In re: Miriam M. Lopez

FILED 1 NOT FOR PUBLICATION SEP 03 2015 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT 3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-14-1450-TaKuPe ) 6 MIRIAM M. LOPEZ, ) Bk. No. 2:14-bk-12175-BB ) 7 Debtor. ) ______________________________) 8 ) MIRIAM M. LOPEZ, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) DAVID ALAN GILL, Chapter 7 ) 12 Trustee, ) ) 13 Appellee. ) ______________________________) [14] Argued and Submitted on July 23, 2015 15 at Pasadena, California 16 Filed – September 3, 2015 17 Appeal from the United States Bankruptcy Court for the Central District of California [18] Honorable Sheri Bluebond, Chief Bankruptcy Judge, Presiding [19] 20 Appearances: Wendolyn E. Arnold argued for appellant; Matthew F. Kennedy argued for appellee. [21] 22 Before: TAYLOR, KURTZ, and PERRIS,** Bankruptcy Judges. [23] 24 * This disposition is not appropriate for publication. 25 Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. 26 See 9th Cir. BAP Rule 8024-1(c)(2). 27 ** The Honorable Elizabeth L. Perris, United States 28 Bankruptcy Judge for the District of Oregon, sitting by designation. 1 INTRODUCTION1 2 The bankruptcy court entered an order sustaining 3 objections to exemptions, requiring turnover of assets, and 4 extending the discharge objection deadline. We AFFIRM the 5 bankruptcy court. 6 FACTS2 7 Miriam A. Lopez filed a petition for chapter 7 relief, and 8 David A. Gill was appointed her trustee. Her initial schedules 9 did not identify all estate assets; but as relevant to this 10 appeal, the initial schedule A included a residence located in 11 Los Angeles, California (the “Property”) and the initial 12 schedule C claimed a personal property exemption in a 2010 Honda 13 CR-V (“SUV”). In subsequently amended schedules, the Debtor 14 modified her election of exemptions to include the following: 15 C $175,000 in the Property, pursuant to CCP § 704.730; 16 C $2,725 in the SUV, pursuant to CCP § 704.010; 17 C $4,850 in a 1959 Chevy pick-up truck (“Truck”), pursuant to 18 CCP § 704.060; and 19 C $2,725 in a 2005 Harley-Davidson motorcycle (“Motorcycle”), 20 pursuant to CCP § 704.010 21 (the SUV, Truck, and Motorcycle are collectively referred to [1] Unless otherwise indicated, all chapter and section [23] references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 . 24 All “Rule” references are to the Federal Rules of Bankruptcy Procedure and all “CCP” references are to the California Code of 25 Civil Procedure. 26 2 We exercise our discretion to take judicial notice of 27 documents electronically filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), [28] 293 B.R. 227 , 233 n.9 (9th Cir. BAP 2003). [2] 1 hereafter as the “Vehicles”). The Debtor indicated that the 2 Truck was used “for work.” Her amended Schedule I, however, 3 evidenced that she was unemployed. 4 The Debtor’s amended schedules also included a $4,000 tax 5 refund that she received post-petition. The Debtor did not 6 claim any exemption in the refund. After receipt, she turned 7 the refund over to her bankruptcy attorney, Montaz M. Gerges 8 (“Gerges”). The Trustee unsuccessfully sought turnover from 9 Gerges, who continued to hold the tax refund as of the oral 10 argument in this appeal. 11 Six months into the case,3 the Trustee objected to the 12 exemptions claimed in the Property and in the Vehicles. In 13 particular, he sought complete disallowance of the exemption as 14 to the Truck and a partial disallowance of the exemptions 15 claimed in the Property and the Motorcycle. In the same 16 document (“Trustee’s Motion”), he also moved for turnover of the 17 tax refund and the Vehicles and requested a second extension of 18 the discharge objection deadline. As the Trustee made clear 19 later, he sought possession of the Vehicles in order to value 20 them. 21 The Debtor did not formally oppose or respond to the 22 Trustee’s Motion. Instead, she vigorously responded to the [23] 24 3 During this time, the Trustee obtained a bankruptcy 25 court order extending the time to object to the Debtor’s discharge, and the Debtor moved to convert her case from 26 chapter 7 to chapter 13. The bankruptcy court denied the 27 Debtor’s conversion motion in an order from which she also appeals. We dispose of that appeal in a separate memorandum 28 decision. [3] 1 Trustee’s opposition to her concurrently pending motion to 2 convert and included some argument in support of her claimed 3 exemptions in that document (the “Response”). In the Response, 4 Gerges, on behalf of the Debtor, personally attacked the Trustee 5 and broadly alleged dishonesty, questioned his alleged valuation 6 of estate assets, and more specifically alleged that the Trustee 7 sought recovery of estate assets only for personal gain. Gerges 8 concluded with an unsupported, but less bombastic, assertion 9 that the Debtor was entitled to claim an enhanced homestead 10 exemption on account of her age and because she was legally 11 disabled. 