FILED JAN 31 2017 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK 2 U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. SC-15-1390-FYJu ) 6 WILLIAM GUTHRIE, ) Bk. No. 15-03397-MM7 ) 7 Debtor. ) _____________________________ ) 8 ) WILLIAM GUTHRIE, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) RONALD E. STADTMUELLER, ) 12 Chapter 7 Trustee, ) ) 13 Appellee. ) ______________________________) 14 Argued and Submitted on January 19, 2017 15 at San Diego, California 16 Filed – January 31, 2017 17 Appeal from the United States Bankruptcy Court for the Southern District of California 18 Honorable Margaret M. Mann, Bankruptcy Judge, Presiding 19 Appearances: Gregory S. Cilli of The Feldman Law Group argued 20 on behalf of Appellant William Guthrie; Ronald E. Stadtmueller, Chapter 7 Trustee argued pro se. 21 22 Before: FARIS, YUN,** and JURY, Bankruptcy Judges. 23 24 * 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 26 9th Cir. BAP Rule 8024-1.
27 ** The Honorable Scott H. Yun, United States Bankruptcy Judge for the Central District of California, sitting by 28 designation. 1 INTRODUCTION 2 Appellant William Guthrie appeals from the bankruptcy 3 court’s order sustaining chapter 71 trustee Ronald E. 4 Stadtmueller’s (“Trustee”) objection to his claimed homestead 5 exemption pursuant to § 522(g). The bankruptcy court did not err 6 in sustaining the objection. Accordingly, we AFFIRM. 7 FACTUAL BACKGROUND 8 A. Prepetition events 9 Mr. Guthrie and his wife, Christine Guthrie, divorced in 10 2005 over concerns about his finances. He claimed that one of 11 the financial concerns was his debt stemming from his failure to 12 pay taxes in 2004. In 2007, Mr. Guthrie reached a settlement 13 with the Internal Revenue Service (“IRS”), whereby he agreed to 14 pay $152,000 in taxes, penalties, and interest. 15 In May 2012, Mr. Guthrie purchased a home in Vista, 16 California (the “Property”). Title to the Property was initially 17 in Mr. Guthrie’s name only. However, in December 2012, he 18 transferred title to the Property to Ms. Guthrie, with whom he 19 was still living, via quitclaim deed for no consideration. As we 20 shall see, he has given a wide variety of explanations for this 21 transfer. 22 After a series of unsuccessful business ventures, 23 Mr. Guthrie contemplated filing for bankruptcy protection. He 24 met with a paralegal at a San Diego law firm, who allegedly told 25 26 1 Unless specified otherwise, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and all “Rule” references are to the Federal Rules of Bankruptcy 28 Procedure, Rules 1001-9037.
2 1 him not to transfer title to the Property back to himself without 2 first consulting the firm. Mr. Guthrie claimed that, after 3 speaking to the paralegal, he believed that he still owned the 4 Property, even though Ms. Guthrie held legal title. 5 B. The bankruptcy schedules and claimed homestead exemption 6 Mr. Guthrie filed for bankruptcy pro se because he could not 7 afford to hire an attorney. He filed a chapter 7 petition, 8 statements, and schedules on May 21, 2015, which scheduled the 9 Property as his real property (with a value of $400,000 and 10 encumbered by a secured lien of $191,000), and claimed a “home” 11 exemption in the amount of $400,000 and a “homestead” exemption 12 for $125,000. He said that he “wanted to make sure the 13 bankruptcy court knew about my home, and to make sure that it did 14 not appear that I was trying to hide anything.” He neglected to 15 mention, however, that Ms. Guthrie owned legal title to the 16 Property. 17 At a § 341(a) meeting of creditors, the Trustee informed 18 Mr. Guthrie that there were a number of deficiencies in his 19 filings. In particular, the claimed $400,000 homestead exemption 20 exceeded the allowable exemption under state law. The Trustee 21 continued the meeting of creditors to allow Mr. Guthrie to 22 provide certain documentation regarding other matters. 23 Shortly thereafter, Mr. Guthrie retained counsel to 24 represent him in the bankruptcy proceedings. He claimed that 25 attorney Gregory Cilli advised him “that I should inform the 26 trustee at the next creditors’ meeting that I had transferred the 27 property to her which I did without giving it any thought.” 28 By the second session of the meeting of creditors,
