FILED NOV 13 2024 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. WW-23-1206-GBS OLIVIER FRANCOIS P. RIGON and CHRISTINE HUI SEOUN KWON, Bk. No. 2:21-bk-11641-CMA Debtors. OLIVIER FRANCOIS P. RIGON; Adv. No. 2:22-ap-01011-CMA CHRISTINE HUI SEOUN KWON, Appellants, v. MEMORANDUM* UNITED STATES TRUSTEE, SEATTLE, Appellee.

Appeal from the United States Bankruptcy Court for the Western District of Washington Christopher M. Alston, Chief Bankruptcy Judge, Presiding

Before: GAN, BRAND, and SPRAKER, Bankruptcy Judges.

Memorandum by Judge Gan.

Partial Concurrence Partial Dissent by Judge Spraker.

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. INTRODUCTION

Chapter 71 debtor Olivier Francois P. Rigon appeals the bankruptcy

court’s judgment denying his discharge under § 727(a)(3), (a)(4), and (a)(5).

Mr. Rigon’s wife, Christine Kwon, jointly filed the chapter 7 petition and

was also denied a discharge, but she does not challenge the denial of her

discharge. After trial, the court determined that Mr. Rigon omitted assets

and transfers from his schedules and statements, failed to keep recorded

information from which his financial condition could be ascertained, and

failed to explain the loss of assets.

Mr. Rigon maintains that he was generally unaware of the

undisclosed assets and transfers, and he relied on Ms. Kwon’s superior

financial sophistication when he signed the schedules and statements. He

argues the bankruptcy court erred by imputing Ms. Kwon’s actions and

knowledge to him, and by denying his discharge without a sufficient

evidentiary basis.

While much of the evidence presented at trial involved Ms. Kwon,

and not all the court’s findings are clearly directed toward Mr. Rigon, there

is a sufficient evidentiary basis for the court’s decision, and we discern no

error. Mr. Rigon failed to maintain and disclose records of community

assets, and he knowingly omitted assets, income, and transfers from his

schedules and statements. Accordingly, we AFFIRM.

Unless specified otherwise, all chapter and section references are to the 1

Bankruptcy Code, 11 U.S.C. §§ 101–1532. 2 FACTS 2

A. Prepetition events

Mr. Rigon and Ms. Kwon met sometime before 2013 when Mr. Rigon,

while living in France, visited a friend in the United States. In 2013, Mr.

Rigon moved to Atlanta, Georgia to live with Ms. Kwon. In 2015, Amazon

recruited Ms. Kwon to work for it as a data engineer. The couple moved to

Washington, and they married in 2016. 3

In 2015, Ms. Kwon formed Rock PI, LLC (“Rock PI”) to purchase,

renovate, rent, and sell real properties. Since its formation, Ms. Kwon was

the sole managing member of Rock PI, and she managed its finances. She

obtained a real estate license and was a real estate broker for several years.

From its formation until 2020, Mr. Rigon worked exclusively for Rock

PI. He held himself out as a co-founder, and he attended various real estate

networking events where he pitched the business to potential investors.

Mr. Rigon’s primary role at Rock PI was to manage projects. He was not

always paid for his work, but he sometimes received a salary from Rock PI.

Mr. Rigon obtained a real estate license in 2019.

2 We exercise our discretion to take judicial notice of documents electronically filed in the adversary proceeding and main bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

, 233 n.9 (9th Cir. BAP 2003). 3 Washington is a community property state, and property acquired during the

marriage is presumed to be community property.

; Seizer v. Sessions,

(Wash. 1997). Mr. Rigon does not contest the bankruptcy court’s presumption that assets acquired by Ms. Kwon after 2016 are community property. 3 For a few years, Rock PI was profitable and expanding. In January

2018, Ms. Kwon left Amazon to focus on the real estate business, but

approximately a year later, Rock PI began to struggle. It was unable to pay

creditors and had to lay off employees. In February 2019, Ms. Kwon began

working as a data engineer for Lithia Motors, Inc. Later in 2019, Mr. Rigon

also sought other employment and began the process of fulfilling the

prerequisites to become a police officer. After obtaining his GED, attending

the police academy, and passing necessary exams, Mr. Rigon began

working for the Seattle Police Department in 2020.

1. The Kwon Irrevocable Trust

In 2016, Mr. Rigon and Ms. Kwon hired accountants from a company

called Perfect Tax (“Perfect Tax”) for tax-related services. Perfect Tax

created an irrevocable trust (the “Trust”), which named Ms. Kwon as

trustor and Mr. Rigon as primary beneficiary. Perfect Tax also established

an entity for the couple called Chrisol, LLC (“Chrisol”).4

During a two-year period, Chrisol transferred over $100,000 to the

Trust. Ms. Kwon testified that she transferred money to Chrisol from either

the couple’s joint bank account or Rock PI’s account, then transferred

money from Chrisol to the Trust’s bank account. Although she initiated the

Chrisol’s tax returns show it is a Texas LLC solely owned by International 4

Medical Help Society (“IMHS”). IMHS is Chrisol’s managing member and Ms. Kwon and Mr. Rigon are its managers. It is not clear what interest, if any, the couple had in IMHS. 4 transfers, Ms. Kwon could not explain their purpose, and she testified that

she made the transfers at the direction of Perfect Tax.

