IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
|DO NOT PUBLISH
This case disposition has no value as precedent and is not intended for publication. Any publication, either in print or electronically, is contrary to the intent and wishes of the court.
ALFRED and DOREEN DALECIO, NO. 93-11361
RAYMOND A. CAREY, Trustee,
v. A.P. No. 95-1277
ALFRED DALECIO, et al.,
Memorandum of Decision
Debtors Alfred and Doreen Dalecio filed a Chapter 11 petition on June 7, 1993. They
remained debtors in possession until May 9, 1995, when the case was converted to Chapter 7 and
plaintiff Raymond Carey was appointed trustee.
Prior to bankruptcy, the Dalecios had operated a restaurant known as Ristorante Dalecio.
They had also formed a closely-held corporation to operate the restaurant, but had never
transferred the restaurant to the corporation. Three months before the bankruptcy filing, they
transferred the restaurant and the lease of its premises to the corporation. They did not schedule
these transfers in their bankruptcy papers, which required disclosure of all transfers made during
the year before filing.
In addition, the Dalecios did not schedule the sales of two condominiums and the liquidation
of some shares of stock, all done within the year before filing. The schedules, certified under
penalty of perjury, were accordingly false.
Further, four days before the filing the Alfred Dalecio entered into a settlement of a civil
lawsuit by agreeing to accept $83,000.00, to be paid over time. He immediately assigned his
rights to these funds to his lawyers, and did not disclose the existence of the settlement agreement
or the assignment anywhere on their schedules.
Worst of all, Alfred Dalecio kept an undisclosed bank account containing some $48,000.00
concealed from his creditors and the trustee. His conduct in relation to this fund is among the
most dishonest of any conduct which has come to light in this court in the ten years the
undersigned has been on the bench.
At the time of the filing, the Dalecios vaguely disclosed the existence of a corporation known
as Dalmacag. They scheduled it as having a value of "unknown" or "0.00," depending on how
one reads the schedules. Alfred Dalecio knew full well at that time that the interest was valuable.
In November of 1994, Dalmacag was liquidated and the Dalecios' share, after payment of all
corporate creditors and other shareholders, was $48,000.00. Alfred Dalecio left these funds in
a corporate bank account, which he controlled. During the time he was debtor in possession, and
without disclosing the fund on his operating reports, Dalecio used the money for personal
expenses, house payments, and unauthorized payments to attorneys. When the case was
converted to Chapter 7 on May 9, 1995, there was still about $37,000.00 in the account. On May
17, 1995, he had the bank issue three cashier's checks in the name of his daughters for
$11,591.70 each. He kept these checks secretly in his possession.
On September 22, 1995, while he still had the secret checks, Dalecio was examined under
oath by the trustee's counsel. When questioned about Dalmacag, Dalecio testified that its only
assets were $3,300.00 remaining in the account. This was as bald a lie as this court has ever
seen. Later that same day, without saying anything to the trustee, Dalecio cancelled the cashier's
checks and returned the funds to the bank account. He thereafter continued to use the bank
account as his personal and secret slush fund.
Based on the foregoing, the court has no difficulty finding that Alfred Dalecio knowingly and
fraudulently made numerous false oaths. In addition, Alfred Dalecio concealed the Dalmacag
funds, which were property of the estate, with the intent to defraud his creditors and the trustee.
He is accordingly not entitled to a discharge pursuant to sections 727(a)(4)(A) and 727(a)(2)(B)
of the Bankruptcy Code.
The case as to Doreen Dalecio is more problematic. There is no evidence that she was
involved in the Dalmacag or settlement assignment matters, or that she knew about or was
involved in any of the undisclosed transfers aside from the restaurant. She was a corporate
officer of the Dalecios' closely held corporation, and signed its minutes; at the very least, she
should have known that the transfers to the corporation were not disclosed. However, the court
is not convinced that this lapse alone justifies denial of a discharge. Plaintiffs presented very
little evidence regarding Doreen's involvement, state of mind, or level of understanding.
Ultimately, the court is unable to conclude with any conviction that she has engaged in culpable
Absent warning signs that her spouse is acting dishonestly, a wife may not be denied a
discharge merely because her husband has been dishonest. In re Cox
, 41 F.3d 1294, 1299 (9th
Cir.1994). Even where a wife has derived benefit and had knowledge of her husband's fraudulent
conduct, fraudulent intent is not automatically imputed to justify denial of her discharge. In re
, 147 B.R. 545, 551 (Bkrtcy.D.Mont.1992); In re Mart
, 75 B.R. 808, 810
(Bkrtcy.S.D.Fla.1987). Plaintiffs presented no evidence of warning signs, no evidence that
Doreen knew what her husband was doing, and no evidence that the schedules Doreen signed
were not true to the best of her
knowledge and understanding. The evidence is accordingly
insufficient to deny her discharge.
For the foregoing reasons, a judgment will be entered denying Alfred Dalecio's discharge.
Doreen Dalecio shall receive her discharge, although by operation of section 524(b)(1)(B) of the
Code her community interest will not be protected. Plaintiffs shall recover their costs of suit.
This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a)
and FRBP 7052. The adversary proceedings brought by the U.S. Trustee and First National Bank
Of Marin shall be deemed consolidated with this adversary proceeding, and a single judgment
shall be entered. Counsel for the trustee shall submit an appropriate form of judgment forthwith.
Dated: September 18, 1996 _______________________