Opinion
NOT FOR PUBLICATION
Argued and Submitted at Seattle, Washington: November 16, 2006
Appeal from the United States Bankruptcy Court for the Western District of Washington. Honorable Karen A. Overstreet, Chief Bankruptcy Judge, Presiding. Bk. No. 03-24716. Adv. No. 05-01244.
Before: SMITH, PAPPAS and MONTALI, Bankruptcy Judges.
MEMORANDUM
The trustee filed a complaint objecting to the appellants' discharge under § 727 . The court granted the trustee's motion for summary judgment in part, under § 727(a)(2)(B), and denied it in part. A timely notice of appeal was filed on February 28, 2006. We AFFIRM in part, VACATE and REMAND in part, and REVERSE in part.
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 The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, Apr. 20, 2005, 119 Stat. 23.
I. FACTS
Anthony Sarp (" Sarp") founded Katmai Lodge, Ltd. (" Katmai"), a fishing lodge located on 126 acres of land on the Alagnak River in Alaska, in 1981. Sarp and his spouse Barbara Sarp (collectively, " Appellants") acted as Katmai's president and officer, respectively.
On November 13, 2003, Sarp filed for chapter 11 relief, and thereafter, on December 12, 2003, Barbara Sarp filed her own chapter 11 petition. Pursuant to court order, Appellants' individual chapter 11 bankruptcies were substantively consolidated and David S. Mork was appointed as the chapter 11 trustee (" Mork" or " trustee"). On December 5, 2003, Katmai filed its chapter 11 petition, which led to the bankruptcy court entering an order on December 17, 2004, substantively consolidating Appellants' and Katmai's bankruptcies. The order also appointed Mork as the chapter 11 trustee for the Katmai estate. Appellants' chapter 11 cases were converted to chapter 7 on April 7, 2005, but remained substantively consolidated with 3 Katmai's chapter 11 case.
On April 25, 2005, the court entered an order approving the appointment of Mork as chapter 7 trustee of the Appellants' estates.
On December 17, 2004, the same date Mork was appointed as chapter 11 trustee in the Katmai case, Appellants signed five Katmai checks made payable to themselves in the aggregate amount of $18,057.80. Mork was able to stop payment on two of the checks, totaling $5,450.30 made payable to Barbara Sarp. However, he was unable to prevent payment on the three checks payable to Sarp, which totaled $12,607.50 (the " Withdrawals"). On December 20, 2004, Mork sent Martin Snodgrass, Appellants' counsel, an e-mail demanding that his clients restore the Withdrawals to the estate. They failed to do so. As a consequence, Katmai was unable to make its December 2004 lease payment to Levelock Natives, Ltd. (" LNL").
In late December 2004 or early January 2005, the trustee notified Sarp of his intent to immediately terminate Katmai's business operations and to discharge all of its employees, including Sarp. He also advised Sarp of his intent to auction off the company sometime in March 2005.
Believing that a complete shutdown of Katmai's operations in January would cause it to be valueless by auction time, Sarp took employment in January 2005 with World Wide Angling LLC (" WWA"), the principal booking agent for Katmai, as a " consultant" and continued booking fishing trips for Katmai for the 2005 and 2006 seasons. From January 2005 through March 2005, Sarp ran the day-to-day operations of WWA and oversaw the solicitation and booking of Katmai vacations, as well as the collection of deposits and payments for those vacations (the " customer payments"). By June 2, 2005, WWA had collected $543,351.73 in customer payments.
A majority of Katmai's trips are booked during the winter, with the main bookings coming during the early part of the year between January and March.
In 2000, Katmai entered into its first booking agency agreement with WWA. The contractual arrangement provided for WWA to buy vacations at wholesale from Katmai. WWA would then market and sell the vacations directly to potential guests and collect payments from the customers for the sold vacations. There is written evidence that Katmai and WWA entered into this type of booking agency agreement for the 2000, 2001, and 2003 seasons.
The collection of the $543,351.73 occurred between September 1, 2004, and June 2, 2005; $316,039.50 of this amount was collected after December 17, 2004. However, when WWA closed its checking account on June 2, 2005, the account ending balance was a -$741.53.
By letter dated December 22, 2004, to WWA, the trustee's counsel demanded that WWA: (1) turnover all the customer payments, and (2) provide an accounting. WWA did not respond.
