[00:00:00] Speaker 02:
Good morning, Mrs. Sanders.

[00:00:01] Speaker 02:
Would you like to reserve any time for a reply?

[00:00:03] Speaker 01:
Yes, five minutes please certainly may begin May it please the court?

[00:00:11] Speaker 01:
Appellants today seek reversal of the Bankruptcy Court order denying discharge the Appellants believe that the Bankruptcy Court aired when it denied the discharge pursuant to section 727 a 2 and a 4

[00:00:26] Speaker 01:
because the appellants do not have the requisite knowledge, fraudulent intent for the denial of the discharge.

[00:00:38] Speaker 01:
In this matter, the appellants had filed the petition for bankruptcy using the attorneys that they had in the prior case in 2018.

[00:00:45] Speaker 01:
At the very first 341 meeting of creditors, Mr. Sanders disclosed to the trustee that there was an error in the schedule and that

[00:00:56] Speaker 01:
a property, the Yates property, was submitted from the schedules.

[00:01:02] Speaker 01:
The appellants believe, and the case law suggests, in the case of Henry Waddell and Inouye Brown, which is cited in the appellants' reply brief on page six,

[00:01:12] Speaker 01:
that when a debtor who fully discloses property transactions at the very first meeting of creditors, fraudulent intent to conceal property is not evident.

[00:01:23] Speaker 01:
In this matter, as indicated, Mr. Sanders disclosed that property was omitted from the schedules.

[00:01:30] Speaker 02:
The debtors did not harbor the intent to conceal the property and the debtors promptly disclosed all information to the creditors in reading all the all of the the transcripts and the arguments and such Clearly the matter was disclosed at the 341 One sense is that the

[00:01:55] Speaker 02:
In these cases, it's often a chain.

[00:01:58] Speaker 02:
One thing doesn't usually become this big of a problem.

[00:02:04] Speaker 02:
For the Yates property, it seemed like one of the concerns was that there was a sense that this property had no value, right?

[00:02:14] Speaker 02:
There's a tone and tenor that well we forgot it's real.

[00:02:18] Speaker 02:
You know it's You know not in great working order.

[00:02:22] Speaker 02:
It's just really more of a burden than anything that there's no value there And then it turns out the trustee sells it for $220,000 so that kind of looking back then that kind of Puts a different look to it.

[00:02:39] Speaker 02:
Can you address that?

[00:02:40] Speaker 01:
I don't believe that mr.. Sanders ever indicated that there was no value to the property I believe what was indicated when the trustee asked for Evaluation of the property what was indicated was that the property isn't listed on Zillow to find a value of the property We disclosed what or mr.. Generally the courts take a very dim view of Zillow values Understood, but the property itself had no value we disclosed the property tax records and

[00:03:06] Speaker 01:
that valued the property and what that was.

[00:03:08] Speaker 01:
And that was listed in the 2018 case.

[00:03:11] Speaker 01:
So there was never any indication that the property didn't have value.

[00:03:15] Speaker 01:
Mr. Sanders disclosed all of the efforts that had went into fixing up the property, all of the work that had gone to rent that property.

[00:03:24] Speaker 01:
What was disclosed was that this property had been vacant for years.

[00:03:28] Speaker 01:
It did not have any tenants.

[00:03:30] Speaker 01:
And there was no income being derived from that rental property because it had been vacant.

[00:03:35] Speaker 01:
since before the pandemic in 2020.

[00:03:37] Speaker 01:
Mr. Sanders was not very clear about how long before, but it was several years before that.

[00:03:43] Speaker 01:
So there was never any indication or intent or suggestion by myself or Mr. Sanders that the property didn't have any value.

[00:03:57] Speaker 01:
So the appellant, again, as I indicated, at the 341, Mr. Sanders immediately disclosed that this property was not left on there.

[00:04:05] Speaker 01:
That first creditor of meetings started late and it did not conclude.

[00:04:10] Speaker 01:
And so we came back at the next creditor of meetings.

[00:04:13] Speaker 01:
And that's when the rest of the questions were about the bank accounts, the tax returns, and that was immediately disclosed as well.

