Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caeb-2_13-ap-02293/USCOURTS-caeb-2_13-ap-02293-0/pdf.json

Parties Involved:
J. Michael Hopper
Plaintiff
Jose Martinez
Defendant
Ana Granados
Defendant

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NOT FOR PUBLICATION 

UNITED STATES BANKRUPTCY 

EASTERN DISTRICT OF CALIFORNIA 

FILED 

[DEC 15 20161 

TED STATES BANKRUPTCY CC 

CTPOKI nISTRICT OF CAUF! 

In re: Case No. 13-21734-C-7 

JOSE MARTINEZ and DCN: DNL-7,DNL-3 

ANA GRANADOS, Debtors 

J. MICHAEL HOPPER, Plaintiff Adversary No. 13-02293-C 

V. 

JOSE MARTINEZ and 

ANA GRANADOS, Defendants. 

MORANDUM DEC IS ION 

Before: David E. Russell, Bankruptcy Judge 

J. Russell Cunningham, J. Luke Hendrix, Nolan, Livaich & 

Cunningham, Sacramento, California, for Plaintiff. 

Scott A. Coben, Sacramento, California, for Defendants. 

J. Michael Hopper, chapter 7 trustee, objects to the amended 

wildcard exemption claimed by the debtors JoseMartinez and Ana 

Granados. Having considered the papers, the evidentiary record, 

and arguments of counsel, the court overrules the trustee's 

objection and denies the trustee's motion for turnover based upon 

the following findings of fact and conclusions of law made 

pursuant to Federal Rule of Civil Procedure 52 (a), as 

incorporated into Federal Rule of Bankruptcy Procedure 7052 and 

Filed 12/15/16 Case 13-02293 Doc 43
1 applied to contested matters by Federal Rule of Bankruptcy 

2 Procedure 9014 (c) 

3 

4 I. BACKGROUND 

5 The debtors Jose Martinez and Ana Granados filed a voluntary 

6 chapter 7 petition on February 8, 2013. J. Michael Hopper is the 

7 duly appointed chapter 7 trustee. 

8 The debtors speak Spanish and very little English. 

9 (Alternate Direct Test. of Jose Martinez ("Martinez Test.") at 2, 

10 ¶ 4.) Due to financial difficulties, the debtors sought counsel 

11 at the law offices of Thomas Gillis in January of 2012. (Id. at 

12 2, ¶ 5.) The debtors met with a paralegal who informed them that 

13 he would prepare the necessary bankruptcy paperwork and call them 

14 when it was ready to sign. () 

15 When the debtors did not receive any phone call, they asked 

16 their daughter, who spoke English, to assist them in 

17 communicating with the office of Mr. Gillis. (Id. at 2, 91 4.) 

18 After the debtors' daughter went to the law offices and made 

19 numerous phone calls, the debtors were finally able to sign the 

20 bankruptcy petition and schedules in July of 2012. (Id. at 3, 91 

21 10.) After even further delays, the petition was filed on 

22 February 8, 2013. (Id. at 3, ¶ 13.) The filed schedules had not 

23 been changed since they were signed seven months earlier. The 

24 debtors contend that someone from the office of Mr. Gillis used 

25 white out in an attempt to cover up the date next to each of the 

26 debtors' signatures and convert the year of the signing from 2012 

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1 to 2013. (Id. at 4, ¶ 14.) 

2 In their first amended schedules, the debtors scheduled 

3 their interests in a 1988 Chevy catering truck, valued in the 

4 amount of $19,500, a sole proprietorship business operated out of 

5 the catering truck identified as La Guanakita, valued in the 

6 amount of $500, and a 2004 Hummer H2, valued in the amount of 

7 $14,379. (Docket No. 1.) The debtors claimed the catèring truck 

8 and business exempt from their bankruptcy estate under California 

9 Code of Civil Procedure section 703.140(b) (5), California's so10 called "wildcard" exemption, which allows a debtor to exempt up 

11 to $25,340 in "any property." (Docket No. 15.) 

