Court Opinion

ID: 4192829
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:02:52.137691+00
Date Added: 2024-06-11T14:40:22.029837
License: Public Domain

FILED
                                                               NOV 03 2015

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1                         NOT FOR PUBLICATION                 OF THE NINTH CIRCUIT

2
3                   UNITED STATES BANKRUPTCY APPELLATE PANEL
4                             OF THE NINTH CIRCUIT
5    In re:                        )       BAP No. NC-15-1031-DJuTa
                                   )
6    BOOKER THEODORE WADE, JR.,    )       Bk. No. 13-50376
                                   )
7              Debtor.             )
     ______________________________)
8                                  )
     BOOKER THEODORE WADE, JR.,    )
9                                  )
               Appellant,          )
10                                 )
     vs.                           )       M E M O R A N D U M1
11                                 )
     ARLENE STEVENS,               )
12                                 )
               Appellee.           )
13   ______________________________)
14                         Submitted Without Argument
                               on October 23, 2015
15
                            Filed - November 3, 2015
16
                 Appeal from the United States Bankruptcy Court
17                   for the Northern District of California
18        Honorable Stephen L. Johnson, Bankruptcy Judge, Presiding
19   Appearances:    Appellant Booker Theodore Wade, Jr. pro se on brief;
                     David Hamerslough of ROSSI, HAMERSLOUGH, REISCHL &
20                   CHUCK on brief for Appellee Arlene Stevens.
21
     Before:   DUNN, JURY, and TAYLOR, Bankruptcy Judges.
22
23
24        1
             This disposition is not appropriate for publication.
25   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
26   Cir. BAP Rule 8024-1.

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1             The chapter 72 debtor in a no-asset case sought an order from
2    the bankruptcy court awarding him an exemption in his residence
3    property.     The bankruptcy court determined that the relief it could
4    award was limited to an order recognizing that the claimed exemption
5    was valid for purposes of the bankruptcy case only.     The debtor
6    appealed, asserting that the bankruptcy court erred when it did not
7    determine that the “allowed” exemption was effective in state court
8    proceedings in which a judgment creditor was seeking to exercise
9    rights against the subject property.
10        For the reasons stated below, we AFFIRM.
11                             I.   FACTUAL BACKGROUND
12        Since 2007, Appellant Booker Theodore Wade, Jr. and Appellee
13   Arlene Stevens have been in litigation to resolve disputes, both
14   personal and business in nature, stemming from the termination of
15   their personal relationship.     They reached a judicially-supervised
16   settlement (“Settlement”) for the division of their interests in
17   property in 2009.     This appeal relates specifically to a parcel of
18   real property (“Property”) in Palo Alto, California, as to which the
19   Settlement required a sale and division of proceeds 60% to
20   Ms. Stevens and 40% to Mr. Wade.
21
22
          2
             Unless specified otherwise, all chapter and section
23   references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all
     “Rule” references are to the Federal Rules of Bankruptcy Procedure,
24
     Rules 1001–9037, and any “Local Rule” reference is to the local
25   rules of the Bankruptcy Court for the Northern District of
     California. All “Civil Rule” references are to the Federal Rules of
26   Civil Procedure.

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1         In the course of his efforts to prevent Ms. Stevens from
2    realizing on her interest in the Property, Mr. Wade filed a
3    chapter 11 petition on January 22, 2013.   Mr. Wade listed the
4    Property in Schedule A with a value of $710,250.   In Schedule D,
5    Mr. Wade included the consensual lien on the Property of Rushmore
6    Loan Management Services, LLC in the amount of $674,945.3   In
7    Schedule C, Mr. Wade claimed the Property as exempt pursuant to
8    Cal. Code Civ. Proc. § 704.730 in the amount of $175,000.
9         On September 5, 2013, the bankruptcy court granted Ms. Stevens
10   relief from the automatic stay (“First Stay Relief Order”) to return
11   to the Superior Court to request entry of a judgment on the
12   Settlement.   The First Stay Relief Order also denied Mr. Wade’s
13   motion to reject the Settlement as an executory contract.   Mr. Wade
14   did not appeal the First Stay Relief Order.   On June 13, 2014, the
15   Superior Court entered a judgment (“Judgment”) with respect to
16   enforcement of the Settlement, pursuant to which
17   (1) Mr. Wade’s 40% interest in the Property was forfeited to
18   Ms. Stevens because of the additional liability she incurred from
19   Mr. Wade’s failure to comply with the terms of the Settlement, and
20   (2) Mr. Wade was to transfer the Property to Ms. Stevens by
21
22
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             The Property also was encumbered by a judgment lien in the
23   amount of $756,919.10 which was avoided during the course of
     separate proceedings in the bankruptcy case. In addition, Forest
24
     View Homeowners Association filed a proof of claim, asserting a
25   secured claim in the Property based upon unpaid HOA assessments in
     the amount of $60,929.82. Resolution of Mr. Wade’s objection to
26   that proof of claim is the subject of a separate appeal.

