Court Opinion

ID: 4301731
Source: CourtListenerOpinion
Date Created: 2018-08-07 22:00:38.525827+00
Date Added: 2024-06-11T14:27:06.670596
License: Public Domain

FILED
                                                                          AUG 06 2018

                                                                      SUSAN M. SPRAUL, CLERK
                           NOT FOR PUBLICATION                          U.S. BKCY. APP. PANEL
                                                                        OF THE NINTH CIRCUIT

             UNITED STATES BANKRUPTCY APPELLATE PANEL
                       OF THE NINTH CIRCUIT

In re:                                               BAP Nos. CC-17-1092-FSKu
                                                              CC-17-1303-FSKu
KATHLEEN KELLOGG-TAXE,                                        (Consolidated)

                    Debtor.                          Bk. No. 2:12-bk-51208-RK

RICHARD TAXE,                                        Adv. Pro. 2:13-ap-02019-RK

                    Appellant,

v.                                                   MEMORANDUM*

CAROLYN A. DYE, Chapter 7 Trustee,

                    Appellee.

                     Argued and Submitted on July 27, 2018
                            at Pasadena, California

                                Filed – August 6, 2018

               Appeal from the United States Bankruptcy Court
                    for the Central District of California

         *
        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.
            Honorable Robert Kwan, Bankruptcy Judge, Presiding

Appearances:        Appellant Richard Taxe argued pro se; Christian T. Kim
                    of Dumas & Kim, APC argued on behalf of appellee
                    Carolyn A. Dye, Chapter 7 Trustee.

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

                                 INTRODUCTION

      Richard Taxe, husband of chapter 71debtor Kathleen Kellogg-Taxe,

appeals the bankruptcy court’s judgment (1) determining that the shares of

Dwarfco Productions, Inc. (“Dwarfco”) and its assets, including a

promissory note and deed of trust owned by Dwarfco, were property of the

bankruptcy estate, (2) ordering Richard,2 his brother Ronald Taxe, and

Dwarfco to turn over those shares and assets to the bankruptcy trustee, and

(3) holding Richard liable to the chapter 7 trustee for $2,509, which the

court found was the value of gemstones that he failed to turn over to the

trustee pursuant to a prior order. Richard argues on appeal that the court

committed numerous errors of fact and law. Among other things, he

      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 refer to Richard, Kathleen, and Ronald by their first names for the sake of
clarity and convenience. We intend no disrespect.

                                            2
maintains that Dwarfco is owned by Ronald, and therefore its shares and

assets cannot be community property of Kathleen and Richard subject to

turnover. He also contends that the chapter 7 trustee’s complaint was

untimely and that the bankruptcy court and the trustee cannot reach

property located outside of California, where Kathleen filed her petition.

      Richard’s contentions are meritless. We AFFIRM.

                           FACTUAL BACKGROUND

A.    The Taxe parties

      Richard has been married to Kathleen since 1984. They do not have

any written agreement regarding their interests in each other’s property.

      Dwarfco was incorporated in the state of Nevada in 1990. Richard

claims that Ronald’s family trust is the actual owner of Dwarfco. Richard

maintains that he is an officer of Dwarfco but does not have an ownership

interest in Dwarfco.

      Dwarfco’s sole asset is a $1.1 million promissory note made in 2007

by Carlton Global Resources, LLC,3 which is secured by a deed of trust

(“Deed of Trust”) encumbering real property located in Boron, California.

Ronald testified that all income from the Deed of Trust is paid to Richard,

not Dwarfco, and Richard testified that Kathleen also receives some of the

      3
        Carlton Global Resources was going through its own chapter 7 bankruptcy case.
Richard repeatedly refers to the alleged fraud committed by the trustee in that case, but
those arguments have no bearing on this appeal, and we will not address them.

                                           3
proceeds.

      Before she filed the present case, Kathleen filed for bankruptcy once

in 2009 and three times in 2012. All four cases were dismissed shortly after

their inception. In those cases, she stated in her schedules (under penalty of

perjury) that she had a one-half interest in Dwarfco and a one-half interest

in Massrock, Inc.4 In 2009, she stated that the combined value of those

interests was $4 million, and in 2012, she valued her interests at $2.5

million. She also represented that her shares in Dwarfco and the income

generated from the Deed of Trust were property of her chapter 13

bankruptcy estate. She further testified that her estate included original

paintings worth $50,000 and furs, jewelry, and gems valued at $40,000.