12 Prior to the hearing on the Trustee’s Motion, the 13 bankruptcy court issued a tentative ruling,4 indicating its 14 intent to sustain the Trustee’s objections and grant his 15 requested relief. The ruling noted the Debtor’s failure to 16 supply evidence showing that she was entitled to the enhanced 17 homestead exemption based on disability and agreed that an 18 inoperable pickup truck could not be used in the operation of 19 the debtor’s business. The ruling concluded by asking how the 20 Debtor wished to allocate her undisputed $2,900 vehicle 21 exemption. 22 Only the Trustee appeared at the hearing, and the 23 bankruptcy court granted relief consistent with its tentative 24 ruling. Having received no input from the Debtor regarding 25 allocation of the vehicle exemption, the bankruptcy court [4] 27 The September 3, 2014 tentative ruling is not in the record. It was instead obtained from the bankruptcy court’s 28 website: http://www.cacb.uscourts.gov/. [4] 1 allowed the Debtor additional time to make an election but also 2 stated that, unless the Debtor timely designated otherwise, it 3 would allocate the exemption to the SUV. 4 The subsequent order provided relief consistent with the 5 bankruptcy court’s oral ruling; because the Debtor took no 6 position on allocation of the vehicle exemption, the exemption 7 attached to the SUV. The order also required that the Debtor 8 turn over possession of the Vehicles and the tax refund to the 9 Trustee. The Debtor timely appealed. 10 JURISDICTION 11 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 12 §§ 1334 and 157(b)(2)(B), (E), and (O). We have jurisdiction 13 under 28 U.S.C. § 158 . 14 ISSUES5 15 1. Whether the bankruptcy court erred when it sustained the 16 Trustee’s objections to the claimed exemptions. 17 2. Whether the Trustee overvalued estate assets. 18 3. Whether the bankruptcy court erred when it extended the 19 Trustee’s time to object to the Debtor’s discharge. 20 STANDARDS OF REVIEW 21 As a question of law, we review de novo the right of a 22 debtor to claim an exemption. Elliot v. Weil (In re Elliott), [23] 523 B.R. 188, 191 (9th Cir. BAP 2014). A bankruptcy court’s 24 findings of fact as to a claimed exemption, however, are [5] The Debtor also argues that the bankruptcy court abused 26 its discretion in extending the deadline to object to 27 exemptions. Not only did the Debtor fail to raise this issue before the bankruptcy court, it is beyond the scope of the order 28 on appeal. Therefore, we do not further address the issue. [5] 1 reviewed for clear error. Id. A finding of fact is clearly 2 erroneous if illogical, implausible or without support from 3 inferences that may be drawn from facts in the record. See 4 Trafficschool.com v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 5 2011). 6 We review for an abuse of discretion the bankruptcy court’s 7 decision to grant a timely motion to extend the time for filing 8 a complaint objecting to the debtor’s discharge. See Willms v. 9 Sanderson, 723 F.3d 1094, 1103 (9th Cir. 2013). A bankruptcy 10 court abuses its discretion if it applies an incorrect legal 11 standard or misapplies the correct legal standard, or if its 12 factual findings are clearly erroneous. Shahrestani v. Alazzeh 13 (In re Alazzeh), 509 B.R. 689, 692 (9th Cir. BAP 2014). 14 DISCUSSION 15 The reasons offered by the Debtor for her failure to oppose 16 the Trustee’s Motion are conflicting. In her brief on appeal, 17 the Debtor contends that she “did not oppose . . . since she had 18 raised the same issues” in the Response. Apl’t Op. Br. at 14. 19 But, at oral argument, the Debtor asserted that neither she nor 20 her counsel had notice of the hearing (or, by extension, the 21 Trustee’s Motion). As a result, they did not oppose or attend 22 the hearing and were unaware of the bankruptcy court’s 23 determinations until after the ruling. 