3 1 Mr. Guthrie had not amended his schedules. The Trustee then 2 advised Mr. Guthrie and Mr. Cilli that he would object to the 3 homestead exemption. Mr. Guthrie informed the Trustee that his 4 ex-wife owned the Property and that he would amend Schedule C to 5 reflect her ownership. He further told the Trustee that he had 6 transferred the Property to Ms. Guthrie because he was not good 7 with finances. The Trustee continued the meeting of creditors 8 again to permit Mr. Guthrie to amend his schedules. 9 After the second session of the meeting of creditors, 10 Mr. Guthrie amended his schedules to remove the Property and the 11 claimed exemption, thus apparently disavowing any interest in the 12 Property. 13 At the third session of the meeting of creditors, the 14 Trustee questioned Mr. Guthrie about a number of issues, 15 including the Property. After Mr. Cilli confirmed that they had 16 removed the Property and claimed exemption from the schedules, 17 the Trustee asked about Mr. Guthrie’s reasons for transferring 18 the Property to his ex-wife. Mr. Guthrie said that it was 19 “because of my I.R.S. debts that I – that I realized I wouldn’t 20 be able to pay quickly enough.” He said that he wanted to make 21 sure that the IRS “wouldn’t come after it [the Property] right 22 away and [to] try to get time so I’d have enough income to do 23 it.” The Trustee pressed Mr. Guthrie: 24 TRUSTEE: Okay. But you transferred the house to your ex to - to - maybe I’m misunderstanding your 25 testimony. I thought your testimony was you transferred the house to your ex-spouse to avoid the 26 I.R.S. from levying your house or going after your house? 27 MR. GUTHRIE: It - uh - in reality, yes, because - 28
4 1 TRUSTEE: Okay.2 2 The day after the third session of the meeting of creditors, 3 the Trustee filed an ex parte application to employ general 4 counsel.3 The Trustee stated that he wanted to employ counsel to 5 pursue avoidance claims, including to regain estate assets: 6 Assist the Trustee in analyzing certain pre and post-bankruptcy transactions completed by the debtor 7 regarding possible avoidance claims, and to prosecute such avoidance claims to the extent they exist. 8 Counsel may be required to file adversary proceedings against third parties to regain assets of the estate, 9 as well as to prepare all necessary documents and court pleading in support of such proceeding or any other 10 issues related to the debtor’s inappropriate transfers of estate property[.] 11 12 The court granted the application to employ Davis & Stadtmueller, 13 LLP. 14 A few days later, Mr. Guthrie amended his schedules again. 15 This time, he rescheduled the Property with a value of $350,000 16 (reduced from $400,000). He also amended his Schedule C to claim 17 a $9,000 exemption under California Code of Civil Procedure 18 (“CCP”) § 704.730(a)(1) and a $150,000 exemption under CCP 19 § 704.730(a)(3).4 20 2 Later, Mr. Guthrie tried to explain away this testimony. 21 He said, “I personally have no real fear that the IRS would take 22 the home because they had not tried once to do so in eight years.” He claimed that he was too nervous or embarrassed to 23 explain that he had transferred the Property to his ex-wife to make her feel more secure. 24 3 Mr. Guthrie claimed that his ex-wife attempted to commit 25 suicide after she learned that the Trustee filed an application 26 to employ general counsel as a precursor to objecting to the homestead exemption. 27 4 CCP § 704.730(a) provides, in relevant part: 28 (continued...)
5 1 On the same day, Mr. Guthrie arranged to transfer the title 2 to the Property back to himself, “so that [he] would not get in 3 trouble with the lender for having transferred title, and to 4 avoid the possibility of the Trustee objecting to [his] homestead 5 exemption claim . . . .” 6 Four days later, Mr. Guthrie amended his schedules for the 7 third time to claim a $175,000 exemption in the Property under 8 CCP § 704.730(a)(3). 9 10 4 (...continued) (a) The amount of the homestead exemption is one of the 11 following: 12 (1) Seventy-five thousand dollars ($75,000) unless 13 the judgment debtor or spouse of the judgment debtor who resides in the homestead is a person 14 described in paragraph (2) or (3). 15 . . . 16 (3) One hundred seventy-five thousand dollars 17 ($175,000) if the judgment debtor or spouse of the judgment debtor who resides in the homestead is at 18 the time of the attempted sale of the homestead 19 any one of the following:
20 (A) A person 65 years of age or older.
