Opinion
NOT FOR PUBLICATION
Argued and Submitted at Seattle, Washington: February 19, 2010
Appeal from the United States Bankruptcy Court for the Western District of Washington. Bk. No. 08-14147-KAO, Adv. No. 08-01338-KAO. Hon. Karen A. Overstreet, Chief Bankruptcy Judge, Presiding.
Before MONTALI, MARKELL and HOLLOWELL, Bankruptcy Judges.
This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1.
Appellant-Debtor, Dr. Christopher Phillips (" Phillips"), appeals an order from the bankruptcy court denying his discharge under 11 U.S.C. § § 727(a)(2)(B) and 727(a)(4)(A). Because the bankruptcy court did not clearly err when it determined that Phillips intentionally concealed a claim under a disability insurance policy after the date of the filing of the petition, and that Phillips knowingly and fraudulently made a false oath by failing to disclose the claim in his schedules, amended schedules, and at the section 341 meeting of creditors, we AFFIRM.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
I. BACKGROUND
A. Prepetition Background.
The extensive facts in this case are largely undisputed. Phillips is an ophthalmologist, licensed to practice medicine in Washington. Phillips began his medical practice as an eye surgeon in 2004. He also has a law degree, and is nearing completion of his MBA.
In 1992, while serving in the Navy, Phillips suffered an injury to his feet resulting in several surgeries, chronic pain, and an addiction to painkillers. Since that time, Phillips has continued to struggle with an addiction to opiate narcotics and with various psychiatric illnesses including mood disorders, anxiety, depression, and suicidal tendencies. His addiction and illnesses led to marital problems, numerous lawsuits in various states, adverse media exposure, and the eventual closing of his ophthalmology practice in 2007. Phillips receives monthly VA disability benefits of $3,750 for his foot injury.
In November 2002, Phillips applied to Standard Insurance Company (" Standard") for a disability income insurance policy (the " Policy"). The Policy became effective on December 18, 2002, providing for a $3,000 monthly benefit over a maximum benefit period up to age 67.
For ease of explanation, the following is a timeline of events occurring from approximately late 2007, up to the date Phillips filed bankruptcy:
Late 2007 -- Early 2008
State of Washington informs Phillips he can no longerpractice medicine until he completes psychiatrictreatment
Late 2007 -- Prior to February 12, 2008
Phillips makes inquiry to Standard about how to filea claim against the Policy
February 12, 2008
Standard sends Phillips a letter responding to hisinquiry about how to file a claim
Early March, 2008
Phillips retains bankruptcy counsel and beginscompleting what he calls the " core"portion of his bankruptcy schedules
March 22, 2008
Phillips checks into Menninger Clinic for treatment
March 22, 2008
Phillips files a claim with Standard under the Policy(the Claim)
March 27, 2008
Standard receives the Claim
March 27, 2008 -- Up to and after date of bankruptcyfiling
Standard makes multiple requests to Phillips toprovide additional information about his physicalcondition and his medical practice before it willprocess the Claim
February 12, 2008 -- Up to date of bankruptcy filing
Phillips receives ten (10) letters from Standardregarding the Claim; Phillips sends one letter toStandard responding to its request for additionalinformation; Phillips has two extensive conversationswith Standard representatives regarding the Claim
April 18, 2008 -- Following months
Phillips is discharged from Menninger Clinic; hecontinues to battle withdrawal symptoms fromnarcotics, including sleep deprivation, depression,anxiety, anger, and weight loss.
B. Postpetition Background.
Phillips, assisted by counsel, filed a chapter 7 petition on July 2, 2008 (" Petition Date"). The Claim was still pending at that time. Phillips did not include the Claim or the Policy in his schedule B, or include the Policy as an executory contract in his schedule G. Phillips did, however, include in his schedule B many other potential claims against parties for various torts, including conversion, defamation, fraud, slander, libel, and medical malpractice, in addition to a breach of contract claim. Phillips asserted on his schedule C that almost all of these claims were fully exempt under section 522(d).
