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ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NV-12-1439-JuKiD

)

EUGENE SCOTT NEWMAN, JR., ) Bk. No. 11-28663-LBR

)

Debtor. )

______________________________)

)

EUGENE SCOTT NEWMAN, JR., )

)

Appellant, )

)

v. ) O P I N I O N

)

LENARD SCHWARTZER, Chapter 7 )

Trustee, )

)

Appellee. )

______________________________)

Argued and Submitted on January 25, 2013

at Las Vegas, Nevada

Filed - February 4, 2013

Appeal from the United States Bankruptcy Court

for the District of Nevada

Honorable Linda B. Riegle, Bankruptcy Judge, Presiding

_____________________________________

Appearances: Malik W. Ahmad, Esq., Law Office of Malik W.

Ahmad, appeared for appellant Eugene Scott

Newman, Jr.; Lenard E. Schwartzer, chapter 7

trustee appeared pro se 

____________________________________

Before: JURY, KIRSCHER, and DUNN Bankruptcy Judges.

FILED

FEB 04 2013

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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 Unless otherwise indicated, all chapter and section 1

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 

“Rule” references are to the Federal Rules of Bankruptcy

Procedure and “Civil Rule” references are to the Federal Rules

of Civil Procedure.

 We take judicial notice of the docket of the underlying 2

bankruptcy case and the imaged documents attached thereto. See

O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887

F.2d 955, 957–58 (9th Cir. 1989).

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JURY, Bankruptcy Judge:

Chapter 7 debtor Eugene Scott Newman, Jr., appeals the 1

bankruptcy court’s order granting the motion to compel turnover

of debtor’s 2011 tax refund in the amount of $4,727 brought by

chapter 7 trustee Lenard Schwartzer. We AFFIRM.

I. FACTS

Debtor and his spouse are married and residents of Nevada. 

On December 2, 2011, debtor filed his individual chapter 7

petition. Debtor’s schedules did not list his 2011 tax refund

as an asset nor did he claim any portion of the refund exempt.

In January 2012, debtor made three amendments to his

Schedules B and C which related to vehicles.

On March 12, 2012, debtor received his discharge.2

On May 1, 2012, the trustee sent debtor a letter requesting

a copy of his 2011 tax return. Debtor complied. The jointly

filed tax return showed a refund of $5,135 due.

On May 11, 2012, the trustee sent debtor a second letter

stating that a portion of the refund, in the sum of $4,727,

constituted property of the estate under § 541 and thus was

subject to turnover under § 542(a). The letter further stated
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 Counsel listed debtor’s case as well as Case No. 09- 3

32838.

 These rules reflect three approaches that various 4

bankruptcy courts have taken in allocating tax refunds between

the debtor and non-debtor spouse. See In re Spina, 416 B.R. 92,

(continued...)

-3-

that debtor could claim an exemption for the earned income

credit if debtor filed an amended Schedule C.

On May 22, 2012, debtor’s counsel sent an email to the Help

Desk at the bankruptcy court stating:

I have the following cases to reopen for changes in

the schedules . . . . Do I need to pay the reopening 3

case fee of $269 in each case. These folks have been

discharged. The procedural question is if the fee is

payable after discharge or after the closure of the

case. As usual thanks for your help.

On May 23, 2012, the Help Desk responded: “Yes, the

reopening fee needs to be paid in each case with that motion. 

Thank you.”

On May 30, 2012, debtor’s counsel filed an ex parte motion

to reopen debtor’s case even though debtor’s case was not

closed.

On July 9, 2012, the trustee moved for an order compelling

turnover of the 2011 tax refund in the amount of $4,727 and for

sanctions of $250 (Turnover Motion).