B.    Kathleen’s present bankruptcy case

      On December 18, 2012, Kathleen filed a chapter 11 bankruptcy

petition. She did not respond to a creditor’s motion to convert her case to a

chapter 7 case, and the court granted the motion. Appellee Carolyn A. Dye

was appointed chapter 7 trustee (“Trustee”).

      Kathleen failed to file the required schedules of assets and liabilities.

The Trustee requested that the court not dismiss the case on that basis and

instead permit the Trustee to file schedules based mostly on information

taken from the filings in Kathleen’s prior bankruptcy cases. The court

      4
       Massrock, Inc. was formed in 1996 and is at least partially owned and operated
by Richard.

                                          4
granted the Trustee’s request, and the Trustee filed schedules listing as an

asset shares of Dwarfco and Massrock valued at $2.5 million. The Trustee

also scheduled income from real property in the amount of $3,050 and a

monthly “Contribution from Ronald Taxe” of $1,050.

      In May 2013, Kathleen filed amended schedules. Even though she

had claimed a substantial interest in Dwarfco in her prior four bankruptcy

proceedings, she omitted any mention of Dwarfco shares and checked the

box indicating that her interest in stocks was “None.” She also omitted any

income related to real property or Ronald.

      In July 2013, the Trustee examined Richard under Rule 2004. Richard

testified that he was the owner of and in possession of a painting by

Wassily Kandinsky (“Kandinsky Painting”). He testified that he acquired

the painting in 2009 and that it was “worth a lot of money.” He also

testified that he owned valuable gemstones and diamonds. Kathleen had

not disclosed the existence of either the Kandinsky Painting or the

gemstones in her schedules.

      The Trustee initiated an adversary proceeding against Richard,

Ronald, and Dwarfco (“Defendants”),5 seeking turnover of the Deed of

Trust, the Kandinsky Painting, and the gemstones under § 542(a). She

      5
       The Trustee also sued Massrock, alleging that it is a sham corporation whose
bank account Richard and Kathleen used to pay their living expenses. Massrock filed its
own bankruptcy petition in November 2013 and did not participate in the adversary
proceeding or this appeal.

                                           5
alleged that Dwarfco is a sham corporation and that Richard formed

Dwarfco for the purpose of evading his creditors. Because the state of

Nevada revoked Dwarfco’s charter in 2007, it no longer existed as a legal

entity. Therefore, according to the Trustee, Richard and Ronald were

successors in interest to any claim that Dwarfco may have under the Deed

of Trust, and Richard’s interest was shared with Kathleen as community

property. She therefore asserted that any assets of Dwarfco were property

of the estate in Kathleen’s case.

      The Trustee filed a motion for a preliminary injunction, requesting

that the bankruptcy court: (1) enjoin Kathleen and the Defendants from

transferring any shares of Dwarfco or any interest in the Dwarfco Deed of

Trust and promissory note; (2) appoint a receiver to liquidate Dwarfco’s

assets; (3) require the parties to turn over the Kandinsky Painting; and

(4) require the parties to turn over the gemstones in Richard’s possession.

      The court entered an interim order on December 6, 2013, prohibiting

Kathleen and the Defendants from transferring or disposing of any assets

that were the subject of the Trustee’s motion.

      On April 21, 2014, the bankruptcy court issued a Memorandum of

Decision and an Order Granting, in Part, Denying, in Part, Trustee’s

Motion for Preliminary Injunction and Appointment of Receiver

(“Preliminary Injunction”). The court stated that the Trustee “has pled

sufficient evidence to prove that the Kandinsky Painting (acquired in or

                                      6
about 2009) and Gemstones (acquired in or about 1993) are community

property and thus property of the Debtor’s estate. . . . Defendants do not

appear to contest this conclusion.” As for Dwarfco, the court stated that the

Trustee “proffered sufficient evidence that Debtor has an interest in

Dwarfco (formed in 1990), including any income received from the

Dwarfco Note and DOT. Debtor claimed a 50% interest in Dwarfco in her

prior bankruptcy schedules under penalty of perjury, and also claimed an

interest in the Dwarfco Note and DOT.”

