Court Opinion

ID: 9556257
Source: CourtListenerOpinion
Date Created: 2023-08-16 18:01:42.983036+00
Date Added: 2024-06-11T16:42:06.081811
License: Public Domain

FILED
                                                                                  AUG 14 2023
                          NOT FOR PUBLICATION
                                                                              SUSAN M. SPRAUL, CLERK
                                                                                U.S. BKCY. APP. PANEL
                                                                                OF THE NINTH CIRCUIT
           UNITED STATES BANKRUPTCY APPELLATE PANEL
                     OF THE NINTH CIRCUIT

 In re:                                             BAP No. NC-22-1232-FSC*
 DANIELA M. FARINA,
              Debtor.                               Bk. No. 22-10021-RLE

 DANIELA M. FARINA,
              Appellant,
 v.                                                 MEMORANDUM**
 JANINA M. HOSKINS, Chapter 7
 Trustee,
              Appellee.

               Appeal from the United States Bankruptcy Court
                   for the Northern District of California
               Roger L. Efremsky, Bankruptcy Judge, Presiding

Before: FARIS, SPRAKER, and CORBIT, Bankruptcy Judges.

      *
         We concurrently heard argument in this appeal on July 28, 2023 with two other
appeals: (1) Farina v. Hoskins (In re Farina), BAP No. NC-22-1233-SCF, and (2) Farina v.
Hoskins (In re Farina), BAP No. NC-22-1235-CFS. These companion appeals are or will be
the subject of their own separate written decisions. In addition, this Panel recently
heard and decided another appeal prosecuted by the appellant, which also is the subject
of its own written decision. See Farina v. Hoskins (In re Farina), BAP No. NC-22-1071-TBF,
2022 WL 17484959 (9th Cir. BAP Dec. 7, 2022).
      **
         This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
                                 INTRODUCTION

      Chapter 71 debtor Daniela M. Farina appeals the bankruptcy court’s

order grating summary judgment in favor of chapter 7 trustee Janina M.

Hoskins (“Trustee”) on the Trustee’s objection to Ms. Farina’s homestead

exemption. She argues that the Trustee was not entitled to summary

judgment because the Trustee did not need to recover any estate property

under § 522(g)(1) and that she should have been allowed to conduct

discovery before the court granted summary judgment.

      We discern no error and AFFIRM.

                                        FACTS2

A.    Prepetition events

      Ms. Farina owned real property in Napa, California (“Property”) that

she purchased as tenants in common with Victor Alam in 2020. Ms. Farina

and Mr. Alam each owned a fifty-percent interest in the Property.

      Mr. Alam vacated the Property shortly after they moved in. In

November 2020, he instituted a partition action against Ms. Farina in the

state superior court. In July 2021, the superior court appointed a receiver

      1
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
      2
          We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case and the associated adversary proceeding. See
Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP
2003).

                                            2
and prohibited Ms. Farina from encumbering, mortgaging, creating a

security interest in, or otherwise disposing of the Property.

      Nevertheless, Ms. Farina allegedly recorded or caused to be recorded

three liens against her interest in the Property: (1) a deed of trust in favor of

Mr. and Mrs. Nicolosi (Ms. Farina’s parents) for $395,000, recorded on

August 11, 2021; (2) a deed of trust in favor of Alpha Lyons Endeavors,

LLC (“Alpha Lyons”) for $685,000, recorded on October 25, 2021; and (3) a

mechanic’s lien in favor of Alpha Lyons for $685,000, recorded on October

26, 2021. Because the two Alpha Lyons liens secured a single debt, the lien

claims totaled $1,080,000.

B.    Ms. Farina’s bankruptcy case

      Ms. Farina, proceeding pro se, filed a chapter 7 bankruptcy petition

in January 2022. She identified the Property as her residence but indicated

a different mailing address in South San Francisco.

      On her Schedule A/B, Ms. Farina scheduled the Property and

indicated that she held it as tenants in common. She claimed two

exemptions on her Schedule C. First, she listed the Property with a value of

$1.3 million. She cited § 522(b)(2) as the applicable statutory authority and

appeared to claim a $900,000 exemption, but she also checked the box for

“100% of fair market value, up to any applicable statutory limit.” Second,

she claimed a $15,000 exemption in household furniture.

