In re Obedian

• Decision Date: 01 March 2016
• Docket Number: Case No. 2:14–bk–24247–RK
• Citation: 546 B.R. 409
• Parties: In re : Paravaneh Obedian, Debtor.
• Court: U.S. Bankruptcy Court — Central District of California

546 B.R. 409

In re : Paravaneh Obedian, Debtor.

Case No. 2:14–bk–24247–RK

United States Bankruptcy Court, C.D. California, Los Angeles Division .

Signed March 1, 2016

M. Jonathan Hayes, Simon Resnik Hayes LLP, Sherman Oaks, CA, for Debtor.

MEMORANDUM DECISION ON DEBTOR'S MOTION TO AVOID LIEN OF CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES

Robert Kwan

, United States Bankruptcy Judge

Pending before the court is the Motion to Avoid Lien under 11 U.S.C. § 522(f)

(the "Motion") of Debtor Paravaneh Obedian ("Debtor"). ECF 108. The Motion seeks to avoid the judgment lien of the California Department of Health Care Services ("DHCS") against certain real property located at 9476 Hidden Valley Place, Beverly Hills, Los Angeles County, California 90210, Assessor's Parcel Number 4388–002–021 (the "Real Property").

After Debtor and her non-debtor spouse, Fred Obedian ("Mr.Obedian"), bought the Real Property in 2009, on February 3, 2011, a judgment was entered by the Superior Court of California, County of Sacramento, in favor of DHCS and against Mr. Obedian in the amount of $729,890.29. DHCS recorded an abstract of judgment on February 22, 2011 with the Recorder of Los Angeles County, California, to perfect its judgment lien against the Real Property. Motion at Exhibit D. Debtor now seeks to avoid DHCS's judgment lien through the Motion.

Wesley H. Avery, the Chapter 7 Trustee ("Trustee") of Debtor's bankruptcy estate, filed an opposition to the Motion, ECF 111, and the United States of America, on behalf of its agency, the Internal Revenue Service (the "United States"), filed an objection to the Motion, ECF 114. Debtor filed a reply to Trustee's opposition and the United States' objection. ECF 120. DHCS also filed an opposition to the Motion. ECF 122.

The Motion initially came on for hearing before the undersigned United States Bankruptcy Judge on November 24, 2015. The court determined at this hearing that because the Motion raised disputed factual and legal issues regarding the nature of Debtor's interest in the Real Property, and thus, whether DHCS's judgment lien attached to Debtor's interest in the Real Property, the Motion would be treated as a contested matter under Federal Rule of Bankruptcy Procedure 9014

. Thereupon, the court set a schedule for further briefing and continued the hearing to January 5, 2016. Debtor filed a supplemental brief to its Motion, ECF 129, and Trustee filed a supplemental brief to its opposition, ECF 130. At the further hearing on the Motion on January 5, 2016, the court determined that the evidence attached to Debtor's supplement raised a genuine issue of material fact regarding whether the Real Property is community property and set the Motion for an evidentiary hearing on January 12, 2016.

At the evidentiary hearing on January 12, 2016, M. Jonathan Hayes, of the law firm of Simon Resnik Hayes LLP, appeared on behalf of Debtor, and Robert A. Hessling, of the law firm of Robert A. Hessling, APC, appeared on behalf of Trustee. Following the evidentiary hearing, the court authorized the parties to file further supplemental briefing. On January 19, 2016, Debtor filed a supplemental brief styled Closing Argument of Movant Paravanah Obedian, ECF 133, and on January 26, 2016, Trustee filed his Second Supplemental Opposition to Motion of Debtor to Avoid Lien under 11 U.S.C. § 522(f)

, ECF 135. After Debtor and Trustee filed their supplemental briefing, the court took the matter under submission. On February 2, 2016, DHCS filed a joinder to Trustee's Second Supplemental Opposition to Motion of Debtor to Avoid Lien Under 11 U.S.C. § 522(f). ECF 136.

Having considered the moving and opposing papers, the exhibits and declarations attached therein, the parties' oral arguments, the evidence presented at the January 12, 2016 evidentiary hearing, the parties' supplemental briefs, and the record before the court, the court makes the following findings of fact and conclusions of law pursuant to Rules 9014

and 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52 of the Federal Rules of Civil Procedure and rules as follows.

DISCUSSION

In order to decide whether Debtor can avoid the judgment lien of DHCS under 11 U.S.C. § 522(f)