      The court enjoined the Defendants from transferring, disposing of, or

hypothecating Dwarfco’s shares, assets, inventory, and Deed of Trust, the

Kandinsky Painting, and the gemstones. The Preliminary Injunction also

instructed that “the Kandinsky painting and the gemstones shall be turned

over to the Trustee, forthwith, to be held in trust pending the resolution of

this adversary proceeding or further order of the court.”6

      Over a year later, on or around June 3, 2015, Richard delivered a

collection of gemstones to the Trustee. However, it was substantially less

than what the Trustee expected: according to the Trustee, the surrendered

gemstones had an appraised value of only $2,491.25.

      Richard did not surrender the Kandinsky Painting.

      6
       It also authorized the appointment of a receiver to take possession of and
preserve Dwarfco’s assets and inventory, “pending the resolution of this adversary
proceeding and further order of this Court.” So far as the record reveals, the court never
appointed a receiver.

                                            7
C.     Trial

       The bankruptcy court held a one-day trial on the Trustee’s complaint

on July 28, 2016.7 Richard appeared pro se; Ronald and Dwarfco did not

attend.

       Richard’s testimony was confusing and scattershot, but he made a

number of important admissions. He testified that he ran his money

through Dwarfco’s bank accounts:

       My brother told me if I wanted to run some checks through
       there or some business through there I can as long as I don’t
       make the company, you know, vulnerable to any debtor [sic] I
       think. All that money in the – all those deposits were my
       money. The checks were made out to me. I deposited them in
       there and I paid bills with them. And it didn’t hurt my brother,
       didn’t hurt Dwarfco, didn’t hurt anybody. I did it because . . .
       there were people before [Trustee’s counsel] trying to cause me
       trouble all the time . . . .

He also testified that he rarely received money from the interest on the

Deed of Trust, and that sometimes that money would go to Kathleen.8

       7
        Prior to trial, the parties submitted a joint pretrial order in which Richard
agreed that many facts were undisputed. Despite his pretrial stipulation, Richard
disputes many of those facts on appeal.
       8
           Richard testified:

                THE COURT: [So] the money on the note went to you[r] wife?

                THE WITNESS: No, no, no. I think that my brother said, “Give her
                                                                           (continued...)

                                             8
      The Trustee asked Richard about Kathleen’s prior statements that she

owned shares of Dwarfco. Richard brushed off those filings because the

cases were quickly terminated and did not result in any relief: “Let’s not

talk about all of those bankruptcies. Those were bankruptcies she never did

anything. . . . The whole thing - she bought herself about a month and a

half or two months’ time. That’s all.” He also asserted that Kathleen did not

“testify” to any facts in her schedules because the representations were not

made verbally or in a deposition.

      He stated that the Kandinsky Painting was worthless because it was a

forgery. Because it was worthless, he had given it to a woman to sell for her

charity. The court inquired why he gave away the Kandinsky Painting

despite the bankruptcy court’s injunction against transferring the painting;

he responded, “Well, apparently . . . [I] didn’t read it right or something.”

When asked why he did not turn over the Kandinsky Painting pursuant to

the Preliminary Injunction, he said that “I’d already given it to that woman

      8
       (...continued)
      the money.” It wasn’t – it was like $5,000 or $6,000.

             THE COURT: Oh, okay. So the money went to you and then you
      gave it to your wife?

            THE WITNESS: If it came to me, I would have given it to my wife
      immediately, but I thought it went to her. . . . But it’s not community
      property.

                                            9
back there. That’s what – it’s not worth anything. I don’t care.”

      Regarding the gemstones, Richard testified that he had not sold or

acquired gemstones for at least fifteen years. He said that, at some point

after the court issued the Preliminary Injunction, they searched the house

and found some gems that had “fallen under the tables.”

D.    The findings of fact and conclusions of law

      The bankruptcy court issued findings of fact and conclusions of law

on March 10, 2017. It stated that community property of a married debtor

and her spouse is property of the bankruptcy estate under California law. It

noted that property acquired during marriage is presumptively community

property, but that presumption can be rebutted.