On March 29, 2005, after WWA failed to turnover all the customer payments, the trustee filed a complaint against WWA, Murray Armstrong, and Appellants for an accounting, turnover of property, violation of the automatic stay, breaches of fiduciary duties, breach of § 521 duties, fraud, and injunctive relief. Thereafter, on November 9, 2005, the bankruptcy court entered an order granting in part and denying in part the trustee's motion for summary judgment in that proceeding. In relevant part, the court granted summary judgment against Sarp and the community property of Barbara Sarp, in the amount of $118,229.99, for turnover of estate property under § 542, violation of the automatic stay under § 362(a)(3), breach of Sarp's fiduciary duties as an officer and shareholder of Katmai, and breaches of Sarp's duties as a debtor under § 521(3) and (4). It also entered a permanent injunction, in which the court found that Sarp, Armstrong, and WWA had " solicited, accepted, and spent Katmai Lodge customer deposits and payments, which were property of the substantively consolidated bankruptcy estate, without any legal right to do so."
On June 30, 2005, trustee filed a complaint objecting to Appellants' discharge under § 727. The complaint alleged that 8 Appellants had intended to defraud the trustee by improperly transferring the Withdrawals and the customer payments, which represented property of Katmai's estate, to themselves or WWA.
The specific subsections of § 727 under which the trustee objected to discharge were (a)(2)(A), (a)(2)(B), (a)(3), and (a)(4)(B).
On December 13, 2005, the trustee moved for summary judgment, asserting that Appellants were not entitled to a discharge because they had (1) misappropriated $316,039.50 in estate funds, of which $118,229.99 had not been refunded to the estate, from customer payments; and (2) withdrawn substantial funds from Katmai's checking account on the date of the trustee's appointment. Because there were no genuine issues of material fact, the trustee claimed entitlement to a judgment as a matter of law under § 727(a)(2)(B).
While we recognize the trustee also sought summary judgment on the other asserted § 727 causes of action, this appeal focuses solely on the denial of discharge pursuant to § 727(a)(2)(B).
In response, Appellants denied that they had acted with the intent to defraud the estate. Rather, they argued that the Withdrawals represented reasonable compensation for unpaid salary and expenses, and that Sarp's continued efforts in booking vacations for Katmai and collecting customer payments were done for the benefit of the estate. Because their state of mind (i.e., intent) was at issue, they contended that summary judgment was inappropriate.
In disputing the existence of any triable material factual issues, the trustee maintained that the facts unequivocally established that 1) Sarp's continued efforts were not beneficial to the estate because Katmai was sold without including the additional profits from those vacations; and 2) Sarp had admittedly continued selling vacations and collecting customer payments despite knowledge of the trustee's intention to halt Katmai's operations. Further, Sarp's admission was in itself sufficient to demonstrate his intent to misappropriate the customer payments for § 727(a)(2)(B) purposes.
Finally, the trustee pointed out that Appellants had failed to show how they were entitled to the Withdrawals. No payroll records, expense reports, receipts, or any other type of independent evidence was provided to support their claim. Moreover, there was evidence that Steven Hartung, Katmai's former chief financial officer, had not even authorized the Withdrawals. The only logical conclusion for Appellants' actions, the trustee insisted, was that they intentionally raided Katmai's checking account before he could gain control. Accordingly, the Appellants' discharge should be denied under § 727(a)(2)(B).
The summary judgment motion came on for hearing on January 6, 2006. The bankruptcy court found that Sarp's intent to defraud the trustee was evidenced by his acceptance of checks from the customer payment funds, and that Appellants both had exhibited the requisite intent when they cashed, or attempted to cash, checks related to the Withdrawals.
The court noted that if Sarp had booked the vacations and caused the customer payments to remain in WWA's account, then there would be evidence of his intent to sell the vacations for the benefit of the estate. Sarp, however, did not do this. Instead, the court found that he took " a check every single week after the trustee ha[d] demanded deposits to pay to himself and his wife." Sarp's actions were consistent with an intent to hinder the trustee's ability to exercise control over those estate funds.
The court further determined that Sarp's acceptance of the Withdrawals was done irrespective of Katmai's continued operations and the estate. The evidence showed that " [h]e knew his time was up, and he took the money" before he lost the ability to do so. The evidence also persuaded the court that Barbara Sarp was just as involved with the Withdrawals as Sarp. She was a beneficiary of the funds and had even signed at least one of the checks made payable to her. The fact that the trustee was able to stop payment on the checks did not change her intent.
