foregoing reasons, we AFFIRM.
" Thompson knowingly and fraudulently presented or used a false claim in connection with the pending Chapter 7 case."
(2) the debtor, with intent to hinder, delay, or defraud a creditor or officer of the estate . . . has . . . concealed . . . (A) property of the debtor, within one year before the date of the filing of the petition; (3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained . . .; (4) the debtor knowingly and fraudulently, in or in connection with the case. . . (B) presented or used a false claim; (5) the debtor has failed to explain satisfactorily, before determination of denial of discharge . . . any loss of assets. . . .
We commend counsel for his disclosure. Leaving aside whether it would be proper to consider the Thompson Letter the day before oral argument, we conclude that it has no effect on our decision. Therefore, whether or not we consider it is a non-issue.
(4) the debtor knowingly and fraudulently, in or in connection with the case -. . . (D) withheld from an officer of the estate entitled to possession . . . any recorded information, including books, documents, records, and papers, relating to the debtor's property or financial affairs.