Opinion
NOT FOR PUBLICATION
Argued and Submitted at Pasadena, California: July 23, 2010
Appeal from the United States Bankruptcy Court for the Central District of California. Bk. No. 06-10093-RK, Adv. No. 07-01404-RK. Hon. Robert Kwan, United States Bankruptcy Judge, Presiding.
Before: PAPPAS, KIRSCHER and TAYLOR, Bankruptcy Judges.
The Honorable Laura Taylor, United States Bankruptcy Judge for the Southern District of California, sitting by designation.
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 8013-1.
John M. Wolfe (" Trustee") appeals the judgment of the bankruptcy court dismissing his complaint for turnover of property from Chapter 7 debtor Myrna E. Jacobson (" Myrna") and her spouse Donald L. Jacobson (" Donald", and together, " the Jacobsons"). We AFFIRM.
Unless otherwise indicated, all chapter, section and rule references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532 and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
For clarity, we refer to some parties by their first names. No disrespect is intended.
FACTS
The following facts are presented, roughly, chronologically.
The Jacobsons have been married since 1959. For most of those years, Myrna worked as a licensed real estate broker. Donald is disabled.
Myrna has been involved in litigation with her major creditor for over 20 years. In 1985, Larry Cunningham (" Cunningham") sued the Jacobsons and their business partners for multiple torts stemming from the construction and sale to Cunningham of a beach house. Cunningham v. Imperial Bank et al., Case no. 460596 (Orange County Superior Court, June 7, 1985). As discussed below, after a trial, the state court awarded a large money judgment to Cunningham against Myrna. While Cunningham does not figure prominently in this appeal, an understanding of his ongoing dispute with the Jacobsons sheds light on the developments in the Jacobsons' bankruptcy cases.
The Prior Bankruptcy Cases and the Acquisition of the Kensington and Enterprise Properties
In February 1994, the Jacobsons purchased a residence (the " Kensington property") from Alvin and Barbara Fink. The Kensington property was initially titled in the name of Lynn Jacobson (" Lynn"), Donald's son and Myrna's stepson.
The Jacobsons filed a joint Chapter 7 voluntary petition on October 6, 1995, Case No. SA-95-02024-JR. At the Jacobsons' request, the case was converted to a chapter 13 case on January 24, 1996.
During the pendency of the chapter 13 case, Donald received a $14,266.74 inheritance from his mother. Trustee in this appeal alleges that Donald did not disclose his receipt of this money to the chapter 13 trustee, or amend his schedules in the bankruptcy case. Trustee's Open. Br. at 5.
In 1997, Myrna and Donald allegedly purchased a 95 percent interest in the Kensington property from Lynn. This left Lynn with a 5 percent interest.
On motion of the chapter 13 trustee, the bankruptcy court found that the chapter 13 petition, schedules and statement of financial affairs had been filed in bad faith, and on February 12, 1997, the court reconverted the case to chapter 7. Cunningham filed an adversary proceeding in the reconverted chapter 7 case objecting to the Jacobsons' discharge under § 727(a). After a trial, the bankruptcy court entered a judgment denying Myrna a discharge because, the court found, that Myrna had engaged in fraudulent conduct during the case, but that Donald had not.
While the reconverted chapter 7 case was ongoing, the Jacobsons filed another chapter 13 petition on August 5, 1998. SA-21038-JR. The bankruptcy court dismissed this chapter 13 case as another bad faith filing on October 14, 1998.
Shortly thereafter, a jury trial was concluded in Cunningham's state court action. The jury returned a verdict in favor of Cunningham, and the state court entered a judgment in his favor against Myrna for $862,933.41 on August 11, 2000.
Donald contracted to purchase a rental property in Los Alamitos (the " Enterprise property") in 2001 for $260,000. The deed he received for the property conveyed title to Donald as his sole and separate property. With Myrna's help, the Enterprise property was refinanced in 2005, yielding cash proceeds to the Jacobsons of $89,000.
On April 26, 2004, Lynn executed a grant deed conveying his remaining 5 percent interest in the Kensington property to Myrna and Donald as a gift. This deed was not recorded.
By early 2006, the amount due on Cunningham's judgment had grown to $1,302,918.03; he applied to the state court for an order to sell the Kensington property at an execution sale. Apparently in reaction to this move, Myrna filed a chapter 7 petition on February 2, 2006, commencing the bankruptcy case out of which the adversary proceeding and this appeal arise.
Cunningham moved for relief from stay to proceed with the judgment execution sale of the Kensington property. The motion was granted on May 5, 2006, and the Kensington property was sold by the Orange County Sheriff on August 2, 2007. The Sheriff paid the Jacobsons $150,000 from the proceeds of the sale as their homestead exemption on August 24, 2007.
The Turnover Adversary Proceeding
On November 21, 2007, Trustee commenced the adversary proceeding against the Jacobsons from which this appeal arises. His complaint asserted claims against them for: (1) turnover of the Enterprise property under § 542(a), alleging that it was either the sole property of Myrna, or community property with Donald; (2) turnover of any equity extracted from the Enterprise property via the 2005 refinancing, along with an accounting for any rents received for that property; and (3) turnover of the $150,000 proceeds received by the Jacobsons from the execution sale of the Kensington property.