On July 31, 2008, Phillips filed his first amended schedule B, which did not disclose either the pending Claim or the Policy. On that same date, Phillips testified at the section 341 meeting of creditors (the " 341 meeting") that he reviewed his petition and schedules prior to filing bankruptcy, that they were true and accurate, and that no changes were needed. Again, Phillips did not disclose the pending Claim or the Policy. Between the Petition Date and July 31, 2008, Phillips and Standard engaged in three more communications about the Claim. Eventually, Phillips hired an attorney to assist him with the Claim against Standard.
On August 29, 2008, Standard informed Phillips that it was denying the Claim. Enclosed with its denial letter was a check to Phillips in the amount of $8,260.13 for all premiums paid on the Policy to date. An email from Phillips to his counsel dated September 3, 2008 (the " September 3 email"), discusses the possibility that Phillips may receive disability income, the maximum he could recover is $6,600, and that this is the amount Phillips had just told the paralegal (in a prior email) to include in the to-be-filed amended schedules.
On September 9, 2008, Standard informed the chapter 7 trustee about the existence of the Claim and its denial. From July 31, 2008, up to and including September 9, 2008, Phillips and Standard engaged in seven more communications about the Claim. On September 15, 2008, Standard filed an adversary proceeding against Phillips and the chapter 7 trustee, seeking to rescind the Policy based on misrepresentations it alleged Phillips made to Standard in obtaining the Policy in 2002.
On September 17, 2008, Phillips filed a second amended schedule B disclosing the Claim. The Policy was not identified in question 9, but question 21 states " Disability claim/Potential increase in disability income, " along with the notation that Phillips was receiving a check for the returned premiums, but that " [Phillips] does not believe he is entitled to these funds." On October 7, 2008, Phillips filed an amended schedule C to exempt the Claim, which he valued at $6,600.
Phillips appeared and testified at a Rule 2004 examination on October 15, 2008, stating that the Policy and Claim were not disclosed on his schedule B or at the 341 meeting because he " forgot" about them.
C. Adversary Proceeding History.
On December 5, 2008, Appellee-United States Trustee (" UST"), filed a complaint seeking to deny Phillips's discharge under section 727(a)(2) for intentionally concealing the Policy and the Claim both before and after the Petition Date, and under section 727(a)(4)(A) for knowingly and fraudulently making a false oath when he declared that his schedules were true and accurate, and when he testified to this effect at the 341 meeting.
In his answer and trial brief, Phillips asserted that his lack of disclosure of the Claim and Policy in his schedule B, his first amended schedule B, and at the 341 meeting, was an inadvertent oversight and unintentional. He explained that his " singular" omission in his schedule B was due to a combination of the difficulty of his case (which involved over 650 creditors and documents comprising over 200 pages), his psychiatric illness and hospitalizations, and other turmoil in his personal life, including losing his wife, losing his medical practice, and being the subject of seventy-five Department of Health investigations, any of which could end his career in medicine.
Phillips further contended that failing to disclose these two items, which were not estate property and likely fully exempt, while disclosing several other non-exempt claims, rendered his omission immaterial and further evidenced his lack of intent. Moreover, he contended, his numerous communications with Standard did not show fraudulent intent, but rather showed evidence of a person who was overwhelmed by psychiatric and other problems and could not give his case the care and detail it required.
Phillips asserts that he listed many other " non-exempt" claims, so that his failure to list the Claim, which he believes is fully exempt, vitiates his intent. It is unclear to which " non-exempt" claims Phillips is referring since he claimed almost every asset as 100% exempt.
Phillips also contended since he did not know whether the Claim would result in any paid benefits, he did not consider the Policy an asset of the estate that needed to be identified and exempted.
Finally, Phillips contended that his 341 meeting testimony was true and accurate since he forgot about the Policy and the Claim at that time; it was the result of his honest, though mistaken, belief that the Policy and pending Claim had been disclosed on his initial bankruptcy schedules. When he became aware of the situation, he amended his schedules.