Based on the above findings, the court granted partial summary judgment as to the § 727(a)(2)(B) claim for relief against Sarp both in his separate capacity and in his capacity as a member of the marital community of Appellants, and against Barbara Sarp in her capacity as a member of the marital community.
The court denied summary judgment as to the § 727(a)(2)(A), (a)(3), and (a)(4)(B) causes of action. There has been no appeal filed as to the court's denial of such.
Appellants appeal.
II. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § 1334 and § § 157(b)(1), (b)(2)(A), and (2)(B). We have jurisdiction under 28 U.S.C. § 158.
Appellants state that one issue is whether the customer payments collected by WWA constitute property of the estate. This issue was asserted in Appellants' related appeal BAP No. 05-1478. In that appeal we found the customer payments did represent property of the estate. Because we have fully disposed of this issue in Appellants' related appeal, it is not necessary for the Panel to readdress the issue here.
A. Whether there are genuine issues of material fact as to Sarp's intent to hinder, delay, or defraud the trustee for purposes of § 727(a)(2)(B); and
B. Whether the Code allows for a partial denial of a debtor's discharge based upon the character of the debtor's property.
IV. STANDARD OF REVIEW
We review a grant of summary judgment de novo. Patterson v. Int'l Bhd. of Teamsters, Local 959, 121 F.3d 1345, 1349 (9th Cir. 1997). In viewing the evidence in the light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the applicable substantive law was correctly applied by the bankruptcy court. City of Vernon v. S. Cal. Edison Co., 955 F.2d 1361, 1365 (9th Cir. 1992). If the record before the bankruptcy court, including all " pleadings, depositions, answers to interrogatories, and admissions on file, together with any affidavits" establish that there are no triable issues and that " the moving party is entitled to judgment as a matter of law, summary judgment will be upheld." In re Gertsch, 237 B.R. 160, 165 (9th Cir. BAP 1999).
Though summary judgment is rarely granted where intent is at issue, Provenz v. Miller, 102 F.3d 1478, 1489 (9th Cir. 1996), cert. denied, 522 U.S. 808, 118 S.Ct. 48, 139 L.Ed.2d 14 (1997), " summary judgment is appropriate if all reasonable inferences defeat the claims of one side, even when intent is at issue." Newman v. Checkrite Cal., Inc., 912 F.Supp. 1354, 1380 (E.D. Cal. 1995)(citing White v. Roper, 901 F.2d 1501, 1505 (9th Cir. 1990)).
V. DISCUSSION
Section 727(a)(2)(B) provides that a " court shall grant the debtor a discharge unless the debtor, with the intent to hinder, delay, or defraud . . . an officer of the estate charged with custody of property . . . has transferred, removed, destroyed, mutilated, or concealed, or has permitted" such to occur to " property of the estate, after the date of the filing of the petition." This section is to be construed liberally in favor of the debtor and strictly against those objecting to discharge. In re Devers, 759 F.2d 751, 754 (9th Cir. 1985). Accordingly, a discharge will be denied under § 727(a)(2)(B) only upon a showing of actual intent to hinder, delay, or defraud creditors. Id. at 753; see In re Adeeb, 787 F.2d 1339, 1342 (9th Cir. 1986). Constructive fraudulent intent cannot be the basis for denial of discharge. Adeeb, 787 F.2d at 1343. However, " intent 'may be established by circumstantial evidence, or by inferences drawn from a course of conduct.'" Id. (quoting Devers, 759 F.2d at 753-54). Lack of injury to creditors is irrelevant for purposes of denying a discharge pursuant to § 727(a)(2). In re Bernard, 96 F.3d 1279, 1281-82 (9th Cir. 1996).
Ordinarily, summary judgment is not appropriate in a § 727 action where intent is at issue. Fogal Legware of Switz., Inc. v. Wills (In re Wills), 243 B.R. 58, 65 (9th Cir. BAP 1999); see also Consol. Elec. Co. v. United States, 355 F.2d 437, 438 (9th Cir. 1966). Nevertheless, " [e]ven in cases where . . . intent [is] at issue, summary judgment may be appropriate if the nonmoving party rests merely upon conclusory allegations, improbable inferences, and unsupported speculation." Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990).
