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FILED

JUL 01 2015

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. AZ–14-1511-PaJuKi

) AZ-14-1514-PaJuKi

DUSTIN ROGER CHANTEL and ELIZABETH ) (related appeals)1

DARLENE CHANTEL, )

) Bankr. No. 13-11909

Debtors. )

___________________________________) Adv. Proc. 13-00977

) 14-00041

DUSTIN ROGER CHANTEL; ELIZABETH )

DARLENE CHANTEL, )

)

Appellants, )

)

v. ) M E M O R A N D U M2

)

WILLIAM PIERCE, Chapter 7 Trustee; )

UNITED STATES TRUSTEE, )

)

Appellees. )

___________________________________)

Submitted Without Oral Argument3

on June 19, 2015

Filed - July 1, 2015

Appeal from the United States Bankruptcy Court

for the District of Arizona

Hon. Eddward P. Ballinger, Jr., Bankruptcy Judge, Presiding

 

1 Although the parties have separately briefed the two

appeals, the Panel elects to treat them as related appeals in this

Memorandum.

2 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 8024-1.

3 After reviewing the briefs and submissions of the parties,

pursuant to Fed. R. Bankr. P. 8019, in separate orders entered on

April 30, 2015, the Panel determined that oral argument was not

required in these appeals.

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Appearances: Dustin Roger Chantel pro se on brief; Ramona D.

Elliott, P. Matthew Sutko, John Postulka, Ilene J.

Lashinsky, Elizabeth C. Amorosi, and Christopher J.

Pattock on brief for appellee United States

Trustee; Terry A. Dake on brief for appellee

William E. Pierce, chapter 7 trustee.

 

Before: PAPPAS, JURY, and KIRSCHER, Bankruptcy Judges.

Chapter 74 debtors Dustin Roger Chantel (“Dustin”) and

Elizabeth Darlene Chantel (“Elizabeth”5 and, together, “Debtors”)

appeal two judgments of the bankruptcy court entered in related

adversary proceedings: (1) determining that all of the real and

personal property held by an entity known as the Chan-Lan Trust

(the “Trust”) was property of the bankruptcy estate, and directing

Debtors to turn over that property to the chapter 7 trustee,

William E. Pierce (“Pierce”); and (2) denying their discharge

under § 727 (a)(2)(A), (a)(2)(B), (a)(3), (a)(4)(A), and

(a)(4)(D). We AFFIRM the bankruptcy court’s judgment determining

that the Trust’s assets are property of the estate and directing

Debtors to turn them over to Pierce. We AFFIRM that portion of

the bankruptcy court’s judgment denying discharge under

§ 727(a)(2)(A), (a)(2)(B), and (a)(4), but we REVERSE that portion

of the judgment denying Debtors’ discharge under § 727(a)(3) and

(a)(4)(D). 

4 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and

all Rule references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001–9037.

5 We refer to Debtors by first name for clarity; no

disrespect is intended.

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I. FACTS

Dustin is retired; Elizabeth, his spouse, is a housewife.

The disputes in this appeal focus on the Trust, a California

trust created by Dustin and Elizabeth in 1995. In the initial 

trust documents, Donna Aguirre was identified as the settlor of

the Trust,6 and Dustin was the trustee. Elizabeth became a cotrustee in 1997.

Debtors became embroiled in litigation with their electricity

supplier, Mohave Electric Cooperative (“Mohave”). Mohave had

erected power lines on Debtors’ property in Kingman, Arizona (the

“Property”) on an easement granted decades before Debtors acquired

the land. Later, Debtors constructed what they described as a

“divinely inspired structure” directly beneath the power lines. 

Mohave County issued a stop-work order to Debtors during

construction of the structure; Debtors ignored the order. On

September 12, 2008, the county instructed Mohave to de-energize

the overhead lines because the structure had created an unsafe

condition. As a result, Debtors lost their source of electric

power on the Property. 

In 2009, Debtors sued Mohave for complying with the county’s

instructions in state court. Mohave asserted a counterclaim

against Debtors, and the state court entered a money judgment of

$175,000 against Debtors on Mohave’s counterclaim. Debtors

appealed, but the judgment was affirmed by the Arizona Court of

Appeals. Chantel v. Mohave Elec. Co-op, 2013 WL 1628308 (Ariz.

