Pacheco-Koveleski v. Brown ( 1999 )

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 27 1999
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
In re: KIRK PATTERSON BROWN,
HELEN TOMICICH BROWN,
Debtors.
No. 99-1019
____________________________ (D.C. No. 97-B-2671)
(D. Colo.)
CHRISTINE PACHECO-
KOVELESKI, Chapter 7 Trustee,
Plaintiff-Appellee,
v.
KIRK PATTERSON BROWN,
HELEN TOMICICH BROWN,
Defendants-Appellants.
ORDER AND JUDGMENT *
Before TACHA , KELLY , and BRISCOE , Circuit Judges.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
Debtors Kirk and Helen Brown appeal the district court’s affirmance of the
bankruptcy court’s orders (1) granting the trustee an extension of time in which to
file a complaint objecting to debtors’ discharge, and (2) denying debtors a
discharge pursuant to 11 U.S.C. §§ 727(a)(2) & (4). We exercise jurisdiction
pursuant to 28 U.S.C. § 158, and affirm.
Debtors filed bankruptcy under Chapter 7 of Title 11 of the United States
Code on December 9, 1996. At that time, Mr. Brown was a practicing attorney
whose office maintained a Colorado Lawyer Trust Account Foundation
(COLTAF) account. The first creditors’ meeting was set for January 8, 1997, thus
the trustee had until March 10, 1997, to object to debtors’ discharge. See Fed. R.
Bank. P. 4004(a). The bankruptcy court approved counsel for the trustee on
February 7, 1997.
A group of five unsecured creditors had previously scheduled a Rule 2004
creditors’ examination for February 12, 1997. Because the trustee’s counsel had
just been appointed, the trustee did not attend and participate in the examination.
The examination was not completed on that date, however, and a continuation was
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scheduled for March 19, 1997, nine days after the deadline for objecting to the
debtors’ discharge. On March 7, 1997, after reviewing a copy of the examination
transcript and certain documents received on March 6, 1997, the trustee moved
for an extension of the deadline for objecting to debtors’ discharge. The group of
five creditors joined in the trustee’s motion. A hearing was held on April 21,
1997, at which the requested ninety-day extension was granted.
The creditors’ examination continued on March 19, 1997, but was not
completed. On March 27, 1997, the trustee obtained an order for a Rule 2004
examination to be held on May 14, 1997. On June 6, 1997, the trustee filed her
complaint objecting to the debtors’ discharge based on debtors’ use and
subsequent concealment of the COLTAF account. After a trial, the bankruptcy
court denied debtors’ discharge on December 8, 1997. The district court
affirmed, and this appeal followed.
Debtors argue first that the district court erred in finding the bankruptcy
court did not abuse its discretion by granting the extension. 1
“We review the
district and bankruptcy courts’ legal determinations de novo, and the bankruptcy
1
Debtors also argue for the first time that they were not provided notice of
the hearing on the motion to extend. We do not consider bankruptcy issues that
were not raised in an appeal to the district court, however. See Walker v. Mather
(In re Walker) , 959 F.2d 894, 896 (10th Cir. 1992). Even if we were to consider
this issue, debtors would lose, because it is apparent that they had actual notice of
the hearing and were represented by counsel at that proceeding.
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court’s factual findings for clear error.” IRS v. Craddock (In re Craddock) , 149
F.3d 1249, 1255 (10th Cir. 1998). The bankruptcy court’s order granting an
extension of time is reviewed for an abuse of discretion. See Pioneer Inv. Servs.,
Co. v. Brunswick Assocs. Ltd. Partnership , 507 U.S. 380, 398 (1993) (reviewing
extension of bar date under Fed. R. Bank. P. 9006(b)(1) for abuse of discretion).
We conclude the bankruptcy court did not abuse its discretion. Debtors
have attempted to prevent inquiry into their use of the COLTAF account from the
beginning, by failing to disclose the account or their use of it on any of their
schedules, by seeking a protective order, by claiming the information was
privileged, and by delaying production of much of the requested documentation
until after the March 10, 1997 deadline for objecting to their discharge. Debtors
were responsible also for the delay in continuing the creditor’s Rule 2004
examination beyond the scheduled deadline based on their attorney’s congested
calendar. It is clear that denying the motion to extend the deadline would have
precluded a full and complete examination of debtors and would have permitted
them to thwart the purpose of the examination procedure. See In re Solomon , 506
F.2d 463, 465 (7th Cir. 1974) (approving extension when retaining original
deadline would have precluded proper examination of debtors); Northeastern Real
Estate Secs. Corp. v. Goldstein , 91 F.2d 942, 943-44 (2d Cir. 1937) (describing
considerations for extending deadline to file discharge objections as “whether the
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creditor has had enough time to bring the examination to a conclusion; whether
anything has yet been unearthed which should be followed up; whether the
bankrupt has proved recalcitrant or appears to be trying either to rush, or to
obstruct, the proceeding”); In re Schultz , 134 B.R. 604, 606 (Bankr. E.D. Mich.
1991) (extending deadline for filing discharge complaint when inability to
examine debtor before deadline was due, in part, to delay by debtor’s attorney); In
re Halliwell , 130 B.R. 508, 509 (Bankr. S.D. Ohio 1991) (extending deadline
when debtor failed to disclose completely all available information relating to
dischargeability issues).
We conclude also that the bankruptcy court did not err in denying debtors a
discharge. We agree with the district court that debtors failed to challenge
adequately the bankruptcy court’s denial of a discharge under § 727(a)(4), and
note that the decision could be affirmed on this ground alone. Nonetheless, after
carefully reviewing the record, we conclude there is sufficient evidence to support
the bankruptcy court’s denial of a discharge under either § 727(a)(2) (acting with
intent to hinder, delay, or defraud creditors) or § 727(a)(4) (knowingly and
fraudulently making a false oath). The evidence, including an admission by
Mr. Brown, fully supports the finding that debtors acted with the intent to hinder
or delay the IRS’ collection of taxes that were due and owing when debtors took
their actions. The evidence also fully supports the finding that debtors
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knowingly and fraudulently failed to disclose the existence of the COLTAF
account or their extensive use of that account during the previous year. The
bankruptcy court did not err, therefore, in denying a discharge to debtors. 2
The judgment of the district court is AFFIRMED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
2
Debtors also argue that the court erred in denying them a discharge
because, in retrospect, they did not actually owe a debt to the IRS. As this
argument was not raised to the district court, it will not be considered on appeal.
See In re Walker , 959 F.2d at 896. We note, however, that a debt was due and
owing to the IRS at the time debtors were funneling their income and expenses
through the client trust account, even if the debt was adjusted later by filing an
amended 1994 tax return.
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