Lincoln Savings Bank v. Freese (In Re Freese)
460 B.R. 733
8th Cir. BAP2011Background
- The Debtor, Jay Freese, filed Chapter 7 and sought discharge, which the Bank sought to deny under § 727(a)(4)(A) for false oaths in his schedules and statements.
- The Bank alleged omissions including the hog farming business, its gross income, over $25,000 in 2007 income, transfers of two ATVs, a Bobcat, a tractor, and co-ownership of a Ford Explorer with his wife.
- Question 1 and Question 18 on the Statement of Financial Affairs were focal; Freese claimed he misunderstood the questions and disclosed everything he could to the trustee.
- Freese testified his hog operation was not a business and described farming as a hobby, despite substantial farm income and assets, and he admitted several 2007 omissions (e.g., $21,014 from First Choice Livestock LLC and $4,050 from Unique Swine System Inc.).
- Freese argued that misstatements were not intentional and resulted from his interpretation of the questions; the Bank argued omissions were knowing and material due to Freese’s business scale.
- The bankruptcy court found Freese had a security interest in certain equipment that he did not disclose, and it noted he failed to list a jointly owned vehicle with his wife; the court concluded the omissions were material and fraudulent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 727(a)(4)(A) false oath was proven. | Freese knowingly made false statements. | Freese did not knowingly misstate; omissions were inadvertent and due to misunderstanding. | Yes; false oaths proven with material omissions and intent. |
| Whether omitted disclosures were material and related to the bankruptcy case. | Omissions concerned Freese's hog business and assets, income, and transfers tied to the estate. | Omissions were immaterial or due to misreading, not connected to the estate. | Omissions were material and related to the business/assets disclosures. |
Key Cases Cited
- In re Chalik, 748 F.2d 616 (11th Cir. 1984) (materiality of false oath in bankruptcy)
- Anderson v. City of Bessemer City, 470 U.S. 564 (U.S. 1985) (clear error standard and deference to credibility findings)
- Mertz v. Rott, 955 F.2d 596 (8th Cir. 1992) (petition must be accurate and complete; no broad permission to dig)
- Palatine Nat'l Bank of Palatine, Ill. v. Olson (In re Olson), 916 F.2d 481 (8th Cir. 1990) (undisclosed assets and business-related matters can be material)