Summary
concluding court had jurisdiction where appeal was not premature pursuant to Rule 8002
Summary of this case from Roark v. Gladstone (In re Roark)Opinion
No. C 01-1818 MMC
August 13, 2002
ORDER DISMISSING BANKRUPTCY APPEAL IN PART AS MOOT; AFFIRMING ORDER DENYING DEBTOR'S CLAIM OF EXEMPTION
Before the Court is Pepi Schafler's ("Debtor") appeal from an order of the Bankruptcy Court allowing Trustee Richard J. Spear ("Trustee") to sell stock certificates previously found to be assets of the bankruptcy estate, and an order denying Debtor's claim that certain of the stock certificates were exempt from the bankruptcy estate. Having reviewed the briefs filed by the parties, the Court rules as follows.
BACKGROUND
On March 26, 1996, Debtor filed a petition for relief pursuant to Chapter 7 of the Bankruptcy Code. On July 5, 1996, the Bankruptcy Court entered a Discharge Order, and a final decree was entered on July 9, 1996, closing the case. On May 7, 1998, the Bankruptcy Court granted Trustee's motion to reopen the case for the purposes of allowing Trustee to investigate and pursue recovery of potential bankruptcy estate assets that may have been undisclosed. On November 3, 1999, Trustee filed a First Amended Complaint seeking, inter alia a declaration that certain assets, specifically stock certificates and a condominium, were the assets of the bankruptcy estate. On December 18, 2000, the Bankruptcy Court granted Trustee's motion for summary judgment on Trustee's claim for declaratory relief, finding the undisputed evidence demonstrated that Debtor had fraudulently concealed her interest in the subject assets. Debtor filed a notice of appeal from the resulting judgment. This Court affirmed the judgment on June 12, 2001. See Spear v. Schafler (In re Schafler), 263 B.R. 296 (N.D. Cal. 2001).
Further details of the procedural history of this action, up to the date the Bankruptcy Court granted Trustee's motion for summary judgment on the claim for declaratory relief, can be found in the Court's order affirming the Bankruptcy Court's judgment. See Spear v. Schafler (In re Schafler), 263 B.R. 296 (N.D. Cal. 2001).
On February 14, 2001, while Debtor's appeal from the judgment was pending before this Court, Debtor filed, in the Bankruptcy Court, an Amended Schedule C in which she claimed that an Individual Retirement Account ("IRA") was exempt from the bankruptcy estate. (Docket No. 174). On February 23, 2001, Trustee, in response to the amendment, filed a Notice of Trustee's Objection to Claims of Exemption, arguing, inter alia that the exemption should be denied because Debtor sought an exemption "in property which she never disclosed as an asset." (Docket No. 176.) On March 9, 2001, Debtor filed an Objection to Trustee's Objection to Claim of Exemption, arguing therein that Trustee's objection was not properly filed under the Federal and Local Rules of Bankruptcy Procedure. (Docket No. 187)
Except where otherwise indicated, all references to the record correspond to the number in the Bankruptcy Court.
On March 9, 2001, Trustee filed a Motion for Order Approving Sale of Personal Property, in which he sought permission to sell the stock certificates the Bankruptcy Court had previously determined were assets of the bankruptcy estate. (Docket No. 181.) Debtor filed opposition to the motion, arguing, inter alia that some of the stock certificates were subject to the exemption she had claimed in her Amended Schedule C, and that the motion should be denied until the Bankruptcy Court "resolved" any "argument the Trustee advance[d] to save his defective objection." (Docket No. 194 at 2-3.) In reply, Trustee argued that Debtor's claim of exemption was precluded because she had fraudulently concealed the assets being claimed as exempt, and that the objection was not defective. (Docket No. 202.)
On April 25, 2002, the Bankruptcy Court conducted a hearing to consider Trustee's motion. (Docket No. 222.) The Bankruptcy Court granted the motion, sustaining Trustee's objection to Debtor's claim of exemption on the ground that she had fraudulently concealed the assets she now claimed as exempt. (Id. at 25.) The Bankruptcy also held that Trustee's objection was timely, and had been filed in substantial compliance with the Bankruptcy Rules. (Id. at 25.) The Bankruptcy Court's oral rulings were memorialized in a minute order entered on the docket on April 27, 2001. (Docket No. 207.)