21 . . . 22 (C) A person 55 years of age or older with a 23 gross annual income of not more than twenty-five thousand dollars ($25,000) or, if 24 the judgment debtor is married, a gross annual income, including the gross annual 25 income of the judgment debtor’s spouse, of 26 not more than thirty-five thousand dollars ($35,000) and the sale is an involuntary 27 sale.
28 CCP § 704.730(a).
6 1 C. The Trustee’s objection to the homestead exemption 2 The Trustee timely filed his objection (“Objection”) to 3 Mr. Guthrie’s claimed homestead exemption pursuant to 4 § 522(g)(1). He objected to the homestead exemption under § 522 5 because Mr. Guthrie had no legal interest in the Property on the 6 date of bankruptcy. He also argued that § 522(g)(1) barred 7 Mr. Guthrie’s exemption claim because he had voluntarily 8 quitclaimed the Property to his ex-wife to avoid the IRS’s 9 attempt to levy the Property, which constituted a fraudulent 10 transfer under § 548. 11 In response to the Objection, Mr. Guthrie denied any 12 fraudulent intent. He claimed that he “transferred the property 13 to Christine to help her and make her feel better about our 14 finances and feel like she had something to live for[.]” 15 Prior to the hearing on the Objection, the bankruptcy court 16 issued a tentative ruling. Regarding avoidance of the transfer 17 of the Property to Ms. Guthrie, the court stated, “Debtor and 18 Trustee agree that legal title to the Property was transferred 19 without receiving reasonably equivalent value, and Debtor 20 testified at his third 341(a) hearing that he believed he would 21 be unable to pay his IRS debts as they came due, making the 22 Transfer at a minimum avoidable under Cal. UFTA § 3439.04(a)(2) 23 incorporated under § 544.” 24 Regarding the Trustee’s efforts to recover the Property, the 25 court said that “it is not clear whether Trustee’s actions in 26 this case constitute recovery [of] the property” under Glass v. 27 Hitt (In re Glass), 60 F.3d 565 (9th Cir. 1995), because 28 Mr. Guthrie arguably retained equitable title.
7 1 The bankruptcy court tentatively concluded that, “[i]f the 2 transfer is voidable under § 544 and was returned to the estate 3 as a result of Trustee’s efforts, Debtor is not entitled to 4 exempt the Property under § 522(g)(1)(A).” 5 D. Hearing on the Trustee’s Objection 6 The bankruptcy court held a hearing on the Objection on 7 October 29, 2015. The court informed the parties that it had 8 reviewed the facts again and concluded that the Trustee had 9 recovered the Property because (1) the Trustee filed his 10 application to employ counsel to pursue avoidance actions; 11 (2) the Property was reconveyed to Mr. Guthrie eight days later; 12 and (3) the purpose of the reconveyance was to avoid the 13 Trustee’s Objection to the homestead exemption. 14 The court said that Mr. Guthrie had a form of equitable 15 interest in the Property, but lacked legal title. However, the 16 transfer and recovery of legal title to the Property invoked 17 § 522(g). 18 On November 10, 2015, the bankruptcy court issued its order 19 sustaining the Trustee’s Objection. The bankruptcy court said 20 that there was no triable issue of fact regarding whether legal 21 title to the Property was returned to the estate as a result of 22 the Trustee’s efforts pursuant to § 522(g) and Glass. “Transfer 23 of legal title was sufficient to trigger the transfer provisions 24 of § 522(g) because legal title was necessary for the Trustee to 25 transfer the Property without litigation.” 26 Mr. Guthrie timely appealed. 27 JURISDICTION 28 The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
8 1 §§ 1334 and 157(b)(2)(B) and (H). We have jurisdiction under 2 28 U.S.C. § 158. 3 ISSUES 4 (1) Whether the bankruptcy court erred in determining that 5 the Property was returned to the estate as a result of the 6 Trustee’s efforts. 7 (2) Whether the bankruptcy court erred in determining that 8 Mr. Guthrie was not entitled to claim a homestead exemption, 9 despite holding an equitable interest in the Property. 10 STANDARDS OF REVIEW 11 We review legal issues de novo and the bankruptcy court’s 12 factual findings under a clearly erroneous standard. Village 13 Nurseries v. Gould (In re Baldwin Builders), 232 B.R. 406, 409-10 14 (9th Cir. BAP 1999). “[Q]uestions regarding the right of a 15 debtor to claim exemptions are questions of law subject to de 16 novo review, whereas the issue of a debtor’s intent is a question 17 of fact to be reviewed under the clearly erroneous standard.” 18 Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th Cir. BAP 19 2003) (citing Coughlin v. Cataldo (In re Cataldo), 224 B.R. 426, 20 428-29 (9th Cir. BAP 1998)). 21 De novo review means that we review a matter anew, as if no 22 decision previously had been rendered. Dawson v. Marshall, 23 561 F.3d 930, 933 (9th Cir. 2009). 24 We must affirm the bankruptcy court’s factual findings 25 unless we determine that those findings are illogical, 26 implausible, or without support in inferences that may be drawn 27 from the facts in the record. United States v. Hinkson, 585 F.3d 28 1247, 1262 (9th Cir. 2009) (en banc).
