In re: Jose J. Hernandez, 9th Cir. BAP (2012)

7/25/2019 In re: Jose J. Hernandez, 9th Cir. BAP (2012)

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ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP Nos. SC- 12- 1209- J uMkPa) SC- 12- 1217- J uMkPa

J OSE J . HERNANDEZ, ) ( consol i dat ed appeal s))

Debt or . ) Bk. No. 11- 15921_____________________________ )COLLECT ACCESS LLC, )

))

Appel l ant , )v. ) O P I N I O N)

J OSE J . HERNANDEZ, ))

Appel l ee. )______________________________)

Ar gued and Submi t t ed on November 15, 2012at Pasadena, Cal i f or ni a

Fi l ed - December 14, 2012

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Sout her n Di st r i ct of Cal i f or ni a

Honorabl e Margaret M. Mann, Bankr upt cy J udge, Presi di ng

Appear ance: Tappan Zee, Esq. , Zee Law Gr oup, P. C. ar gued f orappel l ant Col l ect Access LLC. J or ge Hal per i n,Esq. and El i zabet h P. Swi l l er , Esq. ,

submi t t ed on br i ef f or appel l ee J ose J .Her nandez.

Bef ore: J URY, MARKELL, and PAPPAS Bankr upt cy J udges.

FILED

DEC 14 2012

SUSAN M SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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1 Unl ess other wi se i ndi cat ed, al l chapt er and sect i onr ef erences ar e t o t he Bankr upt cy Code, 11 U. S. C. 101- 1532, and

Rul e r ef er ences ar e t o t he Feder al Rul es of Bankrupt cyProcedur e.

2 The bankrupt cy cour t t r eat ed Col l ect s mot i on to vacat e asa t i mel y mot i on f or r econsi der at i on under Rul e 9023, whi ch t ol l edt he t i me t o appeal t he or i gi nal or der . Accor di ngl y, we havej ur i sdi ct i on t o r evi ew bot h t he under l yi ng or der and t he or derdenyi ng r econsi der at i on. Wal l St . Pl aza, LLC v. J SJ F Cor p. ( I nr e J SJ F Cor p. ) , 344 B. R. 94, 99 ( 9t h Ci r . BAP 2006) . Fur t her ,Col l ect s Not i ce of Appeal ( NOA) desi gnat es onl y t he or derdenyi ng i t s mot i on t o vacat e and does not at t ach t he under l yi ngt ur nover order . Rul e 8001( a) does not r equi r e t he NOA t odesi gnat e the or der or j udgment f r om whi ch an appeal i s t aken,but our l ocal r ul e, 9t h Ci r . BAP Rul e 8001( a) - 1, does. We maydepar t f r om our l ocal r ul e absent pr ej udi ce. I n r e J SJ F Cor p. ,344 B. R. at 100. Ther e i s no pr ej udi ce her e as t he par t i es havebr i ef ed t he i ssues wi t h r espect t o t he t ur nover or der . We t husr evi ew t he t ur nover or der .

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J URY, Bankr upt cy J udge:

Appel l ant - credi t or , Col l ect Access LLC ( Col l ect ) , l evi ed

on f unds i n chapt er 71

debt or s deposi t account i n t he amount of$712. 39. Twent y days l at er , debt or f i l ed hi s bankrupt cy

pet i t i on and cl ai med t he f unds exempt . Debt or sought an ex

par t e t ur nover or der r equi r i ng Col l ect t o sur r ender t he f unds.

The bankr upt cy cour t f ound t hat debtor had an i nter est i n t he

f unds despi t e t he l evy and or der ed t ur nover . Col l ect moved t o

vacat e t he tur nover or der whi ch t he bankrupt cy cour t deni ed.

Col l ect appeal s f r om t hat or der . 2

For t he reasons st at ed, we AFFI RM t he bankrupt cy cour t s

r esul t , but we r el y on di f f er ent gr ounds.


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3 The st andi ng of Col l ect t o pur sue execut i on on t hej udgment has not been chal l enged.

4 CCP 703. 140( b) ( 5) i s r ef er r ed t o as t he wi l d car dexempt i on because i t can be used t o pr otect any ki nd of pr opert y.Goswami v. MTC Di st r i b. ( I n r e Goswami ) , 304 B. R. 386, 390 ( 9t hCi r . BAP 2003) . The wi l d card exempt i on al l ows debt ors t o exemptup t o $925, al ong wi t h any unused port i on of t he $17, 425exempt i on amount under CCP 703. 140(b) ( 1) .

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I. FACTS

On August 30, 2002, t he Cal i f or ni a st at e cour t ent er ed a

j udgment i n f avor of Fi r st Sel ect , I nc. ( Fi r st Sel ect ) and

agai nst J ose J . Her nandez, t he debt or i n t hi s case.On J anuar y 22, 2008, Fi r st Sel ect r ecor ded an abst r act of

j udgment f or t he sum of $2, 091. 71 i n t he Count y of San Di ego.

On May 19, 2008, Fi r st Sel ect r enewed t he j udgment f or t he

sum of $3, 723. 19.

On J ul y 12, 2011, appar ent l y as a successor t o Fi r st

Sel ect , 3 Col l ect submi t t ed a wr i t of execut i on t o t he Los

Angel es Count y Sher i f f s Depar t ment ( Sher i f f ) . On August 26,

2011, t he wr i t was ser ved on Wel l s Far go Bank ( Bank) . On

Sept ember 7, 2011, t he Sher i f f r ecei ved f r om t he Bank $712. 39

t hat was i n debt or s deposi t account .

On Sept ember 27, 2011, debt or f i l ed hi s bankr upt cy

pet i t i on. At t he t i me of hi s f i l i ng, t he l evi ed f unds wer e i n

t he Sher i f f s possessi on. Debt or cl ai med t he f unds exempt underCal . Ci v. Pr oc. Code (CCP) 703. 140( b) ( 5) . 4

On Oct ober 29, 2011, t he chapt er 7 t r ust ee f i l ed her r epor t

of no di str i but i on.


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On November 3, 2011, debt or f i l ed an ex par t e mot i on f or

t ur nover of t he f unds under 542, cont endi ng t hey were pr opert y

of hi s est ate, had been exempt ed, and t heref ore bel onged t o hi m.

The next day t he bankrupt cy cour t ent er ed an or der r equi r i ng t heSher i f f t o t ur n over $712. 39 t o debt or ( Tur nover Or der I ) .

On November 7, 2011, bef ore recei vi ng t he or der , t he

Sher i f f t r ansf er r ed t he f unds t o Zee Law Gr oup ( Zee) , t he

at t or ney f or Col l ect.