Myrna and Donald filed separate answers, generally denying the allegations of the complaint. Myrna later submitted her Trial Brief, arguing that she had no interest in the Enterprise property, which was Donald's separate and sole property, that the $150,000 from the sale of the Kensington property was properly paid to Myrna and Donald as their homestead exemption, and that Trustee could not, therefore, recover it. Donald's Trial Brief argued that he no longer had any of the proceeds from sale of the Kensington property; and that he owns the Enterprise property as his sole and separate property, and as a result, any proceeds of the refinance loan secured by the Enterprise property were also his separate property.
Trustee's Trial Brief presented three arguments. First, he argued that the Jacobsons should be ordered to turn over the $150,000 proceeds from sale of the Kensington property because any exemption on the money had lapsed when the Jacobsons failed to reinvest the proceeds in the purchase of another homestead within six months of receiving them. Second, Trustee contended that the Jacobsons were not entitled to a homestead exemption on the Kensington property because of their fraud and bad faith regarding that property. Finally, Trustee argued that the bankruptcy estate held an interest in the Enterprise property that should be turned over to Trustee.
A trial was held in the adversary proceeding on December 11, 2008. Trustee, Myrna and Donald were each represented by counsel, and Myrna testified. The questions focused primarily on the Enterprise property. Trial Tr. 29:13-40:19 (December 11, 2008). Over sixty documentary exhibits were entered into evidence. While counsel made closing arguments, the bankruptcy court invited them to also file supplemental briefing, which they did, and the court took the issues under advisement.
On September 22, 2009, the bankruptcy court entered a detailed Memorandum Decision resolving all of the issues in favor of the Jacobsons. Among other conclusions, the bankruptcy court held that:
- Donald and Myrna had not lost their homestead exemption in the sale proceeds from the Kensington property sold after Myrna's bankruptcy petition was filed. - Trustee lacked standing to challenge the Jacobsons' purchase of the Kensington property based upon conduct occurring during their prior bankruptcy case. - The Enterprise property, the refinance proceeds, and any rents, were the sole and separate property of Donald.
The bankruptcy court entered a judgment in the Jacobsons' favor on January 25, 2010. Trustee filed a timely notice of appeal on January 27, 2010.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. § § 1334 and 157(b)(2)(A), (B) and (E). The Panel has jurisdiction under 28 U.S.C. § 158.
ISSUES
1. Whether the bankruptcy court erred in determining that the Jacobsons' homestead exemption did not lose its exempt status because the funds were not reinvested.
2. Whether Trustee lacked standing to challenge the purchase transaction for the Kensington property, which purchase occurred during the Jacobsons' prior bankruptcy case.
3. Whether the bankruptcy court clearly erred in determining that the Enterprise property, the refinance proceeds, and any profits from the property, were Donald's separate property.
4. Whether the bankruptcy court abused its discretion in rejecting Trustee's estoppel arguments.
STANDARDS OF REVIEW
The terms of statutory exemptions, whether property is property of the estate, and procedures for recovering property of the estate are questions of law reviewed de novo. White v. Brown (In re White), 389 B.R. 693, 698 (9th Cir. BAP 2008).
Standing is a legal issue that we review de novo. Kronemyer v. Am. Contrs. Indem. Co. (In re Kronemyer), 405 B.R. 915, 918 (9th Cir. BAP 2009).
Whether the Enterprise property was Donald's sole and separate property is a factual question. In re Marriage of Broderick, 209 Cal.App.3d 489, 497, 257 Cal.Rptr. 397 (Cal.Ct.App. 1989). We review a bankruptcy court's findings of fact for clear error. Rule 8013; Wolkowitz v. Beverly (In re Beverly), 374 B.R. 221, 230 (9th Cir. BAP 2004), aff'd in part, dismissed on other grounds, 551 F.3d 1092 (9th Cir. 2008). Under the " clear error" standard, we accept findings of fact unless they leave the " definite and firm conviction that a mistake has been committed" by the trial judge. Id . (citing Latman v. Burdette, 366 F.3d 774, 781 (9th Cir. 2004).
Application of judicial estoppel is reviewed for abuse of discretion. Yanez v. United States, 989 F.2d 323, 326 (9th Cir. 1993). The bankruptcy court's application of issue preclusion is also reviewed for abuse of discretion. Lopez v. Emergency Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99, 107-08 (9th Cir. BAP 2007), as is its decision concerning whether to invoke quasi-estoppel. Kritt v. Kritt (In re Kritt), 190 B.R. 382, 388 (9th Cir. BAP 1995). In applying an abuse of discretion test, we first " determine de novo whether the [bankruptcy] court identified the correct legal rule to apply to the relief requested." United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009). If the bankruptcy court identified the correct legal rule, we then determine whether its " application of the correct legal standard [to the facts] was (1) illogical, (2)implausible, or (3) without support in inferences that may be drawn from the facts in the record." Id . (internal quotation marks omitted). If the bankruptcy court did not identify the correct legal rule, or its application of the correct legal standard to the facts was illogical, implausible, or without support in inferences that may be drawn from the facts in the record, then the bankruptcy court has abused its discretion. Id .