12 The trustee subsequently asked that the debtors either 

13 terminate or seek abandonment of the business. (Trustee Decl., 

14 Docket No. 127 at 1, ¶ 2.) The debtors filed a motion to abandon 

15 the catering truck and business, which the court granted on March 

16 26, 2013. (Docket No. 19.) 

17 In or about March and April 2013, the trustee requested 

18 turnover of loan statements and the insurance policy for the 

19 Hummer. (Alternate Direct Test. of J. Michael Hopper at 3, ¶ 

20 10.) 

21 On May 9, 2013, the debtors amended their wildcard 

22 exemption. (Docket No. 25.) The debtors reduced the dollar 

23 amount of the wildcard exemption applied to the catering truck 

24 and applied, for the first time, a California Code of Civil 

25 Procedure section 703.140(b) (6), "tools-of-the-trade", exemption 

26 to the catering truck. (j) The debtors used the freed-up 

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1 wildcard dollar amount to exempt a 2004 Hummer H2 in the amount 

2 of $6,269 and a 2012 federal tax refund valued at $6,000. 

3 The debtors had not disclosed the existence of the 2012 tax 

4 refund on their petition or subsequent amended schedules prior to 

5 May 9, 2013. The trustee later discovered that the tax return 

6 had been prepared on January 27, 2013 and that the debtors had 

7 received a refund in the amount of $6,526. (P1's Tr. Exs. 13, 

8 14. 

9 The debtors contend that they did not disclose the 2012 tax 

10 refund in their original schedules because they had prepared 

11 their original schedules in early 2012 and had filed their tax 

12 'return in early 2013. (Martinez Test. at 6, ¶ 20.) In May of 

13 2013, a representative from the office of Mr. Gillis contacted 

14 the debtors and inquired as to the amount of their 2012 tax 

15 refund. (j) Prior to this time, the debtors had not attended 

16 any scheduled meetings of creditors because they were either not 

17 informed of the meetings or informed they did not have to attend. 

18 (Id. at 5, ¶ 17-18.) Further, the debtors never saw or signed 

19 the May 9, 2013 amended schedules before they were filed. (I d. 

20 at 6, 91 22.) 

21 On July 16, 2013, the trustee filed the following three 

22 motions: (1) an objection to the debtors' claims of exemption in 

23 the catering truck, Hummer, and 2012 tax refund (Docket No. 52); 

24 (2) a corresponding motion for turnover (Docket No. 48); and (3) 

25 a motion to determine excessive payment to Mr. Gillis for doing 

26. poor work (Docket No 43). The court sustained the objection to 

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claim of exemption on September 23, 2013 on the basis that the 

2 exemptions claimed were in excess of the allowable dollar 

3 amounts. (Docket No. 83.) The remaining two motions were 

4 scheduled for hearing on November 5, 2013. 

5 The debtors retained Scott Coben to replace Mr. Gillis as 

6 attorney of record on October 28, 2013. (Docket No. 95.) Two 

7 days later, the debtors filed amended schedules B and C. (Docket 

8 No. 97) . The amended schedule B (1) listed the value of the 

9 business at $0 (its resale value); (2) listed the exact amount of 

10 the tax refund at $6,526; (3) listed the value of the catering 

11 truck at $12,000 (reduced from $19,500); and (4) listed the value 

12 of the Hummer, which was subject to a purchase security interest, 

13 at $13,875. (Docket No. 97.) The debtors contend they had 

14 originally overvalued the catering truck by listing its value as 

15 the price the debtors had paid to purchase the truck six years 

16 prior to their bankruptcy filing. (Martinez Test. at 7, ¶ 29.) 

