In re: Gloyd Green and Gail Holland ( 2017 )


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  •                                                            FILED
    NOT FOR PUBLICATION              MAR 10 2017
    1
    SUSAN M. SPRAUL, CLERK
    2                                                        U.S. BKCY. APP. PANEL
    OF THE NINTH CIRCUIT
    3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
    4                            OF THE NINTH CIRCUIT
    5   In re:                        )        BAP No.   NV-16-1080-JuKuL
    )
    6   GLOYD GREEN and GAIL HOLLAND, )        Bk. No.   2:14-bk-15981-ABL
    )
    7                  Debtors.       )
    ______________________________)
    8   GLOYD GREEN; GAIL HOLLAND,    )
    )
    9                  Appellants,    )
    )
    10   v.                            )        M E M O R A N D U M*
    )
    11   YVETTE WEINSTEIN, Chapter 7   )
    Trustee; OSCAR BRANNON HOWARD,)
    12   III; TRUMAN HOLT, Trustee for )
    the Howard Family Trust Dated )
    13   August 21, 1998,              )
    )
    14                  Appellee.      )
    ______________________________)
    15
    Argued and Submitted on February 24, 2017
    16                          at Las Vegas, Nevada
    17                           Filed - March 10, 2017
    18             Appeal from the United States Bankruptcy Court
    for the District of Nevada
    19
    Honorable August B. Landis, Bankruptcy Judge, Presiding
    20                _____________________________________
    21   Appearances:      Christopher P. Burke argued for appellants Gloyd
    Green and Gail Holland; Jerimy L. Kirschner
    22                     argued for appellee Truman Holt, Trustee for the
    Howard Family Trust Dated August 21, 1998.
    23                    ____________________________________
    24   Before:   JURY, KURTZ, and LAFFERTY, Bankruptcy Judges.
    25
    26       *
    This disposition is not appropriate for publication.
    27 Although it may be cited for whatever persuasive value it may
    have (see Fed. R. App. P. 32.1), it has no precedential value.
    28 See 9th Cir. BAP Rule 8013-1.
    -1-
    1            Debtor-appellants, Gloyd Green (Green) and Gail Holland
    2   (Holland) (collectively, Debtors), filed a chapter 111
    3   bankruptcy case which was converted to chapter 7.        In
    4   schedule C, Debtors claimed a homestead exemption in real
    5   property located on Loma Portal, Las Vegas, Nevada (Loma
    6   Property).
    7            Creditor-appellee, Truman Holt (Holt), Trustee for The
    8   Howard Family Trust dated August 21, 1998 (THFT), and Oscar
    9   Brannon Howard, III (Howard)2 objected to Debtors’ homestead
    10   exemption on the ground that Green had embezzled thousands of
    11   dollars from THFT while acting as trustee and used part or all
    12   of the funds to purchase the Loma Property.        As a result, Holt
    13   asserted that under Maki v. Chong, 
    75 P.3d 376
    (Nev. 2003),
    14   Debtors were not protected by the homestead exemption.
    15            After an evidentiary hearing, the bankruptcy court orally
    16   issued its findings of fact and conclusions of law, sustaining
    17   the objection and disallowing Debtors’ homestead in its
    18   entirety.      This appeal followed.    For the reasons set forth
    19   below, we AFFIRM.
    20                                   I. FACTS
    21   A.       Prepetition Events
    22            Oscar B. Howard, Jr. and Betty J. Howard created THFT and
    23   designated themselves as the initial co-trustees.        Green, a
    24
    25        1
    Unless otherwise indicated, all chapter and section
    26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532 and
    “Rule” references are to the Federal Rules of Bankruptcy
    27 Procedure.
    28        2
    Howard has not participated in this appeal.
    -2-
    1   family friend, was named as a successor trustee upon Oscar and
    2   Betty’s death or other events not relevant here.    Green was also
    3   a beneficiary of the trust.    Betty died on February 25, 2005.
    4   Oscar died on November 5, 2005, survived by his only son.    After
    5   Oscar’s death, Green took over as successor trustee.    According
    6   to Green, the trust agreement authorized him, among other
    7   things, to loan or advance his own funds for any trust purposes.
    8        1.   The Probate Action
    9        In 2008, suspecting possible misappropriation of trust
    10   assets, Holt, Betty’s brother and a trust beneficiary, and
    11   Howard, also a beneficiary, filed a petition in the probate
    12   court for the Eighth Judicial District of Clark County, Nevada.