From 2018 through 2020, the Trust paid over $100,000 to American

General Life Insurance Company for a life insurance policy owned by the

Trust with Mr. Rigon named as beneficiary (the “AIG Policy”). Mr. Rigon

claimed he did not know he was the beneficiary of the AIG Policy.

The couple also received checks from the Trust totaling over

$100,000. Neither Ms. Kwon nor Mr. Rigon explained the payments from

the Trust, and they offered conflicting testimony about whether they

deposited money into the Trust’s bank account, had access to its account,

or ever wrote checks from the Trust’s account. The Trust’s bank statements

reveal that Ms. Kwon made many deposits into its account.

2. The Denny Street properties

In 2016, Rock PI purchased three real properties located on Denny

Street in Bremerton, Washington (“2315 Denny,” “2317 Denny,” “2319

Denny,” and collectively the “Denny Street Properties”). In 2017, Rock PI

transferred the Denny Street Properties to Ms. Kwon for no consideration.

Ms. Kwon explained that Rock PI would purchase properties and quitclaim

them to her to refinance at a more favorable interest rate.

From 2017 until 2020, Mr. Rigon and Ms. Kwon collected rents of

approximately $3,000 per month from tenants in the Denny Street

Properties. They reported the rental income on their personal tax returns.

5 Mr. Rigon and Ms. Kwon sold the Denny Street Properties in 2020.

They received net proceeds of $19,072.51 from the sale of 2315 Denny,

which they deposited into Rock PI’s bank account, and they received net

proceeds of $48,438,77 from the sale of 2319 Denny, which they deposited

into their personal bank account. The couple sold 2317 Denny in November

2020, but did not realize net proceeds from that sale.

Ms. Kwon testified that she and Mr. Rigon had several discussions

about how to use the sale proceeds. They considered using the funds to

“buy back” their home following its July 2020 foreclosure, but they

ultimately decided to pay six months’ advance rent for a residence and use

the remaining proceeds for their last real estate project.

3. Interests in other companies

Ms. Kwon held a 50% interest in Sands Partners, LLC (“Sands

Partners”), which purchased a motel in Ocean Shores, Washington in

August 2019. Ms. Kwon also held a 25% interest in Sands Holdings, LLC

(“Sands Holdings”), which purchased a hotel in Ocean Shores, Washington

in August 2019. Her ownership of each company was later reduced to 5%,

but she did not receive any payment in exchange for her reduced equity,

and she failed to explain why her ownership was reduced.

Ms. Kwon’s bank statements show that she received approximately

$25,000 from Sands Holdings in 2021. The couple’s joint bank account

shows that they received $10,000 from Sands Holdings in July and August

2021, and an additional $5,000 from Bamboo Consulting, Inc.—a company

6 owned by Ms. Kwon’s partner in Sands Partners and Sands Holdings—in

August 2021.

B. The bankruptcy and adversary complaint

In 2020, three different creditors obtained judgment against Ms.

Kwon, Mr. Rigon, and Rock PI, totaling approximately $300,000. Rock PI

filed a chapter 7 petition in February 2021, and the couple filed a joint

chapter 7 petition in August 2021.

Mr. Rigon and Ms. Kwon filed their schedules and statement of

financial affairs (“SOFA”) in September 2021. They did not schedule their

interests in the Trust, the AIG Policy, or a Bank of America savings account

(the “BofA Account”). They did not disclose the rental income or sales

proceeds from the Denny Street Properties, and they did not disclose the

Trust or income they received from it. Despite receiving $15,000 from

Sands Holdings and Bamboo Consulting, Inc. within a few weeks of filing

their petition, the couple did not disclose the income. They each affirmed

they reviewed the schedules and SOFA, and that the information provided

was correct.

At the initial § 341 meeting of creditors, Mr. Rigon and Ms. Kwon

again testified that their schedules were complete and accurate. They

confirmed they did not transfer or sell any property within two years of the

petition date. However, when confronted with records of the sales of the

Denny Street Properties, Ms. Kwon admitted they sold the properties but

said they misunderstood the question in the SOFA. The couple stated they

7 would provide documents requested by the chapter 7 trustee and would

update their SOFA.

Mr. Rigon and Ms. Kwon did not immediately provide the

documents. Their ongoing failure to provide necessary information and

disclose all their assets resulted in eleven § 341 meetings. Although the

chapter 7 trustee repeatedly informed them that their schedules and SOFA

were incomplete and inaccurate, the couple did not amend their

documents until March 2022, when they made a single amendment to

reduce the value of one vehicle from approximately $9,000 to $6,000.