, the court must first determine as a preliminary matter the nature of Debtor's interest in the Real Property because the DHCS judgment was entered against Mr. Obedian, and not against Debtor herself, raising the issue of whether the DHCS judgment lien attached to Debtor's interest in the Real Property, which is property of the estate in this bankruptcy case under 11 U.S.C. § 541(a) as an interest of the Debtor as of the commencement of the case. That is, if Debtor's interest in the Real Property was community property, the judgment lien against Mr. Obedian would attach to both spouses' interests in the Real Property, but if Debtor's interest in the Real Property was separate property as indicated by record title of the Real Property in Debtor and Mr. Obedian in joint tenancy, then the judgment lien against Mr. Obedian would only attach to Mr. Obedian's one-half joint tenancy interest, which would not be an asset of Debtor's bankruptcy estate, and not Debtor's one-half joint tenancy interest, thus making the judgment lien not avoidable by Debtor. Compare 2 Ahart, California Practice Guide: Enforcing Judgments and Debts, ¶ 6:166 at 6B–6 (2015) ("A judgment lien attaches to the interests of both spouses in community real property, since all community property interests are subject to enforcement of the judgment.") (emphasis in original) citing California Code of Civil Procedure §§ 695.020 and 697.310, with id. at ¶ 6:167 at 6B–6 ("Only the interest of the debtor joint tenant is subject to a judgment lien") citing Dang v. Smith, 190 Cal.App.4th 646, 659–660, 118 Cal.Rptr.3d 490 (2010). This is an issue of property characterization which is a matter of state law. See 4 March, Ahart and Shapiro, California Practice Guide: Bankruptcy, ¶ 6:3 at 6–1—6–2 (2015), citing inter alia, Butner v. United States, 440 U.S. 48, 54, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) ("State law determines whether a particular right, power or interest is ‘property’ and the nature and extent of the debtor's interest therein.").

The Real Property is located in California, and its characterization is governed by California law. In California, "[g]enerally speaking, property characterization depends on three factors: (1) the time of acquisition; (2) the ‘operation of various presumptions, particularly those concerning the form of title’; and (3) the determination ‘whether the spouses have transmuted’ the property in question, thereby changing its character." In re Marriage of Rossin, 172 Cal.App.4th 725, 732, 91 Cal.Rptr.3d 427 (2009)

(internal citations omitted).

I. AT THE TIME THE REAL PROPERTY WAS ACQUIRED BY DEBTOR AND MR. OBEDIAN, THE REAL PROPERTY WAS COMMUNITY PROPERTY

On one hand, under California Family Code § 770

, property that one spouse owned before the marriage is deemed to be that spouse's separate property. SeeIn re Marriage of Valli, 58 Cal.4th 1396, 1399–1400, 171 Cal.Rptr.3d 454, 324 P.3d 274 (2014)

. On the other hand, California Family Code § 760 sets forth an evidentiary presumption that property acquired by a spouse during the marriage is deemed to be community property. See also, In re Marriage of Valli, 58 Cal.4th at 1400, 171 Cal.Rptr.3d 454, 324 P.3d 274 ; In re Summers, 332 F.3d 1240, 1242–1243 (9th Cir.2003), citing, In re Marriage of Haines, 33 Cal.App.4th 277, 289–290, 39 Cal.Rptr.2d 673 (1995). This community property presumption under California law can be rebutted if the property's acquisition is (1) traceable to a separate property source, (2) acquired by gift or bequest, or (3) earned or accumulated while the spouses are living separate and apart. In re Marriage of Valli, 58 Cal.4th at 1400, 171 Cal.Rptr.3d 454, 324 P.3d 274, citing inter alia, In re Marriage of Lucas, 27 Cal.3d 808, 815, 166 Cal.Rptr. 853, 614 P.2d 285 (1980) and California Family Code §§ 770 and 771. The standard of proof required to rebut the community property presumption under California Family Code § 760 is the preponderance of the evidence. In re Marriage of Valli, 58 Cal.4th at 1400, 171 Cal.Rptr.3d 454, 324 P.3d 274, citing In re Marriage of Ettefagh, 150 Cal.App.4th 1578, 1591, 59 Cal.Rptr.3d 419 (2007).

Debtor and Mr. Obedian were married in 1972. Supplement to Debtor's Motion to Avoid Lien Pursuant to Section 522(f)

, Declaration of Paravaneh Obedian in Support Thereof at 5; Testimony of Paravaneh Obedian, January 12, 2016, at 3:28 p.m.; Testimony of Fred Obedian, January 12, 2016, at 3:41 p.m. Debtor testified that in 1997, during their marriage, Debtor and Mr. Obedian purchased a parcel of real property in Tarzana, California as their prior residence with community property funds and subsequently made the mortgage payments on the Tarzana house with income from Debtor and Mr. Obedian's medical supply business. Testimony of Paravaneh Obedian, January 12, 2016, at 3:29–3:30 p.m. After selling the Tarzana property, in 2009 during their marriage, Debtor and Mr. Obedian used the proceeds from the sale of the Tarzana house as a down payment to buy the Real Property, which they took record title to as joint tenants. Request for Judicial Notice in Support of California Department of Health Care Services' Opposition to Debtor's Motion to Avoid Lien Under 11 U.S.C. § 522(f), Exhibit A, ECF 123; Testimony of Fred Obedian, January 12, 2016, at 3:43 p.m. Debtor and Mr. Obedian testified at the evidentiary hearing that although they had taken title to the Real Property as joint tenants as indicated on the grant deed, they did not request this and said that taking title in joint tenancy was something the real estate agent did without their understanding. Testimony of Paravaneh Obedian, January 12, 2016, at 3:31–3:32 p.m.; Testimony of Fred Obedian, January 12, 2016, at 3:44–3:45 p.m. The grant deed transferring the Real...