Opinion
NOT FOR PUBLICATION
Argued and Submitted at Pasadena, California: January 22, 2009
Appeal from the United States Bankruptcy Court for the Central District of California. Bk Nos. RS 03-25365-PC, RS 03-25780-PC (Substantively consolidated), Adv. No. RS 05-01429-PC. Honorable Mitchel R. Goldberg, Bankruptcy Judge, Presiding.
Before: PAPPAS, DUNN and MONTALI, Bankruptcy Judges.
MEMORANDUM
Alexis Michaels (" Michaels") appeals the decision of the bankruptcy court revoking Michaels' discharge pursuant to § 727(d)(2) and (3). Robert L. Goodrich (" Trustee"), trustee of the Debtors' consolidated chapter 7 bankruptcy cases, cross-appeals the decision of the bankruptcy court declining to revoke the discharge of Joanne Louise Michaels (" Mrs. Michaels" and, together with Michaels, " Debtors"). Perceiving no errors or abuse of discretion in the bankruptcy court's decisions, we AFFIRM the revocation of Michaels' discharge pursuant to § 727(d)(3) and the decision of the bankruptcy court not to revoke Mrs. Michaels' discharge under § 727(d)(2). Having affirmed Michaels' denial of discharge under § 727(d)(3), we do not reach issues related to the bankruptcy court's denial of Michaels' discharge under § 727(d)(2).
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1330, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9036, as enacted and promulgated prior to the effective date (October 17, 2005) of most of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, April 20, 2005, 119 Stat. 23.
FACTS
On October 21, 2003, Michaels filed a petition for relief under chapter 7 of the Bankruptcy Code. Shortly thereafter, on October 29, 2003, Mrs. Michaels, his spouse, filed a separate chapter 7 petition. By order of the bankruptcy court entered on November 11, 2003, the two cases were substantively consolidated.
On the schedule A filed in both cases, Debtors listed an ownership interest in a certain parcel of undeveloped real estate in Imperial County, California (the " Property"). In preparing the schedules, Michaels suggests that he searched property records and discovered that his wife was listed as the owner of the Property on the Imperial County records. Though the Property was ostensibly scheduled as a matter of prudence, Debtors allege that they were under the impression that the Property had been sold in 1982 to the State of California in a tax sale.
A copy of a tax deed, dated July 2, 1982, is included in the excerpts of record.
Before the bankruptcy filings, on July 23, 2003, Imperial County recorded a Notice of Power to Sell Tax-Defaulted Property against the Property. The Notice to Sell indicated that Mrs. Michaels was the holder of title to the Property. The Property was apparently sold on February 12, 2004, and the deed recorded on March 15, 2004.
On December 12, 2003, Trustee conducted the initial § 341(a) creditors' meeting in the bankruptcy cases and requested that Debtors provide him documentation concerning the Property. Debtors' attorney, Mr. Broker, replied in a letter to Trustee on January 27, 2005, that the Property had been sold in a tax sale. At the continued § 341 meeting on January 30, 2004, Michaels testified that the Property was sold at a tax sale in 1982.
The Debtors were granted discharges on November 19, 2004.
The Trusts Adversary Proceeding
In 1992, two separate trusts, the Grove Trust and the Apartment Trust, were created by Debtors. These were irrevocable trusts created in favor of Debtors' daughter, Sydnee Michaels. Juan Briones (" Briones"), a bookkeeper in Michaels' employ, was appointed trustee of the trusts.
In December 1997, four lots of land that contained avocado-producing trees were purchased and became property of the Grove Trust (the " Grove Lots"). Grove Trust purchased the Grove Lots in part with notes and deeds of trust owned by Impetrol Corporation, a corporation wholly owned by Michaels.
On October 28, 2004, Trustee brought an adversary proceeding against the Grove Trust, alleging that Michaels fraudulently transferred the funds to the Trusts which were used to purchase the Grove Lots. The bankruptcy court conducted a trial in this action from May 15, 2006, to June 23, 2006. Shortly after the trial began, Trustee moved for issuance of an injunction to enjoin Briones and Michaels from making any expenditures from the Grove Trust in excess of $10,000 without providing Trustee advance notice of the proposed payment and an opportunity to object. This injunction was granted by the bankruptcy court at a hearing on June 7, 2006. At that hearing, the bankruptcy court addressed both Briones and Michaels, advising them that the injunction applied to actions by either of them.
On April 30, 2007, Trustee moved for an order to show cause why Michaels and Briones should not be held in civil contempt for violating the injunction. Trustee argued that Briones had disbursed $14,155.99 to Michaels on October 16, 2006, without first advising the Trustee or obtaining approval of the bankruptcy court, thus violating the injunction. On July 2, 2007, the bankruptcy court ordered that the preliminary injunction would remain in effect until final judgment was entered in the adversary proceeding.