On July 16, 2012, debtor’s counsel filed an opposition to

the Turnover Motion arguing: (1) the tax refund of the nondebtor spouse was not property of the estate subject to

turnover; (2) the non-debtor spouse need not turn over her

portion of the refund due to the application of the Withholding

Rule, the Proportionate Income Rule, or the 50/50 Refund Rule;4
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(...continued) 4

96-97 (Bankr. E.D.N.Y. 2009). The Withholding Rule “allocates

the joint tax refund between the spouses in proportion to their

respective tax withholding.” Id. at 96. Under this rule, a

nondebtor spouse may have been employed but not have generated

any withheld taxes, and, therefore, would have no right to any

withheld taxes which are repaid to the taxpayer. Id. The

Proportionate Income Rule allocates the tax refund as a direct

percentage of the earnings of the spouses. Id. The 50/50

Refund Rule, a minority view which applies New York matrimonial

law, creates a rebuttable presumption that each spouse

contributed equally to the household, including nonmonetary

contributions, and, therefore, the refund should be divided

equally between the spouses. Id. at 96-97. See also In re

Palmer, 449 B.R. 621 (Bankr. D. Mont. 2011) (adopting formula

used by Internal Revenue Service to allocate tax refund).

 Debtor has provided no transcripts in the record on 5

appeal.

 This section provides: 6

1. The following property is exempt from execution,

except as otherwise specifically provided in this

section or required by federal law:

. . . 

(aa) Any tax refund received by the judgment debtor

that is derived from the earned income credit

(continued...)

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(3) allocation of a joint tax refund is predicated upon

consideration of many factors; and (4) the trustee’s motion to

compel was “too late” because debtor and his spouse spent the

money to pay utility bills, their mortgage and other

expenditures.

On August 9, 2012, the bankruptcy court heard the matter

and granted the trustee’s Turnover Motion by order entered

August 19, 2012.5

On August 22, 2012, debtor amended his Schedule C to claim

the sum of $3,094 exempt under Nev. Rev. Stat. 21.090 , the 6
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(...continued) 6

described in section 32 of the Internal Revenue Code,

26 U.S.C. § 32, or a similar credit provided pursuant

to a state law.

-5-

earned income exemption statute, and to claim an additional

$1000 exempt under Nev. Rev. Stat. 21.090(1)(z), the wildcard

exemption. Debtor’s amended Schedule C does not identify the

property to which the exemption applies, but we presume it is

the tax refund at issue in this appeal.

On August 22, 2012, the same date the amended Schedule C

was filed, debtor filed a timely notice of appeal.

II. JURISDICTION

The bankruptcy court had jurisdiction over this proceeding

under 28 U.S.C. §§ 1334 and 157(b)(2)(A), (B) and (E). We have

jurisdiction under 28 U.S.C. § 158.

III. ISSUE

Whether the bankruptcy court erred in entering the turnover

order.

IV. STANDARD OF REVIEW

Whether property is included in a bankruptcy estate and

procedures for recovering estate property are questions of law

that we review de novo. White v. Brown (In re White), 389 B.R.

693, 698 (9th Cir. BAP 2008).

V. DISCUSSION

A. Debtor Did Not Exempt Any Portion of the Tax Refund Before

the Bankruptcy Court Ruled

Debtor first contends that the bankruptcy court erred as a

matter of law in holding that debtor’s earned income credit of
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 We are aware that the purported reason for the delay in 7

amending Schedule C was debtor’s attorney’s mistaken belief that

before amending the Schedule, it was first necessary to obtain a

court order reopening debtor’s case even though the case had not

yet been closed. As a result of his mistaken belief, debtor’s

attorney claims that the amended Schedule C should be considered

on the basis of excusable neglect. However, once the bankruptcy

court entered the order granting the trustee’s Turnover Motion,

debtor’s remedy was to file a motion under Civil Rule 59, as

incorporated by Rule 9023, or file a motion under Civil Rule

60(b), as incorporated by Rule 9024. Debtor did neither and

from what we can tell, debtor’s attorney now raises the issue of

his excusable neglect for the first time in this appeal. We

address this argument in further detail below.

 Under Rule 1009(a), a debtor may amend his schedules as a 8

matter of course at any time prior to the closing of the case. 

Generally, “[t]he bankruptcy court has no discretion to disallow

amended exemptions, unless the amendment has been made in bad

faith or prejudices third parties.” Arnold v. Gill (In re

Arnold), 252 B.R. 778, 784 (9th Cir. BAP 2000) (citing Martinson

v. Michael (In re Michael), 163 F.3d 526, 529 (9th Cir. 1998)).

