Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-canb-1_06-ap-01057/USCOURTS-canb-1_06-ap-01057-1/pdf.json

Parties Involved:
Jeffry G. Locke
Plaintiff
John Perpinan
Defendant

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This disposition is not appropriate for publication. *

Although it may be cited for whatever persuasive value it may

have (see Fed. R. App. P. 32.1), it has no precedential value. 

See 9th Cir. BAP Rule 8013-1.

Hon. Elizabeth L. Perris, Chief Bankruptcy Judge for the **

District of Oregon, sitting by designation.

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NC-06-1459-KSP

)

JOHN PERPINAN, ) Bk. No. 05-14638

)

Debtor. ) Adv. No. 06-01057

)

______________________________)

)

JOHN PERPINAN, )

)

Appellant, )

)

v. ) MEMORANDUM*

)

JEFFRY G. LOCKE, Trustee, )

)

Appellee. )

______________________________)

Argued and Submitted on July 27, 2007

at Pasadena, California

Filed – August 15, 2007

Appeal from the United States Bankruptcy Court

for the Northern District of California

Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding

__________________________

Before: KLEIN, SMITH and PERRIS, Bankruptcy Judges. **

FILED

AUG 15 2007

HAROLD S. MARENUS, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

Entered on Docket 

August 16, 2007

GLORIA L. FRANKLIN, CLERK 

U.S BANKRUPTCY COURT 

NORTHERN DISTRICT OF CALIFORNIA

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2

The debtor, John Perpinan, appeals from a judgment denying

his discharge and compelling turnover of property of the estate. 

We AFFIRM.

FACTS

The debtor, a residential remodeling contractor, became

involved in a contentious dispute with one of his clients, Janet

Low, in 2001. As a result, in February 2003, Low filed a lawsuit

against the debtor in state court for damages arising out of a

construction contract. Low v. Perpinan, Sonoma County Superior

Court Case No. SCV 231987. Low was represented by attorney Glenn

Smith.

While the state court case was pending, a marital

dissolution proceeding between the debtor and his former spouse

was also proceeding. In connection with the marital dissolution

proceeding, the family court ordered the debtor and his former

spouse to sell their residence, pay certain debts, and divide the

proceeds.

Pursuant to the state court order, the debtor and his former

spouse sold their residence and closed escrow on July 12, 2005. 

After payment of the secured debt and certain other claims, the

debtor received $121,750.84 in proceeds from the sale. 

Of the $121,750.84, $10,000 was wired directly from the

title company to the debtor’s checking account. The balance

($111,750.84), was paid to the debtor through two checks drawn on

the title company. The debtor took the larger of the two checks

(in the amount of $109,279.45) to a branch of the title company’s

bank whereby the bank negotiated the check and issued to the

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debtor several cashier’s checks and money orders in small

denominations. The debtor did not deposit any of these items

into a bank account.

All the while, Low continued to prosecute her state court

case against the debtor. Due to a lack of cooperation with Low,

and a lack of compliance with court orders compelling the debtor

to attend a deposition, Low filed a Motion for Terminating

Sanctions. Low’s motion was set for hearing on October 20, 2005.

On October 16, 2005, the debtor filed a chapter 7 case and

scheduled Low as a disputed creditor. On the debtor’s Schedule

B, he scheduled as “Cash on Hand” $48,000 in sale proceeds from

the sale of his residence. On the debtor’s Schedule C, he

claimed the $48,000 in sale proceeds as exempt pursuant to

California Code of Civil Procedure §§ 704.710 - 704.880. 

At the debtor’s first 11 U.S.C. § 341 meeting of creditors,

the chapter 7 trustee (appellee) questioned the debtor at length

about the disposition of the proceeds from the sale of his

residence:

Trustee: So you got $122,000 from the title

company you said you cashed that you

didn’t deposit that in a bank account. 

Is that correct?

Debtor: That is correct

Trustee: You did not deposit any of those funds

into a bank account?

Debtor: No I did not

Trustee: And why not?

Debtor: Why not? I was worried this man might

come steal my money

Trustee: O.K. and by this man you are talking

about?

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4

Debtor: Glenn Smith

Trustee: O.K.

Because the debtor received approximately $122,000 in sale

proceeds but only scheduled $48,000 on his bankruptcy petition,

the trustee informed the debtor that it was the debtor’s

responsibility to explain and account for approximately $74,000

in sale proceeds that he did not schedule. 

When the trustee questioned the debtor about the amount of

sale proceeds that the debtor had spent since escrow had closed

in July 2005, the debtor told the trustee that it had been spent

on legal fees, living expenses, child care, vehicles, home

furnishings, and the like. 