      Regarding Dwarfco, the bankruptcy court held that Richard owned

Dwarfco by virtue of his control over it and that any asset Dwarfco owned

that is controlled and enjoyed by Richard is his property. Accordingly, the

court found that the shares of Dwarfco and the Deed of Trust are assets

owned by Kathleen and Richard as community property. It held that,

under Nevada law, Dwarfco was Richard’s alter ego because: (1) Richard

influenced and governed Dwarfco; (2) there was a unity of interest between

Dwarfco and Richard because Richard had control and enjoyment of

Dwarfco and used Dwarfco’s bank accounts to pay family expenses;

(3) Richard commingled his funds with those of Dwarfco and treated

Dwarfco’s bank account as his own; (4) Richard testified at trial that income

                                      10
from the Dwarfco Deed of Trust went to Kathleen, rather than Ronald, the

purported owner of the Dwarfco shares; and (5) it would be unjust to treat

Dwarfco as a separate entity where Richard avoids claiming an interest in

businesses he controls “because of judgments,” yet uses those businesses to

pay personal and family expenses and to avoid exposure to creditors. The

court also relied on Kathleen’s bankruptcy schedules in her previous cases,

wherein she scheduled a fifty percent interest in Dwarfco and identified the

Deed of Trust as a source of her income.

      As for the gemstones, the bankruptcy court found that they were

property of the estate and that Richard’s failure to turn over the gemstones

prevented the Trustee from ascertaining their value as of the petition date

and realizing their value for the benefit of the bankruptcy estate. The court

stated that, based on Richard’s delay in turning over the gemstones until

fourteen months after the Preliminary Injunction and over two and a half

years after the petition date, “the court draws a reasonable inference that

the gemstones he turned over in June 2015 were not all of the gemstones

that he had when the Debtor’s bankruptcy case was filed.” It accepted the

Trustee’s total valuation of the gemstones at $5,000.

      Regarding the Kandinsky Painting, the court held that it was part of

the bankruptcy estate and that Richard wrongfully failed to turn over the

painting. It found his testimony “not credible” as to the painting’s value.

Nevertheless, it did not believe that Richard would now turn over the

                                      11
painting and it held that the “Trustee has not produced sufficient evidence

to establish the value of the Kandinsky painting for the court to award its

value to the bankruptcy estate.”

       The bankruptcy court issued its judgment (“Judgment”) holding that

the shares of Dwarfco and its assets, including the Deed of Trust, were

property of the bankruptcy estate and ordered the Defendants to turn over

the Dwarfco shares and the Deed of Trust. The court also ordered Richard

to pay $2,509 to the Trustee, representing the gemstones’ value. But it

entered judgment in favor of Richard as to the Kandinsky Painting.

E.     The BAP appeals

       Richard filed a timely notice of appeal from the Judgment. The BAP

consolidated that appeal with an untimely second appeal concerning

identical issues.

       Ronald and Dwarfco also appealed the Judgment to the BAP.

According to Richard, Ronald and Dwarfco decided not to pursue their

appeal “to save thousands of dollars.” They failed to file an opening brief,

and the BAP motions panel dismissed their appeal for lack of prosecution.9

       9
        Subsequently, the Trustee requested court approval to sell the Deed of Trust. At
oral argument, the parties represented to the Panel that the court granted the Trustee’s
motion. The bankruptcy court entered an order approving the sale on August 3, 2018,
but the sale has not closed, as far as we can tell. The completion of the sale might render
this appeal partly moot, but that has not yet happened.

                                            12
                                JURISDICTION

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

and 157(b)(2)(E).

      The Trustee argues that we do not have jurisdiction over this appeal,

because Richard is asserting rights and arguments on behalf of Ronald and

Dwarfco, who chose not appeal. We agree that Richard is not entitled to

present arguments on behalf of Ronald or Dwarfco, so we will consider

only Richard’s arguments that concern his own rights. Accordingly, we

have jurisdiction over Richard’s appeal under 28 U.S.C. § 158.

                                     ISSUES

      (1) Whether the bankruptcy court clearly erred in its factual findings.

      (2) Whether the bankruptcy court erred as a matter of law in

determining that the court could exercise jurisdiction over Dwarfco and its

assets, that the Dwarfco shares and Deed of Trust were community

property, and that the Trustee timely sought turnover.

                          STANDARDS OF REVIEW

      We review the bankruptcy court’s legal conclusions de novo. Banks v.

Gill Distrib. Centers, Inc. (In re Banks), 263 F.3d 862, 867 (9th Cir. 2001).

Whether an asset is estate property is a conclusion of law reviewed de

novo. Groshong v. Sapp (In re MILA, Inc.), 423 B.R. 537, 542 (9th Cir. BAP

2010). De novo review is independent and gives no deference to the trial

court’s conclusions. Roth v. Educ. Credit Mgmt. Corp. (In re Roth), 490 B.R.
13
908, 915 (9th Cir. BAP 2013).