    13   They requested the probate court to assume jurisdiction over
    14   THFT, issue an order confirming Green as successor trustee, and
    15   compel Green to provide an accounting of THFT’s assets and
    16   liabilities.
    17        On October 17, 2008, the probate court assumed jurisdiction
    18   over THFT, confirmed Green as successor trustee, and ordered him
    19   to (1) prepare an inventory of the trust’s assets as of
    20   November 5, 2005 - the date of Oscar’s death - including current
    21   values for those assets; (2) provide tax returns filed during
    22   that period for the trust or the trustor’s estates; (3) pay
    23   $2,650 in attorney’s fees and costs to Holt’s attorney;
    24   (4) provide an accounting; and (5) provide a full copy of the
    25   complete trust agreement together with all amendments to all
    26   beneficiaries of the trust (2008 Order).
    27        Green did not appear at the hearing on the matter, but was
    28   personally served with the 2008 Order.    He failed to comply.    He
    -3-
    1   did not pay the attorney’s fees and costs or provide tax returns
    2   for the trust.   He provided a copy of the trust agreement which
    3   showed the names of the beneficiaries blacked out and which was
    4   missing the page setting forth the distribution after the
    5   trustors’ deaths.   He also provided a handwritten inventory of
    6   trust assets and values (2008 List).   Holt complained that there
    7   were significant omissions and misstatements in the 2008 List.
    8   The list showed zero income from the date of Oscar’s death on
    9   November 5, 2005 through October 31, 2008.    Expenses were simply
    10   listed as $6,274 for property taxes and about $1100 for
    11   utilities.   Despite repeated requests, Green failed to produce a
    12   more detailed inventory or sufficiently answer questions about
    13   trust assets.
    14        In March 2009, Holt petitioned the probate court for
    15   Green’s removal as the successor trustee and for appointment of
    16   an interim successor trustee.   On April 8, 2009, the probate
    17   court entered an order removing Green.    The probate court found
    18   that Green failed to comply with the 2008 Order — he did not
    19   fully account for trust assets, disclose income received by the
    20   trust or himself while he was trustee, provide proper tax
    21   documents, and pay court ordered costs.    The probate court
    22   appointed Holt as the successor trustee.    The order also
    23   prohibited Green from making or completing any transactions
    24   involving the trust and compelled him to immediately comply with
    25   the 2008 Order by turning over to Holt, within 15 days of the
    26   entry of the order, complete copies of the trust agreement and
    27   all amendments, and copies of all records of the trust during
    28   the term of his administration, including tax returns, check
    -4-
    1   registers, cancelled checks, information regarding trust
    2   investments, copies of all deeds, mortgages, deeds of trust,
    3   promissory notes and similar documents related to trust
    4   activities.
    5        On June 8, 2009, Green provided a new accounting of the
    6   trust’s assets and liabilities to Holt’s attorney (2009 List).
    7   The 2009 List was different from the 2008 List and stated that
    8   THFT held $612,000 in assets, almost a two-fold increase from
    9   his previous accounting.
    10        In early 2012, Holt, on behalf of the trust, filed a notice
    11   of taking Green’s deposition on May 3, 2012.    The probate court
    12   also issued a “Citation to Appear and Show Cause” related to
    13   Green’s failure to account for THFT assets or comply with its
    14   previous orders.    Although served, Green did not appear at the
    15   May deposition.    Green was served with a second “Citation to
    16   Appear and to Show Cause” for a hearing scheduled on
    17   September 21, 2012.    Again, Green did not appear.
    18        On November 28, 2012, the probate court issued an order
    19   granting Holt’s motion for enforcement of the forfeiture
    20   provision in the trust.    That clause provided that a violation
    21   of the terms of the trust resulted in a complete forfeiture of
    22   property designated to be received by a violating beneficiary
    23   under the terms of the trust.    The probate court found that
    24   Green had failed to provide an accounting and otherwise adhere
    25   to the provisions of the trust.    Accordingly, the court found
    26   that enforcement of the forfeiture clause was proper under the
    27   circumstances and thus required Green to return to Holt any
    28   prior and current trust property taken by him.