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$3,094 is not exempted under Nev. Rev. Stat. 21.090. This

contention is erroneous.

Debtor’s earned income credit exemption was not listed in

his original Schedule B or C, nor did debtor amend his Schedules

to claim the exemption in the tax refund prior to the bankruptcy

court’s ruling on the trustee’s Turnover Motion. It was only 7

after the bankruptcy court entered an order in favor of the

trustee on the Turnover Motion that debtor filed his amended

Schedule C and, even then, his amended Schedule does not

identify the property to which the exemption applies. Because 8

debtor’s amended Schedule C was not before the bankruptcy court

with respect to the order on appeal, we do not consider it now. 

Oyama v. Sheehan (In re Sheehan), 253 F.3d 507, 512 n.5 (9th

Cir. 2001) (“Evidence that was not before the [trial] court will
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not generally be considered on appeal.”) (citing Karmun v.

Comm’r, 749 F.2d 567, 570 (9th Cir. 1984)); see also Kirshner v.

Uniden Corp. of Am., 842 F.2d 1074, 1078 (9th Cir. 1988)

(“Papers not filed with the [trial] court or admitted into

evidence by that court are not part of the clerk’s record and

cannot be part of the record on appeal.”). As it now stands,

the order on appeal necessarily subsumes a determination that

the tax refund at issue is nonexempt property of the estate.

B. The Tax Refund Was Property of Debtor’s Estate

Debtor next challenges the bankruptcy court’s conclusion

that the entire tax refund was property of his estate. Section

541(a)(1) provides that property of the estate includes all

legal or equitable interests of the debtor in property as of the

commencement of the case. Under § 541(a)(2), the estate also

includes “[a]ll interests of the debtor and the debtor’s spouse

in community property as of the commencement of the case that is

. . . under the sole, equal or joint management and control of

the debtor.” (Emphasis added).

“[T]he right to receive a tax refund constitutes an

interest in property.” Nichols v. Birdsell, 491 F.3d 987, 990

(9th Cir. 2007). The nature and extent of the debtor’s interest

in the tax refund is determined by nonbankruptcy law. Travelers

Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443,

451 (2007) (citing Butner v. United States, 440 U.S. 48, 54–55

(1979)). Nevada law applies here.

Under Nevada law, all property acquired by either spouse

during the marriage, with some exceptions not applicable here,

is community property. Nev. Rev. Stat. 123.220; see Norwest
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 Debtor advocates that instead of applying Nevada’s 9

community property law to this case, we should apply what is

known as the 50/50 Refund Rule. Debtor provides no cogent

reason — other than a favorable outcome for himself and nondebtor spouse — as to why this Panel should adopt a minority

view followed by a handful of bankruptcy courts in New York that

apply New York matrimonial law. Simply put, New York is not a

community property state.

-8-

Fin. v. Lawver, 849 P.2d 324, 326 (Nev. 1993) (wages of either

spouse during marriage are considered to be community funds

regardless of which spouse earns the greater income or which

spouse supports the community). Spouses also have joint control

of community property. Either spouse may transfer or encumber

community property without the consent of the other subject to

several exceptions, which are not relevant here. Nev. Rev.

Stat. 123.230; Soper v. Crystal Palace Gambling Hall, Inc. (In

re Crystal Palace Gambling Hall, Inc.), 36 B.R. 947, 950 (9th

Cir. BAP 1984). Therefore, because the tax refund is community

property subject to the joint control of either spouse,

§ 541(a)(2) “dictates that the entire prorated tax refund is

property of [d]ebtor’s bankruptcy estate.” In re Martell, 349

B.R. 233, 236 (Bankr. D. Idaho 2005). We thus conclude that 9

the bankruptcy court properly found the tax refund was property

of debtor’s estate subject to turnover.