DISCUSSION
I.
The bankruptcy court did not err in determining that the Jacobsons' homestead sale proceeds did not lose their exempt status because the funds were not reinvested within 180 days.
A bankruptcy estate consists of all legal and equitable interests of the debtor in property as of the date of the filing of the bankruptcy petition. § 541(a)(1). A debtor may claim property as exempt from administration by a trustee. § 522(b)(1). Although the bankruptcy code provides a list of categories of property exemptions, § 522(d), States may choose not to participate in the federal exemption scheme. § 522(b). California has opted out of the federal exemption scheme, Cal. Code Civ. Proc. § 703.130, and instead has established its own automatic exemption scheme for debtors. Cal. Code Civ. Proc. § § 704.010 et seq. Under the California statutes, a debtor in a bankruptcy case may claim an exemption in a homestead. Cal. Code Civ. Proc. § 703.140.
Under both the bankruptcy code and California law, exemptions are to be construed broadly and liberally in favor of the debtor. In re Arrol, 207 B.R. 662, 665 (Bankr. N.D. Cal. 1997). The homestead exemption, in particular, " [is] to be construed liberally on behalf of the homesteader." Id . at 665 (quoting Ingebretsen v. McNamer, 137 Cal.App.3d 957, 958, 187 Cal.Rptr. 529 (Cal.Ct.App. 1982)).
In 2006, when Myrna filed her chapter 7 bankruptcy case, she claimed a $150,000 homestead exemption in the Kensington property under Cal. Code Civ. Proc. § 704.730(a)(3)(A), which provided at the time of the exemption:
In 2009, the California homestead exemption was increased to $175,000. Cal. Stats 2009, c. 499 (A.B. 1046) § 2.
§ 704.730. Amount of homestead exemption
(a) The amount of the homestead exemption is . . .
(3) One hundred fifty thousand dollars ($150,000) if the judgment debtor or spouse of the judgment debtor who resides in the homestead is at the time of the attempted sale of the homestead any one of the following: (A) A person 65 years of age or older.
Both Myrna and Donald were over the age of 65 at the time of the exemption. Myrna's homestead exemption claim was not challenged by Trustee, or any other party, in the bankruptcy case. As a result, that exemption was deemed allowed. § 522(1) (providing that, " [u]nless a party in interest objects, the property claimed exempt . . . is exempt."); Taylor v. Freeland & Kronz, 503 U.S. 638, 641-42, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992).
However, after the bankruptcy was commenced, the Kensington property was sold at a sheriff's sale, and the Jacobsons were paid $150,000 from the proceeds of that sale for their homestead exemption. Trustee argues that, even if the property was exempt, in order to preserve the exempt status of the homestead sale proceeds, the Jacobsons were required to reinvest them in the purchase of another homestead within six months of receipt, pursuant to Cal. Code Civ. Proc. § 704.720(b). That statute provides:
If a homestead is sold under this division or is damaged or destroyed or is acquired for public use, the proceeds of sale or of insurance or other indemnification for damage or destruction of the homestead or the proceeds received as compensation for a homestead acquired for public use are exempt in the amount of the homestead exemption provided in Section 704.730. The proceeds are exempt for a period of six months after the time the proceeds are actually received by the judgment debtor, except that, if a homestead exemption is applied to other property of the judgment debtor or the judgment debtor's spouse during that period, the proceeds thereafter are not exempt.
Cal. Code Civ. Proc. § 704.720(b) (emphasis added). Because the Jacobsons did not reinvest their homestead proceeds by the six-month deadline, February 24, 2008, according to Trustee, the proceeds became nonexempt, and Trustee should be entitled to recover them as property of Myrna's chapter 7 bankruptcy estate.
The bankruptcy court rejected Trustee's argument. Relying on the Panel's analysis of California homestead exemption law in Harris v. Herman (In re Herman), 120 B.R. 127 (9th Cir. BAP 1990), the bankruptcy court reasoned that " exemptions are determined on the petition date, without reference to subsequent changes in the character or value of the property and, thus, any post-petition disposition of the property, or post-petition change in the identity of the property from real property into proceeds, has no impact upon the exemption analysis." Memorandum Decision at 5 (paraphrasing In re Herman, 120 B.R. at 130).
The bankruptcy court's reliance on In re Herman is appropriate. In Herman, the debtor owned and resided in a residence. A creditor obtained state court default judgments against the debtor and recorded them as judgment liens on the house. The debtor filed a chapter 7 petition, claimed a homestead exemption under Cal. Code Civ. Proc. § 704.710 on the house, and moved to avoid the judgment liens under § 522(f)(1)(A) (providing that a debtor may avoid judicial liens impairing the debtor's exemption). The following day, the debtor entered into a contract to sell the residence. The creditor challenged the debtor's right to avoid the judgment liens on the proceeds to be received from the voluntary sale of the property. The bankruptcy court ordered the liens avoided as impairing the debtor's homestead exemption, and the creditor appealed.
