Opinion ID: 468198
Heading Depth: 2
Heading Rank: 1

Heading: Actual Intent to Hinder, Delay, or Defraud a Creditor

Text: 12 The bankruptcy court denied discharge of Adeeb's debts pursuant to 11 U.S.C. Sec. 727(a)(2)(A) (1982). Section 727(a)(2)(A) provides that a debtor shall not be granted a discharge if within one year of the filing of a petition in bankruptcy he has transferred, removed, destroyed, mutilated, or concealed his property with intent to hinder, delay, or defraud a creditor. 13 Section 727's denial of discharge is construed liberally in favor of the debtor and strictly against those objecting to discharge. In re Devers, 759 F.2d 751, 754 (9th Cir.1985). Accordingly, discharge of debts may be denied under section 727(a)(2)(A) only upon a finding of actual intent to hinder, delay, or defraud creditors. Constructive fraudulent intent cannot be the basis for denial of a discharge. Id. at 753. However, intent may be established by circumstantial evidence, or by inferences drawn from a course of conduct. Id. at 753-54. 14 The bankruptcy court found that Adeeb transferred real property out of his estate with actual intent to hinder or delay a creditor. Adeeb argues that the court's finding of actual intent is clearly erroneous. He contends that circumstances surrounding the transfers and events subsequent to the transfers indicate that he did not actually intend to defraud his creditors. In support of this argument, Adeeb points out that he disclosed the transfers to his creditors and recovered or attempted to recover the property. He also points out that he transferred the property on the advice of his attorney and that he intended to protect the property from one creditor for the benefit of the other creditors. 15 Adeeb's reliance on circumstantial evidence and inferences from his conduct to prove that he lacked actual intent is misplaced. Adeeb admitted that he transferred the property intending to put it out of the reach of one of his creditors. When a debtor admits that he acted with the intent penalized by section 727(a)(2)(A), there is no need for the court to rely on circumstantial evidence or inferences in determining whether the debtor had the requisite intent. Under these circumstances, the district court was not clearly erroneous in finding that Adeeb acted with actual intent to hinder or delay a creditor. 16 Further, Adeeb's claim that he lacked actual intent to hinder or delay his creditors because he relied on the advice of his attorney is mistaken. Generally, a debtor who acts in reliance on the advice of his attorney lacks the intent required to deny him a discharge of his debts. See, e.g., Hultman v. Tevis, 82 F.2d 940, 941 (9th Cir.1936); In re Nerone, 1 B.R. 658, 660 (Bankr.S.D.N.Y.1979). However, the debtor's reliance must be in good faith. See Hultman, 82 F.2d at 941; Nerone, 1 B.R. at 660. In this case, the bankruptcy court found that both Cooper and Adeeb knew that the purpose of the transfers was to hinder or delay creditors of the debtor. Such a finding precludes the defense of good faith reliance on the advice of an attorney even if the client is otherwise innocent of any improper purpose. A debtor who knowingly acts to hinder or delay his creditors acts with the very intent penalized by section 727(a)(2)(A). 17 Adeeb is also mistaken in his assertion that he lacked actual intent because he intended to protect some of his creditors. Our inquiry under section 727(a)(2)(A) is whether Adeeb intended to hinder or delay a creditor. If he did, he had the intent penalized by the statute notwithstanding any other motivation he may have had for the transfer. Cf. Matter of Trinity Baptist Church, 25 B.R. 529, 532-33 (Bankr.M.D.Fla.1982) (admirable of debtor to attempt to protect assets from one creditor for benefit of all creditors; nevertheless, the result is hinderance and delay of creditors that makes the transfer voidable). Further, the statute requires only that the debtor make the transfer with intent to hinder, delay, or defraud a creditor. There is no requirement that the debtor intend to hinder all of his creditors. See Matter of Goldberg, 2 B.R. 15, 17 (Bankr.S.D.Fla.1979).