C. The Bankruptcy Court Properly Ordered Turnover

Having concluded that the tax refund was property of

debtor’s estate, we next consider whether the trustee may compel

turnover of the property from debtor when he has spent the

funds. Section 542(a) provides:

Except as provided in subsection (c) or (d) of this
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section, an entity, other than a custodian, in

possession, custody, or control, during the case, of

property that the trustee may use, sell, or lease

under section 363 of this title, or that the debtor

may exempt under section 522 of this title, shall

deliver to the trustee, and account for, such property

or the value of such property, unless such property is

of inconsequential value or benefit to the estate.

Relying on Brown v. Pyatt (In re Pyatt), 486 F.3d 423 (8th

Cir. 2007), debtor contends that by spending the funds, they are

no longer in his “possession, custody or control” within the

meaning of § 542(a). In Pyatt, although the debtor had

approximately $1,900 in his bank account at the time his

petition was filed, the Eighth Circuit found that he could not

be compelled to turn over that amount when most of the funds

were used to honor prepetition checks that cleared soon after

his bankruptcy filing because the funds were no longer in his

possession or control. In reaching this conclusion, the court

first reasoned that the language of § 542(a) said nothing about

whether the obligation to deliver the property to the trustee

continued after custody or control ceased. Id. at 428. Next,

citing Maggio v. Zeitz, 333 U.S. 56 (1948), the court observed

that pre-Code practice suggested that § 542(a) permitted a

trustee to compel turnover only from entities which have control

of property of the estate or its proceeds at the time of the

turnover demand. Id. at 428-29. The court also rejected the

argument that present possession was not required in light of

the statutory language that authorized the trustee to demand

turnover of the property, “or its value.” According to the

Eighth Circuit, this language meant that if a debtor transferred

property of the estate and received value for it, “a trustee may
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 We note that the Nevada District Court has followed Pyatt 10

in Shapiro v. Henson (In re Henson), 449 B.R. 109 (D. Nev.

2011).

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compel him to turn over the value of the property because he

still has control over the proceeds of the property.” Id. at

429.

Finally, the court expressed concern that if present

“possession, custody or control” was not required, the “trustee

could proceed both against the debtor and against the payees and

obtain double satisfaction.” Id. at 427. The court noted that

§ 550(d) prohibited double satisfaction in avoidances under

§§ 544, 545, 547-549, 553(b), and 724(a) but made no mention of

§ 542(a). The court reasoned: “The absence of such a

prohibition suggests that the drafters did not intend to

authorize a trustee to proceed under § 542(a) against everyone

who may have had control over property of the estate at some

point after the petition was filed.” Id. at 427-28.

The Pyatt ruling does not persuade us. Among the Circuit

courts and Bankruptcy Appellate Panels that have addressed the

issue before us, Pyatt represents a minority view. The Fourth 10

and Seventh Circuits and the Sixth and Tenth Circuit bankruptcy

appellate panels do not require the debtor/defendant to have

present possession, custody or control of property when a demand

for turnover is made. See Beaman v. Vandeventer Black, LLP (In

re Shearin), 224 F.3d 353 (4th Cir. 2000) (law firm, having

possessed year-end profits belonging to the debtor during the

pendency of his bankruptcy case, must turn over profits, or

their equivalent value, to the trustee, notwithstanding that the
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law firm no longer possessed the funds at the time the turnover

proceeding was filed); Boyer v. Carlton, Fields, Ward, Emmanuel,

Smith & Cutler, P.A. (In re USA Diversified Prods., Inc.), 100

F.3d 53, 56 (7th Cir. 1996) (“[B]y the time the trustee got

around to demanding the money from the law firm, the law firm no

longer had it, so how could it deliver it to the trustee? 

[Section 542], however, requires the delivery of the property or

the value of the property. Otherwise, upon receiving a demand

from the trustee, the possessor of property of the debtor could

thwart the demand simply by transferring the property to someone

else. That is not what the statute says, . . . and can’t be

what it means.”) (emphasis in original); Bailey v. Suhar (In re

Bailey), 380 B.R. 486, 491-93 (6th Cir. BAP 2008) (portion of

tax refund which was property of the debtor’s estate retained by

attorney for unpaid attorney’s fees and no longer in the

debtor’s possession was subject to turnover); and Jubber v. Ruiz

(In re Ruiz), 455 B.R. 745 (10th Cir. BAP 2011) (requiring

turnover of the balance of funds in the debtors’ checking

account when petition was filed, prior to payment of checks that

debtors had written prepetition).

