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FILED

JUN 06 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

NOT FOR PUBLICATION

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-15-1231-KiTaL

)

ROBERT KENNETH ZIEGLER, ) Bk. No. 8:13-bk-20257-CB

)

Debtor. )

 )

)

ROBERT KENNETH ZIEGLER, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

THOMAS H. CASEY, Chapter 7 )

Trustee; UNITED STATES )

TRUSTEE, )

)

Appellees. )

______________________________)

Argued and Submitted on May 19, 2016,

at Pasadena, California

Filed - June 6, 2016

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding

 

Appearances: Richard G. Heston of Heston & Heston argued for

appellant Robert Kenneth Ziegler; Kathleen J.

McCarthy and Steve Burnell of Law Office of Thomas

H. Casey, Inc. argued for appellee Thomas H. Casey,

Chapter 7 Trustee. 

 

1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may

have, it has no precedential value. See 9th Cir. BAP Rule 8024-1.
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Before: KIRSCHER, TAYLOR and LANDIS,2 Bankruptcy Judges.

Chapter 73 debtor Robert Kenneth Ziegler appeals an order

sustaining the trustee's objection to Debtor's amended "wildcard"

exemption for what were initially exempted homestead sale proceeds

which Debtor failed to reinvest in a new homestead within six

months as allowed under CAL. CIV. CODE P. ("CCP") § 704.720(b)4 and

Wolfe v. Jacobson (In re Jacobson), 676 F.3d 1193 (9th Cir. 2012). 

The bankruptcy court failed to make sufficient findings to support

its decision to disallow the exemption. Nonetheless, because the

prior turnover order adjudicated against Debtor the issue of

whether he could exempt a portion of the non-reinvested homestead

sale proceeds under the wildcard exemption, we AFFIRM. 

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

A. Debtor first claims sale proceeds exempt under the homestead

exemption.

Debtor filed his chapter 7 bankruptcy case on December 30,

2013. Thomas H. Casey was appointed as chapter 7 trustee. 

Debtor's residence, which had significant equity, was days away

from foreclosure. Debtor was unemployed at the time and had no

2 Hon. August B. Landis, Bankruptcy Judge for the District

of Nevada, sitting by designation.

3 Unless specified otherwise, all chapter, code and rule

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

the Federal Rules of Bankruptcy Procedure, Rules 1001-9037. The

Federal Rules of Civil Procedure are referred to as “Civil Rules.”

4 CCP § 704.720(b) provides, in relevant part:

If a homestead is sold under this division . . . the proceeds

of sale . . . are exempt in the amount of the homestead

exemption provided in Section 704.730. The proceeds are

exempt for a period of six months after the time the proceeds

are actually received by the judgment debtor[.]

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income. In his Schedule A, Debtor estimated the residence's value

at $485,000, subject to secured liens totaling $353,279. Debtor

initially claimed a homestead exemption of $100,000, but later

filed an amended Schedule C and reduced his exemption in the

residence to $75,000. Trustee did not object to Debtor's $75,000

homestead exemption under CCP § 704.730(a)(1).

Trustee sold Debtor's residence for $495,000. Initially,

Trustee had requested, and Debtor opposed, that Trustee be allowed

to retain the claimed exempt homestead funds for the statutory six

months pending evidence from Debtor that he would use the funds to

purchase a new homestead. Trustee ultimately conceded after

reviewing applicable legal authorities that Debtor was entitled to

receive the funds upon the close of escrow. 

The order to sell Debtor's residence provided that Trustee

had the right to recover the exempt homestead funds in the event

Debtor failed to timely reinvest them in a homestead. 

Debtor received the homestead funds on June 18, 2014. The

deadline to reinvest the funds expired on or about December 18,

2014. 

Immediately after the six-month deadline, Trustee requested

evidence from Debtor's counsel that the homestead funds were

timely reinvested. At a later continued § 341(a) examination, at

which Debtor failed to appear, Debtor's counsel could not provide

any evidence that Debtor had timely reinvested the funds in a

homestead. Thereafter, Trustee emailed Debtor's counsel to

determine what date Debtor would be available for a Rule 2004

examination regarding the status of the homestead funds. In his

response, Debtor's counsel indicated he was withdrawing from the

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case and that Trustee should contact Debtor directly. In his

motion to withdraw, Debtor's counsel stated that despite his

repeated advice to Debtor regarding the consequences of not

reinvesting the homestead funds in a new homestead, Debtor had

failed to reinvest the funds. Counsel had advised Debtor that the

funds were no longer exempt and therefore had to be turned over to

Trustee.

