In re Onubah
| Decision Date | 29 August 2007 |
| Docket Number | Bankruptcy No. SV 06-10910-KT.,BAP No. CC-06-1409-McMoD. |
| Citation | 375 B.R. 549 |
| Parties | In re Boniface ONUBAH, Debtor. Boniface Onubah, Appellant, v. Nancy Zamora, Chapter 7 Trustee, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
Andrew E. Smyth, Smyth Law Office, Los Angeles, CA, for Boniface 0. Onubah.
Jeffrey I. Golden, Weiland, Golden, Smiley, Wang, Ekvall & Strok, LLP, Costa Mesa, CA, for Nancy Hoffmeier, Ch. 7 Trustee.
Before: McMANUS,1 MONTALI, and DUNN, Bankruptcy Judges.
The debtor, Boniface Onubah, appeals from an order entered on November 14, 2006,2 granting the motion of the chapter 7 trustee, Nancy H. Zamora, to surcharge his homestead and household goods exemptions. We conclude that the bankruptcy court did not abuse its discretion when surcharging the debtor's exemptions under Latman v. Burdette, 366 F.3d 774, 785-86 (9th Cir.2004). We AFFIRM.
Onubah filed a chapter 7 petition on June 15. Among his scheduled assets was a residence located in Calabasas, California, as well as household goods located in that residence. Onubah claimed as exempt $75,000 of the equity in the residence and the entire $25,000 value of the household goods.
Onubah's residence had a scheduled value of $2 million and was encumbered by two deeds of trust securing claims totaling $1,680,000, as well as a $2,000 lien for delinquent homeowners' association assessments and four judicial liens. The most senior judicial lien, securing a $5,400 judgment, was held by Geoffrey Ojo. The remaining three judicial liens secured judgments exceeding $2.4 million in favor of the California Department of Health Services (CDHS).
Despite the apparent lack of equity, Zamora was able to procure a buyer for the residence that produced a return for the estate. This was due in part to the $2.3 million sale price, slightly higher than the scheduled value, and in part to Zamora's agreement with CDHS permitting the estate to retain $96,000 of the sale proceeds otherwise due CDHS. The sale price permitted payment in full of the two deeds of trust, the delinquent real property taxes and homeowners' association assessments, the judicial lien held by Ojo, Onubah's homestead exemption, and all transactional costs. After paying the $96,000 "carveout" to the bankruptcy estate, the balance was payable to CDHS.
Zamora filed her motion to approve the sale on August 15. Onubah did not oppose the motion, and on September 5 the bankruptcy court entered an order authorizing the sale. With the sale approved and scheduled to close escrow on September 26, Zamora sent a letter to Onubah, requesting that he vacate and turn over the residence to her by September 15. Onubah refused.
Onubah's refusal to cooperate with the trustee threatened to derail the sale because the buyer's deposit of the sale price into escrow was conditioned upon Onubah relinquishing possession. Further, the holder of the first deed of trust had scheduled a September 28 hearing on its motion to terminate the automatic stay. If granted, the holder of the first deed of trust would be able to foreclose on the residence.
Faced with Onubah's refusal to relinquish possession, on September 20 Zamora filed an emergency motion to compel Onubah to turn over the residence.3 The motion was scheduled for hearing on September 25.
On September 25, but prior to the hearing on the turnover motion, Onubah filed, and the bankruptcy court granted without a hearing, a motion to convert his case from chapter 7 to chapter 11.
In a bid to salvage the, sale, Zamora immediately moved to reconvert the case to one under chapter 7. On September 25, with Onubah present in the courtroom, the bankruptcy court took up Zamora's reconversion and turnover motions.
Under questioning by the bankruptcy court, Onubah was unable to explain coherently why his creditors would be better off under chapter 11. With no indication that he had the ability to reorganize his financial affairs under chapter 11, the bankruptcy court ordered the case reconverted to chapter 7 and then granted the turnover motion. Its turnover order required Onubah to remove his household goods and turn over the residence to Zamora by 5:00 p.m. on September 26.
When representatives of the estate arrived at the residence to take possession of it, Onubah informed them that an involuntary bankruptcy petition had been filed against him on September 26. Welford and Gilfert Jackson had filed the involuntary petition in the Los Angeles Division of the Central District.
Zamora responded on September 294 by filing a motion seeking, among other things, the reassignment of the involuntary petition to Judge Kathleen T. Thompson, the bankruptcy judge presiding in the chapter 7 case, the dismissal of the involuntary petition, and the termination and annulment of the automatic stay created by the filing of the involuntary petition, in order to permit Zamora to proceed with the sale.
On September 29, the bankruptcy court, Judge Geraldine Mund presiding, entered an order reassigning the involuntary petition to Judge Thompson as well as terminating and annulling the automatic stay to allow Zamora to move ahead with the sale. In so ordering, Judge Mund concluded that the involuntary petition had been filed solely to circumvent Judge Thompson's turnover order. Judge Mund also found that the parties filing the involuntary petition, Welford and Gilfert Jackson, were known to "act in tandem to prevent foreclosures and eviction[s]."
Later, when dismissing the involuntary petition, Judge Thompson similarly concluded that, by filing the involuntary petition, Onubah and the Jacksons were "working together to obstruct the judicial process and prevent the [t]rustee from administering the [residence]."