    -5-
    1        In the forfeiture order, the court made findings that
    2   Green had violated the terms of the trust and had failed to
    3   carry out his duties as trustee.     The probate court found that
    4   Green “intentionally obscure[d] the true identity of the
    5   beneficiaries by ‘blacking out’ their names, and then making
    6   distributions from the [thrust in accordance which [sic] his
    7   desires, rather than the desire of the creators.”    Green did not
    8   appeal the forfeiture order.
    9        2.   The Civil Action
    10        In August 2012, Holt, in his individual capacity and as
    11   successor trustee, filed a civil action against Debtors and
    12   their revocable trust alleging ten causes of action, including
    13   conversion, embezzlement, breach of fiduciary duty, civil theft
    14   and fraud, both actual and constructive (Civil Action).    On
    15   September 13, 2012, Holt filed a first amended complaint.
    16   Debtors failed to answer the complaint.    On January 31, 2013,
    17   the civil court entered a default judgment against Debtors and
    18   their revocable trust.
    19        In the Civil Action, Holt’s expert, Ms. Klein, conducted a
    20   forensic accounting that traced hundreds of thousands of dollars
    21   taken by Green from THFT over several years and assets that
    22   should have been returned pursuant to previous court orders.      On
    23   May 22 and August 28, 2014, the civil court held a prove-up
    24   hearing regarding THFT’s damages.    Green appeared in the Civil
    25   Action for the first time at the prove-up hearing and submitted
    26   a statement.
    27        Since he appeared late at the first hearing, the civil
    28   court agreed to continue the hearing to allow Green to review
    -6-
    1   the testimony of Ms. Klein and prepare to cross-examine her.      At
    2   the continued hearing held on August 28, 2014, Green questioned
    3   Ms. Klein about her investigation.     Ms. Klein concluded that at
    4   least $638,427.07 in funds or assets were either stolen from
    5   THFT or lost by Debtors.   Ms. Klein testified that there could
    6   be additional undiscovered assets and losses, but Green’s
    7   refusal to cooperate in the investigation made finding
    8   additional assets problematic.
    9        At the hearing, the court found that Green had stolen
    10   $638,427.07 from the trust over a period of years.    The judge
    11   indicated his intent to enter a default judgment against Debtors
    12   for that amount and a like amount for punitive damages, along
    13   with equitable relief in the form of a constructive trust and
    14   equitable liens.   Holt’s counsel later submitted a proposed
    15   judgment which the judge signed.
    16        In the judgment, the civil court found Ms. Klein qualified
    17   as an expert forensic accounting investigator and found her
    18   testimony was both credible and supported by the summaries and
    19   voluminous financial records admitted into evidence.    The court
    20   found that Green was not credible and that his 2008 and 2009
    21   accountings were intentionally and materially misleading, with
    22   irreconcilable differences between them and the actual assets of
    23   THFT.   The civil court also adopted the findings of the probate
    24   court — that Green had provided an altered trust document with
    25   the names of THFT beneficiaries blacked out in an apparent
    26   attempt to call into question the determination of the rights of
    27   the other beneficiaries.   The civil court further found that the
    28   transfer and commingling of trust property with Debtors’
    -7-
    1   personal property resulted in the complete loss of identity of
    2   any of Debtors’ property.      Finally, the court found that Debtors
    3   purchased the Loma Property with cash that had been at some
    4   point converted from THFT assets, that the purchase price of the
    5   Loma Property was less than the total amount stolen from THFT,
    6   and that Debtors could not produce evidence showing the Loma
    7   Property was purchased with their personal funds.      The court
    8   ordered the Loma Property held in constructive trust for THFT
    9   and granted Holt and Howard equitable liens on all Debtors’ real
    10   and personal property.      The civil court awarded compensatory
    11   damages for $638,427.07 and punitive damages in the same amount.
    12   Although the judgment was signed by the civil court judge, it
    13   was not entered on the state court docket due to Debtors’
    14   bankruptcy filing.
    15   B.       Postpetition Events
    16            Debtors filed a chapter 11 case on September 3, 2014.
    17   Later, the bankruptcy court converted the case to chapter 7.3
    18   Debtors’ schedules showed that they owned free and clear all
    19   three of their real properties valued at $455,000 and that they
    20   had nearly $1 million in their retirement accounts.      They had no
    21   secured creditors or unsecured priority creditors.      Debtors
    22   scheduled Holt and THFT as having an unsecured claim of
    23   $1.3 million.      In schedule B, Debtors listed the Loma Property
    24   with a value of $265,000, and in schedule C they claimed an
    25
    3
    26        On September 30, 2015, the bankruptcy court converted
    Debtors’ case to chapter 7 on the grounds that their bankruptcy
    27 filing was not made in good faith. Debtors appealed the
    conversion order to this Panel. On November 9, 2016, the Panel
    28 issued a memorandum decision affirming the conversion order.
