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|DO NOT PUBLISH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.
DEEPAK and KUSUM STOKES,   No. 99-12603
NORTHWEST FARM CREDIT SERVICES,
v. A.P. No. 00-1118
DEEPAK and KUSUM STOKES,
Memorandum of Decision
Debtors and defendants Deepak and Kusum Stokes are both medical doctors. In addition to
medical practice, they had extensive business dealings. Prior to bankruptcy, plaintiff Northwest Farm
Credit Services obtained a large judgment against them. In this adversary proceeding, Northwest seeks
denial of the Stokes' discharge.
Northwestern identified several acts which, if proved, would have resulted in denial of the
Stokes' discharge. However, when the court read the Stokes' own proposed findings and conclusions,
it appeared that they admitted one of the acts and the requisite intent. They proposed the following
4. The Court finds that the debtors did in fact deposit some funds into a
bank account in the name of their son, Arvind Stokes, but that said deposit
was made because of a levy by the Plaintiff on the Defendant's [sic] own
Because this admission appeared to mandate denial of discharge pursuant to § 727(a)(2)(A) of
the Bankruptcy Code, the court directed Northwest to confine its case to this issue.
After hearing some testimony, it became clear that the facts were even worse than those
admitted by the Stokes. During the year before bankruptcy, they transferred many tens of thousands of
dollars to their son's bank account so that Northwest could not levy on the money. The Stokes had
Arvind give them numerous checks which he had signed in blank. They used these checks to pay their
bills and expenses.
The Stokes argue that their intent in placing their money in Arvind's account was to preserve
their estate from Northwestern and that denial of their discharge for this act is therefore not justified.
This argument stems from a misreading of the law. Section 727(a)(2)(A) provides that the court may
not grant a discharge to debtors who transferred or concealed their property within one year before
their bankruptcy "with intent to hinder, delay or defraud a creditor
." [emphasis added]. If a debtor
transfers or conceals property with the intent to hinder a single creditor, the requisite intent is
established. In any event, it was clear that the Stokes were motivated only by a desire to thwart
Northwestern and not any sort of altruistic concern for other creditors.
The evidence established that within the year before bankruptcy the Stokes transferred many
tens of thousands of dollars to their son's bank account with the intent to conceal the money from
Northwestern and hinder its attempts to enforce its judgment. Accordingly, the Stokes are not entitled
to a discharge pursuant to § 727(a)(2)(A). Inquiry into the other alleged improper acts is accordingly
At the conclusion of testimony, the court granted Northwestern's motion for judgment based on
§ 727(a)(2)(A). Kusum Stokes chose not to appear and testify. After the court had recessed for lunch,
reconvened and moved on to other matters, Kusum Stokes appeared and sought to be heard on the
discharge issue. The court treated this as a motion for reconsideration and listened to her. Nothing in
her testimony justified granting her a discharge.
Kusum Stokes argued that all of the community finances were solely managed by her husband.
However, it was clear from her testimony that she knew about Northwest's judgment, knew about the
transfers to Arvind's account and that they were done to hinder Northwestern, and actively participated
by using some of the blank checks supplied by Arvind. These facts establish that she knowingly
participated in and benefitted from the improper transfers. This is sufficient to prevent her from
receiving the benefits that bankruptcy law accords the honest person. See In re Arm
, 87 F.3d 1046,
1049 (9th Cir.1996).
For the foregoing reasons, judgment will be entered denying the Stokes' discharge. This
memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and FRBP 7052.
Counsel for Northwest shall submit an appropriate form of judgment forthwith.
Dated: December 6, 2001 ___________________________