In re: Edward E. Elliott
CC-15-1127-DKiG
9th Cir. BAPJan 29, 2016Background
- Debtor Edward Elliott filed chapter 7 in 2011 but did not disclose an ownership interest in the Buckingham Property (title held prepetition by his wholly-owned corporation LWI), nor did he list related judgment creditors; he testified under oath that his schedules were complete.
- After discharge and case closure, LWI quitclaimed the Buckingham Property to Elliott; creditors discovered the title history and moved to reopen the case; the trustee was reappointed and Elliott later amended schedules to list the Buckingham Property and claim a $175,000 homestead exemption.
- The trustee filed an adversary proceeding seeking turnover of the property under § 542 and revocation of discharge; the bankruptcy court entered a turnover judgment requiring Elliot to deliver the Buckingham Property to the trustee (that judgment was not appealed after remand proceedings).
- On remand in the main case, the trustee objected to Elliott’s claimed homestead exemption, arguing denial was authorized under 11 U.S.C. § 522(g)(1) because Elliott had voluntarily transferred and concealed the property; the trustee also argued state-law automatic homestead requirements were unmet.
- The bankruptcy court found Elliott concealed the property and that the trustee had recovered it under § 542; it concluded § 522(g)(1) barred Elliott’s homestead exemption even if he otherwise could have claimed it as of the petition date.
- The Bankruptcy Appellate Panel affirmed, holding Law v. Siegel did not bar application of statutory limits like § 522(g)(1), and therefore the exemption denial was proper; no separate ruling on California law was required.
Issues
| Issue | Plaintiff's Argument (Elliott) | Defendant's Argument (Trustee) | Held |
|---|---|---|---|
| Whether Law v. Siegel prevents denial of Elliott’s homestead exemption | Law v. Siegel bars courts from denying exemptions based on debtor misconduct or equitable considerations | Law v. Siegel does not disturb statutory limits on exemptions such as § 522(g)(1) | Law v. Siegel does not preclude applying § 522(g)(1); denial allowed |
| Whether § 522(g)(1) bars Elliott’s homestead exemption after trustee’s § 542 recovery | § 522(g)(1) inapplicable because turnover is not a recovery of a "transferred" property for purposes of the statute | Elliott voluntarily transferred and concealed the property; trustee recovered it under § 542, so § 522(g)(1) applies | § 522(g)(1) applies: Elliott concealed and previously transferred the property; exemption denied |
| Whether the trustee’s § 542 turnover judgment qualifies as a "recovery" under § 522(g) | Not contested by Elliott that turnover could be a recovery, but he argued statutory text requires recovery of a transfer | Trustee maintained § 542 turnover judgment is a recovery bringing property within § 522(g) | Court treats the § 542 turnover judgment as a recovery under § 522(g) and applies the statute |
| Whether the bankruptcy court needed to separately analyze California automatic homestead law | Elliott argued state-law homestead analysis was required if § 522(g)(1) inapplicable | Trustee argued § 522(g)(1) resolved the objection so no state-law ruling was necessary | No need to reach California law because § 522(g)(1) disposed of the objection |
Key Cases Cited
- Law v. Siegel, 134 S. Ct. 1188 (2014) (Supreme Court limits equitable powers of bankruptcy courts and forbids using § 105(a) to override explicit Code exemption protections)
- Elliott v. Weil (In re Elliott), 523 B.R. 188 (9th Cir. BAP 2014) (Panel decision vacating bad-faith denial of exemption and remanding for statutory/state-law analysis)
- Elliott v. Weil (In re Elliott), 529 B.R. 747 (9th Cir. BAP 2015) (Panel decision addressing discharge revocation and turnover issues on remand)
- Hitt v. Glass (In re Glass), 60 F.3d 565 (9th Cir. 1995) (transfer and concealment can trigger § 522(g) limitations; trustee recovery doctrine explained)