Court Opinion

ID: 9928662
Source: CourtListenerOpinion
Date Created: 2024-01-31 20:02:45.526748+00
Date Added: 2024-06-11T09:52:52.038583
License: Public Domain

FILED
                                                                                 JAN 31 2024
                           NOT FOR PUBLICATION
                                                                             SUSAN M. SPRAUL, CLERK
                                                                               U.S. BKCY. APP. PANEL
          UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
                    OF THE NINTH CIRCUIT

 In re:                                              BAP No. NV-23-1130-BNF
 WAHLING HUI,
                     Debtor.                         Bk. No. 21-15681-abl

 WAHLING HUI,
                     Appellant,
 v.                                                  MEMORANDUM∗
 SHELLEY D. KROHN, Chapter 7 Trustee,
              Appellee.

              Appeal from the United States Bankruptcy Court
                          for the District of Nevada
             August B. Landis, Chief Bankruptcy Judge, Presiding

Before: BRAND, NIEMANN,** and FARIS, Bankruptcy Judges.

                                  INTRODUCTION

      Appellant Wahling Hui appeals an order sustaining in part and

overruling in part the chapter 71 trustee's objection to certain exemptions Hui

claimed under Nevada law. We AFFIRM.

      ∗ 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.
       ** Hon. Jennifer E. Niemann, U.S. Bankruptcy Judge for the Eastern District of

California, sitting by designation.
       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, all "NRS" references are to the Nevada Revised Statutes, and all
"NRCP" references are to the Nevada Rules of Civil Procedure.
                                               1
                                   FACTS

A.   Prepetition events

     Prior to Hui's bankruptcy filing, her daughter, Jamie Lee (f/k/a Michelle

Wong) ("Lee"), purchased a home in Las Vegas known as Casa Bella, which

Lee transferred to an irrevocable trust known as the Wong Trust. Lee and her

minor son were the sole beneficiaries of the Wong Trust; Hui was the trustee.

     After Lee and her son relocated to California, Hui, without consent or

knowledge of the beneficiaries, sold Casa Bella for $600,000, which was

$260,000 below market value. Hui then used $318,000 of the proceeds to

purchase a home in Las Vegas known as Minots Ledge for her personal use.

Of the remaining proceeds, Hui gave $100,000 to Lee, then exhausted all but

$22,038.85.

     Ultimately, Lee prevailed in a suit against Hui in Nevada state court.

On October 14, 2021, the state court entered a default judgment ("Judgment")

against Hui concluding that she: (1) breached fiduciary duties owed to the

Wong Trust beneficiaries by selling Casa Bella for under market value and

misappropriating a portion of the funds to purchase Minots Ledge for her

sole use and benefit; and (2) unjustly enriched herself by misappropriating

Wong Trust funds to purchase Minots Ledge. The state court authorized the

clerk of court to execute a quitclaim deed to transfer ownership of Minots

Ledge to Lee, and it entered judgment in favor of Lee and against Hui for

$419,984.77 plus attorney’s fees and costs. Hui did not appeal.

                                       2
      Meanwhile, in late 2019, Hui recorded a declaration of homestead for

Minots Ledge.

      On November 30, 2021, the clerk of court executed a quitclaim deed

conveying Minots Ledge to Lee in accordance with the Judgment. The

quitclaim deed to Lee was recorded on December 10, 2021. Around this time,

Lee caused a five-day notice to quit and five-day notice of unlawful detainer

to be served on Hui in an effort to evict her from Minots Ledge.

B.    Postpetition events

      On December 15, 2021, Hui filed a skeletal chapter 7 bankruptcy case.2

Shelley D. Krohn ("Trustee") was appointed as trustee.

      Trustee continued the § 341(a) meeting of creditors multiple times to

afford Hui an opportunity to amend her schedules. Hui filed several versions

of her bankruptcy schedules and statements of financial affairs, but she filed

the final version of her Schedules A/B and C and SOFA on March 10, 2022.

Hui disclosed for the first time on her last amended SOFA that she was

holding $50,000 worth of personal property for Lee, Lee's son, and "Tom C.,"

including "watches."

