3 ABR 295
IN THE UNITED STATES DISTRICT
FOR THE DISTRICT OF ALASKA
_____________________________
)
JERALD C. BRISKE. )
Debtor/Appellant, )
)
v. )
) Case No. A93-055-Civil (JWS)
)
NORTH SLOPE BOROUGH, ) ORDER FROM CHAMBERS
)
Defendant/Appellee. )
_____________________________)
Debtor/appellant Jerald C. Briske appeals, pro se, the decision
of the bankruptcy court denying him discharge pursuant to 11
U.S.C. § 727(a)(2)(B) and (a)(4) in A88-000l1-HAR. Bankruptcy
Judge Herbert A. Ross also granted defendant/appellee North Slope
Borough a nondischargeable judgment against appellant in the
amount of $6,170.27 pursuant to 11 U.S.C. §523(a)(l).
(1)Appellee
North Slope Borough filed the adversary proceeding, A88-00011-004,
objecting to appellant's discharge based upon appellant's
alleged failure to
3 ABR 296
list all of his property in his Schedule of
Assets and Liabilities, failure to list post-petition income on
his monthly financial reports, payment of pre-petition creditors
outside the course of the bankruptcy and without bankruptcy
approval, and making of false statements during his examination
under Bankruptcy Rule 2004. The bankruptcy court ruled that
appellant had an interest in certain fuel tanks which he failed
to report in his schedules, sold property of the estate without
court approval, and used the proceeds for personal use, also
without court approval.
Appellant challenges these rulings. Appellant claims that the fuel tanks were property of Tanko, Inc., a company in which appellant claims he held no interest, although he and another "investor" personally guaranteed a loan from Alaska Mutual Bank (AMB) to pay the balance of the purchase price for the tanks and to provide capital for Tanko. Appellant states that AMB consolidated personal loans, the Tanko loans, and loans for BB&S Construction, Inc., appellant's construction company, on August 26, 1986. Appellant contends that he assumed that any equity in the fuel tanks belonged to BB&S, the sole investor in Tanko. AMB abandoned the tanks in August 1988 based upon the belief that they had no value. Appellant considered the tanks to be outside the property of the bankruptcy estate, and "briefly" conferred with an attorney to determine his ability to sell such property.
Appellant proceeded to enlist the aid of several people to market
and sell the fuel tanks. Each, in turn, was promised a portion of
the sales price. Appellant agreed to sell the tanks first to
Thorn Fischer for $12,000 sometime in late July or early August
1988. Appellant later received and accepted an offer from
Natchiq, Inc. in August 1988 to purchase the tanks for $60,000.
The check used to purchase the tanks was made out to "Thom A.
3 ABR 297
Fischer, P.E. Cooper Construction." From the proceeds Thom
Fisher received $17,000.(2)
SteveCooper then retained $43,000
from the proceeds, with instructions from appellant to pay White
Water Engineering (Mr. Fisher's company) $2,600 for expenses
incurred in the sale, Spenard Builders System $15,000 to settle
BB&S' account, and $5,000 to King Equipment, in which appellant's
brother holds an ownership interest. Mr. Cooper did as
instructed, and received $20,390 from the sale proceeds.
Appellant never accounted for the sale proceeds to the bankruptcy
court.
The bankruptcy court found that discharge was properly denied appellant under both 11 U.S.C. § 727(a)(2)(B) for transferring, removing, destroying, mutilating or concealing property of the estate after the date of filing the bankruptcy petition, with the intent to hinder, delay or defraud creditors. Additionally, the court held that appellant forfeited his discharge under 11 U.S.C. § 727(a)(4) for knowingly and fraudulently making a false oath or account.
The law recognizes that seldom will an individual be so candid as
to admit under oath that he or she acted with the intent to
defraud his or her creditors. A court, therefore, may infer
fraudulent intent from the circumstances attendant to the
challenged transaction. In re Devers, 759 F.2d 751,
754 (9th Cir. 1985). However, constructive intent to defraud is
insufficient to warrant a denial of discharge. Id. at 753.
On appeal this court shall disturb
3 ABR 298
the bankruptcy court's findings of fact only in
the presence of clear error. In re Adeeb, 787 F.2d 1339 (9th Cir.