9 1 We may affirm the bankruptcy court on any basis supported by 2 the record. Heilman v. Heilman (In re Heilman), 430 B.R. 213, 3 216 (9th Cir. BAP 2010). 4 DISCUSSION 5 A. A trustee may object to the homestead exemption under § 522(g) where he recovers property that the debtor either 6 transferred voluntarily or concealed. 7 Section 522(g) provides: 8 (g) Notwithstanding sections 550 and 551 of this title, the debtor may exempt under subsection (b) of this 9 section property that the trustee recovers under section 510(c)(2), 542, 543, 550, 551, or 553 of this 10 title, to the extent that the debtor could have exempted such property under subsection (b) of this 11 section if such property had not been transferred, if - 12 (1)(A) such transfer was not a voluntary transfer of such property by the debtor; and 13 (B) the debtor did not conceal such property; or 14 (2) the debtor could have avoided such transfer 15 under subsection (f)(1)(B) of this section. 16 § 522(g). In other words, § 522(g) “allows the debtor to exempt 17 property that the trustee recovers under [various sections of the 18 Bankruptcy Code] as long as the transfer was involuntary and the 19 property was not concealed by the debtor.” 4 Collier on 20 Bankruptcy ¶ 522.12[1] (Alan N. Resnick & Henry J. Sommer, eds., 21 16th ed.). Conversely, a debtor may not exempt property that the 22 trustee recovers under one of the enumerated provisions if the 23 debtor voluntarily transferred the property or if the debtor 24 concealed the property. 25 B. The bankruptcy court properly held that § 522(g) applies. 26 Mr. Guthrie argues that § 522(g) does not apply to his 27 claimed exemption in the Property. We disagree. 28
10 1 1. The Trustee was entitled to recover the Property under § 544(b). 2 3 The bankruptcy court did not err when it determined that the 4 Trustee was entitled to recover the Property under § 544(b). The 5 court noted that the Trustee recovered the Property under § 550, 6 insofar as, “under § 544, also incorporated into § 522(g) under 7 § 550, trustees can avoid transfers that are otherwise voidable 8 by an unsecured creditor under applicable law.” It noted that 9 California’s Uniform Fraudulent Transfer Act (“UFTA”) 10 § 3439.04(a)(1) provides that a transfer is voidable if it is 11 made with the actual intent to hinder, delay, or defraud. A 12 transfer is also avoidable if the debtor made the transfer 13 without receiving a reasonably equivalent value in exchange for 14 the transfer and the debtor intended to incur, or believed or 15 reasonably should have believed, that he would incur debts beyond 16 his ability to pay as they came due. Because (1) Mr. Guthrie 17 transferred the Property with the actual intent to hinder, delay, 18 and defraud and to avoid the IRS’s lien; (2) legal title to the 19 Property was transferred without receiving reasonably equivalent 20 value; and (3) Mr. Guthrie admitted that he believed that he 21 would be unable to pay the IRS debts as they came due, the 22 transfer was avoidable under the California UFTA § 3439.04(a)(2). 23 We find no error in these decisions. 24 2. The transfer was voluntary. 25 There is no dispute that Mr. Guthrie voluntarily transferred 26 the Property to his ex-wife. As a result, because 27 §§ 522(g)(1)(A) and (B) are written in the conjunctive, it does 28 not matter whether Mr. Guthrie also concealed the Property.