      We review the bankruptcy court’s factual findings underlying its

legal conclusions for clear error. Bronitsky v. Bea (In re Bea), 533 B.R. 283, 285

(9th Cir. BAP 2015). A finding of fact is clearly erroneous if it is illogical,

implausible, or without support in the record. Retz v. Samson (In re Retz),

606 F.3d 1189, 1196 (9th Cir. 2010). The bankruptcy court’s choice among

multiple plausible views of the evidence cannot be clear error. United States

v. Elliott, 322 F.3d 710, 715 (9th Cir. 2003).

                                  DISCUSSION

      Richard’s briefs are rambling and his arguments are hard to parse.

For example, he objects to some of the court’s findings on the ground that

he does not remember giving the testimony on which the findings were

based, even though the trial transcript shows that he gave that testimony.

He makes legal arguments based solely on his “understanding” of or

“belief” regarding the law, without providing any supporting authority.

(As we will see, his legal understanding and beliefs are deficient.) He does

not understand the function of an appellate court: he offers to “prove

beyond a shadow of a doubt” his factual assertions, but the time for factual

development is long past. Even construing Richard’s arguments liberally,

see Ozenne v. Bendon (In re Ozenne), 337 B.R. 214, 218 (9th Cir. BAP 2006), we

                                         14
AFFIRM.10

A.    A trustee may seek turnover of property belonging to the
      bankruptcy estate.

      “A turnover action ‘invokes the court’s most basic equitable powers

to gather and manage property of the estate.’” Bencomo v. Avery (In re

Bencomo), BAP No. CC-15-1442-DKuF, 2016 WL 4203918, at *5 (9th Cir. BAP

Aug. 8, 2016) (quoting Braunstein v. McCabe, 571 F.3d 108, 122 (1st Cir.

2009)). Section 542 of the Bankruptcy Code provides:

      [A]n 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.

§ 542(a). The term “entity” includes individuals and corporations.

§§ 101(15), (41).

      The property to be turned over must be property of the bankruptcy

estate. §§ 363, 542(a); see White v. Brown (In re White), 389 B.R. 693, 699 (9th

Cir. 2008). The property of the estate includes:

      10
           Richard makes much of the court’s chastisement of the Trustee’s counsel for his
trial filings and argues that the court bent over backwards to make the Trustee’s
arguments. We reject this view. The court thought that the Trustee’s counsel could have
made its job easier, but the court never assumed the role of an advocate or exceeded its
proper bounds.

                                           15
       All interests of the debtor and the debtor’s spouse in
       community property as of the commencement of the case that is
       –

              (A) under the sole, equal, or joint management and
              control of the debtor; or

              (B) liable for an allowable claim against the debtor, or for
              both an allowable claim against the debtor and an
              allowable claim against the debtor’s spouse, to the extent
              that such interest is so liable.

§ 541(a)(2). The trustee has the burden of proving that the bankruptcy

estate is entitled to turnover. Wolfe v. Jacobson (In re Jacobson), 676 F.3d 1193,

1200-01 (9th Cir. 2012).

B.     The bankruptcy court’s factual findings are not clearly erroneous.

       Richard mostly argues that the bankruptcy court committed factual

errors.11 His arguments are of the “kitchen sink” variety. We divide them

into six categories. None has any merit.

       1.     The bankruptcy court ordered turnover.

       Richard argues that the bankruptcy court did not order him to turn

over the gemstones. First, he argues that “during my research for this case I

learned that there was No Order for Turnover of anything to the Trustee

only an Injunction . . . .” Second, he contends that the injunction was

       11
        His brief also asserts that the Trustee’s complaint contained false allegations.
We review only court decisions, and therefore we disregard his objections to the
complaint (except those that duplicate his objections to the court’s findings of fact).

                                            16
defective because it “was signed on the first page by Judge Neiter. There

was no signature on the second page.” Third, he argues that the

Preliminary Injunction did not require him to turn over any assets. He says

that “Judge Kwan is mistaken in thinking that Judge Neiter’s Preliminary

Injunction . . . called for the turnover of any Dwarfco asset. Injunctions

don’t require turnover of assets to Trustees.” Fourth, he contends that he

complied with the Preliminary Injunction because he did not sell or

transfer any of Dwarfco’s assets.