The chapter 7 trustee made several requests for the couple’s personal

tax returns, but the most recent return they provided was for 2017. After

months of delay, they filed their 2018 return, which they finalized in

August 2022 and amended in November 2022. Mr. Rigon and Ms. Kwon

promised they would produce their 2019 and 2020 returns within a year of

the initial § 341 meeting, but they had not done so by October 2023.

In March 2022, the United States Trustee (the “UST”) filed an

adversary complaint to deny the couple’s discharges. The UST made

allegations against each debtor individually. Pertinent to Mr. Rigon, the

UST alleged he failed to keep adequate records, made false oaths, and

failed to adequately explain the loss of community assets.

Mr. Rigon argued that any omissions were inadvertent or de

minimis, or that such transfers were not required to be disclosed because

8 they occurred in the ordinary course of business.5 He also asserted that he

should be entitled to a discharge because he was generally uninvolved in

the couple’s business transactions, and he disclosed everything personally

known to him.

C. The trial and the court’s judgment

The bankruptcy court conducted a trial, which concluded in October

2023. Mr. Rigon acknowledged that he signed the schedules and SOFA and

testified at the § 341 meeting that he was personally familiar with the

information in the documents, but he testified at trial that he did not

actually review the documents or do anything to ensure they were

accurate.

Mr. Rigon admitted that he met with Perfect Tax in 2016 and

discussed forming the Trust, but he did not review the Trust document.

According to Mr. Rigon, he was unaware of his interest in the Trust or the

AIG Policy, and although he knew the Denny Street Properties were sold,

he did not know who owned them. Mr. Rigon stated he was aware of

rental income from the Denny Street Properties, but he did not know

whether he disclosed that income in his SOFA.

Ms. Kwon testified that although she personally held title to the

Denny Street Properties, she considered them business assets belonging to

5 Question 18 of the SOFA asks: “Within 2 years before you filed for bankruptcy, did you sell, trade, or otherwise transfer any property to anyone, other than property transferred in the ordinary course of your business or financial affairs?” 9 Rock PI, and she sold them in the ordinary course of its business. Contrary

to her prior testimony, she stated that the $25,000 received from Sands

Holdings was a loan, but she acknowledged that she did not list the entity

as a creditor.

After trial, the bankruptcy court entered an order and judgment

denying Mr. Rigon’s discharge under § 727(a)(3), (4), and (5). The court

held that creditors and the trustee could not accurately ascertain his

financial condition because he failed to disclose his interest in the BofA

Account, failed to maintain and preserve records pertaining to income

from Sands Holdings, 6 or records pertaining to the Trust and its bank

account, and he failed to file tax returns. The court determined that Mr.

Rigon “feigned ignorance” of the Trust’s assets and its actions, and he

provided no justification for his transactions with the Trust.

The bankruptcy court also held that Mr. Rigon made false oaths or

omissions of material fact in his schedules and SOFA. Despite not knowing

if the documents were accurate, he falsely stated they were, with the intent

that creditors and the trustee would rely on the documents. Mr. Rigon did

not disclose his interest in sale proceeds from the Denny Street Properties,

income from Sands Holdings, the BofA Account, or the Trust. Finally, the

court held that Mr. Rigon failed to satisfactorily explain the decrease in his

6 The bankruptcy court determined that the couple’s failure to disclose the $5,000 from Bamboo Consulting, Inc. was inadvertent. 10 community interest in Sands Partners and Sands Holdings. Mr. Rigon

timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(J). We have jurisdiction under

.

ISSUE

Did the bankruptcy court err by denying Mr. Rigon’s discharge?

STANDARDS OF REVIEW

In an appeal from a denial of discharge under § 727: “(1) the court’s

determinations of the historical facts are reviewed for clear error; (2) the

selection of the applicable legal rules under § 727 is reviewed de novo; and

(3) the application of the facts to those rules requiring the exercise of

judgments about values animating the rules is reviewed de novo.” Searles

v. Riley (In re Searles),

(9th Cir. BAP 2004), aff’d,

(9th Cir. 2006).

Under de novo review, “we consider a matter anew, as if no decision

had been made previously.” Francis v. Wallace (In re Francis),

(9th Cir. 2014).

Factual findings are clearly erroneous if they are illogical,

implausible, or without support in the record. Retz v. Samson (In re Retz),

(9th Cir. 2010). “Where there are two permissible views

of the evidence, the factfinder’s choice between them cannot be clearly

erroneous.” Anderson v. City of Bessemer City,

(1985).

