In re Cogliano
| Decision Date | 12 September 2006 |
| Docket Number | Bankruptcy No. RS 96-28188 MG.,BAP No. CC-05-1061-BMOT.,BAP No. CC-05-1202-BMOT. |
| Citation | 355 B.R. 792 |
| Parties | In re Susan COGLIANO, Debtor. Susan Cogliano, Appellant, v. Karl T. Anderson, Chapter 7 Trustee; Polis & Associates, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Daniel C. Sever, Cathedral, CA, for Appellant.
Thomas J. Polis, Polis & Associates, Irvine, CA, for Appellees.
Before: BRANDT, MONTALI and TCHAIKOVSKY,1 Bankruptcy Judges.
After reopening a case that had been closed for three years, the chapter 72 trustee obtained an order for turnover of funds in debtor's individual retirement account ("IRA") which were derived from her former spouse's pension. Six months later, debtor amended her schedules to exempt the IRA. After a contested hearing, the bankruptcy court sustained the trustee's objection to the exemption and again ordered turnover of the funds "so that it would not be dissipated." Debtor's motion for reconsideration was denied; she did not appeal. Debtor filed a second amended exemption claim, in which she argued that the IRA was not property of the estate, but that if it was, it was exempt. The trustee again objected; the court sustained the objection orally in 2002. The order was not entered until 2005. Debtor appealed.
Meanwhile, trustee and his counsel applied for fees, to which debtor objected, arguing the services did not benefit the estate. The bankruptcy court approved the final fee application, and the debtor appealed.
Concluding that neither claim nor issue preclusion bars debtor's assertion in her second claim of exemption that the IRA is not property of the estate, but that claim preclusion bars her assertion that it is exempt if it is property of the estate, we REVERSE the first order (exemption), VACATE the second (fees), and REMAND.
Background. Three years after her divorce from Peyton Frazier Smythe in 1993, Susan Cogliano filed her pro se chapter 7 petition, scheduling less than $50,000 in unsecured debt. She was granted a discharge, and her case was closed in February 1997.
Smythe participated in a "defined benefit plan" through his employer, Texaco Oil Company. Section 21.04 of the plan provided:
Restrictions on Alienation and Assignment. No member, Retired member, [or] Beneficiary ... will have the right to assign, [or] transfer ... her interest in any payments under this Plan, ... and payments under this Plan will not in any way be subject to any legal process to levy upon or attach the same for payment of any claim against any ... Beneficiary....
The decree of divorce awarded Cogliano an interest in Smythe's pension in small monthly amounts. The divorce decree also provided that, should Smythe elect a lump sum distribution, she would be entitled to 50 percent of the distribution. Cogliano's personal property schedule B reflected the monthly payment, although she claimed she had never received her monthly share and never expected she would, and she scheduled "spousal support" of $15,794.61 owing.
When she filed her bankruptcy petition, Cogliano did not know that Smythe had already retired in 1995 and had elected a lump sum distribution, triggering her entitlement to a one-half share. In 1998, when she learned of these facts, Cogliano sought a modification of the divorce decree and initiated judgment enforcement proceedings. The state court modified the decree, and entered a corrected Qualified Domestic Relations Order ("QDRO") awarding Cogliano a proportional interest.
The exact form in which Smythe held the funds after receiving distribution from the Texaco pension plan, and the nature of any restrictions on alienation or transfer, are not clear from the excerpts of record provided us. Rule 8009(b). Paragraph 4 of Cogliano's Declaration in Response to Order to Show Cause ... dated 10 December 2000 indicated that Smythe held them in an IRA. But at the hearing of Cogliano's motion for reconsideration, trustee's counsel stated he had never been provided the substantiating documents he had requested. Transcript, 4 September 2001, at 16-17.
Cogliano finally obtained a state court order in California, and levied the sum of $64,937.11 from Smythe's account. She opened an individual retirement rollover account at Charles Schwab (the "IRA") in July 2000, and transferred the levied funds there in October 2000. Meanwhile, upon learning of debtor's bankruptcy, Smythe's attorney contacted former chapter 7 trustee Karl Anderson ("trustee") to inform him about the IRA.
The trustee moved to reopen Cogliano's case under § 350 and to compel turnover of the IRA under § 542, alleging that Cogliano had concealed the account. Cogliano disclaimed any concealment, asserting she either had no interest, or at least knew of none, on the petition date. The Hon. David Naugle granted the contested motion to compel turnover, "without prejudice to any and all rights concerning the Debtor's exempt interest, if any, in the monies turned over to the Trustee." Order Granting Motion to Compel Turnover, Without Prejudice to Debtor's Exemption Rights, entered 29 December 2000. Cogliano eventually turned over $28,000, and the trustee later moved to abandon any interest the estate had in the balance.
