In re Hansen

• Decision Date: 23 April 2007
• Docket Number: Adversary No. SA 04-01337 ES.,BAP No. CC-06-1137-BPaMa.,Bankruptcy No. SA 03-19212 ES.,Adversary No. SA 04-01336 ES.
• Citation: 368 B.R. 868
• Parties: In re Michael HANSEN and Kimberly A. Hansen, Debtors. Kimberly A. Hansen; Michael Hansen, Appellants, v. Scott Moore; Insco Insurance Services, Inc., Appellees.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

368 B.R. 868

In re Michael HANSEN and Kimberly A. Hansen, Debtors.

Kimberly A. Hansen; Michael Hansen, Appellants, v. Scott Moore; Insco Insurance Services, Inc., Appellees.

BAP No. CC-06-1137-BPaMa.

Bankruptcy No. SA 03-19212 ES.

Adversary No. SA 04-01336 ES.

Adversary No. SA 04-01337 ES.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted February 22, 2007.

Filed April 23, 2007.

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J. Scott Bovitz, Bovitz & Spitzer, Los Angeles, CA, for Appellants.

Andrew K. Mauthe, Irvine, CA, for Appellees.

Before: BRANDT, PAPPAS and MARLAR,¹ Bankruptcy Judges.

OPINION

BRANDT, Bankruptcy Judge.

After trial, the bankruptcy court entered judgment denying debtor Kimberly Hansen's discharge under § 727(a)². She timely moved for reconsideration, which the bankruptcy court denied. Thereafter, the bankruptcy court awarded the adversary plaintiffs $97,678.72 in attorneys' fees as a sanction under FRCP 37, applicable via Rule 7037. Debtor timely appealed all three orders.

We conclude that,

• To the extent she preserved her objections, debtor has not shown the bankruptcy court considered inadmissible evidence, or that its findings of fact are clearly erroneous;

• Debtor waived her affirmative defense that settlement of the trustee's separate denial of discharge action precluded these actions, and that, in any event, there is no preclusion; and

• Debtor waived any issue regarding the sanction award.

Accordingly, we AFFIRM the judgment and the two orders.

I. FACTS

Kimberly Hansen ("Hansen"), an attorney, and Michael Hansen, a real estate broker, filed for chapter 7 relief on 22 December 2003. Although Mr. Hansen is named as an appellant, he was not a party to the adversary proceeding, nor was he named in the judgment on appeal.

Debtors hired counsel to assist them with the preparation and filing of their bankruptcy. Hansen reviewed and revised at least two versions of the chapter 7 forms, after which counsel transmitted revised forms to her. She signed her petition, schedules, and statements approximately two months before they were filed.

Debtors scheduled a residence in Orange County, California, with a value of $500,000, encumbered by a first deed of trust securing $356,718.92, and a second deed of trust in favor of "IAT Group" for $115,000. Testimony at trial established that as of the petition date there was no encumbrance of record in favor of IAT Group, nor was there any such entity. Rather, "IAT Group" referred to Hansen's mother, Irene A. Tennant.

The schedules and statements contained a number of other inaccuracies: omitted assets, understated income, undisclosed prior related bankruptcy cases, and undisclosed potentially preferential transfers. On the same day as their continued § 341 meeting, debtors filed amended schedules of income and expenses and an amended statement of financial affairs. They amended their schedules again after Rule 2004 examinations. Their amended schedule of secured claims still included the deed of trust to IAT Group, but the claim amount was reduced to $0.

In the meantime, on 9 February 2004, Hansen recorded a deed of trust in favor of her mother, which purportedly secured a $115,000 loan Ms. Tennant made to the Hansens in 1994 to help purchase the residence. The evidence at trial was that the total amount loaned had been $50,000, and that the $115,000 reflected the amount due as of the petition date.

Appellees INSCO Insurance Services, Inc., and Scott Moore are creditors by virtue of attorney's fees awarded to them in Hansen's unsuccessful pre-petition employment discrimination lawsuit against INSCO and Moore, a former employee of INSCO who was named as a codefendant. On 26 May 2004 INSCO and Moore initiated separate adversary proceedings against Hansen, seeking to deny her discharge under § 727.

The chapter 7 trustee also initiated a § 727 action against debtors, which they settled by paying $217,500 to the estate. The bankruptcy court approved the settlement by order entered 19 January 2005, and thereafter dismissed the trustee's adversary proceeding with prejudice.

The INSCO and Moore adversary proceedings were consolidated for trial. After trial, the bankruptcy court concluded that debtor's discharge should be denied pursuant to §§ 727(a)(2)(A) (transfer of property with intent to hinder, delay, or defraud), and (a)(4)(A) and (B) (false oath and false claim). Transcript, 24 January 2006, pages 2-5. The court entered findings and conclusions and a separate judgment on 16 February 2006.

