1.1. 11 USC § 727(a)(3)- One of the basis upon which Nationwide Insurance Company (Nationwide) seeks summary judgment⁽¹⁾ that the Adams' discharge be revoked is § 727(a)(3). The grounds for denying a discharge under that section are:

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, unless such act or failure to act was justified under all of the circumstances of the case . . .

Neither the admissions of Adams, procured by Nationwide as a discovery 6 ABR 44      sanction,⁽²⁾ nor the affidavits of Nationwide's records custodian⁽³⁾ and Peter Aschenbrenner,⁽⁴⁾ factually support its § 727(a)(3) action. The relevant facts can be summarized as follows:

• Adams had filed a prior chapter 13 which was dismissed, in which she had not scheduled Nationwide;

• Adams was sued before the present chapter 7 case in state court by Nationwide for having collected insurance proceeds for an auto accident while at the same time collecting from another insurance carrier (the facts asserted by Nationwide in support of summary judgment do not say this was fraudulent or even advise the court what type of claim it was -- no policy information or proof of loss was included in the supporting documents);

• Adams defaulted in the state court action and Nationwide got a default judgment (copies of this were not supplied, and there is no indication that a finding of fraud was made);

• Adams agreed to make repayments and started to do so;

• Adams then filed the present chapter 7 after the default judgment, again failing to give Nationwide's address, although listing its name, or to disclose her prior chapter 13; and,

• Adams' listing of Nationwide "was not calculated to give notice to Nationwide Insurance Company of the pending bankruptcy."⁽⁵⁾

The gravamen of a § 727(a)(3) offense is the failure of a debtor, without a reasonable explanation, to produce books or records to explain the debtor's financial affairs.⁽⁶⁾ Nationwide has not established that Adams destroyed, hid or falsified recorded information. Her failure to properly list Nationwide's address in the 6 ABR 45      schedules or lists does not fall under any reasonable interpretation of § 727(a)(3).

1.2. 11 USC § 727(a)(4)- Nor can summary judgment be entered on the § 727(a)(4) count. Denial of a discharge under § 727(a)(4) requires that a debtor knowingly and fraudulently made a false affidavit under oath, presented a false claim, received money or some advantage, or withheld information from an officer relating to Adams' property in connection with the case.

Nationwide has the burden of proof to prove revocation of the discharge.⁽⁷⁾

With respect to omission of creditors, Collier on Bankruptcy⁽⁸⁾ says:

The debtor is guilty of a false oath and may be denied a discharge by knowingly and fraudulently omitting the name of a creditor from this schedule. It has been suggested, however, that the inference of fraudulent intent should not be readily drawn from such an omission, because the debtor would ordinarily have little to gain from it, since the omitted claim might be excepted from discharge. However, strictly speaking, detriment to creditors is not necessary [ footnotes omitted ] .

Nationwide's evidence only shows that Adams failed to put the mailing address of Nationwide in the schedules, and that the schedules (and, the mailing matrix) were not likely to give notice of the bankruptcy to Nationwide. This does not prove the fraudulent conduct required by § 727(a)(4).⁽⁹⁾

2. DENIAL OF SUMMARY JUDGMENT FOR NONDISCHARGEABILITY UNDER 11 USC § 523(a)(3)(B)-

6 ABR 46      2.1. 11 USC § 523(a)(3)(B)-  Nationwide did not have notice of the bankruptcy because its address was not given by Adams in the lists or schedules. Because of this, Nationwide will be treated as an "omitted creditor" for the purposes of analysis.⁽¹⁰⁾

In the Adams' bankruptcy case, there was no claims bar date set and there were no distributions to creditors. In that situation, the omission of Nationwide does not bar dischargeability of Nationwide's claims, except if the debt is nondischargeable due to certain bad behavior of Adams.⁽¹¹⁾ Section 523(a)(3)(B) provides that the claim of an omitted creditor that did not have notice of the bankruptcy in time to file a timely proof of claim is the type which is nondischargeable under §§ 523(a)(2),(4), (6), or (15) and will not be discharged. Nationwide has the burden to establish the right to prevail under §§ 523(a)(2)(A)⁽¹²⁾ or (6).⁽¹³⁾

2.2. 11 USC § 523(a)(2)(A)- Nationwide's counterclaim alleges nondischargeability under § 523(a)(2)(A), obtaining property through a material misrepresentation.

