FOR THE NORTHERN DISTRICT OF CALIFORNIA
FREDERIC and DIANA LILIENTHAL, No. 1-86-02044
CHARLES DUCK, Trustee,
v. A.P. No. 1-87-0143
FREDERIC and DIANA LILIENTHAL,
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
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
For the foregoing reasons, a judgment will be entered in favor of defendants. Each side shall bear its
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 ________________________