Wells Wyatt v. Banner Bank ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS DEC 27 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: WELLS ALAN WYATT, No. 21-35016
Debtor, D.C. No. 1:19-cv-00372-DCN
______________________________
WELLS ALAN WYATT, MEMORANDUM*
Appellant,
v.
BANNER BANK,
Appellee.
Appeal from the United States District Court
for the District of Idaho
David C. Nye, Chief District Judge, Presiding
Argued and Submitted November 18, 2021
Pasadena, California
Before: BERZON, RAWLINSON, Circuit Judges, and KENNELLY, ** District
Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Matthew F. Kennelly, United States District Judge for
the Northern District of Illinois, sitting by designation.
The bankruptcy code bars a debtor’s discharge if he has “failed to keep or
preserve any recorded information . . . 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.” 11 U.S.C. § 727(a)(3). A
debtor accordingly must “present sufficient written evidence which will enable his
creditors reasonably to ascertain his present financial condition and to follow his
business transactions for a reasonable period in the past.” Caneva v. Sun Cmtys.
Operating Ltd. P’ship (In re Caneva), 550 F.3d 755, 761 (9th Cir. 2008) (quoting
Rhoades v. Wikle, 453 F.2d 51, 53 (9th Cir. 1971)).
The bankruptcy court in this case found that Wells Wyatt failed to meet his
burden under section 727(a)(3), and it thus barred his discharge. Specifically, the
bankruptcy court found that it could not ascertain Wyatt’s ownership interests in
cattle lots that he co-owned with his business partner, the Timmermans, from the
records Wyatt presented. Although Wyatt introduced thousands of pages of exhibits
into evidence, they did not include settlement sheets that, based on the record, had
existed and would have definitively enabled determination of Wyatt’s ownership
interests. Instead, Wyatt introduced borrowing bank certificates (BBCs) that he
claimed showed his interests. These BBCs, however, were riddled with
inconsistences that made it impossible to accurately determine his ownership
interests.
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On appeal, the district court affirmed the bankruptcy court’s decision. This
Court independently reviews the bankruptcy court’s decision and gives no deference
to the district court’s decision. Harkey v. Grobstein (In re Point Ctr. Fin., Inc.),
957 F.3d 990, 995 (9th Cir. 2020). When reviewing a discharge denial under
section 727, the following standards apply:
(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.
Retz v. Samson (In re Retz), 606 F.3d 1189, 1196 (9th Cir. 2010) (alteration in
original) (quoting Searles v. Riley (In re Searles), 317 B.R. 368, 373 (9th Cir. BAP
2004)).
The bankruptcy court’s finding that Wyatt failed to “keep and preserve”
records was not clearly erroneous. Testimony from both Wyatt and Candice Cooley,
Wyatt’s bookkeeper for a few years, supports the finding that the BBCs did not
accurately reflect Wyatt’s equity ownership interests. Furthermore, the settlement
sheets would have filled the gap, but Wyatt did not “keep and preserve” critical
sheets: Wyatt produced settlement sheets from 2012 and 2015 but notably failed to
produce settlement sheets from the two years immediately preceding his petition for
bankruptcy, which would have enabled the court to fill in the missing information
from the BBCs. Wyatt’s reference to Merena v. Merena (In re Merena), 413 B.R.
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792, 818 (Bankr. D. Mont. 2009), does not help him either, as it was not binding
authority on the bankruptcy court in this case.
The bankruptcy court’s conclusion that Wyatt did not justify his lack of
adequate records was also correct. Wyatt contends that the inadequacy of his records
was due to Cooley taking the laptop that contained the records, but there is no
evidence that the laptop had the only copies of the records. On this point, Wyatt has
not reconciled his contention with the fact that he was able to enter other settlement
sheets into evidence. Wyatt’s reliance on Cooley’s accounting experience does not
excuse his lack of records either. Based on his history of recordkeeping prior to his
relationship with Cooley—a period that included the time when he entered into
complex business agreements such as the original loan with Banner Bank—the
bankruptcy court did not clearly err in finding that Wyatt bore responsibility for
maintaining Livestock’s records.
Lastly, Wyatt argues that the bankruptcy court committed legal error by
failing to consider certain factors in its section 727(a)(3) analysis. We disagree. The
court considered the relevant factors. See In re Cox, 904 F.2d 1399, 1403 n.5 (9th
Cir. 1990) (identifying potentially relevant factors for the district court to consider).
Specifically, it discussed Wyatt’s background and experience in recordkeeping; in
the absence of evidence to the contrary, it presumed that similarly situated cattle
ranchers would maintain records identifying the disposition of major assets crucial
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to their business operations; and it weighed the impact of Wyatt’s reliance on
Cooley. In short, the bankruptcy court correctly applied the law.
AFFIRMED.
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