Albert v. Golden (In re Albert)

• Decision Date: 10 June 2021
• Docket Number: No. 20-60006,20-60006
• Citation: 998 F.3d 1088
• Parties: IN RE: Lenore L. ALBERT, Esquire, Debtor, Lenore L. Albert, Esquire, aka Lenore L. Albert-Sheridan, DBA Law Offices of Lenore Albert, Appellant, v. Jeffrey Ian Golden, Chapter 7 Trustee, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

998 F.3d 1088

IN RE: Lenore L. ALBERT, Esquire, Debtor,

Lenore L. Albert, Esquire, aka Lenore L. Albert-Sheridan, DBA Law Offices of Lenore Albert, Appellant,

v.Jeffrey Ian Golden, Chapter 7 Trustee, Appellee.

No. 20-60006

United States Court of Appeals, Ninth Circuit.

Submitted February 10, 2021^* Pasadena, California

Filed June 10, 2021

Lenore L. Albert, pro se, Westminster, California, for Appellant.

Eric P. Israel, Aaron E. de Leest, and Sonia Singh, Danning, Gill, Israel & Krasnoff, LLP, Los Angeles, California, for Appellee.

Before: Richard C. Tallman, Consuelo M. Callahan, and Kenneth K. Lee, Circuit Judges.

CALLAHAN, Circuit Judge:

Lenore Albert appeals the Bankruptcy Appellate Panel's rejection of her attempt to exempt two assets from her estate. We affirm and, in doing so, clarify that a bankruptcy court's prior rejection of claimed exemptions carries preclusive weight, even after Law v. Siegel , 571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014). We further hold that the bankruptcy court properly deemed Albert's claims precluded.

I.

Albert petitioned for Chapter 13 bankruptcy and, as relevant here, sought to exempt from her estate counterclaims she had filed in state court against Ford Motor Credit Company, as well as accounts receivable from former clients. In a schedule itemizing these exemptions, Albert listed each asset as worth "$500,000 TBD." She cited California Code of Civil Procedure sections 704.140 and 704.210 as the bases for exempting her counterclaims, and section 704.210 as the basis for exempting her accounts receivable. Section 704.140 allows debtors to keep awards arising from personal-injury suits, provided the money is needed to support the debtor or her dependents. Section 704.210 automatically exempts "[p]roperty that is not subject to enforcement of a money judgment."

The Chapter 13 trustee and Ford, which in addition to defending against Albert's counterclaims was one of her creditors, objected to the exemptions. They argued that Albert had not shown that any recovery from her counterclaims would be necessary for her support, as section 704.140 requires, and that she identified no statute immunizing her assets from the enforcement of a money judgment, as section 704.210 requires. After a hearing the bankruptcy court sustained the objections, and Albert did not timely appeal those rulings.

Shortly thereafter, the bankruptcy court converted Albert's Chapter 13 proceeding to Chapter 7 and appointed a new trustee, Jeffrey Golden. Golden moved to settle Albert's counterclaims, and Albert amended her exemptions the following month. By and large the amended schedule remained the same as the initial one. Albert again listed her counterclaims and accounts receivable as exempt and valued at $500,000 each. The purported bases for the exemptions likewise went unchanged. But Albert now somehow claimed for herself $1.93 million of her counterclaims’ purported $500,000 value.

Golden objected that Albert's amended exemptions were identical to those the court had previously rejected and that, as a result, the doctrines of issue and claim preclusion barred their relitigation. Golden also urged the court to reject Albert's amended exemptions on the merits. Albert then tried to appeal to the BAP the orders sustaining the original objections. She argued that those orders were not final, given that the bankruptcy judge had commented at the hearing that its denial would be without prejudice. The BAP disagreed and dismissed Albert's appeal as untimely—a decision Albert never appealed.

While Albert was belatedly litigating the denial of her initial exemptions before the BAP, she failed to timely oppose Golden's objections to her amended schedule in the bankruptcy court. The night before a hearing on the matter, she submitted a 419-page document incorporating portions of her previous filings. The court declined to consider this late-filed material and denied her amended exemptions, deeming them precluded by dint of their earlier rejection. Albert unsuccessfully appealed that decision to the BAP. She then appealed to this court.

II.

We review BAP decisions de novo , applying "the same standard of review that the BAP applied to the bankruptcy court's ruling." In re Boyajian , 564 F.3d 1088, 1090 (9th Cir. 2009). Accordingly, we review the bankruptcy court's legal conclusions de novo , its factual findings for clear error, and its application of issue preclusion for an abuse of discretion. In re Cherrett , 873 F.3d 1060, 1064 (9th Cir. 2017) ; Dias v. Elique , 436 F.3d 1125, 1128 (9th Cir. 2006).

III.

A.

