ABG Corp. dba Beacon Lumber v. Oliveira

1 The complaint actually lumps the six alleged misrepresentations into a single count under § 727(a)(4)(A).
Insofar as each alleged misrepresentation is by itself a possible basis for denial of discharge under § 727(a)(4)(A),
the Court treats them as six distinct counts.
I note that at trial and in its post-trial brief, Beacon cited and appears to rely upon other alleged
misstatements in the schedules and statement of financial affairs. These other statements were not set forth by
Beacon in its complaint, as bases for denial of discharge under § 727(a)(4)(A) or otherwise. Fraud must be pled with
particularity. FED. R. C IV. P. 9(b) (“In all averments of fraud or mistake, the circumstances constituting fraud or
mistake shall be stated with particularity”), made applicable to this adversary proceeding by FED. R. B ANKR . P. 7009.
And a false oath under within the meaning of § 727(a)(4)(A) is a species of fraud. Accordingly, though I have
considered the evidence of other false statements as bearing on the Debtor’s credibility, they cannot constitute
grounds for relief under § 727(a)(4)(A) because the Debtor was afforded no notice as to them.
In re
ANTONE OLIVEIRA,
Debtor
______________________________________
ABG CORPORATION,
d/b/a BEACON LUMBER,
Plaintiff
v.
ANTONE OLIVEIRA,
Defendant
U NITED STATES BANKRUPTCY COURT
D ISTRICT OF MASSACHUSETTS
Chapter 7
Case No. 05-11026-RS
Adversary Proceeding
No. 05-1407
MEMORANDUM OF DECISION
By its complaint in this adversary proceeding, creditor ABG Corporation, d/b/a Beacon
Lumber (“Beacon”), objects to the Debtor’s discharge, stating one count under 11 U.S.C. §
727(a)(2) that was dismissed at trial on motion for directed verdict and six counts under §
727(a)(4)(A) that remain to be decided. 1 In each remaining count, the Plaintiff contends that the
Debtor, Antone Oliveira, knowingly and fraudulently made a false oath—that is, a false
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representation under oath—in the schedules or statement of financial affairs that he filed in his
bankruptcy case. This memorandum of decision constitutes the Court’s findings of fact and
rulings of law under F ED . R. CIV . P. 52 (a) as to the counts under § 727(a)(4)(A).
Section 727(a)(4)(A) states, in relevant part, that “[t]he court shall grant the debtor a
discharge unless the debtor knowingly and fraudulently, in or in connection with the case, made
a false oath or account.” The creditor bears the burden of proof, and the standard is a
preponderance of the evidence. As to each statement at issue, the creditor must prove that the
debtor made the statement under oath, that the statement was false, and that the Debtor made the
false statement knowingly and fraudulently. The Debtor does not dispute that he completed and
filed the documents in question under oath.
As to three of the six statements—that the Debtor had no income from employment or
operation of his business in 2003 and 2004, that he had no motor vehicle, and that he had no
bank accounts—Beacon has failed to prove that the statements were false. No evidence was
presented that the Debtor had income in the years in question. The Debtor testified credibly that
he was ill and not working during that time, that his corporation, L.O.T., Inc., had ceased doing
business, and that he was being supported and housed by his daughter and receiving occasional
assistance from other family members. The Debtor also testified that he had no bank account
and no motor vehicle, and Beacon adduced no evidence to the contrary. For failure to prove
falsity, the objections to discharge that are based on these statement must be overruled.
Two statements—in fact, a single answer of “none” where two items should have been
disclosed—clearly were false. Item 18(a) of the statement of financial affairs required that the
Debtor list the businesses in which he was an officer or director in the six years immediately
preceding the commencement of his bankruptcy case. He answered, “none.” In fact, during the
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six year period he had been the president, treasurer, clerk, and a director of L.O.T., Inc., a small
construction business. Also, from March 2002 until July 30, 2004, the Debtor was also the clerk
and a director of A.L.O.T., Inc., a small construction business of which the Debtor’s daughter,
Lynn Castro, was president and principal. As to both L.O.T. and A.L.O.T., the Debtor’s answer
to item 18(a) was false.
With regard to the last statement, truth or falsity is less clear. Item 2 of the statement of
financial affairs required that the Debtor state the amount of income he received “other than from
employment, trade, profession, or operation of the debtor’s business during the two years
immediately preceding the commencement of this case.” He responded, “none.” Beacon
contends that this statement was false because, as the Debtor concedes, during the two-year
period, the Debtor had received $18,000 in settlement of a personal injury claim. The nature of
the injury and the components of the claim (pain and suffering, medical expenses, lost wages)
are not in evidence. It is not clear to the court that monies received in settlement of a personal
injury claim are “income” within the meaning of item 2. Item 2 does not define the income it
seeks to except by specifying that it does not seek income “from employment, trade, profession,
or operation of the debtor’s business.” Investment income clearly would qualify. Compensation
for loss or injury is much less clear.