Although the bankruptcy court in Herman was primarily concerned with whether the debtor's post-petition sale was an execution sale or a voluntary sale for purposes of the California homestead statute, the Panel ultimately decided that the nature of the sale was, simply, " irrelevant in determining the exemption [in that bankruptcy case]." Id . at 130. The Panel explained:
Absent conversion from one chapter to another, the nature and extent of a debtor's exemption rights are determined as of the date of the petition [citing, among others, In re Magallanes, 96 B.R. 253, 255 (9th Cir. BAP 1988)]. The petition date is appropriate because the existence of exemptions presupposes a hypothetical attempt by the trustee to levy upon and sell all of the debtor's property upon the filing of the petition.
Id .; accord Pasquina v. Cunningham (In re Cunningham), 513 F.3d 318, 325 (1st Cir. 2008) (citing Herman for the proposition that " federal bankruptcy law does not allow post-petition uses of exempt property to change the previously established exemption status" and concluding that " the post-petition sale of Cunningham's home, for which he obtained a homestead exemption under the law of Massachusetts, did not cause the proceeds of the sale to lose their exempt status under the Bankruptcy Code."). Because the Panel concluded that the debtor's homestead exemption on his house was valid as of the date the petition was filed, the creditor's judgment liens could be avoided, thereby allowing the debtor to retain the equity generated by the sale as exempt sale proceeds.
The majority of courts to consider the question reach a conclusion consistent with In re Herman and hold that " a post-petition change in the character of property properly claimed as exempt will not change the status of that property, relying on the principle that once property is exempt, it is exempt forever and nothing occurring post-petition can change that fact." In re Hyde, 334 B.R. 506, 514 (Bankr. D. Mass. 2005) (citing cases). Among the cases cited by Hyde are: In re Peterson, 897 F.2d 935, 937 (8th Cir. 1990) (debtor's post-petition death did not cause his homestead exemption to lapse); Payne v. Wood, 775 F.2d 202, 204 (7th Cir. 1985) (insurance proceeds of destroyed exempt property did not become property of the estate); Lasich v. Estate of A.N. Wickstrom (In re Wickstrom), 113 B.R. 339, 343-44 (Bankr. W.D. Mich. 1990) (debtor's post-petition death did not cause exempt worker's compensation proceeds to lapse); In re Whitman, 106 B.R. 654, 656-57 (Bankr. S.D. Cal. 1989) (conversion of homestead to proceeds post-petition does not cause proceeds to become property of the estate); In re Harlan, 32 B.R. 91, 92-93 (Bankr.W.D.Tex. 1983) (same). The thrust of these cases is that property which is deemed to be exempt is thereafter no longer property of the estate, so that its subsequent transformation does not restore it to the estate. See also Owen v. Owen, 500 U.S. 305, 307-08, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991) (" An exemption is an interest withdrawn from the estate (and hence its creditors) for the benefit of the debtor . . . ."); Mwangi v. Wells Fargo Bank, N.A. (In re Mwangi), 432 B.R. 812, 2010 WL 2723204 *6 (9th Cir. BAP 2010) (exempt property " leaves the estate and revests in the debtor.").
In re Herman also provides an answer to the Trustee's argument to the bankruptcy court that our court of appeals' decision in England v. Golden (In re Golden), 789 F.2d 698 (9th Cir 1986), and its progeny, somehow change this result, at least in this Circuit. Like the bankruptcy court, we do not think Golden controls under these facts.
While Golden no doubt applied the California homestead exemption in a bankruptcy case, the issue presented in that appeal was significantly different than the one we consider here. The Ninth Circuit was called upon to decide " whether an individual who files for bankruptcy after selling his home, and claims a homestead exemption under California law for the proceeds of that sale, is required to reinvest those proceeds in another home within six months in order to maintain the exemption." Id . at 699. The court held that the debtor, who had sold his residence before the bankruptcy petition was filed, and was holding the proceeds on the petition date, was required under California law to reinvest the proceeds in real property within six months of receipt of the proceeds to preserve the homestead exemption as against the trustee in his bankruptcy case. Id . at 699-701. But the Herman Panel directly addressed whether Golden applied to situations where the debtor's homestead had not been sold on the petition date:
In Golden the court determined that a debtor lost his exemption in the proceeds of a pre-petition sale of his residence when he did not reinvest the proceeds in another homestead within six months. Golden is distinguishable because the debtor in that case held proceeds on the date of filing rather than an interest in the residence. The court looked to the exemption in proceeds existing at the date of the petition and the affirmative requirement that those proceeds be reinvested in order for the exemption to continue beyond six months. In this [the Herman] case, the homestead exemption existing at the date of the petition was not limited by such a requirement of affirmative action for its continuing validity.
In re Herman, 120 B.R. at 130 n.5. Thus, under Golden as interpreted by Herman, a homestead exemption in sale proceeds that exists on the petition date is subject to a condition subsequent, that is, a " requirement of affirmative action for its continuing validity" that those proceeds be reinvested within six months. That condition subsequent, according to Herman's analysis of Golden, does not apply where the homestead exemption is in real property as of the petition date.