11 1 Mr. Guthrie argues that, because he did not conceal the 2 Property from the court or the Trustee, sustaining the Objection 3 did not serve the purpose of § 522(g). While it is true that 4 Mr. Guthrie listed the Property in his original schedules, he 5 omitted the crucial fact that he did not have title to the 6 Property at that point. He then amended his schedules several 7 times to avoid the Trustee’s Objection to his homestead 8 exemption: (1) after the second session of the meeting of 9 creditors in which the Trustee questioned his exemption, he 10 removed the Property entirely from his amended schedules; 11 (2) after the Trustee continued to question him about the 12 Property at the third session of the meeting of creditors and he 13 admitted that he had transferred the Property so that the IRS 14 “wouldn’t come after it [the Property] right away and [he could] 15 try to get time[,]” he again amended his schedules to include the 16 Property; and (3) after the Trustee filed an application to 17 employ counsel to avoid the transfer of the Property, he arranged 18 to transfer the Property from his ex-wife to himself, admittedly 19 “to avoid the possibility of the Trustee objecting to [his] 20 homestead exemption claim . . . .” 21 These are not the actions of a forthright debtor that the 22 Bankruptcy Code is meant to protect.5 23 5 24 Mr. Guthrie also argues that he relied on the advice of the paralegal (whose firm he did not retain) and his counsel in 25 deciding what information to disclose. Mr. Guthrie cannot blame 26 advice from non-retained attorneys and his counsel for his decision to not disclose the prepetition transfer of the 27 Property. See Ehrenberg v. Hidalgo (In re Hidalgo), BAP No. CC-06-1399-PaAK, 2007 WL 7540950, at *8 (9th Cir. BAP July 9, 28 (continued...)
12 1 In any event, Mr. Guthrie’s supposed honesty and non- 2 concealment of the Property alone are not determinative. Section 3 522(g) provides that an exemption is only valid as to property 4 recovered by the trustee if “(A) such transfer was not a 5 voluntary transfer of such property by the debtor; and (B) the 6 debtor did not conceal such property[.]” § 522(g)(1) (emphasis 7 added). Because these requirements are stated in the 8 conjunctive, both must be present in order allow the exemption. 9 Mr. Guthrie’s exclusive focus on the latter requirement ignores 10 the fact that he voluntarily transferred the Property. 11 3. Glass is controlling; the Trustee recovered the Property within the meaning of § 522(g). 12 13 Mr. Guthrie contends that the Trustee did not recover the 14 Property for the estate because Mr. Guthrie arranged for his ex- 15 wife to return the Property to him, but not in response to 16 anything that the Trustee did. We disagree. 17 Both parties rely on this panel’s decision in Glass v. Hitt 18 (In re Glass), 164 B.R. 759 (9th Cir. BAP 1994), which the Ninth 19 Circuit affirmed, 60 F.3d 565 (9th Cir. 1995). In that case, the 20 debtor had transferred his residence to his son for “love and 21 affection.” He did not include his house in his schedules or 22 disclose the transfer, and he did not claim a homestead 23 exemption. When the trustee discovered the transfer, the debtor 24 amended his schedules to include the property and assert a claim 25 5 26 (...continued) 2007) (Klein, J., concurring) (“It is worth noting that an advice 27 of counsel defense is not availing where the debtor either does not rely in good faith or is trying to keep an asset out of 28 view.”).