[00:04:22] Speaker 01:
So there wasn't the sense, as Appellant notes in his brief, that the trustee had to drag this information out.

[00:04:29] Speaker 01:
At the first opportunity that we had, this information was disclosed.

[00:04:33] Speaker 01:
And then as required under, I believe it's the Sears case and Combs case, the remedy is to prepare the amendments for the schedules, which was done.

[00:04:47] Speaker 01:
Through counsel, we disclosed all of that information.

[00:04:53] Speaker 01:
Appellant counsel in his brief cites that the TAC LLC was not disclosed.

[00:04:59] Speaker 01:
And we do not believe, appellants do not believe that that was a material.

[00:05:04] Speaker 01:
omission.

[00:05:06] Speaker 01:
The TAC LLC, as indicated, was not in existence.

[00:05:10] Speaker 01:
It had opened, and I don't recall the exact year, but it was mentioned in the 2018 case, for the intent of transferring the business to that entity.

[00:05:20] Speaker 01:
That did not happen.

[00:05:22] Speaker 01:
It was transferred to the PNOL LLC, PNOL Packaging and Postage LLC.

[00:05:27] Speaker 01:
And TAC LLC was never used.

[00:05:30] Speaker 01:
It had no assets.

[00:05:31] Speaker 01:
It had no other operations.

[00:05:32] Speaker 01:
So we don't believe that the TAC LLC was material, but we did disclose that in the amendments when they were filed as requested by the trustee.

[00:05:43] Speaker 01:
Appellants also believe that in the bankruptcy court's ruling, the bankruptcy court I think went through and tried to establish the facts, but I believe, excuse me, appellants believe that there was a conflating of the issues and the intent.

[00:06:02] Speaker 01:
the appellate court tended to treat the debtors as one individual as opposed to two separate individuals in determining what the intent was and what the actions were.

[00:06:13] Speaker 01:
And as cited in my reply brief and in the opening brief, that the actions of spouses have to be treated individually and you cannot, the case law does not allow the conferrence of intent from one spouse to the other spouse.

[00:06:29] Speaker 01:
With respect to

[00:06:33] Speaker 01:
Excuse me.

[00:06:37] Speaker 01:
In the trial, as noted in the transcript, the bankruptcy court noted on the transcript for May 22, 2025, on page 139, lines 15 through 29, and page 140, lines 5 through 7, that there was a question of liability as to the distinction between Mr. Sanders and myself, Mrs. Sanders, and requested briefing on that issue, which

[00:07:02] Speaker 01:
the appellants did do.

[00:07:04] Speaker 01:
But when the court issued its ruling on August 13, 2025, the court made no distinction in terms of the difference of liabilities from the actions from Mr. Sanders and Mr. Sanders.

[00:07:17] Speaker 01:
Instead, the court made a general observation about the actions in general without distinguishing what actions Mr. Sanders made, what Ms.

[00:07:25] Speaker 01:
Sanders made, and in that case, inferred intent from Mr. Sanders to Ms.

[00:07:30] Speaker 01:
Sanders

[00:07:31] Speaker 01:
And we believe that that was error in this case.

[00:07:34] Speaker 03:
So is it the error that with the court have not been an error if they just determined the court determined that Mr. Sanders was not entitled to a discharge, but your separate estate was.

[00:07:47] Speaker 01:
So I believe it's two things.

[00:07:49] Speaker 01:
I think I believe that the evidence does not show that Mr. Sanders had the fraudulent intent itself because he did disclose all of the information.

[00:07:58] Speaker 01:
There was an error.

[00:07:59] Speaker 01:
It was corrected, and that is what the law requires.

[00:08:03] Speaker 01:
But in answer to your second part of your questions, yes, I do believe that the court needed to make a distinction between the actions of myself and Mr. Sanders, and that was not done.

[00:08:14] Speaker 01:
And that is error.

[00:08:15] Speaker 01:
You cannot infer.

[00:08:17] Speaker 01:
The case law is clear that intent has to be actual.

[00:08:21] Speaker 01:
It cannot be constructive, and it cannot be inferred.

[00:08:24] Speaker 01:
The actions of one spouse do not infer to the actions of the other spouse.