      In March 2022, the Trustee obtained from the bankruptcy court an

order for judgment of possession and writ of assistance. The order stated

                                        3
that the Property was property of the bankruptcy estate and directed

Ms. Farina to vacate the Property.

      Shortly thereafter, the bankruptcy court approved a compromise

between the Trustee and Mr. Alam. Mr. Alam agreed to waive his co-

ownership interest in the Property up to the amount of administrative

expenses and to contribute all net proceeds from the sale of the Property to

pay for allowed administrate expenses. This allowed the Trustee to market

and sell the Property.

      The Trustee then objected to Ms. Farina’s two claimed exemptions:

the homestead exemption and the household furniture exemption.

      As to the homestead exemption, the Trustee alleged that Ms. Farina

did not live at the Property. The Trustee stated that the receiver in the state

court action inspected the Property in late 2021 and concluded that no one

resided on the Property. The Trustee inspected the Property postpetition

and reached the same conclusion. Additionally, the Trustee pointed out

that Ms. Farina appeared to claim the federal exemption, while California

has opted out of the federal exemptions.

      In response, Ms. Farina, now represented by counsel, moved to

dismiss her case, claiming that she did not intend to initiate a chapter 7 case

and risk losing the Property. She also amended her claimed exemptions; of

relevance here, she claimed a $600,000 homestead exemption pursuant to

California Code of Civil Procedure (“CCP”) § 704.730.

                                       4
C.    The Trustee’s objection to the amended homestead exemption

      The Trustee objected to all of the amended exemptions. She again

contended that the Property was not Ms. Farina’s “homestead” or

“principal dwelling.”

      While the objection was pending, the Trustee filed a motion to sell

the Property. Ms. Farina, the Nicolosis, and Alpha Lyons opposed the

motion. After two hearings, the bankruptcy court entered an order

authorizing the Trustee to sell the Property for $1,350,620. The Trustee

reported that the sale closed in August 2022.

      In response to the Trustee’s objection to her exemptions, Ms. Farina

argued that she always intended to treat the Property as her residence and

that any absence from the Property was temporary and involuntary.

      In reply, the Trustee argued that Ms. Farina had not established her

intent to reside at the Property. Furthermore, the Trustee argued that the

dispute was moot, because there were no funds available to pay Ms. Farina

a homestead exemption. The net sale proceeds totaled $240,662.67. The

bankruptcy estate was entitled to half of this, or $120,331.33. The Nicolosi

deed of trust and the Alpha Lyons deed of trust and mechanics lien totaled

$1,080,000, thus consuming the remaining equity if the Trustee could not

avoid them; if the Trustee successfully avoided the liens, then the proceeds

would be preserved for the benefit of the estate pursuant to § 551, and

§ 522(g) would preclude Ms. Farina from claiming a homestead exemption.

The Trustee concluded that, in any scenario, “there will be no funds with

                                      5
which to pay the Debtor’s claimed homestead exemption, and the issue of

the Debtor’s claimed homestead exemption is moot.”

D.    The avoidance action

      Meanwhile, the Trustee filed an adversary proceeding against the

Nicolosis and Alpha Lyons to avoid and recover the liens and deed of trust

as preferential transfers, actual fraudulent transfers, and constructive

fraudulent transfers pursuant to §§ 547, 548, and 550, and to preserve the

avoided transfers for the benefit of the estate pursuant to § 551.

      The defendants did not answer the complaint, and the court entered

default judgment against all of them.

E.    The Trustee’s motion for summary judgment

      While the adversary proceeding was pending, the bankruptcy court

sustained the objections to all of the claimed exemptions except the

homestead exemption. It scheduled an evidentiary hearing to resolve the

factual question of whether Ms. Farina resided or intended to reside at the

Property. 3

      Prior to the evidentiary hearing, the Trustee filed a motion for

summary judgment (“Motion”) on her homestead exemption objection. She

argued that, even if Ms. Farina intended to reside at the Property, she was

not entitled to payment on her claimed homestead exemption. The Trustee

contended that the liens were voluntary liens and that she was required to

      3
        Around this time, the bankruptcy court denied Ms. Farina’s discharge under
§ 727(a)(6)(A).

                                          6
take action to avoid them. She asserted that they were avoidable as

preferential transfers pursuant to § 547(b): the Nicolosi deed of trust was

recorded within the one-year preference period for insiders; and the Alpha

Lyons liens were recorded within the ninety-day preference period. If the

Trustee successfully avoided the liens, then Ms. Farina could not claim a

homestead exemption in the recovered transfers, and § 522(g) would bar

her from exempting those proceeds. If the Trustee could not avoid the

liens, then they would consume any remaining sale proceeds, leaving no

proceeds for a homestead exemption.

