Court Opinion

ID: 4192886
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:03:09.303418+00
Date Added: 2024-06-11T14:40:28.681416
License: Public Domain

FILED
                                                            JUN 01 2015
 1                         NOT FOR PUBLICATION
                                                        SUSAN M. SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 2                                                        OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    CC-14-1361-TaPaKi
                                   )
 6   JESUS BENCOMO,                )      Bk. No.    13-11245-BR
                                   )
 7                   Debtor.       )      Adv. No.   13-01451-BR
     ______________________________)
 8                                 )
     JESUS BENCOMO,                )
 9                                 )
                     Appellant,    )
10                                 )
     v.                            )      MEMORANDUM*
11                                 )
     WESLEY HOWARD AVERY,          )
12   Chapter 7 Trustee; UNITED     )
     STATES TRUSTEE,               )
13                                 )
                     Appellees.    )
14   ______________________________)
15                   Argued and Submitted on March 19, 2015
                             at Pasadena, California
16
                              Filed - June 1, 2015
17
                 Appeal from the United States Bankruptcy Court
18                   for the Central District of California
19            Honorable Barry Russell, Bankruptcy Judge, Presiding
20
     Appearances:     Glenn Ward Calsada of the Law Offices of Glenn
21                    Ward Calsada argued for appellant; Stella A.
                      Havkin of Havkin & Shrago argued for appellee.
22
23   Before:    TAYLOR, PAPPAS, and KIRSCHER, Bankruptcy Judges.
24
25
26        *
             This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8024-1(c)(2).
 1        Chapter 71 debtor Jesus Bencomo appeals from a judgment
 2   denying his bankruptcy discharge pursuant to § 727(a)(4)(A).     We
 3   determine that the bankruptcy court did not err when it included
 4   the Debtor’s misconduct in a prior bankruptcy as a basis for its
 5   decision.    The bankruptcy court, however, did not make findings
 6   that allow us to review how it resolved the Debtor’s objections
 7   to the admissibility of expert testimony from the bankruptcy
 8   trustee’s sole witness.   As a result, we VACATE the judgment and
 9   REMAND the case to the bankruptcy court.
10                                   FACTS
11        The Debtor filed a chapter 7 petition on January 16, 2013.
12   Wesley H. Avery was appointed as the chapter 7 trustee
13   (“Trustee”).   The bankruptcy case was the Debtor’s second.    He
14   filed a chapter 7 petition in May of 1998 and received a
15   discharge three months later.
16        In the second case, the Debtor scheduled real property
17   located in Norwalk, California (the “Property”) at a value of
18   $175,000.2   He also scheduled a $145,879 claim secured by the
19   Property and claimed a $29,121 exemption in the Property under
20
21
          1
             Unless otherwise indicated, all chapter and section
22   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.
     All “Rule” references are to the Federal Rules of Bankruptcy
23
     Procedure, all “Civil Rule” references are to the Federal Rules
24   of Civil Procedure, and all “Evidence Rule” references are to
     the Federal Rules of Evidence.
25
          2
             We exercise our discretion to take judicial notice of
26   documents electronically filed in the adversary proceeding and
27   the underlying bankruptcy case. See Atwood v. Chase Manhattan
     Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP
28   2003).

                                       2
 1   state law.
 2        Following the § 341(a) meeting of creditors, the Trustee
 3   filed an application to employ Re/Max of Santa Clarita and
 4   Miguel Soler as the broker for the estate preparatory to
 5   marketing and selling the Property.    The employment application
 6   asserted that the actual current value of the Property was
 7   between $305,000 and $333,000.    Thus, even if the Debtor claimed
 8   the maximum statutory exemption against the Property, the
 9   Trustee estimated a net realization for the estate of between
10   $60,000 and $86,000.
11        Two weeks later, the Debtor amended his schedules; he
12   increased the scheduled value of the Property from $175,000 to
13   $245,000 and the amount of the claim secured by the Property
14   from $145,879 to $214,929.27.    He also increased his claimed
15   exemption from $29,121 to $100,000.
16        The Debtor also opposed the Trustee’s application to employ
17   a broker.    Following various continued hearings, the bankruptcy
18   court entered an order granting the employment application.
19        Meanwhile, the Trustee commenced an adversary proceeding
20   against the Debtor, objecting to his bankruptcy discharge under
21   § 727(a)(2)(A) and (a)(4)(A).    As relevant to this appeal, the
22   adversary complaint alleged that the Debtor was a longtime real
23   estate professional and, as a result, knew that at the time of
24   the filing of the petition the value of the Property was in the
25   $300,000 range, rather than $175,000 as initially scheduled.
26   The adversary complaint also alleged that the Debtor knowingly
27   and fraudulently “severely undervalued” the Property in his
28   schedules.