On January 17, 2006, which was just over six months after

the July 12, 2005, close of escrow on the sale of the debtor’s

residence, the trustee filed an Objection to Claim of Exemption,

followed by a Motion to Compel Turnover and Accounting of

Property of the Estate. The trustee argued that the debtor’s

homestead exemption lapsed on January 12, 2006, unless the funds

had been reinvested in a new homestead.

The debtor filed an opposition on February 14, 2006, and

filed a declaration stating that on January 11, 2006, he tendered

a $48,000 cashier’s check to his mother, Joan Scoggins, for a

4.5% interest in her home. His mother, in return, had executed

and recorded a grant deed in favor of the debtor on January 12,

2006. 

Based on the information provided by the debtor in his

declaration, the trustee dropped his Objection to Claim of

Exemption.

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5

On March 9, 2006, trustee filed an adversary proceeding

against the debtor objecting to his discharge pursuant to 11

U.S.C. § 727(a)(2)(A), (a)(3), (a)(4)(A), and (a)(5). The

trustee alleged that the debtor’s pre-petition disposition of the

sale proceeds into cashier’s checks and money orders was a

transfer or concealment of the debtor’s property done with the

intent to “hinder, delay, or defraud” his creditors.

Several months later, the trustee discovered that on January

13, 2006, the debtor had signed and notarized a quitclaim deed in

favor of his mother that reversed the transaction the debtor and

his mother had entered into the previous day (January 12). The

trustee also discovered that the debtor’s mother never deposited

the $48,000 cashier’s check given to her by the debtor in

exchange for an interest in her property. Instead, the debtor’s

mother returned the original cashier’s check to the debtor. 

The debtor did not disclose the latter series of events

between himself and his mother in his February 14, 2006

declaration alleging the re-establishment of his homestead.

On March 15, 2006, the debtor redeemed the $48,000 cashier’s

check at the bank and used the cash for living expenses. Several

days later, the deed reversing the transaction was recorded with

the county land records. 

Armed with this newly discovered information, the trustee

filed a first amended adversary complaint on November 21, 2006,

seeking to deny the debtor’s discharge on the additional ground

that the transaction between the debtor and his mother was a

“sham” and a fraudulent concealment of property of the estate. 

The trustee also sought to compel turnover of the $48,000.

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Trial was held on November 29, 2006. On December 4, 2006,

the bankruptcy court entered its memorandum decision denying the

debtor’s discharge pursuant to § 727(a)(2)(A) and ordering the

debtor to turnover the $48,000 in sale proceeds to the trustee. 

Final judgment was entered on December 5, 2006.

This appeal ensued. 

JURISDICTION

The bankruptcy court had jurisdiction via 28 U.S.C. § 1334. 

We have jurisdiction under 28 U.S.C. § 158(a)(1).

ISSUES

1) Whether the bankruptcy court erred when it denied the

debtor’s discharge pursuant to § 727(a)(2)(A).

2) Whether the bankruptcy court erred when it ordered the

debtor to turn over to the trustee the $48,000 in sale proceeds.

STANDARD OF REVIEW

In bankruptcy discharge appeals, we review findings of fact

for clear error, conclusions of law de novo, and also apply de

novo review to “mixed questions” of law and fact that require

consideration of legal concepts and the exercise of judgment

about the values that animate the legal principles. Murray v.

Bammer (In re Bammer), 131 F.3d 788, 791-92 (9th Cir. 1997) (en

banc), overruling, e.g., Finalco v. Roosevelt (In re Roosevelt),

87 F.3d 311, 314, as amended, 98 F.3d 1169 (9th Cir. 1996) (§ 727

reviewed for abuse of discretion), and Friedkin v. Sternberg (In

re Sternberg), 85 F.3d 1400, 1404-05 (9th Cir. 1996) (same);

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First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339, 1342

(9th Cir. 1986) (§ 727 finding of transfer of property with

intent to defraud is finding of fact).

Whether a debtor harbors actual intent to hinder, or delay,

or defraud a creditor is a question of fact reviewed for clear

error. Emmett Valley Assoc. v. Woodfield (In re Woodfield), 978

F.2d 516, 518 (9th Cir. 1992); Searles v. Riley (In re Searles),

317 B.R. 368, 379 (9th Cir. BAP 2004), aff’d, 212 F. App’x 589

(9th Cir. 2006). Intent may be inferred from circumstances

surrounding the transaction. Woodfield, 978 F.2d at 518.