24 As the Trustee pointed out, the record belies counsel’s 25 assertion. The proof of service attached to the Trustee’s 26 Motion evidences that the Debtor was served with the Trustee’s 27 Motion and notice of the related hearing at the Property via 28 U.S. mail. In addition, pursuant to general orders and the [6] 1 local bankruptcy rules for the Central District of California, 2 Gerges was served electronically via the bankruptcy court’s 3 Notice of Electronic Filing. In both cases, service occurred on 4 August 6, 2014 - approximately 26 days before the hearing. The 5 allegation of a lack of notice or knowledge of the Trustee’s 6 Motion is simply untrue. 7 Against this background, most of the Debtor’s arguments are 8 presented for the first time on appeal. Even so, given the 9 legal issues implicated and the fact that the record is fully 10 developed, we exercise our discretion and briefly consider the 11 Debtor’s arguments. See Mano–Y & M, Ltd. v. Field (In re The 12 Mortg. Store, Inc.), 773 F.3d 990, 998 (9th Cir. 2014). 13 A. The bankruptcy court did not err in disallowing the 14 Debtor’s claimed exemptions. 15 The Debtor argues broadly that the bankruptcy court erred 16 by finding bad faith conduct or prejudice when it disallowed 17 some of her claimed exemptions. Relying on Law v. Siegel, [18] 134 S.Ct. 1188 (2014), she argues that a bankruptcy court may 19 not disallow an amended exemption claim on the basis of bad 20 faith conduct. 21 Unfortunately for the Debtor, however, the bankruptcy court 22 disallowed the exemptions based on the Debtor’s failure to 23 provide evidence of entitlement to the state law exemptions she 24 claimed. It did not disallow the exemptions pursuant to 25 § 105(a), let alone make a determination of bad faith conduct or 26 prejudice. Consequently, the Debtor’s myopic focus on the 27 ability to liberally amend exemptions and discussion of the 28 impact of Law v. Siegel is inapt. [7] 1 Further, after applying de novo review, we discern no error 2 in the bankruptcy court’s decisions to disallow or limit the 3 claimed exemptions. 4 1. Partial disallowance of the homestead exemption 5 in the Property. 6 California law provides for an enhanced homestead exemption 7 in the amount of $175,000 to a person who is: (1) 65 years old 8 or older; (2) “physically or mentally disabled who as a result 9 of that disability is unable to engage in substantial gainful 10 employment”; or (3) 55 years old or older with an annual gross 11 income of no more than $25,000 (or $35,000, if married). Cal. 12 Code Civ. P. § 704.730(a)(3)(A)-(C). These provisions are in 13 the disjunctive; thus, a person qualifies for the enhanced 14 homestead exemption if she meets any one of the three 15 requirements. 16 Here, the bankruptcy court sustained the Trustee’s 17 objection because the Debtor failed to provide evidence that she 18 qualified for an enhanced homestead exemption under any theory. 19 After the Trustee called into question the enhanced homestead 20 exemption claim, the burden shifted to the Debtor to provide 21 evidence of entitlement. See In re Tallerico, 532 B.R. 774 , 22 790-91 (Bankr. E.D. Cal. 2015) (extensive discussion on the 23 evidentiary burdens as to California exemption claims). No one 24 disputes that the Debtor was not 65; thus, she needed to provide 25 evidence of a qualifying disability or evidence that her 26 household’s annual gross income fell below $35,000. Her 27 schedules made clear that she did not meet the income 28 requirement given her husband’s income. She never provided [8] 1 declaratory or documentary evidence of a qualifying disability. 2 The Debtor’s schedules did evidence that she received 3 workers’ compensation benefits during the bankruptcy case, but 4 not at the date of petition. Case authority makes clear that a 5 qualifying disability must exist as of the date of petition. 6 See Neff v. Denoce (In re Neff), 2014 WL 448885 , at *8 (9th Cir. 7 BAP Feb. 4, 2014); In re Rolland, 317 B.R. 402, 413 , 419-20 8 (Bankr. C.D. Cal. 2004); In re Rostler, 169 B.R. 408 , 411 9 (Bankr. C.D. Cal. 1994). 10 And, as Debtor’s counsel acknowledged at oral argument, the 11 showing of disability necessary for CCP § 704.730(a)(3)(B) is 12 not per se equivalent to that required for receipt of workers’ 13 compensation under California law. The enhanced homestead 14 exemption requires a disability that precludes “substantial 15 gainful employment”; that term is defined as significant mental 16 or physical work activity, done for pay or profit, in a 17 competitive or self-employed position. In re Rostler, 169 B.R. 18 at 412. There is a rebuttable presumption of an inability to 19 engage in substantial gainful employment if the debtor receives 20 social security or supplemental social income benefits. Cal. 21 Code Civ. P. § 704.730(a)(3)(B). A qualifying workers’ 22 compensation disability, however, may be of temporary duration 23 and based on a less than total disability that merely impairs 24 the ability to work. Thus, evidence that the Debtor received 25 post-petition workers’ compensation benefits was not dispositive 26 on the issue of whether she was precluded from substantial 27 gainful employment as a result of disability; additional 28 evidence on this point was required. [9] 1 2. Disallowance of the exemption claim in the Truck. 