A. Denial of Sarp's Discharge
Appellants challenge the bankruptcy court's order granting partial summary judgment under § 727(a)(2)(B) in favor of the trustee as erroneous in light of what Appellants believe are genuine issues of material fact as to the allegations regarding Sarp's intent to defraud or hinder the trustee. Specifically, Appellants contend that triable material issues exist with respect to the intent underlying Sarp's decision to continue booking Katmai vacations, his acceptance of checks related to those bookings, and his cashing of the Withdrawal checks. We disagree.
1. The Customer Payments
The bankruptcy court found that Sarp accepted over $40,000 in consulting fees and expenses from customer payments collected by WWA for his efforts in booking Katmai vacations for the 2005 and 2006 seasons with actual intent to hinder the trustee from getting those funds. Appellants argue that, because genuine issues of fact existed, the court erred in its findings regarding Sarp's intent.
As the bankruptcy court correctly recognized, the test under § 727(a)(2)(B) is not whether a debtor's actions benefit the estate, but whether he intends to hinder, delay, or defraud " an officer of the estate charged with custody of property." 11 U.S.C. § 727(a)(2). Based on this test, Sarp could be found to have acted with the actual intent to hinder, delay or defraud the trustee even if his actions ultimately benefitted the estate, provided the evidence supported such a finding.
It is undisputed that after the trustee discharged Sarp as Katmai's president and informed him of his plan to shutdown its business operations, Sarp immediately took employment as a consultant with WWA and assumed complete managerial control over the day-to-day operations of WWA. With knowledge and in defiance of trustee's stated plans to cease the business operations of Katmai, Sarp, through WWA, effectively continued such operations by selling vacations for the 2005 and 2006 seasons and collecting customer payments without the authority of the trustee or the bankruptcy court. At his direction, WWA solicited and accepted $316,039.50 in customer payments from the date of the trustee's appointment (December 17, 2004) through mid-March 2005. However, with the exception of $110,300.40, Sarp and WWA disbursed all of the customer payments, and did so in the face of the trustee's demand for the turnover of them in December 2004. Included in the disbursements was over $40,000.00 in fees and expenses paid to Sarp in January, February, and March 2005.
This amount was turned over to the trustee on the date that he filed a complaint for turnover of the customer payments, among other things, against Appellants, WWA, and Murray Armstrong (WWA's owner).
Even if, as asserted by Sarp, the prospective purchasers asked him to continue operating Katmai's business pending the sale, Sarp was well aware of the trustee's intent to terminate the operations. It is undisputed that he never sought authority from the trustee to continue the operations and to collect funds on behalf of the estate. See 11 U.S.C. § 363(b)(1) & (c)(1) (providing that only the trustee has the ability to sell or use property of the estate).
When stacked against the very substantial evidence presented by the trustee, Sarp's self-serving, unsubstantiated statements that he booked the vacations for the benefit of the estate, that he continued the operations at the request of prospective purchasers, and that he paid only wages and expenses from the funds collected, amount to a mere " scintilla" of evidence - insufficient to defeat a motion for summary judgment where, as here, the moving party has met his burden of proof. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Rivera v. Phillip Morris, Inc., 395 F.3d 1142, 1146 (9th Cir. 2005)(" A mere scintilla of evidence supporting [a nonmovant's] position is insufficient to withstand summary judgment.").
Based on the foregoing, we agree with the bankruptcy court that the trustee is entitled to summary judgment denying Sarp's discharge under § 727(a)(2)(B) based upon his collection and use of the customer payments.
2. The Withdrawals
Appellants deny that Sarp actually intended to hinder and delay the trustee's administration of the case when he tried to deposit the Withdrawals on the same date as the trustee's appointment. According to Sarp, the checks would have been deposited earlier, but he was waiting until Katmai had sufficient funds to cover them. In light of Sarp's asserted lack of awareness of the trustee's appointment, Appellants contend that there is a genuine issue of material fact as to his intent in cashing the Withdrawals.
The initial burden of showing that there is an absence of any genuine issue of material fact rests on the party seeking summary judgment. City of Vernon, 955 F.2d at 1365. If this burden is met, then the non-moving party must " set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The non-moving party cannot defeat summary judgment by relying on self-serving statements alone as evidence that a disputed material fact is present. Far Out Prods., Inc., 247 F.3d 986, 997 (9th Cir. 2001).