The bankruptcy court held a trial on March 3, 2009. Since many of the facts were undisputed, the primary issue was whether Phillips's failure to disclose the Policy and the Claim on his schedules, and at the 341 meeting, was made intentionally for the purpose of defrauding creditors or the trustee. By this time, Standard had paid, under a reservation of rights, $52,000 in benefits to the chapter 7 trustee.
Phillips testified that he began filling out the " core" of his bankruptcy schedules in early March, 2008, prior to entering Menninger Clinic and filing the Claim with Standard, but that he continued to inform his counsel up to the Petition Date about creditors and to provide other information. Phillips also testified that his psychiatric condition and other unfortunate events occurring during these months caused him to " simply forget" to list the Policy and Claim, other claims, and several creditors. Phillips admitted that his testimony at the 341 meeting was that he reviewed his petition and schedules prior to filing, and that to the best of his knowledge they were true and accurate. He further explained that since the Policy would not have paid benefits until ninety-one days post-submission, it (the Policy) was not an asset at the time he filled out his initial schedules. Phillips also testified that at the time of the 341 meeting and during all of his post-bankruptcy communications with Standard, he was operating under the assumption that the Policy and Claim had been listed. Finally, Phillips testified, that during the time period in question, he was experiencing severe financial difficulties, and that he was relying primarily on his VA benefits and assistance from his family.
Psychologist Dr. Judith Cohen (" Dr. Cohen") testified that at her first meeting with Phillips on November 20, 2008, she diagnosed him with major depression and general anxiety. She further testified that based upon his condition and reports of other health providers, that some of the psychological issues with which Phillips struggled may be attributable to as far back as the fall of 2007. Dr. Cohen opined that at the time Phillips filed bankruptcy, and in the preceding months, he was likely suffering loss of memory as a result of a chronic sleep disorder. Finally, Dr. Cohen testified that although she had no direct knowledge of Phillips's mental capacity or his abilities on the Petition Date, she believed that he would have had the capacity to form intent at that time, but because his executive functions were impaired he may not have had the ability to follow through with that intent.
Finally, the chapter 7 trustee testified she had no reason to suspect that Phillips was not mentally capable of handling his financial affairs when she questioned him at the 341 meeting. Likewise, Jeffrey Wells, the bankruptcy attorney for Phillips's business, testified that during his meetings with Phillips in August of 2008, he did not detect any signs of impaired mental capacity.
On March 18, 2009, the bankruptcy court issued a written letter decision denying Phillips a discharge under sections 727(a)(2)(A), 727(a)(2)(B), and 727(a)(4)(A). To show that Phillips intended to conceal the pending Claim both pre- and postpetition under section 727(a)(2), the court rejected Phillips's contention that he " simply forgot" about it in light of the significant amount of correspondence with Standard about the Claim during the relevant period, his persistent and costly pursuit of it, his dire financial straits, and the suspicious timing of his disclosure of the Policy and the Claim -- just six days before Standard disclosed the Claim to the chapter 7 trustee. The court also rejected the September 3 email as evidence to negate Phillips's intent, since it made no reference to any disclosure about the Claim to his bankruptcy attorneys prior to the Petition Date, the date he filed the first amended schedule B, or the 341 meeting.
As further evidence of intent to conceal, the bankruptcy court found Dr. Cohen's retrospective diagnosis that Phillips was mentally impaired during the relevant period was outweighed by the overwhelming evidence that Phillips was functioning at a very high level during this time, when he had an obligation to disclose all of his assets. Besides dealing with Standard, Phillips pursued and succeeded at overturing a denial of his claim for unemployment benefits. He also successfully prosecuted a motion to dismiss in an unrelated adversary proceeding in bankruptcy court. Further, neither the chapter 7 trustee nor bankruptcy counsel for Phillips's business detected any signs of impaired mental capacity.
