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In re Crawford

United States Court of Appeals, First Circuit

October 25, 2016

IN RE: RICHARD D. CRAWFORD, Debtor.
v.
RICHARD D. CRAWFORD, Defendant, Appellee. PREMIER CAPITAL, LLC, Plaintiff, Appellee,

         APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Leo T. Sorokin, U.S. District Judge]

          Emily C. Shanahan, with whom Mark S. Furman, John D. Finnegan, and Tarlow, Breed, Hart & Rodgers, P.C. were on brief, for appellant.

          Douglass C. Lawrence, with whom Thomas H. Curran, Peter Antonelli, and Curran Antonelli, LLP were on brief, for appellee.

          Before Thompson and Barron, Circuit Judges, and McConnell, [*] District Judge.

          MCCONNELL, District Judge.

         A bankruptcy court denied Richard D. Crawford's petition for bankruptcy, in part, because Crawford omitted the existence of his Cash Balance Plan ("CBP"), a retirement account, from his Schedule B filing. While Crawford omitted the existence of the account, he disclosed the account's value through inclusion with a second retirement account, a 401(k). On appeal, this Court considers whether omitting an asset's name but including the asset's value on a Schedule B form clears the materiality threshold for a false oath claim under 11 U.S.C. § 727(a)(4)(A). For the reasons set out below, we affirm.

         I. Background

         The genesis of this bankruptcy case dates back to a loan that Crawford personally guaranteed. Crawford, a financially sophisticated individual, works in the banking industry as a mortgage originator at Wells Fargo. In 1987, Oak Street Realty Trust ("Oak Street"), a company in which Crawford has an 80% interest, received a $250, 000 loan from Amoskeag Bank ("Amoskeag") secured by Oak Street property. In 1989, through a Change in Terms Agreement, Crawford guaranteed the loan in his individual capacity. After the loan matured, neither Oak Street nor Crawford paid the balance. The FDIC, acting as liquidating agent for Amoskeag, assigned Amoskeag's interest to Tenth RMA Partners, L.P. ("RMA"). RMA obtained a judgment against Crawford in the amount of $388, 753.01 and then assigned its interest to Premier who sought and received a $456, 774.04[1] execution on the judgment from the Middlesex Superior Court. Save for the $7, 030.68 that Premier obtained from wage garnishments, the execution remains in full force.

         Reaching a financial impasse with liabilities far exceeding assets, Crawford petitioned for bankruptcy. He subsequently filed his Schedules and Statement of Financial Affairs ("SOFA"). Two weeks later, Crawford filed an amended SOFA. With Crawford's fresh start in sight, Premier thwarted Crawford's discharge of debt through the filing of the instant action. Two claims formed the basis for the bankruptcy court's disposition: (1) the making of a false oath in violation of 11 U.S.C. § 727(a)(4)(A) and (2) the intentional concealment of property in violation of 11 U.S.C. § 727(a)(2)(A). Because we affirm on the false oath count, we do not reach the merits of the unlawful concealment claim.

         At the time Crawford petitioned for bankruptcy, he had two retirement accounts with Wells Fargo, a 401(k) account and a CBP. Wells Fargo provides quarterly statements to Crawford with the heading "401(k) Plan and Cash Balance Plan." On this statement, the two accounts are listed separately and with separate balances, but the statement also contains a cumulative amount reported under the label "Total Retirement Accounts."

         Schedule B, item 12, requires an individual filing for bankruptcy to disclose "[i]nterests in IRA, ERISA, Keough, or other pension or profit sharing plans" and to "[g]ive particulars." In addition, this form contains a column for the description and location of property as well as the current value of the property. After consulting with counsel, Crawford filed his Schedule B, item 12, which listed "401(k) with Wells Fargo" under the description and "$148, 000" under the value. Crawford's form made no mention of his CBP.

         Premier's complaint made a general allegation of a false oath in Crawford's Schedules and Statement of Financial Affairs. The CBP, though not mentioned in the complaint as the basis for a false oath claim, became a topic of the trial on the second day of the three day trial. At trial, Premier introduced Exhibit 847-1, which contained Crawford's quarterly statements with Wells Fargo. Crawford objected to the introduction of the exhibit under Rule 403, arguing that the statements were cumulative. The bankruptcy court overruled Crawford's sole objection on the matter. On direct examination, Premier questioned Crawford on whether he had a CBP that he failed to list on his Schedule B.[2] Evasive at first, Crawford retorted, "I gave all this information to [my former attorney]." Eventually, Crawford admitted that his CBP is a retirement account and he failed to include it in his Schedule B. Pressing further, Premier directly asked why Crawford failed to list the CBP. To this, Crawford equivocated, "I don't have a good answer for you sir." On cross-examination, Crawford's counsel presented Crawford with Exhibit 847-1 and asked whether he disclosed the amount listed on the quarterly statement. Crawford affirmed that he had. On redirect, Premier once again questioned Crawford on his failure to list his CBP. Specifically, Premier asked, "Is it not separated out as a separate plan on your statement, the CBP? Is it not?" "I think it's a different heading. I agree; yes, sir, " Crawford answered.

         In Premier's post trial brief, Premier argued that by failing to disclose his interest in the CBP, Crawford committed a false oath in violation of 11 U.S.C. § 727(a)(4)(A). In Crawford's Proposed Findings of Fact and Conclusion of Law, again contesting the disclosure, Crawford reasoned that he did disclose his CBP, or if he did fail to disclose, that failure was not the product of fraudulent intent. At closing arguments, both parties engaged the merits of the false oath claim at issue. Crawford averred, "So while the CBP wasn't separately listed on his schedules, the amount in it was included in the 401K amount that was reflected on Mr. Crawford's schedule . . . ."

         The bankruptcy court found Crawford "less than credible" based on numerous misrepresentations and evasive answers. The court ruled that while the claim of a false oath by omission of the CBP was not raised in Premier's complaint, Crawford impliedly consented to the trial of the charge. Additionally, the court concluded that Crawford's failure to include his CBP in his Schedule B, item 12, amounted to a false oath. Finding Crawford's veracity suspect, the court reasoned that the CBP and 401(k) are separate accounts and that Crawford believed the accounts were separate when he filed his Schedule B. Premier Capital, LLC v. Crawford (In re Crawford), 531 B.R. 275 (Bankr. D. Mass. 2015). On appeal, the District of Massachusetts affirmed the false oath claim. Premier Capital, LLC v. Crawford (In re Crawford), No. 15-12726 (D. Mass. Feb. 26, 2016). Now, Crawford raises several errors with the district court's decision: the finding of implied consent on Crawford's part to try the omission of the CBP Plan from Schedule B, the improper application of the burden-shifting method of proof for false-oath claims, and the determination that the omission of the CBP was a false oath and material.

         II. ...


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