13 1 of homestead exemption. 164 B.R. at 760. 2 The trustee objected to the claimed exemption, arguing that 3 § 522(g) precluded the debtor from claiming a homestead exemption 4 under § 522(b). Id. at 760-61. The trustee said that he 5 intended to seek avoidance of the conveyance as a § 548 6 fraudulent transfer. Id. at 761. 7 Three days after the trustee filed his objection (and before 8 the trustee commenced any avoidance action), the debtor’s son 9 conveyed the property back to the debtor in consideration of 10 “love and affection.” The debtor again amended his schedules by 11 listing a fee interest in the residence and claiming the 12 homestead exemption. Id. 13 The bankruptcy court overruled the trustee’s objection 14 because the trustee had not shown that he had directed any action 15 against the son in order to achieve reconveyance of the residence 16 to the estate. Accordingly, the trustee had not “recovered” the 17 property and could not object under § 522(g). Id. 18 On appeal, the panel noted that “[n]o court has addressed a 19 situation in which the trustee has not filed a complaint for 20 avoidance or recovery but has been instrumental in recovery of 21 the property.” It considered the plain meaning of the statute 22 and said, although a “literal interpretation of the statute . . . 23 seems to indicate that ‘recovery’ of the property must be 24 accomplished pursuant to an action commenced under one of the 25 enumerated code sections[,]” “requiring the Trustee to recover 26 property through a formal avoidance action would defeat the 27 drafters’ intent of limiting exemptions where a debtor has 28 voluntarily transferred property in a manner giving rise to the
14 1 trustee’s avoiding powers or has engaged in fraudulent conduct by 2 failing to disclose the transfer or an interest in the property.” 3 Id. at 763. The panel concluded: 4 Accordingly, we hold that where a debtor voluntarily transfers property in a manner that 5 triggers the trustee’s avoidance powers or the debtor knowingly conceals a prepetition transfer or an 6 interest in property, and such property is returned to the estate as a result of the trustee’s actions 7 directed toward either the debtor or the transferee, the debtor is not entitled to claim an exemption under 8 § 522(g)(1). It is not necessary for the trustee to commence a formal adversary proceeding or obtain a 9 final judgment to prevail on an objection to a debtor’s claim of exemption pursuant to § 522(g)(1). 10 A trustee, however, must present sufficient facts 11 upon which a bankruptcy court could reasonably conclude that a debtor transferred property in such a manner as 12 to invoke the trustee’s avoidance powers under §§ 510(c)(2), 542, 543, 550, 551 or 553, the transfer 13 was voluntary or the debtor knowingly concealed the transfer or an interest in the property, and the 14 property was returned to the estate as the result of the trustee’s efforts, not limited to actions directed 15 toward the transferee. 16 Id. at 764-65. 17 The panel held that the bankruptcy court erred in overruling 18 the objection. It said that the “overwhelming inference” from 19 the voluntary transfer of the property for no consideration and 20 the debtor’s failure to disclose the property or its transfer “is 21 that the Debtor was attempting to hide assets from his creditors, 22 thus giving rise to a cause of action under § 548(a)(1).” Id. at 23 765. Additionally, the trustee’s actions 24 were instrumental in the return of the property to the estate. Three days after the Trustee filed his 25 Objection, the Debtor’s son reconveyed the property to the Debtor by quitclaim deed. Since the Debtor and the 26 transferee are father and son and the transfer occurred on the heels of the Objection, the only reasonable 27 inference to be drawn is that the Trustee’s promise of legal action had a coercive effect on father and son, 28 directly resulting in the return of the property to the
15 1 estate. 2 Id. The panel thus reversed the bankruptcy court’s overruling of 3 the trustee’s objection. 4 The debtor appealed to the Ninth Circuit, arguing, in 5 relevant part, that the panel had misconstrued the term 6 “recovers.” The Ninth Circuit affirmed. It noted that, 7 “following the debtor’s failure to properly disclose the property 8 transfer there was not only a ‘suggestion’ by the trustee, but 9 also a filed objection that contained the threat of use of 10 avoidance powers.” 60 F.3d at 569. It held that “[t]he filing 11 of the objection containing the threat to use avoidance powers 12 which resulted in the reconveyance of the property for the estate 13 was ‘some action.’” Id. 14 Glass is nearly on all fours with this case. The Trustee 15 recovered the Property through “some action” when, after learning 16 that Mr. Guthrie had transferred the property to his ex-wife to 17 avoid IRS liens, he filed the application to employ counsel 18 potentially to file an avoidance claim to recover property to the 19 estate. We do not think it a coincidence that, roughly a week 20 after the Trustee sought to employ counsel and gave notice that 21 he would seek to prosecute avoidance claims, Ms. Guthrie conveyed 22 the Property back to Mr. Guthrie, and Mr. Guthrie again listed 23 the Property in his schedules. 24 As in Glass, the Trustee’s filing “contained the threat of 25 use of avoidance powers.” See id. We similarly conclude that 26 “the only reasonable inference to be drawn is that the Trustee’s 27 promise of legal action had a coercive effect on [transferor and 28 transferee], directly resulting in the return of the property to