Recently, in the unpublished decision of Rynda v. Thompson

(In re Rynda), 2012 WL 603657 (9th Cir. BAP Jan. 30 2012),

another Panel of this court held that § 542(a) does not require

current possession under circumstances similar to those here. 

In Rynda, the debtor filed a chapter 7 petition and did not list

her entitlement to tax refunds under state and federal law in

her Schedule B or claim such refunds exempt in her Schedule C. 

After learning about the refunds, the trustee made a demand on
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the debtor to turn over the refunds. In response, the debtor

asserted, among other things, that the funds were no longer in

her possession — although she offered to make monthly payments

to pay the amount of the refunds. The trustee refused her

proposal and filed a motion for turnover of the refunds under

§ 542. After a hearing, the bankruptcy court issued a decision

determining that a turnover order was appropriate if a debtor

came into possession of estate property after filing a petition,

even if the debtor no longer had possession of the property. 

Id., at *1. The debtor appealed.

On appeal, the Panel held that even though debtor no longer

possessed the funds, she was not relieved of her statutory

obligation “‘to deliver to the trustee and account for such

property’ or its value.” Id., at *2. “Section 542’s mandate

means that she must deliver property or pay over money to the

trustee. The requirement is not waived because the debtor no

longer possesses the property.” Id. (citation omitted). In the

end, the Panel held that “since the Debtor had been in

possession of property of the estate, the Turnover Order was

appropriate even though the Debtor did not possess the funds at

the time the Trustee filed the Turnover Motion.” Id., at *3.

Because we do not find Rynda distinguishable from this

case, we adopt its holding, but expand on its analysis in light

of debtor’s reliance on Pyatt. We begin our analysis with the

language of § 542(a) itself. United States v. Buckland, 289

F.3d 558, 564 (9th Cir. 2002) (en banc). Under the plain

language of the statute “[t]he obligation to turnover extends

not just to property presently in someone’s possession, custody
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or control but to property in its ‘possession, custody or

control during the case.’” Boyer v. Davis (In re USA

Diversified Prods., Inc.), 193 B.R. 868, 874-75 (Bankr. N.D.

Ind. 1995) (emphasis in original). Here, there is no question

that debtor was entitled to the tax refund on the petition date

and that he received the refund post-petition. Thus, debtor was

in “possession, custody, or control” of the property “during the

case” as required under the statute.

Moreover, the plain language of the statute provides a

broader remedy than turnover of property itself. Section 542(a)

provides that “an entity . . . in possession, custody, or

control, during the case, . . . shall deliver . . . and account

for, such property or the value of such property.” (Emphasis

added). “[I]f the statute [were] read to require current

possession of the property, the language allowing a trustee to

alternatively recover ‘the value of the property’ would become

superfluous, as the trustee could only recover the property

itself.” In re Ruiz, 455 B.R. at 751. The statute should not

be interpreted so as to render one part inoperative. Id.

In addition, the pre-Code practice of requiring possession

must be viewed in context. In Maggio, 333 U.S. 56, the trustee

brought a motion to hold Maggio in contempt for failing to turn

over property of the estate. “Numerous courts, including

Maggio, were troubled by the possibility that a turnover order

might be issued against a party who could not possibly comply

with it, because the property in question was no longer in its

possession, and then attempt to force that party to do the

impossible through contempt proceedings.” In re USA Diversified
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Prods., Inc., 193 B.R. at 876. Even then, if the party did not

have present possession, it only meant that the trustee could

not seek to enforce turnover through contempt, but instead was

required to initiate a plenary proceeding in an effort to obtain

a money judgment for what the turnover respondent no longer

possessed. Id. at 877. Considered in this context, the United

States Supreme Court in Maggio “held that turnover was

appropriate only ‘when the evidence satisfactorily establishes

the existence of the property or its proceeds, and possession

thereof, by the defendant at the time of the [turnover]

proceeding.’” In re Bailey, 380 B.R. at 491 (quoting Maggio,

333 U.S. at 63-64). Whatever the procedures then, the plain

language of § 542(a) has no “present possession” requirement.

