Source: https://law.justia.com/cases/federal/appellate-courts/F2/971/799/71759/
Timestamp: 2019-07-22 16:25:00
Document Index: 492455257

Matched Legal Cases: ['§ 152', '§ 152', '§ 152', '§ 152', '§ 727', '§ 152', '§ 152', '§ 2', '§ 152', '§ 542', '§ 542', '§ 70', '§ 110', '§ 70', '§ 110', '§ 727', '§ 542', '§ 542']

United States of America, Appellee, v. John A. Grant, Defendant, Appellant, 971 F.2d 799 (1st Cir. 1992) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › First Circuit › 1992 › United States of America, Appellee, v. John A. Grant, Defendant, Appellant
United States of America, Appellee, v. John A. Grant, Defendant, Appellant, 971 F.2d 799 (1st Cir. 1992)
US Court of Appeals for the First Circuit - 971 F.2d 799 (1st Cir. 1992)
Heard Jan. 7, 1992. Decided July 28, 1992
John A. Grant, a former chapter 7 debtor, appeals his felony conviction for concealing art work belonging to the chapter 7 estate, claiming that there was insufficient evidence to support the conviction and that the prosecutor made improper remarks during closing argument. A panel of this court initially vacated the judgment of conviction on the ground that the government had not established an essential element of the crime of concealment, see 18 U.S.C. § 152 (1979 & Supp.1991), namely, that the art work "belonged" to the chapter 7 estate at the time of the alleged concealment. United States v. Grant, 946 F.2d 1 (1st Cir. 1991) (withdrawn September 26, 1991). Upon rehearing en banc, we vacate the panel opinion and affirm the judgment of conviction.
We relate the material facts in the light most favorable to the verdict. United States v. Lopez, 944 F.2d 33, 39 (1st Cir. 1991); United States v. McNatt, 813 F.2d 499, 502 (1st Cir. 1987). Prior to 1987, Grant, a nonpracticing attorney, controlled five corporations [hereinafter "Summit"] which were engaged in providing financial and investment planning services. Between November 1983 and April 1986, Grant purchased at least nine remarqued maritime prints by artist John Stobart [hereinafter "Stobart prints"] from the Stobart Gallery in Boston, for between $1500 and $3000 each. Most of the invoices were signed by Grant, as the named "purchaser."1
The concealment offense with which Grant was charged under the indictment in this case required proof beyond a reasonable doubt that Grant knowingly concealed property of his chapter 7 estate from the chapter 7 trustee, with specific intent to defraud creditors. See United States v. Guiliano, 644 F.2d 85, 87 (2d Cir. 1981) (Bankruptcy Act case).3 Grant contends that the government failed to establish beyond a reasonable doubt that (1) the concealed Stobart prints were property of the chapter 7 estate, (2) Grant acted with the requisite specific intent to defraud creditors, and (3) the prints were of substantial value to the estate.
As Grant's "relation back" claim is raised for the first time on appeal, we review for plain error, see, e.g., United States v. Dietz, 950 F.2d 50, 55 (1st Cir. 1991) (as a general rule, appellant may not "switch horses mid-stream" and raise new legal arguments not made the basis for objections in the district court), affording appellate relief only from " ' "particularly egregious errors" ... that "seriously affect the fairness, integrity or public reputation of judicial proceedings".' " United States v. Griffin, 818 F.2d 97, 100 (1st Cir.) (quoting United States v. Young, 470 U.S. 1, 15, 105 S. Ct. 1038, 1046, 84 L. Ed. 2d 1 (1985) (quoting United States v. Frady, 456 U.S. 152, 102 S. Ct. 1584, 71 L. Ed. 2d 816 (1982))), cert. denied, 484 U.S. 844, 108 S. Ct. 137, 98 L. Ed. 2d 94 (1987).5 Assuming the trustee did abandon any interest of the chapter 7 estate in the Stobart prints allegedly concealed by Grant, a dubious proposition at best, see supra note 4, we conclude nonetheless that the doctrine of "relation back" is unavailing, as it is logically and legally inapposite to a criminal prosecution for concealing "property belonging to [a chapter 7] estate" arising under the Bankruptcy Code.