The bankruptcy court found that Briones and Michaels violated the injunction in an order entered October 19, 2007. In its order, the court observed,
The loan from the Grove Trust in the amount of $14,155.99 to Mr. Michaels, on or about October 16, 2006, required prior court approval, which was not obtained.
In accepting the loan of $14,155.99 from the Grove Trust without prior court approval or written consent of the trustee, Mr. Michaels violated this Court's prior order. The Trustee is awarded sanctions in the amount of $3,000, jointly and severally, against Mr. Briones and Mr. Michaels, for their violation(s) of the Injunction, which shall be paid within twenty (20) days of the entry of this Order.
The bankruptcy court would ultimately decide that Grove Trust was an alter ego of Michaels, and that the transfer of the Grove Lots into the Grove Trust was a transfer intended to defraud creditors. The judgment in the Trusts Adversary Proceeding was appealed to the district court. On November 21, 2008, the district court reversed the judgment of the bankruptcy court regarding Grove Trust, determining the Michaels was not an alter ego to Grove Trust, and that the transfer of the Grove Lots was not a fraudulent transfer. The district court judgment is now on appeal to the Ninth Circuit Court of Appeals.
Events Leading Up to the Discharge Revocation Proceeding
At approximately the same time that Debtors received their discharges, in late 2004 or January 2005, Michaels alleges that he had a telephone conversation with a representative of Global Discoveries, an asset search company. In that conversation, the Global Discoveries agent informed Michaels that his wife might have a claim to some property. While the caller did not discuss details, Michaels deduced that the property referred to was likely the Property. Michaels alleges that he then contacted the Imperial County tax office and was informed that there had been a tax sale of the Property and that funds were available from that sale as a result of an overbid.
Michaels contacted Anthony Sias (" Sias"), who occasionally worked for him, and asked him to investigate the status of the Property. Sometime in early January 2005, Sias sent Michaels a memo (the " Sias Memo"). Sias reported that he had a conversation with Debbie Walters (" Walters") of the Imperial County tax office, and that the county was holding overbid proceeds of $31,997.89 from the tax sale of the Property. Sias also reported:
There is no copy of the Sias Memo in the excerpts of record, but a copy of the Sias Memo is attached to Michaels' brief. Because Trustee cites in his Reply Brief to this text in Michaels' brief, we assume that Trustee does not challenge the authenticity of this document.
There is an excess proceeds claim form. It will be mailed to my home address. They will not accept a fax copy. There is no " Assignment of Beneficial Interest" document. Schanafelt must sign a document releasing funds to you. This document my [sic] be created by legal counsel and must be notarized. You then may fill out the excess proceeds claim form and attach notarized document. The notarized document gives you the right to sign and submit claim form.
Schanafelt is Mrs. Michaels' maiden name, and apparently, the name appearing on the county's records as the former owner of the Property.
On or about January 8, 2005, the tax office sent Mrs. Michaels, in care of Sias, a letter and accompanying claim form that advised her that " our records indicate that you may be a party of interest" who may have a right to file a claim for excess proceeds from the tax sale of the Property. The claim form indicated that the deadline for filing a claim was March 15, 2005.
Between January 8 and March 2005, Michaels admits that he contacted Walters " three or four times" to inquire whether any other party had filed a claim for the overbid proceeds. Then, as Mrs. Michaels would later testify, in early March 2005, Michaels instructed her to sign the claim form for submission to the county claiming the proceeds, a document that Michaels had already filled out. Acting on Michaels' instructions, on March 11, 2005, Mrs. Michaels submitted the claim form to the Imperial County tax office.
On or about March 10, 2005, Global Discoveries contacted Trustee, suggesting that the bankruptcy estate may have an interest in the excess proceeds from sale of the Property. Trustee instructed Global Discoveries to take whatever steps were necessary to collect the asset on his behalf. With Global Discoveries' help, Trustee filed a claim with the county on behalf of the bankruptcy estate on March 15, 2005.
On, or shortly after, March 15, 2005, Michaels again contacted Walters and was told that Trustee had filed a claim. Michaels then instructed his wife to withdraw her claim. He told Mrs. Michaels that her claim was no longer necessary. She attempted to withdraw the claim by phoning the Imperial County tax office, but was told that claims could only be withdrawn by a written request. She never submitted a written request to withdraw the claim. Eventually, the overbid proceeds were distributed by the county to Trustee.