As for denial of his discharge under section 727(a)(4), the bankruptcy court found that Phillips's false statements and omissions about the pending Claim in his schedules and at the 341 meeting were false oaths. Such false oaths were material because they concerned the chapter 7 trustee's ability to discover Phillips's assets. The court rejected Phillips's argument that since the Claim was likely exempt, failing to disclose it was not material. Exempt or not, the schedules required Phillips to disclose all assets. Finally, for the reasons the bankruptcy court set forth in its intent analysis under section 727(a)(2), it found that Phillips had made material false oaths knowingly and fraudulently. An order denying his discharge was entered on March 23, 2009 (" March 23 Order").
On April 1, 2009, Phillips filed a motion to reconsider or amend the March 23 Order, requesting that the bankruptcy court take a second look at the evidence regarding his medical condition and impaired abilities during the relevant period. Additionally, Phillips sought to submit a previously " unavailable" email from him to his bankruptcy attorneys dated March 17, 2008 (" March 17 email"), telling them about a lawsuit he failed to mention. Phillips contended the March 17 email proved that he had completed the " core" portions of his schedules in early March, 2008. Lastly, Phillips asserted that omission of the Policy was immaterial because it resulted in no loss to the estate, and even if the Claim was exempt to the extent necessary for his support, his medical expenses far exceeded the $3,000 monthly benefit. On April 2, 2009, Phillips filed his notice of appeal of the March 23 Order.
Phillips filed an amended motion to reconsider on April 17, 2009. In addition to his prior arguments, Phillips contended that under Fogal Legware of Switz. v. Wills (In re Wills), 243 B.R. 58 (9th Cir. BAP 1999), only an omission that " detrimentally affects" the estate can be considered material enough to deny discharge. While conceding that omitting the Policy perhaps resulted in an inability to claim it as exempt, Phillips argued that even if he had disclosed the Policy, any potential disability benefits were exempt, and therefore, since no money would ever come to the estate, the omission was not material. Lastly, Phillips contended that since the Policy was not concealed before the Petition Date, the court erred when it denied his discharge under section 727(a)(2)(A).
Following his motion filed on April 1, 2009, on April 2, 2009, Phillips filed his notice of appeal of the March 23 Order. On April 8, the bankruptcy court denied his April 1 motion to reconsider because it believed his notice of appeal removed the court's jurisdiction to hear it. In response, Phillips filed his amended motion to reconsider on April 17, 2009, which convinced the bankruptcy court that it had erred in its April 8 decision denying his motion to reconsider for lack of jurisdiction.
On May 26, 2009, the bankruptcy court entered an order denying Phillips's motion to reconsider, but granting the motion to amend the March 23 Order. His discharge was still denied under sections 727(a)(2)(B) and 727(a)(4)(A), but the court agreed that denial of discharge under section 727(a)(2)(A) was improper since there was no evidence of any prepetition concealment of the Policy. The bankruptcy court remained unconvinced that Phillips lacked intent under sections 727(a)(2) and 727(a)(4). It rejected the March 17 email as irrelevant, explaining that it had accepted Phillips's testimony that he completed " core" portions of his schedules in early March, but what the court did not find credible was Phillips's contention that he had disclosed the Claim in the schedules, and that he continued to hold this belief notwithstanding ample opportunity to confirm or correct his error. Finally, the bankruptcy court rejected Phillips's assertion that his omissions were immaterial under Wills because the benefits at issue were of substantial value, and had not been proven fully exempt by Phillips.
While the court focused on concealment and false oaths about the Claim in its March 23 Order, in this order it focused on the Policy, almost using the terms interchangeably. Perhaps this is because in his motion to reconsider/amend the March 23 Order, Phillips focused on the Policy. In any event, even though the order denying reconsideration refers to the Policy, the March 23 Order, at issue here, denied Phillips's discharge under sections 727(a)(2)(B) and 727(a)(4)(A) for concealing and making false oaths about the Claim.
