- Case Type:
- Case Status:
- 20-1165 (9th Circuit, Mar 29,2021) Not Published
- The U.S. Bankruptcy Appellate Panel of the Ninth Circuit vacated and remanded the decision of the U.S. Bankruptcy Court for the Eastern District of California (BC) sustaining an exemption objection of the chapter 7 trustee (TR) based on the "bad faith" of the debtor (DR) in claiming it to benefit his nephew, not protect the debtor's, i.e his, property. Per the BAP, as California law allows the wild card exemption to be claimed in any property and does not require that a debtor have any specific intent as to the use of the exempted property, the BC had erred, and reversal was necessary.
- Procedural context:
- After the DR had failed to stop the sale of the estate's interest in real property located on Glascow Drive in North Highlands, California (the Property) by the TR in his chapter 7 case, the DR filed amended Schedules A/C. On Schedule C, Debtor added the $32,500 proceeds from the sale of the Property and claimed $27,915 as exempt under California Code of Civil Procedure § 703.140(b)(5), the “wild card” exemption. The TR objected, arguing that the DR had not acted in good faith and was equitably estopped from asserting an exemption in the proceeds because the DR had insisted from the inception of the case that he had no interest in the Property, and he had not claimed any exemption until nineteen months after the petition date. The DR countered, contending that he had not acted in bad faith because he did not hide the Property from the TR, and he changed his exemption only after the BC had ruled that he had a 50% interest in the Property. The BC thereafter issued a memorandum decision and order sustaining the objection. It found that the DR had not met his burden to show that the exemption was claimed in good faith because Debtor claimed the exemption to protect his nephew’s property rather than his own. The DR timely appealed.
- The DR filed his chapter 7 petition in August 2018. On his Schedule A, he listed the Property. Though he valued it at $217,612, he pegged the portion of that sum that he owned at “$0.00," the following notation added as an explanation: “Co-signed for Nephew; Debtor has no interest in property.” The DR not claim any exemption in the Property on Schedule C. The TR's sale of the property lay at the root of this appeal. In November 2019, the TR filed a motion to sell the estate’s interest in the Property, contending, on the basis of recorded documents, that the DR and his nephew, Daryl Guevarra (Daryl), owned the Property as joint tenants. The DR opposed the motion, arguing that he had no interest in the Property but was merely a co-signer with Daryl; days later, he filed a motion to convert his case to a chapter 13 one to save his nephew's home. The BC denied the motion to convert and granted the TR's motion to sell. The estate's interest was subsequently sold for $32,500. The DR then filed amended Schedules A/B and C, his changed in the latter prompting the TR's ire.
- Hons. William J. Lafferty; Julia W. Brand; and Laura S. Taylor
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