In re Caneva

Citation550 F.3d 755
Decision Date05 November 2008
Docket NumberNo. 07-15686.,07-15686.
PartiesIn the Matter of Marc Scott CANEVA, Debtor, Marc Scott Caneva, Appellant, v. Sun Communities Operating Limited Partnership, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

Roberta J. Sunkin, Allan D. NewDelman, P.C., Phoenix, AZ, for the defendant-appellant.

Edwin B. Stanley, Simbro & Stanley, Scottsdale, AZ, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona; Mary H. Murguia, District Judge, Presiding. D.C. No.CV-06-01311-MHM.

Before: ALFRED T. GOODWIN, ROBERT R. BEEZER, and JAY S. BYBEE, Circuit Judges.

ORDER AMENDING OPINION AND AMENDED OPINION

ORDER

The opinion filed November 5, 2008, appearing at slip op. 15129, 547 F.3d 1082, is amended as follows:

At slip op. 15132, 547 F.3d at 1082, line 2, change "plaintiff-appellant" to "defendant-appellant."

At slip op. 15132, 547 F.3d 1082, line 4, change "defendant-appellee" to "plaintiff-appellee."

At slip op. 15133, 547 F.3d at 1085, first full paragraph, 3rd line, after "§ 158(d).", add footnote 1:

Because the bankruptcy court specifically concluded that its summary judgment grant effectively disposed of all claims raised in Sun's adversary complaint, we determine that the appeal from the district court's affirmance thereof was from a final judgment for jurisdictional purposes. Where there is any doubt about finality, a bankruptcy or district court can always avail itself of the direct appeal certification procedures of 28 U.S.C. § 158(d)(2).

OPINION

PER CURIAM.

Marc Scott Caneva (Caneva) appeals the district court's order affirming the bankruptcy court's grant of summary judgment in favor of Sun Communities Operating Limited Partnership (Sun). The bankruptcy judgment denied Caneva discharge pursuant to 11 U.S.C. § 727(a)(3) because it was undisputed that Caneva had failed to keep or preserve records with respect to certain business entities that he owned or controlled and with respect to a payment of $500,000 to one Anita Bowden. Caneva assigns error to both judgments, asserting that "genuine issues of material fact" can be found in the record.

The district court had jurisdiction pursuant to 28 U.S.C. § 158(a). We have jurisdiction pursuant to 28 U.S.C. § 158(d).1 We affirm the challenged judgment.

FACTS AND PROCEDURAL HISTORY

Prior to filing his voluntary Chapter Seven Petition, Caneva owned or controlled numerous business entities, recreational vehicle and mobile home parks in Florida, and an airplane. Sun, one of Caneva's creditors, filed an adversary complaint objecting to discharge pursuant to 11 U.S.C. § 727(a)(3) and (a)(4)(A), and objecting to dischargeability pursuant to 11 U.S.C. § 523(a)(4).

Sun argued that Caneva was not entitled to discharge under 11 U.S.C. § 727(a)(3) because he had failed to keep or preserve records from which his financial condition or business transactions could be accurately ascertained. Throughout the course of the bankruptcy proceedings, Caneva had filed multiple amendments to his bankruptcy Schedules and Statement of Financial Affairs. In his final amendment to Schedule B, listing his personal property, Caneva listed fifteen business entities in which he held stock or interests and stated that "[t]he extent of his interest and the status of several of the entities is unknown. The debtor has made his best effort to list all he knows and if additional information becomes available, additional amendments will be made."

Sun questioned Caneva about the nature of his interests in these companies and the existence of financial records for them during a Bankruptcy Rule 2004 Examination. Caneva admitted that he kept no records for the entities, despite the fact that some of them had business operations and others existed as holding companies for active businesses. Caneva also admitted during the Rule 2004 Examination that he had no documentation regarding the payment of $500,000 to Bowden as a brokerage fee for a $20 million loan that Caneva stated he did not receive, although he indicated that Sun could contact the Federal Bureau of Investigation for details on Bowden's criminal prosecution and conviction.