We also conclude that the Pyatt court’s concern with a

trustee’s double recovery is unfounded. Section 550(d)’s

prohibition on double recovery references statutes that relate

to the trustee’s avoidance powers (§§ 544, 545, 547–549, 553(b)

and 724(a)). Because § 542(a) addresses not avoidance, but

turnover of property of the estate, “little, if anything, should

be read into the failure to include § 542(a) in the provisions

of § 550.” In re Ruiz, 455 B.R. at 751-52. Moreover, “if a

trustee sought a double recovery, the party from whom the second

recovery was sought could raise as an equitable defense to

turnover that the bank account constituted effectively a single

asset, and the trustee should not be able to recover the same

asset twice.” Id. at 752.

The upshot of this analysis is clear: even though debtor

no longer possessed the funds, he was not relieved of his
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statutory obligation “‘to deliver to the trustee and account for

such property’ or its value.” Rynda, 2012 WL 603657, at *2. 

Our conclusion is consistent with the Ninth Circuit’s holding in

Nichols, 491 F.3d 987. In that case, the issue was whether the

debtors’ overpayment of taxes, which entitled them to an

immediate refund, was property of their estate subject to

turnover. The debtors elected to leave the overpayments on

deposit with the United States and the State of Arizona and to

apply the overpayments to their future tax liability. Upon

discovery, the trustee required debtors to turn over the unpaid

balance on their taxes to the estate. The Ninth Circuit held

that the right to receive a tax refund constituted an interest

in property and, therefore, it followed that the debtors’

election to waive the carryback and relinquish the right to a

refund necessarily implicated a property interest. The court

determined that the debtors had exchanged a right to present

property for the right to it later and thus the value of the tax

credit was subject to the trustee’s avoidance powers. Thus,

even though the funds were not presently in the debtors’

possession, the trustee had authority to compel turnover of the

value of the tax credit from the debtors. Compare United States

v. Gould (In re Gould), 401 B.R. 415 (9th Cir. BAP 2009) (fact

that the debtor had spent tax refund which he was not entitled

to did not make Internal Revenue Service’s appeal moot because

debtor could be ordered to pay back the money), aff’d, 603 F.3d

1110 (9th Cir. 2010).

In sum, we hold that § 542(a) does not require the debtor

to have current possession of the property which is subject to
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 Although debtor contends the amount recovered by the 11

trustee would be inconsequential because he is entitled to

claimed exemptions, as previously explained, the issue of

whether he is entitled to any exemption is not properly before

us in this appeal.

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turnover. “If a debtor demonstrates that [he] is not in

possession of the property of the estate or its value at the

time of the turnover action, the trustee is entitled to recovery

of a money judgment for the value of the property of the

estate.” Rynda, 2012 WL 603657, at *3. In addition, the refund

here, approximately $5,000, cannot be viewed as having an

insignificant value to the estate. Accordingly, the bankruptcy 11

court properly granted the trustee’s Turnover Motion.

D. Civil Rule 60(b) and Excusable Neglect

Debtor’s attorney argues on appeal that his failure to file

amended Schedule C prior to the hearing on the Turnover Motion

constitutes excusable neglect. Civil Rule 60(b)(1) grants

bankruptcy courts discretion to relieve a party from a judgment

or order for reason of “mistake, inadvertence, surprise, or

excusable neglect,” provided that the party moves for such

relief not more than a year after the judgment was entered.

A Civil Rule 60(b) motion must be made in the bankruptcy

court. After entry of the order granting the trustee’s Turnover

Motion, debtor made no such motion for the bankruptcy court to

consider. At the hearing on this matter, the Panel urged

debtor’s counsel to proceed with the filing of a Civil Rule

60(b) motion because we generally do not decide issues on appeal

that were not first presented to the bankruptcy court. In re

E.R. Fegert, Inc., 887 F.2d at 957. Debtor must seek this
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relief in the bankruptcy court.

VI. CONCLUSION

For the reasons stated, we AFFIRM.