      During the case, Trustee moved on two occasions to extend the

deadline to object to Hui's discharge under § 727, which Hui opposed. In

opposing the first extension motion, Hui disclosed for the first time that she

was in possession of a ladies' Rolex watch that she co-owned with Lee, and

      2
        Although Hui had initially retained a bankruptcy attorney, he never appeared in
the case. Hui later retained a second bankruptcy attorney in February 2022, but that
representation was short-lived as he moved to withdraw two months later.
                                             3
she requested that the court rule on its exempt status. In opposing the second

extension motion ("Second Extension Opposition"), Hui explained how she

determined the claimed exemptions on her last Schedule C. 3 Hui also

disclosed for the first time that she was holding a "men's watch," which

turned out to be a valuable Patek Philippe and part of the $50,000 worth of

watches and jewelry she was holding for others. Hui explained later at trial

that the Patek watch was purchased in 2006 for her grandson by his father.

Trustee valued the Patek watch at $30,000.

      Trustee ultimately withdrew her second motion to extend the § 727

deadline, and Hui received a discharge on July 15, 2022.

      1.     Exemption objection

      Relevant to this appeal, Trustee objected to the following three

exemptions claimed by Hui ("Exemption Objection"):

   • a homestead exemption under NRS § 21.090(1)(m) 4 for Minots Ledge

      ("Homestead Exemption");

      3
         Hui explained at trial how she determined her exemptions. In her view, the
Second Extension Opposition was not an "amendment" to her Schedule C because she
believed she did not have to amend; rather, it was meant to help clarify how she
completed her Schedule C. The bankruptcy court gave Hui the benefit of the doubt and
considered the Second Extension Opposition as an amendment to her last Schedule C.
       4 NRS § 21.090(1)(m) provides:

       1. The following property is exempt from execution, except as otherwise
       specifically provided in this section or required by federal law:
       ...
       (m) The dwelling of the judgment debtor occupied as a home for himself
       or herself and family, where the amount of equity held by the judgment
       debtor in the home does not exceed $605,000 in value and the dwelling is
       situated upon lands not owned by the judgment debtor.
                                               4
   • a jewelry exemption under NRS "§ 21.090(1)(a)(z)" ("Jewelry

      Exemption"); and

   • an exemption for cash, money deposits, prepaid HOA dues, and health

      aids ("Miscellaneous Exemptions").

As to the claimed Homestead Exemption, Trustee argued that Hui could not

claim an exemption for equity in a home that she did not hold title to on the

petition date. Title to Minots Ledge had been transferred to Lee prior to the

petition date. As to the claimed Jewelry Exemption, Trustee argued that Hui

relied on a nonexistent statute for it. As to the Miscellaneous Exemptions for

$4,700 total in cash and $500 in health aids, Trustee argued that Hui failed to

identify under which statute they would be exempt. In addition, Hui had not

identified the Rolex or Patek watches on her Schedule B, nor had she claimed

them exempt on her Schedule C. Thus, argued Trustee, if Hui was claiming

an exemption in either watch, it should be disallowed.

      Hui opposed the Exemption Objection. She argued that Minots Ledge

was exempt based on the homestead declaration she recorded in 2019. Hui

further argued that, contrary to Trustee's position, she had listed the Rolex

and Patek watches "on the schedule" even though her attorney had told her

not to since they did not belong to her.5

      2.     Ruling on the Exemption Objection

      The bankruptcy court held an evidentiary hearing on the Exemption

      5
        Hui likely meant that she disclosed the watches on her SOFA. At trial, she agreed
that she did not list them on her Schedule A/B or claim them exempt on her Schedule C.
                                             5
Objection. Hui and Trustee testified. The court then entered an order and

memorandum decision sustaining in part and overruling in part Trustee's

objections. It sustained Trustee's objection to the Homestead Exemption,

finding that, under NRS § 111.205(1), Hui did not hold any "estate or interest"

in Minots Ledge "by deed or conveyance, in writing" on the petition date

because title to Minots Ledge had already transferred to Lee by quitclaim

deed five days prior. The court also found that Hui did not hold any "estate

or interest" in Minots Ledge "by act or operation of law" by way of her 2019

homestead declaration. The homestead declaration combined with Hui's

residency did not overcome her lack of title or equity in Minots Ledge on the

petition date. Therefore, because she lacked any equity or interest in Minots

Ledge on the petition date and it never became estate property, the court

found that Hui was not entitled to the claimed Homestead Exemption under

NRS § 21.090(1)(m).