11 DISCUSSION

Mr. Rigon argues he was unaware of most of the undisclosed

financial assets and transactions, and the bankruptcy court improperly

imputed Ms. Kwon’s actions and knowledge to him. He asserts that the

evidence does not provide a basis to deny his discharge. Mr. Rigon

contends that his failure to schedule the BofA account was not material,

and he was not required to include the Denny Street Property sales because

they were made in the ordinary course of business.

A. Legal standards

The bankruptcy court denied Mr. Rigon’s discharge under three

independent grounds: § 727(a)(3), (a)(4), and (a)(5). Because the provisions

of § 727(a) are phrased in the disjunctive, we must affirm unless Mr. Rigon

can demonstrate error under each of the court’s bases. See, e.g. Farouki v.

Emirates Bank Int’l, Ltd.,

(4th Cir. 1994).

1. § 727(a)(3)

Pursuant to § 727(a)(3), a bankruptcy court must deny the debtor a

discharge when “the debtor has concealed . . . 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 of the circumstances of the case[.]”

“[T]he purpose of § 727(a)(3) is to make discharge dependent on the

debtor’s true presentation of his financial affairs.” Caneva v. Sun Cmtys. 12 Operating Ltd. P’ship (In re Caneva),

(9th Cir. 2008)

(citation omitted). This 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.’”

(quoting Burchett v.

Myers,

(9th Cir. 1953)).

Consequently, a debtor must “present sufficient written evidence

which will enable his creditors reasonably to ascertain his present financial

condition and to follow his business transactions for a reasonable period in

the past.”

(quoting Rhoades v. Wikle,

(9th Cir. 1971)). The

statute “places an affirmative duty on the debtor to create books and

records accurately documenting his business affairs.” Id. at 762 (citations

omitted).

2. § 727(a)(4)

Section 727(a)(4) denies discharge to a debtor who “knowingly and

fraudulently, in or in connection with the case . . . made a false oath or

account[.]” A debtor’s false statement or omission in his schedules or

statement of financial affairs can constitute a false oath under §727(a)(4).

Khalil v. Devs. Sur. & Indem. Co. (In re Khalil),

(9th Cir. BAP

2007) (first citing In re Searles,

; and then citing Roberts v.

Erhard (In re Roberts),

(9th Cir. BAP 2005), aff’d,

(9th Cir. 2007)), aff'd,

(9th Cir. 2009). The purpose

of § 727(a)(4) is “to insure that the trustee and creditors have accurate

information without having to conduct costly investigations.” In re Khalil,

13

(quoting Fogal Legware of Switz., Inc. v. Wills (In re Wills),

(9th Cir. BAP 1999)).

To prevail on a § 727(a)(4) claim, the plaintiff must prove: “(1) the

debtor made a false oath in connection with the case; (2) the oath related to

a material fact; (3) the oath was made knowingly; and (4) the oath was

made fraudulently.” In re Retz,

(quoting In re Roberts,

). “A debtor acts knowingly if he or she acts deliberately and

consciously.”

at 1198 (quoting In re Khalil,

).

The intent element of § 727(a)(4) “is usually proven by circumstantial

evidence or by inferences drawn from the debtor’s conduct.” Id. at 1199; see

also In re Khalil,

(“Fraudulent intent may be inferred from a

pattern of behavior.”). Both the number of omissions, and a debtor’s failure

to rectify inconsistencies and omissions by filing amended schedules, can

support a finding that a debtor acted fraudulently in making a false oath. In

re Khalil, 379 B.R at 176; AutoSource Cap. v. Traina (In re Traina), 501 B.R 379,

386 (Bankr. N.D. Cal. 2013); see also In re Retz,

(“[A]

significant number of falsehoods and omissions, together with the failure

to amend the Schedules and SOFA in the three years between the petition

and trial, can constitute reckless indifference to the truth, which is evidence

of fraudulent intent.”).

3. § 727(a)(5)

Pursuant to § 727(a)(5), the bankruptcy court must deny discharge

when “the debtor has failed to explain satisfactorily, before determination 14 of denial of discharge under this paragraph, any loss of assets or deficiency

of assets to meet the debtor’s liabilities.” To prevail on a claim under

§ 727(a)(5), a plaintiff must show: “(1) debtor at one time, not too remote

from the bankruptcy petition date, owned identifiable assets; (2) on the

date the bankruptcy petition was filed or order of relief granted, the debtor

no longer owned the assets; and (3) the bankruptcy pleadings or statement

of affairs do not reflect an adequate explanation for the disposition of the

assets.” In re Retz,

(quoting Olympic Coast Inv., Inc. v.

Wright (In re Wright),

(Bankr. D. Mont. 2007)). Once the

plaintiff establishes these elements, the debtor must offer credible evidence

regarding disposition of the missing assets.

B. The bankruptcy court did not err by denying Mr. Rigon’s discharge.

Mr. Rigon’s primary argument is that he was unaware of the various

assets and transactions and should not be denied a discharge because of his

failure to maintain records of those assets, disclose them in his schedules

and SOFA, or explain their loss. But despite Ms. Kwon’s superior financial

acumen, Mr. Rigon had a duty to maintain adequate records of his

financial condition and to disclose assets and income about which he knew.