1986).
Appellant's testimony, including his affidavit submitted after the trial, is simply irreconcilable with that of Steve Cooper and Thom Fischer. Judge Ross found appellant, and his explanation of the sale of the tanks, not to be credible. The record demonstrates that this determination of credibility is not clearly erroneous. Appellant denies having any interest in the tanks, yet he admitted in his deposition that he owned the tanks. Appellant also signed a UCC-l Financing Statement in his individual capacity. As noted by the bankruptcy court, AMB, the secured creditor who held the security interest in the tanks moved for relief from stay within appellant's bankruptcy case and subsequently released the tanks to appellant personally. Appellant points to no evidence to contradict the bankruptcy court's finding that appellant held an interest in the tanks, much less demonstrate that this finding is clearly erroneous.
Equally important and uncontradicted is the distribution of the sale proceeds. At appellants instruction, Thom Fischer received $5,000 and Steve Cooper received $20,390 for "lending" their names to the sale. Neither appellant, nor the other recipients of the sale proceeds, have been able to adequately explain what service they provided to support receipt of the sales proceeds. The bankruptcy court concluded that appellant used property of the estate to favor his friends and business associates over the creditors of his estate. Appellant again fails to point to any evidence to demonstrate that these facts, and the inference of fraudulent intent derived from them, are clearly erroneous.
3 ABR 299
Appellant contends that his reliance on his attorney's advice absolves him of any fraudulent intent and, thus, the court improperly concluded that he acted with an intent to defraud his creditors. As a general proposition, one who acts upon the advice of his attorney does not have the requisite intent to hinder or delay a creditor. In re Adeeb, 787 F.2d at 1343. However, "the debtor's reliance must be in good faith." Id.
A closer examination of appellant's argument reveals that this argument is without merit. Appellant has stated that his counsel advised him to place the tanks into bankruptcy and that if they were not part of the bankruptcy estate then funds received from their sale would not be subject to bankruptcy control. However, the tanks were part of the bankruptcy estate by virtue of appellant's ownership interest in them. 11 U.S.C. § 54 1(a). Upon sale of the property of the estate, the proceeds from that sale also became property of the bankruptcy estate. 11 U.S.C. § 541(a)(7). The record on appeal does not show that appellant informed his attorney about his interest in the tanks. Reliance upon legal advice obtained based on partial disclosure of the relevant facts does not preclude a finding of actual intent to hinder or delay creditors. See In re Mascolo, 505 F.2d 274, 276 (1st Cir. 1974) ("an explanation by a bankrupt that he had acted upon advice of counsel who in turn was fully aware of all the relevant facts generally rebuts an inference of fraud."). Indeed, the failure to disclose all the relevant facts to the attorney may be evidence of "the very intent penalized" by §§ 727(a)(2)(B) and (a)(4). In re Adeeb, 787 F.2d at 1343.
The record below supports the bankruptcy court's decision denying
appellant discharge under l1 U.S.C. §§ 727(a)(2)(B) and (a)(4).
The evidence supports the findings that appellant knew he owned
the tanks, failed to report the income derived from the sale
3 ABR 300
of the tanks, disbursed the proceeds to associates without
bankruptcy court approval, and then declined to disclose those
facts at his Rule 2004 examination.
Appellant raises a number of procedural issues relating to the bankruptcy court's ability to deny him a discharge pursuant to 11 U.S.C. §§ 727(a)(2)(B) and (a)(4). The court finds these arguments to be without merit.
IT IS THEREFORE ORDERED THAT:
The decision denying appellant Jerald C. Briske a discharge in bankruptcy pursuant to 11 U.S.C. §§ 727(a)(2)(B) and (a)(4) is AFFIRMED.
| John W. Sedwick United States District Judge |
3 ABR 295
1. Appellant does not challenge this ruling on
appeal.
3 ABR 297
2. Appellant admits that Mr. Fischer issued him
a check for the original purchase price of the tanks, $12,000. Appellant's
latest testimony is that he never accepted the check. At his
deposition appellant testified that Thom Fischer owed him
$12,000 for the tanks, though he had not been paid yet, and
therefore, he had not reported it. In either case, Mr. Fischer
retained not less than $5,000.