      Ms. Farina opposed the Motion and argued that the Trustee failed to

offer declarations, affidavits, or other evidence. Additionally, she requested

time to conduct discovery under Civil Rule 56(d).

      She also argued that the Alpha Lyons and Nicolosi liens were void,

so the Trustee never had to exercise her avoidance powers: the Alpha

Lyons lien was created during the automatic stay in her previous

bankruptcy case, so it was void by operation of law, and the Nicolosi deed

of trust was void because it did not have an accompanying note.

      In reply, the Trustee responded that the record supported the Motion

even without any accompanying declaration, that Ms. Farina failed to offer

any facts showing a genuine dispute, and that the disputed facts that she

identified were not material.

      At the hearing on the Motion, the bankruptcy court held that the

Trustee’s motion had adequate evidentiary support. The court rejected

                                      7
Ms. Farina’s argument that the lack of a final judgment in the adversary

proceeding precluded summary judgment. Finally, the court agreed with

the Trustee that, whether the Trustee avoided the liens or not, there would

be no proceeds to pay on account of the claimed exemption.

      The bankruptcy court granted the Motion and sustained the Trustee’s

objection to the homestead exemption. Ms. Farina timely appealed.

                               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.

                                     ISSUE

      Whether the bankruptcy court erred in granting the Trustee

summary judgment on her objection to Ms. Farina’s homestead objection.

                         STANDARDS OF REVIEW

      We review de novo the bankruptcy court’s grant of summary

judgment on a trustee’s objection to a claimed exemption. See Zamora v.

Perez (In re Perez), 628 B.R. 327, 331 (9th Cir. BAP 2021) (“Whether the

debtor has the right to claim an exemption is a question of law that we

review de novo.”); Arkison v. Gitts (In re Gitts), 116 B.R. 174, 176 (9th Cir.

BAP 1990) (“The grant of summary judgment is reviewed

independently.”), aff’d, 927 F.2d 1109 (9th Cir. 1991). “De novo review

requires that we consider a matter anew, as if no decision had been made

previously.” Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP

2014).

                                        8
      We review the bankruptcy court’s denial of further discovery before

granting summary judgment for an abuse of discretion. Marciano v. Fahs (In

re Marciano), 459 B.R. 27, 35 (9th Cir. BAP 2011), aff’d, 708 F.3d 1123 (9th Cir.

2013). The bankruptcy court abused its discretion if it applied an incorrect

legal rule or its factual findings were illogical, implausible, or without

support in the record. TrafficSchool.com v. Edriver Inc., 653 F.3d 820, 832 (9th

Cir. 2011). However, if the bankruptcy court did not explicitly address the

request for additional discovery, we review the denial de novo. See Stevens

v. Corelogic, Inc., 899 F.3d 666, 677 (9th Cir. 2018) (“[I]f a [trial] court

implicitly denies a [Civil] Rule 56(d) motion by granting summary

judgment without expressly addressing the motion, that omission

constitutes a failure ‘to exercise its discretion with respect to the discovery

motion,’ and the denial is reviewed de novo.” (citation omitted)).

                                  DISCUSSION

A.    The bankruptcy court did not err in granting the Trustee summary
      judgment.

      Under Civil Rule 56(a), made applicable by Rule 7056, summary

judgment is appropriate when “there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.”

The movant bears the initial burden of demonstrating the absence of a

genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986). If the movant is successful, the nonmoving party must show that

there is a dispute “over facts that might affect the outcome of the suit under

                                          9
the governing law . . . .” Balboa v. Haw. Care & Cleaning, Inc., 105 F. Supp. 3d

1165, 1169 (D. Haw. 2015) (citation omitted).

      We must view the evidence in the light most favorable to Ms. Farina,

the nonmoving party, and draw all justifiable inferences in her favor.

Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125 (9th Cir.

2014).

      1.      The bankruptcy court did not err in sustaining the Trustee’s
              objection to the homestead exemption.

      Ms. Farina argues that the Trustee failed to establish the basis for her

objection because the liens were void as a matter of law, so there was no

transfer of property for the Trustee to recover. Her argument is meritless.

      The Bankruptcy Code allows debtors to exempt certain amounts and

types of real and personal property. See § 522. California has opted out of

the federal exemption scheme, so such exemptions are controlled by state

law. CCP § 703.130; In re Tallerico, 532 B.R. 774, 779 (Bankr. E.D. Cal. 2015).

      Section 522(g) limits a debtor’s ability to claim an exemption if the

Trustee has recovered property for the benefit of the estate. That section

provides that, if a trustee recovers property of the estate, the debtor may

only claim a homestead exemption in the recovered property under certain

conditions:

      the debtor may exempt under subsection (b) of this section
      property that the trustee recovers under section 510(c)(2), 542,
      543, 550, 551, or 553 of this title, to the extent that the debtor
      could have exempted such property under subsection (b) of this

                                       10
      section if such property had not been transferred, if—

             (1)(A) such transfer was not a voluntary transfer of such
             property by the debtor; and

             (B) the debtor did not conceal such property . . . .

§ 522(g). Thus, a debtor may “exempt property that the trustee recovers

under various sections of the Bankruptcy Code as long as the transfer was

involuntary and the property was not concealed by the debtor” but “may

not exempt property that the trustee recovers under one of the enumerated

provisions if the debtor voluntarily transferred or concealed the property.”

de Jesus Gomez v. Stadtmueller (In re de Jesus Gomez), 592 B.R. 698, 705 (9th

Cir. BAP 2018) (cleaned up); see also Hitt v. Glass (In re Glass), 164 B.R. 759,

764 (9th Cir. BAP 1994) (“Since the Code is based upon providing honest

debtors with a fresh start, a debtor who has voluntarily transferred

property in an avoidable transaction or who has been dishonest in

concealing assets or prepetition transfers should not be allowed to use

§ 522(g) as a shield.”), aff’d, 60 F.3d 565 (9th Cir. 1995).

      In the present appeal, the Trustee sought to recover property of the

estate under §§ 550 and 551. She alleged that the liens were voluntary

transfers caused by Ms. Farina. Ms. Farina does not contest this point. 4

      When the bankruptcy court sustained the objection to Ms. Farina’s

      4 For the first time, Ms. Farina argues in her reply brief that the liens were not
“voluntary transfers of property” because liens are merely “holds” on property, not
transfers. This contention is frivolous. Under the Bankruptcy Code, the term “transfer”
includes “the creation of a lien.” § 101(54).
                                           11
claimed exemption, the Trustee had not yet avoided the liens. But this is of

no moment for two reasons. First, the Trustee did eventually obtain a final

judgment avoiding the liens. Second, § 522(g) does not necessarily require a

trustee to prevail in an adversary proceeding. In re Perez, 628 B.R. at 332

(holding that “the trustee’s efforts need not include obtaining a final

judgment; nor must the trustee even file an adversary proceeding”). It is

enough that the debtor “is put on notice by an affirmative act or statement

of the trustee that the transfer is avoidable and/or recoverable under the

Bankruptcy Code and that the trustee intends to take action to recover the

property interest.” Id. at 335.

      The Trustee’s actions easily satisfied this requirement. When the

Trustee filed the Motion, she had already instituted an avoidance action

against the Nicolosis and Alpha Lyons. She had obtained default against

the defendants; after the Motion was decided, the bankruptcy court entered

judgment against the defendants. Therefore, the bankruptcy court did not

err in concluding that the Trustee’s actions were sufficient and holding that

§ 522(g) precluded Ms. Farina from asserting a homestead exemption in the

Property.

      Furthermore, the bankruptcy court did not err in determining that,

even if the Trustee could not avoid the liens, Ms. Farina was not entitled to

the homestead exemption, because the liens would consume the value of

the sale proceeds. Ms. Farina does not dispute this calculation.

