- Case Type:
- Case Status:
- BAP NO. PR 16-045 (1st Circuit, May 17,2017) Published
- The Order denying Debtor's Second Reconsideration of the Bankruptcy Court's order sustaining the Chapter 7 Trustee's objection to certain claimed exemptions is Affirmed.
- Procedural context:
- The substantive issue before the BAP was whether the subsequent amendments to schedule C on Debtors' claimed exemptions opens the door to object to all the items listed or only to the newly amended items on the list. But, since Debtors only appealed from the order denying reconsideration of order sustaining objection filed by the Trustee, the BAP jurisdiction on the issue is limited. The BAP clarified: "If the underlying Order Sustaining Second Exemption Objection were before us, we would conduct a de novo review on the merits of the legal issues raised by that order, including whether a new objection period arises as to all claimed exemptions with any amendment of the exemption schedule and whether the DIP Accounts were subject to exemption under § 522(c)(5). But it is not, so our review of the July 13 Order Denying Reconsideration is limited to the abuse of discretion standard." After Debtor’s fourth amendment to Schedule C, the list of claimed exemptions, the Chapter 7 Trustee timely filed an objection to several listed exemptions. In that second objection the Trustee reasserted an objection previously overruled by the Bankruptcy Court. (The prior order was final). The notices to respond to the first and second objection to exemptions were flawed since included a 30 days period to respond when the FRBP established as applicable a 14 days period. On both instances the Bankruptcy Court entered orders, as unopposed, after the 14 days period elapsed. The Bankruptcy court granted the reconsideration timely filed by the Debtors on the order granting the first objection filed by the Trustee, but denied Debtor’s reconsideration of the order granting the trustee’s second objection to the claimed exemptions by the reasons stated in the Trustee’s opposition. On appeal Debtors didn’t establish whether their reconsideration was couched on Rule 59 (e) or on Rule 60(b), in oral argument said that none of them, which limited the Bankruptcy Appellate Panel’s jurisdiction to review the order denying the reconsideration on an abuse of discretion standard. The BAP also pointed out that Debtor’s arguments on the applicability of Section 522(d)(5), even though raised on their reconsideration of the first order, was not raised on the second reconsideration motion therefore was deemed waived. As neither the Supreme Court nor the First Circuit had addressed the precise issue, and the courts are not in agreement, the BAP concluded that the there was no manifest error of law nor abuse of discretion on the Bankruptcy Court’ s determination based on the literal construction of Rule 4003(b)(1) which refers to a 30-day objection deadline to “any amendment to the list or supplemental schedules filed”, therefore a party in interest may object to any claimed exemption even if the challenged exemption was not itself the subject of an amendment.
- Guzman and Rodriguez filed a chapter 11 petition on May 2013. Two years later the case was converted to Chapter 7. During the pendency of the chapter 11, debtors amended Schedule C - property claimed as exempt once. Shortly after the case conversion, Debtors again amended Schedule C to add to their claimed exemptions under § 522(d)(5)2 the funds that had been held in the chapter 11 debtor-in-possession bank accounts. The Chapter 7 Trustee objected including a wrong period of time in the notice to respond. The Court granted the objection but later reversed it. the trustee never did not file a timely request for reconsideration of that order. Later on, Debtors filed a third and fourth amendment to their Schedule C to include as exempted property an apartment they owned. Within 30 days of the amendment the Trustee filed a Second Objection to Claimed Exemptions and, Alternative for Turnover of Property to the Estate." The Chapter 7 Trustee maintained that the Vacating Order and the Order Overruling First Exemption Objection only related to the First and Second Amended Exemption Schedules, and the Debtors’ subsequent filings of the Third and Fourth Amended Exemption Schedules rendered those prior orders moot. She asserted that this objection was timely because it was filed within the 30-day period for objection to the Fourth Amended Exemption Schedule. As to the merits, the Trustee primarily pressed her position that as a matter of law the Debtors were not entitled to claim an exemption in the DIP Accounts upon conversion of the case to chapter 7. the Second objection filed by the Trustee contained the same notice error as the first one, however the bankruptcy case docket reflected the correct 14 days response period. After Debtors failed to respond within the 14 days, the court again entered an order granting the Trustee's objection. Debtor's filed a second a motion for reconsideration and the corresponding opposition to the objection; to which the Trustee's opposed. The Court finally denied the Debtors' request for reconsideration couched on the Trustee's arguments on the opposition.
- Feeney, Finkle and Fagone
3144 in the system
1 Being Processed