Both Michaels and Mrs. Michaels admit in a Pre-trial Order approved by the parties that, at all relevant times, they knew they were under an obligation to inform Trustee if they learned of the existence of possible assets of the bankruptcy estate. They also concede that neither ever contacted Trustee to advise him of the existence of the overbid proceeds for the Property, nor that they were submitting a claim to the county for those proceeds. Trial Tr. 168:2-6 (Michaels); Trial Tr. 98:9-14 (Mrs. Michaels).
The Discharge Revocation Proceeding
On November 17, 2005, Trustee filed an adversary complaint against Debtors seeking to revoke their discharges. He alleged in the complaint that Debtors had fraudulently used a family trust to shield assets from the reach of their creditors. Second, he alleged that Debtors had fraudulently submitted a claim to collect the tax sale overbid proceeds for the Property without reporting their entitlement to the proceeds to Trustee or the court. Based upon this conduct, Trustee requested that the bankruptcy court revoke Debtors' discharges under § 727(d)(1) and (2). Trustee later added an additional claim against Michaels in the Pre-trial Order they approved and submitted to the bankruptcy court, in which Trustee alleged that Michaels discharge should be revoked because he had intentionally violated a lawful order of the court, thus implicating § 727(d)(3) and (a)(6).
In response to Trustee's allegations, Debtors maintained that there was no fraud. Regarding the tax sale proceeds, Debtors argued that they had, or believed they had, no remaining interest in the Property, that they filed the claim with the county not to obtain the funds, but as a way to protect the bankruptcy estate from expiration of the state statute of limitations for submitting claims for the proceeds, and that they never concealed anything from Trustee regarding the Property.
A three-day trial was conducted by the bankruptcy court on October 9, 11 and 12, 2007. Trustee and Debtors were represented by counsel and presented evidence, testimony, and argument. During the course of the trial, the bankruptcy court dismissed Trustee's claim under § 727(d)(1). However, regarding Trustee's claims under § 727(d)(2) and (3), the bankruptcy court found and concluded:
-that Michaels had intentionally, knowingly, willingly and fraudulently failed to properly report or disclose to his counsel or to Trustee Debtors' entitlement to the overbid proceeds from the tax sale of the Property; -that Michaels' testimony and explanation regarding his actions concerning submission of the claim for the excess proceeds was not credible; -that Michaels intentionally, knowingly, willingly and fraudulently attempted to obtain the overbid proceeds; -that Mrs. Michaels was an unwitting participant in Michaels' efforts to obtain the excess proceeds; -that Michaels violated the bankruptcy court's injunction issued in the Trusts Adversary Proceeding by soliciting and accepting $14,155.99 in avocado grove revenues from Briones without first advising Trustee or the court; and, among other findings, -that Michaels' testimony and explanation regarding his motives in disregarding the court's injunction were not justified as excusable neglect.
On December 4, 2007, the bankruptcy court entered its judgment revoking Michaels' discharge under § 727(d)(2) and (3); the judgment denied Trustee's request to revoke Mrs. Michaels' discharge.
On December 14, 2007, Debtors, now acting pro se, moved for reconsideration of the judgment revoking Michaels' discharge. In their motion, Debtors generally disputed the findings of the bankruptcy court. In an effort to shore up his credibility, Michaels attached and offered to the court the report of a technician who had conducted his post-trial polygraph examination in support of the truthfulness of his testimony before the bankruptcy court.
The bankruptcy court considered Debtors' motion for reconsideration on February 2, 2008. The bankruptcy court ruled the polygraph examination was inadmissible evidence and, even if admitted, would not have persuaded the court to modify its judgment. The court denied the motion for reconsideration by order entered February 26, 2008.
Debtors filed a timely appeal of the judgment revoking Michaels' discharge on March 7, 2008. Trustee filed a timely cross-appeal of the judgment dismissing his claim for revocation of Mrs. Michaels' discharge on March 14, 2008.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § § 1334 and 157(b)(2)(A) and (J). The Panel has jurisdiction under 28 U.S.C. § 158.
ISSUES
1. Whether the bankruptcy court erred in revoking Michaels' discharge under § 727(d)(3) and (a)(6).2. Whether the bankruptcy judge erred in not recusing himself for bias and prejudice under 28 U.S.C. § 455(a).
Michaels first raised this issue on appeal to this Panel.
3. Whether the bankruptcy court erred in declining to revoke Mrs. Michaels' discharge under § 727(d)(2).4. Whether the bankruptcy court abused its discretion in denying Michaels' motion for reconsideration and excluding the report of the polygraph examiner.