“A debtor cannot, merely by playing ostrich and burying his head deeply

enough in the sand, disclaim all responsibility for statements which he has

made under oath.” In re Retz,

(cleaned up).

15 The bankruptcy court determined that Mr. Rigon “feigned

ignorance” and both debtors demonstrated a “pattern of willful ignorance

of their assets and liabilities.” We typically give great deference to the

bankruptcy court’s determination of witness credibility. See Cooper v.

Harris,

(2017) (“we give singular deference to a trial

court’s judgments about the credibility of witnesses . . . because the various

cues that ‘bear so heavily on the listener’s understanding of and belief in

what is said’ are lost on an appellate court later sifting through a paper

record.” (quoting Anderson,

)).

We agree with the bankruptcy court that both debtors exhibited

willful ignorance of their assets and liabilities, particularly involving

Chrisol and the Trust. But despite the numerous “red flags” surrounding

their actions, neither the record presented, nor the court’s decision, clearly

delineate each individual debtor’s involvement, intent, and liability. Many

of the court’s factual findings are based on Ms. Kwon’s actions and

knowledge of assets that she controlled. Notwithstanding the fact that Ms.

Kwon was primarily responsible for the couple’s financial dealings, Mr.

Rigon was obligated to maintain records and disclose his known interests

in community assets. His complete reliance on Ms. Kwon in verifying the

accuracy and completeness of his schedules and SOFA—which omitted

assets he knew about—was at least reckless indifference to the truth, and

the evidence supports the court’s decision to deny Mr. Rigon’s discharge.

16 The record amply supports Mr. Rigon’s individual liability under

§ 727(a)(3) based on his failure to maintain and disclose records of income

from Sands Holdings, the BofA Account, and his personal income tax

returns. The evidence also supports the court’s decision under § 727(a)(4)

for Mr. Rigon’s material omissions of his interest in the BofA Account,

income from Sands Holdings, and the Denny Street Properties. 7

Mr. Rigon was aware of the BofA Account but argues he was justified

in concealing it because it had no value and there was no evidence that he

used the account. Similarly, he knew of the Denny Street Properties sales,

but argues he was not required to disclose them because they were sold in

the ordinary course of Ms. Kwon’s business. Mr. Rigon contends he was

unaware of the Sands Holdings income, and he blames his failure to timely

file tax returns on Perfect Tax and the complex tax strategies it devised for

the couple. Mr. Rigon’s excuses are unavailing.

First, he is not relieved of his statutory obligation to maintain and

disclose financial records merely because he believes the records pertain to

7 We are less convinced that the evidence establishes a violation of § 727(a)(5) by Mr. Rigon for Ms. Kwon’s reduced equity in Sands Holdings and Sands Partners. We agree with the UST that § 727(a)(5) does not include an intent element and “the issue turns on whether a satisfactory explanation is—or is not—forthcoming,” Harrington v. Simmons (In re Simmons),

(1st Cir. 2016). But it is not clear that the chapter 7 trustee or UST directed the issue to Mr. Rigon, or that he could offer a satisfactory explanation. Although the ownership interests were community assets, there is no evidence that Mr. Rigon had knowledge of Ms. Kwon’s involvement in those entities. However, because we affirm the bankruptcy court’s decision under § 727(a)(3) and (a)(4), we do not reach the question of whether denial of discharge was also warranted under (a)(5). 17 a valueless asset. The “purpose of § 727(a)(3) is to make discharge

dependent on the debtor’s true presentation of his financial affairs.” In re

Caneva,

(citation omitted). The disclosure requirement

allows creditors and the trustee to review a debtor’s transactions and verify

his financial condition, and it “removes the risk to creditors of ‘the

withholding or concealment of assets by the bankrupt under the cover of a

chaotic or incomplete set of books or records.’”

(quoting Burchett,

). In short, it was not up to Mr. Rigon to decide which accounts

were worth disclosing.

Second, although Mr. Rigon claims he was unaware of the Sands

Holdings income, the court found his testimony not credible. While it is

plausible that Mr. Rigon was unaware of the Trust—given that the only

evidence of his knowledge was his presence at the initial 2016 meeting with

Perfect Tax—the same cannot be said for the Sands Holdings income. The

debtors received at least $10,000 from Sands Holdings within a few weeks

of filing their chapter 7 petition. Mr. Rigon had access to the joint account

and made payments from it. It is not plausible that he was unaware of the

Sands Holdings income, and he was obligated to maintain and disclose

records of it.