On November 11, 2011, debtor sought ex par t e a second

t ur nover or der , t hi s t i me di r ect ed at Zee. The bankrupt cy cour t

gr ant ed debt or s r equest by order ent ered on November 30, 2011

( Tur nover Or der I I ) .

On December 1, 2011, Col l ect f i l ed an opposi t i on t o

debt or s t ur nover r equest . Fi r st , r el yi ng on t he hol di ng i n Del

Ri cci o v. Super . Ct . of L. A. Cnt y. , 115 Cal . App. 2d 29, 31 ( Cal .

Ct . App. 1952) , Col l ect ar gued t hat t he f unds wer e no l onger

pr oper t y of debt or or hi s est at e because owner shi p of t he f undspassed f r om debt or t o t he j udgment cr edi t or once t he Sher i f f

r ecei ved t he f unds. Second, Col l ect mai nt ai ned t hat t he chapt er

7 t r ust ee nei t her asser t ed a pr ef er ence cl ai m nor sought t o

r ecover t he l evi ed f unds. Thi r d and l ast , Col l ect argued t hat

debt or had wai ved hi s cl ai m of exempt i on agai nst t he f unds

because he di d not t i mel y asser t i t . Si x days l at er , Col l ect

f i l ed an ex par t e appl i cat i on t o quash Tur nover Or der I I ( Mot i on

t o Vacat e) .


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Debt or r esponded t o Col l ect s opposi t i on, t hi s t i me

al l egi ng t hat he had t he r i ght t o recover t he f unds under

522( g) and ( h) r at her t han 542. Debt or mai nt ai ned t hat he

l i st ed t he l evi ed f unds i n Schedul e B and cl ai med t hem exempt i nSchedul e C, t he t r ust ee f i l ed a r epor t of no di st r i but i on

t her eby abandoni ng t he asset and, as a resul t , debt or coul d seek

t o r ecover t he f unds. Debt or f ur t her ar gued t hat t he l evy

const i t ut ed a pr ef er ence under 547. He al so mai nt ai ned t hat

he di d not wai ve hi s exempt i on i n t he f unds, because he cl ai med

t hemexempt under CCP 703. 140( b) ( 5) when he f i l ed hi s

pet i t i on. Fi nal l y, debt or al l eged t hat Col l ect vi ol at ed t he

aut omat i c st ay by cont i nual l y r ef usi ng t o t ur n over t he f unds

and r equest ed $1, 100 i n at t or neys f ees.

On J anuary 17, 2012, t he bankr upt cy cour t i ssued a

t ent at i ve r ul i ng i ndi cat i ng i t s r easons f or ent er i ng t he

t ur nover orders. The cour t expl ai ned t hat under CCP 697. 710,

a l evy on pr oper t y under a wr i t of execut i on cr eat es a l i en ont he pr oper t y f r om t he t i me of t he l evy unt i l t he expi r at i on of

t wo year s af t er t he dat e of i ssuance of t he wr i t unl ess t he

j udgment i s sooner sat i sf i ed. The cour t r easoned t hat because

Col l ect s execut i on l i en was unsat i sf i ed on t he dat e of debt or s

bankrupt cy f i l i ng, t he f unds r emai ned par t of debt or s est at e

under t he hol di ngs i n Uni t ed St at es v. Whi t i ng Pool s, I nc. , 462

U. S. 198, 207, 76 L. Ed. 2d 515, 103 S. Ct . 2309 ( 1983) and

Rami r ez v. Fusel i er ( I n r e Rami r ez) , 183 B. R. 583, 591 ( 9t h Ci r .

BAP 1995) . I n t he end, t he bankr upt cy cour t opi ned t hat debt or


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5 Thi s appeal was t r ansmi t t ed t o t he Panel and ass i gned BAPNo. SC- 12- 1209. On Apr i l 18, 2012, Col l ect f i l ed a second NOAwhi ch was al so t r ansmi t t ed t o t he Panel and assi gned BAP No. SC-12- 1217. A not i ce of Def i ci ent Appeal and I mpendi ng Di smi ssal( NOD) was i ssued i n t hi s l at er appeal , si nce i t appear edunt i mel y. On May 23, 2012, t hi s Panel determi ned t hat t he NODwas sat i sf i ed and t hat appel l ant had f i l ed a t i mel y NOA. Si nceCol l ect s NOAs wer e i dent i cal and r equest ed r evi ew of t he sameset of or der s, t he Panel ent er ed an or der consol i dat i ng t heappeal s on t he same dat e.

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may be el i gi bl e t o r ecover act ual f ees and cost s associ at ed wi t h

hi s t wo mot i ons seeki ng a t ur nover or der .

On J anuary 19, 2012, t he bankr upt cy cour t hear d or al

ar gument f r om t he par t i es and t ook t he mat t er under submi ssi on.On March 19, 2012, t he bankr upt cy cour t ent ered a

Memor andum of Deci si on whi ch essent i al l y adopt ed i t s ear l i er

t ent at i ve r ul i ng. See I n r e Her nandez, 468 B. R. 396 ( Bankr .

S. D. Cal . 2012) .

On Apr i l 3, 2012, t he bankrupt cy cour t ent er ed t he or der

denyi ng Col l ect s Mot i on t o Vacat e Tur nover Or der I I . On Apr i l

9, 2012, Col l ect t i mel y appeal ed. 5

Meanwhi l e, on Apr i l 4, 2012, debt or f i l ed a mot i on f or

cost s, damages and f ees. On Apr i l 26, 2012, debt or f i l ed a

mot i on t o avoi d Col l ect s l i en under 522( f ) and a mot i on f or

cont empt .

On J une 14, 2012, t he bankr upt cy cour t hear d t he thr ee

mot i ons. The cour t ( 1) gr ant ed debt or s mot i on t o avoi dCol l ect s l i en; ( 2) deni ed hi s mot i on f or cont empt because

Col l ect had compl i ed wi t h Tur nover Or der I I by t hat t i me, and

( 3) gr ant ed debt or s mot i on f or cost s, damages and f ees,


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awardi ng debt or $3, 572. 06 i n act ual damages and $1, 000 i n

puni t i ve damages f or Col l ect s f ai l ur e t o t ur n t he f unds over t o

debt or pur suant t o t he cour t s or der s.

On J une 19, 2012, t he bankr upt cy cour t ent ered t he or derawar di ng t he f ees and damages.