      In other words, he claims that: there was no order; the order was

defective; the order did not say what the court thought it said; and he

complied with (a portion of) the order. Logically, not all of these arguments

can be correct. In this case, none of them is correct.

      The facts are straightforward, and the bankruptcy court correctly

recounted them. On December 6, 2013, the bankruptcy court issued an

interim order that prevented Richard from selling, transferring, disposing

of, or hypothecating Dwarfco’s shares and assets, gemstones, and any

antiques or artwork within his possession. Despite this order, Richard

transferred the Kandinsky Painting and possibly disposed of some of the

gemstones.

      On April 21, 2014, the bankruptcy court’s Preliminary Injunction

unequivocally ordered Richard to turn over the Kandinsky Painting and

gemstones: “The Kandinsky Painting and the Gemstones shall be turned

                                       17
over to the Trustee, forthwith, to be held in trust pending the resolution of

this adversary proceeding or further order of the Court.”

      These orders existed. They appear on the bankruptcy court’s docket

and in the excerpts of record.

      These orders were effective. It is true that Judge Neiter’s electronic

signature appears on the second page of the three-page Preliminary

Injunction. But this clerical mistake does not invalidate the order.

      The fact that the orders were styled as injunctions is of no moment.

The body of the Preliminary Injunction unambiguously required turnover

of the assets. The title did not negate the body of the order.

      There is no serious ground for dispute that the Defendants violated

the interim order and the Preliminary Injunction. Richard admitted at trial

that, after the court entered the interim order, he gave away the Kandinsky

Painting.

      The bankruptcy court therefore did not clearly err in finding that the

interim order and Preliminary Injunction barred Richard from transferring

the gemstones, the Kandinsky Painting, and the Dwarfco shares and assets,

that the Preliminary Injunction required Richard to turn over those assets

to the Trustee, and that Richard defied both orders.

      2.    Dwarfco was inactive on the petition date.

      The bankruptcy court pierced the corporate veil between Richard and

                                      18
Dwarfco,12 held that the shares and assets of Dwarfco are community

property of Richard and Kathleen, and therefore held that those assets are

property of Kathleen’s bankruptcy estate. The bankruptcy court based

these determinations partly on its finding that Dwarfco was an inactive

corporation.

       Richard argues that Dwarfco is not inactive. He states repeatedly that

Dwarfco regained active status and points to documents purportedly

evidencing Dwarfco’s reinstatement in January 2014; he also maintains that

the bankruptcy court should have done its own investigation and searched

Nevada business registration websites. We reject this argument for

multiple reasons.

       First, Dwarfco’s inactive status was only one reason why the

bankruptcy court found that Richard personally owned the corporate

assets. The court also relied on Richard’s complete control over and

dominance of Dwarfco. Richard does not challenge any of those other bases

       12
          The bankruptcy court said that Dwarfco was Richard’s alter ego. This may
have been the wrong label. The Ninth Circuit has held that alter ego is a procedural
mechanism to transfer liability: “In fact, there is no such thing as a substantive alter ego
claim at all: ‘A claim against a defendant, based on the alter ego theory, is not itself a
claim for substantive relief, e.g., breach of contract or to set aside a fraudulent
conveyance, but rather, procedural . . . .’” Ahcom, Ltd. v. Smeding, 623 F.3d 1248, 1251
(9th Cir. 2010) (quoting Hennessey’s Tavern, Inc. v. Am. Air Filter Co., 204 Cal. App. 3d
1351, 1359 (1988)). But the use of the wrong label is not reversible error: the bankruptcy
court properly found that Richard’s control and use of Dwarfco evidenced his
ownership interest.

                                             19
(other than to repeat ad nauseam that Dwarfco was owned by Ronald’s

family trust). Therefore, even if the finding about Dwarfco’s status was

wrong (and it wasn’t), the court’s result would stand.

      Second, Richard offered no admissible evidence of Dwarfco’s status.

Richard’s Exhibit 9 is a document purportedly from the Nevada Secretary

of State website. This document is not authenticated or even dated, and we

cannot tell whether it was presented at trial or at any other time to the

bankruptcy court.

      Third, the bankruptcy court had no obligation to conduct its own

independent investigation into Dwarfco’s status. See ABA Model Code of

Judicial Conduct R. 2.9(C) (“A judge shall not investigate facts in a matter

independently, and shall consider only the evidence presented and any

facts that may properly be judicially noticed.”).