We note at the outset that the doctrine of "relation back" has been recognized in bankruptcy proceedings for more than a century, yet Grant has not cited to a criminal case in which the doctrine was applied. No less significantly, the doctrine originated within the very dissimilar framework of the Bankruptcy Act, and its application in relation to these chapter 7 proceedings under the Bankruptcy Code would serve none of the benign purposes for which it was fashioned. Rather, its extension to criminal proceedings for bankruptcy fraud arising out of a chapter 7 case would disserve the interests of justice which the "relation back" doctrine was designed to serve. See, e.g., Wallace v. Lawrence Warehouse Co., 338 F.2d 392, 394 n. 1 (9th Cir. 1964) ("[Relation back] is a fiction, and a fiction is but a convenient device, invented by courts to aid them in achieving a just result. It is not a categorical imperative, to be blindly followed to a result that is unjust."); Rosenblum v. Dingfelder, 111 F.2d 406, 409 (2d Cir. 1940) ("Relation back may be considered in the nature of a fiction" which may be used if it "fits" the case at hand).
Perhaps more importantly, however, neither "relation back" mechanism was designed to insulate bankruptcy fraud, either in the bankruptcy proceeding itself or in any related criminal proceeding. Like other criminal statutes, section 152 is intended to deter the outlawed conduct. See, e.g., Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 423 (3d Cir.) (§ 152 intended to deter nondisclosure of assets), cert. denied, 488 U.S. 967, 109 S. Ct. 495, 102 L. Ed. 2d 532 (1988); see also Stuhley v. Hyatt, 667 F.2d 807, 809 n. 3 (9th Cir. 1982). Section 152 promotes efficient bankruptcy administration and an equitable allocation of the assets of debtor estates by criminalizing efforts to preempt a neutral and informed assessment by the trustee as to the status and value of the debtor's legal, equitable, and possessory interests in property at the commencement of the case. See United States v. Cherek, 734 F.2d 1248, 1254 (7th Cir. 1984) ("It is a reasonable reading of 18 U.S.C. § 152 to conclude that the statute requires a bankrupt to disclose the existence of assets whose immediate status in bankruptcy is uncertain ... [e]ven if the asset is not ultimately determined to be property of the estate under the technical rules of the Federal Bankruptcy Code"), cert. denied, 471 U.S. 1014, 105 S. Ct. 2016, 85 L. Ed. 2d 299 (1985). If the debtor's schedules omit or camouflage an asset, the chapter 7 trustee is disabled from exercising an informed judgment as to whether the debtor had a sufficient legal, equitable, or possessory interest to permit and warrant its liquidation for the benefit of creditors.
The present case exemplifies a type of harm the bankruptcy fraud statute was designed to prevent. Although Grant vigorously argues that all the Stobart prints were abandoned by the trustee, their settlement agreement is more naturally interpreted as an abandonment of the two Stobart prints located and inventoried at the Grant residence, and not the five or six other Stobart prints allegedly removed on November 20, 1987. See supra note 4. It is sufficient to note that Grant's concealment of Stobart prints on November 20, 1987, put the trustee at a significant disadvantage in ascertaining the nature and value of the chapter 7 estate's interest in these prints. See In re Tarpley, 4 B.R. 145, 146 (Bankr.M.D. Tenn. 1980) (abandonment revocable where trustee lacked knowledge or "sufficient means of knowledge") (emphasis added).
Grant challenges the sufficiency of the government's evidence that the Stobart prints were "property belonging to [his chapter 7] estate," within the meaning of 18 U.S.C. § 152, clause 1.9 The present contention reduces to the basic proposition that particular elements of the prosecution's case, viewed in isolation, were inconclusive on the issue of the ownership of the Stobart prints.10 Of course we review the evidence as a whole and in context, not in piecemeal isolation. United States v. Geer, 923 F.2d 892, 894 (1st Cir. 1991) (per curiam); United States v. Kaplan, 832 F.2d 676, 679 (1st Cir.), cert. denied, 485 U.S. 907, 108 S. Ct. 1080, 99 L. Ed. 2d 239 (1987). The determination whether a debtor held a legal, equitable, or possessory interest in property at the commencement of the case requires the fact-finder to evaluate all relevant direct and circumstantial evidence relating to the property and to the intent of the debtor. See, e.g., Provencher v. Berman, 699 F.2d 568, 572-73 (1st Cir. 1983) (fact-finder considers evidence relating to such criteria as the source of funds, donative intent); accord In re Sommer, 28 B.R. 95, 95-97 (Bankr.D. Colo. 1983) (relevant factors may include the source of funds used to acquire the property, the record title, actual possession, intent of purchaser, payment of taxes, and maintenance of the property).
United States v. Lopez, 944 F.2d 33, 39 (1st Cir. 1991) (quoting United States v. Batista-Polanco, 927 F.2d 14, 17 (1st Cir. 1991)). Viewed in the light most favorable to the verdict, there was ample evidence that Grant acquired at least six Stobart prints in his own right, maintained them as his own, and well knew at the time of their removal that the prints belonged to his chapter 7 estate.