On J une 20, 2012, debt or f i l ed a mot i on t o di smi ss t hi s

appeal as moot on t he gr ounds t hat Col l ect compl i ed wi t h

Tur nover Or der I I and i t s l i en was avoi ded under 522( f ) . On

J ul y 25, 2012, t he Panel i ssued an or der denyi ng debtor s mot i on

t o di smi ss t he appeal as moot , but aut hor i zed t he par t i es t o

f ur t her addr ess the i ssue i n t hei r br i ef s. We di scuss the

moot ness i ssue bel ow.

II. JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on over t hi s proceedi ng

under 28 U. S. C. 1334 and 157( b) ( 2) ( A) , ( B) and ( E) . We have

j ur i sdi ct i on under 28 U. S. C. 158.

III. ISSUES

A. Whet her t hi s appeal i s moot ;

B. Whet her t he bankr upt cy cour t er r ed i n f i ndi ng t hat t he

l evi ed f unds hel d by t he Sher i f f wer e pr oper t y of debt or s

est at e subj ect t o t ur nover ;

C. Whet her t he bankr upt cy cour t er r ed i n denyi ng

Col l ect s Mot i on t o Vacat e Tur nover Or der I I ; and

D. Whet her t he bankr upt cy cour t er r ed by gr ant i ng

debt or s ex par t e mot i on f or t ur nover of t he f unds wi t hout an

adver sar y pr oceedi ng.


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IV. STANDARDS OF REVIEW

Whether an appeal i s moot and whether pr oper t y i s proper t y

of t he est ate are quest i ons of l aw we r evi ew de novo. See Menk

v. Lapagl i a ( I n r e Menk) , 241 B. R. 896, 903 ( 9t h Ci r . BAP 1999) ;Mwangi v. Wel l s Far go Bank, N. A. ( I n r e Mwangi ) , 432 B. R. 812,

818 ( 9th Ci r . BAP 2010) . We al so revi ew de novo t he bankr upt cy

cour t s concl usi ons of l aw, i ncl udi ng st at ut or y i nt er pr et at i ons.

DeMassa v. MacI nt yre ( I n r e MacI nt yre) , 74 F. 3d 186, 187 ( 9t h

Ci r . 1996) .

A bankrupt cy cour t s deni al of a mot i on f or r econsi der at i on

i s r evi ewed f or abuse of di scret i on. Fi r st Ave. W. Bl dg. , LLC

v. J ames ( I n r e Onecast Medi a, I nc. ) , 439 F. 3d 558, 561 ( 9t h

Ci r . 2006) . To determi ne whether t he bankr upt cy cour t abused

i t s di scr et i on, we conduct a t wo- st ep i nqui r y: ( 1) we r evi ew de

novo whet her t he bankrupt cy cour t i dent i f i ed t he cor r ect l egal

r ul e t o appl y t o t he r el i ef r equest ed and ( 2) i f i t di d,

whet her t he bankrupt cy cour t ' s appl i cat i on of t he l egal st andar dwas i l l ogi cal , i mpl ausi bl e or wi t hout suppor t i n i nf er ences

t hat may be dr awn f r om t he f act s i n t he r ecor d. Uni t ed St at es

v. Hi nkson, 585 F. 3d 1247, 126162 ( 9t h Ci r . 2009) ( en banc) .

Whether an adver sar y pr oceedi ng was r equi r ed i s an i ssue

t hat r equi r es us t o i nt er pr et and appl y Rul e 7001, whi ch i s a

mat t er f or de novo r evi ew. Ruvacal ba v. Munoz ( I n r e Munoz) ,

287 B. R. 546, 550 ( 9t h Ci r . BAP 2002) .

We may af f i r m on any gr ound suppor t ed by t he recor d.

Si r i ani v. Nw. Nat l I ns. Co. ( I n r e Si r i ani ) , 967 F. 2d 302, 304


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( 9t h Ci r . 1992) .

V. DISCUSSION

A. Mootness

Bef or e reachi ng t he mer i t s, we consi der debt or s moot nessargument . An appeal i s const i t ut i onal l y moot when event s occur

dur i ng the pendency of t he appeal t hat make i t i mpossi bl e f or

t he appel l at e cour t t o gr ant ef f ect i ve r el i ef . Cl ear Channel

Out door , I nc. v. Knupf er ( I n r e PW, LLC) , 391 B. R. 25, 33 ( 9t h

Ci r . BAP 2008) . Debt or cont ends t hat t he f ol l owi ng event s

r ender t hi s appeal moot : ( 1) t he f unds ar e now i n t he hands of

t he debt or ; ( 2) t he l i en whi ch gave r i se t o Col l ect s cl ai m has

been avoi ded; and ( 3) t he under l yi ng debt has been di schar ged.

Under t hese ci r cumst ances, debt or ar gues, ef f ect i ve r el i ef i s no

l onger avai l abl e. On t he ot her hand, Col l ect mai nt ai ns that i f

t he Panel r ever ses t he bankrupt cy cour t and f i nds t hat debt or s

i nt er est i n t he f unds was ext i ngui shed af t er t he l evy, we can

or der debt or t o r et ur n t he f unds t o Col l ect . Col l ect f ur t herar gues t hat i t woul d not have been a vi ol at i on of t he aut omat i c

st ay f or Col l ect t o r et ai n t he f unds post pet i t i on i f , under

Cal i f or ni a l aw, owner shi p of t he f unds passed f r om debt or t o t he

j udgment cr edi t or once t he Bank r el eased t he f unds t o t he

Sher i f f . On t hese gr ounds, Col l ect cont ends ef f ect i ve r el i ef i s

avai l abl e.

Debt or , as t he par t y ar gui ng f or di smi ssal based on

moot ness, has t he heavy bur den of est abl i shi ng t hat t her e i s no

ef f ect i ve r el i ef r emai ni ng f or a cour t t o pr ovi de. Sut er v.


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Goeder t , 504 F. 3d 982, 986 ( 9t h Ci r . 2007) . Debt or has not met

hi s bur den here. Where t he order appeal ed i nvol ves the

di st r i but i on of money and t he par t y who r ecei ved t he f unds i s a

part y t o t he appeal , t he appeal i s not moot because we have t hepower t o f ashi on ef f ect i ve r el i ef by or der i ng t he par t y t o

r et ur n t he money. See Spi r t os v. Mor eno ( I n r e Spi r t os) , 992

F. 2d 1004, 1007 ( 9t h Ci r . 1993) . Under t hi s r ul e, we can

i mpl ement ef f ect i ve r el i ef because debt or i s a par t y to t he

appeal , and we can order hi m t o repay t he money t o Col l ect upon

r ever sal of t he bankr upt cy cour t s rul i ng. Debt or s di schar ge

al so woul d not i mpact t he r et ur n of t he f unds t o Col l ect . I f

debt or had no i nt er est i n t he f unds af t er t he l evy, t hey woul d

have been r i ght f ul l y i n t he Sher i f f s possessi on. I n addi t i on,

under t hese f act s, no st ay vi ol at i on woul d have occur r ed.

