Graham Mortgage Corp. v. Goff (In re Goff)

Citation:
Graham Mortgage Corp. v. Goff (In re Goff), Case No.: 13-41148 (5ht Cir. Aug. 22, 2014)
Tag(s):
Ruling:
Fifth Circuit affirmed denial of Debtor's discharge pursuant to11 U.S.C. §727(a)(3) for debtor's failure to maintain adequate books and records without justification, where the only evidence the debtor submitted in support of his position was his own testimony, and where the documents he did produce "contained material gaps."
Procedural context:
Appeal from the U.S. District Court for the Eastern District of Texas affirming Bankruptcy Court's denial of Debtor's chapter 7 discharge pursuant to to11 U.S.C. §727(a)(3).
Facts:
The debtor, Tommy Goff (the “Debtor” or “Mr. Goff”) is a sophisticated businessman engaged in the business of real estate development in Texas. He was denied a chapter 7 discharge in his personal bankruptcy case under 11 U.S.C. §727(a)(3) for failure to maintain or preserve adequate books and records without justification. Graham Mortgage Corp. (“Graham”) filed an adversary proceeding against Mr. Goff seeking denial of his chapter discharge for failure to maintain adequate books and records without justification among other things. Upon completion of discovery, Graham obtained partial summary judgment against Mr. Goff on the count alleging that Mr. Graham failed to maintain adequate books and records from which his financial position could be traced. A bench trial was held to determine whether Mr. Goff’s failure to do so was justifiable. The bankruptcy court found that Mr. Goff’s testimony lacked credibility, and, that his failure to maintain his books and records was not justified. Accordingly, the bankruptcy court denied Mr. Goff’s chapter 7 discharge. Mr. Goff appealed (i) the grant of partial summary judgment; (ii) the denial of the his motion for rehearing on the partial summary judgment; and (iii) the final judgment holding that his failure to maintain adequate books and records was not justified and denying entry of his discharge. The District Court affirmed all three decisions of the Bankruptcy Court. The Debtor again appealed and the Fifth Circuit upheld all three decisions of the lower court. Noting that there is “no set standard” for determining whether a debtor’s failure to maintain adequate books and records may be justified, the Fifth Circuit held that “[t]he trier of fact must decide based on the circumstances of each case,” and that “[t]he sophistication of the debtor and the scale of the debtor’s business are critical factors in this analysis.” Further “[b]ecause this issue turns largely on the debtor’s credibility, the bankruptcy judge’s findings of credibility, or lack thereof, is reviewed with particular deference.” In re Goff, at p. 10. Although the Debtor argued that he “made a diligent effort to locate the records that he had” and “that he did not intentionally destroy evidence,” the only “evidence” the Debtor offered in support of his position was his own testimony, which the bankruptcy court found lacked credibility. Id. at p. 10. The Debtor argued that the facts in his case were analogous to In re Morgan, 363 B.R. 507, 536 (Bankr. N.D. Tex. 2007), where the court found that the debtor’s failure to maintain records was justifiable, since both involved several office moves and lost computers. The Fifth Circuit disagreed and “easily distinguished” the Morgan case, noting that “the Morgan court found that the debtor’s testimony was credible and noted that the debtor provided documentary evidence which was ‘quite voluminous,’” while in Mr. Goff’s case, “not only did the bankruptcy court find that Goff’s testimony was not credible, the uncontested material facts on summary judgment established that the records Goff submitted had material gaps, even failing to identify the source of funds used to purchase certain real property.”
Judge(s):
DAVIS, SMITH, and CLEMENT.

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