Elliott v. Weil (In re Elliott), BAP No. CC–14–1321–PaKiTa.

• Decision Date: 22 April 2015
• Docket Number: Bankruptcy No. SV 11–23855–VK.,Adversary No. SV 13–01118–VK.,BAP No. CC–14–1321–PaKiTa.
• Citation: 529 B.R. 747
• Parties: In re Edward E. ELLIOTT, Debtor. Edward E. Elliott, Appellant, v. Diane C. Weil, Chapter 7, Trustee, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

529 B.R. 747

In re Edward E. ELLIOTT, Debtor.Edward E. Elliott, Appellant

v.Diane C. Weil, Chapter 7, Trustee, Appellee.

BAP No. CC–14–1321–PaKiTa.

Bankruptcy No. SV 11–23855–VK.

Adversary No. SV 13–01118–VK.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted March 19, 2015.

Filed April 22, 2015.

Andrew E. Smyth, Smyth Law Office, argued for appellant Edward E. Elliot; Alla Tenina, Tenina Law, Inc., argued for appellee Diane C. Weil, Chapter 7 Trustee.

Before: PAPPAS, KIRSCHER, and TAYLOR, Bankruptcy Judges.

OPINION

PAPPAS, Bankruptcy Judge.

Debtor Edward E. Elliot (“Debtor”) appeals the summary judgment entered by the bankruptcy court in favor of chapter 7¹ trustee Diane C. Weil (“Trustee”) revoking Debtor's discharge pursuant to § 727(d)(1) and ordering that Debtor turn over a house to Trustee pursuant to § 542(a). We conclude that Trustee's discharge revocation complaint was not timely filed as required by § 727(e)(1) and, therefore, that the bankruptcy court erred in revoking Debtor's discharge. We thus VACATE that portion of the judgment and REMAND this matter to the bankruptcy court with instructions to dismiss Trustee's § 727(d) claim. As a result, we also VACATE the judgment of the bankruptcy court requiring turnover of the house to Trustee and REMAND this matter for further proceedings.

I. FACTS

Debtor, represented by counsel, filed a chapter 7 petition on December 1, 2011. In his petition, Debtor listed his address as Hiawatha Street, Granada Hills, California. On Schedules A and D, Debtor did not list any real property in which he had an interest, nor did he list any claims secured by real property. Debtor did not schedule several creditors holding a money judgment against him based on fraud and negligent misrepresentation (the “Judgment Creditors”), who apparently had obtained a judgment lien pursuant to California law. See Cal.Code Civ. Proc. § 697.310(a).

During his testimony at the initial § 341(a) meeting of creditors, Debtor confirmed that his address was Hiawatha Street and stated that the information in his bankruptcy petition, schedules, and statement of financial affairs (“SOFA”) was true and complete. Debtor further testified that he did not own any real property and had not transferred or given away anything of value in the last four years. Based on the information in Debtor's bankruptcy schedules, SOFA, and his § 341(a) meeting testimony, Trustee filed a “No Distribution” report in the bankruptcy case. Debtor received a discharge on March 8, 2012, and the bankruptcy case was closed on March 13, 2012.

On March 26, 2012, Lee Wong Investments, Inc. (“LWI”) transferred certain real property located in Los Angeles (the “Buckingham Property”) to Debtor by quitclaim deed as a gift. Debtor does not dispute that LWI is a Nevada corporation which he organized and controlled. LWI was formerly known as Shilalee Enterprise, Inc., but the name of the corporation was changed on February 14, 2007. Juanita Jehdian, Debtor's fiancee and LWI's president, signed the quitclaim deed.

Following the transfer of the Buckingham Property to Debtor, he sent a letter to counsel for the Judgment Creditors, who were never informed of the bankruptcy filing, advising counsel that Debtor had acquired the Buckingham Property, and demanding that the judgment liens be removed. This letter triggered an inquiry by the Judgment Creditors and eventually Trustee, which revealed the history of Debtor's interest in the Buckingham Property through numerous transfers of title.

In particular, shortly after the Judgment Creditors obtained their judgment, Debtor, who then owned the Buckingham Property, deeded it to 1019 South Central Associates, Ltd. (“S. Central”). California Secretary of State records evidence that a son of Debtor's deceased partner organized S. Central. Shortly thereafter, S. Central transferred the Buckingham Property to LWI; LWI held title during Debtor's bankruptcy case. LWI conveyed title back to Debtor after he received his discharge.

When the Judgment Creditors discovered Debtor's longstanding connections to the Buckingham Property, they filed a motion to reopen Debtor's bankruptcy case, which the bankruptcy court granted on January 7, 2013. Trustee was reappointed to serve in the reopened case.