STANDARD OF REVIEW
In reviewing a bankruptcy court's decisions regarding revocation of discharge pursuant to § 727(d), we examine its legal conclusions de novo and its factual findings for clear error. Bowman v. Belt Valley Bank (In re Bowman), 173 B.R. 922, 924 (9th Cir. BAP 1994).
We review a bankruptcy judge's failure to recuse for bias and prejudice, where the issue was not raised before the bankruptcy court, for plain error. Morris Weiss v. Sheet Metal Workers Local. No. 544 Pension Trust, 719 F.2d 302, 304 (9th Cir. 1983). Plain error may only be found " where there is (1) error, (2) that was clear or obvious, (3) that affected substantial rights, and (4) that seriously affected the fairness, integrity, or public reputation of the judicial proceedings." United States v. Randall 162 F.3d 557, 561 (9th Cir. 1998).
A trial court's decision to admit or exclude expert testimony is reviewed for abuse of discretion. Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999).
Likewise, a bankruptcy court's denial of a motion for reconsideration is reviewed for abuse of discretion. In re Sandoval, 186 B.R. 490, 492 (9th Cir. BAP 1996). We find an abuse of discretion if we have a " definite and firm conviction" that the bankruptcy court committed a clear error of judgment in the conclusion it reached. A bankruptcy court also necessarily abuses its discretion if it bases its ruling on an erroneous view of the law. Sewell v. MGF Funding, Inc. (In re Sewell), 345 B.R. 174, 178-79 (9th Cir. BAP 2006).
DISCUSSION
I.
The bankruptcy court did not err in revoking Michaels' discharge under § 727(d)(3).
Section 727(d)(3) provides:
On request of the trustee, a creditor, or the United States Trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if - . . . (3) the debtor committed an act specified in subjection (a)(6) of this section.
Section 727(a)(6), in turn, provides that: " The court shall grant the debtor a discharge, unless . . . (6) the debtor has refused, in this case -- (A) to obey any lawful order of the court, other than an order to respond to a material question or to testify[.]" A trustee seeking to revoke a discharge pursuant to § § 727(d)(3) and (a)(6)(A) requires a showing that the debtor (a) was aware of the order; and (b) willfully or intentionally refused to obey the order (i.e., something more than a mere failure to obey the order through inadvertence, mistake or inability to comply). Smith v. Jordan (In re Jordan), 521 F.3d 430, 434 (4th Cir. 2008).
A bankruptcy court has authority to issue injunctions. Celotex Corp. v. Edwards, 514 U.S. 300, 303, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). The injunction was issued in the Trusts Adversary Proceeding that arose in Michaels' main bankruptcy case. Michaels has not questioned the authority of the bankruptcy court to enter the injunction or the applicability of § 727(a)(6) to an order entered in an adversary proceeding related to his own bankruptcy case.
It is not disputed by Michaels that, in connection with the Trusts Adversary Proceeding, the bankruptcy court entered an order enjoining Michaels and Briones from disbursing more than $10,000 from the Groves Trust without first notifying Trustee. Indeed, that Michaels was aware that this injunction prohibited Briones from disbursing more than $10,000 without advance notice to Trustee or prior order of the bankruptcy court is evidenced from his trial testimony:
PEMBERTON [Trustee's atty]: Do you recall your attorney, Mr. Broker, standing up and stating to the court that he understood that the injunction also applied to you and Mrs. Michaels and that you would abide by the injunction?
MICHAELS: Not overly clear on that but I understood what was going on.
PEMBERTON: And you did not voice any objection to that injunction at the time, did you?
MICHAELS: No.
Trial Tr. 5:9-14 (October 11, 2007).
Though he was aware of the restrictions in the bankruptcy court's injunction, Michaels later engineered a " loan" from the trustee of the Grove Trust, in violation of that order:
PEMBERTON: Nevertheless [in spite of the injunction] you accepted a payment of $14,155.99 from Mr. Briones in the form of receipts from the fall avocado grove. Isn't that correct?
MICHAELS: Yes.
Trial Tr. 6:9-12 (October 11, 2007).
Michaels admitted that, intentionally and willfully, he did not inform Trustee or the bankruptcy court about his plan to " borrow" funds from the trust:
PEMBERTON: Was there a reason you didn't ask your counsel to simply petition the court for an order allowing [you to obtain money from the Grove Trust?]
MICHAELS: Good question, Mr. Pemberton.
THE COURT: You didn't even go and discuss it with your counsel about the possibility?
MICHAELS: Because I knew . . . you're [the Court] a very smart guy and . . . it just would have been inappropriate for you to give permission and that I know.
THE COURT: So you decided to take matters into your own hands?
MICHAELS: Yes.
Trial Tr. 12:10--13:6.