The analysis in Herman was also shared in a cogent decision by the bankruptcy court in In re Lane, 364 B.R. 760 (Bankr. D. Ore. 2007), where Judge Perris concluded, correctly we believe, that:
Where the debtor holds homestead proceeds on the date of bankruptcy and the pertinent exemption statute contains a " sunset provision" that conditions validity of an exemption on the satisfaction of a condition subsequent, such as reinvesting sales proceeds within a specified time period, the sunset provision can apply in the bankruptcy context. (Citations omitted.) This limited exception does not apply to a debtor who claims a homestead exemption in real property rather than proceeds if the state law provides, as does Oregon [and California], that upon sale the sheriff turns over to the debtor the amount of the homestead exemption. The right to a homestead exemption in real property is not conditional. . . . This approach is consistent with the Ninth Circuit Bankruptcy Appellate Panel's decision in Herman[.]
Id . at 763.
Although Trustee relied heavily on Golden in his trial brief before the bankruptcy court, except for one conclusory reference, he spends no time in his briefs in this appeal urging that this decision controls. Instead, Trustee now relies for support on the Fifth Circuit's opinion in In re Zibman, 268 F.3d 298 (5th Cir. 2001). According to Trustee, Zibman stands for the proposition that the entire state law on exemptions should be applied in a bankruptcy setting, and not to " read the 6-month limitation out of the statute." Id . at 304. Trustee describes the supposed rule that all elements of a state law should be considered by the bankruptcy court in determining whether the exemption has lapsed as the " Zibman-Golden" Rule. Trustee's Br. at 18.
Clearly, there is nothing in Golden that requires us to apply the six-month limitation where the homestead property has not been converted to sale proceeds on the petition date. In fact, Zibman itself is a case dealing with an exemption in proceeds on the petition date, not an exemption in real property on that date. Simply put, Zibman does not compel nor persuade us to reverse in this appeal.
2007 WL 2345019 (9th Cir. BAP 2007) as in " accord" with Zavala. Not only is our Perpinan decision not precedent in this appeal, it also is not in accord. Perpinan dealt with exempt proceeds on the petition date, not real property. Trustee cites to only one case where the conversion of the real property into sale proceeds occurred post-petition. In re Zavala, 366 B.R. 643 (Bankr.W.D.Tex. 2007). In Zavala, debtors argued that Zibman did not apply where the homestead was sold after the petition was filed. The Zavala court found that this was a distinction without a difference and that, in its reading of Zibman, whether a conversion of property to proceeds occurred pre-or post-petition was immaterial for application of the six-month limitation. At oral argument before the Panel, counsel for Trustee conceded that he was aware of no other authority for this interpretation of Zibman. Additionally, Trustee's position is not advanced by his reference to the Panel's unpublished memorandum in In re Perpinan,
In sum, we conclude that the bankruptcy court did not err in ruling that the exemption claimed by Myrna in the Kensington property was effectively determined as of the petition date in this case; that the post-petition conversion of that real property into sales proceeds had no impact on the validity of Myrna's exemption; and that she was not required to reinvest the sale proceeds in another homestead real property in order to preserve her exemption.
II.
Trustee lacks standing to challenge the purchase transaction for the Kensington property which occurred during the an earlier bankruptcy case.
Trustee argues on appeal that the Jacobsons were not entitled to a homestead exemption in the Kensington property because they acquired that property fraudulently, having secretly purchased the Kensington property with funds that were properly funds of their prior bankruptcy estate. However, Trustee seems to ignore in his Opening Brief that the bankruptcy court ruled that he lacked standing to make this argument because, if any fraud occurred during the prior bankruptcy case, only the trustee in that case would be the proper party to seek to recover the property, and only in that prior case.
We believe the bankruptcy court correctly based its ruling on the well-established rule that a party, to have standing in the trial court, must only assert its own rights, rather than the rights and interests of a third party. Williams v. Boeing Co., 517 F.3d 1120, 1126-27 (9th Cir. 2008) (citing Warth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). And Trustee's failure to challenge the bankruptcy court's ruling on standing prevents him from asserting his argument in this appeal. Id .; accord Tippett v. Umpqua Shopping Center, Inc. (In re Umpqua Shopping Center, Inc.), 111 B.R. 303, 305 (9th Cir. BAP 1990) (citing Seiden for the above rule, even where the party is directly affected by an appealed order).
Of course, a decision that a party lacks standing is itself appealable. Buono v. Norton, 371 F.3d 543, 546 (9th Cir. 2004). However, Trustee did not list such as an issue in his statement of issues on appeal, nor did he even discuss it in his Opening Brief. Like our court of appeals, " we will not ordinarily consider matters on appeal that are not specifically and distinctly argued in appellant's opening brief." Koerner v. Grigas, 328 F.3d 1039, 1048-49 (9th Cir. 2003) (quoting United States v. Ullah, 807 F.2d 1483, 1487 (9th Cir. 1987).