After the hearing, the Bankruptcy Court further memorialized its oral rulings by issuing, on April 25, 2001, an Order Approving Trustee's Sale of Personal Property (Stock Certificates), (Docket No. 208), and, on May 17, 2001, an Order Denying Debtor's Claim of Exemption in IRA. Meanwhile, on May 3, 2001, Debtor filed a Notice of Appeal, amended May 7, 2001. In her Amended Notice of Appeal, Debtor appeals from "each of the several orders announced in open court on April 25, 2001 and entered on the docket on April 27, 2001 of the bankruptcy case insofar as said orders are adverse to her." (Docket No. 220.)
The copy of the Order Denying Debtor's Claim of Exemption in IRA provided to this Court in the record on appeal is not signed. It is undisputed, however, that a written order consistent with the Bankruptcy Court's oral ruling was filed on May 17, 2001. (See Appellee's Brief at 12:10-11.)
At the hearing on April 25, 2001, the Bankruptcy Court also granted three fee applications. By order filed June 26, 2001, this Court denied Debtor's motion for leave to appeal those interlocutory orders.
I. STANDARD OF REVIEW
A bankruptcy court's conclusions of law are reviewed de novo. See Ardmor Vending Co. v. Kim (In re Kim), 130 F.3d 863, 865 (9th Cir. 1997). A debtor's entitlement to a bankruptcy exemption is a question of law. See Matter of Yonikus, 996 F.2d 866, 868 (7th Cir. 1993). Whether a party has properly filed an objection to a claim of exemption is a question of law. See Spenler v. Siegel (In re Spenler), 212 B.R. 625, 628 (9th Cir. BAP 1997).II. DISCUSSION
A. Jurisdiction
Both parties indicate that after Debtor filed the instant appeal, Trustee sold the stock certificates in accordance with the Bankruptcy Court's order of April 25, 2001. (See Appellee's Brief at 12:16; Appellant's Reply Brief at 13:25-26.) Debtor concedes that her appeal from the order approving the sale is moot. (See Notice to the Court of Error, filed October 1, 2001.) The Court agrees. See Onouli-Kona Land Co. v. Estate of Richards (In re Onouli-Kona Land Co.), 846 F.2d 1170, 1171 (9th Cir. 1988) ("Bankruptcy's mootness rule applies when an appellant has failed to obtain a stay from an order that permits a sale of a debtor's assets.") Accordingly, Debtor's appeal from the order granting the motion approving the sale will be dismissed as moot.
Neither party contends that Debtor's appeal from the order denying Debtor's claim of exemption is moot. Trustee, however, argues that the Court nonetheless lacks jurisdiction to review that order. According to Trustee, because Debtor filed her Amended Notice of Appeal on May 7, 2001, ten days before the Bankruptcy Court filed its written order denying the claim of exemption, an appeal from the order denying the claim of exemption "is not properly before this Court." (See Appellee's Brief at 1:25.)
As the Bankruptcy Court observed at the hearing held April 25, 2001, if that order were to be reversed, the bankruptcy estate would reimburse Debtor for the value of the property found to be exempt. (See Docket No. 220 at 20.)
Rule 8002(a) of the Federal Rules of Bankruptcy Procedure provides: "A notice of appeal filed after the announcement of a decision or order but before entry of the judgment, order, or decree shall be treated as filed after such entry and on the day thereof." See Fed.R.Bankr.P. 8002(a). Here, Debtor filed her notice of appeal after the Bankruptcy Court announced its decision denying Debtor's claim of exemption, but before the written order was issued. Under Rule 8002(a), Debtor's notice of appeal is treated as filed on May 17, 2001, the day the written order denying the exemption was entered. Consequently, Debtor's appeal from the order denying the claim of exemption is not premature, and the Court has jurisdiction to consider Debtor's appeal from the order denying her claim of exemption.
B. Merits of Appeal
Debtor argues that Trustee's objection to the claim of exemption was not properly filed and noticed under the Federal and Local Rules of Bankruptcy Procedure, and that the Bankruptcy Court's consideration of the allegedly defective objection deprived Debtor of due process.
The Federal Rules provide that an objection to a claim of exemption must be filed "within 30 days after the meeting of creditors held under § 341(a) is concluded or within 30 days after any amendment to the list [of property claimed to be exempt] or supplemental schedules is filed, whichever is later." See Fed.R.Bankr.P. 4003(b). Here, Trustee's objection, which included the argument that the claim of exemption was improper because Debtor had not disclosed the subject property, was filed within 30 days of Debtor's filing of her Amended Schedule C. Consequently, the objection was properly filed under the Federal Rules.
The meeting of creditors was held in 1996. (See Appellee's Brief at 3:22-23.) The 30-day period to object thus ran from the date Debtor filed her Amended Schedule C.
