Lincoln Savings Bank v. Freese (In re Freese)
- Citation:
- United States Bankruptcy Panel for the Eighth Circuit, No. 11-6055
- Tag(s):
-
- Ruling:
- The BAP affirmed the decision of the bankruptcy court denying the debtor's discharge under Section 727(a)(4)(A), based on the finding that the debtor knowingly omitted material information from his Schedules and Statement of Financial Affairs.
- Procedural context:
- Debtor appealed from the ruling of the bankruptcy court denying his discharge, pursuant to Section 727(a)(4)(A).
- Facts:
- The debtor filed a voluntary petition for relief under Chapter 7 and, under oath, signed his Schedules and Statement of Financial Affairs ("Statement") which were never amended. One of the debtor's secured lenders (the "Bank") brought an action seeking to deny the debtor's discharge, pursuant to Section 727(a)(4)(A), based on the making of a false oath in connection with numerous inaccurate statements made in his Schedules and Statement. In summary, the Bank produced evidence that the debtor failed to disclose and failed to satisfactorily explain the omissions of: (1) the existence of the debtor's livestock business; (2) the gross income from his livestock business; (3) income from 2007; (4) transfers of certain equipment which constituted part of the bank's collateral; and (5) co-ownership of the car his wife drove. To establish a false oath under Section 727(a)(4)(A), the court noted that the Bank must prove each of the following elements by a preponderance of the evidence: (1) debtor made a statement under oath; (2) the statement was false; (3) debtor knew the statement was false; (4) debtor made the statement with fraudulent intent; and (5) the statement related materially to the debtor's bankruptcy case. Proof of the intent, the court stated, can be made by circumstantial evidence and a statement made with reckless indifference to the truth is treated as if it is intentionally false. The debtor insisted that his answers were not false based on his interpretation of the questions. He further argued that he did not understand what to disclose on his Schedules and Statement, but tried his best and believed that he provided "completely understandable" explanations regarding the omissions and that any omissions were merely mistakes. He also submitted that any omissions were immaterial.
The bankruptcy court had noted that some of the reasons given by the debtor were simply not the law, such as his argument that his failure to disclose gross income from his livestock business was excused by the fact that the operation did not generate a profit. Agreeing with the bankruptcy court, the BAP rejected the debtor's attempt to have the court adopt a subjective standard that would allow each individual debtor to make their own determination of what is meant by the questions on the Schedules and Statement and make disclosures accordingly. Such a subjective standard is not the law. Finally, the BAP agreed that the debtor's omissions were material, emphasizing that the value of the undisclosed asset does not determine whether the subject matter of the false oath is material and failure to disclose an asset with a minimal value may be material. Even if discovery of the debtor's property interests results in no recovery for his estate, the BAP agreed that the omissions in this case were dircectly related to the debtor's business and his assets, defining them as "material" for purposes of Section 727(a)(4)(A).
- Judge(s):
- Schermer, Venters, and Saladino.
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