Accor di ngl y, we concl ude t hat t he appeal i s not moot .

B. Property of the Estate

A bankrupt cy cour t may or der t ur nover of pr oper t y t o t hedebt or s est at e i f , among ot her t hi ngs, such pr oper t y i s

consi der ed pr oper t y of t he est at e. See 541( a) ( def i ni ng

pr oper t y of t he est at e) , 542( a) ( aut hor i zi ng t ur nover of

pr oper t y that t he t r ust ee may use, sel l , or l ease under sect i on

363 of t hi s t i t l e, or t hat t he debt or may exempt under sect i on

522 of t hi s t i t l e) . Sect i on 541( a) pr ovi des t hat pr oper t y of

t he est at e i ncl udes al l l egal or equi t abl e i nt er est s of t he

debt or i n pr oper t y as of t he commencement of t he case. The

pr i mar y quest i on on appeal i s whet her t he pr epet i t i on l evi ed


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f unds i n t he hands of t he Sher i f f on t he pet i t i on dat e wer e i n

f act pr oper t y of debt or s bankrupt cy est at e. We hol d t hat t hey

wer e.

Whet her a debt or s i nt er est const i t ut es pr oper t y of t heest at e i s a f eder al quest i on t o be deci ded by f eder al l aw.

McCar t hy, J ohnson & Mi l l er v. N. Bay Pl umbi ng, I nc. ( I n r e

Pet t i t ) , 217 F. 3d 1072, 1078 ( 9t h Ci r . 2000) . However , t he

nat ur e and extent of t he debt or s i nt er est i n pr oper t y must be

determi ned by nonbankr upt cy l aw. Travel ers Cas. & Sur . Co. of

Am. v. Pac. Gas & El ec. Co. , 549 U. S. 443, 451, 127 S. Ct . 1199,

167 L. Ed. 2d 178 ( 2007) ( ci t i ng But ner v. Uni t ed St at es, 440 U. S.

48, 5455, 99 S. Ct . 914, 59 L. Ed. 2d 136 ( 1979) ) . Cal i f or ni a l aw

appl i es t o t hi s case.

Cal i f or ni a st at ut or y l aw gover ns gener al l y t he r i ght s and

obl i gat i ons of debt or s and cr edi t or s wi t h r espect t o t he

enf orcement of money j udgment s. I n exami ni ng t he st atut ory

scheme, t he bankrupt cy cour t f i r st f ound t hat t he Sher i f f s l evyunder Col l ect s wr i t of execut i on r esul t ed i n an execut i on l i en,

r at her t han a t r ansf er of t he owner shi p of t he f unds. I n r e

Hernandez, 468 B. R. at 402; see al so CCP 697. 710 ( A l evy on

pr oper t y under a wr i t of execut i on cr eat es an execut i on l i en on

t he pr oper t y f r om t he t i me of l evy . . . . ) . Next , t he cour t

f ound t hat bef or e t he execut i on l i en coul d be t r ansf or med i nt o

owner shi p of t he f unds, t he Sher i f f had t o r el ease t he f unds t o

t he j udgment credi t or . I d. I n r eachi ng t hi s concl usi on, t he

cour t r el i ed on CCP 697. 710 and 724. 010( b) . Under CCP


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6 Thi s subsect i on pr ovi des: Where a money j udgment i ssat i sf i ed by l evy, t he obl i gat i on of t he j udgment credi t or t ogi ve or f i l e an acknowl edgment of sat i sf act i on ar i ses onl y whent he j udgment cr edi t or has r ecei ved t he f ul l amount r equi r ed t osat i sf y t he j udgment f r om t he l evyi ng of f i cer .

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697. 710, ent i t l ed Cr eat i on and Dur at i on of Execut i on Li en,

an execut i on l i en cr eat ed by l evy sur vi ves f or t he ear l i er of

t wo year s, or when t he j udgment i s sat i sf i ed. I d. Under CCP

724. 010( b) ,6

t he cour t r easoned, t he j udgment i s not f ul l ysat i sf i ed unt i l t he credi t or r ecei ves t he l evi ed f unds f r om t he

l evyi ng of f i cer and f i l es an acknowl edgment of sat i sf act i on. On

t hi s basi s, t he bankrupt cy cour t concl uded t hat si nce t he

Sher i f f st i l l hel d t he f unds when debt or f i l ed hi s pet i t i on,

Col l ect onl y hel d a l i en on t he f unds because t he second st ep of

sat i sf act i on had not yet occur r ed. I d. at 402- 03.

The bankrupt cy cour t s anal ysi s r el i es on t he i ncor r ect

st at ut or y scheme. The Cal i f or ni a l egi sl at ur e has enact ed a

compr ehensi ve and pr eci sel y detai l ed scheme governi ng

enf orcement of money j udgment s. Ford Motor Cr edi t Co. v.

Wat er s, 166 Cal . App. 4t h Supp. 1, 7 ( Cal . App. Dep t Super . Ct .

2008) . I n CCP 700. 010- 700. 200, t he j udgment cr edi t or i s

advi sed of al l met hods of l evy avai l abl e t o enf or ce a moneyj udgment . Those st at utes t el l t he j udgment cr edi t or and l evyi ng

of f i cer how t o l evy on asset s . . . , as her e r el evant , bank

account s. I d.

CCP 700. 140 ent i t l ed Deposi t account s pr ovi des i n

r el evant par t :


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( a) [ T] o l evy upon a deposi t account , t he l evyi ngof f i cer shal l per sonal l y ser ve a copy of t he wr i t ofexecut i on and a not i ce of l evy on t he f i nanci ali nst i t ut i on wi t h whi ch t he deposi t account i smai nt ai ned . . . . The execut i on l i en r eaches onl yamount s i n t he deposi t account at t he t i me of servi ce

on t he f i nanci al i nst i t ut i on, i ncl udi ng any i t em i nt he deposi t account t hat i s i n t he pr ocess of bei ngcol l ect ed, unl ess t he i t em i s r et ur ned unpai d t o t hef i nanci al i ns t i t ut i on.

. . .