17 The corresponding amended schedule C applied exemptions to 

18 the assets using various provisions under California's section 

19 703.140(b) exemption scheme. Specifically, (1) the tax refund 

20 was exempted under the wildcard provision; (2) the catering truck 

21 was exempted under the wildcard and tools-of-the-trade 

22 provisions; and (3) the Hummer was exempted under the wildcard 

23 and automobile provisions. 

24 On the morning of the November 5, 2013 hearings on the 

25 motion for turnover and motion for excessive payment to counsel, 

26 the trustee advised Mr. Coben that the value of the Hummer had 

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1 increased since the debtors had made payments on the loan secured 

2 by the Hummer and that the trustee would request turnover due to 

3 nonexempt equity. (Defs' Trial Br., Case No. 13-02293, Adv. 

4 Docket No. 33 at 9-10.) The debtors filed an amended schedule C 

5 that same day to exempt all equity in. the Hummer. (Docket No. 

6 99.) 

7 The debtors have not amended their schedules since November 

8 5, 2013. The aggregate dollar amount of wildcard exemptions 

9 claimed on the November 5 amended schedules equates to the 

10 statutory limit of $25,340 allowed under California Code of Civil 

11 Procedure section 703.140(b) (5) as of the petition date. () 

12 The court granted the trustee's motion to determine 

13 excessive payment to debtors' counsel. The motion claimed that 

14 Mr. Gulls (a) failed to schedule certain assets; (b) provided 

15 inaccurate information regarding the loan balance on the Hummer; 

16 (c) failed to turn over pay advices for the 60 days before the 

17 filing; (d) failed to provide information regarding two vehicles; 

18 • (e) failed to provide bank statements; (f) failed to accurately 

19 schedule a tax refund; (g) changed exemptions after abandonment; 

20 and (h) was unprepared for meetings of creditors. (Docket No. 

21 43.) The court determined that Mr. Gillis essentially provided 

22 services of a petition preparer and ordered Mr. Gulls to 

23 disgorge fees in the amount of $1,575.00 to the trustee on behalf 

24 of the estate. (Docket No. 103.) 

25 The court continued the motion for turnover several times. 

26 (Docket Nos. 98, 114.) The court suggested both attorneys review 

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1 the Law v. Siegel case pending before the Supreme Court and 

2 warned that the court may wait until the Supreme Court issues a 

3 decision before deciding on any requests for surcharging 

4 exemptions. 

5 In response to the debtors' November 5, 2013 amended 

6 schedules, the trustee filed another objection to the debtors' 

7 wildcard exemptions applied to the Hummer and 2012 tax refund on 

8 the basis of bad faith. (Docket No. 115.) This objection and 

9 the continued motion for turnover (Docket No. 48) were 

10 consolidated and set to be tried with the trustee's adversary 

11 complaint objecting to discharge of the debtors pursuant to 11 

12 U.S.C. section 727(c), (d), and (e) (Adv. Docket No. 1). The 

13 complaint seeks denial of discharge based on unjust (1) failure 

14 to turn over the Hummer and tax return to the trustee; and (2) 

15 failure to produce required documents and properly disclose 

16 assets. (Adv. Docket No. 1.) 

17 On July 8, 2014, the court held a one-day trial primarily 

18 litigating questions of law regarding the objection to exemption. 

19 At the conclusion of the trial, the court and the parties agreed 

20 to put litigation of the discharge objection on the "back burner" 

21 until after the court ruled on the exemption issue. (Trial Tr., 

22 l Adv. Docket No. 41 at 58.) 

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1 II. DISCUSSION 

2 

3 A. Disallowing a State-Created Exemption in the Ninth Circuit 

4 After Law. v. Siegel 

5 The Bankruptcy Code authorizes a debtor to exempt certain 

6 assets. 11 U.S.C. § 522(b). 

7 California residents filing for bankruptcy must choose from 

8 two sets of exemption options under state law. See 11 U.S.C. § 

9 522(b) (1); Cal. Civ. P. Code § 703.130; In re Steward, 227 B.R. 