[00:08:29] Speaker 01:
and the intent as a specific state of mind cannot be inferred from one party to another.

[00:08:34] Speaker 03:
But could it be inferred from the fact that you knew about the Yates property?

[00:08:39] Speaker 03:
It was disclosed in your previous bankruptcy, and you signed schedules that didn't have the Yates property on it.

[00:08:45] Speaker 01:
And as I've indicated in the prior testimony and it was indicated in the brief, it was clearly a mistake.

[00:08:52] Speaker 01:
It was clearly, I guess you would say, careless or sloppy that I didn't carefully review that.

[00:08:58] Speaker 01:
to see that that information was in there, but there was not an intent to hide or conceal that property.

[00:09:05] Speaker 01:
It was listed in the prior case.

[00:09:07] Speaker 03:
Wouldn't the fact that it wasn't listed in your second bankruptcy, that that's a fact to be considered whether or not you had intent?

[00:09:18] Speaker 01:
It's a factor to be considered, but when the court looks at all of the other factors and all of the actions, as I said, the immediate disclosure of that, no other

[00:09:27] Speaker 01:
We went through several creditor meetings and there was no other property that was concealed.

[00:09:34] Speaker 01:
It was disclosed that the earliest opportunity at the first 341 and then again the error in the account records which were disclosed prior to the filing of the petition through the attorney.

[00:09:46] Speaker 01:
There was no intent for myself or Mr. Sanders to conceal, hinder or conceal the property.

[00:09:53] Speaker 02:
But that brings us to the complicating factor of recklessness in these situations.

[00:10:00] Speaker 02:
Recklessness alone isn't enough, but it doesn't have to be a specific intent to defraud recklessness with something else occasion.

[00:10:09] Speaker 02:
get you there.

[00:10:12] Speaker 02:
And the court was clear that it was the Yates property, the TAC, as you mentioned, but also then the refunds and the undisclosed

[00:10:25] Speaker 02:
Bank accounts that those refunds had gone at least one had gone into by the time of year 341 the problem And you're beyond your time on taking you over a little bit is that when you look at all of that?

[00:10:39] Speaker 02:
Understand that that there's an argument that you could go the other way and we may not even quibble if the court did go the other way, but it it found Enough here.

[00:10:48] Speaker 02:
Why is that error?

[00:10:50] Speaker 01:
So I think that the error, and again, I want to reserve a little bit of time, but into conflating the issue.

[00:10:58] Speaker 01:
So the tax returns went into Mr. Sanders' direct account, his personal account, to which Ms.

[00:11:05] Speaker 01:
Sanders, myself, I don't have access to.

[00:11:08] Speaker 01:
So to infer that I have knowledge of that or information about that or I tried to conceal that, I think that is error.

[00:11:15] Speaker 01:
And then it infers his actions onto my intent.

[00:11:18] Speaker 01:
And with that, I do want to refer.

[00:11:20] Speaker 02:
So thank you very much.

[00:11:35] Speaker 00:
Thank you.

[00:11:35] Speaker 00:
Good morning, and may it please the court.

[00:11:37] Speaker 00:
The Sanders's filed this appeal because they disagree with the conclusions of the bankruptcy court below.

[00:11:43] Speaker 00:
But Judge Lafferty's factual findings in this matter are subject to clear error on review.

[00:11:51] Speaker 00:
And for that reason, and I think that the appellants are aware of this to some extent, they primarily rely on distortions of what that ruling was, sort of strawman arguments.

[00:12:03] Speaker 00:
I'm going to first give a summary of the issues on appeal and then get into some of their arguments.

[00:12:09] Speaker 00:
The first issue on this appeal is whether the court abused its discretion

[00:12:13] Speaker 00:
in denying the standards as a discharge under section 727A2A.

[00:12:18] Speaker 00:
The court did not err.

[00:12:21] Speaker 00:
There is no dispute that there were very many omissions in this case from the schedules and statements that Mr. and Mrs. Sanders filed.

[00:12:30] Speaker 00:
Those schedules and statements were signed under penalty of perjury.

[00:12:33] Speaker 02:
Are you arguing specific fraudulent intent actual or is this a recklessness case?

[00:12:39] Speaker 00:
I think there's specific intent, Your Honor.