( e) When t he amount l evi ed upon pur suant t o thi ssect i on i s pai d t o t he l evyi ng of f i cer , t he execut i onl i en on t he deposi t account l evi ed upon t er mi nat es.

Under t he pl ai n l anguage of CCP 700. 140, Col l ect obt ai ned

an execut i on l i en on t he amount s i n t he deposi t account at t he

t i me of t he ser vi ce on t he f i nanci al i nst i t ut i on. These amount s

wer e not avai l abl e f or debt or s use. The l i en was t er mi nat ed

under subsect i on ( e) at t he t i me t he f unds wer e pai d t o t he

l evyi ng of f i cer . The t er mi nat i on of Col l ect s execut i on l i en

occur r ed wel l bef or e debt or s bankrupt cy. Gi ven t hi s st at ut or y

f r amewor k that appl i es t o deposi t account s, t he bankrupt cycour t s r el i ance on CCP 697. 710 and 724. 010( b) f or i t s

anal ysi s was mi spl aced.

Nonethel ess, we do not t hi nk t he pl ai n l anguage of CCP

700. 140 pr ovi des an answer t o t he ownershi p quest i on Col l ect

r ai ses on appeal . Al t hough t he st at ut e suggest s t hat debt or s

i nt er est i n t he f unds was t r ansf er r ed when t he f unds wer e pai d

t o t he l evyi ng of f i cer and t he l i en t er mi nat ed, t he st at ut e does

not pl ai nl y say so. Compare I n r e Rami r ez, 183 B. R. at 589

( not i ng t hat al t hough r el evant Cal i f or ni a st at ut e st at ed when

l evy was compl et e, i t di d not st at e that a compl et ed l evy

t r ansf er r ed owner shi p of t he pr oper t y) .


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Col l ect r el i es on Del Ri cci o, 115 Cal . App. 2d 29, t o suppor t

i t s posi t i on t hat t he t r ansf er of f unds t o t he Sher i f f

ext i ngui shed al l r i ght s t hat debt or had i n t he pr oper t y

pr epet i t i on. Al t hough Col l ect ur ges t he Panel t o r el y on DelRi cci o t o adopt a br i ght l i ne r ul e, we decl i ne t o r ead t he case

so br oadl y. I n Del Ri cci o, af t er a j udgment was obt ai ned, a

wr i t of execut i on was i ssued and l evi ed upon a bank i n whi ch t he

def endant had t he sum of $6, 426. 66. Whi l e t he sher i f f had t he

money i n hi s possessi on, def endant appl i ed f or and obt ai ned a

cour t or der pr ohi bi t i ng t he sher i f f f r om payi ng any money t o the

pl ai nt i f f s. The pl ai nt i f f s moved t o vacat e t he or der whi ch t he

cour t deni ed. The def endant t hen moved f or an order st ayi ng

execut i on upon post i ng a cash under t aki ng i n t he act i on. Af t er

def endant post ed a sat i sf actor y bond, t he cour t made a f ur t her

or der st ayi ng t he execut i on. Pl ai nt i f f s appeal ed.

The Cal i f or ni a Cour t of Appeal f ound t hat t he t r i al cour t

had t he power t o i mpose a st ay of execut i on, but had no power t oundo what had al r eady been done so as t o depr i ve t he credi t or of

ownershi p and use of t he money col l ected under t he wr i t . The

appel l at e cour t di scussed t he par t i es i nt er est hel d i n money i n

l evy as f ol l ows:

When t he wr i t has been r egul ar l y i ssued and execut ed,money col l ect ed, whi l e i n t he hands of t he of f i cer , i spr oper t y of t he j udgment cr edi t or s and not t he debt or .

Not hi ng can be done wi t h i t ot her t han t o t ur n i t overt o t he credi t or . The possessi on of t he of f i cer sol el yf or t he use and benef i t of t he credi t or i s possessi onby t he l at t er . . . . Cor r espondi ngl y, when t hedebt or s money i s t aken on a val i d execut i on i t ceasest o be hi s and he i mmedi atel y becomes ent i t l ed t opar t i al or f ul l sat i sf act i on of t he j udgment .

Del Ri cci o has not been over r ul ed, but t he r ul e of l aw i t


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7 See al so McCaf f ey Canni ng Co. v. Bank of Am. , 109 Cal .App. 415, 423- 24 ( Cal . Ct . App. 1930) ( Whi l e t he pr oper t y was i nt he cust ody of t he sher i f f , i t was const r uct i vel y i n t hepossessi on of pl ai nt i f f t hr ough t he sher i f f as hi s agent . ) .

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est abl i shed i s not a compl et e answer t o t he bankrupt cy i ssue

bef or e us. Al t hough Del Ri cci o does say t hat money col l ect ed

whi l e i n t he hands of t he Sher i f f i s t he pr oper t y of t he

j udgment cr edi t or , t he deci si on di scussed onl y t he t r i al cour t spower wi t h r espect t o a val i d execut i on. The cour t had no

r eason t o exami ne t he var i ous st at ut or y r i ght s and obl i gat i ons

of t he j udgment credi t or vi s- a- vi s t he debt or af t er t he

execut i on. Ther ef or e, we do not r ead Del Ri cci o as st at i ng a

per se r ul e t hat t he l evyi ng of f i cer s possessi on of money af t er

a val i d execut i on accompl i shes a compl et e t r ansf er of owner shi p

of t he pr oper t y, wi t hout l i mi t at i on, and i n di sr egar d of ot her

st atut es i n t he enf orcement of money j udgment scheme.

The bankrupt cy cour t s anal ysi s i n I n r e Cal dwel l , 111 B. R.

836 ( Bankr. C. D. Cal . 1990) , sheds f ur t her l i ght on t he pr oper t y

of t he est at e anal ysi s. Ther e, t he bankr upt cy cour t par t i al l y

r el i ed on Del Ri cci o i n anal yzi ng t he conf l i ct i ng cl ai ms of t he

debt or s and t he St at e Boar d of Equal i zat i on i n f unds hel d by abank. Under Cal . Rev. & Tax Code 6703, a not i ce of l evy was

t he equi val ent of a l evy. The Cal dwel l cour t f ound t hat [ a]

l evy t r ansf er s owner shi p i n pr oper t y. Thi s usual l y t akes pl ace

when a l aw enf or cement of f i cer sei zes t he pr oper t y. I d. at

838. Ci t i ng Del Ri cci o, t he bankrupt cy cour t not ed t hat under

Cal . Rev. & Tax Code 6703, t he bank i n ef f ect became the

execut i ng of f i cer f or t he benef i t of t he Boar d. 7 I d.