After the bankruptcy court ruled but before judgment was entered Hansen moved for reconsideration, arguing for the first time that the settlement of the trustee's § 727 action barred the separate non dischargeability actions of INSCO and Moore. The trial judge having retired, the action was reassigned to another judge, who heard the motion and denied it.

INSCO and Moore moved for an award of attorneys' fees under FRCP 37, applicable via Rule 7037, as a sanction for debtors' refusal to admit during discovery factual matters that were later proven at trial. The bankruptcy court awarded $97,678.72.

Hansen appealed the judgment, the denial of reconsideration, and the sanction.³

II. JURISDICTION

The bankruptcy court had jurisdiction via 28 U.S.C. § 1334 and § 157(b)(1) and (b)(2)(J), and we do under 28 U.S.C. § 158(c).

III. ISSUES⁴

A. Whether the bankruptcy court abused its discretion in admitting excerpts of deposition testimony of non-party witnesses, excerpts of § 341 meeting testimony, and excerpts of Rule 2004 examinations of both party and non-party witnesses;

B. Whether the bankruptcy court erred in entering judgment denying Hansen's discharge;

C. Whether the bankruptcy court abused its discretion in denying Hansen's motion for reconsideration;

D. Whether INSCO and Moore are estopped by their failure to object to the settlement;

E. Whether the nondischargeability actions of INSCO and Moore are barred by their election of other remedies; and

F. Whether the bankruptcy court abused its discretion in sanctioning Hansen under FRCP 37.

IV. STANDARDS OF REVIEW

We review the bankruptcy court's findings of fact for clear error and its conclusions of law de novo. In re Lawson, 122 F.3d 1237, 1240 (9th Cir.1997). In an action for denial of discharge, a finding that debtor acted with intent to hinder, delay, or defraud creditors is reviewed for clear error. Id.

"A finding is `clearly erroneous' when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." United States v. U.S. Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 92 L.Ed. 746 (1948). If two views of the evidence are possible, the trial judge's choice between them cannot be clearly erroneous. Anderson v. Bessemer City, 470 U.S. 564, 573-575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). We give findings of fact based on credibility particular deference. Id. See also Rule 8013 (on appeal, "due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses.")

We review the denial of a motion for reconsideration for abuse of discretion, In re Weiner, 161 F.3d 1216, 1217 (9th Cir.1998); likewise the imposition of discovery sanctions under FRCP 37. In re Rothery, 200 B.R. 644, 649 (9th Cir. BAP 1996). A bankruptcy court necessarily abuses its discretion if it bases its decision on an erroneous view of the law or clearly erroneous factual findings. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990). To reverse for abuse of discretion we must have a definite and firm conviction that the bankruptcy court committed a, clear error of judgment in the conclusion it reached. S.E.C. v. Coldicutt, 258 F.3d 939, 941 (9th Cir.2001); In re Black, 222 B.R. 896, 899 (9th Cir. BAP 1998).

We also review a bankruptcy court's evidentiary rulings for abuse of discretion. Latman v. Burdette, 366 F.3d 774, 786 (9th Cir.2004). To reverse an evidentiary ruling, we must conclude that the error was prejudicial. Id.

V. DISCUSSION

A. Evidentiary Rulings

Hansen argues that the bankruptcy court erred in admitting (allowing to be read into the record) excerpts of deposition testimony of non-party witnesses, § 341 first meeting of creditors testimony, and Rule 2004 examination testimony of both party and non-party witnesses. She argues that § 341 testimony and Rule 2004 examination testimony are not "depositions" admissible under FRCP 32, applicable via Rule 7032, and that plaintiffs should have elicited live testimony from Kimberly Hansen and the other witnesses.

A party who fails to object to evidence at trial waives the right to raise admissibility issues on appeal. Price v. Kramer, 200 F.3d 1237, 1251-52 (9th Cir. 2000). The record reflects that objections to evidence were not consistently raised at trial, and that some were raised but were not pursued. For example, Hansen's counsel objected to admission of excerpts of § 341 meeting testimony on the basis that the transcript had not been authenticated. The court conditionally admitted the excerpts without prejudice to a motion to strike as to authenticity. Transcript, 2 December 2005, page 41. Nothing in the record indicates that Hansen ever so moved.

More importantly, appellant has not articulated how she was prejudiced by admission of the evidence at issue. Each witness whose testimony was read into the record was present at the trial, gave live testimony, and could have been cross-examined on their previous testimony. And it is apparent that the bankruptcy court's ruling was based on live testimony. "In nonjury trials, it is assumed that in reaching a decision the trial judge disregarded evidence admitted improperly over objection if the record contains sufficient competent evidence to sustain the result."...