[00:12:42] Speaker 00:
As to both spouses?

[00:12:45] Speaker 00:
Yes, Your Honor.

[00:12:46] Speaker 00:
And I will note that all of the facts that Judge Lafferty found indicative of fraud applied to both Mr. and Ms.

[00:12:56] Speaker 00:
Sanders in this case.

[00:12:58] Speaker 00:
So that's one of the, I think, strawman argument, the argument that there's some imputation going on here.

[00:13:06] Speaker 00:
Clearly, the court considered the issue because the court asked for a briefing on the issue of intent for both spouses.

[00:13:13] Speaker 00:
And then the court went on to make findings of fact that only applied to both spouses.

[00:13:18] Speaker 00:
There really wasn't a reliance on conduct of Mr. Sanders to find fraud under either A4 or A2B.

[00:13:27] Speaker 02:
And that included the receipt of the tax refunds, as Mrs. Sanders just mentioned.

[00:13:33] Speaker 00:
Yes, I understand that under A to B, there was a concealment.

[00:13:39] Speaker 00:
They knew that they were entitled to tax refunds.

[00:13:41] Speaker 00:
They received those tax refunds, which were property of the state post-petition.

[00:13:46] Speaker 00:
They signed their schedules and statements and didn't disclose those refunds.

[00:13:50] Speaker 00:
There's a specific question on schedules and statements that solicits whether or not there are tax refunds entitled to debtors.

[00:13:58] Speaker 00:
And they answered no, and they signed those documents under penalty of perjury.

[00:14:02] Speaker 00:
They waited to disclose those omissions until prompted by the Chapter 7 trustee.

[00:14:09] Speaker 00:
And then after that, they waited multiple months before filing amendments.

[00:14:14] Speaker 00:
The First Amendment was filed October 3rd.

[00:14:17] Speaker 00:
And then the Second Amendment was filed October 16th.

[00:14:21] Speaker 00:
The First Amendment only had one of the tax returns.

[00:14:24] Speaker 00:
The Second Amendment had the 2022 tax return, which was the $15,000.

[00:14:30] Speaker 00:
And it also had the TAC account

[00:14:32] Speaker 00:
which was used to deposit the returns.

[00:14:35] Speaker 00:
So there are very many facts in this case that left Judge Lafferty to say, and I quote, it is difficult to conclude anything other than fraudulent intent.

[00:14:47] Speaker 00:
And all those facts apply to both Mr. and Mrs. Sanders in this case.

[00:14:57] Speaker 00:
Going back to a for there's an argument about materiality all of the emissions that were made the 8's property in the tax refunds obviously were valuable assets and with respect to the other emissions there's are material because they would have led to the discovery of valuable assets or even just generally the discovery of omissions.

[00:15:18] Speaker 00:
uh... that that makes them material uh... there is knowledge there's no dispute that both mister and mrs standard centers had a knowledge of all the assets in information that was omitted and again the court found fraudulent intent looking at the type of emissions the interplay on the emissions

[00:15:40] Speaker 00:
the delay in amendments, the multiple amendments.

[00:15:44] Speaker 00:
And I think what the court found was inconsistent and implausible explanations.

[00:15:51] Speaker 00:
And I think that's probably a good time to get into one of the arguments that the appellant makes, which is that they disclosed the Yates property at the very first 341 meeting.

[00:16:03] Speaker 00:
And it's true that they did disclose it at the very first 341.

[00:16:07] Speaker 00:
But I think it's very telling to go back and review that transcript, because it gets to the middle of the 341, and the trustee asks if there are any errors or omissions.

[00:16:19] Speaker 00:
And Mr. Sanders then states, and this is the supplemental excerpts record 12,

[00:16:27] Speaker 00:
Listening earlier today, I think I might have omitted a property, a real property.

[00:16:33] Speaker 00:
He then answers, it's just, it's really an abandoned building, but it's in Chicago.

[00:16:41] Speaker 00:
And the trustee asks, you own it?

[00:16:43] Speaker 00:
And Mr. Sanders responds, yeah, with my father.

[00:16:46] Speaker 00:
And then later he says, well, he just used it for work.