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8 Her e, j ust as i n Cal dwel l , debt or had no r edempt i on r i ght swi t h r espect t o t he f unds. Li kewi se, al t hough t he bankrupt cycour t par t i al l y r el i ed on Whi t i ng Pool s f or i t s deci si on, debt orhad none of t he i nt erest s whi ch were i dent i f i ed by the Supr emeCour t i n Whi t i ng Pool s as i nt er est s suf f i ci ent t o consi der t hesei zed pr oper t y par t of t he debt or s est at e. Ther e, t he I RS sl evy was on t angi bl e pr oper t y t hat was subj ect t o t he

r equi r ement s of a st at ut or y t ax sal e whi ch pr ovi ded t he debt orwi t h not i ce r i ght s, r edempt i on r i ght s, and r i ght s t o t he sur pl usf r om t he sal e. 462 U. S. at 211. Thus, al t hough Whi t i ng Pool spr ovi des a summar y of t he l aw i n t he tur nover / pr oper t y of t heest at e anal ysi s, i t s f act s ar e di st i ngui shabl e f r om t hose her e.Whi t i ng Pool s i s al so di st i ngui shabl e i n t hat i t was a debt or - i n-possessi on i n a r eor gani zat i on t hat sought t ur nover . Asdi scussed bel ow, a chapt er 7 debt or general l y does not havest andi ng t o seek a tur nover order under 542.

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Accor di ngl y, t he cour t concl uded t hat under Cal i f or ni a l aw, t he

Boar d s not i ce of l evy ( whi ch was t he equi val ent of a l evy)

ext i ngui shed t he debt or s pr oper t y i nt er est i n t he f unds. I n

ot her wor ds, t he Not i ce of Levy t r ansf er r ed owner shi p of t heFunds f r om debt or s t o t he Boar d. I d. Fi nal l y, because t he

debt ors had no r i ght of r edempt i on under Cal . Rev. & Tax Code

6703, t he cour t observed t hat a l evy under [ t hi s st at ut e]

t er mi nat es any and al l i nt er est s a debt or may have i n t he

pr oper t y. I d. at n. 2.

I f anyt hi ng, Cal dwel l s anal ysi s i nst r uct s us t o del ve

f ur t her i nt o whet her t he ef f ect of t he l evy was t o di vest debt or

of al l i nt er est s i n t he pr oper t y sei zed f or pur poses of a

pr oper t y of t he est at e anal ysi s. 8 Use of t he t er m owner shi p

t o i dent i f y t he i nt er est s of t he par t i es does not hel p because

t he t erm i s not def i ned. The Bankrupt cy Code does not def i ne

pr oper t y, owner shi p, or owner ; however , di ct i onar y def i ni t i ons

pr ovi de gui dance. Pr oper t y i s def i ned as [ t ] he r i ght t opossess, use, and enj oy a det er mi nat e t hi ng . . . ; t he r i ght of


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9 The Code of Feder al Regul at i ons ( CFR) , whi ch gover n st at eand f eder al f i nanci al i nst i t ut i ons, set s f or t h r ul es r egar di ngsoci al secur i t y benef i t s i n a debt or s deposi t account . St at eand f eder al f i nanci al i nst i t ut i ons must , bef or e compl yi ng wi t h acr edi t or s gar ni shment or der , det er mi ne whet her cert ai n exemptf eder al benef i t s ( e. g. , soci al secur i t y, suppl ement al secur i t yi ncome, et c. ; see 31 CFR 212. 2( b) ) have been el ect r oni cal l ydeposi t ed i nt o the debt or s account wi t hi n t he pr ecedi ng t womont hs and, i f so, pr otect whatever amount was deposi t ed dur i ngt hat per i od. I n shor t , banks may not f r eeze t he ent i r e account

and t he debt or r etai ns access t o t he exempt f unds. [ See 31 CFR 212. 1 et seq. ; see al so 31 CFR 212. 3 ( def i ni t i ons) ] . Hon.Al an M. Ahar t , Cal . Prac. Gui de: Enf or ci ng J udgment s and Debt s 6: 560. 10 ( 2012) . I t i s not appar ent f r om t he r ecor d whet hert hese regul at i ons wer e f ol l owed i n t hi s case and, t her ef or e,whether t he execut i on here was val i d.

10 CCP 703. 080 pr ovi des:( cont i nued. . . )

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owner shi p . . . . Al so t er med bundl e of r i ght s. Bl ack s Law

Di ct i onar y 1335 ( 9t h ed. 2009) . Owner shi p i s def i ned as [ t ] he

bundl e of r i ght s al l owi ng one t o use, manage, and enj oy

pr oper t y, i ncl udi ng t he r i ght t o convey i t t o ot her s. . . . I d. at 1215. An owner i s [ o] ne who has t he r i ght t o possess,

use, and convey somet hi ng; a person i n whom one or more

i nt er est s ar e vest ed. I d. at 1214. Taken t oget her , t hese

def i ni t i ons demonst r at e t hat a debt or s bundl e of r i ght s i n

pr oper t y must be i dent i f i ed on a case- by- case basi s.

I t appear s f r om t he bankr upt cy cour t s f i ndi ngs of f act

t hat vi r t ual l y al l of t he f unds i n debt or s account on t he day

of t he l evy consi st ed of soci al secur i t y benef i t s. 9 The

bankrupt cy cour t f ound t hat debt or s onl y sour ce of i ncome ot her

t han $100 of f ami l y cont r i but i ons was $636 i n mont hl y soci al

secur i t y benef i t s. I n r e Her nandez, 468 B. R. at 404. Col l ect

does not di sput e t hi s f i ndi ng on appeal . 10


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10( . . . cont i nued)( a) Subj ect t o any l i mi t at i on pr ovi ded i n t hepar t i cul ar exempt i on, a f und t hat i s exempt r emai nsexempt t o t he extent t hat i t can be t r aced i nt o deposi taccount s or i n t he f or m of cash or i t s equi val ent .

( b) The exempt i on cl ai mant has t he bur den of t r aci ng anexempt f und.

( c) The t r aci ng of exempt f unds i n a deposi t accountshal l be by appl i cat i on of t he l owest i nt er medi at e

bal ance pr i nci pl e unl ess t he exempt i on cl ai mant or t hej udgment cr edi t or shows t hat some ot her met hod oft r aci ng woul d bet t er ser ve t he i nt er est s of j ust i ce andequi t y under t he ci r cumst ances of t he case.