First Amended Schedules. Approximately six months later, debtor filed amended schedules B, personal property, listing the $64,000 IRA, and C, exempt property, claiming it as fully exempt under CCP § 703.140(b)(10)(E). The trustee objected, contending that the IRA had been concealed and the exemption should be denied (citing § 522(g)(1)(B)) and again sought turnover. The court, without findings or conclusions of law, sustained the trustee's objection to the amended claim of exemptions, and granted the trustee's motion for turnover and an accounting. Transcript, 24 July 2001, at 118; Order Granting ... Trustee's Motion Objecting to ... Amended Schedule C, ..., entered 26 July 2001; Amended Order, 6 August 2001.
Debtor moved for reconsideration and sought sanctions, which the bankruptcy court denied without findings or conclusions, entering an order 4 September 2001. The court also denied the trustee's counter-motion seeking to have debtor declared a vexatious litigant. There were no appeals.
Second Amended Schedules. In June 2002, Cogliano, now represented by counsel, filed her second amended schedules B and C, again listing her IRA and claiming it exempt under the same provision, CCP § 703. 140(b)(10)(E). Both schedules provided much more detail, and now asserted that the asset was an ERISA-qualified3 pension and was thus excluded from the definition of property of the estate under § 541. The "description of property" in both schedules read:
Vested interest in former husband's Peyton Smythe's ERISA-qualified defined benefit pension plan arising out of Mr. Smythe's employment with Texaco. As of date of filing, debtor's known interest in the pension has a value of $1,000.17 ...; in addition, debtor has an interest in the pension of unknown value, depending on if and when Peyton Smythe elects to take a lump-sum distribution ....
The foregoing pension benefits are not "property of the estate" for purposes of the Bankruptcy Code but are nevertheless identified in these schedules for disclosure purposes[.]
The trustee again objected and argued the issue was res judicata. Cogliano argued she was not precluded from amending her schedules, pointed out that there had been no finding of concealment, and explicated the argument that the IRA was not property of the estate. Without briefing on whether the IRA was estate property under § 541(c)(2), and without deciding if that issue was precluded under any theory, the court denied the second amended claim of exemptions, remarking at the conclusion of hearing:
And we don't disagree that the standard of Patterson v. Shumate is [that] ERISA qualified plans are not imputable [includable?] within the estate as a general rule, and but for concealment in this case, probably [there would] be a little different viewpoint.
Transcript, 10 September 2002 at 10. There had been no previous finding of concealment, nor was any made at or after the hearing.
Trustee's counsel stated he would lodge an order, Id. at 9, but did not. In early 2005, debtor moved for entry of the order; the final order was entered 2 May 2005. Debtor appealed. (No. CC-05-1202).
In the lengthy interim period, trustee again moved for turnover in late 2002, but ultimately withdrew his motion. Judge Naugle recused himself, and the Hon. Mitchel Goldberg replaced him. At hearing on the trustee's counsel's interim fee application, and apparently without the benefit of transcripts of the earlier hearings, he queried whether the property of the estate issue had been decided and requested briefing, but then concluded that Judge Naugle's ruling on the claim of exemption was final:
THE COURT: This [December 2000] order was very strong about turning over everything ... [b]ut it doesn't say he made a finding that this is property of the estate. Just that it would be turned over so that it would not be dissipated. Turnover does not necessarily constitute a finding that it must be property of the estate.
. . . .
... If she filed requests for exemptions, they were denied. That's done with. I'm not going to change Judge Naugle's ruling on that.
But if there is not a specific finding under [§ 541], what is and what is not property of the estate ... I want to see if there has been a specific ruling based on hopefully [the divorce court judge's] order in 2000 that triggered it, which became a final order, apparently. How Judge Naugle dealt with the facts to make a determination [that it] was property of the estate because, fill in the blank [sic].
It does not qualify under the exemption clauses. It does...
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...§ 105(a) to disallow a claimed exemption after the time period had expired to object to the claimed exemptions. 32. In re Cogliano, 355 B.R. 792 (9th Cir. BAP2006). 33. In re Kaelin, 308 F.3d 885 (8th Cir.2002). 34. 504 U.S. 753, 112 S.Ct. 2242, 119 L.Ed.2d 519 (1992). 35. See supra n. 13. ......
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In re Delaney, Case No. 06-32701 (Bankr.S.D.Ohio 3/10/2009), Case No. 06-32701.
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