16 1 the estate.” See In re Glass, 164 B.R. at 765. Mr. Guthrie 2 effectively admitted the force of the Trustee’s “threat” when he 3 stated that his ex-wife attempted to commit suicide upon learning 4 that the Trustee had retained counsel to pursue avoidance claims. 5 Accordingly, the bankruptcy court properly determined that 6 the Trustee recovered the Property for the estate within the 7 meaning of § 522(g). 8 4. Mr. Guthrie’s equitable interest in the Property under state law does not overcome § 522(g). 9 10 Mr. Guthrie claims, and the bankruptcy court acknowledged, 11 that he had an equitable interest in the Property. Under 12 California law, a debtor may claim a homestead exemption in an 13 equitable interest in estate property, even if he has 14 fraudulently transferred the property. See Putnam Sand & Gravel 15 Co. v. Albers, 92 Cal. Rptr. 636, 639 (Cal. Ct. App. 1971) 16 (“notwithstanding the fraudulent conveyance, the defendants . . . 17 retained an equitable interest in the property which would enable 18 them to file a valid claim of homestead before judgment”). 19 Moreover, under California law, a debtor may claim a homestead 20 exemption in his primary residence, even if he does not own it. 21 See Elliott v. Weil (In re Elliott), 523 B.R. 188, 195-96 (9th 22 Cir. BAP 2014) (“Elliott I”) (holding that, under California’s 23 automatic exemption in CCP § 704.730, the debtor’s conveyance of 24 the property’s “title to a third party does not defeat his right 25 to an automatic exemption, because continuous residency, rather 26 than continuous ownership, controls the Article 4 27 analysis . . .”). 28 Mr. Guthrie is also correct that his equitable interest in
17 1 the Property became part of his bankruptcy estate. Section 2 541(a) provides that the commencement of a bankruptcy case 3 creates an estate that is composed of “all legal or equitable 4 interests of the debtor in property as of the commencement of the 5 case.” § 541(a)(1). 6 Mr. Guthrie argues that, at most, the Trustee recovered only 7 legal title to the Property. He contends that the bankruptcy 8 court should have allowed his homestead exemption in the 9 equitable interest he retained despite his fraudulent transfer. 10 We disagree. 11 We addressed a similar question in Elliott v. Weil 12 (In re Elliott), 544 B.R. 421 (9th Cir. BAP 2016) 13 (“Elliott III”). In that case, the debtor transferred his real 14 property to his company before he filed his bankruptcy petition, 15 did not disclose the property in his bankruptcy case, and then 16 had the company reconvey the property to him after he received 17 his discharge. The BAP affirmed the bankruptcy court’s decisions 18 that the debtor had concealed his interest in the property for 19 purposes of § 522(g)(1)(B), and that the court’s judgment in the 20 trustee’s § 542(a) turnover action6 constituted a “recovery” for 21 purposes of § 522(g). Id. at 433. The BAP then turned to the 22 debtor’s argument that the bankruptcy court erred in not 23 considering whether California law still permitted his homestead 24 25 6 The debtor appealed this issue in a second appeal to the 26 BAP, Elliott v. Weil (In re Elliott), 529 B.R. 747 (9th Cir. BAP 2015) (“Elliott II”). On remand, the court required that the 27 debtor immediately turn over possession of the property to the trustee under § 542(a). The debtor did not appeal that decision 28 further.
18 1 exemption, notwithstanding his misconduct. Id. The BAP 2 disagreed, holding instead that the court’s § 522(g) 3 determination ended the analysis: “Since the bankruptcy court 4 appropriately denied [the debtor’s] claimed homestead exemption 5 under an applicable Bankruptcy Code provision, § 522(g)(1), it 6 fully resolved the Trustee’s objection and was not required to 7 proceed further to analyze [the debtor’s] homestead exemption 8 claim under state law.” Id. at 436 (emphasis added).7 9 We agree with the Elliott III panel’s reasoning. Section 10 522(g) limits a debtor’s ability to assert exemption rights in 11 certain circumstances, even if state law would permit the debtor 12 to assert an exemption in those very circumstances. Once the 13 bankruptcy court has determined that § 522(g) applies, a state 14 exemption law cannot overcome the trustee’s objection. 15 Mr. Guthrie relies on the BAP’s unpublished disposition in 16 Gray v. Bova (In re Bova), BAP No. EC-05-1307-NMaPa, 2006 WL 17 6810940 (9th Cir. BAP Mar. 7, 2006). In that case, the debtor 18 had five siblings. Their parents transferred certain California 19 property to the debtor and two of his siblings, but the family 20 always understood that the property belonged to all six siblings 21 in equal shares. Thirteen years prior to filing his chapter 7 22 petition, the debtor transferred his 1/3 legal interest to his 23 sisters who owned the other 2/3 interest so that the sisters 24 could refinance the mortgage. Despite this transfer of legal 25 title, the family still understood that all six siblings, 26 27 7 Elliott III is currently on appeal to the Ninth Circuit, 28 9th Cir. No. 16-60020 (Mar. 28, 2016).