Phillips contends that the Policy pays benefits on mental health claims for only two years, thus rendering the Claim worth only $72,000. However, the Policy is not in the record so we cannot confirm this. The bankruptcy court noted in its order on Phillips's motion to reconsider that a trial exhibit submitted by the UST showed the maximum payout on the Policy to be $1,116,000.
II. ISSUES
1. Did the bankruptcy court err when it denied Phillips a discharge under section 727(a)(4)(A)?
2. Did the bankruptcy court err when it denied Phillips a discharge under section 727(a)(2)(B)?
III. JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § § 157(b)(2)(J) and 1334. We have jurisdiction under 28 U.S.C. § 158.
IV. STANDARD OF REVIEW
On an objection to discharge, we review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. Beauchamp v. Hoose (In re Beauchamp), 236 B.R. 727, 729 (9th Cir. BAP 1999). The bankruptcy court's finding that Phillips acted with intent to hinder, delay, or defraud his creditors, or that he knowingly and fraudulently made a false oath in his bankruptcy case, are findings of fact reviewed for clear error. Id.
A factual finding is clearly erroneous if the appellate court, after reviewing the record, has a definite conviction that a mistake has been made. Anderson v. Bessemer City, 470 U.S. 564, 573-75, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). We give findings of fact based on credibility particular deference. Rule 8013. If the bankruptcy court's account of the evidence is plausible in light of the record reviewed in its entirety, we may not reverse it even though convinced that we might have weighed the evidence differently. Anderson, 470 U.S. at 574.
V. DISCUSSION
A claim for denial of discharge under section 727 is construed liberally in favor of the debtor and strictly against those objecting to discharge. First Beverly Bank v. Adeeb (In re Adeeb), 787 F.2d 1339, 1342 (9th Cir. 1986). Nonetheless, the bankruptcy discharge is equitable in nature and is intended only for honest debtors. Id . at 1345. The objecting party bears the burden of proving that the debtor's discharge should be denied by a preponderance of the evidence. Khalil v. Developers Sur. & Indem. Co. (In re Khalil), 379 B.R. 163, 172 (9th Cir. BAP 2007); Rule 4005.
A. The Bankruptcy Court Did Not Clearly Err When It Found That Phillips Knowingly And Fraudulently Made A False Oath About The Claim In Violation Of Section 727(a)(4)(A).
Under section 727(a)(4)(A), a debtor shall not be granted a discharge if " the debtor knowingly and fraudulently, in or in connection with the case, made a false oath . . . ." In order to prevail, the UST must establish that: (1) Phillips made a false oath or omission, (2) regarding a material fact, and (3) did so knowingly and fraudulently. Khalil, 379 B.R. at 172.
1. False Oath.
A false statement or omission in the debtor's bankruptcy schedules or statement of financial affairs can constitute a false oath. Roberts v. Erhard (In re Roberts), 331 B.R. 876, 882 (9th Cir. BAP 2005). The same is true for statements made by the debtor when being examined at meetings of creditors. Netherton v. Baker (In re Baker), 205 B.R. 125, 131 (Bankr. N.D.Ill. 1997); Lanker v. Wheeler (In re Wheeler), 101 B.R. 39, 49 (Bankr. N.D. Ind. 1989).
We agree with the bankruptcy court that Phillips made a false statement or omission. It is undisputed that he omitted the Claim and Policy from his schedule B, his first amended schedule B, and that he testified at the 341 meeting that the information in his bankruptcy schedules was true and accurate and that no changes were necessary.
2. Material Fact.
To merit denial of discharge under section 727(a)(4), the false statement or omission must be material. Wills, 243 B.R. at 62. A false statement or omission is a material fact " if it bears a relationship to the debtor's business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and disposition of the debtor's property." Id . " A false statement or omission may be material even if it does not cause direct financial prejudice to creditors." Id . at 63. On the other hand, false statements or omissions relating to assets having little value or that would not be property of the estate, may be considered immaterial and not support denial of discharge. Id.