                                      3
 1        The bankruptcy court entered the parties’ joint pretrial
 2   conference order; it disclosed Soler and the Debtor as the
 3   Trustee’s intended witnesses at trial.    Pursuant to another
 4   bankruptcy court order, Soler provided his direct testimony by
 5   declaration.
 6        In his declaration, Soler attested that he was a licensed
 7   real estate agent and specialized in residential real estate
 8   sales.   Soler opined that the value of the Property was at least
 9   $305,000 at the time of the petition, based initially on a
10   review of multiple listings in the area; he confirmed his
11   opinion almost a year later by a physical inspection.
12        The Debtor objected to Soler’s declaration and moved to
13   strike his testimony.   He disputed Soler’s qualifications and
14   the methodology Soler employed in rendering his opinion that the
15   Property was valued at $305,000.    The Debtor particularly
16   challenged Soler’s failure to provide a written report or to
17   identify the sources of data used to render the $305,000 value.
18   As a result, the Debtor complained that he was hindered from
19   evaluating the accuracy and completeness of Soler’s analysis.
20        The bankruptcy court held a one-day trial on June 17, 2014.
21   Both the Debtor and Soler provided additional testimony.
22        The Debtor, over his counsel’s objections, responded to the
23   Trustee’s specific inquiries regarding several prior transfers
24   of the Property.   He testified that within a two-week period in
25   December 1996, there were three transfers of the Property: from
26   the previous owner to him, then from him to a third party, and
27   finally from the third party back to him.    The last deed
28   transferring the Property back to the Debtor remained in his

                                     4
 1   possession for approximately six years, without recordation,
 2   until he finally recorded the deed in 2002.   He acknowledged
 3   that he did not disclose the Property in his 1998 chapter 7
 4   case.
 5         At the conclusion of trial, the bankruptcy court recognized
 6   that it was a close case; nonetheless, it sustained the
 7   Trustee’s objection to discharge under § 727(a)(4)(A) based on
 8   the Debtor’s undervaluation of the Property in his schedules.
 9         The bankruptcy court found that the value of the Property
10   was “significantly higher” than $175,000.   It also found that
11   the Debtor knew that he undervalued the Property.   Conversely,
12   the bankruptcy court found credible the testimony of Soler, as
13   the Trustee’s “qualified expert”; Soler both attacked the
14   Debtor’s value and valuation methodology and gave his own
15   opinion of value.   The bankruptcy court also found that the
16   Debtor’s actions in his first bankruptcy case constituted an
17   inappropriate manipulation of the bankruptcy system and
18   supported its credibility determinations.
19         The bankruptcy court entered findings of fact and
20   conclusions of law and a judgment denying discharge.   The Debtor
21   timely appealed.
22                               JURISDICTION
23         The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
24   §§ 1334 and 157(b)(2)(J).   We have jurisdiction under 28 U.S.C.
25   § 158.
26   ///
27   ///
28   ///

                                      5
 1                                  ISSUES3
 2   1.   Whether Soler was required to file a written expert report
 3        pursuant to Civil Rule 26(a)(2)(B) and whether, in the
 4        absence of such a report, the bankruptcy court erred in
 5        permitting Soler’s testimony.
 6   2.   Whether the bankruptcy court erred by “widening the scope”
 7        of trial so as to include a false oath made in the Debtor’s
 8        first bankruptcy case.
 9                         STANDARDS OF REVIEW
10        In a proceeding for denial of discharge, we review: (1) the
11   bankruptcy court’s determinations of the historical facts for
12   clear error; (2) its selection of the applicable legal rules
13   under § 727 de novo; and (3) its application of the facts to
14   those rules requiring the exercise of judgments about values
15   animating the rules de novo.    Searles v. Riley (In re Searles),
16   317 B.R. 368, 373 (9th Cir. BAP 2004), aff’d, 212 F. App’x. 589
17   (9th Cir. 2006).
18        To reverse an evidentiary ruling, we must find that the
19   bankruptcy court abused its discretion and that the error was
20   prejudicial to the appellant.    Van Zandt v. Mbunda
21   (In re Mbunda), 484 B.R. 344, 351 (9th Cir. BAP 2012).   A
22   bankruptcy court abuses its discretion if it applies the wrong
23
24        3
             The Debtor delineates 20 issues on appeal, some of which
25   are substantively identical, but posed in the converse. In his
     opening brief, however, the Debtor only specifically addresses
26   the issues we identify above.
27        Given our ultimate determination, we do not address whether
     the bankruptcy court erred in determining that sufficient
28   evidence existed supporting the $305,000 value.