6 Ms. Aguirre’s identity or whereabouts is not provided by

the parties. She resigned as settlor of the Trust on the day it

was created. She did not contribute any property to the Trust.

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Ct. App. Apr. 16, 2013). No further appeal was taken.

Debtors filed a petition for relief under chapter 13 on

July 11, 2013, which the court dismissed due to Debtors’ failure

to timely file a chapter 13 plan. The court then granted Debtors’

motion to reinstate the case but converted it to a chapter 7 case

on August 12, 2013. Pierce was appointed to serve as chapter 7

trustee. 

Debtors’ schedules indicated that they owned no real property

and had not transferred any property to a self-settled trust in

the previous ten years. The only reference to the Trust was in

schedule G in which Debtors claimed they leased farmland from the

Trust. Debtors listed their monthly income as $2,039, comprised

solely of pension, social security benefits, and disability

benefits. There is no declaration in their schedules about the

income of, nor any compensation Debtors may receive from, the

Trust.7

On August 27, 2013, Pierce commenced an adversary proceeding

against Debtors in their personal capacities and as trustees of

the Trust. Pierce sought a judgment denying Debtors’ discharge

under § 727(a)(2)(A), (a)(2)(B), (a)(3), (a)(4)(A), and (a)(4)(D)

alleging that Debtors had: failed to properly disclose their

interests in the Trust; failed to provide records concerning the

Trust; transferred assets of the Trust during the bankruptcy case

without court approval; and knowingly, wilfully, and fraudulently

hindered, delayed, and defrauded their creditors and the trustee. 

7 Although Debtors did not list any real property in their

schedules, they did list a mortgage of approximately $163,000. 

Their schedule F also acknowledges a debt of $175,000 to Mohave

based upon the state court judgment.

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Pierce also sought a judgment from the bankruptcy court

determining that all of the real and personal property of the

Trust was property of the bankruptcy estate pursuant to § 541 and

directing that Debtors turn over all of the property to Pierce

pursuant to § 542.

On January 16, 2014, the United States Trustee (the “UST”)

commenced an adversary proceeding against Debtors. It also

requested that the bankruptcy court deny Debtors’ discharge under

§ 727(a)(2), (a)(3), and (a)(4). The UST alleged that the Trust

was a sham, that Debtors were the beneficial owners of the Trust’s

assets, and that Debtors had transferred, removed, and concealed

property of the Trust with the intent to hinder, delay, and

defraud their creditors. The UST further alleged that Debtors had

failed to keep, or had concealed, records, and that they

knowingly, and with fraudulent intent, made false statements under

oath concerning material information by failing to disclose their

interest in the Trust in their schedules.

At the request of the UST and Pierce, the bankruptcy court

ordered that both adversary proceedings be tried at the same

time.8 The trial occurred on July 31 and August 8, 2014. Pierce

and the UST were represented by counsel; Debtors appeared pro se. 

At the beginning of trial, both Pierce and the UST informed the

bankruptcy court that they no longer sought a denial of Debtors’

discharge for their failure to produce books and records. 

Dustin and Elizabeth testified at the trial. Dustin made

8 Before trial commenced, Dustin, as trustee of the Trust,

filed a motion to dismiss the case. The bankruptcy court denied

the motion because Dustin was not an attorney, and only attorneys

may represent the Trust in federal court.

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several important admissions and other statements during his

testimony. Among them, he testified that in the years preceding

creation of the Trust a group of people whom he could not identify

had approached him about creating a trust; they then gratuitously

gave him two parcels of real estate to create the Trust. Dustin

later claimed that he had traded services in exchange for the two

parcels. Dustin testified that Debtors owned no real property,

and later he testified that Debtors had transferred numerous

parcels of real property and items of personal property to the

Trust, including the Property. Dustin admitted that Debtors had

declared income from property ostensibly owned by the Trust on

their personal income tax returns. He also admitted that Debtors

had used the Property allegedly owned by the Trust as collateral

for loans made to Debtors, including the mortgage loan, and then

had deducted the mortgage loan interest on their personal income

taxes. Dustin admitted that the Trust’s funds were used to pay

Debtors’ personal cable bill, cell phone bill, dental expenses,

gas and propane bills, car loan payments (for cars titled in

Debtors’ names), car registration, credit card bills, and other

personal expenses. Dustin was unable to identify any

distributions to beneficiaries made by the Trust except for loans. 