Trustee then moved for an order authorizing a Rule 2004

examination of Debtor, which was granted. Just before the

examination, Debtor provided Trustee with documents showing that

the homestead funds were not reinvested in a homestead and that,

as of January 30, 2015, Debtor had only approximately $29,000

remaining of the $75,000. 

At his Rule 2004 examination, Debtor testified that he was

aware of and understood the language in the sale order concerning

the homestead funds, including that Trustee would be entitled to

recover the $75,000 should Debtor fail to reinvest the funds in a

homestead. When asked if he had any intention of purchasing a

home within the six months after he received the money, Debtor

testified that he hoped he might buy a mobile home or trailer,

with his parents' help, but admitted that he never looked for a

place to buy during the six-month period. 

Debtor admitted, and the record reflects, that he began

spending the funds on things other than a homestead the day after

he received them, including: $11,500 paid to his father for the

repayment of a postpetition loan; $7,000 paid to the new owner of

his home for three months rent; $6,000 paid for a new car; $5,580

paid for rent of a friend's home; buying gifts for his daughter;

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and paying for various living expenses. Debtor indicated he would

turn over the remaining $29,000 in homestead funds to Trustee if

ordered to do so. 

Trustee then filed a motion requiring Debtor to turn over the

$75,000 in homestead funds, contending the funds had lost their

exempt status for Debtor's failure to reinvest them in a homestead

and were now property of the estate. On February 20, 2015, the

bankruptcy court ordered Debtor to return immediately to Trustee

the homestead funds in the full amount of $75,000. The turnover

order was not appealed. 

On March 2, 2015, Debtor remitted $25,000 to Trustee, leaving

the remaining $50,000 due and owing under the turnover order. 

B. When the sale proceeds are not timely reinvested in a

homestead Debtor claims the proceeds exempt under the

wildcard exemption.

Debtor subsequently filed an amended Schedule C, now claiming

the homestead funds exempt in the amount of $26,925 under

CCP § 703.140(b)(5), the wildcard exemption. 

In response, Trustee moved for an order to show cause why

Debtor should not be held in contempt for failing to comply with

the turnover order and sanctioned for $50,000. Trustee also filed

a timely objection to Debtor's amended wildcard exemption for the

sale proceeds in the amount of $26,925. Trustee characterized

Debtor's now-claimed wildcard exemption as nothing more than a

thinly-veiled attempt to decrease his culpability under the

pending OSC motion. Trustee contended that during the six-month

period in which Debtor was required to reinvest the homestead

funds, the bankruptcy estate held a reversionary, contingent

interest in them. Thus, argued Trustee, at the exact moment

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Debtor failed to reinvest the funds by voluntarily transferring

them to pay for his personal expenses, the homestead funds lost

their exempt status and became property of the estate. 

Trustee objected to Debtor's wildcard exemption on five

grounds: (1) § 522(g) barred Debtor's attempt to exempt property

Trustee had recovered for the bankruptcy estate via the turnover

order; (2) federal judicial estoppel; (3) federal equitable

estoppel; (4) state law judicial estoppel; and (5) state law

equitable estoppel. Trustee's objection to the amended wildcard

exemption was set for hearing on the same date as his OSC motion. 

Debtor conceded that he used the homestead funds to support

himself and that he owed Trustee $23,075 [$75,000 - $26,925

(wildcard exemption) - $25,000 (already turned over to Trustee)]. 

Debtor contended the appropriate remedy was to enter judgment

against him for the $23,075. Debtor argued that § 522(g) did not

apply because he never "transferred" the homestead funds to a

third party, which therefore never triggered Trustee having to

"recover" them. Debtor also disputed Trustee's estoppel theories,

contending that upon the sale of the residence he was entitled to

claim some of the sale proceeds exempt under either the homestead

exemption for $75,000 or the wildcard exemption for $26,925. By

later amending, argued Debtor, he was merely exercising his right

to claim some of the proceeds exempt under the wildcard exemption. 

