UNITED STATES BANKRUPTCY COURT
|DO NOT PUBLISH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.
NORTHERN DISTRICT OF CALIFORNIA
DONNA LEA MORSE, No. 99-11966
v. A.P. No. 99-1193
DONNA LEA MORSE,
Memorandum of Decision
In this adversary proceeding, creditor Karen Thomas seeks to deny the discharge of Chapter 7
debtor and defendant Donna Lea Morris. For the reasons stated below, the court finds no merit to any
of the three grounds asserted by Thomas.
Before bankruptcy, Morse operated a business known as the Plaza Street Café in Healdsburg,
California. She was not successful. On the eve of her bankruptcy, she accepted an offer from the
landlord of the business premises to surrender her lease rights for $15,000.00. On the advice of her
counsel, Morse placed the landlord's $15,000.00 check in a safe deposit box. She scheduled the funds
in her list of assets, and fully disclosed the transaction in at least two other places in her statement of
affairs. Thomas urges that this conduct constitutes concealment of property with the intent to hinder
creditors, such that §727(a)(2) of the Bankruptcy Code bars a discharge.
The court finds no evidence to support Thomas' allegations. The funds were not concealed.
Their location was freely discussed with the trustee. It is true that their exact location was not
scheduled, in that Morse opened the safe deposit box in the few days between the time she signed the
bankruptcy papers and the time they were filed. There is no evidence, however, that the location of the
money was ever a secret or that the failure to mention the safety deposit box was material. Nor does
Thomas have any explanation as to how it could profit Morse to conceal the location of the funds after
so fully disclosing their existence. Morse had no judgment creditors. The placing of the funds in the
safe deposit box appears completely lawful.
Even if the placing of the funds in the safe deposit box was somehow improper, the court finds
no evidence that Morse placed the funds there with the intent to hinder or defraud anyone. She
segregated the funds on the advice of counsel. That advice appears to have been lawful and proper.
Even if it somehow was not, Morse's reliance on the advice was reasonable and negates any fraudulent
intent. In re Adeeb
, 787 F.2d 1339, 1343 (9th
Thomas' second ground for denial of the discharge relates to an ex parte
order Thomas obtained
from the state court prohibiting Morse from transferring the lease. Thomas obtained the order three
days after Morse had agreed to surrender the premises to the landlord and had given him her keys. The
copy of the order served on Morse did not contain the name or signature of the judge who issued it.
After consulting with her counsel, Morse believed the order was ineffective, both because it had been
issued after she had made her agreement with the landlord and because it was defective.
Thomas argues that the violation of the state court order constitutes a "separate basis for denial
of discharge." However, she provided no support for this assertion. It is clear from her own argument
that violation of the order was nothing more than evidence of Morse's intent. The court is not
persuaded by this evidence, in light of Morse's relative lack of sophistication in business and legal
matters, limited education, and her reliance on counsel. Regardless of whether the order was defective
or too late, Morse had a good faith belief that it was both.
Thomas' last argument is that Morse should be denied her discharge because she falsely failed to
schedule family members as creditors. Morse testified that she "morally" owed some money to family
members, in an unknown amount. There was no evidence that these debts were legally enforceable.
There was no evidence that any of the family members considered themselves to be creditors, or that
anything more than the most vague idea exists as to how much their claims might be. There is no just
basis for such vague and immaterial allegations to stand between Morse and her discharge.
For the foregoing reasons, Thomas will take nothing by her complaint, which will be dismissed
with prejudice. Morse shall recover her costs of suit.
This memorandum constitutes the court's findings and conclusions pursuant to FRCP 52(a) and
FRBP 7052. Counsel for the prevailing party shall submit an appropriate form of judgment forthwith.
Dated: March 6, 2000 ___________________________