10 895, 898 (9th Cir. BAP 1998) . "One set of exemptions are state 

11 law non-bankruptcy exemptions, including a homestead exemption," 

12 and the "other set of exemptions is modeled closely upon the 

13 federal exemptions listed in § 522(d)." In re Steward, 227 B.R. 

14 at 898. A debtor may choose only one set of exemptions. j; 

15 see Cal. Civ. P. Code § 703.140(a). Under the Bankruptcy Code 

16 and California law, exemptions are to be construed liberally in 

17 favor of the debtor. In re Arrol, 207 B.R. 662, 665 (Bankr. N.D. 

18 Cal. 1997) 

19 Federal Bankruptcy Rule 1009(a) provides that a "schedule 

20 may be amended by the debtor as a matter of course at any 

21 time before the case is closed," and the Ninth Circuit has 

22 applied this right to the claim of exemptions. See In re 

23 Michael, 163 F.3d 526, 529 (9th Cir.1998); see also In re 

24 Nicholson, 435 B.R. 622, 630 (9th Cir. BAP 2010) 

25 Prior to the recent Supreme Court case Law v. Siegel, 

26 bankruptcy courts routinely used their discretion under 11 U.S.C. 

27 section 105(a) to deny exemptions based on bad faith or 

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1 prejudice. 134 S.Ct. 1188 (2004) . held that "when a debtor 

2 claims a state-created exemption, the exemption's scope is 

3 determined by state law, which may provide that certain types of 

4 debtor misconduct warrant denial of the exemption." Id. at 

5 1196-97. The Supreme Court emphasized that "federal law provides 

6 no authority for bankruptcy courts to deny an exemption on a 

7 ground not specified in the Code," and that any basis for denial 

8 of a state law exemption must arise under state law. • Id. at 

9 1197-98. 

10 A growing number of cases have held that bankruptcy courts 

11 lack the authority to disallow a debtor's claimed state-created 

12 exemption based on section 105(a), whether indirectly by denying 

13 leave to amend or directly by disallowing the exemption, because 

14 doing so would be irreconcilable with Law v. Siegel. See, e.g., 

15 In re Elliott, 523 B.R. 188 (9th Cir. BAP 2014); In re Lua, 529 

16 B.R. 766 (Bankr. C.D. Cal.), aff'd, 551 B.R. 448 (C.D. Cal. 

17 2015) 

18 Here, the trustee's objection initially argued that the 

19 debtors' amended wildcard exemption should be disallowed under 

20 section 105(a), based on the debtors' bad faith. The court 

21 disagrees and interprets Law v. Siegel as a clear mandate that 

22 this court lacks the authority to disallow a claim of exemption 

23 based on section 105(a). 

24 Without identifying a specific legal principle, the 

25 trustee's trial brief proposed that a basis independent of 

26 section 105(a) bars the debtors' from amending their wildcard 

27 I exemption: 

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1 Even if Law is read broadly to preclude exemption 

objections on bad faith grounds and other judge-made 

2 exceptions to the exemption scheme, L.. is not 

implicated in this case because this case stands 

3 independent of bad faith. This case is about the 

Debtors trying to exceed the statutory limits of the Wild Card 

4 exemption. The Debtors are attempting to re-use the Wild Card 

exemption after already using it and benefitting from it to 

5 obtain abandonment of assets after the Court, the Trustee, and 

other interested parties relied upon the same. 

6 

(F1's Trial Br., Adv. Docket No. 38 at 9.) 

7 

The trustee appears to argue the debtors should be equitably 

8 

estopped from amending the wildcard exemption applied to the 

9 

catering truck after the debtors had successfully obtained 

10 

abandonment of the truck. The court disagrees with the trustee's 

11 

assertion that Law v. Siegel does not extend to this situation. 

12 

13 As the Supreme Court and the Ninth Circuit Bankruptcy Appellate 

Panel have instructed, this court will turn to California state 

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law to determine whether the debtors' amended wildcard exemption 

15 

16 may be disallowed based on the equitable doctrine asserted by the 

trustee. 