     Even if Hui had held an estate or interest in Minots Ledge which passed

to her bankruptcy estate on the petition date, the court concluded that it

would sustain Trustee's objection and deny the claimed Homestead

Exemption based on the Judgment. Under Maki v. Chong, 75 P.3d 376, 379

(Nev. 2003), and Green v. Weinstein (In re Green), BAP No. NV-16-1080-JuKuL,

2017 WL 957151, at *7-9 (9th Cir. BAP Mar. 10, 2017), the Nevada homestead

exemption statutes cannot be used as an instrument of fraud and imposition,

and, as a matter of public policy, the exemption does not protect individuals

using fraudulently obtained funds to purchase real property. The court found

                                       6
that Hui's conduct regarding Minots Ledge, as found by the state court, fit

squarely within this exception to the Nevada homestead exemption.

      The court sustained in part and overruled in part Hui's claimed Jewelry

Exemption. Hui claimed $11,000 of her $13,000 in jewelry exempt under NRS

"§ 21.090(1)(a)(z)," leaving $2,000 of scheduled jewelry as nonexempt.

Trustee's only objection was based on the nonexistent statute cited in support

of the exemption, which the court overruled. NRS § 21.090(1)(a) permits an

exemption for jewelry up to $5,000, while NRS § 21.090(1)(z) – the "wildcard"

exemption – permits an exemption for personal property not otherwise

exempt up to $10,000. Hui explained in the Second Extension Opposition and

at trial that she claimed the $5,000 allowed under NRS § 21.090(1)(a), and she

claimed another $5,000 allowed under NRS § 21.090(1)(z), which had $7,000

remaining after deducting $3,000 for exempt household goods and clothing

(which was allowed over Trustee's objection), thereby leaving $2,000

remaining unused for her "wildcard" exemption. Thus, the court found that

$3,000 of Hui's jewelry was not exempt and had to be turned over to Trustee.

      The court sustained in part and overruled in part Hui's claimed

Miscellaneous Exemptions. In her last Schedule C, Hui claimed the $1,000

prepaid HOA fees as exempt under the unused $2,000 wildcard exemption,

so the court overruled Trustee's objection. Trustee's only objection to the

exemption for the cash, deposits of money, and the Sonic Pain Relief health

aid was that Hui did not identify any statute permitting them. The court

sustained Trustee's objection as to the Sonic Pain Relief health aid for $500,

                                        7
which Hui maintained in the Second Extension Opposition was exempt

under NRS § 21.090(1)(q), which permits an exemption for any prosthesis or

equipment prescribed by a physician or dentist. The court found that nothing

in the record established that the Sonic Pain Relief health aid was prescribed

to Hui by a physician or dentist. The court also sustained Trustee's objection

as to the $2,000 in cash and the $1,700 in deposits of money, which Hui

maintained in the Second Extension Opposition and at trial were exempt

under NRS § 21.090(1)(t) and/or (w). Those statutes permit an exemption for

(t) court-ordered money or benefits paid to a debtor by a former spouse for

the debtor's support and maintenance, and (w) payments received as

compensation for the loss of future earnings. The court found that nothing in

the record established that the scheduled cash and deposits of money were

paid to Hui for either of these reasons. Consequently, Hui's claimed

exemptions for the Sonic Pain Relief health aid, cash, and deposits of money

were denied, and Hui had to turn those assets over to Trustee.

     Finally, the court determined that the Rolex and Patek watches were

not properly claimed as exempt. Hui did not list either watch on her last

Schedule A/B, nor did she claim them exempt on her last Schedule C. The

Second Extension Opposition also did not identify any statute under which

the watches could be properly exempted. This timely appeal followed.