      Rather, she argues that the Trustee did not need to take any action to

                                      12
avoid the liens – and the liens did not wipe out the sale proceeds – because

the liens were void as a matter of law. Even if she were correct that the

liens were “void” rather than voidable, her conclusion would not follow.

      The liens were recorded against the Property and clouded its title.

Even void liens do not disappear by themselves; someone must take action

to obtain a determination of their voidness and to expunge them from the

record. This is what the Trustee did. Her actions satisfied § 522(g)(1), so

Ms. Farina is not entitled to claim her homestead exemption.5

      2.     The Trustee did not need to support her Motion with
             declarations or affidavits.

      Ms. Farina argues that the Trustee failed to support her Motion with

declarations, affidavits, or a request for judicial notice and cannot establish

the lack of a genuine dispute of material fact. She is wrong.

      There is no requirement that the movant provide affidavits or

declarations, if summary judgment can be supported by the law and the

record. Civil Rule 56(c)(1)(A) provides that a movant may establish lack of

a factual dispute by “citing to particular parts of materials in the

record . . . .” The Trustee supported the Motion by directing the court to the

documents that had been filed in the bankruptcy case and the adversary

proceeding. There was no need to bring in additional evidence through

      5  Ms. Farina also argues that the Trustee failed to satisfy the four-part test to
avoid the liens. However, this point is moot: the bankruptcy court already granted the
Trustee judgment in the adversary proceeding, and Ms. Farina is not entitled to
relitigate that issue in the exemption proceedings.
                                           13
declarations or affidavits.

      Even if the Trustee’s submissions were not offered in admissible

form, summary judgment was appropriate. Civil Rule 56(c)(2) provides

that “[a] party may object that the material cited to support or dispute a

fact cannot be presented in a form that would be admissible in evidence.”

Regardless of the form of the Trustee’s submissions, there is no doubt that

the Trustee could offer them in admissible form.

B.    The bankruptcy court did not err in denying Ms. Farina’s request to
      conduct discovery.

      Finally, Ms. Farina argues that the bankruptcy court erred in granting

the Trustee summary judgment despite her request for additional

discovery under Civil Rule 56(d). We disagree.

      Civil Rule 56(d) provides:

      If a nonmovant shows by affidavit or declaration that, for
      specified reasons, it cannot present facts essential to justify its
      opposition, the court may:

            (1) defer considering the motion or deny it;

            (2) allow time to obtain affidavits or declarations or to
            take discovery; or

            (3) issue any other appropriate order.

      “To justify a continuance [the movant] was required to show: ‘(1) it

has set forth in affidavit form the specific facts it hopes to elicit from

further discovery; (2) the facts sought exist; and (3) the sought-after facts

are essential to oppose summary judgment.’” Alanis v. Nelson, 561 F. App’x
                                        14
595, 596 (9th Cir. 2014) (citation omitted).

      The bankruptcy court did not explicitly address Ms. Farina’s Civil

Rule 56(d) request in its decision, so we review the issue de novo.

Nevertheless, she fails to articulate any reason warranting reversal.6 We do

not consider arguments not raised in the appellant’s opening brief. Smith v.

Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[O]n appeal, arguments not

raised by a party in its opening brief are deemed waived.”).

      Even if we considered the argument, we would discern no error.

Ms. Farina failed to offer the required affidavit or declaration detailing the

specific facts she hoped to elicit from discovery and the reasons why she

had been unable to conduct discovery. She argued in her opposition to the

Motion that the Trustee’s adversary proceeding to avoid and recover the

Nicolosi and Alpha Lyons liens was still pending, so she was entitled to

conduct discovery as to the validity of the liens. But, as we discussed

above, the validity of the liens was not a material, disputed fact, because

the Trustee took action to avoid them, and that is enough to preclude

Ms. Farina from claiming a homestead exemption under § 522(g)(1).

Moreover, the bankruptcy court ultimately entered judgment against the

Nicolosis and Alpha Lyons and avoided the liens.

      6
        Ms. Farina’s opening brief contains a heading and partial paragraph addressing
Civil Rule 56(d) but then appears to skip a page. She did not correct the omission in her
reply brief, even though the Trustee pointed out the missing page.
                                           15
                           CONCLUSION

     The bankruptcy court did not err in granting the Trustee summary

judgment on her objection. We AFFIRM.

                                  16