      Fourth, even by Richard’s and Ronald’s own account, Dwarfco was

only reactivated as of January 2014, over a year after Kathleen filed her

bankruptcy petition. The Trustee provided proof that Dwarfco was inactive

in the state of Nevada on the petition date. The contents of the estate are

ascertained as of the petition date. § 541. Richard and Ronald lacked power

to remove assets from the estate by reactivating Dwarfco.

      Therefore, the bankruptcy court did not clearly err in finding that

Dwarfco was an inactive corporation and, more importantly, did not err in

deciding that Dwarfco’s assets were property of Kathleen’s bankruptcy

                                      20
estate.

      3.    Kathleen’s prior statements under oath were “testimony.”

      Richard repeatedly insisted at trial and in this appeal that Kathleen’s

statements in her earlier bankruptcy cases cannot be used against her

because she did not “testify” to any facts. He states that “[t]estified means

questioned under oath etc.[,]” and “she never ‘testified’ in the prior

Chapter 13 bankruptcies.” He is wrong.

      A party’s statements in her bankruptcy schedules are made under

oath. See Khalil v. Developers Sur. & Indem. Co. (In re Khalil), 379 B.R. 163, 172

(9th BAP Cir. 2007), aff’d, 578 F.3d 1167 (9th Cir. 2009) (“A false statement

or an omission in the debtor’s bankruptcy schedules or statement of

financial affairs can constitute a false oath.”); Olympic Coast Inv., Inc. v.

Wright (In re Wright), 364 B.R. 51, 71-72 (Bankr. D. Mont. 2007), aff’d, 2008
WL 160828 (D. Mont. Jan. 16, 2008), aff’d, 340 F. App’x 422 (9th Cir. 2009)

(“A false oath or statement is made when it occurs (1) in the debtor’s

schedules or (2) at an examination during the course of the proceedings.”).

When Kathleen signed her schedules, she declared under penalty of

perjury that the information she provided was true and correct. Such

statements are “testimony.”

      Moreover, in the joint pretrial order, Richard agreed that Kathleen

had previously testified to those facts in her prior bankruptcy cases:

      2. . . . In the schedules submitted in each of the subject prior

                                        21
     bankruptcies, the Debtor testified that she had a one-half
     interest in Massrock, Inc. and Dwarfco. . . .

     3. In the subject prior bankruptcies, the Debtor testified that the
     income from the Dwarfco Deed of Trust was property of her
     Chapter 13 bankruptcy estate.

     4. The Debtor testified in a prior bankruptcy that her estate
     included original paintings having a value of $50,000 and “furs
     and jewelry,” including “gems” having a value of $40,000.

(Emphases added.)

     Therefore, the bankruptcy court did not clearly err in relying on

Kathleen’s prior statements.

     4.    Richard and Kathleen received money from the Dwarfco
           Deed of Trust.

     Richard contends that he did not have any shares in Dwarfco and did

not receive any income from Dwarfco.

     As for the shares, Richard misapprehends the bankruptcy court’s

findings. The court largely repeated Richard’s contentions that he did not

own Dwarfco shares. But it found that he nevertheless had an ownership

interest in Dwarfco by virtue of his control of the company and his use of

the company’s accounts as his personal piggy bank.

     The bankruptcy court also found that Richard received income from

Dwarfco’s Deed of Trust. Both Ronald and Richard stated in their

declarations that Richard was entitled to receive any proceeds from the

                                     22
Deed of Trust. Moreover, Richard testified at trial that both he and

Kathleen occasionally received income from the Deed of Trust.

      The bankruptcy court did not clearly err in determining that Richard

had an ownership interest in Dwarfco and received income from the Deed

of Trust.

      5.    The trial transcript confirms Richard’s testimony under oath.

      Richard disputes certain findings because he says that he does not

remember making such statements at trial. Fortunately, we need not rely

on Richard’s memory, because we have a verbatim transcript.

      He states that he does not remember testifying that he took $98,000

from Massrock’s bank account, but “I had every right to spend it.” The

transcript shows that, at trial, the Trustee represented that there was

$98,623 in Massrock’s bank account on the petition date; Richard stated

that “I remember there was a lot of money but we were spending it[,]” and

that “if it was in there, I’m sure we spent it.”

      Richard further professes “surprise” to learn that he testified at trial

that Ronald told him that he could run checks and business through

Dwarfco. He tries to explain how that could not be the case, since Dwarfco

has not had a bank account since 2008. Regardless, he concedes that he

made the statement at trial under oath, as the transcript shows.