The bankruptcy court determined that Phillips's false oaths about the Claim were material because they concerned the chapter 7 trustee's ability to discover his assets. It rejected Phillips's exemption argument, because exempt or not (a decision not then made by the court), Phillips was required to disclose all assets.
Phillips contends that since the Policy was not property of the estate, or was fully exempt under section 522(d)(10)(C), then omitting it was immaterial, and since his omission did not " detrimentally affect" the estate, then it does not justify a denial of discharge. We disagree. Both the Policy and Claim were property of the estate, and the Claim's potential exempt status does not alter the materiality of its nondisclosure.
Under section 541, a debtor's interests in property, legal or equitable, become property of the bankruptcy estate upon the filing of the petition. The Ninth Circuit has held that the contract rights of a debtor, and specifically rights in insurance policies, are property of the estate under section 541. Groshong v. MILA, Inc. (In re MILA, Inc.), 423 B.R. 537, 542 (9th Cir. BAP 2010) (citing The Minoco Group of Cos., Ltd. v. First State Underwriters Agency of New England Reins. Corp. (In re The Minoco Group of Cos., Ltd.), 799 F.2d 517, 519 (9th Cir. 1986). See Stinnett v. Laplante (In re Stinnett), 465 F.3d 309, 312 (7th Cir. 2006) (disability insurance policy in which debtor has an interest at the time of petition constitutes property of the estate).
At the time Phillips filed his chapter 7 petition he unquestionably owned the Policy. Furthermore, and what is more important here, the events (e.g., addiction, hospitalizations, inability to work) that gave rise to Phillips's contractual right under the Policy to assert the Claim had occurred prior to the Petition Date. Even if he had allowed the Policy to lapse prior to filing bankruptcy but after the events establishing his disability, on the Petition Date he still held the pending Claim for which he expected disability benefits once approved. Thus, when Phillips filed for bankruptcy, the Policy and the Claim became property of his bankruptcy estate. Additionally, as the bankruptcy court noted, the Claim's value was not insignificant.
We also reject Phillips's argument that he held no " interest" in the Policy, or any right to payment under the Policy as of the Petition Date, because it was an unperformed executory contract, and based on Washington law the estate could never acquire something in which he had no interest.
Furthermore, materiality of an omission is not lessened by the fact that the asset omitted may be exempt, because such assets still bear a relationship to the debtor's estate. Mertz v. Rott, 955 F.2d 596, 598 (8th Cir. 1992) (non-disclosure of exempt tax refund of $1,358 was material because it was an asset of the estate and therefore bore a relationship to the estate).
Finally, as the bankruptcy court noted, since a debtor's claim of exemption under section 522 is subject to objection and denial, full disclosure of all assets is required of debtors, including assets that are worthless or claimed as fully exempt. Rule 4003; See Matter of Yonikus, 974 F.2d 901, 904-05 (7th Cir. 1992) (citing series of cases). We also recognize the equitable principle that a debtor loses the ability to claim an asset as exempt if the debtor acquired it with the intention to defraud creditors. Miguel v. Walsh, 447 F.2d 724, 726-27 (9th Cir. 1971).
The Claim was property of the estate, and was potentially a major source of income for Phillips. As such, it bore a relationship to the estate because it would have aided in understanding his financial affairs and, as noted by the bankruptcy court, it concerned the chapter 7 trustee's ability to discover his assets. Wills, 243 B.R. at 62. Consequently, Phillips's omissions and false statements about the Claim were material.
3. Knowingly and Fraudulently.
A debtor " acts knowingly if he or she acts deliberately and consciously." Khalil, 379 B.R. at 173. A debtor acts fraudulently when (1) the debtor made a false statement or omission in connection with the case, such as in bankruptcy schedules or at creditor meetings, (2) that at the time the debtor knew was false, and (3) debtor made such statement or omission with the intention and purpose of deceiving creditors or the trustee. Id.