Moreover, Mr. Rigon’s justification for failing to keep records does

not depend on his subjective knowledge. The “justification for a bankrupt’s

failure to keep or preserve books or records will depend on . . . whether

others in like circumstances would ordinarily keep them.”

at 763

18 (quoting Lansdowne v. Cox (In re Cox),

(9th Cir. 1994))

(cleaned up). He does not explain why a typical debtor would not be

expected to keep records of significant income received in the immediate

weeks prior to filing a petition. Under these circumstances, the bankruptcy

court did not err by rejecting Mr. Rigon’s purported justification for not

maintaining records.

Finally, tax returns are important for the trustee and creditors to

check the accuracy of a debtor’s schedules and SOFA. See Nisselson v.

Wolfson (In re Wolfson),

(S.D.N.Y. 1993) (“Income tax

returns are quintessential documents ‘from which the debtor’s financial

condition or business transactions might be ascertained,’ in the words of

subsection (3).”); Fox v Miller,

(C.D. Cal. 2018)

(“Appellant’s failure to file tax returns provides another basis for denying

Appellant’s discharge under section 727(a)(3) because it prevents creditors

and trustees from obtaining important financial information.”) (cleaned

up). It is immaterial whether Mr. Rigon intentionally failed to file his

returns. Fox,

.

Mr. Rigon blamed Perfect Tax for delays in filing his returns, but he

provided no evidence to corroborate his claim. The bankruptcy court relied

on email communications and found that the delays stemmed from Mr.

Rigon’s and Ms. Kwon’s failure to provide accurate information.

The evidence also supports the court’s conclusion that Mr. Rigon was

aware of income and proceeds from the Denny Street Properties. Ms. Kwon

19 testified that the couple had numerous discussions about how to utilize the

sale proceeds, and their tax returns included rental income from the

properties.

Mr. Rigon argues that the court erred by rejecting his “ordinary

course of business” defense, but he does not cogently explain why the

defense should apply. We agree with the bankruptcy court that Rock PI

was engaged in buying and selling real properties, but there is no evidence

in the record that Mr. Rigon or Ms. Kwon personally engaged is such

business. The record demonstrates that Ms. Kwon worked as a data

engineer, or directly for Rock PI, and Mr. Rigon worked solely for Rock PI

until he began working as a police officer. Additionally, Mr. Rigon offers

no explanation why he was not obligated to disclose rental income

generated by the Denny Street Properties, which the couple reported in

their personal tax returns.

Mr. Rigon had an independent obligation to disclose records and he

knowingly made material omissions in his schedules and SOFA. The

bankruptcy court did not err in denying his discharge.

CONCLUSION

Based on the foregoing, we AFFIRM the bankruptcy court’s

judgment denying Mr. Rigon’s discharge.

Partial concurrence and partial dissent begins on next page.

20 SPRAKER, Bankruptcy Judge, concurring in part and dissenting in part.

I agree with my colleagues that the bankruptcy court did not err in

denying Mr. Rigon his discharge under § 727(a)(4). Specifically, substantial

evidence supports the court’s conclusion that Mr. Rigon knowingly and

fraudulently made a false oath by failing to disclose the sales of the Denny

Street Properties1 and the income received from those sales. I would end

the analysis there. The other claims for denial of the discharge lack specific

findings as to Mr. Rigon’s involvement in the various business endeavors

and interests previously discussed. The bankruptcy court’s decision

focuses predominantly on Ms. Kwon’s knowledge and actions, with good

reason. The court often spoke of “the debtors” or “the defendants”

generally, but identified specific actions taken, or interests held, by Ms.

Kwon alone. This is understandable given their jointly administered case.

But I write separately to emphasize that denial of discharge requires the

bankruptcy court to render sufficient findings and conclusions as to each

spouse individually. The record before us does not support denial of Mr.

Rigon’s discharge under § 727(a)(3). I also agree with the majority that

there is no need to further examine the claims under § 727(a)(5) in light of

our affirmance under § 727(a)(4).

I. The failure to keep and preserve adequate records under § 727(a)(3).

1 I use the same defined terms as the majority decision. 1 The majority decision concludes in part that Mr. Rigon’s discharge

was properly denied under § 727(a)(3) for failure to maintain and disclose

records for the BofA Account, Sands Holdings, the Trust, and for his failure

to file his personal tax returns. As the bankruptcy court and the majority

explained, to deny a discharge for the failure to keep and preserve records

under § 727(a)(3), the creditor or trustee must prove, “(1) that the debtor

failed to maintain and preserve adequate records, and (2) that such failure

makes it impossible to ascertain the debtor’s financial condition and

material business transactions.” Caneva v. Sun Cmtys. Operating Ltd. P'ship

(In re Caneva),

(9th Cir. 2008).