Grant insists that there was not enough evidence from which the jury could have concluded, beyond a reasonable doubt, that he removed the Stobart prints from his residence with the specific intent to defraud creditors. Analogizing to adversary proceedings under Bankruptcy Code § 727,14 Grant contends that a debtor normally will not be denied a discharge based on allegations of fraudulent concealment if the property was scheduled or otherwise disclosed to the trustee during the early stages of the bankruptcy proceedings. See, e.g., In re Hirengen, 112 B.R. 382, 385 (Bankr.D. Mont. 1989); In re Wolmer, 57 B.R. 128, 131-32 (Bankr.N.D. Ill. 1986). The attempted analogy ultimately depends on the establishment of three theses: (1) Grant disclosed the Stobart prints in the schedules attached to the voluntary chapter 11 petition filed in March 1987; (2) Grant was never disabused of the good faith understanding that he was authorized, as the agent of the displaced chapter 11 debtor in possession, to use property of the chapter 7 estate and to remove the prints from the Grant residence; and (3) Grant arranged to return the prints immediately upon learning that their removal was not authorized. Our review reveals sufficient record evidence for finding, beyond a reasonable doubt, that Grant, with the requisite fraudulent intent, removed and continued to conceal the prints.
First, the manner of Grant's disclosure of the prints did not preclude a jury finding that he subsequently concealed them. The crime of concealment includes "withhold[ing of] knowledge" or "prevent[ing] disclosure or recognition. " United States v. Turner, 725 F.2d 1154, 1157 (8th Cir. 1984) (§ 152 case) (emphasis added). Grant scheduled "15 prints & photographs ... located at 92 State Street" as his own property, neither providing a means of identifying any particular print, nor stating the total number or the individual or overall value of the prints. Since it was (and remains) impossible to determine from the property schedules how many Stobart prints were located at 92 State Street (or their identity and value), the schedules made no disclosure which would preclude the requisite fraudulent intent to conceal the prints removed from the Winchester residence on November 20, 1987.15
Third, the jury was not required to ascribe conclusive weight or import to Grant's testimony that he arranged to have the prints returned to the Winchester residence shortly after the trustee learned of their removal. Further, if the jury chose to credit Grant's testimony that he made arrangements to return the prints to the Grant residence, it was not required to conclude that the chapter 7 trustee was so informed. Moreover, in neither event did Grant's testimony preclude a finding that he removed the prints with the requisite fraudulent intent to conceal, even if he returned them after their removal had been discovered. Although the replacement of removed property may be probative evidence of a lack of fraudulent intent, it is not dispositive. See United States v. Klupt, 475 F.2d 1015, 1018-1019 (2d Cir. 1973) (return of property not dispositive under § 152); see also United States v. Rodriguez-Cardona, 924 F.2d 1148, 1151 (1st Cir.) (proof of continuing criminal intent unnecessary; "it is sufficient to prove that a defendant had the necessary intent at the time of the offense.") (emphasis added), cert. denied, --- U.S. ----, 112 S. Ct. 54, 116 L. Ed. 2d 31 (1991). Given the highly incriminating circumstantial evidence, see supra at pp. 801-02, the jury was entitled to conclude that Grant possessed the requisite fraudulent intent to conceal the prints at the time he removed them from the Grant residence and thereafter.