19 1 including the debtor, owned the property in equal shares. When 2 the debtor filed for bankruptcy, he claimed a homestead exemption 3 in his 1/6 interest in the amount of $150,000 pursuant to CCP 4 § 704.730(a)(3). 2006 WL 6810940 at *1. 5 The trustee objected to the debtor’s claimed exemption, 6 arguing that it should be disallowed under § 522(g). The 7 bankruptcy court disagreed, and the BAP affirmed. The BAP held 8 that the debtor retained an equitable interest in the property 9 despite the conveyance of legal title to his sisters thirteen 10 years prior, and that the debtor could claim a homestead 11 exemption in that equitable interest under California law. The 12 BAP held that § 522(g) did not apply because there was no 13 transfer that the trustee could avoid under any of the sections 14 listed in § 522(g). Id. at *4. 15 Bova is not binding on us because it is unpublished, and in 16 any event it is readily distinguishable. In Bova, the trustee 17 was able to realize for the estate the full value of the debtor’s 18 true interest in the property without invoking any of the 19 avoiding powers; he could simply sell the debtor’s interest in 20 the property together with the interests of his co-owners under 21 § 363(h) (which was designated § 363(g) when we decided Bova) and 22 claim the debtor’s share of the proceeds from his sisters, who 23 held the property in a resulting trust for his benefit. The 24 trustee did not need to employ any of the statutory powers 25 enumerated in § 522(g) in order to recover and liquidate the 26 debtor’s interest in the property; the trustee asserted a claim 27 under § 542(a), but as the panel noted, this was entirely 28 unnecessary. In this case, however, the Trustee could not have
20 1 recovered the Property without invoking one of the sections 2 listed in § 522(g).8 3 Section 522(g) might present difficult questions in a case 4 where the trustee recovered only a limited interest in certain 5 property.9 But we need not reach those issues here. We hold 6 that, where the debtor signs a deed purporting to make a 7 voluntary, outright transfer of his entire interest in certain 8 property and the trustee recovers that property by using (or 9 threatening to use) his avoiding powers under § 544 or § 548, 10 § 522(g) bars the debtor from claiming any exemption in that 11 property. 12 CONCLUSION 13 For the reasons set forth above, the bankruptcy court did 14 15 8 Ehrenberg v. Hidalgo (In re Hidalgo), BAP No. 16 CC-06-1399-PaAK, 2007 WL 7540950 (9th Cir. BAP July 9, 2007), which none of the parties cited, is similar to Bova. The debtor 17 conveyed to his sister his legal interest in property that they jointly owned. When he filed for bankruptcy without listing the 18 property in his schedules and later claimed a homestead exemption 19 in his equitable interest, the trustee objected under § 522(g). The bankruptcy court overruled the objection, and the BAP agreed 20 on appeal, noting that the objection was premature because the trustee had not yet recovered anything. Like Bova, Hidalgo is 21 unpublished and not binding. It is also distinguishable because, 22 unlike Hidalgo, the Trustee in this case has recovered the Property. 23 9 Most courts considering this issue hold that § 522(g) 24 applies even if the only interest that the trustee recovers is a lien. See, e.g., Russell v. Kuhnel (In re Kuhnel), 495 F.3d 25 1177, 1181 (10th Cir. 2007) (creditor’s release of its security 26 interest in a truck constituted recovery of property by the trustee); In re Lamping, 8 B.R. 709, 711 (Bankr. E.D. Wis. 1981) 27 (under § 522(g), “transfers of a security interest are voluntary transfers and are not subject to exemption claims by the debtor 28 after the property is recovered by the trustee”).
21 1 not err in sustaining the Objection to the homestead exemption. 2 Therefore, we AFFIRM. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28