The filing of a bankruptcy petition creates an estate comprising the debtor's property, including the debtor's claims against third parties. 11 U.S.C. § 541(a) ; Sierra Switchboard Co. v. Westinghouse Elec. Corp. , 789 F.2d 705, 709 (9th Cir. 1986). In Chapter 7 proceedings, an appointed trustee liquidates the estate to satisfy creditors. 11 U.S.C. §§ 704(a)(1), 726. The debtor can, however, seek to "exempt" certain assets from the estate, and thus from liquidation, to allow for a "fresh start" after bankruptcy. Id. § 522(b)(1); United States v. Sec. Indus. Bank , 459 U.S. 70, 72 & n.1, 103 S.Ct. 407, 74 L.Ed.2d 235 (1982). The Bankruptcy Code lists exemptable property, but since California has opted out of the federal exemptions and promulgated its own, the state's exemptions apply. See 11 U.S.C. § 522(b)(2) ; Cal. Code Civ. Proc. § 703.130 ; see also Gladstone v. U.S. Bancorp , 811 F.3d 1133, 1142 (9th Cir. 2016).

B.

We first address whether bankruptcy courts can deny exemptions simply because they have denied the same exemptions before. The question seems straightforward. After all, the Bankruptcy Code empowers its courts to "issue any order, process, or judgment ... to carry out" its provisions, 11 U.S.C. § 105(a), and the Supreme Court has long applied preclusion doctrines in the bankruptcy setting, see, e.g. , Katchen v. Landy , 382 U.S. 323, 334, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966) ; Heiser v. Woodruff , 327 U.S. 726, 736, 66 S.Ct. 853, 90 L.Ed. 970 (1946). Unsurprisingly, then, the BAP has often invoked the doctrines to reject repeatedly claimed exemptions. See, e.g. , In re Cogliano , 355 B.R. 792, 802–05 (9th Cir. BAP 2006) ; In re Magallanes , 96 B.R. 253, 256–57 (9th Cir. BAP 1988). Albert nonetheless contends that Law v. Siegel , 571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014), abrogated those decisions by barring courts from denying exemptions on equitable grounds. In her view, this prohibition includes the judicially created doctrines of issue and claim preclusion.

We disagree, as Law involved a markedly different situation. The debtor in that case unquestionably qualified for the disputed exemption under California's exemption statutes. Id. at 423, 426, 134 S.Ct. 1188. But based on the debtor's misconduct, the bankruptcy court decided to apply the exemption's value to fees the trustee had incurred sorting out the situation. Id. at 420, 134 S.Ct. 1188. The Supreme Court reversed. Pointing out that the Bankruptcy Code prohibits using exemption funds for administrative expenses like the trustee's fees, the Court held that the bankruptcy court lacked authority to "surcharge" the debtor's exemption. Id. at 420–22, 134 S.Ct. 1188 (discussing 11 U.S.C. § 522(k) ). The Court thus reiterated the "hornbook" rule that the bankruptcy courts’ equitable powers must yield to the Code's more specific mandates. Id. at 421, 134 S.Ct. 1188 ; accord SEC v. U.S. Realty & Improvement Co. , 310 U.S. 434, 455, 60 S.Ct. 1044, 84 L.Ed. 1293 (1940) ("A bankruptcy court ... is guided by equitable doctrines and principles except in so far as they are inconsistent with the Act."). And because no Code provision bars bankruptcy courts from deeming prior orders preclusive, the conflict animating Law is not present here.

Certainly, the Court in Law went on to explain that there must be a "valid statutory basis" for refusing to honor a debtor's exemptions. 571 U.S. at 424, 134 S.Ct. 1188 ; see also id. ("[C]ourts are not authorized to create additional exceptions [to exemptions]."). But this does not help Albert. In its initial orders, the bankruptcy court determined that her counterclaims and accounts receivable failed to satisfy California's exemption laws. These were final judgments "determin[ing] all issues regarding the claimed exemption[s]." In re Gilman , 887 F.3d 956, 961 (9th Cir. 2018) (quoting In re White , 727 F.2d 884, 886 (9th Cir. 1984) ). As Albert appealed those orders too late to the BAP, and never to this court, they are binding, even if Albert believes them wrongly decided. See Federated Dep't Stores, Inc. v. Moitie , 452 U.S. 394, 398, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981) ("Nor are the res judicata consequences of a final, unappealed judgment on the merits altered by the fact that the judgment may have been wrong ...."). Hence, unlike Law , where the debtor was statutorily entitled to the exemption, here Albert, by operation of the earlier orders, is not. Nothing in Law prevented the bankruptcy court from giving preclusive effect to that determination.

To hold otherwise would not only undermine the finality of exemption orders, In re Gilman , 887 F.3d at 961–64, but would considerably frustrate the trustee's duty to expeditiously close the debtor's estate, see In re Riverside-Linden Invest. Co. , 925 F.2d 320, 322 (9th Cir. 1991). Debtors can amend their exemptions as a matter of course, Fed. R. Bankr. P. 1009(a), so if orders denying exemptions carry no preclusive weight, debtors could delay matters by claiming the same property as exempt time and time again. Debtors could also decline to meaningfully press their claims, and creditors would bear the brunt of such behavior, as the relitigation of resolved issues would drain estate—not to mention judicial—resources. Those burdens are precisely what the preclusion doctrines were designed to avoid, see Taylor v. Sturgell , 553 U.S. 880, 892, 128 S.Ct. 2161, ...