Dustin also testified that, after Debtors filed their bankruptcy

petition, Dustin sold silver bullion, which had been purchased

with Trust funds, to unnamed parties, and then lost the $110,000

in sale proceeds gambling in Nevada.9

9 Dustin ignored the bankruptcy court’s advice that he

consider invoking the Fifth Amendment because of the potential

(continued...)

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In her testimony, Elizabeth confirmed several aspects of

Dustin’s testimony, while adding other details. She insisted that

the information Debtors listed in the bankruptcy schedules was

correct. She acknowledged that Debtors had transferred their

assets to the Trust, including a $90,000 cash inheritance she

received, which Debtors then used to make improvements to the

Property. She recounted how Debtors had purchased jewelry with

Trust funds, which was stored in Elizabeth’s jewelry box and worn

by her. 

At the close of trial, the bankruptcy court took the matter

under advisement. On October 15, 2014, the court announced its

oral findings, conclusions, and decision. Highlights of the

court’s decision included that:

- Debtors were the settlors, trustees, and beneficiaries of

the Trust because Debtors supplied all of the assets contributed

to the Trust without consideration, and without relinquishing

enjoyment, dominion, and control over those assets. 

- Debtors used Trust assets regularly to pay personal

expenses.

- The $110,000 in Trust assets (i.e., the silver bullion sale

proceeds) gambled away by Dustin, and the jewelry purchased for

Elizabeth, were prominent examples of why, in the court’s words,

“[t]he Trust was nothing more than Debtors’ personal asset

repository.” Hr’g Tr. 9:10-11, Oct. 15, 2014.

- Debtors had unlimited power over the Trust, including the

9(...continued)

criminal implications of his testimony.

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power to amend the Trust.

- The Trust documents did not require any distributions to be

made to its beneficiaries, and no distributions other than loans

to be repaid were in fact made.

- Debtors “maintained all the beneficial ownership of the

Trust assets.” Hr’g Tr. 11:6-9, Oct. 15, 2014.

- “The trial evidence, including [among] other things, the

Court’s evaluation of witness credibility clearly established that

the Debtors withheld, concealed their assets, and provided false

information to the Trustees with the intent to hinder, delay, and

defraud their creditors, the estate Trustee, and the U.S.

Trustee.” Hr’g Tr. 15:5-15, Oct. 15, 2014.

- Debtors knowingly and fraudulently signed the bankruptcy

schedules in which they failed to disclose Trust assets and

personal income earned by the sale of Trust property.

- Debtors’ failure to disclose the assets and transfers to

the Trust constituted false oaths.

The bankruptcy court entered separate judgments in the two

adversary proceedings on November 11, 2014. In the judgment in

Pierce’s adversary proceeding, the court denied Debtors’ discharge

under § 727(a)(2)(A), (a)(2)(B), (a)(3), (a)(4)(A), and (a)(4)(D). 

It also determined that all of the assets of the Trust were

property of the Debtors’ bankruptcy estate under § 541 which must

be turned over to Pierce pursuant to § 542. In the UST’s

adversary proceeding, the court denied “discharge of all of

Debtors’ debts and claims which are listed in the Schedules . . .

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or could have been included in the Schedules.”10

Dustin and Elizabeth filed timely appeals of both judgments.

II. JURISDICTION

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

and 157(b)(2)(E) and (J). We have jurisdiction under 28 U.S.C.

§ 158.

Although their argument is difficult to decipher, Debtors

appear to challenge the jurisdiction of the bankruptcy court and

this Panel to adjudicate the issues raised in these proceedings

because, they allege, there are “non-core” issues implicated here. 

Debtors seem to argue that the judgments purport to adjudicate

their dispute with Mohave, thereby presenting non-core contract

law issues, which the bankruptcy court and this Panel may not

constitutionally decide. See N. Pipeline Constr. Co. v. Marathon

Pipe Line Co., 458 U.S. 50 (1982); Stern v. Marshall, 564 U.S. 2

(2011). For the following reasons, we reject Debtors’ attempted

jurisdictional challenge. 

First, no non-core claims were asserted in the adversary

proceedings. Pierce and the UST sought a judgment denying

Debtors’ discharge under § 727(a), a classic core proceeding per

28 U.S.C. § 157(b)(2)(J).11 In addition, Pierce sought an order

10 The judgment in the UST action did not reference any

specific provisions of § 727(a) upon which the Court determined

Debtors’ discharge should be denied. However, the judgment does

reference the oral ruling of October 15, 2014, during which the

bankruptcy court determined Debtors’ discharge should be denied

under § 727(a)(2)(A), (a)(2)(B), and (a)(4)(A).