Col l ect r ai sed no i ssue i n t he bankrupt cy cour t r egar di ngdebt or s bur den of t r aci ng hi s exempt soci al secur i t y benef i t swhi ch were made i nt o hi s deposi t account . Consequent l y, anyt r aci ng i ssue i s wai ved on appeal . Campbel l v. Ver i zon Wi r el essSCA ( I n re Campbel l ) , 336 B. R. 430, 434 n. 6 (9t h Ci r . BAP 2005)( ci t i ng O Rour ke v. Seaboar d Sur . Co. ( I n r e E. R. Feger t , I nc. ) ,

887 F. 2d 955, 957 ( 9t h Ci r . 1989) ( The r ul e i n t hi s ci r cui t i st hat appel l at e cour t s wi l l not consi der ar gument s t hat ar e not proper l y rai se[ d] i n t he t r i al court s . ) .

11 Feder al st at ut es al so pr ovi de t hat soci al secur i t y andsuppl ement al secur i t y i ncome benef i t s ( whet her pai d or payabl e)or di nar i l y ar e not subj ect t o execut i on, l evy, at t achment ,gar ni shment or ot her l egal pr ocess; or t o t he oper at i on ofbankrupt cy l aws. See 42 U. S. C. 407, 1382( d) .

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Under Cal i f or ni a l aw, gover nment benef i t s such as soci al

secur i t y ar e i nt ended excl usi vel y f or t he benef i t and suppor t of

qual i f i ed r eci pi ent s. These f unds ar e exempt and cannot be

subj ect t o col l ect i on. See Kr uger v. Wel l s Far go Bank, 521 P. 2d441, 458- 60 ( Cal . 1974) . 11 Under CCP 704. 080( b) , soci al

secur i t y benef i t s i n deposi t account s ar e exempt i n t he amount

of $2, 425 and t he exempt i on i s aut omat i c. The debt or need not

make a cl ai m and t hus t her e coul d be no t r ansf er of owner shi p i n

t he f unds by wai ver or by operat i on of l aw. See CCP


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12

CCP 703. 030( b) pr ovi des:

Except as ot her wi se speci f i cal l y pr ovi ded by st at ut e,pr oper t y that i s descr i bed i n t hi s chapt er or i n anyot her st at ut e as exempt wi t hout maki ng a cl ai m i s notsubj ect t o any pr ocedur e f or enf orcement of a moneyj udgment .

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703. 030( b) . 12 Some exempt i ons need not be cl ai med. They are

aut omat i c and are denoted by t he st atut ory t erms of art exempt

wi t hout maki ng a cl ai m, whi ch has t he ef f ect of el i mi nat i ng t he

appl i cabi l i t y of t he pr ocedur e f or enf or ci ng a money j udgment . I n r e Her nandez, 468 B. R. at 404 ( ci t i ng I n r e Pet r uzzel l i , 139

B. R. 241, 243 ( Bankr. E. D. Cal . 1992) ) . One t r eat i se f ur t her

expl ai ns:

Theoret i cal l y, a cl ai m of exempt i on shoul d never havet o be f i l ed f or pr oper t y exempt wi t hout maki ng acl ai m. I n pr act i ce, however , i f such pr oper t y i sl evi ed upon by t he j udgment cr edi t or , a cl ai m ofexempt i on may have t o be f i l ed t o obt ai n i t s

r el easeunl ess t he cr edi t or can be persuaded t o orderi t r el eased. [ CCP 703. 510( b) ] ( But so l ong as nosal e has occur r ed, t he l evyi ng of f i cer shoul d r el easet he pr oper t y whet her or not t he exempt i on f i l i ng i st i mel y. ) .

Hon. Al an M. Ahar t , Cal . Prac. Gui de: Enf or ci ng J udgment s and

Debt s 6: 870 ( 2012) .

Exempt i ons under Cal i f or ni a l aw ar e whol l y st at ut or y and

cannot be enl ar ged [ or di mi ni shed] by t he cour t s. For d Mot orCr edi t Co. , 166 Cal . App. 4t h Supp. at *8. Fur t her mor e, t he

exempt i on l aws ar e desi gned t o f aci l i t at e t he debt or s f i nanci al

r ehabi l i t at i on and have t he ef f ect of shi f t i ng soci al wel f ar e

cost s f r om t he communi t y t o j udgment cr edi t or s. Consequent l y,

t he exempt i on st at ut es shoul d be const r ued, so f ar as


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13 Even i f t he t en- day r ul e t o cl ai m an exempt i on di d appl yt o some or al l of t he f unds, t he st at e cour t had aut hor i t y t or el i eve a per son upon such t er ms as may be j ust f r om f ai l ur e t ocl ai m an exempt i on wi t hi n t he t i me and i n t he manner pr escr i bedi n t he appl i cabl e enf or cement pr ocedur e. CCP 703. 030( c) .

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pr act i cabl e, t o t he benef i t of t he j udgment debt or . I d. at *9.

Cal i f or ni a s exempt i on phi l osophy i s echoed i n bankrupt cy l aw.

Because debt or had an exempt pr opert y i nt erest i n t he

f unds, we concl ude t hat Col l ect s l evy di d not oper at e t oext i ngui sh t hose i nt er est s. See I n r e Her nandez, 468 B. R. at

404 ( debt or s exempt i on r i ght s i n t he f unds had not been

t er mi nat ed pr epet i t i on) . To adopt Col l ect s ar gument f or a

br i ght l i ne owner shi p r ul e under t hese ci r cumst ances woul d

r ender t he aut omat i c exempt i on f or soci al secur i t y benef i t s

meani ngl ess and al l ow cr edi t ors t o l evy on exempt f unds t hat

t hey ar e not ent i t l ed t o under bot h st at e and f eder al l aw. I n

shor t , debt or had gr ounds t o recover t he exempt f unds and coul d

have chal l enged t he l evy i n t he st at e cour t pr epet i t i on on t hat

basi s. 13

As pr oper t y i n whi ch debt or hel d a l egal or equi t abl e

i nt er est when hi s pet i t i on was f i l ed, t he bankrupt cy cour t s

concl usi on t hat t he f unds i n quest i on const i t ut ed pr oper t y oft he est at e was cor r ect . See I n r e Var ney, 449 B. R. 411 ( Bankr .

D. I daho 2011) ( even pot ent i al l y exempt asset s nonet hel ess

become pr oper t y of t he est at e upon the commencement of t he

bankrupt cy case) ; I n r e McAl i st er , 56 B. R. 164, 166 ( Bankr . D.

Or . 1985) ( even exempt pr oper t y must i ni t i al l y be regar ded as

pr oper t y of t he est at e and t hen cl ai med and di st r i but ed as

exempt ) .


