In re: Booker Theodore Wade, Jr.

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: November 3, 2015
• Docket: NC-15-1031-DJuTa
• Status: Unpublished

Opinion

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 PANEL 1 NOT FOR PUBLICATION OF THE NINTH CIRCUIT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.

1 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.

2 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 3 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.

3 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

4 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 / / /

5 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. 19 20 21 22 23 24 25 26