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Cadlerock Joint Venture II, L.P. v. Sandiford (In re Sandiford), 394 B.R. 487 (B.A.P. 8th Cir. 2008) (Because ultimate burden of proof remained on plaintiff in S 727(a)(2) action, debtors' explanation that gratuitous transfer of property into trust during year before petition was intended as an investment overcame presumption of fraud; bankruptcy court properly resolved evenly split evidence in favor of debtors. "There is a presumption of fraud in S 727(a)(2) cases when a debtor transfers valuable property without payment. . . . 'Once a gratuitous transfer is shown, the burden then shifts to the debtor to prove his intent was not to hinder, delay, or defraud his creditors.' . . . [Plaintiff] confuses the burden of production with the burden of proof. . . . [Debtors] rebutted the presumption by offering evidence of a non-fraudulent reason for the transfer of the property; namely, they created the trusts to hold property until the property increased in value to create enough equity to make a profit on the sale of the property[;] . . . a business model [learned by debtors] in the real estate seminars they attended.").
D. 11 U.S.C. S 727(a)(3)
Caneva v. Sun Comtys. Operating Ltd. P'ship (In re Caneva), 550 F.3d 755 (9th Cir. 2008) (Denial of discharge under S 727(a)(3) on summary judgment was appropriate when debtor provided no records for 15 businesses in which he held stock or other interests and no documentation regarding a $500,000 transfer. "[T]he purpose of S 727(a)(3) is to make discharge dependent on the debtor's true presentation of his financial affairs. . . . The disclosure requirement removes the risk to creditors of 'the withholding or concealment of assets by the bankruptcy under cover of a chaotic or incomplete set of books and records.' . . . The statute doesn't require absolute completeness in making or keeping records. Rather, the debtor must 'present sufficient written evidence which will enable his creditors reasonably to ascertain his present financial condition and to follow his business transactions for a reasonable period in the past.'" Creditor must show "''(1) that the debtor failed to maintain and preserve adequate records, and (2) that such failure makes it impossible to ascertain the debtor's financial condition and material business transactions.''. . . After showing inadequate or nonexistent records, 'the burden of proof then shifts to the debtor to justify the inadequacy or nonexistence of the records.'. . . [W]hen a debtor owns and controls numerous business entities and engages in substantial financial transactions, the complete absence of recorded information related to those entities and transactions establishes a prima facie violation of . . . S 727(a)(3). Likewise, . . . when a debtor transfers a substantial amount of money to a third party, the failure to keep any documentation evidencing the terms of the transfer or the fact that the payment actually took place establishes a prima facie violation of . . . S 727(a)(3). . . . [A] debtor may show that he is nonetheless entitled to discharge by establishing that his failure to keep or preserve records was justified under the circumstances of his case. . . . ''Justification for [a] bankrupt's failure to keep or preserve books or records will depend on . . . whether others in like circumstances would ordinarily keep them.'' . . . [Debtor] has continuously asserted that the fact that he produced some records creates a question of material fact as to whether those records were adequate[,] . . . and that the circumstances of his business dealings justified the absence of any records he did not possess
©2009 Keith M. Lundin