11 A claim for denial of the debtor’s bankruptcy discharge is

a “public rights” controversy, involving only the Debtors and the

bankruptcy estate, which the bankruptcy court may constitutionally

(continued...)

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requiring Debtors to turn over what the bankruptcy court

determined to be property of the estate, another core proceeding. 

See 28 U.S.C. § 157(b)(2)(E). Marathon and Stern address

constitutional questions regarding the bankruptcy court’s

authority to adjudicate claims between the bankruptcy estate and

third parties other than the debtors. Here, the only parties

involved were Debtors, Pierce, and the UST. Because there were no

third parties involved in these proceedings, the principles

discussed in those decisions are of no consequence. 

Secondly, while they suggest otherwise, Debtors’ claims

involving Mohave were not at issue in the adversary proceedings,

and Mohave has not asserted any claims against the assets of the

Trust. Indeed, there is a separate adversary proceeding pending

in the bankruptcy court where the dispute between Mohave and

Debtors will be heard. Adv. 13-01267.12

In sum, Debtors’ ill-defined jurisdictional arguments lack

merit. 

III. ISSUES

Whether the bankruptcy court erred in determining that all of

the real and personal property in the Trust was property of the

estate and directing the turnover of that property to Pierce.

Whether the bankruptcy court erred in denying Debtors’

11(...continued)

adjudicate. Deitz v. Ford (In re Deitz), 760 F.3d 1038, 1039 (9th

Cir. 2014).

12 In their adversary proceeding, Mohave seeks an exception

to discharge under § 523(a)(6) for their Superior Court judgment

of $175,407.04, plus attorneys’ fees and costs. We express no

opinion on the impact this decision has on that adversary

proceeding.

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discharge.

IV. STANDARDS OF REVIEW

Whether property is included in a bankruptcy estate, and the

procedures for recovering estate property, are questions of law

that we review de novo. White v. Brown (In re White), 389 B.R.

693, 698 (9th Cir. BAP 2008). The court’s factual findings are

reviewed for clear error. Retz v. Samson (In re Retz), 606 F.3d

1189, 1196 (9th Cir. 2010).

We review a bankruptcy court’s decision resolving an

objection to discharge as follows:

“(1) the bankruptcy court’s determinations of

the historical facts are reviewed for clear

error; (2) the selection of the applicable

legal rules under § 727 is reviewed de novo;

and (3) the application of the facts to those

rules requiring the exercise of judgments

about values animating the rules is reviewed

de novo.”

In re Retz, 606 F.3d at 1196 (quoting Searles v. Riley

(In re Searles), 317 B.R. 368, 373 (9th Cir. BAP 2004), aff’d,

212 F. App’x 589 (9th Cir. 2006)).

The bankruptcy court’s determinations concerning the debtor’s

intent are factual matters reviewed for clear error. Beauchamp v.

Hoose (In re Beauchamp), 236 B.R. 727, 729 (9th Cir. BAP 1999). A

factual finding is clearly erroneous if it is “illogical,

implausible, or without support in the record.” In re Retz,

606 F.3d at 1196 (citing United States v. Hinkson, 585 F.3d 1247,

1261-62 & n.21 (9th Cir. 2009) (en banc)).

V. DISCUSSION

Debtors’ essential argument, both in the bankruptcy court and

in these appeals, is that they owned none of the Trust property. 

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Because all of the property at issue was the Trust’s property,

Debtors insist that they committed no concealment or false oath in

failing to disclose relevant facts about the property in their

schedules, nor did they engage in any wrongdoing in transferring

property of the Trust both pre- and post-petition. 

We agree with the bankruptcy court that the property held by

the Trust was property of the estate which must be turned over to

Pierce and, with the two exceptions regarding Debtors’ obligations

to keep records discussed below, we agree with the bankruptcy

court that Debtors’ discharge was properly denied under § 727(a).

I.

The bankruptcy court did not err in determining that all

assets of the Trust were property of the estate and directing

turnover of those assets to the chapter 7 trustee.