Despite the bankruptcy court's order permitting Zamora to move ahead with the sale, Onubah still refused to cooperate and turn over the residence. So, on September 30, Zamora had the U.S. Marshal evict Onubah. Zamora then removed and stored Onubah's household goods.
Onubah's efforts to obstruct the sale, while unsuccessful, caused the bankruptcy estate to incur significant expenses. Zamora paid $20,000 in legal fees, $5,000 for the services of the U.S. Marshal, $1,873.40 to change the locks, and $23,544.78 for the removal and storage of Onubah's household goods. These costs totaled $59,418.18.
In order to recover these costs, Zamora filed a motion to surcharge Onubah's homestead and household goods exemptions by $27,500 and $25,000, respectively. The bankruptcy court entered an order granting the surcharge on November 14. In support of the surcharge, the bankruptcy court cited Onubah's "numerous actions to delay and frustrate" Zamora's administration of the chapter 7 estate.
Onubah timely appealed the surcharge order.
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 157(b)(2)(A), (N), (0) and 1334. We have jurisdiction under 28 U.S.C. §§ 158(a)(1) and (c)(1).
We review the bankruptcy court's surcharge of the debtor's exemptions for an abuse of discretion. Latman v. Burdette, 366 F.3d at 786. A bankruptcy court abuses its discretion if it bases its ruling upon an erroneous view of the law or a clearly erroneous assessment of the evidence. Cannery Row Co. v. Leisure Corp. (In re Leisure Corp.), 234 B.R. 916, 920 (9th Cir. BAP 1999). Findings of fact upon which a surcharge is based are reviewed for clear error, while the bankruptcy court's conclusions of law are reviewed de novo. Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th Cir. BAP 2003); see also Earth Island Inst. v. U.S. Forest Serv., 442 F.3d 1147, 1156 (9th Cir.2006).
Onubah argues that the bankruptcy court improperly surcharged his homestead and household goods exemptions because: (A) his misconduct did not involve the concealment of assets; (B) the surcharge was in reality a sanction because the costs incurred by the estate "had nothing to do with [his] exemptions;" (C) legal fees are not recoverable in the surcharge of an exemption, "when a defendant (or debtor) is asserting his rights (even if mistakenly);" and (D) "judgment creditors usually do not get to execute on exemptions to recover costs of gaining possession to collateral."
Each of these arguments lacks merit.
A surcharge of a debtor's exemptions is appropriate only in "exceptional circumstances." Latman, 366 F.3d at 786. Exceptional circumstances are present when a debtor engages in inequitable conduct that, when left unchallenged, denies "creditors access to property in excess of that which is properly exempted under the Bankruptcy Code." Latman, 366 F.3d at 786.
In Latman the debtors concealed $7,000 in proceeds from the sale of a vehicle and a boat. When the trustee became aware of these assets and their sale, he requested an accounting of the sale proceeds. The trustee moved to surcharge the debtors' exemptions when they refused to provide him with an accounting and then turn over the sale proceeds. Latman, 366 F.3d at 778-79.
In this case, Onubah did not conceal his residence. However, when Zamora asked Onubah to vacate the residence by September 15, he refused.
When Zamora filed a motion to compel Onubah to vacate the residence, Onubah responded by converting his chapter 7 petition to one under chapter 11 in an attempt to end Zamora's administration of the bankruptcy estate. This was done even though Onubah did not have the financial ability to reorganize his affairs.
When the petition was reconverted to chapter 7, and after Zamora obtained the turnover order, Onubah colluded with others to file an involuntary petition against himself to prevent the enforcement of the order and the sale.
When Zamora eliminated the involuntary petition as an impediment to the sale, she again demanded that Onubah vacate the...
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In re Nolan
...in actually removing the debtorfrom the premises may be charged against the debtor's claimed homestead exemption. In re Onubah, 375 B.R. 549, 555 (9th Cir. B.A.P. 2007); Swanson, 207 B.R. at 81. 24. In the record before the Court, it is not difficult to find exceptional circumstances warran......
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In re Law, BAP No. CC-09-1077-PaMkH (B.A.P. 9th Cir. 10/22/2009)
...the equitable remedy of surcharge of a debtor's homestead exemption is reviewed for abuse of discretion. Onubah v. Zamora (In re Onubah), 375 B.R. 549, 553 (9th Cir. BAP 2007). The findings of fact upon which a surcharge is based are reviewed for clear error, while the bankruptcy court's co......
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In re Law, 09-60046
...and to ensure that debtor does not exempt amount greater than allowed under Bankruptcy Code); see also Onubah v. Zamora (In re Onubah), 375 B.R. 549, 556 (9th Cir. BAP 2007) (a surcharge should be calculated to compensate the estate for the actual monetary costs imposed by the debtor's misc......
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In re Law, LA-04-10052-TD.
...Such a surcharge is justified where a debtor's misconduct amounts to a fraud on the court and the debtor's creditors. In re Onubah, 375 B.R. 549, 554 (9th Cir. BAP2007). A surcharge must be calculated to compensate the estate for the actual damage inflicted by a debtor's misconduct. Id. at ......