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1    quitclaim deed.
2         On July 15, 2014, Mr. Wade’s bankruptcy case converted from
3    chapter 11 to chapter 7.   On August 19, 2014, the chapter 7 trustee
4    filed a no-asset report.   By its order (“Second Stay Relief Order”)
5    entered October 10, 2014, the bankruptcy court granted relief from
6    stay to Ms. Stevens to return to the Superior Court to enforce the
7    Judgment.   Mr. Wade did not appeal the Second Stay Relief Order.
8    Mr. Wade’s chapter 7 discharge was entered on October 21, 2014.
9         On November 4, 2014, Mr. Wade filed the motion that is the
10   subject of this appeal.    Specifically, Mr. Wade filed a motion
11   (“Exemption Motion”) pursuant to Local Rule 4003-1(a) for the
12   purpose of obtaining an order approving his claimed exemption in the
13   Property.   Through the Exemption Motion, Mr. Wade also sought to
14   prohibit Ms. Stevens from collecting her debts against Mr. Wade’s
15   exempt interest in the Property.
16        The bankruptcy court granted the Exemption Motion in part.     In
17   particular, the bankruptcy court approved the exemption claimed in
18   Schedule C because no party in interest objected to the exemption
19   within 30 days after the conclusion of the meeting of creditors as
20   required by Rule 4003(b)(1).
21        The bankruptcy court, however, declined to make any
22   determination of the effect of the allowed exemption either on the
23   Settlement or the Judgment because such a determination was beyond
24   the scope of a Local Rule 4003-1(a) proceeding.   The bankruptcy
25   court further declined to order additional relief Mr. Wade sought
26   through the Exemption Motion, such as a bar precluding Ms. Stevens

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1    from collecting debts against the Property in light of the allowed
2    exemption.   Finally, the bankruptcy court observed that whether the
3    exemption ultimately had any value or validity aside from removing
4    the Property from the bankruptcy estate was to be decided in
5    proceedings in the Superior Court if and when necessary or
6    appropriate.
7         The order granting the Exemption Motion was entered on January
8    15, 2015, and this timely appeal followed.
9                                   II.   JURISDICTION
10        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
11   and 157(b)(2)(B).   We have jurisdiction under 28 U.S.C. § 158.
12                                    III.   ISSUES
13        Whether the bankruptcy court erred when it refused to rule that
14   the exemption it had allowed in the Property retained its validity
15   in state court proceedings.
16        Whether the bankruptcy court erred in refusing to determine
17   that the Settlement and Judgment were void under state law.
18                            IV.    STANDARDS OF REVIEW
19        The right of a debtor to claim an exemption is a question of
20   law we review de novo.    Elliott v. Weil (In re Elliott), 523 B.R.
21   188, 191-92 (9th Cir. BAP 2014).
22        We may affirm the bankruptcy court’s orders on any basis
23   supported by the record.       See ASARCO, LLC v. Union Pac. R. Co.,
24   765 F.3d 999, 1004 (9th Cir. 2014); Shanks v. Dressel, 540 F.3d
25   1082, 1086 (9th Cir. 2008).
26   / / /

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1                               V.   DISCUSSION
2    A.   An Exemption “Approved” By the Bankruptcy Court Only
          Establishes a Debtor’s Right To Assert the Exemption in the
3         Bankruptcy Case.
4         This appeal stems from Mr. Wade’s failure to understand that
5    the term “exemption” within a bankruptcy case has a different and
6    more limited effect than does the term in a state court context.
7    This appeal concerns whether the bankruptcy court committed error in
8    its application of § 522(b) and Local Rule 4003-1.    Local
9    Rule 4003-1 provides in relevant part:
10        Rule 4003-1. Exempt Property.
11        (a) Orders Setting Apart Exemptions.
12        If no objection to a claim of exemption has been made in a
          Chapter 7 case within the time provided in Bankruptcy Rule
13        4003(b), the Court may, at any time, without a hearing and
          without reopening the case, enter an order approving the
14        exemptions as claimed.
15   In reliance on this rule, Mr. Wade filed a motion requesting that
16   the bankruptcy court approve his exemption in the Property in all
17   contexts, but specifically in connection with Ms. Stevens’ efforts
18   to exercise her state court rights as to the Property.
19        The bankruptcy court articulated carefully the “law governing
20   exemptions in bankruptcy cases.”     We restate it more generally here.
21   Pursuant to § 541, the filing of the bankruptcy petition creates an
22   estate, which is comprised of all of a debtor’s assets.    The debtor
23   then has the right to claim either state law or federal bankruptcy
24   law exemptions, as appropriate under state law, in the assets that
25   now constitute the bankruptcy estate.    If no timely objection is
26   made to the debtor’s claim of exemption in a particular asset, the