Under the “clear error” standard, we accept findings of fact

unless the findings leave the “definite and firm conviction that

a mistake has been committed” by the trial judge. Latman v.

Burdette, 366 F.3d 774, 781 (9th Cir. 2004).

DISCUSSION

I

The trustee sought denial of the debtor’s discharge pursuant

to § 727(a)(2)(A), (a)(2)(B), (a)(3), (a)(4)(A), and (a)(5). The

burden of proof on an objection to discharge under § 727(a)(2) is

preponderance of evidence. Grogan v. Garner, 498 U.S. 279, 289

(1991); Landsdowne v. Cox (In re Cox), 41 F.3d 1294, 1297 (9th

Cir. 1994); Wolkowitz v. Beverly (In re Beverly), slip op. at 36

(9th Cir. BAP July 24, 2007); Searles, 317 B.R. at 376; 6 COLLIER

ON BANKRUPTCY ¶ 522.08[4] (Henry J. Sommer & Alan N. Resnick eds.

15th ed. rev. 2006) (“COLLIER 15th ed.”). The bankruptcy court

found that the debtor kept assets in cash (cashier’s checks and

money orders) in order to hinder his creditors and denied the

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debtor’s discharge pursuant to § 727(a)(2)(A).

Section 727(a)(2)(A) provides,

(a) The court shall grant the debtor a discharge,

unless - 

(2) the debtor, with intent to hinder, delay, or

defraud a creditor . . . has transferred, removed,

destroyed, mutilated, or concealed . . .

(A) property of the debtor, within one year

before the date of the filing of the

petition[.]

11 U.S.C. § 727(a)(2)(A).

Discharge may be denied under § 727(a)(2)(A) only upon a

finding of actual intent to hinder, delay, or defraud creditors. 

Adeeb, 787 F.2d at 1342-43; Devers v. Bank of Sheridan (In re

Devers), 759 F.2d 751, 753 (9th Cir. 1985). Constructive

fraudulent intent can not be the basis for the denial of

discharge. Adeeb, 787 F.2d at 1343.

It is sufficient under the plain language of § 727(a)(2)(A)

to deny discharge upon a showing of intent to hinder or delay or

defraud creditors. Searles, 317 B.R. at 379. In other words,

intent to defraud need not be shown because intent to hinder or

to delay is sufficient.

Here, it is undisputed that the subject transaction involved

property of the debtor and that it occurred within one year of

the debtor filing bankruptcy. The debtor argues that he did not

harbor the requisite intent and did not transfer or conceal his

property.

The bankruptcy court found that the debtor acted with actual

intent to hinder his creditors when he kept the proceeds from the

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sale of his residence in the form of cashier’s checks and money

orders. 

The court based its decision on the debtor’s admission at

his meeting of creditors that he did not deposit the sale

proceeds into a bank account because he believed that Low’s

attorney (Glenn Smith) was going to “steal” his money.

At trial, the debtor was questioned about the statement he

made at his meeting of creditors:

[Trustee’s attorney]: [Y]ou didn’t really think

Glenn Smith was going to point a gun at you

and hold you up in a robbery; did you?

[Debtor]: No. What I thought he was going to do

was lie to the courts –

[Trustee’s attorney]: Okay. Thank you. And you

didn’t think –

[Debtor]: And that’s what he did. He filed a

bunch of lies. He lied to a lot of people.

This evidence supports the trial court’s inference (which

was based on a credibility determination) regarding the debtor’s

intent. We perceive no clear error. Moreover, we agree with the

bankruptcy court that the debtor acted with actual intent to

hinder the collection efforts of his creditors, specifically the

efforts of Low.

We also agree that the debtor’s admitted actions in using

the sale proceeds to acquire money orders and cashier’s checks in

order to prevent the proceeds from being “stolen” by Low’s

//

//

//

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Black’s Law Dictionary defines “concealment” as follows: 1

concealment, n. 1. The act of refraining from

disclosure; esp., an act by which one prevents or

hinders the discovery of something. 2. The act of

removing from sight or notice; hiding. . . . 

Black’s Law Dictionary 282 (7th ed. 1999).

10

attorney was an act of concealment.1

The bankruptcy court did not err when it denied the debtor’s

discharge pursuant to § 727(a)(2)(A).

II

On the debtor’s schedule B, he stated that he had $48,000

“cash on hand” as proceeds from the sale of his residence. 

Because the sale of the debtor’s residence occurred approximately

four months before he filed bankruptcy, the debtor sought to

exempt those sale proceeds.