Thus, Michaels does not dispute that there was an injunction, that he was aware of it, and that he was present when the bankruptcy court explicitly warned him that he was bound by its terms. In spite of the injunction, Michaels persuaded Briones to " loan" him more than $14,000 in violation of the injunction. In doing so, Michaels admits that he " t[ook] matters into his own hands, " intentionally refusing to obey the court order because he knew the court would not approve his access to these funds. In short, Michaels concedes that he " committed an act specified in subjection (a)(6) of this section, " that is, he " refused, in this case -- (A) to obey any lawful order of the court, other than an order to respond to a material question or to testify[.]"
Michaels argues that his motive in obtaining the trust funds was pure. But it is of no moment that Michaels may have believed he was justified in his refusal to obey a lawful order of the court. Persons subject to an injunction are required to " obey that decree until it is modified or reversed, even if they have proper grounds to object to the order." GTE Sylvania, Inc. v. Consumers Union of U.S., Inc., 445 U.S. 375, 386, 100 S.Ct. 1194, 63 L.Ed.2d 467 (1980). The injunction was never appealed, and the bankruptcy court was under no legal compulsion to entertain Michaels' excuses for its willful violation. Consequently, we conclude that the bankruptcy court's revocation of Michaels' discharge was appropriate under § 727(d)(3) and (a)(6).
While it need not have done so, the bankruptcy court considered Michaels' explanation for his decision to willfully disobey the bankruptcy court's injunction because he needed the funds for settlement negotiations with Trustee. Reacting to his story, the court found that " Mr. Michael's testimony and explanation regarding his conduct in violating the court's injunction is not excusable neglect." Indeed, the bankruptcy court found that Michaels used the funds from the trust for his personal benefit.
" [I]t is totally within the discretion of the bankruptcy court to find a particular violation of the court's order so serious as to require denial of discharge under § 727(a)(6)(A)." Devers v. Bank of Sheridan, Mont. (In re Devers ), 759 F.2d 751, 755 (9th Cir. 1985). But even were we free to weigh Michaels' conduct anew, we would nonetheless conclude that his brazen flouting of the bankruptcy court's injunction simply because he " needed" the money, and because he felt that the bankruptcy court would never let him access the funds if he asked, justifies the bankruptcy court's decision to revoke Michaels' discharge under § 727(d)(3).
The bankruptcy court committed neither legal error nor an abuse of discretion in deciding to revoke Michaels' discharge under § 727(d)(3) based upon his intentional and willful refusal to obey the court's order.
Because we affirm the bankruptcy court's decision to revoke Michaels' discharge under § 727(d)(3), we need not address his appeal of the court's decision to revoke his discharge under § 727(d)(2).
II.
Michaels contends that the bankruptcy judge presiding in the adversary proceeding exhibited bias and animus toward him and that the court's judgment was tainted. Michaels cites multiple examples of statements and comments by the bankruptcy judge from various hearings or the trial to evidence what he considers to be the judge's bias, derision, scorn, and prejudice toward him. Because the judge was biased, Michaels argues that the bankruptcy court's judgment should not be allowed to stand. We disagree.
It is not clear from Michaels' brief if he is requesting that the Panel order the recusal of the bankruptcy judge, or that the judgment of the bankruptcy court be reversed. Michaels never asked the bankruptcy judge in this case to recuse himself. Technically, recusal refers to the removal of a judge from further proceedings in a case; it does not necessarily affect a final judgment entered by that judge. Further, we agree with Trustee that an appellate court cannot order a judge to recuse, because the applicable law, 28 U.S.C. § 455(a) and (b) only provides that the judge " shall disqualify himself." But contrary to Trustee's position, it is possible for an appellate tribunal to review for error a trial court's failure to recuse itself pursuant to 28 U.S.C. § 455(a) and (b)(1), even if that request is not raised before entry of final judgment. Lijeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 848, 108 S.Ct. 2194, 100 L.Ed.2d 855 (1988). However, where, as here, the demand for recusal was not first addressed to the trial court, the level of review is very high -- plain error. And, even if it is shown that the trial judge committed plain error by not recusing, the appropriate remedy is vacatur of the judgment, not recusal or reversal. Id .
In general, comments made by a trial judge during the course of judicial proceedings are rarely sufficient to establish bias requiring recusal. Pau v. Yosemite Park & Curry Co., 928 F.2d 880, 885 (9th Cir. 1991) (although district judge was " gruff, " he accorded heavy-handed treatment to all parties equally); United States v. Conforte, 624 F.2d 869, 881 (9th Cir. 1980) (judge's comments about insufficiency of evidence before completion of evidentiary hearing were insufficient to show bias and require recusal). A finding of judicial bias must usually stem from the existence of some personal interest by the judge in the matter before him or her, or result from some extrajudicial source. Liteky v. United States, 510 U.S. 540, 552-53, 114 S.Ct. 1147, 127 L.Ed.2d 474 (1994). There is no evidence in the record before us that the bankruptcy judge held any personal interest, financial or otherwise, in the matters involved in this bankruptcy case or adversary proceeding.