17 

18 

B. Disallowance of Exemption Based on California Law 

19 

20 

California courts have long recognized that the doctrine of 

21 equitable estoppel applies to state-created bankruptcy 

22 exemptions. See, e.g., In re Steward, 227 B.R. 895, 899 (9th 

23 Cir. BAP 1998) (applying estoppel principles to homestead 

24 exemption and concluding homeowner was not estopped from claiming 

25 

homestead exemption); In re Lua, 551 B.R. 448, 453 (C.D. Cal. 

26 2015) (denying homestead exemption on grounds of estoppel under 

27 California law); Jefferson v. Tom, 52 Cal.App.2d 432, 436-37 

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1 (1942) (denying homestead exemption on grounds of estoppel and 

2 laches) 

3 To invoke equitable estoppel under California law, a party 

4 must show: "(a) a representation or concealment of material 

5 facts; (b) made with knowledge, actual or virtual, of the facts; 

6 (c) to a party ignorant, actually and permissibly, of the truth; 

'a' (d) with the intention, actual or virtual, that the ignorant 

8 party act on it; and (e) that party was induced to act on it." 

9 Simmons v. Ghaderi, 44 Cal.4th 570, 584 (2008) . The party 

10 asserting the existence of an estoppel under California law has 

11 the burden of establishing all the elements thereof by a 

12 preponderance of the evidence. See, e.g., Guatav Christian 

13 Fellowship v. Cty. of San Diego, 670 F.3d 957, 972 (9th Cir. 

14 2011): State Comp. Ins. Fund v. Workers' Comp. Appeals. Bd., 40 

15 Cal.3d 5, 16 (1985); see also, DeYouna v. Del Mar Thoroughbred 

16 Club, 159 Cal.App.3d 858, 862 (1984). 

17 For purposes of applying the factors, of equitable estoppel 

18 to the instant case, the court assumes a debtor may amend an 

19 exemption claimed on property that has been abandoned by the 

20 estate. 

21 

22 1. Representation or Concealment of Material Fact 

23 The party against whom equitable estoppel is sought must 

24 have represented or concealed a material fact. Young v. Horizon 

25 West, Inc., 220 Cal.App.4th 1122, 1131-32 (2013) . Here, the 

26 debtor made a written statement, under penalty of perjury, that 

27 he sought abandonment of the catering truck on the basis that its 

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1 scheduled value of $19,500 was claimed exempt under California's 

2 section 703.140(b) (5) "wildcard" provision. (Decl. of Jose 

3 Martinez, Docket No. 13.) The debtors filed subsequent amended 

4 schedules that reduced the dollar amount of the wildcard 

5 exemption applied to the catering truck and reduced the listed 

6 value of the debtors' interest in the catering truck. The dollar 

7 amount of the wildcard exemption necessary to exempt the catering 

8 truck is material--given the amount inversely correlates to the 

9 amount of nonexempt equity that can be realized in other assets 

10 for the benefit of the estate. This element of equitable 

11 estoppel is therefore satisfied. 

12 

13 2. Made with Knowledge of the Facts 

14 The party against whom estoppel is sought must also have had 

15 knowledge of the facts, although "ignorance or mistake will not 

16 prevent an estoppel" when a party makes an affirmative statement 

17 of facts rather than remains silent. Cty. of Long Beach v. 

18 Mansell, 3 Cal.3d 462, 491 (1970). There is no indication that 

19 the debtors were aware of their right to claim the catering truck 

20 exempt as a "tool of the trade" under California exemption law at 

21 any time pridr to the March 26, 2013 abandonment order. The 

22 debtors first applied the tools-of-the-trade exemption in the May 

23 9, 2013 amended schedules. The debtors testified that they had 

24 not seen or signed the May 9 amended schedules nor any prior 

25 amended schedules and did not become aware of the application of 

26 the tools-of-the-trade exemption until after reviewing the docket 

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1 with their current counsel of record. (Martinez Test. at 6 ¶ 

2 22.) 

