Court Opinion

ID: 2649036
Source: CourtListenerOpinion
Date Created: 2014-01-14 00:42:33.266732+00
Date Added: 2024-06-11T12:55:19.864879
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              JAN 13 2014

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

GREGORY O. GARMONG,                              No. 12-15604

              Appellant,                         D.C. No. 3:11-cv-00357-LRH-
                                                 WGC
  v.

CHAPTER 7 TRUSTEE,                               MEMORANDUM*

              Appellee,

LINDA L. GARMONG,

              Intervenor - Appellee.

                    Appeal from the United States District Court
                             for the District of Nevada
                     Larry R. Hicks, District Judge, Presiding

                     Argued and Submitted December 6, 2013
                            San Francisco, California

Before: GOULD and PAEZ, Circuit Judges, and BURNS, District Judge.**

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable Larry A. Burns, District Judge for the U.S. District
Court for the Southern District of California, sitting by designation.
      Gregory Garmong appeals1 the district court’s order affirming the

bankruptcy court’s denial of an attempted trustee sale of Chapter 7 debtor Linda

Garmong’s limited life estate2 in the former couple’s home. We have jurisdiction

under 28 U.S.C. §§ 158(d)(1) and 1291, and we affirm.

      When a debtor files a bankruptcy petition, the trustee acquires interests no

greater than those held by the debtor. 11 U.S.C. § 541(d); In re Coupon Clearing

Serv., Inc., 113 F.3d 1091, 1099 (9th Cir. 1997). Under the former couple’s

divorce agreement, Linda Garmong’s limited life estate was not an equity interest,3

and she was restricted from transferring her limited life estate to any party.4 Linda

Garmong’s limited life estate only permitted her to occupy and possess the

property. The bankruptcy court correctly concluded that the trustee did not have

the power to transfer Linda Garmong’s limited life estate to Gregory Garmong.

      1
        The trustee did not appeal the bankruptcy court’s denial of its Motion to
Sell Limited Life Estate.
      2
       Linda Garmong’s limited life estate interest was created under the former
couple’s 2007 divorce agreement.
      3
        The bankruptcy court denied an attempt to exempt Linda Garmong’s
limited life estate as a debtor’s “dwelling” under Nev. Rev. Stat. § 21.090(1)(m),
which requires an equity interest in the asset. Gregory Garmong owns the
underlying property and it is not an asset of Linda Garmong’s estate.
      4
         While Linda Garmong had no ability to sell or transfer her limited life
estate interest, the divorce agreement provided that Gregory Garmong had the right
to purchase her limited life estate interest at any time for $250,000.

                                         -2-
      Even if Linda Garmong’s limited life estate could be sold as an asset of her

estate, the trustee did not investigate the asset’s value,5 and was not aware of the

restrictions created by the former couple’s divorce agreement. We do not defer to

a trustee’s business judgment where the trustee does not in fact exercise such

judgment. See In re Lahijani, 325 B.R. 282, 288-89 (B.A.P. 9th Cir. 2005). The

bankruptcy court did not abuse its discretion when it determined that the trustee

would improperly exercise its business judgment in selling Linda Garmong’s

limited life estate without any independent analysis of the factual or legal issues

surrounding the asset.

      AFFIRMED.

      5
         The trustee was prompted to file the Motion to Sell Limited Life Estate by
a letter from Gregory Garmong’s counsel, which offered to pay the estate $2,500
and assume property maintenance obligations in exchange for termination of Linda
Garmong’s limited life estate.

                                          -3-