Soori-Arachi v. Ferrara (In re Soori-Arachi)
| Decision Date | 14 January 2021 |
| Docket Number | Bankruptcy Case No. 17-10570-DF,BAP NO. RI 19-037 |
| Citation | 623 B.R. 181 |
| Parties | IN RE Marcus Charles Bernard SOORI-ARACHI and Stephanie Tamgho, Debtors. Marcus Charles Bernard Soori-Arachi, Appellant, v. Stacy B. Ferrara, Chapter 7 Trustee, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
Marcus Charles Bernard Soori-Arachi, pro se, on brief for Appellant.
Stacy B. Ferrara, Esq., Chapter 7 Trustee, on brief for Appellee.
Before Lamoutte, Fagone, and Katz, United States Bankruptcy Appellate Panel Judges.
Marcus Charles Bernard Soori-Arachi (the "Debtor") appeals from the bankruptcy court's: (1) order denying his motion under Rule 4003 (the "Rule 4003 Motion"), challenging as time-barred the objection of the chapter 7 trustee (the "Trustee") to his claimed exemption of funds on deposit with Fidelity Investment Annuity Service Center ("Fidelity"); and (2) order sustaining the Trustee's objections to the Debtor's third and fourth amended Schedule C seeking to exempt those funds (collectively, the "Orders").1 By this appeal, the Debtor attempts to prevent the Trustee's liquidation of the annuity his father purchased for him when he was a minor—now worth $105,000. As discussed below, the Debtor's quest fails because: (1) the Rule 4003 Motion was procedurally and substantively flawed; (2) he waived his claims of exemption under Rhode Island law by failing to brief them on appeal; and (3) he failed to claim and demonstrate entitlement to an exemption under § 522(b)(3)(C), the applicable Bankruptcy Code provision. Accordingly, we AFFIRM the Orders.
In April 2017, the Debtor and his wife, Stephanie Tamgho (collectively, the "Joint Debtors"), filed a chapter 7 petition, pro se. Stacy Ferrara was appointed Trustee and a § 341 meeting of creditors was scheduled for May 18, 2017. A few days before the creditors' meeting, on May 15, 2017, the Joint Debtors filed an amended Schedule A/B: Property (the "First Amended Schedule A/B"), listing previously undisclosed interests in several accounts, including "Fidelity Trust/UTMA accounts," as reflected in the image below:2
Also on the First Amended Schedule A/B, on the line for retirement or pension accounts, the Debtor disclosed he might have accounts, as indicated below:
On his Amended Schedule C also filed on May 15, 2017 (the "First Amended Schedule C"), the Debtor elected the set of federal exemptions under § 522(b)(2), listing an interest in two assets, "Trust/support accts" from line 17 of Schedule A/B, and "Possible retirement accounts" from line 21 of Schedule A/B. As reflected below, he claimed as exempt 100% of their fair market value, up to any applicable statutory limit:
Additionally, the Debtor left blank the space provided for disclosing the value of his property. As for the specific laws that allowed the Debtor to exempt 100% of the fair market value of the accounts, the Debtor stated: "unknown, please advise (pro se) 11 [U.S.C. § 522(b)(2)]?"
At the first meeting of creditors, the Debtor, then unrepresented by counsel, testified that he had been unable to locate any of the accounts he believed his father had opened on his behalf when he was a minor.3 The Debtor gave the Trustee the names of institutions he suspected held possible accounts in his name. After issuing subpoenas to five financial institutions, the Trustee discovered the Debtor owned an annuity at Fidelity—specifically, account number 323026826—with an estimated current value of $105,000 (the "Fidelity Account"). This account number was one in the series of four numbers the Debtor listed on his First Amended Schedule A/B.
After writing several letters to the presiding bankruptcy judge in which he insisted that the funds in the Fidelity Account were exempt retirement funds, the Debtor (having obtained counsel) entered into a Conditional Consent Order (the "Consent Order") with the Trustee. The purpose of the Consent Order was to "reduc[e] litigation expenses for all parties" and to "preserv[e] and protect[ ] the value of the" Fidelity Account. The Consent Order required the Debtor to "immediately amend his bankruptcy schedules to reflect his ownership of the [Fidelity] Account and any exemption applicable thereto" and "enjoined" him "from expending, transferring, liquidating, disposing of, encumbering, pledging, borrowing against, or wasting any of the Account until further Order ...." The court approved the Consent Order on May 24, 2018—about eleven months after the conclusion of the meeting of creditors.
