Mertz v. Rott
| Decision Date | 31 January 1992 |
| Docket Number | No. 91-2120,91-2120 |
| Citation | 955 F.2d 596 |
| Parties | Bankr. L. Rep. P 74,444 Mervyn M. MERTZ, Appellee, v. JoAnn ROTT, Julie Rott Kessel, National Farmers Union Property and Casualty Company, Appellants. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Marnell W. Ringsak, Bismarck, N.D., argued, for appellants.
LaRoy Baird III, Bismarck, N.D., argued, for appellee.
Before JOHN R. GIBSON, Circuit Judge, FRIEDMAN *, Senior Circuit Judge, and MAGILL, Circuit Judge.
The question in this appeal from the United States District Court for the District of North Dakota is whether the bankruptcy court properly denied a discharge in a Chapter Seven bankruptcy proceeding because the debtor failed to list in the schedules to his bankruptcy petition state tax refunds that he anticipated receiving and did receive. The district court reversed the denial of the discharge on the ground that the tax refunds were not "material" because they were exempt assets. We reverse the district court.
I. A. On February 20, 1990, the appellee Mertz filed a petition under Chapter Seven of the Bankruptcy Act, 11 U.S.C. §§ 701-766 (1988). On March 8, 1990, Mertz filed his schedules, dated March 7, 1990, in which, in response to the question "[t]o what tax refunds (income or other), if any, are you, or may you be, entitled?", he responded, for "1989: None Anticipated."
At the first meeting of creditors, held on March 23, 1990, Mertz stated under oath, in response to the question whether he was "expecting a tax refund from tax year 1989," "I think so, yeah," but that he had not yet filed the refund applications. He testified that he had received a $400 tax refund for 1988, which he had shown on his schedule; this referred to a federal tax refund. He also stated that he was "filing" his tax returns "now," and that he would file the returns "[t]hrough ... New York."
On May 18, 1990, Mertz filed amended schedules, in which he stated that he was entitled to a 1989 (federal) tax refund of $1641. He also listed this tax refund on another schedule showing exempt property. Mertz further amended his schedules on June 20, 1990. Although that schedule made various changes in his other assets and liabilities, it did not change the 1989 reported federal tax refund of $1641.
At an adversary hearing held after Mertz filed his second amended schedule, see below, Mertz for the first time stated that he also had received a New York state tax refund in 1990. The record shows that Mertz had signed on March 23, 1990--the same day as the first meeting of creditors--a New York State Income Tax Return, claiming a refund of $1358. He testified that he "believe[s]" he received the New York State tax refund in May 1990. He did not disclose the prospective and actual New York State refund in the three schedules he filed, or at the first meeting of creditors. Mertz testified that the reason he "did not disclose that pending tax refund at the first meeting of creditors" was "[j]ust oversight, I guess." He offered no explanation or justification for his failure to disclose the 1989 New York State tax refund on any of the three schedules he filed.
B. The appellants are the plaintiffs in a pending state court tort suit against Mertz resulting from an automobile collision. Trial of that suit was scheduled to begin the day after Mertz filed his bankruptcy petition, which he filed because of that suit.
After Mertz filed his second amended schedules in June 1990, the appellants filed in the bankruptcy court a complaint to deny Mertz a discharge, on the ground that in his petition and schedules Mertz had misstated and failed to disclose significant assets and income. Following the adversary hearing, at which Mertz testified, the bankruptcy court denied Mertz a discharge.
Ruling from the bench, the court found that on "three occasions" Mertz made a "false oath ... in that the debtor has had not one opportunity to make a correct statement regarding his 1989 tax return and refunds but has had three occasions, once on the original schedule and statement and on the later two amendments." The court
The bankruptcy court subsequently filed written findings and conclusions.
The district court (C.J. Conmy) reversed and remanded the case to the bankruptcy court to enter a discharge order. The court held that "[t]he asset omitted from debtor's schedule [the New York State tax refund] had no effect on the estate or the creditors," because
all of the debtor's assets, including this refund, were exemptible. Debtor's failure to schedule the refund was therefore, immaterial. Based on a finding that, as a matter of law, a failure to list a $1,350. exempt asset is not material, the decision of the Bankruptcy Court is REVERSED....
II. Under 11 U.S.C. § 727(a) (1988), a debtor is entitled to a discharge unless (4) the debtor knowingly and fraudulently, in or in connection with the case--
(A) made a false oath or account.
For such a false oath or account to bar a discharge, the false statement must be "material." In re Olson, 916 F.2d 481, 484 (8th Cir.1990). In Olson, we quoted with approval the following standard of materiality announced in In re Chalik, 748 F.2d 616, 618 (11th Cir.1984): "The subject matter of a false oath is 'material,' and thus sufficient to bar discharge, if it bears a relationship to the bankrupt's business transactions or estate, or concerns the discovery of assets, business dealings, or the existence and...
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