The " extrajudicial source" rule is implicated when a judge's bias originates outside the courtroom. United States v. Grinnell Corp., 384 U.S. 563, 583, 86 S.Ct. 1698, 16 L.Ed.2d 778 (1966) (explaining that the " alleged bias and prejudice to be disqualifying must stem from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case."). There is also no indication in the record that the bankruptcy judge's opinions as expressed in this action were based on any information or events originating outside the bankruptcy court proceedings. United States v. Bray, 546 F.2d 851, 857 (10th Cir. 1976) (" unjudicious" remarks such as referring to counsel's comments as ridiculous, or describing a witness as pathetic are not extrajudicial, but " reflected the judge's attitude and reactions to specific incidents occurring at trial").
Sixty-plus instances which Michaels suggest evidence the bankruptcy court's bias and prejudice toward him occurred in the Trusts Adversary Proceeding. In the only cited example in the discharge revocation proceeding, Michaels asserts that the bankruptcy judge exhibited extrajudicial bias by stating that he could not " put a blind eye to testimony" he learned in the Trusts Adversary Proceeding. Trial Tr. 26:24-27 (October 12, 2007). However, opinions held by judges based upon events in earlier proceedings are not extrajudicial. In re Liteky, 510 U.S. at 551 (noting that " Also not subject to deprecatory characterization as " bias" or " prejudice" are opinions held by judges as a result of what they learned in earlier proceedings. It has long been regarded as normal and proper for a judge to sit in the same case upon its remand, and to sit in successive trials involving the same defendant.").
We also note that all transcripts of the Trusts Adversary Proceeding were unofficial transcripts, to which Trustee objected to their inclusion in the excerpts of record. In his reply brief and attached supplemental excerpts of record, Michaels replaced the unofficial transcripts with official transcripts of the hearings in the Discharge Revocation Proceeding, but did not provide official transcripts of the Trusts Adversary Proceeding where the offending passages occur.
There is an exception to the rule that judicial bias must arise either personally or extrajudicially. This is the so-called " pervasive bias" exception. The Supreme Court instructs that " opinions formed by the judge on the basis of facts introduced or events occurring in the course of the current proceedings, or of prior proceedings, do not constitute a basis for a bias or partiality motion unless they display a deep-seated favoritism or antagonism that would make fair judgment impossible." Liteky, 510 U.S. at 555 (emphasis added). As one treatise explains:
This pervasive bias exception to the extrajudicial source factor arises when a judge's favorable or unfavorable disposition toward a party, although stemming solely from the facts adduced or the events occurring at trial, nonetheless becomes so extreme as to indicate the judge's clear inability to render fair judgment. However, the exception is construed narrowly; bias stemming solely from facts gleaned during judicial proceedings must be particularly strong in order to merit recusal.
12 Moore's Fed. Prac.- Civ. § 63.21[5] (Matthew Bender, 3d ed. 2007); accord In re Huntington Commons Assocs., 21 F.3d 157, 158 (7th Cir. 1994) (explaining that a judge does not have to be impervious to impressions about litigants; impatience, admonishments to defendant, adverse rulings, and vague references to possible predisposition are not remotely sufficient to meet requirement of deep-seated and unequivocal antagonism that would render fair judgment impossible).
We have carefully examined the record in this appeal and, while some of the bankruptcy judge's comments and statements made during the proceedings are sharply critical of Michaels, we find no evidence the bankruptcy judge harbored the sort of " deep-seated antagonism" against Michaels necessary for the Panel to intervene.
III.
The bankruptcy court did not err in denying Trustee's request to revoke Mrs. Michaels' discharge under § 727(d)(2).
Section 727(d)(2) provides that:
On request of the trustee, a creditor, or the United States Trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if -
. . .
(2) the debtor acquired property that is property of the estate, or became entitled to acquire property that would be property of the estate, and knowingly and fraudulently failed to report the acquisition of or entitlement to such property, or to deliver or surrender such property to the trustee[.]
