Last Class This Friday – Guest Speaker

We will have our final class this Friday.   I am going to skip the section on chapter 13 so you do not need to read the cases previously assigned.

Bankruptcy Judge Thomas Donovan (Ret.) is going to come by and visit.  Judge Donovan was the trial judge in the Beverly case so we can discuss that with him.  Remember he ruled in favor of the debtor but was reversed by the court of appeals.

Judge Donovan also argued (as a young lawyer) a case (on behalf of the trustee!) at the Supreme Court in 1966 called Bank of Marin v. EnglandI would like you to read the opinion in that case which is here.   Especially the dissent by Justice Harlan which agreed with Judge Donovan.

Judge Donovan was recently overruled by the Supreme Court in Law v. SiegelThe opinion in that case is here.  It deals with taking away a homestead exemption based on the debtor being a really bad guy.

Finally, Judge Donovan recently ruled on a case involving Section 727, whether the discharge should be denied.  We can talk to him about that.  My brief is below.   

United States Trustee v. Pynn (In re Pynn) 546 B.R. 425 (Bkrtcy, C. D. Cal. March, 2016) Donovan, J.

Issue:   Did the debtor here undervalue certain assets on his schedules sufficient  to justify denial of the discharge?

Holding:   Yes, the debtor “intentionally undervalued the … property, knowingly and fraudulently, with the intent to deceive his creditors.”

Judge Thomas Donovan

This is a chapter 7.  The Debtor listed a 1966 Porsche 911 with a value of $5,000 and multiple guitars, valued at $2,750 and bicycles valued at $2,600.   About 30 days later, a creditor had these properties appraised.  “According to the appraisal, the Porsche was in very clean condition with a few minor paint chips and minor upholstery damage and had a value between $20,000 and $45,000 . . . [the appraiser] valued Debtor’s bicycles at $7,710 and his guitars at $6,200.”  At the 341(a), “Debtor testified that $5,000 is what he paid for [the Porsche] and [that’s] ‘what it’s really worth to me at this point, adding, ‘. . . I figured I could just roll it out in the driveway, put a sign [on] it and [it was] what I could sell it for in a heartbeat.'”  At the 341, he testified that “the bicycles would sell for between $5,350 to $7,450 on eBay . . . [and] the guitars, if sold on eBay, would sell for between $5,500 to $6,400.”  He later amended his schedule B “to add the items that he failed to list previously, but Debtor left the values of his guitars, bicycles and Porsche unchanged.”  The chapter 7 trustee sold the Porsche for $83,000 to a third party and the bicycles to the debtor for $5,450 and the guitars and other musical equipment to the debtor for $3,900.

After trial, the court found that the debtor “intentionally undervalued the above mentioned property, knowingly and fraudulently, with the intent to deceive his creditors.  In doing so, Debtor made false oaths in his schedules in violation of 11 U.S.C. § 727(a)(4)(A).  It is inconceivable that Debtor did not know the true (or at least more accurate) values for his assets when he signed his schedules under oath.”  The debtor testified at trial that

“he was a ‘hobbyist’ and was ‘meticulous’ about his collections.  He testified he had been collecting, riding and enjoying bikes for over 30 years.  Debtor was an avid eBay user and had extensive experience purchasing items on eBay.  Debtor’s receipts show that Debtor had made numerous purchases on eBay.  Debtor kept careful records of his bicycles and guitars at the time of his purchases and prepared detailed and comprehensive itemizations listing not just the bicycles and guitars but many of their component parts.  He testified at trial that he attended Porsche car shows in 2004 and 2005.  Debtor admitted at trial that he ‘might have’ looked up the Porsche’s value on eBay at some point to ascertain its value.  The evidence persuades the court that Debtor knew that the true (or at least more accurate) values of his assets listed in his schedules were significantly higher than stated; he consciously chose not to list values more closely related to their true market value.”

“Further evidence of Debtor’s intent to deceive was the fact that he valued his other vehicle, a 2008 Honda Fit, at fair market value, not a quick sale, liquidation price.”  “Debtor’s failure to amend his schedules promptly and accurately upon noting the discrepancies supports the court’s inference that Debtor acted with wrongful intent, knowingly and fraudulently.”

Note:  The judgment was not appealed.

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