3 California's "tools-of-the-trade" exemption allows a debtor 

4 to exempt up to "($7,175) in value, in any implements, 

5 professional books, or tools of the trade of the debtor or the 

6 trade of a .dependent of the debtor." Cal. Civ. P. Code § 

7 703.140(b) (6) . While noting that, "California cases purporting 

8 to interpret the scope of the tools-of-the-trade exemption are 

9 few and far between," several courts have held that a vehicle 

10 qualifies as a "tool of the trade" under California exemption law 

11 if it is "necessary" to the debtor's trade, business, or 

12 profession. In re Lopez, No. 2:14-BK-12175-BB, 2015 WL 5309580, 

13 at *4 (B.A.P. 9th Cir. Sept. 3, 2015). 

14 It is undisputed that the debtors operated their sole 

15 proprietorship out of the catering truck. (Trustee Deci., Docket 

16 No. 115 at 2, ¶ 3.) It is therefore self-evident that the 

17 catering truck was "necessary" to the business and qualified as a 

18 "tool of the trade" under California exemption law. Further, the 

19 Ninth Circuit has held that the mere fact that a chapter 7 debtor 

20 exempts an interest in motor vehicle under the California's 

21 "wildcard" statute does not prevent a later characterization of 

22 the vehicle as a "tool of the trade." In re Garcia, 451 B.R. 

23 909, 916-17 (C.D. Cal. 2011), aff'd, 709 F.3d 861 (9th Cir. 

24 2013). 

25 In contrast to the wildcard exemption, which can be applied 

26 to any property, the tools-of-the-trade exemption is narrow in 

27 scope. It defies reason to assume a debtor would knowingly elect 

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1 to use the majority of the wildcard dollar amount to exempt an 

2 asset that could be exempted under a narrower statutory category. 

3 The court concludes the "knowledge of the facts" element is not 

4 satisfied. 

5 

6 3. To a Party Ignorant of the Truth 

7 To successfully invoke equitable estoppel against the 

8 debtor, the trustee must also demonstrate that it was "ignorant, 

9 actually and permissibly, of the truth." Simmons, 44 Cal.4th at 

10 584. At the time the debtor moved to compel abandonment of the 

11 catering truck claimed exempt under the wildcard provision, the 

12 trustee had no reason to be aware that the debtor would later 

13 amend the claimed wildcard exemption. The trustee did not oppose 

14 the abandonment motion and diligently pursued the debtor's 

15 i in nonexempt property. This element is therefore 

16 satisfied. 

17 

18 4. With the Intention That the Party Act on It 

19 Equitable estoppel requires a finding of intent. Nansell, 3 

20 Cal.3d at 491. After the catering truck was claimed exempt and 

21 authorized abandoned, only $5,340 of the wildcard dollar amount 

22 was available to exempt remaining assets. With this knowledge, 

23 the trustee pursued assets with equity in excess of the remaining 

24 wildcard dollar amount. It is reasonable to assume that the 

25 debtors intended the trustee to act on their representation that 

26 only $5,340 remained under the wildcard exemption. Nevertheless, 

27 it cannot be deduced that the debtors moved to compel abandonment 

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ill of the catering truck with the intent that the trustee would 

2 pursue the Hummer and tax refund. 

3 The debtors filed the abandonment motion shortly after 

4 filing their bankruptcy petition. They did so in reaction to the 

5 trustee's ultimatum to either abandon or terminate their 

6 business. Considering the catering truck and business were 

7 critical to the debtors' livelihood, the debtors' decision to 

8 pursue abandonment was likely made hastily and without much 

9 reflection or foresight. The debtors' statement of intention 

10 filed with their initial petition indicates their intent to 

11 retain the Hummer. (Docket 1.) Additionally, the debtors did 

12 not remain silent when the trustee pursued the Hummer and tax 

13 refund. The debtors repeatedly claimed the Hummer and tax refund 

14 exempt and opposed their turnover. The court concludes the 

15 element of intent is not satisfied. 