2 California law also provides for an exemption in 3 “[p]ersonal property necessary to and used in exercise of trade, 4 business or profession.” Cal. Code Civ. P. § 704.060. A 5 vehicle claimed under this exemption must be necessary to the 6 debtor’s trade, business, or profession. In re Rawn, 199 B.R. 7 733, 735 (Bankr. E.D. Cal. 1996). 8 Here, again, the bankruptcy court sustained the Trustee’s 9 objection because the Debtor failed to provide evidence that the 10 Truck qualified for a California tool of the trade exemption. 11 The Debtor failed to provide any evidence as to how she used the 12 Truck, and the bankruptcy court was reasonably skeptical of this 13 claim. It noted that the Debtor’s schedules indicated that the 14 truck was inoperable. Further, in the Response, the Debtor 15 asserted that her non-debtor husband used the Motorcycle for 16 work – not the Truck. Thus, there was no evidence in the record 17 to support the Debtor’s entitlement to a tool of the trade 18 exemption under Cal. Code Civ. P. § 704.060. 19 B. Whether the Trustee overvalued estate assets. 20 The Debtor also argues that the Trustee improperly inflated 21 the values of the assets, so as to increase the equity available 22 for liquidation, notwithstanding her claimed exemptions. 23 Nothing in the record, however, evidences that the bankruptcy 24 court made any valuation determinations. While emails between 25 the Trustee and Gerges evidence a valuation dispute, 26 that dispute never carried over to the bankruptcy court for 27 adjudication. Indeed, the Trustee requested possession of the 28 Vehicles for the purpose of subsequent valuation. [10] 1 Further, given our conclusion that the bankruptcy court 2 appropriately sustained the Trustee’s objections to exemptions, 3 whether he overvalued assets (which we do not determine) is 4 ultimately irrelevant. 5 Finally, the equity issue in regards to the SUV is now 6 irrelevant. During oral argument, Debtor’s counsel disclosed, 7 for the first time since case commencement and in contradiction 8 to the Debtor’s schedules, that the SUV was a leased vehicle. 9 Both parties conceded that the leased SUV would not generate 10 equity for the estate. 11 C. The bankruptcy court did not abuse its discretion in 12 extending the deadline to file an objection to 13 discharge. 14 Finally, the Debtor argues that, given the absence of 15 evidence of bad faith, there is no local rule, statute, or case 16 authority that permitted the bankruptcy court to extend the time 17 to object to the Debtor’s discharge. Once again, we disagree. 18 Rule 4004 provides that a complaint objecting to a debtor’s 19 chapter 7 discharge must “be filed no later than 60 days after 20 the first date set for the [§ 341(a)] meeting of creditors.” 21 That time may be extended, but the motion must be filed prior to 22 the expiration of the 60-day date. 23 Here, the 60th day following the initial § 341(a) meeting 24 was May 16, 2014. What the Debtor fails to mention on appeal is 25 that the Trustee timely moved for and obtained an initial order 26 from the bankruptcy court extending the discharge objection date 27 to August 16, 2014. The Trustee then sought a second extension 28 of the discharge objection deadline in the Trustee’s Motion and [11] 1 filed the Trustee’s Motion prior to the extended deadline date. 2 Neither the Code nor the national rules nor the local rules 3 nor case authority restricts or eliminates the bankruptcy 4 court’s authority to grant a second deadline extension when the 5 request is timely. Nor does any authority limit the 6 justification for an extension request to a debtor’s bad faith. 7 Here, the second extension – an additional 90 days – was 8 timely and neither unreasonable nor capricious. The Trustee 9 stated, repeatedly, that his efforts to obtain additional, 10 necessary information from the Debtor and Gerges were 11 consistently thwarted. Nothing in the record suggests 12 hyperbolic rhetoric on his part. We, thus, discern no abuse of 13 discretion. 14 CONCLUSION 15 Based on the foregoing, we AFFIRM the bankruptcy court.