    -8-
    1   exemption in the property under Nev. Rev. Stat. (NRS)
    2   21.090(1)(l) and 115.050 in the amount of $265,000.4
    3        1.   The Objection To Debtors’ Homestead Exemption
    4        In March 2015, Holt filed an objection to Debtors’ list of
    5   property claimed as exempt, including their homestead exemption
    6   in the Loma Property.5   Holt argued that the Loma Property was
    7   purchased with funds or assets stolen from THFT accounts during
    8   Green’s time as trustee.   Holt further asserted that at the
    9   January 8, 2015 § 341 meeting, his attorney questioned Debtors
    10   about the eventual disposition of two specific sets of assets:
    11   (1) HSBC and General Electric (GE) bonds held in a THFT account
    12   with Zions Direct, Account #5994 (ZD5994) and (2) a $50,000
    13   Certificate of Deposit (CD) purchased by Green from Nevada State
    14   Bank, Account #7177 (NSB7177), after Green was notified that he
    15   was being removed as trustee.
    16        The ZD5944 account was held as “Gloyd G. Green TEE for the
    17   Howard Family Trust DTD 8/21/1998.”    A mixture of cash and bonds
    18   in this account amounted to $304,962.49.   The GE bonds were
    19   worth $45,323.60 and the HSBC bonds were worth $54,186.63.
    20   Green testified that the GE and HSBC bonds were transferred into
    21   his own personal account and used to partially pay for the
    22   purchase of the Loma Property.
    23        The NSB7117 account was held as “Gloyd G Green The Howard
    24
    4
    In January 2012, Debtors purchased the Loma Property for
    25 $230,000. Green homesteaded the property on June 20, 2012.
    26      5
    Holt also objected to Debtors’ exemption in various
    27 retirement accounts. On March 10, 2016, the bankruptcy court
    overruled that objection and allowed Debtors’ exemption in the
    28 retirement accounts in the amount of $960,349.04.
    -9-
    1   Family Trust.”   On March 9, 2009, approximately sixty-five days
    2   after he received notice he was being removed as trustee, Green
    3   wrote himself a $50,000 check “for CD” from NSB7177.    Green
    4   testified that the funds from the CD were later used to purchase
    5   the Loma Property.
    6        According to Holt, Green’s testimony corroborated that
    7   $152,300 came from funds held in THFT accounts and was used to
    8   pay for the purchase of the Loma Property.    Attached to the
    9   opposition were the bank statements showing the transfers of
    10   amounts associated with the GE and HSBC bonds and CD and a copy
    11   of the $50,000 check in the name of Green which was written on
    12   the NSB7117 account.
    13        In April 2015, Debtors responded to Holt’s objection.
    14   Debtors argued that under Nevada law they were allowed to trace
    15   the proceeds from the sale of their prior residences for
    16   homestead exemption purposes under the holding in Christensen v.
    17   Pack (In re Christensen), 
    149 P.3d 40
    (2006).    In that regard,
    18   Green and Holland sold two houses - one in 1999 and another in
    19   2000, and they also sold a vacant lot.    According to Debtors,
    20   proceeds from those sales were used to purchase the Loma
    21   Property.   Debtors also argued that no fraud had been proven and
    22   thus their home was protected.    Alternatively, Debtors argued
    23   that an evidentiary hearing was necessary.
    24        Green submitted a declaration showing that Debtors
    25   individually owned three properties that were sold and that the
    26   proceeds from the sale of those properties were used to purchase
    27   the Loma Property.
    28        In a subsequent declaration, Green declared that he took
    -10-
    1   the funds from THFT accounts because he was repaying himself for
    2   a previous loan to the trust.      Green stated that in January 2006
    3   he loaned his own money to THFT in the approximate sum of
    4   $163,000 to pay off a line of credit on Oscar’s home located on
    5   Race Street in Las Vegas.      According to Green, over the next few
    6   years, he reimbursed himself the $163,000 that he loaned to the
    7   trust.