16 

17 5. That Party Was Induced to Act on It 

18 The element of reliance requires that the party asserting 

19 equitable estoppel change her position in reliance on something 

20 said or done by the other party, resulting in detriment or 

21 prejudice to the party asserting equitable estoppel. State Comp. 

22 Ins. Fund, 40 Cal.3d at 16. It is undeniable that the trustee 

23 changed his position in reliance upon the abandonment order. The 

24 trustee--relying on the debtors' representation that a majority 

25 of the wildcard dollar amount had been applied to the catering 

26 truck--sought turnover of the Hummer and tax refund in an effort 

27 to compensate creditors. 

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The trustee contends the debtors gained a "windfall" to the 

detriment of creditors by reducing the wildcard dollar amount 

used to exempt the catering truck after its abandonment and then 

using the resulting wildcard balance to exempt the Hummer and tax 

refund. Framed differently, the trustee posits that the debtors 

6 are "trying to exceed" the maximum dollar amount of the wildcard 

7 exemption. (21's Trial Br., Adv. Docket No. 38 at 9.) 

8 Under California's section 703.140(b) exemption framework, a 

9 debtor is allowed to exempt certain types of assets up to a 

10 designated dollar amount. In pertinent part, a debtor may 

11 exempt: (1) $4,800 in one or more motor vehicles; (2) $7,175 in 

12 tools of the trade of the debtor; and (3) $25,340 in any 

13 property. Cal. Civ. P. Code § 703.140(b) (2), (b)(5), (b)(6). In 

14 their final amended schedule C, the debtors properly applied the 

15 aforementioned dollar amounts to exempt the Hummer, tax refund, 

16 and catering truck. (Docket No. 99.) Had the final amended 

17 schedule C been filed with the debtor's original petition, or had 

18 the catering truck not been abandoned, it would be undisputable 

19 that the debtors had properly exercised their right to claim the 

20 exemptions afforded to them under the section 703.140(b) 

21 I exemption scheme. 

22 Factoring in the abandonment order, there are two scenarios 

23 in which the wildcard amendment would result in a windfall to the 

24 debtors to the detriment of creditors: (1) if the debtors reduced 

25 the dollar amount of the wildcard exemption applied to the 

26 catering truck without substituting an alternate claim of 

27 exemption in its place; or (2) if the debtors reduced the 

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1 scheduled value of the catering truck to less than its 

2 liquidation value and reduced the corresponding exemption amount. 

3 In both scenarios, the abandonment order would preclude the 

4 estate from realizing nonexempt equity in the catering truck. 

5 The facts of this case do no present either scenario. The 

6 debtors substituted the reduced wildcard dollar amount applied to 

7 the catering truck with the tools-of-the-trade exemption, and the 

8 $12,000 valuation of the catering truck credibly reflects the 

9 asset's depreciation over six years. Notably, the trustee has 

10 never disputed the $12,000 valuation. (See, e.g., Trial Tr., 

11 Docket No. 41 at 45.) 

12 The California Supreme Court has held that equitable 

13 estoppel 'rests firmly upon a foundation of conscience and fair 

14 dealing." Mansell, 3 Cal.3d at 491. Here, it appears the 

15 debtors, although significantly hindered by the incompetence of 

16 their former counsel, dealt fairly with trustee to the best of 

17 their ability. There is no indication that the debtors knowingly 

18 declined to apply the tools-of-the-trade exemption to the 

19 catering truck. There is no indication that the debtors would 

20 have sought abandonment of the catering truck but for the 

21 trustee's ultimatum. There is no indication that the debtors 

22 intended for the trustee to pursue the Hummer and tax refund. 