                               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.

                                       8
                                       ISSUE

      Did the bankruptcy court err in: (1) denying Hui's Homestead

Exemption; (2) denying Hui's Jewelry Exemption in part; (3) denying Hui's

exemptions for the Sonic Pain Relief health aid, cash, and deposits of money;

and (4) determining that Hui did not properly claim the Rolex and Patek

watches as exempt?

                           STANDARDS OF REVIEW

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

de novo. Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th Cir. BAP 2003). De

novo review means we give no deference to the bankruptcy court's decision.

Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).

      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).

                                   DISCUSSION

A.    Law governing exemptions generally

      When a debtor files a bankruptcy petition, all of her assets become

property of the estate and may be used to pay creditors, subject to the

debtor's ability to reclaim specified property as exempt. Schwab v. Reilly, 560

U.S. 770, 774 (2010); § 541(a)(1); § 522(l).

                                          9
      A claimed exemption is "presumptively valid." Carter v. Anderson (In re

Carter), 182 F.3d 1027, 1029 n.3 (9th Cir. 1999) (citation omitted). A party

objecting to a claimed exemption has the burden of proving that the

exemption is not properly claimed. Id. (citing Rule 4003(c)). Initially, this

means the objecting party has the burden of production and the burden of

persuasion. Id. If the objecting party produces evidence to rebut the

presumptively valid exemption, the burden of production then shifts to the

debtor to produce unequivocal evidence to demonstrate the exemption is

proper. Id. The burden of persuasion, however, always remains with the

objecting party. Id.

      Nevada has opted out of the federal exemption scheme provided under

§ 522(d). See NRS § 21.090(3). Therefore, Nevada law governs substantive

issues regarding exemptions.

B.    The bankruptcy court did not err in denying Hui's Homestead
      Exemption, denying Hui's Jewelry Exemption in part, denying Hui's
      exemptions for the Sonic Pain Relief health aid, cash, and deposits of
      money, and determining that she did not properly claim the Rolex
      and Patek watches as exempt.

      The only ruling Hui challenges is the bankruptcy court's denial of the

Homestead Exemption, arguing that the court erred in ruling that she did not

own Minots Ledge on the petition date. Hui argues that the Judgment was

entered on November 22, 2021, that she had 30 days to file an appeal of the

Judgment (or until December 22, 2021), and that she filed her chapter 7

bankruptcy case on December 15, 2021.

                                        10
      Reading between the lines, Hui appears to argue that the Judgment was

not final and enforceable on December 10, 2021, when the quitclaim deed

transferring Minots Ledge to Lee was recorded, because the appeal time for

the Judgment had not yet run; therefore, she still held title to the property on

the petition date. Hui did not raise this argument before the bankruptcy

court, and she cites no authority for this proposition. In any event, the

Judgment was entered on October 14, 2021, not November 22, 2021. Thus, no

stay of the Judgment was in effect under NRCP 62 when the quitclaim deed

was recorded.

      Even if Hui were correct about the stay, she does not challenge the

other basis upon which the bankruptcy court denied the Homestead

Exemption. The court reasoned that, under Maki and Green, Hui would not be

entitled to the Homestead Exemption because she used fraudulently obtained

funds to purchase Minots Ledge. We see no error in that well-reasoned

decision.

      The only other arguments Hui appears to raise dispute the merits of the

Judgment, but that issue is not properly before us. She does not raise any

specific arguments as to the court's denial of her claimed Jewelry Exemption

in part, or her claimed exemptions for the Sonic Pain Relief health aid, cash,

and deposits of money in their entirety. She also does not specifically

challenge the court's ruling that the Rolex and Patek watches were not

properly claimed as exempt. Again, we see no error in the court's well-

reasoned decision with respect to the Jewelry Exemption, the Miscellaneous

                                       11
Exemptions as to the Sonic Pain Relief health aid, cash, and deposits of

money, and the Rolex and Patek watches.

                               CONCLUSION

     For the reasons stated above, we AFFIRM.

                                      12