Here, the trustee met his burden by presenting a number of undisputed facts. First, according to Katmai's payroll records, Sarp received one payroll check per month, consistently dated between the ninth and eleventh of the month. However, beginning in December 2004, the month of the trustee's appointment, Katmai paid Sarp three payroll checks: one on December 10, 2004, in the amount of $5,879.25, another on December 15, 2004, for $2,486.07, and a third on December 16, 2004, in the amount of $5,879.25. These three payroll checks totaled $14,244.57 - $9,072 more than Sarp was ever paid in a single month. As of October 19, 2004, Sarp had notice of the trustee's motion to substantively consolidate Appellants' bankruptcies with Katmai's bankruptcy. In response to this motion, Sarp clearly articulated his concerns regarding Mork having control over Katmai's estate. The substantive consolidation motion was ultimately heard on December 17, 2004. Sarp's opposition and knowledge of this motion supports a finding that he was well aware of the possibility that a trustee could obtain control of Katmai's assets as early as December 17, 2004. Second, not only was Sarp paid significantly more in December 2004, but he admits that Hartung, the court-appointed president and chief financial officer of Katmai, did not authorize the Withdrawals. Third, Sarp conveniently deposited two of the paychecks and a check for reimbursed expenses totaling $12,607.50 on the exact date of the trustee's appointment, i.e., December 17, 2004, the date he lost all control over Katmai's checking account.
The Katmai payroll transaction sheets state that the checks were issued on December 10, 15, and 16, 2004. However, the actual checks have a date on them of December 17, 2004.
The trustee's motion to substantively consolidate the bankruptcy cases and Sarp's opposition were not included as part of the record; nevertheless, we have obtained copies from the bankruptcy court's electronic case filing system, and we are able to take judicial notice of these pleadings. Harris v. U.S. Trustee (In re Harris), 279 B.R. 254, 261 n.4 (9th Cir. BAP 2002)(" A judicially noticed fact must be one not subject to reasonable dispute in that it is . . . capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.").
To rebut the trustee's evidence, Appellants provide only Sarp's declaration averring that the timing of the Withdrawals was entirely coincidental. But this declaration is not sufficient to create a genuine issue of material fact. His statements therein do not explain why he was paid $9,000 more in December than any other previous month, nor do they adequately address the status of Katmai's checking account at the relevant time. Appellants have not provided any time cards, expense reports, nor bank statements which would support any of Sarp's statements. In sum, the statements do nothing " more than simply show that there is some metaphysical doubt as to the material facts[, ]" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), which, by itself, is insufficient to establish that a genuine dispute exists when viewed in light of the trustee's evidence.
The evidence in the record unequivocally demonstrates that 1) in December, Sarp was paid $9,000 more for his services than in any other month in 2004 without any explanation for the increase; 2) on the date of the appointment of the trustee, Sarp deposited over $12,000 of Katmai funds for alleged salary and expenses; 3) no evidence has been provided to support Sarp's entitlement to the $12,000 or that such amount was approved by Katmai's controlling officer; and 4) after the trustee's appointment Sarp lacked the authority to use Katmai funds without prior approval from the trustee or the court. Based on the inferences that can be drawn from Sarp's conduct and the facts in the record, we agree with the bankruptcy court that there is evidence that he acted with the actual intent to hinder, delay or defraud the trustee when he made the Withdrawals. We therefore conclude that the court's granting of summary judgment under § 727(a)(2)(B) to be appropriate.
B. Denial of Barbara Sarp's Discharge
At the summary judgment hearing, the bankruptcy court found that Barbara Sarp had actively participated with Sarp in deceiving the trustee by cashing the Withdrawals made payable to her. Based on this finding, the court granted summary judgment against Barbara Sarp under § 727(a)(2)(B) " in her capacity as a member of the marital community" .
Prior to the conclusion of the hearing on the summary judgment motion, the court granted Appellants' request for the opportunity to file Barbara Sarp's supplemental declaration addressing her specific participation as to the Withdrawals and her separate property liability. The declaration persuaded the court to only grant summary judgment under § 727(a)(2)(B) as to her community property interest.
1. The Lack of Evidence Supporting Intent
Unlike the evidence supporting Sarp's denial of discharge, the trustee's case against Barbara Sarp is thin at best. In this regard, the only evidence presented by the trustee were the two Withdrawals made payable to Barbara Sarp, only one of which was actually endorsed by her.