23 There is no indication that the debtors sought to claim 

24 exemptions in excess of the statutory limits. And, there is no 

25 indication that the debtors reduced the value of the catering 

26 tuck to one below its actual value. In conclusion, the court is 

27 satisfied that the debtors have engaged in the bankruptcy process 

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Filed 12/15/16 Case 13-02293 Doc 43
with conscience and fair dealing. 

For the reasons set forth above, the court finds that the 

trustee has not met his burden of establishing that debtors' 

amended wildcard should be disallowed based on California 

equitable estoppel. 

C. Turnover of Exempt Assets 

The trustee seeks turnover of the Hummer notwithstanding the 

debtors' claim of exemption in the amount $13,875. The trustee 

must prove by a preponderance of the evidence that the bankruptcy 

estate is entitled to a turnover. In re Jacobson, 676 F.3d 1193, 

1201 (9th Cir. 2012) . A debtor is not required to turn over 

property that is of "inconsequential value or benefit to the 

estate." 11 U.S.C. § 542(a). 

The trustee has provided the following evidence to establish 

that the Hummer is of "consequential value" to the estate: 

The Debtors have advised [the trustee] that the Hummer 

is in good condition, has been driven about 120,000 

miles, and as of May 19, 2013 had a Kelly Blue Book 

private party value of $17,500. In [the trustee's] 

opinion, based on consultation with auctioneer Dennis 

West, the Hummer would sell at auction for between 

$12,000 and $15,000, with selling costs ranging from 

$1,500 to $2,000, netting a range of $10,500 to 

$13, 000. 

(Trustee Decl., Docket 48 at 2, ¶ 5.) 

At the time of writing this decision, a 2004 Hummer H2 in 

good condition has a Kelly Blue Book private party value of 

$13,099. Based upon the formula set forth in the turnover 

motion, the court finds no possibility for the estate to realize 

1 equity in the Hummer in excess of the allowed exemption in the 

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Filed 12/15/16 Case 13-02293 Doc 43
amount of $13,875. Accordingly, the trustee has not met his 

evidentiary burden to prove that the Hummer is of "consequential 

value" to the estate. The Hummer is therefore not subject to 

turnover. 

D. Denial of Discharae 

The trustee filed a complaint objecting to discharge of the 

debtors pursuant to ii U.S.C. section 727(c), (d), and (e). In 

light of the foregoing decision, the trustee is ordered to file a 

statement as to whether the trustee wishes to proceed with the 

discharge objection. 

III. CONCLUSION 

For the foregoing reasons, the Objection to Claim of 

Exemption is OVERRULED and the Motion for Turnover is DENIED. 

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Dated: December 15 

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CERTIFICATE OF SERVICE 

On the date indicated below, I served a true and correct 

copy(ies) of the attached document by placing said copy(ies) in a 

postage paid envelope addressed to the person(s) hereinafter 

listed and by depositing said envelope in the United States mail 

or by placing said copy(ies) into an interoffice delivery 

receptacle located in the Clerk's Office. 

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J. Michael Hopper 

P0 Box 73826 

Davis, CA 95617 

J. Luke Hendrix 

1830 15th Street 

Sacramento, CA 95811 

Jose Martinez 

3 San Rogue Court 

Sacramento, CA 95823 

Ana Granados 

3 San Rogue Court 

Sacramento, CA 95823 

Scott A. Coben 

5221 Starkes Grade Road 

Sacramento, CA 95726 

AmeriCredit Financial Services, Inc. 

P0 BOX 183853 

Arlington, TX 76096 

Atlas Acquisitions LLC 

Attn: Avi Schild 

294 Union Street 

Hackensack, NJ 07601 

Office of the U.S. Trustee 

Robert T Matsui United States Courthouse 

501 I Street, Room 7-500 

Sacramento, CA 95814 

Dated:tZ_((D_lt IWt. i 

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Filed 12/15/16 Case 13-02293 Doc 43