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Keywords

contractappealtestimonyburden of prooftrustbankruptcy

contracttestimonybankruptcyappellee

Related Cases

In re Burgess, 955 F.2d 134, Bankr. L. Rep. P 74,443

Facts

Commerce Bank and Trust Company held six notes totaling $650,000 against Philip Burgess, Sr., Philip Burgess, Jr., and Burgess Electric and Mechanical Contractors, Inc. (BEMC). In November 1988, the Bank and other creditors filed involuntary Chapter 7 petitions against the Burgesses and BEMC. The bankruptcy court later dismissed the Bank's adversary proceedings opposing the discharge of the Burgesses, leading to the Bank's appeal.

The Bank held six notes on which appellees Philip Burgess, Sr. and Philip Burgess, Jr., father and son, were either makers or personal guarantors. Burgess Electric and Mechanical Contractors, Inc. ('BEMC'), whose president was Philip Burgess, Jr., was the principal obligor on three notes, totaling $575,000.

Issue

Did the bankruptcy court err in granting the Burgesses a discharge in bankruptcy and in determining that certain debts were dischargeable?

The Bank claims that the bankruptcy court committed reversible error by granting Philip Burgess, Sr. a discharge in bankruptcy notwithstanding numerous allegedly false statements in violation of Bankruptcy Code § 727(a)(4)(A).

Rule

The burden of persuasion rests with the party opposing a discharge in bankruptcy, and the statutory requirements for a discharge are construed liberally in favor of the debtor. A debtor can be denied a discharge only if they knowingly and fraudulently made a false oath relating to a material fact.

The burden of persuasion rests with the party either opposing a discharge in bankruptcy under Bankruptcy Code § 727, see Fed.R.Bankr.P. 4005; In re Tully, 818 F.2d 106, 109 (1st Cir.1987), or contesting the dischargeability of a particular debt under Bankruptcy Code § 523.

Analysis

The court found that the Bank did not provide sufficient evidence to demonstrate that the Burgesses made false oaths with fraudulent intent or that they transferred assets with the intent to hinder, delay, or defraud creditors. The bankruptcy court's findings were supported by the Burgesses' testimony, which the court credited, and the Bank's claims were deemed insufficient to meet the clear error standard.

The Bank's exclusive reliance on its conclusory assertion that the Burgesses' testimony should not have been believed falls far short of a showing of clear error in the bankruptcy court's finding that these transfers were not made with 'intent to hinder, delay or defraud.'

Conclusion

The Court of Appeals affirmed the district court's judgment, concluding that the bankruptcy court's findings were not clearly erroneous and that the Burgesses were entitled to their discharge.

Affirmed.

Who won?

Philip Burgess, Sr. and Philip Burgess, Jr. prevailed because the court found that the Bank failed to meet its burden of proof regarding the dischargeability of debts and the alleged fraudulent actions.

The Bank had 'fallen far short' of demonstrating that the bankruptcy court's findings were clearly erroneous.

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