Grant contends that section 152 implicitly requires that the concealment involve a "substantial amount" of property "material" to the chapter 7 estate, see United States v. Key, 859 F.2d 1257, 1261 (7th Cir. 1988), which must be determined in relation to the overall value of the estate.16 Relying on the "victim loss" calculation made at sentencing, see U.S.S.G. § 2F1.1, Grant argues that the government at best may have proven concealment of two Stobart prints worth $100, which must be considered too insubstantial a value, as a matter of law, in relation to a debtor estate of $3,000,000 to $4,000,000.17
Grant cites no authority for the suggested "substantiality" requirement and nothing in the language of section 152 supports it. See Kanner v. United States, 21 F.2d 285, 287 (2d Cir. 1927) (value of concealed property is not an essential element of the conduct criminalized under § 152); cf. United States v. Solomonson, 908 F.2d 358, 364-65 (8th Cir. 1990) (unnecessary to prove actual financial loss to victim under bank fraud statute).18 Furthermore, as the overriding prophylactic aim of the bankruptcy fraud statute is to deter and punish conduct which would inhibit the ability of the trustee, as distinguished from the debtor, see Bankruptcy Code § 542(a), 11 U.S.C. § 542(a); see also supra pp. 805-06, to determine whether property of the estate is of sufficient value to warrant liquidation and distribution for the benefit of creditors, we do not find the "substantiality" claim compelling in the present circumstances.19
Since Grant did not object to any of the prosecutor's remarks at trial, we review for plain error, see Rodriguez-Cardona, 924 F.2d at 1154, evaluating the challenged remarks in the context of the entire record. See United States v. Rosa, 705 F.2d 1375, 1380 (1st Cir. 1983). Our review reveals that these statements were supported by the following evidence and the reasonable inferences drawn therefrom: (1) Grant did buy the Stobart prints, the only dispute being in what capacity; (2) Grant's assistant, Murphy, testified that Grant took the time to explain to her the special qualities of the remarqued prints shortly after Grant purchased them; (3) Murphy testified that Grant's personal files contained a list of Stobart prints identical to the list forwarded to Summit's insurer, see supra note 1; (4) Linda Young, Esquire, notified Grant that the chapter 7 trustee was proceeding to collect all assets of the estate for liquidation and distribution; (5) Grant's conduct demonstrated his right of access to the Winchester residence, and the trustee had agreed to allow Grant to continue to reside there; (6) Grant told the trustee at their November 20 meeting, which ended at 10:30 a.m., that he had an appointment with another attorney "later that morning" which would extend beyond noon; (7) Grant's statements to the trustee implied that he would not have time to return to Winchester, by train or otherwise, before his next meeting; (8) Grant would not have needed to ask his assistants to transport the prints if there had been additional room in his van; (9) Grant's assistant, Murphy, testified that she was "pretty sure" that at least eight of the framed items placed in the vehicles were Stobart prints; (10) Grant's other assistant, Dolores Donahue, testified that he told her that he "shouldn't have taken [the prints]"; (11) Grant did not arrange for the return of the prints until after the trustee had left the residence on November 20; and (12) Grant testified that he had removed only two prints from the Winchester residence, not the six prints charged in the indictment.
Grant's "relation back" claim cannot succeed unless the trustee abandoned the chapter 7 estate's entire interest in all the Stobart prints. As a general rule, an abandonment does not relinquish an undisclosed interest in property. See Dushane v. Beall, 161 U.S. 513, 516, 16 S. Ct. 637, 638-39, 40 L. Ed. 791 (1896). Even though the jury could have found that Grant concealed eight or nine Stobart prints on November 20, 1987, see infra note 20, only two prints were found in the Grant residence prior to the putative abandonment. See supra note 2. The August 1989 settlement agreement merely provided:
The "revesting" mechanism. Under the ancillary "revesting" mechanism, title to property abandoned by the trustee in bankruptcy as valueless or unduly burdensome, see 4A Collier p 70.42, at 511, was deemed to revert to the bankrupt, or to a bona fide transferee from the bankrupt during the pre-abandonment period, see, e.g., Bankruptcy Act § 70(a) (2), (b) & (d), 11 U.S.C. § 110(a) (2), (b) & (d); Brown v. O'Keefe, 300 U.S. 598, 602, 57 S. Ct. 543, 546, 81 L. Ed. 827 (1937) (citing American File Co. v. Garrett, 110 U.S. 288, 295, 4 S. Ct. 90, 94, 28 L. Ed. 149 (1884)); In re Yalden, 109 F. Supp. 603, 604 (D. Mass. 1953). In the rare instance where a post-abandonment title dispute arose between the bankrupt and an interim transferee, the trustee was deemed to have abandoned the title the bankrupt held at the date of bankruptcy, rather than the title held by the trustee in bankruptcy at the time of the abandonment. See 4A Collier p 70.42, at 514. Under the title "revesting" mechanism, therefore, the bankrupt's prepetition title to the abandoned property would be reinstated, free of any intervening act by the trustee, see, e.g., Brookhaven Bank & Trust Co. v. Gwin, 253 F.2d 17, 23, 23 n. 6 (5th Cir. 