Under § 541(a)(1), property of the estate includes "all legal

or equitable interests of the debtor in property as of the

commencement of the case." This expansive language is not

ambiguous – all means all. But even assuming the statute is

ambiguous, this provision has been consistently interpreted by the

courts to have the broadest possible scope. United States v.

Whiting Pools, 462 U.S. 198, 204 (1983) (noting that "Congress

intended a broad range of property to be included in the estate 

. . . . The statutory language reflects this scope of the estate 

. . . . The house and senate reports on the Bankruptcy Code

indicate that § 541(a)(1)'s scope is broad."); accord Cusano v.

Klein, 264 F.3d 936, 945 (9th Cir. 2001). 

Although the term “property of the estate” is to be construed 

broadly, the Bankruptcy Code does limit its reach. For example, 

§ 541(b)(1) provides that: “Property of the estate does not

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include — 1) any power that the debtor may exercise solely for the

benefit of an entity other than the debtor.” Under this

provision, a debtor who is a trustee of a private or business

trust ordinarily exercises its “power” on behalf of the trust and

thus “solely for the benefit of an entity other than the debtor.” 

However, there is an important exception to this rule: when a

debtor is both the trustee and beneficiary of a trust. Torts

Claimants Comm. v. Roman Catholic Archbishop in Or. (In re Roman

Catholic Archbishop of Or.), 345 B.R. 686, 707 (Bankr. D. Or.

2006).

A. The Trust was the alter ego of Debtors and its assets

were property of the estate.

In bankruptcy, an alter ego is a nominal third party that has

no substantive existence separate from the debtor, and property

purportedly held by that third party is, therefore, the debtor's

own property. Int’l Fin. Servs. Corp. v. Chromas Techs. Can.,

Inc., 356 F.3d 731, 734, 736-737, 740 (7th Cir. 2004);

In re Pisculli, 426 B.R. 52, 61 (Bankr. E.D.N.Y. 2010) (assets of

an alter ego of debtor at the time of filing the bankruptcy

petition are property of the estate).

Alter ego theory is usually used to reach assets nominally

held by a corporation. Dietel v. Day, 492 P.2d 455, 457 (Ariz.

Ct. App. 1972). However, Arizona law allows the same theory to

reach assets of a trust because “the underlying principle is the

sham nature of the arrangement.” Id.; United States v. Hart,

2006 WL 3377626, at *3 (D. Ariz. Oct. 19, 2006); see also Neely v.

United States, 775 F.2d 1092, 1094 (9th Cir. 1985) (alter ego

theory may be applied to sham trusts under federal law).

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A trust is an individual’s alter ego when there is a unity of

interest and ownership between the trust and the individual, such

that observing the trust form would work an injustice. Dietel,

492 P.2d at 457; Ize Nantan Bagowa, Ltd. v. Scalia, 577 P.2d 725,

728 (Ariz. Ct. App. 1978). Under Arizona law, a court may find

that a trust is an alter ego where (1) the individual treats the

trust property as his own; (2) the trust paid minimal or no

consideration for the property; (3) the individual has expressed

the intent to shelter assets via the trust mechanism; (4) the

individual maintains active or substantial control over the

operations and decisions of the trust; and (5) a family or close

relationship exists between the individual and the holding entity. 

Hart, 2006 WL 3377626, at *3 (citing Deutsche Credit Corp. v. Case

Power & Equip. Co., 876 P.2d 1190, 1195-96 (Ariz. Ct. App. 1994)). 

Here, the bankruptcy court made clear findings concerning 

each of these requirements. Because its decision was based on

competent evidence, it could properly conclude that there was a

near perfect unity of interest between the Trust and Debtors, and

thus, that the Trust was the alter ego of Debtors and its assets

were property of the bankruptcy estate.

1. Debtors treated trust property as their own. The

bankruptcy court heard the testimony of both Debtors and was given

voluminous documentary exhibits detailing each asset of the Trust. 

Among its findings from this evidence, it determined that Debtors

had used the Trust “to pay Debtors’ home loan as well as expenses

personally related to utilities, gas for vehicles, tires, car

payments, personal eyeglasses, dental work, credit card bills,

propane gas purchases, cable television and cell phones.” Hr’g

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Tr. 7:11-17, Oct. 15, 2014. The court concluded that “the

evidence clearly established the Trust served as the Debtors’ de

facto checking account, or personal account, I should say.” Id.

at 7:22-23. The court further found that, although Debtors

claimed to have repaid the Trust for some of these expenses, their

testimony “lacked credibility” and any payments made were “de

minimis in relation to the benefits provided.” Id. at 7:19-21.