To revoke a debtor's discharge under § 727(d)(2), the trustee must prove (1) that the debtor acquired, or became entitled to acquire, property of the bankruptcy estate and (2) the debtor knowingly and fraudulently failed to report or deliver such property to the trustee. Bowman, 173 B.R. at 925-26, citing In re Yonikus, 974 F.2d 901 (7th Cir. 1992). Yonikus explained, regarding the first element, that " [debtors have an absolute duty to report whatever interests they hold in property, even if they believe their assets are worthless or are unavailable to the bankruptcy estate." 974 F.2d at 904. As to the second element, the court held that a finding of fraudulent intent may be based on inferences drawn from a course of conduct, or inferred from all the surrounding circumstances or the debtor's " whole pattern of conduct." 974 F.2d at 905, citing In re Devers, 759 F.2d at 753-54.
Trustee argues that the Mrs. Michaels' trial testimony shows she was aware of the existence of the overbid proceeds and of her duty to report this fact to Trustee, and she did not inform Trustee about the funds.
Even so, there was evidence presented to the bankruptcy court that Mrs. Michaels did not, as required for revocation under § 727(d)(2), " knowingly and fraudulently" fail to report the existence of the overbid proceeds to Trustee. Specifically, in her deposition testimony, admitted into evidence at the trial, Mrs. Michaels testified that she had been informed by her husband that she was submitting the claim on behalf of the trustee:
QUESTION: What was the purpose of your submitting [the claim form]?
MRS. MICHAELS: From my understanding of what Alex told me, there needed to be a claim file to preserve a statute of the property for the trustee.
Deposition of Joanne Michaels 18:1-5 (September 11, 2006). . . . .
QUESTION: [I]f the claim wasn't of any value, why did you believe you had to preserve it?
MRS. MICHAELS: Once again, my understanding from my husband, from what he told me, was that it needed to be done for the trustee. That's all he told me.
On January 29, 2009, the Panel received a letter from Mrs. Michaels in which she drew our attention to the two statements she made in her deposition testimony. We deem this letter a Motion to Supplement the Record. The Motion is DENIED. The deposition testimony is already included in the excerpts of record and was examined by the Panel before receipt of Mrs. Michaels' letter.
The bankruptcy court found that Mrs. Michaels routinely and without question relied upon the advice and instructions of her spouse in matters involving the parties' property and finances. The bankruptcy court decided that Mrs. Michaels was, in effect, merely her husband's pawn in his scheme to obtain the overbid proceeds. Substantial, competent evidence was introduced at trial upon which the bankruptcy court could base such findings.
For example, Michaels glibly acknowledged that he engaged in a practice of concealing business information from his wife:
PEMBERTON: Would it have been a custom and practice in your relationship [with your wife] to have shared [business details] with her?
MICHAELS: Actually, it's one of the things that keep[] the marriage good and keep the wife sane . . . was give her as little information as possible[.]
Trial Tr. 3:12-19 (October 9, 2007).
Mrs. Michaels confirmed her passive approach to matters of business in her relationship with her husband:
PEMBERTON: Mrs. Michaels, why didn't you take any steps to notify the Trustee of this excess proceeds claim?
MRS. MICHAELS: It was my understanding from Alex that he already knew about it. That was my understanding, that the attorneys knew about it. Everybody knew about it.
Trial Tr. 98:9-13.
PEMBERTON: Is it your practice to sign documents in front of a notary without reading those documents?
MRS. MICHAELS: When my husband gives me the document, pretty much.
Trial Tr. 81:1-4.
THE COURT: Who filled this thing [the claim] out? Did your husband fill out all the handwritten part?
MRS. MICHAELS: Yes.
THE COURT: So all you did was sign it?
MRS. MICHAELS: Yes.
THE COURT: At his request.
MRS. MICHAELS: Yes.
Trial Tr. 93:8-22.
PEMBERTON: So Mr. Michaels gave you a phone number of the office of Imperial County tax collector and asked you to call up the tax collector and withdraw this claim, correct?
MRS. MICHAELS: Correct.
PEMBERTON: He told you to do so because it wasn't necessary. In other words, it wasn't necessary to have the claim form in there. Is that correct?
MRS. MICHAELS: Yes, I believe he did.
Trial Tr. 95:15-22.
After considering all the testimony and evidence, the bankruptcy court observed that:
As to Mrs. Schwarzkopf, the Court finds that throughout their marital history, Mrs. Schwarzkopf was an unknowing participant in the conduct of Mr. Schwarzkopf. I find insufficient evidence to support that Mrs. Schwarzkopf should be denied her discharge pursuant to § 727(d)(2), and that the evidence submitted supports that she basically reacted and did what her husband advised her to do.
Trial Tr. 2:17-25 (October 11, 2007).