We acknowledge that, as an exception to the general rule, we have " discretion to review an issue not raised by appellant . . . when it is raised in the appellee's brief." In re Riverside Linden Investment Co., 945 F.2d 320, 324 (9th Cir. 1991). Here, the Jacobsons' brief did, indeed, discuss the standing issue, in that it repeats the bankruptcy court's ruling that only the bankruptcy trustee in the prior bankruptcy case had standing to challenge the propriety of the purchase transaction in the prior case.
However, Trustee's reply brief does not satisfactorily address the standing issue. Trustee cites to Schwartz v. United States (In re Schwartz), 954 F.2d 569 (9th Cir. 1992) concerning the " effects of events in a prior bankruptcy case on standing in a subsequent bankruptcy case." Trustee's Reply Br. at 4. In Schwartz, the IRS assessed penalties against the debtors and their corporation in a prior chapter 11 bankruptcy case. Later, when debtors filed a chapter 13 case, they challenged the unpaid assessments as void in violation of the automatic stay. The bankruptcy court ruled in favor the debtors, holding that the IRS claims were void in the chapter 13 case. Id . at 570. Other cases cited by Trustee are: In re Covino, 245 B.R. 162, 169 (Bankr. D. Idaho 2000) (attempting to conceal assets in prior chapter 7 case resulted in dismissal of subsequent chapter 13 case); In re Chesnut, 300 B.R. 880, 889 (Bankr. N.D. Tex. 2003) (reliance on deed records not appropriate where debtors concealed assets in prior chapter 13 case); In re Lami, 49 Collier Bankr. Cas.2d 1074 (Bankr. E.D. Pa. 2003) (debtor's actions in earlier bankruptcy cases " usually most probative evidence of willful conduct.").
Contrary to Trustee's assertion, none of these cases support his standing in the bankruptcy court to challenge the Jacobsons' acquisition of the Kensington property which occurred in their prior bankruptcy case. Indeed, none of these decisions even includes the word " standing." They all sponsor the unremarkable proposition that misdeeds committed by parties in an earlier bankruptcy case may come back to haunt them in a subsequent case. In contrast, the standing issue focuses on what party may, in reliance upon those earlier misdeeds, seek relief in the subsequent bankruptcy case.
On this record, we think that bankruptcy court correctly concluded that Trustee did not have standing to challenge the purchase transaction for the Kensington property which occurred in an earlier bankruptcy case in which he was not the trustee. Because Trustee did not adequately address the standing issue in this appeal, we decline to disturb the bankruptcy court's decision.
III.
The bankruptcy court did not clearly err in determining that the Enterprise property was Donald's separate property and thus not part of Myrna's bankruptcy estate.
It is " well established" that the party asserting that an asset should be turned over to the bankruptcy estate under § 542 bears the burden of proof. Evans v. Robbins, 897 F.2d 966, 968 (8th Cir. 1990); Boyer v. Davis (In re U.S.A. Diversified Prods., Inc.), 193 B.R. 868, 872 (Bankr. N.D. Ind. 1995), aff'd, 196 B.R. 801 (N.D. Ind.), aff'd, 100 F.3d 53 (7th Cir. 1996). Trustee was therefore obliged to show that he should be able to recover the Enterprise property, the refinance proceeds received by the Jacobsons, and the rents.
Although it is not doubted that the party seeking to recover property in a turnover motion bears the burden of proof, there is considerable dispute whether the proper standard of proof in turnover actions is preponderance of the evidence or clear and convincing evidence. Evans, 897 F.2d at 968 (applying clear and convincing standard); Boyer, 193 B.R. at 872 (commenting that it is " doubtful that the need to prove turnover by clear and convincing evidence . . . survived the enactment of § 542."). However, this distinction is of no moment in the present appeal, because the bankruptcy court ruled against Trustee, the party asserting turnover, under the preponderance of the evidence standard. Consequently, neither party is prejudiced by the court's use of the more lenient standard, and we express no opinion concerning the proper standard.
Myrna is the debtor in the bankruptcy case, and Trustee is charged with administering her bankruptcy estate. The Enterprise property therefore would only be subject to turnover to Trustee if it was either Myrna's separate property or community property of the Jacobsons. § 541(a)(1)-(2) (providing that property of the estate includes the debtor's property, and all interests of the debtor and her spouse in community property).
The bankruptcy court conducted a trial in the adversary proceeding at which it received evidence and testimony concerning the nature of Myrna's interest in the Enterprise property. In its Memorandum Decision, the bankruptcy court ruled that " the weight of the evidence shows that Donald was the sole owner of the Enterprise property and the transmutation of the property by the interspousal grant deed to Donald by Myrna otherwise demonstrates that the Enterprise property was his separate property." The bankruptcy court listed its reasons for its factual findings and, in our view, they are supported in the record.
A. The Title Documents
The bankruptcy court ruled that " the title documents show that the [Enterprise] property was conveyed to Donald only by third party sellers, and the documents for the purchase of the Enterprise property only show Donald as the buyer." The court cited to documentary evidence in the record, including title documents showing only Donald as owner, the Interspousal Transfer Deed, and the depositions of Donald, Myrna and Shellie Schneidereit (daughter of Myrna and stepdaughter of Donald, who acted as broker).