None of the facts admitted as a discovery sanction against Adams⁽¹⁴⁾ establish any material misrepresentation or false oath. Nationwide makes the inference of fraud because Adams failed to list its address, but there is no proof of fraud.

6 ABR 47      Although there was a state court default judgment entered against Adams in favor of Nationwide prior to the present bankruptcy, there is no indication that a conclusive determination of fraud was made in that case. To establish its § 523(a)(2)(A) case, Nationwide has to show that Adams made a material misrepresentation with the intent to mislead Nationwide at the time she made the statement.⁽¹⁵⁾

The fact that she agreed after-the-fact, under pressure from Nationwide, to make repayments, does not fill in the evidentiary gap about what she knew when she made the insurance claim. In fact, the court has no way of knowing what she represented, because no copy of the proof of claim application or insurance policy were offered in evidence.

I do not know whether the Nationwide proof of claim form or the policy itself spells out in a conspicuous way that there is coverage under the Nationwide policy only if there is no other insurance coverage. Did Adams knowingly cheat Nationwide or just not understand the terms of a complicated insurance policy? In short, a § 523(a)(2)(A) claim has not been established by Nationwide's summary judgment motion.

2.3. 11 USC § 523(a)(6)- For similar reasons, the § 523(a)(6) summary judgment claim will be denied. The supreme court recently said that to sustain a § 523(a)(6) action, the creditor must prove that the debtor did an act which was intentionally and willfully intended to harm the creditor and had that effect.⁽¹⁶⁾

6 ABR 48      To the extent Nationwide is seeking to recover from Adams' failure to live up to contractual duties, whether in the insurance contract or failing to live up to the settlement, that is not the type of recovery contemplated by § 523(a)(6).⁽¹⁷⁾

If Nationwide's § 523(a)(6) action is intended to be more of a remedy for an embezzlement type of action, there is no factual support in the record to sustain summary judgment.

3. CONCLUSION- A separate order denying summary judgment will be entered.

DATED: December 21, 1998

HERBERT A. ROSS

Bankruptcy Judge

D3660

1. 6 ABR 43      Defendant's Motion for Summary Judgment, Docket Entry 20, filed November 17, 1998.

2. 6 ABR 44      Order Deeming Matters Admitted, Docket Entry 15, filed July 20, 1998.

3. 6 ABR 44      Affidavit of Records Custodian, Docket Entry 23, filed November 17, 1998.

4. 6 ABR 44      Affidavit of Peter J. Aschenbrenner, Docket Entry 22, filed November 17, 1998.

5. 6 ABR 44      See, footnote 2 at ¶ 9.

6. 6 ABR 44      6 Collier on Bankruptcy, ¶ 727.03 (15^th ed Supp 1998).

7. 6 ABR 45      FRBP 4005.

8. 6 ABR 45      Id at ¶ 727.04 [ 2 ] .

9. 6 ABR 45      6 Collier on Bankruptcy, ¶ 727.04 [ a ] (15^th ed Supp 1998); In re Burgess, 955 F2d 134, 137 (1st Cir 1992).

10. 6 ABR 46      4 Collier on Bankruptcy, ¶ 523.09 [ 2 ] [ b ] (15^th ed Supp 1998); Manufacturers Hanover v. Dewalt (In re Dewalt), 961 F2d 848 (9th Cir 1992).

11. 6 ABR 46      In re Beezley, 994 F2d 1433 (9^th Cir 1993); 4 Collier on Bankruptcy, ¶ 523.09 [ 5 ] .

12. 6 ABR 46      In re Eashai, 167 BR 181, 183 (9^th Cir BAP 1994), aff'd 87 F3d 1082 (9^th Cir 1996).

13. 6 ABR 46      In re Lauricella, 105 BR 536, 538 (9^th Cir BAP 1989).

14. 6 ABR 46      See, footnote 2.

15. 6 ABR 47      Compare, In re Anastas, 94 F3d 1280, 1284 (9^th Cir 1996); 4 Collier on Bankruptcy, ¶ 523.08 [ 1 ] [ d ] (15^th ed Supp 1998).

16. 6 ABR 47      Kawaauhah v Geiger, 118 SCt 974 (1998).

17. 6 ABR 48      In re Riso, 978 F2d 1151, 1153 (9^th Cir 1992).