I need not decide the issue because Beacon has in any event failed to prove that the
Debtor’s answers to items 2 and 18(a) were made knowingly—that is, with knowledge of
falsity—and fraudulently. I reach this conclusion for several reasons.
First, there has been no showing that the answers to items 2 and 18(a) somehow did or
might have enabled the Debtor to gain advantage in his bankruptcy case. A.L.O.T. was his
daughter’s corporation, not his. L.O.T. itself had almost no assets and was grossly insolvent; it
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had been out of business for two years. Nor was the Debtor’s interest in L.O.T. a secret. In fact,
L.O.T. filed a bankruptcy petition at the same time as the Debtor filed his petition; he disclosed
his interest in L.O.T. in the statement of financial affairs filed in that case; the two cases were
assigned to the same chapter 7 trustee; and their meetings of creditors were conducted together.
The settlement proceeds had been used to fund his mortgage obligations and did not represent
existing, secreted assets. There is no suggestion that the nondisclosures somehow hid existing
assets. There is simply no indication that the statements in question served a sinister or
fraudulent purpose.
Second, the Debtor’s native language is not English; and though he has been in this
country since 1959, his English leaves something to be desired. Nor is he an attorney. Because
of the language barrier and his layman’s unfamiliarity with the requirements of bankruptcy forms
and practice, he relied heavily on his bankruptcy attorney to elicit from him the requisite
information and to complete the forms. The Debtor signed the forms—or authorized his attorney
to file them with his electronic signature—but relied on his attorney to determine whether they
had been properly completed. He testified credibly that he answered his attorney’s questions
truthfully, and I do not doubt that he did. For example, he clearly did disclose to his attorney
that he owned and was the president and director of L.O.T. The attorney needed this information
in order to file a bankruptcy petition on behalf of L.O.T. and did in fact incorporate that
information in the statement of financial affairs that the Debtor signed and filed as president of
L.O.T. in the corporate case. The omission of his interest and positions in L.O.T. from the
Debtor’s own statement of financial affairs represents an error in preparation and proof reading
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2 It was by no means the only error. The Debtor’s Statement of Intention stated that the Debtor intended to
reaffirm his debt to Beacon, who at that time held a judicial lien on his home. The Debtor clearly had no intention of
reaffirming that debt; rather, the Debtor moved to avoid Beacon’s judicial lien and prevailed on that motion.
3 Though an amended statement of financial affairs was introduced into evidence at the trial, the docket in
the bankruptcy case does not show that that document had ever been filed in the case. I surmise that the document
was prepared by counsel but never filed.
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by counsel. 2 I do not mean to suggest that language difficulties relieved the Debtor himself from
the obligation to ensure the accuracy of his answers; the point is that the Debtor did in fact rely
on counsel, and counsel failed to include in the statement of financial affairs information that the
Debtor had clearly given him.
Third, as to monies from the personal injury settlement, the Debtor, in speaking with
counsel, had initially been uncertain as to the dates on which he received the settlement
installments. When he determined that they were within the period as to which item 2 was
concerned, he so informed his bankruptcy attorney, and amended schedules were prepared
accordingly. 3
Fourth, as to A.L.O.T., the Debtor had instructed the attorney who handled the
incorporation not to give him a role in the corporation. It is not clear when he did this. The
Debtor himself signed the Articles of Incorporation, on which he was listed as clerk and a
director, in March 2002. His amended statement of financial affairs indicate that his tenure as an
officer and director of A.L.O.T. ended on July 30, 2004. It is not clear that he ever wanted or
accepted a position in A.L.O.T. 	In short, it is not clear that the Articles of Incorporation reflect
roles that the Debtor knowingly accepted and held.
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For all these reasons, the Court concludes that Beacon has failed to prove by a
preponderance of the evidence that the three statements in questions were made by the Debtor
with knowledge of falsity and intent to defraud. The Court will enter judgment dismissing the
complaint, and the Debtor will receive a discharge.
Date: September 28, 2007 	_______________________________
Robert Somma
United States Bankruptcy Judge
cc: Roger Stanford, Esq., for Plaintiff
John Zajac, Esq., for Defendant
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