Under California law, there is a rebuttable presumption that the name appearing on title documents is the owner of the real property. Cal. Evid. Code § 662; In re Marriage of Haines, 33 Cal.App.4th 277, 297, 39 Cal.Rptr.2d 673 (Cal.Ct.App. 1995). This " form of title presumption" is a matter of California public policy and can only be overcome by clear and convincing evidence. Id .
As noted earlier, the bankruptcy court applied the lesser preponderance of evidence standard in rejecting Trustee's position. To the extent the bankruptcy court may have applied an incorrect standard, Trustee was not prejudiced.
There is also a rebuttable presumption under California law that all property acquired during marriage is community property. Cal. Fam. Code § 760. However, " there is a stronger rebuttable presumption that the terms of a conveyance accurately state the ownership interests." In re Allustiarte, 786 F.2d 910, 915 (9th Cir. 1986)(applying California law). Under California case law, the form of title presumption overcomes the community property presumption where there is evidence of spousal consent. This was the holding in In re Marriage of Brooks, 169 Cal.App.4th 176, 86 Cal.Rptr.3d 624 (Cal.Ct.App. 2008), where the court states:
Thus, the mere fact that property was acquired during marriage does not . . . rebut the form of title presumption; to the contrary, the act of taking title to property in the name of one spouse during marriage with the consent of the other spouse effectively removes that property from the general community property presumption. In that situation, the property is presumably the separate property of the spouse in whose name title is taken.
Id . at 186-87.
The bankruptcy court found that Myrna's execution of the Interspousal Transfer Deed at the time of Donald's acquisition of the Enterprise property was sufficient evidence of her consent that the Enterprise property was to be his separate property. Under California law, even if property is otherwise community property, a married person may by agreement " transmute an asset in which [she] has a community property interest into the separate property of [her] spouse." Cal. Fam. Code § 850(a); Marriage of Brooks & Robinson, 169 Cal.App.4th at 191-92. Transmutation is effective provided that it is made in a writing by an " express declaration." Cal. Fam. Code § 852(a). The express declaration must contain " language which expressly states that the characterization of ownership of the property is being changed." Estate of MacDonald, 51 Cal.3d 262, 272 Cal.Rptr. 153, 794 P.2d 911, 919 (Cal. 1990).
In its Memorandum Decision, the bankruptcy court cited to the Interspousal Transfer Deed, which contains the following: " Myrna Jacobson, spouse of grantee hereby GRANTS to Donald L. Jacobson, A Married Man as His Sole and Separate Property the real property in the City of Los Alamitos, Count of Orange, State of California: [the Enterprise Property]." Memorandum Decision at 11. The bankruptcy court found that this instrument was sufficient evidence of an " express declaration" to meet the requirements for transmutation under the California Family Code. The bankruptcy court also found that the documents submitted by Trustee purportedly showing that the Jacobsons considered the Enterprise property to be community property did not meet the express declaration requirements.
The bankruptcy court weighed the evidence and concluded that Donald was the sole owner of the Enterprise property. The court supported its findings by reference to the evidence, and to the extent that the bankruptcy court was presented with two permissible views of the evidence, its rulings cannot be clearly erroneous. Anderson v. City of Bessemer City, NC, 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985). The bankruptcy court was justified in finding that Trustee had not overcome the strong presumption in California law favoring recorded title in Donald's name alone.
We therefore conclude that the bankruptcy court did not clearly err in determining that Trustee did not adequately prove that the Enterprise property is an asset of Myrna's bankruptcy estate and, therefore, that he was not entitled to an order compelling the Jacobsons to turn over the property.
B. Trustee's Estoppel Arguments
Trustee argues that Donald and Myrna should be precluded from arguing that Donald was capable of managing his own financial affairs because, in their previous chapter 7 case, in connection with saving Donald's discharge, they argued successfully to the bankruptcy court that Myrna had complete control of their finances, and that he did not actively engage in the parties' financial and property transactions. Trustee relies on the doctrine of judicial estoppel, which allows a court to estop a party from gaining advantage by taking one position and later seeking another advantage from an inconsistent position. See New Hampshire v. Maine, 532 U.S. 742, 749-51, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001).