    8            In reply, Holt argued that § 522(o) prevented Debtors from
    9   claiming a homestead exemption in the Loma Property to the
    10   extent Debtors acquired the homestead with nonexempt property in
    11   the previous 10 years “with the intent to hinder, delay, or
    12   defraud a creditor.’”      Holt reiterated that Debtors testified
    13   under oath at their § 341 meeting that the funds they used to
    14   purchase the Loma Property could be directly traced to funds
    15   previously held in THFT accounts.        Finally, Holt argued that
    16   under Maki v. Chong the homestead exemption could not be taken
    17   when the proceeds used to purchase the Loma Property could be
    18   traced directly to funds obtained through Green’s fraud or
    19   similar tortious conduct.
    20            2.   The Evidentiary Hearing
    21            The bankruptcy court held an evidentiary hearing on July 2
    22   and July 15, 2015.6     Green testified that he transferred more
    23
    6
    24          After the evidentiary hearing was set, Debtors amended
    their schedule C twice. With respect to the Loma Property, the
    25   amended schedule C showed that it was held in a revocable trust.
    26   Other amendments are not relevant to this matter. On June 2,
    2015, Holt filed a second objection to Debtors’ claim of
    27   exemptions, including the homestead exemption, essentially
    reiterating points made in the first objection. Debtors filed a
    28                                                      (continued...)
    -11-
    1   than $360,000 from THFT accounts or money belonging to THFT into
    2   Debtors’ personal accounts.    He also testified that he loaned
    3   the trust approximately $163,000 in 2006, which he used to pay
    4   off the line of credit on Oscar’s home.    He admitted that there
    5   was no documentation regarding the loan.    Green also
    6   acknowledged that the accounting he provided in 2008 or 2009 to
    7   the probate court did not mention a loan from him to the trust
    8   for $163,000 nor did he ever inform the beneficiaries that he
    9   had made the loan.
    10        Green further testified that he used funds from liquidating
    11   assets of the trust (the GE and HSBC bonds and $50,000 CD) to
    12   pay part of the purchase price of the Loma Property.     When asked
    13   why those assets did not belong to THFT, Green testified that
    14   they were partial reimbursement for the loan he had made to the
    15   trust in 2006.
    16        3.   Post Trial Briefs
    17        The bankruptcy court authorized the parties to file post
    18   trial briefs.    In his brief, Holt argued that he had traced
    19   THFT’s funds through the bank statements and Green’s testimony
    20   to the purchase of the Loma Property.    Holt further asserted
    21   that Green did not have the right to use the funds, and even if
    22   he did have the right at some point, the forfeiture order
    23   required him to return any and all assets taken from THFT.      Holt
    24   asserted that Green’s taking of the funds from THFT amounted to
    25
    26        6
    (...continued)
    27 response to the second objection. The second objection was not
    considered by the bankruptcy court during this proceeding and did
    28 not go on the court’s calendar.
    -12-
    1   fraud, conversion, embezzlement and defalcation.
    2        Holt also maintained that Green’s allegation of a loan to
    3   the trust was unsupported.    Holt pointed out that Green made
    4   this claim for the first time a decade after he became trustee
    5   and that the loan was not listed in either the 2008 List or the
    6   2009 List.   Moreover, he never mentioned the loan in the probate
    7   court.   Holt further asserted that Green had transferred more
    8   than the $165,000 from trust funds into Debtors’ personal
    9   accounts.    Thus, even if the loan existed, Debtors took more
    10   than they were entitled to receive.    Finally, Holt contended
    11   that Green was obligated to disclose the existence of the loan
    12   in an accounting to the probate court and also would have been
    13   required to disclose the existence of the loan in annual
    14   accountings to the beneficiaries, but he did not do so.
    15        According to Holt, Debtors should have disclosed the loan
    16   as a defense in the Civil Action or disclosed the details of the
    17   loan in the probate matter.    Since they did not do so, the
    18   defense was waived and they were precluded from asserting it in
    19   the bankruptcy court.
    20        Finally, Holt noted that Green could not remember where
    21   tens of thousands of dollars worth of CDs purchased with trust
    22   funds went to, or even how many he had purchased.    Accordingly,
    23   Holt maintained that Debtors’ claim of a loan was simply
    24   untenable by operation of law and also implausible under a
    25   review of the facts.