                                        6
1    exemption is allowed for bankruptcy purposes.    The effect of an
2    allowed bankruptcy exemption is to withdraw from the bankruptcy
3    estate property with respect to which the exemption is claimed and
4    to revest in the debtor any interest he might have in that property.
5    See Taylor v. Freeland & Kronz, 503 U.S. 638, 642-43 (1992).
6         To be clear, the sum and substance of the allowance of the
7    claim of an exemption is to declare that the exempt property will
8    not be used to satisfy, in the bankruptcy case, the claims of
9    creditors.    See § 522(b)(1) (“Notwithstanding section 541 of this
10   title, an individual debtor may exempt from property of the estate
11   . . . .”).    Nothing in § 522 purports to govern the effect of any
12   claim of exemption outside of the bankruptcy case.
13   B.   The Dispute Between Mr. Wade and Ms. Stevens No Longer Was
          Within the Scope of the Bankruptcy Court’s Jurisdiction At
14        the Time the Exemption Motion Was Filed.
15        The First Stay Relief Order was entered October 5, 2013, and
16   included a denial of Mr. Wade’s motion to reject the Settlement as
17   an executory contract.    The First Stay Relief Order authorized
18   Ms. Stevens to return to state court specifically to enforce the
19   Settlement.    After further proceedings, the state court entered the
20   Judgment which divested Mr. Wade of his interest in the Property.4
21
          4
22           A review of the docket reflects that after the Judgment was
     entered, Mr. Wade made a concerted effort to attack it in the
23   bankruptcy court. For instance, he filed an ex parte motion to
     declare it void for the reason that the entry of the Judgment
24
     exceeded the scope of the stay relief that had been granted. The
25   bankruptcy court denied the ex parte motion both because it was not
     accompanied by a notice and because Mr. Wade provided no authority
26                                                         (continued...)

                                        7
1         The Second Stay Relief Order was entered October 15, 2014, and
2    specifically included relief to allow Ms. Stevens to exercise her
3    rights, as described in the Judgment, as to the Property.
4         None of the prior orders of the bankruptcy court were appealed.
5         In his final effort to block Ms. Stevens from enforcing the
6    Judgment, Mr. Wade filed the Exemption Motion.   Through the
7    Exemption Motion, Mr. Wade reargued that both the Settlement and the
8    Judgment were not enforceable against him.
9         The bankruptcy court properly ruled that any matter relating to
10   these issues was beyond the scope of the relief allowed in Local
11   Rule 4003-1, the authority upon which the Exemption Motion was
12   based.   The primary thrust of Mr. Wade’s arguments on appeal relates
13   to the bankruptcy court’s failure to determine that the allowed
14   exemption in the Property trumps Ms. Stevens’ rights under the
15   Settlement and the Judgment.
16        Bankruptcy courts are courts of limited jurisdiction.     See
17   Stern v. Marshall, 546 U.S. 2 (2011).   The bankruptcy court had core
18   jurisdiction under 28 U.S.C. § 157(b)(2) with respect to “allowance
19   or disallowance of . . . exemptions from property of the estate.”
20   That jurisdictional provision does not extend to determining an
21
22
          4
           (...continued)
23   for ex parte relief of the type sought. Mr. Wade also filed an
     adversary proceeding in the bankruptcy court seeking to reinstate
24
     the automatic stay and to determine that attempted enforcement of
25   the Judgment by Ms. Stevens violated the automatic stay. The
     complaint was dismissed summarily for failure to prosecute after
26   Mr. Wade did not pay the filing fee within the time allowed.

                                       8
1    exemption that a debtor might claim in state court proceedings.
2    Further, the bankruptcy court previously had been divested of
3    jurisdiction entirely over the dispute between Mr. Wade and
4    Ms. Stevens as a direct result of the entry of the First Stay Relief
5    Order and the Second Stay Relief Order.   Any remaining issues
6    between the parties are solely within the jurisdiction of the state
7    court.   The bankruptcy court’s recognition of the limits on its
8    jurisdiction in the dispute was not error.
9                               VI.   CONCLUSION
10        The bankruptcy court entered an order that assured that
11   Mr. Wade’s exemption was honored in the bankruptcy case.    In light
12   of both the limited purpose of an exemption in bankruptcy
13   proceedings and the bankruptcy court’s lack of jurisdiction over the
14   fundamental dispute between Mr. Wade and Ms. Stevens, the bankruptcy
15   court did not err in denying Mr. Wade’s request to determine that
16   the bankruptcy exemption trumped Ms. Stevens’ rights in and to the
17   Property in state court proceedings to enforce the Judgment.
18        We AFFIRM.
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