[00:16:52] Speaker 00:
Later he responds, it's dilapidated.

[00:16:55] Speaker 00:
Then the trustee retorts, it's my understanding it is in a good neighborhood.

[00:17:02] Speaker 00:
Mr. Sanders responds, nah, I mean I haven't seen it in 10 years.

[00:17:08] Speaker 00:
So I think that there is clearly from the facts in the record and what Judge Lafferty saw is that they were trying to downplay this asset.

[00:17:19] Speaker 00:
And even at the outset, Mr. Sanders said his

[00:17:23] Speaker 00:
It was listening to other 341s that caused him to disclose the property.

[00:17:30] Speaker 00:
And what I gleaned from that, and what I think Judge Lafferty probably understood, is that he saw how diligent the trustee was being, and he realized that he probably should disclose the asset that he had not disclosed, especially because it had been disclosed in a prior bankruptcy.

[00:17:47] Speaker 00:
And that is, in fact, what the Chapter 7 trustee was doing.

[00:17:52] Speaker 00:
She already did know about the property because she had read the schedules and statements in the prior filing.

[00:17:58] Speaker 00:
And she addressed that with the Sanders' former counsel, Mr. Gonzalez, at this 341 meeting.

[00:18:06] Speaker 03:
With respect to the is there anything the record that shows that trustee let counsel know that she'd looked at the chapter 13 schedules before Mr. Sanders volunteered the information.

[00:18:25] Speaker 00:
Yes, but you have to make an inference.

[00:18:27] Speaker 00:
I think by by reading the transcript.

[00:18:32] Speaker 00:
She she.

[00:18:34] Speaker 00:
The way she talks about it, she starts to talk to Mr. Gonzalez about, well, are there any other emissions?

[00:18:43] Speaker 00:
I think she says something akin to, do you know how I found out about this?

[00:18:48] Speaker 00:
And then he says, oh, I don't know.

[00:18:50] Speaker 00:
And she says, yeah, because they listed it in the prior bankruptcy.

[00:18:54] Speaker 00:
So that's at the first 341.

[00:18:55] Speaker 03:
But did that happen before or after the debtor said, I have property in Chicago?

[00:19:03] Speaker 00:
It definitely happened after, but I don't think that there's anything in the record to indicate that the trustee was surprised by the information.

[00:19:13] Speaker 03:
I was wondering if it was information provided by the debtor voluntarily or did it come as a result of the trustees work?

[00:19:21] Speaker 00:
Well, I would argue that it came as a result of listening to the other 341s that were going on that day.

[00:19:27] Speaker 00:
And that was what he stated at the 341, that he listened and then decided to disclose that property.

[00:19:39] Speaker 00:
And the appellant also argues that she had no access to the bank account that held one of the tax refunds

[00:19:51] Speaker 00:
I don't think there's support for that in the record.

[00:19:55] Speaker 00:
I know that the tax refunds were deposited into two separate accounts.

[00:19:59] Speaker 00:
And I think one of them was the personal account.

[00:20:01] Speaker 00:
One of them was the TAC LLC account.

[00:20:04] Speaker 03:
And was the tax return in which it was saying, hey, we should get some money back, was that a joint tax return?

[00:20:11] Speaker 00:
Yes, it was.

[00:20:12] Speaker 03:
So both parties signed it.

[00:20:16] Speaker 03:
Both parties expected a tax return.

[00:20:18] Speaker 00:
Yes, Your Honor.

[00:20:19] Speaker 00:
And there simply was no

[00:20:20] Speaker 00:
evidence presented at any juncture in this trial below that there was no knowledge.

[00:20:27] Speaker 00:
There was no time at which Mrs. Sanders testified that something was going on that she had no idea about.

[00:20:36] Speaker 00:
And because of that, that's probably why Judge Lafferty simply didn't need to bifurcate his analysis here with fraudulent intent because he only

[00:20:48] Speaker 00:
looked to facts that generally applied to them both.

[00:20:51] Speaker 00:
The knowledge, the lack of disclosure in schedules and statements, delay in amendments, the interplay between the omissions, and just a second here.

[00:21:12] Speaker 00:
They also make an argument that the court imputed fraudulent intent from the numerosity, I think, of the omissions alone.