By contrast, Barbara Sarp states in her declaration that she never participated in the management of Katmai's operations and that her involvement with the company was limited to " run[ning] errands and sign[ing] checks when told to do so." Further, she was never employed by WWA in any capacity. The trustee has not provided any evidence to rebut or even put into question the veracity of her declaration. When the evidence is viewed in a light most favorable to Barbara Sarp, there are clearly material factual issues regarding her intent. The execution of a single check simply does not provide sufficient evidence for us to reasonably infer an intent to deceive, delay, or defraud the trustee. Thus, the bankruptcy court's denial of her discharge on summary judgment as to her marital community liability is erroneous and we remand the matter for further findings as to Barbara Sarp's intent.
2. Partial Denial of Discharge
In a somewhat novel ruling, the bankruptcy court denied Barbara Sarp's discharge under § 727(a)(2), but only in her capacity as a member of the " marital community." Her discharge was left intact in her " separate capacity." Specifically, the order granting partial summary judgment provides in relevant part:
2. . . . Summary judgment is GRANTED against Barbara A. Sarp in her capacity as a member of the marital community of Anthony J. Sarp and Barbara A. Sarp. Summary judgment is DENIED against Barbara A. Sarp in her separate capacity;
3. Anthony J. Sarp is DENIED discharge of his debts under 11 U.S.C. § 727(a)(2)(B) both in his separate capacity and in his capacity as a member of the marital community of Anthony J. Sarp and Barbara A. Sarp; and
4. Barbara A. Sarp is DENIED discharge of her debts under 11 U.S.C. § 727(a)(2)(B) only in her capacity as a member of the marital community of Anthony J. Sarp and Barbara A. Sarp.
Order Granting In Part and Denying In Part the Trustee's Motion for Summary Judgment (" Summary Jmt. Order") at 2, Feb. 16, 2006.
A discharge under § 727(a), discharges a debtor of " all debts that arose before the date of the order for relief . .., and any liability on a claim that is determined under section 502 . . . as if such claim had arisen before the commencement of the case." 11 U.S.C. § 727(b). Section 727 allows the court to deny a debtor's discharge provided one of the ten enumerated grounds listed under subsection (a) is proven. Id. § 727(a). If the court denies discharge under § 727(a), creditors retain the right to pursue collection of their debt against the debtor and against non-bankruptcy estate property.
In contrast to certain subsections of § 523(a) which allow for a partial discharge of an otherwise nondishargeable debt, see Saxman v. Educ. Credit Mgmt. BJR Corp. (In re Saxman), 325 F.3d 1168, 1173-74 (9th Cir. 2003)(discussing partial discharge under § 523(a)(8) and (a)(15)), § 727(a) embraces an all-or-nothing approach. This section " relieve[s] the honest debtor from the weight of oppressive indebtedness and permit[s] him to start afresh from the obligations and responsibilities consequent upon business misfortune." Adeeb, 787 F.2d at 1345 (citing Devers, 759 F.2d at 754-55)(emphasis added). If a debtor is found to be dishonest under § 727(a), then discharge is denied as to all debts no matter the extent of the dishonest behavior. Nothing in § 727 allows for a partial denial of a debtor's discharge based upon the character of the debtor's property.
To the extent the bankruptcy court " denied discharge of [Barbara Sarp's] debts under 11 U.S.C. § 727(a)(2)(B) only in her capacity as a member of the [Appellants'] marital community" Summary Jmt. Order at 2, Feb. 16, 2006, it erred. We, therefore, reverse the bankruptcy court's order as to the granting of summary judgment against Barbara Sarp and the denial of discharge under § 727(a)(2)(B) in her capacity as a member of the marital community of Appellants.
VI. CONCLUSION
For the foregoing reasons, we AFFIRM the bankruptcy court's order as to the granting of summary judgment against Anthony Sarp and the denial of his discharge. However, we VACATE and REMAND the order in regards to the granting of summary judgment against Barbara Sarp and REVERSE the order as to the denial of her discharge.
Appellants appealed the order as to the court's findings regarding Sarp's breach of his § 521(3) and (4) duties and their liability as a result of such. We affirmed the bankruptcy court's order (BAP No. 05-1478).