THOMAS C. BRITTON, Chief Judge.
The plaintiff trustee opposes the debtor's discharge under 11 U.S.C. § 727(a)(4)(A) and (D) and (a)(5). The debtor has answered and the matter was tried on August 23.
On April 29, the day after the initial creditors' meeting, a month after this chapter 11 case was voluntarily converted to chapter 7 and the trustee was appointed, the trustee made a written request for 25 sets of documents to be furnished by May 9.
In view of the extent and complexity of the debtor's business, which had been conducted through a professional association, a corporation, and a partnership, the request was reasonable.
The debtor is a physician specializing in radiation oncology who owned and operated five cancer treatment centers in three States. Each center was staffed with a resident physician and technicians. The revenue from the centers was collected by C. Harry Kent, M.D., P.A., which also funded the five centers. Kent, P.A., is wholly owned by this debtor and is also in bankruptcy.
For the fiscal year immediately preceding bankruptcy, the total income of Kent, P.A. exceeded $3.1 million.
Kent, P.A. was served by Physicians Computer Services, Inc. owned by this debtor (and possibly his wife), and by Medicenter Laboratories, a partnership, of which the debtor was a partner. Neither of these last two entities is in bankruptcy. The debtor's interest in these entities was not disclosed in his bankruptcy schedules.
Debtors are under a statutory mandate to:
The trustee's request fell within these parameters and the debtor has neither questioned the reasonableness of the request nor said he was unable to comply.
Only 10 of the items were furnished by the specified date. When this complaint was filed, two months later, the debtor had furnished two more. By the trial date, three months after the specified date, he had furnished four more and partially furnished another three.
The debtor has never produced any part of requests 5, 10, 12, 13, 15, or 17 and has only partially complied with requests 1, 16, and 22 and has offered no excuse for his failure to do so.
Amendment of Complaint
Because of the debtor's delayed and incomplete delivery of records requested by the trustee, the trustee's complaint was accompanied by a motion (CP 3) to permit later amendment to add additional grounds. The motion was deferred to trial (CP 7).
At trial the trustee asserted no new count, but merely requested leave to add 11 more omissions from the debtor's scheduled assets to the two omissions specifically identified in paragraph 7 of the complaint. The two alleged omissions were the debtor's bank accounts and the debtor's stock in Physician's Computer Services, Inc. The 11 additional omissions are itemized in the trustee's written argument (CP 20 at 10). Each of these items had surfaced during pretrial discovery.
At the trial, the debtor waived objection to this further particularization
This subsection denies discharge to a debtor who has:
In his sworn bankruptcy schedules, the debtor failed to disclose 13 property interests. These range from his ownership interest in two corporations and two partnerships to a 34' motorhome. The debtor's explanation is that the omissions were due to mere inadvertence caused by stress because of his financial condition, and not to a scheme to defraud creditors. As evidence of his good faith, he argues that in subsequent oral examination under oath, he acknowledged each of these property interests. (CP 19 at 7).
The number and nature of the omissions make it impossible for me to accept the debtor's explanation. To give but one representative example: the first category of documents requested by the trustee was the financial statements of the debtor and Kent, P.A. for the four years before bankruptcy. The debtor has produced none, but eight months after bankruptcy the trustee obtained the debtor's July 1, 1987 financial statement from the debtor's accountant during a deposition in Tampa. (Ex 1, document 12).
That statement included as an asset a Japanese art collection worth $175,000. The schedules make no reference to the art collection. At trial, nine months after bankruptcy, the debtor explained for the first time that he had never paid for the Japanese art and that he returned the collection to "the owner" within the year before his bankruptcy. (CP 21 at 66-67 and 76-77). The schedules require disclosure of all transfers or repossessions occurring within the year before bankruptcy. This asserted transfer was not disclosed.
The belated disclosure of the asset and the debtor's transfer of that asset, undisclosed until the trial, made it impossible for the trustee to verify the debtor's explanation and may jeopardize the trustee's recovery under § 547 of an apparent preferential transfer.
If this debtor had failed to reveal only this one asset, his excuse that he forgot might be tenable. However, he also failed to disclose his bank accounts, his ownership of two corporations, Persian rugs worth $65,000, jewelry worth $275,000, a porcelain and crystal collection worth $90,000, two cars worth $75,000, and a partnership interest worth $108,000. Only his mother could believe that he forgot all of this property.
This was not an uneducated, sick or infirm debtor with a language problem who hastily swore to papers he claims to have been erroneously prepared for him by inexperienced counsel. This successful physician,
His schedules were filed a month after bankruptcy and were not signed by the debtor until later. They were amended six months later but only to add additional creditors.
The debtor was able to and did disclose in his schedules:
Yet he claims to have forgotten 13 assets he saw and dealt with daily. Omitted creditors' claims are not discharged. § 523(a)(3). The debtor's memory was infallible, therefore, when it served his purpose and faltered only when he was required to divulge his assets.
I am convinced that the debtor deliberately omitted these assets (and very probably others) with the hope that they would be overlooked by the trustee. I also doubt the debtor's present protestation that some of these assets have little or no value, but the value of omitted assets is irrelevant.
As stated in In re Chalik, 748 F.2d 616, 618 (11th Cir.1984):
In Chalik as here, the debtor subsequently revealed the omitted information. 748 F.2d at 617. The denial of Chalik's discharge was affirmed.
I find that the debtor knowingly and fraudulently made a false oath in this case with respect to each of the 13 assets he failed to disclose in his bankruptcy schedules. For this reason, discharge must be denied under § 727(a)(4)(A).
This subsection denies discharge to a debtor who has:
The six categories of documents identified above, which were first requested in April and which have never been furnished by the debtor, all relate to the debtor's property or financial affairs.
The debtor argues only that the trustee never visited the debtor's place of business or reviewed any documents kept there and that the trustee's attorney made only one visit there but spent less than an hour and looked at almost none of the records. (CP 19 at 3-4).
In a criminal proceeding, the police and the prosecutor must ferret out the evidence they need and the accused is under no duty to assist them. This is not a criminal proceeding and the debtor is not standing behind the Fifth Amendment.
In bankruptcy, the debtor is under an affirmative statutory duty to assist the trustee. § 521(3) and (4). The trustee is not required to play detective and is not provided the resources to do so. It is not enough for the debtor to make available eight file cabinets of records (CP 21 at 36) and invite the trustee or his attorney to help themselves.
I am convinced that the debtor deliberately withheld or delayed the production of records in the hope that the trustee would abandon his investigation.
I find that the debtor knowingly and fraudulently withheld from the trustee the identified records. For this reason, discharge must also be denied under § 727(a)(4)(D).
This subsection denies discharge to a debtor who:
The debtor's personal financial statement of July 1, 1987 showed a net worth of $4.8 million. His bankruptcy occurred five months later. As of that date he admits assets of only $3.7 million and claims a negative net worth of $4.1 million.
The debtor's only explanation is that his financial statement was exaggerated.
I find that he has failed to explain satisfactorily the precipitous erosion of his assets and his net worth. For this reason, discharge must also be denied under § 727(a)(5).
As is required under B.R. 9021(a), a separate judgment will be entered denying discharge under § 727(a)(4)(A) and (D) and (a)(5).