" The intent required for finding that the debtor has acted fraudulently under § 727(a)(4)(A) with respect to a false oath must be actual intent; constructive fraudulent intent cannot be the basis for the denial of a discharge." Roberts, 331 B.R. at 884. Intent may be established by circumstantial evidence or by inferences drawn from the debtor's course of conduct. Id.
For the same reasons set forth in the bankruptcy court's analysis of Phillips's intent under section 727(a)(2)(B), it found that Phillips knowingly and fraudulently made a false oath in violation of section 727(a)(4)(A). Phillips's contention that he " simply forgot" about the Claim was outweighed by evidence of his extensive communications with Standard about the Claim and his persistent pursuit of it, his dire financial straits at the time, and the suspicious timing of his disclosure, just days before Standard disclosed the Claim to the chapter 7 trustee. The court also rejected the September 3 email as evidence to negate Phillips's intent because it made no reference to any disclosure about the Claim to his bankruptcy attorneys prior to the Petition Date, the date he filed the first amended schedule B, or the 341 meeting. Finally, the court believed that Dr. Cohen's retrospective diagnosis that Phillips was mentally impaired during the relevant period was outweighed by evidence that Phillips was functioning at a very high level during the time he had an obligation to disclose all of his assets.
Phillips argues that the bankruptcy court erroneously applied a constructive rather than actual fraud standard as required under section 727(a). First, he contends his omission was singular; there was no series of omissions to create a pattern sufficient to show actual intent. Clearly, Phillips made more than one omission or false statement.
Phillips also contends that due to the events occurring in his life at the time, he had no time to review his extensive 200-plus pages of schedules and related documents prior to filing bankruptcy, or after, and therefore his actions may have been sloppy, but not fraudulent. This " lack of time" assertion contradicts his 341 meeting testimony, made under oath, that he reviewed his schedules prior to filing and no changes were necessary. Phillips even admitted that he continued to inform his counsel up to the Petition Date about creditors and to provide other information. Moreover, as the bankruptcy court noted in its order denying his motion to reconsider, regardless of when Phillips began filling out the " core" portions of his bankruptcy schedules, he had ample opportunity to confirm or correct his errors. While Phillips's argument may have some merit to explain why he failed to disclose the Claim and Policy in his initial schedule B, it does not explain why he omitted the Claim and Policy again in the first amended schedule B, which consisted of only four pages. Surely if Phillips had time to amend his schedule B in order to add another cause of action he omitted, he certainly had time to review it and notice that the Claim and Policy were missing.
Lastly, Phillips contends that the bankruptcy court improperly gave little weight to Dr. Cohen's testimony about his ability to form or follow through with intent because she was not treating Phillips during the relevant time period. The bankruptcy court considered Dr. Cohen's testimony, but believed it was outweighed by other circumstantial evidence. Even if there were two views of the evidence here, we cannot say on this record that the bankruptcy court's view of Phillips's intent is clearly erroneous. Beauchamp, 236 B.R. at 731.
4. Disposition Of The Issue.
Phillips's testimony has consisted of, " I guess I overlooked the Policy and Claim; " " I thought I disclosed them; " " I didn't think I had to disclose them because there was nothing to disclose." The bankruptcy court's finding that Phillips knowingly and fraudulently made a material false oath is entirely plausible on this record. We see no clear error here. Further, the court applied the correct standard of law for intent under section 727(a). Accordingly, we AFFIRM the bankruptcy court's denial of Phillips's discharge under section 727(a)(4)(A).
B. The Bankruptcy Court Did Not Clearly Err When It Found That Phillips Intentionally Concealed The Claim After The Date Of The Filing Of The Petition In Violation Of Section 727(a)(2)(B).
Section 727(a)(2)(B) provides that a debtor shall not be granted a discharge if " the debtor, with intent to hinder, delay, or defraud a creditor or [trustee] . . . has . . . concealed property of the estate, after the date of the filing of the petition." To prevail, the UST must establish that: (1) Phillips concealed the Claim, and (2) with the purpose to hinder, delay, or defraud creditors or the trustee. Beauchamp, 236 B.R. at 732.
