Arvest Bank v. Dokes
4:16-ap-01049
Bankr. E.D. Ark.May 2, 2017Background
- Debtor Jocelyn K. Dokes owned/operated multiple businesses and at least 50% of Dokes Quality Auto Sales and JNYLECO; she also held a liquor license and a real estate license and owned several real properties.
- In April 2014 the debtor transferred two unencumbered properties (145th Street and adjacent Dineen) to her adult daughter, then filed a Chapter 13 two days later; that case was dismissed.
- Debtor filed a second Chapter 13 (later converted to Chapter 7); in both filings she omitted or misstated numerous assets, income sources, corporate offices/ownerships, transfers, and bank accounts.
- Arvest Bank held loans secured by property that the debtor or her entities had encumbered; Arvest alleged the debtor misrepresented ownership to delay foreclosure and moved to convert/dismiss.
- After conversion, Arvest sued to deny discharge under 11 U.S.C. § 727(a)(2) (concealment/transfer with intent to hinder/defraud) and § 727(a)(4)(A) (false oaths). The bankruptcy court found numerous omissions, suspicious timing of amendments (filed on the eve of hearings), inconsistent explanations, and inferred fraudulent intent.
- Court denied discharge under both § 727(a)(2) and § 727(a)(4)(A); Arvest’s § 523 claim rendered moot by denial of discharge.
Issues
| Issue | Plaintiff's Argument (Arvest) | Defendant's Argument (Dokes) | Held |
|---|---|---|---|
| Whether debtor transferred/failed to disclose property with intent to hinder, delay, or defraud (§ 727(a)(2)) | Debtor omitted assets/transfers and falsely claimed ownership of entity assets to stall foreclosure; timing and pattern show intent to hinder/delay creditors | Omissions were inadvertent or the fault of her attorneys; she relied on counsel and misunderstood some questions | Held for Arvest — elements of § 727(a)(2) proven; concealments and timing support inference of fraudulent intent; discharge denied |
| Whether debtor made knowingly false oaths in schedules/SOFA (§ 727(a)(4)(A)) | Debtor verified schedules under penalty of perjury yet omitted corporate interests, transfers, licenses, income, accounts — showing false statements made knowingly/fraudulently and materially | She lacked fraudulent intent; mistakes stemmed from attorneys, confusion over terms, or reliance on counsel | Held for Arvest — false statements under oath, debtor knew/inferred intent from conduct, material to estate; discharge denied |
| Whether post-filing amendments cured prior false statements | Arvest: amendments were untimely and were filed only when confronted; amendments do not negate original falsity | Debtor: amendments correct errors and show lack of intent to defraud | Held for Arvest — amendments filed only when facing adverse hearings were insufficient; concealment is continuing and late amendments do not absolve prior false oaths |
| Whether reliance on counsel excuses omissions | Debtor: blamed former counsel(s) for errors and relied on them | Arvest: debtor has independent duty to ensure accuracy and cannot hide behind counsel | Held for Arvest — reliance on counsel insufficient where omissions are obvious; debtor still had duty to verify and sign under penalty of perjury |
Key Cases Cited
- Korte v. U.S. Internal Revenue Serv., 262 B.R. 464 (B.A.P. 8th Cir. 2001) (denial of discharge provisions strictly construed but objector bears ultimate burden)
- In re Haynes, 549 B.R. 677 (Bankr. D.S.C. 2016) (false-oath analysis and purpose of § 727(a)(4)(A))
- In re Richmond, 429 B.R. 263 (Bankr. E.D. Ark. 2010) (§ 727(a)(2) concealment and debtor duty to disclose assets)
- Sholdra v. Chilmark Fin. LLP (In re Sholdra), 249 F.3d 380 (5th Cir. 2001) (late amendments after creditor exposes falsity do not erase original inaccuracies)
- In re Kaelin, 308 F.3d 885 (8th Cir. 2002) (liberal allowance to amend schedules, but not to excuse fraudulent omissions)