      Richard also states that he does not “remember receiving any income

from Dwarfco unless Ronald Taxe gave it to me but that had to be more

                                       23
than 8 years ago.” But, as the bankruptcy court accurately pointed out,

Ronald and Richard stated in declarations that Richard is entitled to receive

interest payments on the Dwarfco Deed of Trust. Additionally, Richard

testified at trial that income from the Deed of Trust went to him or

Kathleen on a few occasions.

      The bankruptcy court did not clearly err in recounting and relying on

Richard’s testimony.

      6.     The findings regarding joint bank accounts and assets are not
             clearly erroneous.

      Richard also takes issue with the court’s findings regarding his

property. He appears to agree with the court’s finding that he has no

marital agreement with Kathleen with respect to their property interests,

but nevertheless argues that they did not have any joint bank accounts. He

does not appear to assert any error with the finding in this respect.

      He also argues that he has owned assets “in the past” and has only

one judgment against him. But the court did not make any finding to the

contrary; it only found that “he avoids claiming an interest in any

corporations and business entities that he controls, or whose assets he

controls, ‘because of judgments.’” This is consistent with Richard’s trial

testimony.

      Accordingly, we discern no clear error with any of the bankruptcy

court’s factual findings.

                                      24
C.    The bankruptcy court did not commit any errors of law.

      Richard briefly raises a few purported errors of law. He provides no

legal authority in support of his contentions and argues in conclusory

fashion. Even construing his arguments liberally, we discern no error.

      First, Richard argues that a California bankruptcy court cannot

exercise any power over the assets of a Nevada corporation. He is wrong.

The bankruptcy court has “exclusive jurisdiction . . . of all the property,

wherever located, of the debtor as of the commencement of such case, and

of property of the estate.” 28 U.S.C. § 1334(e).13 Section 542(a) allows the

trustee to seek turnover of property of the estate. Section 541(a) specifies

that a debtor’s bankruptcy estate is comprised of certain types of property,

“wherever located and by whomever held[.]” There is no territorial

limitation on the assets pulled into the bankruptcy estate. See Official

Committee of Creditors of Arcapita Bank B.S.C.(c) v. Bahrain Islamic Bank (In re

Arcapita Bank B.S.C.(c)), 575 B.R. 229, 251 (Bankr. S.D.N.Y. 2017) (“[T]he

addition of the ‘wherever located’ language to the statute ‘ma[de] clear that

a trustee in bankruptcy is vested with the title of the bankrupt in property

which is located without, as well as within, the United States.’” (quoting

      13
          28 U.S.C. § 1334 confers jurisdiction on the district court. 28 U.S.C. § 157 (in
effect) authorizes each district court to delegate its bankruptcy jurisdiction to the
bankruptcy court. The district court for the Central District of California has done so.
See U.S. Dist. Ct. C.D. Cal. Gen. Order 13-05 (July 1, 2013),
https://www.cacd.uscourts.gov/court-procedures/general-orders?field_gocategory_tid=
102&=Apply.

                                            25
H.R. Rep. No. 82-2320, at 15 (1952), reprinted in 1952 U.S.C.C.A.N. 1960,

1976)).

      Second, he argues that the property at issue is not community

property. His understanding is wrong. Under California law, there is a

presumption that all property acquired during a marriage is community

property. Cal. Fam. Code § 760. This presumption may be rebutted, such as

in instances where property is traceable to one spouse’s separate property.

See In re Jacobson, 676 F.3d at 1201; Cal. Fam. Code § 770(a). However,

Richard provided no evidence at trial to rebut the initial presumption. On

the contrary, the Trustee provided evidence (largely through Richard’s

own testimony) that Richard and Kathleen received income from the

Dwarfco Deed of Trust and that he controlled Dwarfco. The bankruptcy

court did not err in concluding that the Dwarfco shares and Deed of Trust

were community property.

      Third, he contends that a trustee may only seize property within a

year after her appointment to a case. No such time limit exists. Section 546

imposes a time limit, but that section applies only to the Trustee’s avoiding

powers. In any event, the Trustee commenced the adversary proceeding on

October 11, 2013, within one year of the December 18, 2012 petition date.

                              CONCLUSION

      The bankruptcy court did not err. We AFFIRM.

                                      26