A. The savings account.

The bankruptcy court denied Mr. Rigon’s discharge for his failure to

disclose the BofA Account because “[c]reditors and the Trustee could not

accurately ascertain the Defendants’ financial condition ….” Order and

Judgement (Dec. 12, 2023) at 22. Mr. Rigon failed to disclose this savings

account in the original and amended Schedule A/B that he and his wife

filed. Nonetheless, the parties have stipulated that the debtors produced

bank statements for the BofA Account in response to a subpoena from the

chapter 7 trustee. Having produced the relevant bank statements, I do not

see how the original failure to disclose the savings account made “it

impossible to ascertain the debtor’s financial condition and material

business transactions.” This is not to condone the failure to disclose the

savings account, which may serve as the basis for denial of discharge for

2 making a false oath under § 727(a)(4). But under § 727(a)(4) the UST was

required to prove that Mr. Rigon fraudulently made the false oath. Under

§ 727(a)(3), no intent to conceal is required. Nevett v. U.S. Tr. (In re Nevett),

, at *11 (9th Cir. BAP July 1, 2021) (citing Lansdowne v. Cox

(In re Cox),

(9th Cir. 1994)). Because of their distinctive

elements, § 727(a)(3) and § 727(a)(4) should not be employed as if they are

readily interchangeable.

B. Sands Holdings.

The bankruptcy court found that the defendants failed to maintain or

preserve adequate records relating to income and interests from Sands

Partners and Sands Holdings. The record amply supports Ms. Kwon’s

knowledge and involvement in both companies and her failure to keep and

preserve records of her interests in both, including the reduction of her

interests in both companies. But there is no finding as to Mr. Rigon’s

involvement in Sands Partners or Sands Holdings, or even his knowledge

of Ms. Kwon’s interest or the income she received from them. He denied

any such knowledge. My colleagues address this point by noting that the

bankruptcy court found Mr. Rigon not credible. The bankruptcy court

specifically found Ms. Kwon not credible in several specific instances. It did

not, however, make any similar specific findings as to Mr. Rigon. Rather,

the court stated, “[t]he Defendants feigned ignorance as to their Trust’s

assets and actions.” There is no such comment as to the Sands companies.

3 We are in no position to extend that factual finding to Mr. Rigon’s claimed

ignorance of Ms. Kwon’s interest in Sands Partners and Sands Holdings.

The majority decision concludes: “The debtors received at least

$10,000 from Sands Holdings within a few weeks of filing their chapter 7

petition. Mr. Rigon had access to the joint account and made payments

from it. It is not plausible that he was unaware of the Sands Holdings

income, and he was obligated to maintain and disclose records of it.” My

colleagues draw a reasonable inference from the totality of the record. But

their conclusion hinges on a factual determination that Mr. Rigon knew of

the Sands interest and income. The bankruptcy court made no such

finding. As the majority decision observes at Footnote 8, “[a]lthough the

ownership interests were community assets, there is no evidence that Mr.

Rigon had knowledge of Ms. Kwon’s involvement in [Sands Holdings and

Sands Partners].” The bankruptcy court found Mr. Rigon not credible as to

his knowledge of the Trust rather than the Sands companies. It was the

UST’s burden to prove that Mr. Rigon knew of the interest and income

from the Sands companies such that he was required to keep and preserve

that information.2 Thus, if this were the sole basis for denying Mr. Rigon

2 As with the BofA Account, the chapter 7 trustee was aware of the $10,000 payment to Ms. Kwon from Sands Holdings. Apparently, the UST again complains that Mr. Rigon’s discharge should be denied merely for the failure to disclose the Sands Holdings income Ms. Kwon received shortly before the bankruptcy filing. Such claim does not sound in § 727(a)(3) given the information that was ultimately provided. 4 his discharge, I would remand to the bankruptcy court for further findings

of fact as to Mr. Rigon.

C. The Trust.

The bankruptcy court also held that the defendants failed to keep and

preserve records as to the Trust because “[t]he Defendants were unable to

explain the thousands of dollars they transferred into their Trust.” The UST

has specifically referenced three checks from the Trust. Each of these

checks was signed by Ms. Velasquez as trustee of the Trust and is dated

between 2017 and 2019: “(1) a $66,000 check payable to Ms. Kwon dated

January 30, 2017; (2) a $40,000 check payable to Ms. Kwon dated January 1,

2019; and (3) a $2,500 check payable to Ms. Kwon and Mr. Rigon for ‘school

fee’ dated September 26, 2019.” The record does not reveal who endorsed

the checks. Again, the record demonstrates that Ms. Kwon was well aware

of these payments, but there is a dearth of evidence to show that Mr. Rigon

was. It is unclear what rights his status as beneficiary entitled him to under

the Trust such that he was under any obligation to keep and preserve

records of the Trust.

The court noted that the Trust’s money had been used to purchase

and maintain the AIG Policy, which named Mr. Rigon as the beneficiary.