Here, there was ample evidence offered to support the

bankruptcy court’s conclusion that Debtors treated the Trust’s

assets as their own. In addition, we must give substantial

deference to the bankruptcy court's findings because they were

based in part on credibility determinations concerning witness

testimony. Anderson v. City of Bessemer City, N.C., 470 U.S. 564,

573 (1985); Rosenbaum v. City & Cnty. of San Francisco, 484 F.3d

1142, 1163 (9th Cir. 2007) (the “trial court's credibility

findings are subject to clear error and deserve special

deference”). 

2. The Trust paid no consideration for the properties,

which were all provided by Debtors. As noted, the court was given

documentary evidence about the assets contributed to and owned by

the Trust. It found that all assets of the Trust had been

contributed by Debtors, and that “Debtors’ transfers of property

and money to the trust were made without receiving adequate

consideration[.]” Hr’g Tr. 7:6-8, Oct. 15, 2014. Debtors have

not effectively challenged the court’s findings in this respect.

3. Debtors intended to shelter assets via the trust

mechanism. Based on the documentary evidence, and because the

Debtors lacked credibility, the bankruptcy court found that

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Debtors intended to shelter assets: “By transferring nominal

ownership of their valuable assets to the trust, the Debtors

sought to and intended to hinder, delay, or defraud their

creditors.” Hr’g Tr. 11:10-15, Oct. 15, 2014. The record

adequately supports this finding, and it was not clearly

erroneous.

4. Debtors maintained active or substantial control over

the operations and decisions of the Trust. The bankruptcy court

made explicit fact findings on this point: “Throughout its

histories, Debtors have exercised exclusive dominion and control

over trust assets[.]” Hr’g Tr. 7:11-12, Oct. 15, 2014. “For all

relevant times since the inception of the Trust, one or both of

the Debtors executed documents and instruments and acted as sole

trustees of the Trust.” Id. at 6:17-20. The bankruptcy court’s

findings are supported in the record and were not clearly

erroneous.

5. A family or close relationship exists between the

Debtors and the Trust. It is undisputed that Debtors, at all

relevant times, served as the trustees of the Trust. The one

exception to this condition occurred in 1997, when Debtors’

stepson/son Brian Lankford was a trustee. However, there is no

indication in the record that anyone outside the Debtors’ family

ever participated in the management of the Trust, nor have Debtors

suggested otherwise. 

As can be seen, the bankruptcy court made appropriate and

adequate fact findings as to each of the five elements under the

Arizona case law to show that the Trust was the alter ego of the

Debtors at the time of filing the bankruptcy petition (and

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thereafter). The bankruptcy court could therefore properly

conclude that the Trust’s assets were actually the Debtors’

property. Chromas Techs. Can., Inc., 356 F.3d at 740. As a

result, those assets became property of the estate when Debtors

filed their bankruptcy petition. § 541(a); In re Pisculli,

426 B.R. at 61. 

B. The bankruptcy court did not err in directing the

turnover of the assets of the Trust.

A bankruptcy court may order the turnover of property to the

debtor’s estate if it is property of the estate. See § 542(a)

(requiring turnover of property of the estate to the trustee

unless such property is of inconsequential value or benefit to the

estate.) To prevail in a turnover action under § 542(a), a

trustee must establish: (1) that property of the estate is or was

in the possession, custody, or control of an entity during the

pendency of the case; (2) that the property may be used by the

trustee under § 363; and (3) that the property has more than

inconsequential value or benefit to the estate. See § 542(a);

Bailey v. Suhar (In re Bailey), 380 B.R. 486, 492 (6th Cir. BAP

2008); Zazali v. Minert (In re DBSI, Inc.), 468 B.R. 664, 669

(Bankr. D. Del. 2011); 5 COLLIER ON BANKRUPTCY ¶ 542.02[2] (Alan N.

Resnick & Henry J. Sommer, eds., 16th ed.).

As discussed in the previous section, the bankruptcy court

properly concluded that all assets of the Trust were property of

the estate and that “at all relevant times, Debtors have exercised

exclusive dominion and control over trust assets[.]" Hr'g Tr.

