Unpublished Disposition, 865 F.2d 264 (9th Cir. 1988)

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US Court of Appeals for the Ninth Circuit - 865 F.2d 264 (9th Cir. 1988)

No. 88-1545.

United States Court of Appeals, Ninth Circuit.

Before HUG, TANG and BOOCHEVER Circuit Judges.

MEMORANDUM* 

Denial of Discharge

Pursuant to 11 U.S.C. section 727(a) (4) (A), 727(a) (2) (B), and 727(a) (3) (1979), the bankruptcy court denied Kenneth Harrington a discharge because it found he had presented false contracts of sale to the court and lied under oath about their legitimacy; concealed property of the bankruptcy estate; and unjustifiably failed to preserve business records. In addition, the court found that Harrington's debts to Borg-Warner, Mercury Marine and Wellcraft Marine (creditors) were excepted from discharge under 11 U.S.C. section 523(a) (6) (1979) because the debts resulted from "out of trust" sales which constituted "willful and malicious injury" to the creditor's property.

We review the court's factual findings for clear error, and its conclusions of law de novo. In re Technical Knockout Graphics, Inc., 833 F.2d 797, 801 (9th Cir. 1987). The bankruptcy judge held that each of his findings under 11 U.S.C. section 727 was by itself sufficient reason to deny the debtor a discharge. It is totally within the discretion of the bankruptcy court to find that an act described in section 727 is serious enough to require a denial of discharge. See In Re Devers, 759 F.2d 751, 755 (9th Cir. 1985). Thus, if the bankruptcy court finding of any one of the acts described in section 727 was not clearly erroneous, we must affirm the denial of discharge, absent a gross abuse of discretion. See Tenn v. First Hawaiian Bank, 549 F.2d 1356, 1357 (9th Cir.), cert. denied, 434 U.S. 832 (1977).

We agree with the bankruptcy appellate panel that the bankruptcy judge's finding that Harrington presented false contracts and lied about their legitimacy was not clearly erroneous. At the hearing on the motion for relief from stay in May, 1985, Harrington testified that he had six contracts to sell boats. Two of these "contracts" were purportedly signed by Romer Scott and Paul Karr. Mr. Scott testified that Harrington asked him to sign the contract and that they were both aware that it was phony. He testified that "we were trying to help Ken in this bankruptcy thing...." Paul Karr Jr. and Paul Karr Sr. each testified that they had never seen the contract allegedly signed by one of them, and that they had no intention of purchasing the boat. In addition, Mr. Sommers, the manager of the business, testified that Harrington told him in May, 1985 to create phony contracts. The bankruptcy judge found "having observed the demeanor of the witnesses and heard their testimony ... that Paul Carr [sic] and Romer Scott testified truthfully and that the Debtor prevaricated under oath." This finding is not clearly erroneous.

Furthermore, we agree with the bankruptcy appellate panel that Harrington's presentation of these contracts was material since it led the bankruptcy court to deny the motion for relief from stay. Because the finding concerning false contracts is sufficient to support the denial of discharge under 11 U.S.C. section 727(a) (4) (A) we need not review the bankruptcy court's other findings. The court did not grossly abuse its discretion in denying the discharge.

Trustee's Discharge of Duties

Harrington contends that the bankruptcy appellate panel erred in affirming the bankruptcy court's judgment in favor of the trustee.

The bankruptcy judge found that all assets were properly accounted for and sold at reasonable and fair prices with court approval after proper notification to all interested parties. Harrington argues that certain assets were liquidated without court approval and without notice to all interested parties. These allegations, however, are made without reference to the record. They are therefore insufficient to demonstrate that the bankruptcy court's findings were clearly erroneous. With respect to the items recovered by Nevada National Bank, the trustee testified she supervised the removal of the goods. Harrington has not shown that she was obligated to do more.

The bankruptcy judge found that the trustee's decisions not to pursue claims against Pioneer Citizen's Bank and the Sommers were reasonable. He found the trustee reasonably believed the claim against the Sommers would not be successful and that even if it were, the Sommers lacked sufficient assets to pay any judgment. Thus her decision not to expend the estate's resources on that litigation was reasonable. He also found that her decision to delay any action against Pioneer Citizen's Bank was reasonable. She was attempting to mitigate and possibly prevent any damages by selling the boats that were purchased with the money withdrawn from the bank. Harrington has not shown that the bankruptcy judge's finding that the trustee's actions were reasonable was clearly erroneous.

The bankruptcy court found that the two inventories taken by the trustee properly accounted for the disposition of the assets of the estate. Harrington's allegation that no accounting was ever provided is not supported by the record.

The bankruptcy court found that the trustee proceeded with due care to determine whether a secured creditor claimed an interest in two trailers that were sold. Harrington's argument that she erred does not demonstrate that the bankruptcy court's finding was clearly erroneous.

Refusal to Dismiss Creditors' Complaint

Harrington made an oral motion before the bankruptcy judge to dismiss the creditors' complaint pursuant to Rule 37(b) (2) of the Federal Rules of Civil Procedure for failure to comply with a discovery order. The judge refused, since Harrington had not previously filed a motion to compel.

We review a decision regarding sanctions under Rule 37 for abuse of discretion. North Am. Watch Corp. v. Princess Ermine Jewels, 786 F.2d 1447, 1450 (9th Cir. 1986). Dismissal under Rule 37 is appropriate " 'only where the failure to comply is due to willfulness, bad faith, or fault of the parties.' " Id. at 1451 (quoting Wyle v. R.J. Reynolds Indus., Inc., 709 F.2d 585, 589 (9th Cir. 1983)).

Harrington tells us that there was an order scheduling depositions and requiring the respondents to pay Harrington's travel expenses. He makes the conclusory allegation that the respondents flagrantly misused the judicial system. Harrington has not shown that the bankruptcy judge abused his discretion when he refused to dismiss the complaint when there had been no motion to compel.

Recusal

Harrington questions the bankruptcy judge's impartiality. We can address this issue even though it is raised for the first time on appeal. See In Re Manoa Finance Co., Inc., 781 F.2d 1370, 1373 (9th Cir. 1986), cert. denied, 479 U.S. 1064 (1987).

Harrington alleges that the bankruptcy judge, during the course of the proceedings, ordered the trustee to lodge a criminal complaint against Harrington. Since that part of the record is not before the court we cannot determine the nature or basis of the order. Harrington does not suggest, however, that the judge made this decision based on information acquired outside his judicial role in this matter. Thus, there was no need for recusal. See id.

AFFIRMED.

 *

This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3

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