In Re Deborah M. Cox, Debtor. Deborah M. Cox v. Paul Lansdowne, Trustee

904 F.2d 1399 58 USLW 2739 , 22 Collier Bankr.Cas.2d 1754 , 20 Bankr.Ct.Dec. 1043 , Bankr. L. Rep. P 73,404 In re Deborah M. COX, Debtor. Deborah M. COX, Appellant, v. Paul LANSDOWNE, Trustee, Appellee. No. 89-35081. United States Court of Appeals, Ninth Circuit. Argued and Submitted Nov. 3, 1989. Decided June 8, 1990. John L. Svoboda, Eugene, Or., for debtor-appellant. G. Jefferson Campbell, Medford, Or., for trustee-appellee. Appeal from the Ninth Circuit Bankruptcy Appellate Panel. Before WRIGHT, TANG and FERNANDEZ, Circuit Judges. EUGENE A. WRIGHT, Circuit Judge: 1 In a case involving massive securities fraud, flight in the dark of night from angry creditors, and avoidance of the law for several months, we consider whether the bankruptcy court erred in denying a discharge in bankruptcy for failure to maintain books and records as required under 11 U.S.C. Sec. 727 (a)(3). BACKGROUND 2 After marrying in 1973, Stephen and Deborah Cox resided in or around Medford, Oregon. She taught school until 1980, when she quit working after having her first child. At that time, Mr. Cox provided the family's sole support. Mrs. Cox did not know the source of funds used to maintain the couple's…

In a case involving massive securities fraud, flight in the dark of night from angry creditors, and avoidance of the law for several months, we consider whether the bankruptcy court erred in denying a discharge in bankruptcy for failure to maintain books and records as required under 11 U.S.C. § 727 (a)(3).

BACKGROUND

After marrying in 1973, Stephen and Deborah Cox resided in or around Medford, Oregon. She taught school until 1980, when she quit working after having her first child. At that time, Mr. Cox provided the family’s sole support. Mrs. Cox did not know the source of funds used to maintain the couple’s lifestyle.

Over the years of their marriage, she signed numerous documents, in which she became, with Stephen, a co-owner of at least 14 parcels of real estate, a partner in at least two partnerships, and an officer or director in at least four corporations. Her signature appearing on additional documents had been forged.

Deborah did not participate actively in any of these ventures. She did not discuss business matters with Stephen, nor did she inquire into matters concerning business transactions, including those involving herself. She admitted that she kept no books…

concurs in part and dissents in part:

I concur in the majority’s holding that Deborah Cox maintained inadequate records. I also concur that she had a shared duty to maintain records. However, I dissent from the majority’s conclusion that the bankruptcy court committed a gross abuse of discretion when it allegedly failed to consider as a relevant factor justifying Deborah Cox’s failure to keep adequate records her claim that she delegated record keeping to her husband.

Deborah Cox sought in bankruptcy to discharge her debts which had accumulated in large part from her husband’s fraudulent activities. The trustee objected to her discharge and alleged that she attempted to defraud creditors and to conceal her financial records. The adversarial matter was heard by the bankruptcy court, which then denied her discharge pursuant to 11 U.S.C. § 727 (a)(3), which requires that a debtor maintain adequate records or provide a sufficient excuse.

The bankruptcy court found that Cox did not intentionally defraud her creditors, but that there was a failure to maintain records from which her financial condition could be determined. This lack of records made it impossible for the trustee or…