Sun moved for summary judgment. It argued that Caneva violated 11 U.S.C. § 727(a)(3) by failing to keep or preserve records, 11 U.S.C. § 727(a)(4)(A) by failing to satisfactorily explain the loss or diminution of assets, and 11 U.S.C. § 523(a)(4) by committing fraud or defalcation while acting in a fiduciary capacity. The bankruptcy court granted summary judgment on the § 727(a)(3) claim and denied Caneva discharge. Neither the bankruptcy court nor the district court reached the § 727(a)(4)(A) diminution of assets or § 523(a)(4) fraud questions.

The bankruptcy court applied the analysis described in Lansdowne v. Cox (In re Cox), 41 F.3d 1294 (9th Cir.1994), and found that Sun had shown a prima facie case that Caneva failed to keep or preserve adequate records and that such failure made it impossible for Sun to accurately determine his financial condition and the nature and extent of material business transactions. The court stated that "[t]his case presents a situation factually different than most cases where the question is whether the information produced was adequate" because Caneva admitted to "not providing any documentation on several business entities and transactions" despite admitting "that some had operations or held assets as holding companies." The court found this to be fatal, reasoning that "[b]y definition ... the failure to have any documents or records is inadequate" because "the absence of any documents for these entities makes it impossible to determine their value, their significance and their impact on [Caneva's] estate."

After finding that Sun had shown a prima facie case, the bankruptcy court found that Caneva failed to carry his burden of explaining why his failure to keep or preserve records was justified under the circumstances. The court faulted Caneva for "simply parrot[ing] back in his affidavit the text of Section 727(a)(3), conclusorily denying its elements," rather than providing affidavits or testimony from the accountants who set up the companies that might have supported his assertion that nothing related to these entities existed because there was nothing to document.

Caneva filed a motion to reconsider, which the bankruptcy court denied, and then appealed to the district court. The district court affirmed the orders granting summary judgment and denying Caneva's motion to reconsider. It focused on Caneva's admissions during the Rule 2004 Examination that "he had no books or records for several of his business entities despite that some of the entities had business operations" and "that he had no documents to substantiate an alleged $500,000 transfer to Anita Bowden. ..." This appeal followed.

STANDARD OF REVIEW

"The roles of this Court and the district court are essentially the same in the bankruptcy appellate process." Parker v. Community First Bank (In re Bakersfield Westar Ambulance, Inc.), 123 F.3d 1243, 1245 (9th Cir.1997) (citing In re DAK Indus., 66 F.3d 1091, 1094 (9th Cir.1995)). Thus, we directly review the bankruptcy court's decision. Id. "We review the bankruptcy court's grant of summary judgment de novo," and must view the evidence in the light most favorable to the non-moving party and "determine whether there are any genuine issues of material fact and whether the bankruptcy court correctly applied the substantive law." Id. (citing Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir.1996)). A material fact is one that, "under the governing substantive law ... could affect the outcome of the case." Thrifty Oil Co. v. Bank of America Nat'l Trust & Savings Ass'n, 322 F.3d 1039, 1046 (9th Cir.2003) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. The party moving for summary judgment must initially identify "those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party meets its burden, the non-moving party must "set out specific facts showing a genuine issue for trial." Fed R. Civ. P. 56(e)(2).

DISCUSSION
I. Failure to Keep or Preserve Records

Section 727(a) of the Bankruptcy Code provides that a debtor is entitled to discharge unless one of eight conditions is met. 11 U.S.C. § 727(a)(1)-(8). Under 11 U.S.C. § 727(a)(3), the court shall grant the debtor discharge unless:

the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all the circumstances of the case.

We have stated that the purpose of § 727(a)(3) is to make discharge dependent on the debtor's true presentation of his financial affairs. Cox, 41 F.3d at 1296 (citation omitted). The disclosure requirement removes the risk to creditors of "the withholding or concealment of assets by the bankrupt under cover of a chaotic or incomplete set of books or records." Burchett v. Myers, 202 F.2d 920, 926 (9th Cir.1953). The statute does not require absolute completeness in making or keeping records. Rhoades v. Wikle, 453 F.2d 51, 53 (9th Cir.1971). Rather, the debtor must "present sufficient written evidence which will enable his creditors reasonably to ascertain his present financial condition and to follow...

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