Unlike section 727(a)(4), there is no materiality requirement under section 727(a)(2). Wills, 243 B.R. at 65 (reversing bankruptcy court for applying a materiality standard under section 727(a)(2)).
Phillips contends three reasons why we must reverse the bankruptcy court's order denying his discharge under section 727(a)(2)(B): (1) the court's finding that he intended to hinder, delay, or defraud his creditors is clearly erroneous; (2) omitting the Policy from his schedules cannot be considered a " concealment, " and (3) the Policy was never property of the estate. We have already rejected his third contention. The Policy and, more importantly, the Claim, were property of the estate. We now address his other arguments.
1. Actual Intent.
To deny Phillips's discharge under section 727(a)(2)(B), the court must find that he acted with actual intent to hinder, delay, or defraud. Adeeb, 787 F.2d at 1342. Constructive fraudulent intent cannot be the basis for denial of discharge. Id . at 1343. Intent may be established by circumstantial evidence or by inferences drawn from the debtor's course of conduct. Id . Fraudulent intent may also be inferred from a pattern of falsity or cumulative falsehoods. Garcia v. Coombs (In re Coombs), 193 B.R. 557, 563 (Bankr. S.D. Cal. 1996); Clark v. Hammeken (In re Hammeken), 316 B.R. 723, 728 (Bankr. D. Ariz. 2004).
Phillips asserts the same arguments regarding his intent as he did under section 727(a)(4)(A). Here, however, he relies heavily on In re Snodgrass, 359 B.R. 278 (Bankr. D. Idaho 2007), to assert that he should not be denied a discharge, because in that case the bankruptcy court refused to deny the debtor's discharge under section 727(a)(2) for concealing disability payments.
While this is true, Phillips tells only half of the Snodgrass story. Although the bankruptcy court there determined that denial of discharge was not warranted under section 727(a)(2)(A) since the only evidence of the debtor's prepetition concealment was his failure to disclose the disability payments in his bankruptcy schedules, the court did deny debtor's discharge under section 727(a)(2)(B) for his postpetition conduct of concealing the payments in his amended schedules and at the 341 meeting of creditors. Id . at 289. The court also denied the debtor's discharge under section 727(a)(4)(A) for his false oaths. Id . at 290. Therefore, Snodgrass does not support Phillips's contention that he should not be denied a discharge under section 727(a)(2).
Accordingly, the bankruptcy court committed no error in its intent analysis under section 727(a)(2), and Snodgrass does not alter that decision.
2. An Omission Can Be A Concealment.
Phillips cites no authority to support his position that an omission cannot be a concealment. Perhaps an " innocent" omission cannot equate to a concealment under section 727(a)(2), but that analysis goes to intent. The bankruptcy court found, and we agree, that there was sufficient evidence to show that Phillips intended to conceal the Claim. Consequently, the series of omissions here constitute a concealment under section 727(a)(2). See In re Sanders, 128 B.R. 963, 972 (Bankr. W.D. La. 1991) (omission of property may warrant denial of discharge both on grounds of false oath under section 727(a)(4) and forbidden concealment under section 727(a)(2)).
3. Disposition Of The Issue.
As we stated above, even if we might have weighed the evidence differently, we cannot reverse the bankruptcy court because its finding that Phillips intentionally concealed the Claim after the date of the filing of the petition is plausible on this record. We are not convinced that a definite mistake has been made. Accordingly, we AFFIRM the bankruptcy court's denial of Phillips's discharge under section 727(a)(2)(B).
VI. CONCLUSION
For the foregoing reasons, we AFFIRM.
What matters here is Phillips's omission of the Claim. Whether the Policy is an executory contract is of no consequence. Even if it was, once Phillips filed the Claim, if valid, he had an accrued right to receive disability benefits, and thus that portion of the contract was executory no more. On the Petition Date, the estate acquired his right to the Claim. Notably, if the Policy is an executory contract as Phillips insists, he did not list it in his schedule G, which constitutes another omission.