Further, his testimony at the Rule 2004 examination established

that he intended to reinvest the funds in a new homestead. Debtor

further contended that his use of the homestead funds to pay his

living expenses did not rise to the level of "bad faith"

sufficient to punish him with the denial of any exemption

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whatsoever. He concluded his argument by asserting that, Law v.

Siegel, 134 S.Ct. 1188 (2014), precluded such equitable rulefashioning, and no statutory basis existed for denying him any

exemption in this case. 

In reply, Trustee argued that Debtor's use of the sale

proceeds to pay for personal expenses constituted a "transfer" for

purposes of § 522(g) because Debtor voluntarily parted with

property. In addition, argued Trustee, California law was clear: 

homestead exemption funds maintained their exempt status only if

the funds are reinvested in a new homestead within six months. 

Debtor had not provided any legal authority creating an exception

to this rule and authorizing him to spend the funds on "personal

expenses." 

Trustee contended that Debtor's argument against applying any

estoppel doctrine was also wrong because Debtor's conduct clearly

showed that he never intended to comply with California law; he

immediately began spending the homestead funds on other things. 

Debtor even admitted to spending the money before he received it

from Trustee. Finally, Trustee argued that Debtor's reliance on

Law was misplaced. This case was not about surcharging an

exemption for administrative expenses as in Law, and Law did not

eliminate the court's authority to apply state law estoppel

doctrines.

C. The bankruptcy court's ruling on Trustee's objection to

Debtor's amended wildcard exemption

At the hearing, the bankruptcy court noted that Debtor had

acknowledged at a prior hearing that he knew he was not supposed

to spend the money. The court then stated that because Debtor did

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not reinvest the sale proceeds in a new homestead, as he was

required to do under state law, that money should have come back

to the estate and been distributed to creditors. By Debtor

spending the funds on something other than a homestead, his

creditors lost out. 

After hearing argument from the parties, the bankruptcy court

announced it was sustaining Trustee's objection and disallowing

Debtor's wildcard exemption: 

On the objection to the wild -- amended wildcard, I am

going to grant that. I think it's inappropriate for us to

be talking about the homestead for as long as we have and

then for the Debtor to now say I don't want the homestead,

I want to take the wildcard instead, there's just no -- I

see no authority for that.

 

Hr'g Tr. (June 30, 2015) 23:14-19.

The bankruptcy court entered an order sustaining Trustee's

objection and disallowing Debtor's amended wildcard exemption on

July 2, 2015. No additional findings were provided in the order. 

Debtor timely appealed. 

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158(b). 

III. ISSUE

Did the bankruptcy court err in sustaining Trustee's

objection and disallowing Debtor's amended wildcard exemption for

the homestead sale proceeds? 

IV. STANDARDS OF REVIEW

We review questions regarding a debtor's right to claim an

exemption de novo, whereas the issue of a debtor's intent is a

question of fact reviewed under the clearly erroneous standard. 

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Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th Cir. BAP

2003). The bankruptcy court's factual findings, for purposes of

determining the validity of a claimed exemption, are reviewed

under the clearly erroneous standard. Id. Factual findings are

clearly erroneous if they are illogical, implausible or without

support in the record. Retz v. Samson (In re Retz), 606 F.3d

1189, 1196 (9th Cir. 2010).

We may affirm on any ground supported by the record,

regardless of whether the bankruptcy court relied upon, rejected

or even considered that ground. Fresno Motors, LLC v. MercedesBenz USA, LLC, 771 F.3d 1119, 1125 (9th Cir. 2014); Arnot v.

Endresen (In re Endresen), 548 B.R. 258, 268 (9th Cir. BAP 2016).

V. DISCUSSION 

A. Rule 4003

Under Rule 4003(b)(1), "a party in interest may file an

objection to the list of property claimed as exempt within 30 days

after the meeting of creditors held under § 341(a) is concluded or

within 30 days after any amendment to the list or supplemental

schedules is filed, whichever is later." It is undisputed that

Trustee's objection to Debtor's amended wildcard exemption was

timely filed. 

Generally, a claimed exemption is presumptively valid. 

Diener v. McBeth (In re Diener), 483 B.R. 196, 203 (9th Cir. BAP

2012). If a party in interest timely objects, "the objecting

party has the burden of proving that the exemptions are not

properly claimed." Id. (quoting Rule 4003(c)). See also Carter

v. Anderson (In re Carter), 182 F.3d 1027, 1029 n.3 (9th Cir.