After the case was reopened, Debtor amended his schedules to disclose his interest in the Buckingham Property and to claim any equity in the property exempt as his homestead. Trustee objected to this claim of exemption based upon Debtor's bad faith in failing to disclose his interest in the property, and the bankruptcy court sustained Trustee's objection and disallowed Debtor's exemption claim. Debtor appealed and, on December 14, 2014, this Panel vacated the order of the bankruptcy court in light of the recent decision of the Supreme Court in Law v. Siegel, ––– U.S. ––––, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014), and remanded the matter to the bankruptcy court for further proceedings to determine if there was any statutory basis to deny Debtor's homestead exemption under California law or under § 522(g)(1). Elliott v. Weil (In re Elliott), 523 B.R. 188, 197–98 (9th Cir. BAP 2014).

In the meantime, on June 4, 2013, Trustee filed an adversary complaint against Debtor in which she asked the bankruptcy court to determine that the Buckingham Property was property of the estate, to order Debtor to turn over the Buckingham Property to Trustee, and to revoke Debtor's discharge. Debtor retained new counsel to represent him in the reopened bankruptcy case and in litigation with Trustee.²

Trustee conducted a continued § 341(a) meeting of creditors on November 18, 2013, at which time Debtor admitted that he lived at the Buckingham Property when he filed bankruptcy, that he considered it to be his home, and that he had purchased it in 1989.

On January 13, 2014, Trustee filed a motion for summary judgment in the adversary proceeding seeking a revocation of Debtor's discharge and turnover of the Buckingham Property. There were several attachments to the motion, including a declaration by Michael Kapulkin, one of the Judgment Creditors, who had obtained a judgment against Debtor in May 2006; a copy of Debtor's grant deed conveying the Buckingham Property to S. Central dated August 14, 2006; a transcript of Debtor's deposition taken on November 2013; a copy of the grant deed transferring the Buckingham Property from S. Central to LWI dated February 13, 2007; a copy of the form changing the name of Debtor's company from Shilalee Enterprise, Inc. to LWI dated February 14, 2007; a copy of the quitclaim gift deed from LWI to Debtor dated March 26, 2012; a transcript of Debtor's second § 341(a) meeting; a copy of the Judgment Creditors' state court complaint against Debtor; a copy of the judgment entered by the state court against Debtor dated May 4, 2006; and a copy of the letter from Debtor to the Judgment Creditors' attorney in which he revealed that he had acquired the Buckingham Property after the entry of his discharge and demanded that the Judgment Creditors remove their judicial liens on that property.

In response to Trustee's summary judgment motion, Debtor filed his own declaration. He claimed that he had provided all the information about LWI, his interest in the company, and the Buckingham Property, to his bankruptcy attorney. However, Debtor averred, the attorney failed to include this information in his bankruptcy schedules. He also stated that, while he had read and signed the bankruptcy petition and schedules, he did not understand them. In addition, Debtor claimed his attorney advised him to answer Trustee's questions the way he did in the initial § 341(a) meeting. Further, Debtor claimed that the bankruptcy petition that he read at his attorney's office listed the Buckingham Property as his home address and that the address must have been changed by his attorney before it was filed. Finally, Debtor stated that the quitclaim deed from LWI to Debtor “speaks for itself,” and he, therefore, denied Trustee's allegation that he received the deed after his discharge.

Debtor asked that the motion for summary judgment be denied because there were triable issues of fact. Specifically, Debtor argued that “[a]dvice of [an] attorney may excuse some types of fraud.” Debtor then filed a statement of “genuine issues in response to summary judgment.” Debtor identified three fact issues for trial: “1. Did [Debtor] list his residential address as [ ] Hiawatha St[reet] 2. Did [Debtor] state at the [§ 341(a) ] hearing that he resided at [ ] Hiawatha St[reet] [and] 3. Were the errors and omissions in the bankruptcy schedules the result of [Debtor's] reliance on his attorney.”

The bankruptcy court conducted a hearing on Trustee's motion for summary judgment on March 19, 2014, at which the parties appeared through counsel and argued their positions. On April 7, 2014, the bankruptcy court granted Trustee's summary judgment motion and entered a “Judgment Vesting Property in Trustee and Revocation of Discharge.” In this judgment, the bankruptcy court finds and concludes that the Buckingham Property was property of the bankruptcy estate and ordered that it be turned over to Trustee. In addition, the Court found and concluded:

The Court finds [Debtor] knowingly and fraudulently failed to disclose a significant asset in his schedules, i.e., [Debtor's] interest in a corporation that held title to his residence. For no consideration, less than three weeks after [Debtor] obtained his discharge, [Debtor] obtained title to his residence from that corporation. [Debtor's] residence, a single family home, has a fair market value in excess of $600,000. [Debtor] concealed his residence, and the debt secured by his residence, in his chapter 7 petition. In his chapter 7 petition and at his initial meeting of creditors pursuant to [ ] § 341(a), in order to conceal property of the estate, [Debtor] knowingly and fraudulently misrepresented where he live

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