7:11-12, Oct. 15, 2014. While the bankruptcy court did not

attempt to value all of the assets of the Trust, the record before

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the court included in its list of assets numerous parcels of real

estate, and other real estate contracts valued at over $175,000. 

The only indication in the record of liens was a mortgage on the

principal residence. Among the personal property assets, the

silver bullion testified to by Dustin had significant value, and

Elizabeth testified that the jewelry was “valuable.” Thus, we are

confident that the Trust assets had a value of consequence, and

that their liquidation would confer a significant benefit to the

creditors of the estate. 

Because the Trust assets had significant value and were

property of the estate in the possession, custody, and control of

Debtors, the bankruptcy court did not err in ordering the turnover

of the Trust assets.

II.

The bankruptcy court did not err in denying Debtors’

discharge.

A. The court did not err in denying Debtors’ discharge

under § 727(a)(2)(A) and (a)(2)(B).

Section 727(a)(2) provides that:

The court shall grant the debtor a discharge,

unless . . . the debtor, with intent to

hinder, delay, or defraud a creditor or an

officer of the estate charged with custody of

property under this title, has transferred,

removed, destroyed, mutilated, or concealed,

or has permitted to be transferred, removed,

destroyed, mutilated, or concealed[,] (A)

property of the debtor, within one year before

the date of the filing of the petition; or (B)

property of the estate, after the date of

filing the petition[.]

Under § 727(a)(2), a party objecting to a debtor’s discharge must

prove the following elements by a preponderance of the evidence:

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“‘(1) disposition of property, such as a transfer or concealment,

and (2) a subjective intent on the debtor’s part to hinder, delay,

or defraud a creditor through the act of disposing of the

property.’” In re Retz, 606 F.3d at 1200 (quoting Hughes v.

Lawson (In re Lawson), 122 F.3d 1237, 1240 (9th Cir. 1997)). The

intent of a debtor in making a transfer or concealment of property

is a question of fact that “may be established by circumstantial

evidence, or by inferences drawn from a course of conduct.” 

Devers v. Bank of Sheridan (In re Devers), 759 F.2d 751, 753-54

(9th Cir. 1985); see also Adeeb v. Adeeb (In re Adeeb), 787 F.2d

1339, 1342 (9th Cir. 1986).

In this case, after a two-day trial where the bankruptcy

court heard testimony from Debtors and received substantial

documentary evidence concerning the assets of the Trust, the court

found the Trust was “a mere conduit for Debtors’ personal

activities and all of the assets contributed [to it] constituted

property of the Debtors before the bankruptcy filing.” Hr’g Tr.

11:7-9, Oct. 15, 2014. Further, the court determined that Debtors

had concealed, and failed to properly disclose, “more than

$110,000 of liquid assets [of the Trust] consisting of quantities

of silver bullion purchased just prior to and subsequent to

Debtors’ petition date.” Id. at 8:25-9:3. The court also found

that Debtors concealed the Property in the Trust, even though in

2013, and for some time prior, Debtors claimed to own the Property

as their personal residence and had pledged it as collateral for

loans. The court found “[a]t the time of their [petition] filing,

Debtors had nominally divested themselves of title to . . . most

if not all of their valuable assets by transferring these to [the

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Trust] in exchange for no or de minimis consideration.” Id. at

9:17-20. Further, the court determined, “[b]y transferring

nominal ownership of their valuable assets to the [T]rust, the

Debtors sought to and intended to hinder, delay, or defraud their

creditors. Notwithstanding the nominal transfer of the assets

during the one year period of filing for bankruptcy, the Debtors

maintained all the beneficial ownership of [T]rust assets.” Id.

at 11:10-15. 

The bankruptcy court did not err in finding that Debtors

concealed and transferred their property both pre- and postpetition. First, we agree with the bankruptcy court that the

evidence in the record established Debtors’ prepetition

concealment and transfers of property within one year prior to the

bankruptcy petition. The evidence also shows that Debtors

concealed and transferred property of the estate after they filed

their bankruptcy petition. Given the evidence presented at trial

regarding the concealment and transfer of property by the Debtors

both pre- and post-petition, the bankruptcy court’s finding that

Debtors intended to hinder, delay, or defraud their creditors by

completing these actions was also not illogical, implausible, or

without support in the record. 

The bankruptcy court did not err in denying Debtors’

discharge under § 727(a)(2)(A) and (a)(2)(B). 

