629 B.R. 893
Bankr. D. Alaska2021Background
- Dry Creek Construction, LLC (DCC) is a family construction business run by Garth (50%) and Jarred (50%) Milliron; multiple vehicles and heavy equipment were used in the business but often titled in family members’ names.
- On September 11, 2018 DCC quitclaimed two Delta Junction parcels (the “Miltan Properties”) to Garth; on October 18–19, 2018 Garth obtained a $110,000 line of credit from Mt. McKinley Bank, secured by those parcels; DCC and the four Millirons filed Chapter 7 petitions on October 22, 2018.
- DCC’s initial schedules omitted the prepetition transfer of the Miltan Properties and certain creditor entries; the Millirons’ personal schedules inconsistently listed substantial DCC equipment and real property across multiple filings and amendments.
- DCC’s trustee instructed the Millirons not to use estate equipment postpetition, but Garth and Jarred continued using some equipment and offered varying explanations at §341 meetings and at trial.
- The Schindlers sued to deny the Millirons’ discharges under 11 U.S.C. § 727(a)(4)(A) (false oaths) and to except debts under § 523(a)(2); the court consolidated trial issues and reserved §523 analysis for a separate memorandum.
- Ruling: the court dismissed the §727 claims against the wives (lack of creditor standing), denied denial of discharge as to Garth (no sufficient fraudulent intent), and entered judgment denying Jarred’s discharge under §727(a)(4)(A) for knowingly and fraudulently making material false oaths.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to pursue §727 claims against Kimberly and Jennifer Milliron | Schindlers asserted discharge objections against all four Millirons | Defendants argued Schindlers lack claims against the wives | Held: Schindlers conceded no §523 claims vs. wives; court found Schindlers not creditors of wives and therefore lack standing under §727(c); claims against wives denied for lack of jurisdiction |
| Failure to disclose Miltan Properties and McKinley deed/LOC in initial schedules (false oath, materiality, intent) | Omission concealed a significant prepetition transfer and encumbrance, impairing estate administration; supports denial of discharge | Garth: omissions inadvertent, corrected by amended schedules, relied on counsel; Jarred: argued confusion | Held: Omissions were false and material. For Garth, amended schedules and surrounding facts showed lack of fraudulent intent to conceal — discharge not denied on this ground. For Jarred, claiming ownership of Miltan Properties in amended schedules where he never held title showed fraudulent intent — supports denial of discharge |
| False scheduling and statements about ownership of DCC equipment (Skidsteer, trailers, etc.) | Millirons scheduled DCC-owned equipment in personal cases to create confusion and enable continued use; materially harmed estate administration | Garth: listed per counsel, some items were his or inherited; Jarred: believed ownership or confused due to titling irregularities | Held: Inclusion of DCC-owned equipment on personal schedules was a false oath and material. Court found Garth knowingly made misstatements but insufficient evidence of fraudulent intent to deny his discharge; court found Jarred knowingly and fraudulently made material false oaths and denied his discharge |
| Statements at §341 meetings justifying postpetition use of DCC equipment (false testimony) | Testimony that they believed they could use equipment despite trustee’s instruction was false and fabricated to excuse unauthorized use — supports denial | Defendants argued confusion, awaiting trustee clarification, or reliance on counsel | Held: Court found those justifications were artifice and false, but the reasons given were not material to estate administration (they explained conduct, not disposition of assets). False testimony at §341s about reasons did not, by itself, support denial under §727(a)(4) |
Key Cases Cited
- Khalil v. Developers Surety & Indem. Co., 379 B.R. 163 (B.A.P. 9th Cir. 2007) (describing § 727(a)(4)(A) purpose and standards for false oaths)
- Retz v. Samson, 606 F.3d 1189 (9th Cir. 2010) (materiality is broad; omissions that detrimentally affect estate administration support denial of discharge)
- Roberts v. Erhard (In re Roberts), 331 B.R. 876 (B.A.P. 9th Cir. 2005) (distinguishing careless mistakes from knowing and fraudulent conduct for § 727(a)(4)(A) purposes)