Sally Brandenfels v. Ticor Title Ins. Co.

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JUN 13 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: SALLY JANE BRANDENFELS, No. 15-60075
Debtor, BAP No. 14-1145
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MEMORANDUM*
SALLY JANE BRANDENFELS,
Appellant,
v.
TICOR TITLE INSURANCE CO.,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Kirscher, Jury, and Faris, Bankruptcy Judges, Presiding
Submitted June 9, 2017**
Portland, Oregon
Before: GOULD and RAWLINSON, Circuit Judges, and RAYES,*** District
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Douglas L. Rayes, United States District Judge for the
District of Arizona, sitting by designation.
Judge.
Chapter 7 debtor Sally Brandenfels appeals a decision of the Bankruptcy
Appellate Panel (“BAP”) affirming the bankruptcy court’s decision granting Ticor
Title Insurance Company’s (“Ticor”) motion to deny a discharge under 11 U.S.C.
§ 727(a)(3). We have jurisdiction under 28 U.S.C. § 158(d)(1) and affirm.
We conclude, contrary to Brandenfels’s argument, that the bankruptcy court
applied the correct legal standard when addressing Ticor’s claim that Brandenfels
did not keep adequate records. Under our case law, Section 727(a)(3) creates a
burden-shifting framework. The creditor must first prove “(1) that the debtor
failed to maintain and preserve adequate records, and (2) that such failure makes it
impossible to ascertain the debtor’s financial condition and material business
transactions.” Caneva v. Sun Cmtys. Operating Ltd. P’ship (In re Caneva), 550
F.3d 755, 761 (9th Cir. 2008) (internal quotation marks omitted). “[T]he burden of
proof then shifts to the debtor to justify the inadequacy or nonexistence of the
records.” Id. (internal quotation marks omitted).
Here, the bankruptcy court properly concluded that Brandenfels unjustifiably
failed to keep adequate records. The bankruptcy court identified three valid
grounds for concluding that the records were inadequately kept: (1) that
Brandenfels could not account for substantial cash withdrawals taken from her
company’s corporate account; (2) that she failed to split her records by indicating
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which expenditures were personal and which were business related; and (3) that
she failed to explain her payments of corporate funds to third parties. See Stewart
Enters., Inc. v. Horton (In re Horton), 621 F.2d 968, 971–92 (9th Cir. 1980);
Caneva, 550 F.3d at 761–62. In light of Brandenfels’s own testimony that she took
measures to avoid Ticor’s garnishments, the bankruptcy court properly found that
the inadequacies in Brandenfels’s records were unjustified.
Ticor did not abandon its claim under Section 727(a)(3). The bankruptcy
court and the parties discussed the issue of Brandenfels’s recordkeeping at length
at trial and the bankruptcy court expressly confirmed with Ticor’s counsel that
Ticor was not withdrawing its Section 727(a)(3) claim.
AFFIRMED.
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