1958) (although trustee's "strong-arm" powers arguably invalidated some pre-bankruptcy liens against bankrupt's property, thereby affecting the priority of competing lien claims to proceeds from trustee's sale of collateral, abandonment of proceeds revested title in debtor "as if it had never been in the trustee"), but subject to the rights of any interim transferee from the bankrupt, see, e.g., Rosenblum v. Dingfelder, 111 F.2d 406, 408-09 (2d Cir. 1940) (bankrupt corporation could make valid pre-abandonment assignment to plaintiff of a chose in action even though it then belonged to bankrupt estate). Thus, even though an interim transfer by the bankrupt might be voidable by the trustee in bankruptcy, see, e.g., Bankruptcy Act § 70(e) (1), (2), 11 U.S.C. § 110(e) (1), (2), the "revesting" mechanism prevented the bankrupt from asserting a superior claim against the interim transferee
Grant's March 17, 1988 deposition was introduced at trial. At the deposition, Grant acknowledged that he had owned between eight and twelve Stobart prints, and expressly stated that he did not "believe [Summit] ever owned any of the prints." (Emphasis added.) Although Grant attempts on appeal to explain away the inconsistency, the effort falls short in light of his categorical denial that Summit ever owned any of the prints. The jury was responsible for evaluating any testimonial inconsistencies and was free to consider Grant's pre-indictment deposition as substantive evidence of his ownership of between eight and twelve Stobart prints. See Fed.R.Evid. 801(d) (1), (2)
Bankruptcy Code § 727(a) (2) (B) provides, in pertinent part:
The authority cited by Grant is inapposite. United States v. Key, 859 F.2d at 1261, involved false statements by a debtor in the course of a bankruptcy proceeding, an offense punishable under clause 2 of section 152. Id. (false statement by debtor concerning allegedly worthless property is "material" if it either "bears a relationship to the bankrupt's business transactions or his estate, ... or pertains to the discovery of assets") (citing United States v. Jackson, 836 F.2d 324, 329 (7th Cir. 1987)); see also United States v. O'Donnell, 539 F.2d 1233, 1237-38 (9th Cir.), cert. denied, 429 U.S. 960, 97 S. Ct. 386, 50 L. Ed. 2d 328 (1976). It seems significant, nonetheless, that even in a prosecution for making a "material" false statement, the government need not prove that the statement resulted in actual harm to creditors. See id. at 1237
Grant argues also that there was a fatal variance between the value alleged in the indictment ($12,000) and the value established at trial. Given our conclusion that the record would support a finding that the concealed prints were worth approximately $12,000, as alleged in the indictment, see infra note 21, Grant's variance claim cannot succeed. See United States v. Flaherty, 668 F.2d 566, 582 (1st Cir. 1981) (substantial right implicated only where indictment too vague to allow defendant to prepare adequate defense, or exposes defendant to risk of double prosecution for same offense); see also United States v. Beery, 678 F.2d 856, 865 (10th Cir. 1982) ("fact that the amount concealed [from receiver and trustee] was less than the amount contained in the indictment does not affect any substantial right.").
Although de minimis value may be probative evidence of the absence of an intent to defraud, cf. In re Taub, 98 F.2d 81, 82 (2d Cir. 1938) ("[l]ack of value in the property omitted from the schedules tends to negative fraudulent intent") (objection to discharge under Bankruptcy Act); In re Graham, 122 B.R. 447, 448 (Bankr.M.D. Fla .1990) (same) (under Bankruptcy Code), the language of section 152, clause 1, does not require a showing that the concealed property was of substantial value. Cf. Bankruptcy Code § 542(a), 11 U.S.C. § 542(a) ("inconsequential value"). Moreover, the contention that the value of the concealed property must be determined in relation to the overall value of the debtor estate is more suitably tailored to fashioning a defense against prosecution for bankruptcy fraud than to fostering sound bankruptcy policy. There appears to be no appropriate correlation between the overall value of a debtor estate and the public policy favoring protection of creditors from fraudulent debtor conduct, except perhaps in the rare event where the value of the estate (large or small) exceeds all possible claims against it
Grant also contends that the prosecutor improperly vouched for (1) the testimony of Linda Young, by suggesting that she "ha[d] no interest in the [criminal] case" because her association with the Grant bankruptcy case had ended in 1988, and (2) the testimony of Grant's former assistants, by suggesting that, if they had any bias, it would be in favor of their former employer. Improper vouching occurs where " 'the prosecution ... place[s] the prestige of the government behind the witnesses [ ] by making explicit personal assurances of the witness' veracity,' " or where the prosecutor " 'implicitly vouch[es] for the witness' veracity by indicating that information not presented to the jury supports the testimony.' " United States v. Martin, 815 F.2d 818, 821-22 (1st Cir. 1987) (quoting United States v. Sims, 719 F.2d 375, 377 (11th Cir. 1983), cert. denied, 465 U.S. 1034, 104 S. Ct. 1304, 79 L. Ed. 2d 703 (1984)). Gauged against these criteria, none of the prosecutor's remarks amounted to impermissible vouching