In re Canino
| Decision Date | 25 May 1995 |
| Docket Number | BAP No. EC-94-1861-OVR. Bankruptcy No. 92-23346-C-7. |
| Citation | 185 BR 584 |
| Parties | In re Vera Agnes CANINO, Debtor. Vera Agnes CANINO, Appellant, v. Richard E. BLEAU, Chapter 7 Trustee, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
COPYRIGHT MATERIAL OMITTED
John A. Tosney, Sacramento, CA, for appellant.
Richard E. Bleau, Orangevale, CA, for appellee.
Before OLLASON, RUSSELL and VOLINN, Bankruptcy Judges.
OVERVIEW
Debtor claimed exemptions for full equity in a vehicle and residence that facially exceeded the statutory exemptions. The bankruptcy trustee did not file an objection to the claimed exemptions within the statutorily prescribed period. Prior to the expiration of the time for the trustee to object to the claimed exemptions, the trustee sold the vehicle and paid Debtor the allowed exemption under California law. After the trustee sold the residence, he moved the court for an order to turn over the proceeds to the estate, minus the allowed homestead exemption pursuant to California law. The bankruptcy court concluded that the trustee's actions for sale of the assets and notice of asset case constituted an informal or de facto objection, and granted his motion. Debtor timely appealed the bankruptcy court's order. We AFFIRM, on other grounds, as to the vehicle and REVERSE as to the residence.
Vera Agnes Canino ("Debtor") and her husband, Loren Joseph Canino ("Canino"), (jointly "Debtors"), filed a Chapter 71 petition in bankruptcy on April 15, 1992. The petition was filed by Debtors in propria persona. Debtor was under 65 years of age and did not assert a disability. Canino was approximately 80 years of age, and was the subject of a conservatorship proceeding. Debtors were joint owners of a residence, and had recorded a declaration of homestead on April 14, 1992, the day before filing for bankruptcy.
On schedule C, Debtors listed their residence as exempt under Cal.Civ.Proc.Code 704.910.2 Debtors listed the property value as $175,000, and the exemption value as $155,053.57, which was the property value minus the one secured lien in the amount of $19,946.43. The exemption facially represented Debtors' total equity in the property. The exemption claim exceeded the statutory exemption available pursuant to Cal.Civ.Proc. Code § 704.730, which provides in pertinent part:
Cal.Civ.Proc.Code § 704.730 (West 1995).
Debtors also listed a 1991 Ford Escort as exempt pursuant to Cal.Civ.Proc.Code § 704.010. The car's value was listed as $7,500, and the exemption value was also listed as $7,500. The exemption claim exceeded the statutory exemption of $1,200. See Cal.Civ.Proc.Code § 704.010(a) (West 1995).
At no time did the Chapter 7 Trustee ("Trustee") or any other party in interest file a formal written objection to these claimed exemptions. Debtor did not amend the schedules at any time, nor was she ordered to do so by the bankruptcy court.
At the time Debtors filed their bankruptcy petition, Canino had not resided at Debtors' residence for at least one year. Debtor and one of Canino's two daughters had been engaged in a conservatorship action concerning Canino; he had been living with his daughter pursuant to court order. Prior to living with his daughter, Canino had been institutionalized at an Alzheimer's center suffering from severe depression. Prior to that, he had resided with Debtor.
On July 29, 1991, the state court ordered that Canino remain in his daughter's home. On November 7, 1991, the state court granted the petition of Canino's daughter for her appointment as conservator of Canino's person. Debtor was appointed conservator of Canino's estate. The state court based its decision, in part, on the findings that Canino was unable to manage his finances or to resist fraud or undue influence, and that he lacked the capacity to give informed consent for medical treatment.
On May 21, 1992, a month after Debtor and Canino filed for bankruptcy, Canino's daughters filed a petition in state court for an order appointing the other daughter as successor conservator of Canino's estate. The automatic stay interrupted that proceeding. On July 10, 1992, Canino's daughters then filed a motion to dismiss the bankruptcy case as to Canino, due to his mental incompetence to sign the bankruptcy petition, and also moved for relief from the automatic stay as to their state court action. They requested the bankruptcy court to take judicial notice of the fact that Debtor had not filed a bond with the Probate Court, nor had any letters of administration been issued to Debtor concerning her status as conservator of Canino's estate as required under California law before Debtor could act on Canino's behalf. Therefore, Canino was in "legal-limbo," their motion alleged. The bankruptcy court granted the motion to dismiss Canino from the bankruptcy case in its order of September 9, 1992, and ruled that the bankruptcy case was "no longer a joint case." The court further ruled that "the rights of the trustee shall be precisely the rights that the trustee would have had if Vera Agnes Canino had filed individually rather than jointly." Thereafter, Canino's daughter was appointed conservator of Canino's estate.
The creditors' meeting was originally scheduled for May 19, 1992, but was continued to and concluded on June 23, 1992. The time for objecting to the exemptions, pursuant to Fed.R.Bankr.P. 4003(b) expired 30 days thereafter, on July 23, 1992.3
Although Trustee did not formally object to the claimed exemptions, on June 1, 1992, he moved to employ a real estate broker to sell the residence. The bankruptcy court denied the motion without prejudice so Trustee could obtain certain additional information.
Trustee had taken immediate possession of the vehicle. On June 3, 1992, he gave notice to Debtor and all interested parties of his intention to sell the vehicle. The sale was completed on June 20, 1992, three days before the conclusion of the creditors' meeting. On July 15, 1992, Trustee paid Debtor the statutory exemption amount of $1,200 for the vehicle. Trustee stated that Debtor accepted the payment without protest.
Although there is no written objection by Debtor in the record on appeal, Debtor's declaration in response to the subsequent turnover motion stated that she objected to Trustee regarding the sale of both the car and the residence, and was "confused" by the transactions.
On July 15, 1992, Trustee filed a Trustee's Report in Asset Case. On or about that same date, Trustee sent a Notice of Asset Case to all parties.
Trustee renewed his application to employ a real estate broker to sell the residence on October 9, 1992, and his motion was granted by order of October 13, 1992. Trustee, in his opening brief, explained the delay in bringing the renewed motion as follows:
Taking into account the current market appraisal, the costs of sale, the then-valid $100,000.00 statutory exemption, and the appellate court\'s recent decisions holding the trustee responsible for all tax consequences which might result from the sale of the real property, the trustee decided not to attempt to market the property at that time, since there appeared to be questionable value to the estate.
(Emphasis added).
On December 1, 1992, Trustee filed a motion for sale of the residence, free and clear. Canino's daughter intervened, and the court set an adversary proceeding. Canino's daughter did not object to the sale, but demanded Canino's half of the proceeds for his joint interest in the property. The bankruptcy court granted Trustee's motion and the residence was sold for $145,000, per the bankruptcy court's order of January 8, 1993. The court also ordered Trustee to hold the balance of proceeds in a blocked account, after payment of taxes, fees and sale costs.
Following a trial on the complaint in August of 1993, the bankruptcy court awarded Canino's conservator one-half of the net sale proceeds, representing his joint ownership interest.
The balance of proceeds from the sale of the car and the residence was approximately $62,000. The total amount of unpaid claims and administrative expenses was approximately $12,800.
On or about May 9, 1994, Trustee filed a motion for turnover of the funds in the account...
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