[00:21:23] Speaker 00:
And I think they primarily rely on the Coombs case for this.

[00:21:27] Speaker 00:
But Coombs is taken out of context.

[00:21:31] Speaker 00:
In that case, there was a 401k that would have been exempt.

[00:21:35] Speaker 00:
And the court was remarking that there were no facts

[00:21:40] Speaker 00:
indicate that they had any reason to try to hide that asset.

[00:21:45] Speaker 00:
And that's very different here because the assets here were very valuable.

[00:21:49] Speaker 00:
We have a property that sold for almost $230,000.

[00:21:53] Speaker 00:
We have a $7,000 plus tax refund and then a separate $15,000 plus tax refund.

[00:21:59] Speaker 00:
And the specific omissions, when Judge Lafferty references the interplay, he's talking about the fact that the concealment of the bank accounts furthered the concealment of the tax refunds and furthered the concealment of the Yates property because

[00:22:17] Speaker 00:
the AIDS property expenses were paid out of the TAC LLC bank account.

[00:22:22] Speaker 00:
And it's that interplay that really is demonstrative of fraud.

[00:22:37] Speaker 00:
And unless your honors have any more questions for me, I would ask, I would rest and ask that the decision below be affirmed.

[00:22:46] Speaker 02:
Any questions?

[00:22:48] Speaker 02:
Thank you very much.

[00:22:49] Speaker 00:
Thank you your honors.

[00:22:58] Speaker 02:
Sanders it looks like you have about three minutes and 45 seconds.

[00:23:02] Speaker 01:
Thank you, so I did want to respond to Council's argument or statements in response to Justice Corbett's question about whether or not the disclosure at the first 341 was voluntary and in response to Justice Corbett's question whether the mr. Sanders disclosed prior to the trustee engaging in a conversation with the pellets attorney

[00:23:29] Speaker 01:
It was prior to that.

[00:23:30] Speaker 01:
Mr. Sanders disclosed first, and then the trustee engaged in a dialogue with the attorney that she had been aware of the disclosure.

[00:23:41] Speaker 01:
So it was voluntary.

[00:23:42] Speaker 01:
Mr. Sanders disclosed that there was an admission prior to that, and that is in the transcript for that first 341 meeting.

[00:23:52] Speaker 01:
Turning back to the tax returns, there were two tax returns in question.

[00:23:58] Speaker 01:
The 2022 tax refund, as was indicated in the transcript for the trial,

[00:24:05] Speaker 01:
was filed prior to April 15, 2023.

[00:24:08] Speaker 01:
For whatever reason, the IRS did not process that return until, I believe, we received the refund in June of 2020.

[00:24:18] Speaker 03:
But it was a joint return, correct?

[00:24:20] Speaker 01:
It was a joint return.

[00:24:21] Speaker 03:
So couldn't Judge Lafferty have inferred that you knew about the tax return because you signed

[00:24:33] Speaker 03:
that he could for that you knew about that there would be a tax refund because you personally signed the tax return.

[00:24:41] Speaker 01:
He could have inferred that but I also had testified that I had not been aware that we did not receive the tax reform tax refund.

[00:24:50] Speaker 01:
Generally a tax refund refunds are received shortly after The state refund was received and the state refund had been received and it went directly into mr. Sanders own personal account 3180 I did not have access to that account and I did not know that the 2022 tax refund had not been received and so the

[00:25:15] Speaker 01:
The issue is that Justice Lafferty would be inferring that knowledge and conflating the issues from what my personal knowledge was and my intent and conflating that with Mr. Sanders.

[00:25:31] Speaker 01:
So unless the court has any additional questions.

[00:25:35] Speaker 02:
I have no other I Don't have any additional questions, so thank you very much.

[00:25:40] Speaker 01:
Thank you.

[00:25:41] Speaker 02:
All right case will be submitted Thank you very much for your arguments.

[00:25:45] Speaker 02:
We'll try to get this out as well as early as possible Madam clerk with that.

[00:25:49] Speaker 02:
I believe we're adjourned and we can go off record.

[00:25:52] Speaker 03:
Thank you all rise This session is now adjourned