Under California law, the proceeds of a homestead sale

remain exempt for a period of six months after the sale. Cal.

Civ. Proc. Code §§ 704.720(b), 704.960(a). When the six month

period expires, the exempt status of the sale proceeds

automatically dissolves, even if the six month period expires

after the filing of the bankruptcy petition. England v. Golden

(In re Golden), 789 F.2d 698, 699 (9th Cir. 1986); Konnoff, 356

B.R. at 208; Gaughan v. Smith (In re Smith), 342 B.R. 801, 808-09

(9th Cir. BAP 2006).

Thus, to keep their exempt status, the proceeds must be

reinvested into another homestead within six months of the sale.

If not timely reinvested, the sale proceeds become property of

the bankruptcy state.

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In this case, because escrow closed on the sale of the

debtor’s residence on July 12, 2005, under California law, the

debtor had until January 12, 2006, to reinvest the proceeds in a

new homestead. On January 17, 2006, the trustee filed an

objection to debtor’s claim of exemption, and, pursuant to

Golden, sought turnover of the $48,000 in sale proceeds the

debtor claimed were exempt. 

In response to trustee’s motions, the debtor filed a

declaration stating that he had tendered to his mother a $48,000

cashier’s check in exchange for a 4.5% interest in her residence. 

The debtor attached to his declaration a copy of the recorded

grant deed that had been executed by his mother in favor of the

debtor. The deed had been recorded with the county recorder’s

office on January 12, 2006.

Based on the debtor’s declaration, the trustee believed that

the debtor had timely reinvested the sale proceeds and he

withdrew his objection to claim of exemption.

However, unbeknownst to the trustee, on January 13, 2006

(one day after the recording of the first deed), the debtor

signed and notarized a quitclaim deed back to his mother

reversing the transaction. The debtor’s mother then returned the

original cashier’s check to the debtor. None of this information

was provided to the court or to the trustee by the debtor in his

declaration that was filed one month after these later events

took place.

At trial, the debtor testified that on March 15, 2006, he

and his mother went to the bank and he “redeemed” the cashier’s

check and “lived off” the proceeds. The deed reversing the

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transaction was recorded with the Sonoma County Recorder’s Office

on March 23, 2006.

When the trustee discovered that the transaction between the

debtor and his mother had been reversed the next day, he filed a

first amended complaint in the pending adversary proceeding to

add a claim for denial of discharge pursuant to § 727(a)(2)(B)

and for turnover of the $48,000 pursuant to 11 U.S.C. § 542. 

After trial, the bankruptcy court concluded that the

debtor’s purchase of a new homestead was a “sham” and therefore,

under Golden, the sale proceeds were property of the estate and

should be turned over to the trustee. We agree.

As it is a factual finding, the bankruptcy court’s

determination that the transaction the debtor entered into with

his mother was a “sham transaction” done with the intent to

conceal property of the estate is reviewed for clear error. 

Atkins v. Fiberglass Representatives, Inc. (In re Atkins), 134

B.R. 936, 940 (9th Cir. BAP 1992) (“sham transaction”). 

Even though the debtor purported to reinvest the $48,000 on

the eve of the expiration of the statutory six month limitations

period, what he in fact did was retain a secret beneficial

interest in those legally transferred proceeds in an effort to

conceal those proceeds from the trustee and his creditors. See

Hughes v. Lawson (In re Lawson), 122 F.3d 1237, 1241 (9th Cir.

1997) (denial of discharge based on continuing concealment

doctrine.)

The debtor and his mother reversed the transaction one day

after its making, but did not make it known publicly until two

months later when the second deed was recorded. 

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The record in this case contains ample evidence to support

the court’s conclusion that the transaction between the debtor

and his mother was a “sham” and therefore, the bankruptcy court

correctly concluded that because the proceeds were not genuinely

reinvested in a new homestead within six months, the proceeds

became property of the bankruptcy estate on January 12, 2006, and

were subject to turnover.

CONCLUSION

Because there is sufficient evidence in the record to

support the court’s finding regarding the debtor’s actual intent

to hinder creditors by concealing his property when he converted

the sale proceeds into money orders and cashier’s checks, all

elements of § 727(a)(2)(A) are satisfied and the debtor’s

discharge was properly denied.

Further, because the transaction between the debtor and his

mother was a “sham” and because the sale proceeds were not

reinvested in a new homestead within the six month limitations

period, under Golden the proceeds were property of the bankruptcy

estate subject to administration. The bankruptcy court did not

err when it ordered debtor to turnover the $48,000. AFFIRMED.

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