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14 Sect i ons ( g) and ( h) pr ovi de:

( g) Not wi t hst andi ng sect i ons 550 and 551 of t hi s t i t l e,

t he debt or may exempt under subsect i on ( b) of t hi ssect i on pr oper t y that t he t r ust ee r ecover s undersect i on 510( c) ( 2) , 542, 543, 550, 551, or 553 of t hi st i t l e, t o t he ext ent t hat t he debt or coul d haveexempt ed such pr oper t y under subsect i on ( b) of t hi ssect i on i f such pr oper t y had not been t r ansf er r ed, i f - -

( 1) ( A) such t r ansf er was not a vol unt ar y t r ansf er of( cont i nued. . . )

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Al t hough we concl ude that t he f unds were pr oper t y of

debt or s estat e, we not e a pr ocedur al i r r egul ar i t y wi t h debt or s

mot i on f or a t ur nover or der under 542. Sect i on 542( a) enabl es

t he bankrupt cy t r ust ee, or t he debt or - i n- possessi on i n ar eor gani zat i on case t o seek tur nover of t he debt or s asset s, f or

t he benef i t of t he est at e. I ndeed, i n Whi t i ng Pool s, i t was the

debt or - i n- possessi on i n a r eor gani zat i on case t hat sought

t ur nover . Under t he st at ut e, a chapt er 7 debt or i s not

ment i oned and gener al l y has no st andi ng to br i ng an act i on f or

t ur nover . See I n r e Fr eeman, 331 B. R. 327, 329 ( Bankr . N. D.

Ohi o 2005) ( t he gener al pr ovi si on i n t he Bankr upt cy Code

gover ni ng t ur nover , conf er s t hi s r i ght upon t he t r ust ee) ; Pr i ce

v. Gasl owi t z ( I n r e Pr i ce) , 173 B. R. 434, 440 ( Bankr. N. D. Ga.

1994) ( t ur nover act i on i s one f acet of a chapt er 7 t r ust ee s

gener al dut i es under 704( 1) ) .

The procedur al i r r egul ar i t y was r emedi ed however by

debt or s r esponse t o Col l ect s opposi t i on. The ul t i mat e r el i eft hat debt or sought was t o pr eserve hi s exempt i on i n t he l evi ed

f unds by i nvoki ng 522( g) and/ or by exer ci si ng t he t r ust ee s

avoi di ng powers under 522( h) . 14 Mor eover , as of t he


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14( . . . cont i nued)such pr opert y by the debt or ; and

( B) t he debt or di d not conceal such pr oper t y; or

( 2) t he debt or coul d have avoi ded such t r ansf er undersubsecti on ( f ) ( 1) ( B) of t hi s secti on.

( h) The debt or may avoi d a t r ansf er of pr oper t y of t hedebt or or r ecover a set of f t o t he ext ent t hat t hedebtor coul d have exempted such proper t y undersubsect i on ( g) ( 1) of t hi s sect i on i f t he t r ust ee hadavoi ded such t r ansf er , i f - -

( 1) such t r ansf er i s avoi dabl e by t he t r ust ee undersect i on 544, 545, 547, 548, 549, or 724( a) of t hi st i t l e or r ecover abl e by the t r ust ee under sect i on 553of t hi s t i t l e; and

( 2) t he t r ust ee does not at t empt t o avoi d sucht r ansf er .

Event ual l y, debt or di d avoi d t he l i en under 522( f ) .

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commencement of t he case, t he aut omat i c s t ay under 362(a)

ar i ses, whi ch enj oi ns any and al l col l ect i on ef f or t s agai nst t he

debt or . As an enf orcement mechani sm, a debt or i s af f orded a

pr i vat e r i ght of act i on t o seek redr ess under 362( k) ( 1) .Sect i on 522 s r i ght t o cl ai m exempt i ons i n pr oper t y of t he

est at e best ows st andi ng on debt or s f or pur poses of 362( k) ( 1) .

I n r e Mwangi , 432 B. R. at 822. Ther ef or e, debt or s st at ut or y

st andi ng t o seek t he ret ur n of t he f unds l evi ed upon was

conf er r ed by st at ut es ot her t han 542( a) . Fur t her , debt or s

pr ocedur al i r r egul ar i t y di d not i n any way af f ect t he bankrupt cy

cour t s abi l i t y t o ent er an or der t hat r equi r ed Col l ect t o

sur r ender t he f unds to debt or . Si nce t hi s i s a pr ot ect i on of

exempt i on case r at her t han one f or t ur nover , t he bankrupt cy


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cour t had t he aut hor i t y t o ent er an or der r equi r i ng Col l ect t o

surr ender t he f unds t o debt or under 105( a) . See 105( a)

( The cour t may i ssue any or der , pr ocess, or j udgment t hat i s

necessary or appr opr i at e t o car r y out t he pr ovi si ons of t hi st i t l e. ) . Once t he pr oper t y came i nt o t he est at e, i t r evest ed

i n debt or when hi s exempt i on cl ai m went unchal l enged. See I n r e

Mwangi , 432 B. R. at 821 ( not i ng t hat [ p] r oper t y cl ai med as

exempt l eaves t he est at e and r evest s i n t he debt or . ) .

Fi nal l y, debt or s ex par t e mot i on seeki ng t he r et ur n of hi s

exempt f unds was a cont est ed mat t er under Rul e 9014 requi r i ng

r easonabl e not i ce and opport uni t y f or a hear i ng. No adver sary

pr oceedi ng was r equi r ed under Rul e 7001. Here, Col l ect had

ampl e oppor t uni t y t o cont est Tur nover Or der I I t hr ough wr i t t en

opposi t i on and or al ar gument at t he event ual hear i ng on i t s

Mot i on t o Vacat e. That sai d, Col l ect does not cont end on appeal

t hat i t was pr ej udi ced i n any way by t he pr ocedur e used.

VI. CONCLUSIONAccor di ngl y, we AFFI RM t he bankrupt cy cour t s or der , al bei t

f or di f f er ent r easons, and hol d t hat t he pr epet i t i on l evi ed

f unds i n t he hands of t he Sher i f f on t he pet i t i on dat e wer e

pr oper t y of debt or s est at e under 541( a) due to debt or s

exempt i on r i ght s i n t he f unds. Ther ef or e, t he bankrupt cy cour t

pr oper l y or der ed Col l ect t o sur r ender t he f unds.

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In re: Jose J. Hernandez, 9th Cir. BAP (2012)

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