Harrington v. Mazzone (In re Mazzone)
510 B.R. 439
Bankr. D. Mass.2014Background
- UST filed adversary to revoke the Mazzones’ chapter 7 discharge under § 727(d)(1) based on alleged pre-petition rental income concealment.
- Mazzones rented basement space to Robert Bost starting Jan 2010; rent paid in cash with various in-kind offsets; no written lease and apartment did not meet zoning rules.
- Mazzones disclosed no rental income or Bost arrangement in schedules, SOFA, Form B22A, or at § 341 meeting; testified that there was no rental arrangement.
- Bankruptcy discharge granted July 9, 2012; case closed July 12, 2012; Bost later reported rent payments and provided supporting documents to UST.
- UST reopened investigation July 9, 2013 and filed this § 727(d)(1) action; testimony and documentary evidence showed cash rent payments and text messages referencing rent.
- Court found the Mazzones’ testimony not credible and held the concealment of rental income was intentional, supporting revocation of discharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was there fraud in fact by concealment of rental income? | Harrington contends concealment of rent income constitutes fraud in fact. | Mazzones claim no true rental arrangement; payments were household contributions, not income. | Yes; concealment found fraudulent in fact. |
| Did the Mazzones knowingly omit material facts in schedules and at § 341 meeting? | Omission of rental income was intentional and material. | Omissions were scrivener’s errors and not intentional. | Yes; omissions were willful and material. |
| Was there knowledge of the fraud by the UST before discharge? | UST lacked knowledge prior to discharge, relying on post-discharge information. | U.S.T. should have known from bank statements and affidavit showing only two daughters as residents. | UST had no pre-discharge knowledge; knowledge established after Mr. Bost’s report. |
| Would the fraud, if known, have denied discharge under § 727(a)? | Fraudulent omission would have invoked § 727(a)(4)(A) and possibly abuse under § 727(b). | Not enough to defeat discharge given lack of pre-discharge knowledge. | Yes; fraud would have led to denial of discharge under § 727(a)(4)(A). |
Key Cases Cited
- Yules v. Gillis (In re Gillis), 403 B.R. 137 (1st Cir. BAP 2009) (sets standard for revocation elements under § 727(d)(1))
- Pelletier v. Donald (In re Donald), 240 B.R. 141 (1st Cir. BAP 1999) (fraud must be intentional and in fact)
- Gillis, 403 B.R. 137 (1st Cir. BAP 2009) (post-petition fraud allegations satisfy § 727(d)(1))
- Koss (In re Koss), 403 B.R. 191 (Bankr. D. Mass. 2009) (false oath or omission requires materiality; burden shifts if oath appears false)
- Tully, 818 F.2d 106 (1st Cir. 1987) (liberal construction of § 727(a)(4)(A) but safeguards against abuse)
- Lussier v. Sullivan (In re Sullivan), 455 B.R. 829 (1st Cir. BAP 2011) (low materiality threshold for false statements)
- Troeder v. Lorsch (In re Troeder), 150 F. 710 (1st Cir. 1906) (early materiality standard for false statements)