While Trustee argued otherwise, the bankruptcy court declined to conclude that Mrs. Michaels acted fraudulently, a necessary element for revocation of discharge under § 727(d)(2). In re Bowman, 173 B.R. at 925; In re Yonikus, 974 F.2d at 905. While we acknowledge that the trial evidence and testimony may be open to varying interpretations, under the circumstances, the bankruptcy court's decision that Mrs. Michaels did not act fraudulently was not clearly erroneous. Anderson, 470 U.S. at 574 (" Where there are two permissible views of the evidence, the fact finder's choice between them is not clearly erroneous.").
IV.
The bankruptcy court did not abuse its discretion in denying Debtors' motion for reconsideration and rejecting his offer to submit the results of his post-trial polygraph examination to bolster his credibility.
In the bankruptcy court, and now on appeal, Michaels contends that the polygraph examination report was " new evidence." Michaels is correct that " newly discovered evidence" may be submitted to a bankruptcy court to support a motion for reconsideration. Hansen v. Moore (In re Hansen), 368 B.R. 868, 878 (9th Cir. BAP 2007) (" Reconsideration under . . . Rule 9023 is appropriate only if the moving party demonstrates . . . (3) newly discovered evidence.").
However, the newly discovered evidence offered to the trial court for reconsideration must have been in existence at the time of the trial. Contemp. Metal Furniture Co. v. E. Tex. Motor Freight Lines, Inc., 661 F.2d 761, 766 (9th Cir. 1981). Here, the polygraph test was apparently administered to Michaels on November 29, 2007, more than six weeks after the trial concluded. The bankruptcy court correctly rejected the polygraph result as inadmissible in evidence because the test was performed post-judgment. Hr'g Tr. 1:23-25 (February 7, 2008). This ruling is consistent with the law and thus not an abuse of discretion.
In addition, Michaels' attempt to use the results of the polygraph examination to bolster the credibility of his testimony is problematic for other reasons.
First, for our purposes, Michaels' credibility is not at issue with respect to the basis upon which the Panel has concluded his discharge was properly revoked, § 727(d)(3). Michaels admitted to willfully and intentionally violating the bankruptcy court's order. He attempted to excuse his conduct by asserting that he violated the order to obtain money that he needed and that he did not seek the court's permission because he knew the court would not grant it. Michaels' credibility as to these points was never challenged by the bankruptcy court. As a result, we will not reverse the bankruptcy court's decision to reject the polygraph results because that decision does not impact our analysis on appeal.
Second, even if there was a reason for the polygraph test evidence to be considered now, Michaels did not submit the polygraph results, only an unsworn statement from the polygraph examiner. An unsworn statement provides no foundation to authenticate the test results. Fed.R.Evid. 901. Moreover, even if an unsworn expert witness report were admissible, it cannot be used to prove the facts therein without submission of the actual evidence. 7- Up Bottling Co. v. Archer Daniels Midland Co. (In re Citric Acid Litigation), 191 F.3d 1090, 1102 (9th Cir. 1999) (" The law is clear, however, that an expert report cannot be used to prove the existence of facts set forth therein.").
Third, polygraph test results, and testimony from polygraph examiners, regarding a party's character for truthfulness have routinely been held inadmissible under the standards set by the Ninth Circuit in United States v. Benavidez-Benavidez, 217 F.3d 720, 724 (9th Cir. 2000); see also Fed.R.Evid. 608 (" Specific instances of the conduct of a witness, for the purpose of attacking or supporting the witness' credibility, other than conviction of crime as provided in rule 609, may not be proved by extrinsic evidence.").
Finally, as the bankruptcy court observed, to the extent the polygraph evidence was offered to test whether Michaels lied to the court, the test results would not sway the judge's position because, in the court's opinion, Michaels' credibility was not at issue: " I don't believe what I stated in my ruling was that I found that you lied. What I ruled was that I found that you knew more and you didn't tell everyone what you knew. Whether it was your professed mistaken belief or whether it was an intentional belief, I reached the conclusions that I reached and the polygraph expert wouldn't change anything from what was stated." Hr'g Tr. 3:15-22 (February 7, 2008).
Since Michaels offered no admissible newly discovered evidence, nor otherwise showed that the bankruptcy court had committed a manifest error of fact or law, the bankruptcy court did not abuse its discretion in denying Debtors' motion for reconsideration. In re Hansen, 368 B.R. at 878.
CONCLUSION
We AFFIRM the judgment of the bankruptcy court revoking Michaels' discharge pursuant to § 727(d)(3) and declining to revoke Mrs. Michaels' discharge pursuant to § 727(d)(2).
Since we do not find that the bankruptcy judge committed plain error by not recusing himself for bias, we need not consider the question of whether vacatur or reversal is appropriate.