The Local Rules provide that an objection to a claim of exemption "shall be set for an actual hearing." See B.L.R. 9014-1(b)(1)(F). Debtor argues that because Trustee did not notice the objection for a hearing, the Bankruptcy Court erred by considering the objection at the hearing scheduled for determination of the motion to approve the sale. Noncompliance with a local rule, however, "is not, by itself, reversible error absent a showing of prejudice." See Houston v. Bryan, 725 F.2d 516, 518 (9th Cir. 1984) (holding district court's noncompliance with local rule requiring hearing be conducted on certain motions for summary judgment did not entitle appellant to reversal where appellant failed to show prejudice from lack of hearing). Debtor contends that because a hearing on the objection was not noticed, she was deprived of the opportunity to show that she had not fraudulently concealed the assets claimed as exempt, and that, as a result, she was prejudiced and deprived of due process.
Although Trustee did not notice a hearing on its objection, Trustee did notice a hearing on its motion to approve the sale, which motion sought permission to sell assets encompassed by Debtor's claim of exemption. The issues of Debtor's entitlement to the exemption and the sufficiency of Trustee's objection thereto were addressed by the parties in the papers submitted in connection with the motion seeking approval of the sale, and thereafter were heard by the Bankruptcy Court at the noticed hearing on the motion to approve, at which time Debtor had the further opportunity to, and did, address the merits of her claim of exemption and the sufficiency of the objection.
As noted, the issue presented by the objection was whether Debtor could claim an exemption in property that the Debtor had not disclosed. On that issue, Debtor did not argue before the Bankruptcy Court, and does not argue to this Court, that a debtor who fraudulently conceals assets may later claim those assets as exempt. Thus, the legal issue was not in dispute. Indeed, "[a]ctive concealment of an asset no doubt requires denial of [an] exemption claim." See Andermahr v. Barrus (In re Andermahr), 30 B.R. 532, 534 (9th Cir. BAP 1983). Instead, Debtor sought an evidentiary hearing on the question of whether she had, in fact, fraudulently concealed the assets. That very factual issue, however, had been fully addressed by the Bankruptcy Court when it granted Trustee's motion for summary judgment on Trustee's claim for declaratory relief. In ruling on the motion for summary judgment, the Bankruptcy Court determined, based on the undisputed evidence, that Debtor had fraudulently concealed the assets, a ruling memorialized in a final judgment granting Trustee's motion. A necessary result of that judgment, which this Court later affirmed, was that Debtor could not claim as exempt the very assets she had fraudulently concealed. See id.
At the hearing to consider the Trustee's motion for approval of the sale, the Bankruptcy Court declined to schedule an evidentiary hearing to consider the exact factual issue it had previously adjudicated and, instead, reaffirmed its prior, final decision that Debtor had fraudulently concealed the assets. There is no indication, nor did Debtor so indicate to the Bankruptcy Court, that she could have offered new evidence relevant to the issue of fraudulent concealment had a separate hearing been scheduled. Under such circumstances, Debtor was not deprived of due process by the Bankruptcy Court's decision to reaffirm its prior ruling that Debtor had fraudulently concealed the subject assets.
Debtor argued to the Bankruptcy Court that the prior judgment did not collaterally estop Debtor from relitigating the fraudulent concealment issue because the judgment, at that time, was on appeal before this Court. The Bankruptcy Court did not reach the question of estoppel, and, on appeal, Trustee does not argue that the prior judgment collaterally estopped Debtor from relitigating the concealment issue.
Debtor also contends the Bankruptcy Court erred by failing to consider her argument that some of her stock interests qualified as an IRA under Maryland law. That argument, however, is irrelevant in light of the Bankruptcy Court's finding that Debtor had fraudulently concealed those assets. The fraudulent concealment required denial of the claim of exemption, irrespective of whether the claim would have been proper in the absence of fraudulent concealment. See Andermahr, 30 B.R. at 534.
Accordingly, as Debtor has not shown she was prejudiced by Trustee's noncompliance with Bankruptcy Local Rule 9014-1(b)(1), and the finding of fraudulent concealment necessarily required that the claim of exemption be denied, the Bankruptcy Court did not err by denying Debtor's claim of exemption.
CONCLUSION
For the reasons expressed above:
1. Debtor's appeal from the Bankruptcy Court's Order Approving Trustee's Sale of Personal Property (Stock Certificates) is hereby DISMISSED as moot.
2. The Bankruptcy Court's Order Denying Debtor's Claim of Exemption in IRA is hereby AFFIRMED.
IT IS SO ORDERED.