In re: Rhonda Stijakovich-Santilli
EC-15-1000-FDJu
| 9th Cir. BAP | Dec 15, 2015Background
- Debtor filed Chapter 7 on Oct. 25, 2013 and listed three houses, claiming a California homestead exemption on the Granite Bay (Beckenham) property; initial exemption $75,000, later amended to $175,000.
- Debtor’s schedules and signed declaration attested under penalty of perjury that the schedules were true; Schedule I listed $3,400/month “Other” income from a roommate.
- Meeting of creditors concluded Jan. 21, 2014; Debtor stated she lived at the Subject Property and received contributions from a roommate.
- Trustee filed an objection Aug. 18, 2014 alleging Debtor did not reside at the Subject Property when she filed and that tax returns treated the house as a rental for all of 2013. Trustee sought relief from prior court order abandoning the property.
- Debtor initially insisted she resided at the Subject Property with roommates; after further evidence (tenant declarations, utility records, homeowner’s exemption not filed until March 2014) she admitted living elsewhere but claimed personal belongings remained there.
- Bankruptcy court overruled Trustee’s objections, holding Trustee’s late objections were untimely because (1) he should have investigated earlier and (2) the Debtor’s later false statements could not by themselves prove fraudulent assertion when the exemption was claimed. Trustee appealed.
Issues
| Issue | What Trustee Argues | What Debtor Argues | Held |
|---|---|---|---|
| Whether Trustee’s late objection is timely under Rule 4003(b)(2) (fraud exception) | Debtor fraudulently asserted the homestead so Rule 4003(b)(2) extends objection deadline up to one year after closing | Trustee’s objection is untimely under Rule 4003(b)(1); no fraud at the time of claim | Panel: apply common-law fraud elements (minus damages); if debtor knowingly intended to deceive when claiming exemption, Rule 4003(b)(2) applies — remand to reconsider fraud findings |
| Whether Trustee had a duty to investigate earlier, barring late objection | Trustee need not investigate beyond relying on debtor’s sworn schedules and meeting statements; lack of earlier inquiry does not defeat fraud claim | Trustee should have investigated after red flags (tax returns, PO box, rent amount) and thus waived late objection | Panel: court erred imposing a duty to investigate; victim’s failure to investigate does not defeat a showing of debtor fraud (justifiable reliance is the relevant inquiry) |
| Whether Debtor’s later false statements can be used to prove she fraudulently asserted the exemption when filed | Later false testimony, admissions, and inconsistent conduct are admissible extrinsic evidence of prior fraudulent intent | Later inaccuracies cannot prove fraudulent intent at the time of the original claim | Panel: later false statements can be probative of the debtor’s knowledge and intent at the time of the initial claim; bankruptcy court misapplied law — remand for factfinding |
Key Cases Cited
- Decker v. Tramiel (In re JTS Corp.), 617 F.3d 1102 (9th Cir. 2010) (standard of review for bankruptcy court legal conclusions)
- Taylor v. Freeland & Kronz, 503 U.S. 638 (1992) (strict rule on timeliness under Rule 4003(b)(1))
- Hyman v. Plotkin (In re Hyman), 967 F.2d 1316 (9th Cir. 1992) (ambiguity in schedules construed against debtor; trustee need not be faulted for reasonable reliance)
- Britton v. Price (In re Britton), 950 F.2d 602 (9th Cir. 1991) (application of common-law fraud elements in bankruptcy contexts)
- Merchants Bank of California v. Oh (In re Oh), 278 B.R. 844 (Bankr. C.D. Cal. 2002) (victim’s failure to investigate does not defeat fraud claim)