The bankruptcy court reviewed the documents from the previous bankruptcy case and observed that, in the prior bankruptcy case, the court had indeed denied the trustee's request to deny a discharge to Donald under § 727(a) because " Myrna was the business person in the debtors' relationship, and Donald Jacobson merely followed her instructions." However, the bankruptcy court in this case ruled that " the fact that Donald was not sufficiently involved in the prior bankruptcy case or followed Myrna's instructions is not per se inconsistent with Donald's purchase of the Enterprise property as his separate and sole property." The court also found that Trustee had not identified any " prior inconsistent position" that Donald had taken in the previous bankruptcy case that was inconsistent with any statement made in the current case. Again, to the extent that the bankruptcy court was presented with two permissible views of the evidence, its choice of the Jacobsons' view cannot be clearly erroneous. Anderson, 470 U.S. at 574
In the Ninth Circuit, whether to apply judicial estoppel is a matter within the discretion of the trial court:
As a general principle, the doctrine of judicial estoppel bars a party from taking inconsistent positions in the same litigation. . . . Although this circuit has adopted the doctrine of judicial estoppel, we have not yet determined the circumstances under which it will be applied. . . . The majority of circuits recognizing the doctrine hold that it is inapplicable unless the inconsistent statement was actually adopted by the court in the earlier litigation; only in that situation, according to those circuits, is there a risk of inconsistent results and a threat to the integrity of the judicial process. . . . The minority view, in contrast, holds that the doctrine applies even if the litigant was unsuccessful in asserting the inconsistent position, if by his change of position he is playing " fast and loose" with the court. . . . In either case, the purpose of the doctrine is to protect the integrity of the judicial process. Accordingly, the doctrine of judicial estoppel " is an equitable doctrine invoked by a court at its discretion."
Yanez v. United States, 989 F.2d 323, 326 (9th Cir. 1993). In connection with its finding that there was no inconsistency between the positions taken by Donald in the earlier and later cases, the bankruptcy court applied the correct rule of law on judicial estoppel, and that finding was not illogical, implausible, or without support in inferences that may be drawn from the facts in the record. In other words, the bankruptcy court did not abuse its discretion in rejecting Trustee's judicial estoppel argument.
Similar to the judicial estoppel argument, Trustee also argues that issue preclusion applies to prevent Donald and Myrna from now arguing that Donald was capable of managing his own financial affairs, and therefore, of transacting in separate property. Issue preclusion forecloses " relitigation of issues of fact or law actually litigated and necessarily decided by a valid and final judgment in a prior action between the parties." Duncan v. United States (In re Duncan), 713 F.2d 538, 541 (9th Cir. 1983)
The bankruptcy court determined that the issue decided in the earlier bankruptcy case involved whether Donald was sufficiently involved in the parties' financial affairs to justify denial of his discharge, or whether he had simply followed Myrna's instructions. In contrast, the bankruptcy court identified the issue in the current case as whether Donald was the sole owner of the Enterprise property.
Under Supreme Court precedent, the bankruptcy court had " broad discretion" in deciding when issue preclusion is to be applied. Parklane Hosiery Co. v. Shore, 439 U.S. 322, 331, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979); Frankfort Digital Servs. v. Kistler (In re Reynoso), 477 F.3d 1117, 1123 (9th Cir. 2007); Lopez v. Emergency Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99, 107-08 (9th Cir. BAP 2007). Because the court determined, correctly we think, that the issues in the two bankruptcy cases were not the same, issue preclusion would not apply, especially in view of the six-year time span between the prior case and Donald's purchase of the Enterprise property. Again, the court applied the correct law and its findings were not illogical, implausible, or without support in inferences that may be drawn from the facts in the record. The court did not abuse its discretion in rejecting Trustee's issue preclusion argument.
Finally, Trustee argues that because Donald and Myrna claimed tax benefits from the Enterprise property on their joint income tax returns, under what Trustee characterizes as " quasi-estoppel, " the Jacobsons should be estopped from arguing that the Enterprise property is not community property subject to administration in Myrna's bankruptcy case. " Quasi estoppel forbids a party from accepting the benefits of a transaction or statute and then subsequently taking an inconsistent position to avoid the corresponding obligations or effects." Kritt v. Kritt (In re Kritt), 190 B.R. 382, 388 (9th Cir. BAP 1995).
In view of the tax laws, Trustee's argument for application of the doctrine here is unfounded. If spouses elect to file a joint tax return, they are obliged to report their income received from all sources, both community and separate, and may jointly claim deductions and credits for both separate and community property. 26 U.S.C. § § 61 and 161-172; IRS Publication 555, Community Property (2007). The evidence presented to the bankruptcy court was that Donald and Myrna had, throughout their marriage, been joint tax filers, and the bankruptcy court concluded that they were required to report all income, deductions and credits, whether derived from separate or community property, on their joint tax returns. Under these circumstances, the bankruptcy court did not err in declining to apply quasi-estoppel.
All things considered, we conclude the bankruptcy court did not abuse its discretion in declining to estop the Jacobsons from arguing that the Enterprise property was Donald's separate property.
CONCLUSION
We AFFIRM the bankruptcy court's judgment in all respects.
With the exception of Zavala, Trustee cites to no other case and we have found no other case which interprets Zibman for the proposition that the six-month limitation period (which is similar in Texas and California exemption law) applies to a homestead exemption in real property. On the contrary, there are elements in Zibman consistent with our approach in this appeal. Zibman recognizes that the rights to exemption are fixed on the petition date. Id . at 304 (" It is the entire state law applicable on the filing date that is determinative [of exemptions]." Zibman also acknowledges that the limitation period in the Texas statute specifically applies to proceeds, not to the real property. Id . at 305. And of course, Zibman is a case dealing with exemption of proceeds and makes no direct or indirect reference to exemption in real property. For these reasons we see no significant inconsistency between our decision in this appeal and Zibman.