                                      6
 1   legal standard, misapplies the correct legal standard, or if its
 2   factual findings are illogical, implausible, or without support
 3   in inferences that may be drawn from the facts in the record.
 4   See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832
 5   (9th Cir. 2011) (citing United States v. Hinkson, 585 F.3d 1247,
 6   1262 (9th Cir. 2009) (en banc)).
 7                                DISCUSSION
 8        Section 727(a)(4)(A) provides that the debtor’s discharge
 9   may be denied where: (1) the debtor made a false oath in
10   connection with the bankruptcy case; (2) the oath related to a
11   material fact; (3) the oath was made knowingly; and (4) the oath
12   was made fraudulently.   Retz v. Sampson (In re Retz), 606 F.3d
13   1189, 1197 (9th Cir. 2010) (citation and internal quotation
14   marks omitted).
15         Objections to discharge are liberally construed in favor
16   of the debtor and against the objector.   Khalil v. Developers
17   Sur. & Indem. Co. (In re Khalil), 379 B.R. 163, 172 (9th Cir.
18   BAP 2007), aff’d, 578 F.3d 1167 (9th Cir. 2009).   For that
19   reason, the objector bears the burden to prove by a
20   preponderance of the evidence that the debtor’s discharge should
21   be denied.   Id.
22        On appeal, the Debtor argues that the bankruptcy court
23   erred by permitting Soler to testify at trial when he did not
24   file a written expert report and by expanding the scope of trial
25   so as to include an alleged false oath that the Debtor made in
26   his first bankruptcy case.   He does not raise issues related to
27   any of the elements expressly required for a denial of discharge
28   under § 727(a)(4)(A), and, in particular, he does not even

                                      7
 1   implicitly discuss the second or third elements of a
 2   § 727(a)(4)(A) claim.    Therefore, we do not address those
 3   elements here.
 4   A.   On this record, we cannot tell how the bankruptcy court
 5        ruled on the issue of Soler’s testimony.
 6        The Debtor argues that Civil Rule 37(c)(1) compelled the
 7   exclusion of Soler’s testimony based on his failure to produce a
 8   written report in accordance with Civil Rule 26(a)(2)(B).         This
 9   failure, the Debtor contends, was not harmless as the Trustee’s
10   case was based entirely on Soler’s testimony.        The Debtor
11   alleges that without the report, he was unable to adequately
12   prepare for cross-examination.
13        The Trustee disagrees that any report was required; he
14   argues that Soler was retained to market and sell the Property,
15   not to testify.   He further asserts that Soler’s duties in
16   connection with his authorized employment did not regularly
17   involve giving expert testimony.        Rather, the Trustee argues,
18   Soler’s testimony was that of a percipient witness.
19        Civil Rule 26(a)(2)(B) requires “a written report -
20   prepared and signed by the witness - if the witness is one
21   retained or specially employed to provide expert testimony in
22   the case or one whose duties as the party’s employee regularly
23   involve giving expert testimony.”        If a party fails to provide a
24   written report, Civil Rule 37(c)(1) dictates that both testimony
25   and information supplied by the expert witness are prohibited at
26   trial.   An exception exists if the failure was substantially
27   justified or harmless.    See id.
28        Here, the bankruptcy court did not expressly rule on the

                                         8
 1   Debtor’s objections to Soler’s testimony.   It permitted Soler to
 2   testify on cross-examination, subject to a later determination.
 3   It subsequently deemed Soler’s testimony credible and referred
 4   to Soler as a “qualified expert.”   It thus appears that it
 5   overruled the Debtor’s evidentiary objections.
 6        On this record, however, we cannot determine with any
 7   certainty how the bankruptcy court ruled.   And that the
 8   bankruptcy court did not expressly address or resolve the
 9   Debtor’s objection to Soler’s testimony is a serious concern
10   because we are unable to appropriately review the merits of the
11   Debtor’s argument absent adequate findings by the bankruptcy
12   court on this subject.
13        The bankruptcy court apparently treated Soler as an expert
14   witness.   Its lone finding in this regard is not particularly
15   helpful: “Trustee’s qualified expert, Miguel Soler, testified
16   that the true value of [the Debtor’s] Property at the time that
17   he filed the Second Bankruptcy was at least $305,000.00 and not
18   $175,000.00 as claimed by [the Debtor] in his original
19   bankruptcy schedules.”   Findings of Fact and Conclusions of Law
20   Following the Trial (Adv. ECF No. 52) at 3 ¶ 13.   In that
21   circumstance, Soler’s failure to provide a written report is
22   problematic under Civil Rule 26(a)(2)(B), unless, of course, the
23   bankruptcy court determined that the error was substantially
24   justified or harmless pursuant to Civil Rule 37(c)(1).     On this
25   record, we cannot discern what the bankruptcy court determined.
26   In particular, we do not know what value the bankruptcy court
27   utilized when it determined that the Debtor “severely
28   undervalued” the Property.   Soler gave his opinion that the

