Opinion ID: 694345
Heading Depth: 2
Heading Rank: 1

Heading: Personal Property Secured at Trustee's Direction

Text: 12 Salzer contends that Stinson violated the automatic stay when, at the direction of the trustee, he secured the personal property located at the leasehold premises and denied Salzer access to it. Salzer theorizes that because there was no objection to his claim of exemption in the property within the thirty days allotted by Bankruptcy Rule 4003(b), title to the property revested in him, and he was entitled to physical possession of the property at the end of the thirty days. Consequently, he asserts, Stinson's refusal to turn over the property upon his demand violated the automatic stay. 13 Upon the filing of a bankruptcy, all property of the debtor becomes property of the bankruptcy estate. 11 U.S.C. Sec. 541; In re Kazi, 985 F.2d at 320. However, the debtor can prevent certain property from being used to satisfy his creditors by claiming it as exempt. 11 U.S.C. Sec. 522(l ); Taylor v. Freeland & Kronz, 503 U.S. 638, 643, 112 S.Ct. 1644, 1647, 118 L.Ed.2d 280 (1992). Once the debtor claims property exempt, the creditors and trustee have the opportunity to object to the claimed exemptions. 11 U.S.C. Sec. 522(l ); Bankruptcy Rule 4003(b); In re Kazi, 985 F.2d at 320. Failure of a trustee or creditor to object within the thirty days provided by Bankruptcy Rule 4003(b) waives the right to contest the validity of an exemption. Taylor, 503 U.S. at 644, 112 S.Ct. at 1648. 14 However, the running of the thirty day period without objection does not mean that the debtor is entitled to possession of the property on the thirty-first day. The statutory scheme established by Indiana law 2 allows the debtor to claim as exempt, inter alia, [r]eal estate or tangible personal property of four thousand dollars ($4,000). Ind.Code Sec. 34-2-28-1(a)(2). 3 Under that scheme, in conjunction with 11 U.S.C. Sec. 522(l ), the debtor is required to file a list of property claimed as exempt. The officer holding the execution, the trustee when the debtor is in bankruptcy, is then obligated to have the property appraised and set apart. He then must sell other property subject to execution (non-exempt property). Ind.Code Sec. 34-2-28-7. Thus, the statutory scheme envisions an appraisal ordered by the trustee insuring that the true value of the property claimed as exempt coincides with the debtor's valuation and that it does not exceed the four thousand dollar statutory limit. Property claimed as exempt but exceeding the statutory limit in appraised value is to be sold. See id. 4 15 Accordingly, the statutory scheme anticipates the trustee's continued administration of the exempted property until such time as its value is definitively determined. Clearly this is appropriate because while the failure to object to an exemption does waive any right to contest the validity of the exemption, such a failure does not waive the estate's right to any excess value over the allowed exemption limit. In re Bronner, 135 B.R. 645, 647 (9th Cir. BAP 1992); In re Hyman, 123 B.R. 342, 348-49 (9th Cir. BAP 1991) aff'd 967 F.2d 1316 (9th Cir.1992); In re Page, 171 B.R. 349, 352 (Bankr.W.D.Wis.1994). 5 16 The trustee has a statutory duty to collect and liquidate the property of the estate. 11 U.S.C. Sec. 704(1). He is accountable for all property received, 11 U.S.C. Sec. 704(2), and he owes a fiduciary duty to the creditors. Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 355, 105 S.Ct. 1986, 1994, 85 L.Ed.2d 372 (1985). Indiana law requires that the trustee cause the property claimed as exempt to be appraised so that property in excess of the allowable limit can be sold. Ind.Code Sec. 34-2-28-7. This procedure enables the trustee to fulfill his duty under the Bankruptcy Code to maximize the value of the estate. Weintraub, 471 U.S. at 352, 105 S.Ct. at 1992. In order to achieve this end, under Indiana law, the trustee has the right to possession of the personal property that the debtor has claimed as exempt. Ind.Code Sec. 34-2-28-7. Allowing a debtor the right to immediate possession of property claimed as exempt upon the running of the thirty day period provided by Bankruptcy Rule 4003(b) would be inconsistent with, and impede, the trustee's duties under Indiana and federal law. We hold that there is no such right. 17 On April 1, 1993, the trustee had the right to possess the personal property located at the leasehold premises, and Salzer did not. Salzer having no right to possess the property, Stinson's refusal to turn the property over to Salzer when he demanded it, did not violate the automatic stay. Furthermore, because the trustee had the authority to possess the property, he had the authority to direct Stinson to secure it on his behalf. Consequently, Stinson was acting under the valid direction of the trustee, and Stinson did not violate the automatic stay by securing the personal property notwithstanding Salzer's claim of exemption. 18