Yet, there is no evidence that Mr. Rigon ever wrote any checks to, or from,

the Trust. The only evidence of his involvement is his attendance at the

initial meeting with the accountant in 2016 where creation of the Trust was

discussed. The only specific evidence of Mr. Rigon’s subsequent

5 involvement is one check from the Trust dated September 26, 2019, jointly

payable to him and Ms. Kwon for $2,500. True, the court did state that

“[t]he Defendants feigned ignorance as to their Trust’s assets and actions.”

But again, if this were the only basis for denying Mr. Rigon’s discharge, I

would remand to the bankruptcy court for more specificity as to the extent

of Mr. Rigon’s individual knowledge sufficient to impose on him a

personal obligation to keep and preserve records for the Trust.

D. The failure to file tax returns.

The bankruptcy court also concluded that “[t]he Defendants’ failure

to timely file tax returns, in addition to their failure to keep or preserve

other records, is grounds for denying the Defendants’ discharge.” The

debtors filed their last tax return for 2017 and produced an unsigned return

for 2018. No tax return was presented for 2019 or 2020, though the debtors

filed their bankruptcy in August 2021.

The failure to prepare and file tax returns timely may be strong

evidence of the failure to keep and preserve adequate records of a debtor’s

financial condition. See Pher Partners v. Womble (In re Womble),

(Bankr. N.D. Tex. 2003), aff’d,

(N.D. Tex. 2003), and aff'd,

(5th Cir. 2004); see also Wachovia Bank v. Spitko (In re Spitko),

(Bankr. E.D. Pa. 2006). But the failure to file tax returns, by

itself, is insufficient to establish that a debtor failed to maintain and

preserve records that made it impossible to ascertain the debtor’s financial

condition and material business transactions. Compare Murray v. Altendorf

6 (In re Altendorf),

, at *8 (Bankr. D.N.D. July 29, 2015)

(“Failing to file a tax return or to produce it during discovery in an

adversary proceeding, without more, does not rise to the level of

concealing or destroying financial documents under the circumstances of

this case.”), with Jou v. Adalian (In re Adalian),

(Bankr. M.D.

Pa. 2012) (“while not alone dispositive, a debtor’s failure to file timely tax

returns—especially for several years in a row—is a blatant example of a

failure to maintain adequate records.” (cleaned up)), and Bell v. Claybrook

(In re Claybrook),

(Bankr. E.D. Tex. 2008) (“Defendant's

failure to file timely tax returns, to produce her tax returns to Bell, to

produce the documents underlying her tax returns, or to introduce the

allegedly filed returns into evidence are factors for the Court to consider

under § 727(a)(3).”), aff'd,

(E.D. Tex. Oct. 20. 2008). This is

because the party challenging the debtor’s discharge under § 727(a)(3) must

prove that Mr. Rigon’s failure to keep and preserve records made it

impossible to ascertain his financial condition. Caneva,

.

Debtors are not required to keep or present any specific types of records to

satisfy this requirement; they only need to keep records that adequately

explain their financial condition.

Mr. Rigon failed to initially disclose the BofA Account, a joint check

payable to him and his wife from Sands Holdings, and his interest in the

Trust as a beneficiary. Yet, that information was ultimately provided to the

chapter 7 trustee. The initial failure to disclose—later rectified—is not an

7 appropriate basis to deny Mr. Rigon’s discharge under § 727(a)(3). True,

Ms. Kwon has failed to explain why her interests in Sands Holdings and

Sands Partners were reduced to 5%, and why or how she transferred funds

into the Trust and received funds from the Trust. The court did not find,

and the UST did not establish, however, that Mr. Rigon had any rights in

either Sands entity or involvement in the Trust that would give rise to an

obligation to keep and preserve records for actions in which he did not

participate—involving entities in which he had no interest other than any

community interest.

Denying a motion for summary judgment, the bankruptcy court in

Texas Capital Bank v. Sharp (In re Sharp),

, at * 9 (Bankr. E.D.

Tex. Feb. 26, 2015) observed in a similar situation:

The Plaintiff has failed to tender any summary judgment evidence that Ms. Sharp, a registered nurse, had any involvement in the business operations of her husband or played any role in the apparent dissipation of any cattle/equipment assets. Indeed, other than the documentation itself, the Plaintiff has failed to tender any summary judgment evidence against Ms. Sharp at all. A plaintiff in this context must make a proper showing as against each individual debtor. The mere existence of the marital relationship does not determine a spouse's entitlement to discharge. This appeal demonstrates the importance of separate findings as to

the basis for denial of each spouse’s individual discharge under § 727.

In sum, I concur in the result as to the denial of Mr. Rigon’s discharge

under § 727(a)(4). And I join in the parts of my colleagues’ analysis

8 affirming the denial of Mr. Rigon’s discharge under § 727(a)(4) based on

Mr. Rigon’s omissions regarding the sale of the Denny Street Properties

and the discussion of § 727(a)(5). However, for the reasons set forth above, I

respectfully decline to join in the remainder of my colleagues’ decision as

to the claims under § 727(a)(3).

9