Memorandum of Decision Re: Denial of Discharge

FOR THE NORTHERN DISTRICT OF CALIFORNIA In re FREDERIC and DIANA LILIENTHAL,                                       No. 1-86-02044      Debtors. _____________________________/ CHARLES DUCK, Trustee,      Plaintiff,    v.                                                                                              A.P. No. 1-87-0143 FREDERIC and DIANA LILIENTHAL,      Defendants. ______________________________/
Memorandum of Decision
     Upon review of the evidence in this case, it appears to the Court probable that at least debtor Frederic Lilienthal has committed acts which would justify denial of his discharge. The most serious allegation against him is that he altered a UCC-1 financing statement which he submitted to the Trustee in order to convince the Trustee that his father-in-law had a perfected interest in an estate asset when in fact the interest was unperfected. Other allegations are the omission from the schedules of an ownership interest in the debtors' residence and a pension plan, unsatisfactory accounting for income during the year prior to bankruptcy, and failure to disclose the transfer of a vehicle.      Frederic Lilienthal's demeanor at trial, coupled with his admittedly cavalier attitude toward the accuracy of the schedules and statements of affairs in both his own case and the related corporate case, demonstrated that he is not the sort of debtor who deserves a discharge. However, the evidence falls just short of meeting the clear and convincing standard required to justify the drastic penalty of discharge denial.      While Lilienthal's explanation of the UCC-1 is feeble, it is at least possible. Moreover, the evidence indicated that the document may have been altered in 1983, too long before the bankruptcy to infer intent to deceive the Trustee. Also, no evidence was presented as to exactly how the document was represented to the Trustee.      There was no evidence presented that failure to disclose the transfer of the car or the existence of the pension plan was detrimental to the estate, or that the debtors thought disclosure might lead to a recovery by the estate. Accordingly, the Court cannot find that these omissions were intentional. The Court notes that since the pension plan was an asset on the date of the bankruptcy filing and has never been declared exempt, it belongs to the Trustee notwithstanding the debtors' failure to disclose it.      The debtors' explanation of their income is plausible, if not convincing. The Court finds no basis here for denial of discharge.      The debtors' home was clearly owned by Diana Lilienthal's father. The funds the debtors spent improving it may have constituted an avoidable transfer to the father, but they do not establish that the debtors owned the property, nor does the fact that they lied about ownership to a bank in a loan application.      For the foregoing reasons, a judgment will be entered in favor of defendants. Each side shall bear its own costs.      Counsel for defendants shall submit an appropriate form of judgment. This memorandum constitutes findings and conclusions pursuant to Bankruptcy Rule 7052.
Dated: March 8, 1988                                                                              ________________________                                                                                                                      Alan Jaroslovsky                                                                                                                      U.S. Bankruptcy