849 F2d 1475 Day v. Topsnik

849 F.2d 1475

Unpublished Disposition

NOTICE: Ninth Circuit Rule 36-3 provides that dispositions other than opinions or orders designated for publication are not precedential and should not be cited except when relevant under the doctrines of law of the case, res judicata, or collateral estoppel.

Terry L. DAY, Plaintiff-Appellee,
Gerd TOPSNIK, Defendant-Appellant.

No. 87-1550.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 7, 1988.
Decided June 9, 1988.

Before WALLACE, REINHARDT and NOONAN, Circuit Judges.

view counter



Gerd Topsnik filed a voluntary Chapter 7 bankruptcy petition and Terry Day was appointed as interim trustee. Day brought an action objecting to the discharge of the debtor and subsequently moved for summary judgment. The bankruptcy court granted her motion and denied Topsnik's motion for reconsideration. The district court affirmed. On appeal, Topsnik argues that summary judgment was not appropriate and that the district court applied the wrong standard of review. We affirm.


When Topsnik filed his petition for bankruptcy, he listed debts of over $650,000 and assets of under $5000. In his amended petition, Topsnik stated that his property also included two pieces of valuable personal property, both of which were said to be held by the probate estate of Bernd Lehnert, and to have been placed with Mr. Lehnert on consignment. However, Topsnik never gave Day any documentation of this consignment.


Topsnik claimed that his debt came from two substantial, if ultimately unwise, investments: first, a loan and mortgage of $400,000 for a new house; second, $280,000 used to start a new business, "Hawaii's European Sausage Mart, Inc.". The sausage company failed, and the mortgage was foreclosed on. Topsnik stated that since his various investments brought him no income, he had been forced to liquidate his personal assets to meet various debts and personal living expenses.


Day filed a complaint objecting to discharge when Topsnik failed to provide her with additional financial records she sought after he had originally turned over records that were only fragmentary at best. Despite several requests by Day, Topsnik provided no further records during the year that elapsed between the filing of her complaint and her motion for summary judgment.


Day based her objection to Topsnik's discharge on 11 U.S.C. Sec. 727(a)(3), (5), which states:


The court shall grant the debtor a discharge, unless--

view counter

* * *


* * *


(3) the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor's financial condition or business transaction might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;


* * *


* * *


(5) the debtor has failed to explain satisfactorily, before determination of denial of discharge under the paragraph, any loss of assets or deficiency of assets to meet the debtor's liabilities;


Topsnik gave a variety of explanations for his failure to produce financial records. He asserted that he had not filed income tax returns for 1981 or 1982. Though Topsnik claimed that he had maintained two checking accounts in his name for the two years preceding his petition, he gave Day only a small number of banking records. He claimed that he had conducted a number of transactions with a trading club, but he was unable to give Day either the name of the club or documentation of the transactions. Topsnik also claimed that the bank that had foreclosed on his sausage company had taken his books and records. Topsnik's position is that he "has cooperated to the fullest extent possible, under the circumstances." He claims that he has failed to produced records only when such records were unavailable; he argues that he has adequately explained the absence of financial records. Topsnik also claims that he is not sophisticated in business affairs.


In its opinion granting summary judgment, the bankruptcy court noted that Topsnik was not "an unsophisticated layman" and that, therefore, a higher standard of keeping records should be applied in his case then is applicable when the petitioner falls into the category it described. The court concluded that the records produced were "haphazard at best" and were "[in]sufficient to piece together a picture of Debtor's financial transactions." In denying a motion for reconsideration, the court reiterated that the records Topsnik produced were inadequate to allow the Trustee to determine "the Debtor's financial health at various times prior to the petition" and whether Topsnik's post-petition transactions were in violation of the Bankruptcy Code.


The district court, in affirming the bankruptcy court, distinguished between "[t]he nature of the books and records produced by the debtor", which is a question of fact, and the sufficiency of that evidence, which is a question of law, the latter ordinarily reviewed under an abuse of discretion standard. While the court did seem to treat the topic of business sophistication, "which affects the standard in determining the sufficiency of the records", as a factual issue, it noted that Topsnik did not "provide any specific facts to raise a genuine issue" as to his sophistication. As to the legal issue of sufficiency, the district court held that the bankruptcy court's conclusions did not constitute an abuse of discretion.


As to the appropriateness of summary judgment, Topsnik has not shown that a genuine issue of material fact exists. Topsnik has not asserted that Day misrepresented the quantity or quality of the records Topsnik had produced, nor has Topsnik offered any evidence other than mere denials to show that he was not a sophisticated businessman.1 What remains is only the legal question of whether the records Topsnik produced were adequate, as a matter of law, for the purpose of 11 U.S.C. Sec. 727. While the inquiry is fact-sensitive, here the inadequacy was beyond serious dispute. In short, the answer was clear. Therefore, in this case there was no reason for the sufficiency of records question not to have been decided on a motion for summary judgment.


On appeal, Topsnik argues that the district court applied an incorrect standard of review with respect to the bankruptcy court's summary judgment regarding discharge. Appellant argues that summary judgment in this context should be reviewed not under an abuse of discretion standard, but in the same manner as summary judgment is reviewed in other contexts: de novo, considering the evidence in the light most favorable to the non-moving party.


Topsnik does not contest the deference generally due a bankruptcy court decision regarding discharge. See Stout v. Prussel, 691 F.2d 859, 861 (9th Cir.1982) ("It has long been the rule in this circuit that the right to a discharge in bankruptcy is left to the sound discretion of the bankruptcy court. An appellate court will not interfere except in a case of gross abuse of discretion."). Topsnik's argument is that although this court should normally defer to the bankruptcy court when it makes a fact-sensitive determination after a hearing, similar deference is not appropriate when the same fact-sensitive determination is made without a hearing on summary judgment.


For his position, Topsnik relies on two recent decisions of the Ninth Circuit Bankruptcy Appellate Panels. See In re Stuerke, 61 B.R. 623, 625 (9th Cir. BAP 1986); In re Stephens, 51 B.R. 591, 594 (9th Cir. BAP 1985). The parties have not cited, and we have not been able to find, any circuit court or district court opinion which discusses whether the standard of review on the issue of discharge should change when the issue is decided on a motion for summary judgment. However, we need not reach the issue of the appropriate standard of review in order to decide the present case.


As the bankruptcy court noted, Topsnik's financial documentation was clearly inadequate to allow the trustee or the court to fulfill their statutory duties. Regardless of the standard of review we apply to the bankruptcy court's judgment that Topsnik's records were not sufficient, we are required to affirm. The denial of discharge was proper.




This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


The only "evidence" Topsnik cites on the issue of business sophistication is the fact that his business failed. If this fact were sufficient, few persons in bankruptcy court would ever be adjudged "sophisticated"