In June 2018, the Joint Debtors filed another Amended Schedule A/B (the "Second Amended Schedule A/B"). On this version of his Schedule A/B, the Debtor no longer listed the four numbered bank accounts he had previously listed. Instead, on line 17, "Deposits of money," he listed "Misc. accounts of nominal value known to Trustee," and left blank the space provided for indicating their value. On line 21, he indicated he had retirement or pension accounts, but listed their value and location as "unknown." Without disclosing an account number, the Debtor also listed an interest in an account at "Fidelity" (presumably the Fidelity Account) with an estimated value of $105,000 in Part IV, line 23, "Annuities" (rather than in the section provided for "Deposits of money" or "Retirement or pension accounts," as previously listed).
On the same date, the Debtor also filed another Amended Schedule C (the "Second Amended Schedule C"), claiming exemptions under § 522(b)(3). For the first time, he claimed an exemption in the Fidelity Account (from line 23 of the Second Amended Schedule A/B) to the extent of 100% of its fair market value, up to any applicable statutory limit, pursuant to R.I. Gen. Laws § 27-4-11, § 27-4-12, § 27-18-24, and § 9-26-4(16).
The Trustee filed an objection to the Debtor's claimed exemption of the Fidelity Account listed in his Second Amended Schedule C (the "Objection to the Second Amended Schedule C"). At the outset, the Trustee acknowledged that the Debtor's claim of exemption under R.I. Gen. Laws § 9-26-4(16), the "wild card exemption," was "appropriate, but limited to $6,400.00." She challenged, however, his claims of exemption under R.I. Gen. Laws § 27-4-11, § 27-4-12, and § 27-18-24.
In support of her Objection to the Second Amended Schedule C, the Trustee attached a copy of "an updated version" of the original Annuity Contract issued by Fidelity Investments Life Insurance Company in April 1998. Both the Annuity Contract and the Fidelity Annuity Information Summary (the "Information Summary") accompanying the contract identified the Debtor as the annuitant and annuity owner. The Information Summary specified that the Debtor's annuity had been issued as a "non-qualified contract" and explained:
That simply means that you established your annuity using "after-tax" money (money that has already been taxed). However, all earnings within this contract will continue to grow tax-deferred until you withdraw them. To continue building the value of your contract, please keep in mind that you can add to this annuity as often as you wish.
In November 2018, the Trustee and the Debtor (by this time, again pro se) filed an Agreed Statement of Facts, Disputed Facts and Supporting Documents (the "Joint Statement") in which they agreed, among other things, that: (1) the Debtor's father "purchased a non-qualified deferred annuity (the ‘Deferred Annuity’)" for $10,040.77 on April 6, 1998; and (2) after October 30, 2019, the Debtor became "the current designated owner" and annuitant of the Deferred Annuity. The parties disputed a single fact—whether "[t]he Debtor was denied access to the Deferred Annuity Contract by Fidelity prior to his bankruptcy filing."
After holding a hearing on January 23, 2019, the bankruptcy court issued its decision regarding the Objection to the Second Amended Schedule C (the "prior decision") on March 26, 2019, sustaining the Trustee's objection to the Debtor's claimed exemption of the Fidelity Account "to the extent the exempted amount exceed[ed] $6,400.00." The court found that: (1) the Fidelity Account held a "non-qualified deferred variable [a]nnuity" purchased by the Debtor's father for $10,040.77; and (2) the Debtor was the owner and annuitant of the account, with the right to liquidate, assign, or surrender it. As a matter of law, the court rejected the Debtor's claims of exemption under R.I. Gen. Laws §§ 27-4-11, 27-18-34, and 27-4-12.
Within two weeks of the prior decision, the Joint Debtors filed a third Amended Schedule A/B, with the Debtor again listing a "Fidelity Account" (with an unspecified account number). The Joint Debtors also filed a third Amended Schedule C (the "Third Amended Schedule C"), indicating they were electing state and federal non-bankruptcy exemptions under § 522(b)(3). This time, the Debtor sought to exempt the Fidelity Account pursuant to § 522(b)(4)(B)(i), § 522(b)(4)(B)(ii)(II), R.I. Gen. Laws § 9-26-4(15), and R.I. Gen. Laws § 9-26-4(16).
Within 30 days, the Trustee filed an objection to the Third Amended Schedule C (the "Objection to Third Amended Schedule C") on various grounds. Although she reiterated that she had no objection to the Debtor's exemption of the Fidelity Account to the extent of $6,400.00 pursuant to R.I. Gen. Laws § 9-26-4(16), the Trustee "vehemently" objected to the newly claimed exemptions under § 522(b)(4)(B)(i) and (ii), arguing:
[Section] 522(b)(4)(B)(i) and § 522(b)(4)(B)(ii)(II) both refer to the exemption of "retirement funds" and provide...
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...Fed. Appx. 86, 88 (2d Cir. 2015) (rejecting arguments made by a pro se litigant for the first time on appeal); In re Soori-Arachi, 623 B.R. 181, 193-94 (B.A.P. 1st Cir. 2021) (holding that the debtor waived his right to object to the timeliness of the trustee's objection to a claimed exempt......