                                     9
 1   value was at least $305,000, while the Debtor conceded some
 2   undervaluation when he revalued the Property at $245,000.
 3        Civil Rule 52(a) requires that the bankruptcy court find
 4   the facts specifically and state its conclusions of law
 5   separately.4    Without complete findings, we may vacate a
 6   judgment and remand the case to the bankruptcy court to make the
 7   requisite findings.    First Yorkshire Holdings, Inc. v. Pacifica
 8   L 22, LLC (In re First Yorkshire Holdings, Inc.), 470 B.R. 864,
 9   870 (9th Cir. BAP 2012).
10        We conclude that the bankruptcy court abused its discretion
11   by failing to make sufficient findings regarding Soler’s opinion
12   testimony.     Consequently, we VACATE the judgment and REMAND the
13   matter to the bankruptcy court with instructions that it enter
14   appropriate findings concerning the Debtor’s objection to
15   Soler’s testimony, and that it consider the impact of those
16   findings upon its conclusions and judgment.
17   B.   The Debtor’s prior acts in regards to the Property were
18        admissible impeachment evidence.
19        The Debtor also argues that the bankruptcy court erred by
20   admitting into evidence his prior acts involving the Property.
21   He questions whether this evidence constituted appropriate
22   impeachment and argues that it was irrelevant and prejudicial as
23   the events in the prior bankruptcy were too remote in time.    He
24   finally argues that there was no evidence that he made a false
25   oath in the first bankruptcy case and that, in any event, it was
26
27        4
             Civil Rule 52 is incorporated in adversary proceedings
28   by Rule 7052.

                                       10
 1   a collateral matter where he was not provided with reasonable
 2   notice and a fair opportunity for rebuttal.
 3        In response, the Trustee contends that he utilized evidence
 4   of actions in the Debtor’s first bankruptcy case only to show
 5   that the Debtor had “gone to every conceivable length to protect
 6   his interest in the [] Property” – not to revoke his discharge
 7   in the first case.
 8        The joint pretrial conference order in this case resolves
 9   this debate.    The parties stipulated to the terms of this order,
10   which identified the exhibits each intended to offer at trial.
11   It also qualified the identification of documents with the
12   statement that it was complete except for “exhibits to be used
13   for impeachment only.”    Joint Pretrial Conference Order (Adv.
14   ECF No. 26) (emphasis added).    There was no due process problem
15   with introducing the evidence for purposes of impeaching the
16   Debtor’s generalized assertion of truthfulness.
17        Pursuant to Evidence Rule 608(b), the bankruptcy court may
18   permit a witness to be cross-examined about specific instances
19   of conduct in order to attack the witness’s character for
20   truthfulness.   Determining whether the testimony is probative of
21   truthfulness or untruthfulness is committed to the discretion of
22   the bankruptcy court.    In exercising its discretion, the
23   bankruptcy court may take into consideration how remote in time
24   the impeaching conduct occurred.      See United States v. Jackson,
25   882 F.2d 1444, 1448 (9th Cir. 1989) (“[R]emoteness remains a
26   relevant factor for the trial court to consider in assessing the
27   probative value of the evidence” for impeachment under Evidence
28   Rule 608(b)).

                                      11
 1        Here, the bankruptcy court permitted the Trustee to cross-
 2   examine the Debtor regarding the transfers of the Property and
 3   his failure to schedule the Property in his first bankruptcy
 4   case in order to raise questions as to the Debtor’s character
 5   for truthfulness.    In doing so, it implicitly determined that
 6   this evidence constituted appropriate impeachment and was more
 7   probative of the Debtor’s truthfulness than prejudicial.    It
 8   also implicitly concluded that the evidence was not too remote
 9   in time.
10        We agree.    Evidence of the Debtor’s prior acts in relation
11   to the Property – namely, omitting the Property from his
12   schedules in the first bankruptcy case despite his possession of
13   a deed transferring the Property to him – was probative of his
14   truthfulness.    That the acts occurred years before the second
15   bankruptcy case and the adversary proceeding did not mandate
16   exclusion.   See Jackson, 882 F.2d at 1448 (prosecution was
17   permitted to question a witness attorney about his disbarment
18   fourteen years earlier for misappropriation of client funds).
19        The bankruptcy court did not improperly expand the scope of
20   the trial.   Nor did it abuse its discretion in permitting the
21   impeachment evidence.
22                                CONCLUSION
23        Based on the foregoing, we VACATE the judgment and REMAND
24   to the bankruptcy court for entry of appropriate findings
25   concerning the Debtor’s objection to Soler’s testimony.
26
27
28

                                      12