1999). If the objecting party can produce evidence to rebut the

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presumption of validity, then the burden of production shifts to

the debtor to provide unequivocal evidence demonstrating the

exemption is proper. Id. The burden of persuasion, however,

always remains with the objecting party. Id. 

Despite this general rule, we recently held in Diaz v.

Kosmala (In re Diaz), 547 B.R. 329, 337 (9th Cir. BAP 2016), that

Raleigh v. Ill. Dep't of Revenue, 530 U.S. 15 (2000), requires

that courts apply the state law burden of proof for state law

exemptions. Thus, in cases where state exemption law specifically

allocates the burden of proof to the debtor, Rule 4003(c) does not

change that allocation. See also In re Jacobsen, 676 F.3d at 1199

(when exemptions are determined by state law, "it is the entire

state law applicable on the filing date that is determinative of

whether an exemption applies."). California has mandated the use

of state exemptions and has placed the burden of proof on the

party claiming the objection. In re Diaz, 547 B.R. at 337 (citing

CCP §§ 703.580(b) ("the exemption claimant has the burden of

proof") and 704.780(a)); In re Tallerico, 532 B.R. 774, 788

(Bankr. E.D. Cal. 2015) (burden of proof proscribed by California

statute regarding contested claims of exemption is substantive and

must be applied by bankruptcy courts). Thus, the burden was on

Debtor to show that his amended wildcard exemption for the sale

proceeds was proper. 

B. The turnover order precluded Debtor from claiming the

homestead sale proceeds exempt under wildcard exemption. 

Debtor asserts very interesting policy arguments for why a

debtor should be able to exempt proceeds from the sale of his or

her home under the wildcard exemption, if for whatever reason the

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debtor is unable to reinvest those proceeds in a new homestead

within the six month period required under California law, as

opposed to forfeiting those funds entirely. Debtor also offers

some interesting arguments for why the Ninth Circuit case of

In re Jacobson should be overruled. In Jacobson, the Ninth

Circuit held that under California law exempt homestead funds lose

their exempt status and the debtor loses the ability to exempt

those funds, if they are not reinvested in a new homestead within

six months. 676 F.3d at 1199-1200. Jacobson, however, did not

discuss whether a debtor could alternatively claim non-reinvested

homestead sale proceeds exempt under the wildcard exemption after

the six-month period has expired.

Noticeably absent from Debtor's brief is precisely how the

bankruptcy court erred in sustaining Trustee's objection to

Debtor's amended wildcard exemption, other than his assertion

that, in violation of Law, the court read into the Code an

inherent "equitable" power to prohibit a debtor from claiming any

exemption whatsoever if the debtor has exceeded the six-month

reinvestment term for homestead sale proceeds, but yet is unable

to return the funds in excess of the wildcard due to having spent

the funds for his own support. 

With the scant findings and conclusions before us, we cannot

determine on what basis the bankruptcy court sustained Trustee's

objection and disallowed Debtor's amended wildcard exemption.

Despite the bankruptcy court's lack of findings, however, our

review of whether Debtor had a right to claim the non-reinvested

homestead sale proceeds exempt under the wildcard exemption is de

novo. In re Kelley, 300 B.R. at 16. We conclude that the

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turnover order entered on February 20, 2015, precluded Debtor from

thereafter claiming any portion of the proceeds exempt.

The turnover order directed Debtor to tender the $75,000 in

homestead sale proceeds to Trustee. It was not appealed and is a

final order, which has the status of a money judgment under Civil

Rule 58. White v. Brown (In re White), 389 B.R. 693, 698-99 (9th

Cir. BAP 2008). Clearly, that order determined Debtor could not

subsequently claim the non-reinvested homestead sale proceeds

exempt under the wildcard (or any other) exemption under state

law; it necessarily subsumed a determination that the $75,000 was

nonexempt property of the estate. Id. at 699. Thus, Debtor's

amended claimed exemption, or, in our opinion, his new claimed

exemption, for a portion of the non-reinvested homestead sale

proceeds under the wildcard exemption constituted nothing more

than an improper collateral attack on the turnover order. 

Accordingly, we AFFIRM the exemption order on that basis.5

VI. CONCLUSION

For the foregoing reasons, we AFFIRM.

5 We take no position on the merits of Debtor's arguments

and save our opinions on this important issue for another day.

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