B. The bankruptcy court did not err in denying discharge

under § 727(a)(4)(A).

Section 727(a)(4)(A) provides: “[t]he court shall grant the

debtor a discharge, unless — . . . (4) the debtor knowingly and

fraudulently, in or in connection with the case — (A) made a false

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oath or account.” The party objecting to a debtor’s discharge

under this provision must prove, by a preponderance of the

evidence, “‘(1) that the debtor made a false oath in connection

with the case; (2) the oath related to a material fact; (3) the

oath was made knowingly; and (4) the oath was made fraudulently.’” 

In re Retz, 606 F.3d at 1197 (quoting Roberts v. Erhard

(In re Roberts), 331 B.R. 876, 882 (9th Cir. BAP 2005)). Intent

is a finding of fact that is usually proven by circumstantial

evidence or by inferences drawn from the debtor’s conduct. 

In re Retz, 606 F.3d at 1199 (citing In re Devers, 759 F.2d at

753-54). 

Here, the bankruptcy court found Debtors failed to disclose

numerous parcels of real property they owned, including the

Property, which they used as their residence. The court also

found Debtors failed to disclose in their schedules several bank

accounts they owned. Moreover, the court found Debtors omitted

the silver bullion from their schedules, as well as the jewelry. 

These findings of fact are supported by the record, and based upon

them, the bankruptcy court did not err in concluding that Debtors

made false oaths and omissions as to material facts in their

bankruptcy case by failing to list these assets in their

schedules. 

The bankruptcy court also did not clearly err when it found

that Debtors acted knowingly because they deliberately omitted

assets from their schedules with knowledge of the fact that they

were incomplete. See Khalil v. Developers Sur. & Indem. Co.

(In re Khalil), 379 B.R. 163, 173 (9th Cir. BAP 2007) (“A debtor

‘acts knowingly if he . . . acts deliberately and consciously.’”)

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(quoting In re Roberts), 331 B.R. at 883); see also In re Retz,

606 F.3d at 1198 (holding that a debtor acts knowingly if he or

she deliberately and consciously signed the schedules and

Statement of Financial Affairs knowing they were incomplete). 

Finally, the bankruptcy court properly found, as it did under

§ 727(a)(2)(A) and (a)(2)(B), that Debtor acted fraudulently in

concealing and omitting assets in their schedules because they did

so with the intent to deceive their creditors and the bankruptcy

trustee. 

Because the bankruptcy court’s findings were not clearly

erroneous, and because all the requirements of the statute are

met, we conclude that the bankruptcy court did not err in denying

the Debtors’ discharge under § 727(a)(4)(A).

C. The bankruptcy court erred in denying discharge under

§ 727(a)(3) and (a)(4)(D).

Under § 727(a)(3), a discharge must be denied if "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." This statute ensures that discharge is dependent on a

debtor's true presentation of his financial affairs. Caneva v.

Sun Cmtys. Operating Ltd. P'ship (In re Caneva), 550 F.3d 755, 761

(9th Cir. 2008). 

Similarly, § 727(a)(4)(D) provides for denial of discharge if

“the debtor knowingly and fraudulently, in or in connection with

the case — . . . (D) withheld from an officer of the estate

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entitled to possession under this title, any recorded information,

including books, documents, records, and papers, relating to the

debtor's property or financial affairs[.]”

We conclude the bankruptcy court, perhaps inadvertently,

erred when it denied Debtors’ discharge under § 727(a)(3) and

(a)(4)(D). Recall, both the UST and Pierce withdrew their claims

under § 727(a)(3) at the beginning of trial. And neither party

presented any evidence regarding Debtors’ records under either

provision of § 727(a). The bankruptcy court also made no findings

regarding the appropriateness of Debtors’ books and records or

whether they were withheld from an officer of the estate. 

We, therefore, REVERSE that portion the bankruptcy court’s

judgment denying Debtors’ discharge under § 727(a)(3) and

(a)(4)(D).

VI. CONCLUSION

We AFFIRM the court’s judgment determining that the assets of

the Trust are property of the estate and directing the turnover of

those assets to Pierce. We AFFIRM the bankruptcy court’s

judgments denying Debtors’ discharge under § 727(a)(2)(A),

(a)(2)(B), and (a)(4)(A). Finally, we REVERSE the bankruptcy

court’s judgment denying Debtors’ discharge under § 727(a)(3) and

(a)(4)(D).

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