Whatley v. Stijakovich-Santilli (In re Stijakovich-Santilli)

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
10 years 3 months ago

Citation:

In re Stijakovich-Santilli, No. EC-15-1000-FDJu (9th Cir. B.A.P. Dec. 15, 2015).

Tag(s):

Ruling:

To object to an exemption as fraudulently claimed, a trustee need not demonstrate that the trustee could not have discovered the fraud, and the trustee may rely on the debtor’s statements made after filing the exemption claim.

Procedural context:

Chapter 7 debtor, Rhonda Stijackovich-Santilli, claimed a homestead exemption in a California house. After the ordinary deadline to object to exemptions, she moved to compel abandonment of the house. Trustee, Douglas M. Whatley, did not oppose abandonment, which the bankruptcy court approved. Trustee later objected to the exemption and requested relief from the abandonment order. The court overruled his objection. He filed a second objection, which the court also overruled. On appeal, the BAP reversed and remanded to the bankruptcy court.

Facts:

A California state-law condition of debtor’s claimed homestead exemption is that the house have been her principal dwelling. In trustee’s first objection, he argued that debtor fraudulently asserted the exemption claim because she did not in fact reside at the house. In his second objection, he relied on further evidence, including statements by debtor. If a debtor fraudulently asserts a claim of exemption, the objection deadline is extended to one year after the closing of the case. FRBP 4003(b)(2). A debtor’s exemption claim includes the implicit representation that the facts support the exemption. An exemption claim is fraudulent if the debtor knew that the implicit representation was false when made, the debtor intended to deceive the trustee (and other readers of the exemption claim), and the trustee justifiably relied on the misrepresentation. Here, to demonstrate that the exemption was claimed fraudulently, trustee need not demonstrate that he investigated but could not have discovered the fraud; he need only show justifiable reliance on debtor’s false representation. Also, her statements after filing her exemption can be considered evidence of her fraudulent assertion of her exemption.

Judge(s):

Robert J. Faris, Randall L. Dunn, and Meredith A. Jury, Bankruptcy Judges. Opinion by Judge Faris.

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