Young v. Merryfield et al
Filing
11
ORDER...under the applicable standard of review, this court cannot say that the Bankruptcy Court erred in finding an absence of fraudulent intent...the decision of the Banrkruptcy Court is affirmed. Signed by Honorable Joe Heaton on 11/25/2014. (lam)
IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
In re:
)
)
MICHAEL D. MERRYFIELD, and
)
SHARON A. MERRYFIELD,
)
Case No. BK-12-15513-SAH
)
(Chapter 7)
Debtors,
)
_____________________________________________________________________
BRUCE A. YOUNG,
Appellant,
v.
MICHAEL D. MERRYFIELD, and
SHARON A. MERRYFIELD,
Appellees.
)
)
)
)
)
)
)
)
)
Case No. CIV-14-0864-HE
ORDER
Appellant Bruce Young, an unsecured creditor, appeals the decision of the Bankruptcy
Court which rejected Young’s challenge to the discharge of appellees Michael and Sharon
Merryfield (collectively, “the Merryfields”), the bankruptcy debtors. Young raised multiple
objections in that court to the discharge of his debts or of the debtors generally, but pursues
here only his objection to discharge based on 11 U.S.C. § 727(a)(4)(A). To warrant denying
a debtor a discharge under this provision, the challenging “creditor must demonstrate by a
preponderance of the evidence that the debtor knowingly and fraudulently made an oath and
that the oath relates to a material fact.” In re Brown, 108 F.3d 1290, 1294 (10th Cir. 1997).
The parties do not dispute that the Merryfields submitted Debtors’ Schedules and Statements
of Financial Affairs (“SOFAs”) that contained false, material information. All that is
disputed is whether the documents were submitted with the requisite fraudulent intent.
Because intent is, by its nature, difficult to determine directly, a factfinder’s
determination of intent must necessarily be based on all the surrounding facts and
circumstances. A bankruptcy court’s determination of fraudulent intent, based on its analysis
of those facts and circumstances, “will not be set aside unless clearly erroneous.” In re
Calder, 907 F.2d 953, 955-56 (10th Cir. 1990); see also In re Seay, 215 B.R. 780, 788
(B.A.P. 10th Cir. 1997) (“A bankruptcy court's findings concerning intent are factual and
subject to review under a clearly erroneous standard.”). A bankruptcy court’s credibility
determinations and factual findings deserve deference, FED. R. BANKR. P. 8013, and will be
accepted absent proof that they “either (1) [are] completely devoid of minimum evidentiary
support displaying some hue of credibility, or (2) bear[] no rational relationship to the
supportive evidentiary data.” In re Ford, 492 F.3d 1148, 1154 (10th Cir. 2007) (applying the
clearly erroneous standard). Applying this standard, the court concludes the Bankruptcy
Court’s decision should be affirmed.
The Bankruptcy Court concluded that the Merryfields lacked fraudulent intent and
that the errors and omissions, which have since been cured, were the result of inadvertence
and/or mistake. Though Young identifies facts which would arguably support a different
conclusion, the Bankruptcy Court’s determination is not clearly erroneous in light of the
circumstances of this case. There was evidence that Mr. Merryfield, who had run the
couple’s business for many years, had become seriously ill and that this substantially affected
his involvement with the business. There was also evidence that Mrs. Merryfield had not
2
been substantially involved in the couple’s businesses in recent years, but had to assume
responsibility for gathering the information needed for the bankruptcy filings. Further, there
was evidence that the accountant the debtors had used for many years died shortly before
they filed for bankruptcy, forcing them to use a new accountant who had less familiarity with
the couple’s businesses. Based on these and other circumstances reflected by the record,
there was a basis in the evidence for a conclusion that the false statements in the filings were
due to something other than fraudulent intent. That is the conclusion that the Bankruptcy
Court drew, supported by a thorough and detailed explanation set out in its order.
For the most part, Young’s challenge is to the credibility and factual determinations
underlying the Bankruptcy Court’s conclusion. However, the Bankruptcy Court observed
the witnesses firsthand and was thus in a unique position to make the credibility and other
determinations central to a finding of intent.
Young also argues that the Bankruptcy Court failed to adequately consider two
factors: that the Merryfields had the help of counsel in submitting these documents and that
the sheer number of omissions and errors suggests fraudulent intent. Courts have considered
these factors, sometimes finding them important or determinative in concluding that
fraudulent intent existed. See e.g.,In re Calder, 907 F.2d at 956 (noting the debtor was a
bankruptcy attorney and finding it “significant that there was not one but four separate
omissions”); In re King, 272 B.R. 281, 303 (Bankr. N.D. Okla. 2002) (considering that a
sophisticated debtor had the assistance of a bankruptcy attorney and made “no less than five”
omissions or errors). But while those cases certainly support the proposition that such
3
circumstances may support an inference of fraudulent intent, they do not compel such a
conclusion. As noted above, determinations of intent are necessarily driven by all the facts
and circumstances of the particular case. There were a number of relatively unique
circumstances present here which were evaluated by the Bankruptcy Court and relied on in
reaching its decision as to intent.
Under the applicable standard of review, this court cannot say that the Bankruptcy
Court erred in finding an absence of fraudulent intent. The decision of the Bankruptcy Court
is therefore AFFIRMED.
IT IS SO ORDERED.
Dated this 25th day of November, 2014.
4
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?