    26        In Debtors’ post trial brief, they argued that they sold
    27   their separate homesteads, loaned part of that money to THFT
    28   several years later, and then after they reimbursed themselves,
    -13-
    1   used the money to purchase the Loma Property.   According to
    2   Debtors, the “unrebuked evidence” proved these facts and showed
    3   that Green paid bills and beneficiaries from the trust account
    4   and his own account as permitted by the trust agreement
    5   throughout his term as trustee.   Debtors further asserted that
    6   Holt did not meet his burden of proof on the exemption.    Debtors
    7   maintained that they “whittled away” at the $360,000 number
    8   which Green allegedly transferred from THFT accounts into
    9   Debtors’ personal accounts through Green’s testimony that showed
    10   the monies were used for the trust.
    11        Finally, Debtors argued that the facts in Maki were
    12   distinguishable.   First, Maki involved a default judgment rather
    13   than just a default as in this case.    Second, there was a lien
    14   against the homesteaded property, while here there were no liens
    15   ever filed against Debtors’ property.
    16        In sum, Debtors argued that neither Holt nor Howard ever
    17   proved that THFT’s money was used to purchase the Loma Property.
    18   Since Green did not obtain the funds to purchase the Loma
    19   Property by fraud, as he only reimbursed himself the money he
    20   loaned to THFT, Debtors maintained that their home was exempt.
    21        4.   The Bankruptcy Court’s Ruling
    22        On March 10, 2016, the bankruptcy court issued its findings
    23   of fact and conclusions of law sustaining Holt’s objection to
    24   Debtors’ homestead exemption.   The bankruptcy court found that
    25   based on Green’s testimony, he had transferred more than
    26   $360,000 from accounts belonging to THFT into Debtors’ personal
    27   bank accounts.   The court also found that Green testified that
    28   he was reimbursing himself for undocumented loans which he had
    -14-
    1   made to the trust.   Finally, the court noted that Green
    2   testified that he cashed in or sold outright assets of the
    3   trust, including a $50,000 CD and $102,300 in GE and HSBC bonds,
    4   for a total of $152,300, and used those funds to pay a portion
    5   of the purchase price for the Loma Property.
    6        Based on these facts and the entire record, the bankruptcy
    7   court concluded that as a matter of law, under Maki equitable
    8   considerations would not permit the homestead exemption to
    9   protect Debtors who bought their real property with THFT funds.
    10   The court stated that Nevada follows the public policy that an
    11   individual using fraudulently obtained funds to purchase real
    12   property should not be protected by the homestead exemption
    13   because the exemption’s purpose was to protect individuals who
    14   claimed their homestead in good faith.   The court noted that
    15   Green acknowledged that at least $152,300 of funds derived from
    16   the sale or liquidation of trust assets were used to purchase
    17   the Loma Property.
    18        In addition, the bankruptcy court opined that even if
    19   Nevada law did not require the denial of Debtors’ homestead in
    20   its entirety, Nevada law would limit the exemption to the amount
    21   of Debtor’s equity in the property.   Since Green testified that
    22   he bought the Loma Property for $230,000 of which $152,300 was
    23   derived from the liquidation of trust assets, the trust assets
    24   amounted to 66.21 percent of the purchase price.   Therefore,
    25   according to the court, if Debtors were entitled to claim a
    26   homestead exemption, which they were not, the exemption would be
    27   limited to $89,525.91.
    28        Next, the court noted that § 522(o) and (p) operated to
    -15-
    1   limit the value of Debtors’ homestead exemption under specific
    2   circumstances.   The court found that § 522(o)(4) was not
    3   applicable since the statute was limited to scenarios where a
    4   debtor disposes of his or her non-exempt assets and then
    5   increases the exempt assets with the intent to hinder, delay or
    6   defraud a creditor.   The court reasoned that since $152,300 of
    7   the purchase price for the Loma Property was a trust asset,
    8   those funds were never Debtors’ non-exempt property and thus
    9   § 522(o) was inapplicable.
    10        In applying § 522(p), the court found that the Loma
    11   Property was purchased within 1,215 days of the bankruptcy and,
    12   therefore, under § 522(p)(1)(D), the homestead exemption would
    13   be capped at $155,675.   However, the court found that since
    14   trust assets were used to purchase the Loma Property, Debtors’
    15   homestead exemption would still be limited to $89,523.91 based
    16   upon their equity in the property.
    17        On March 14, 2016, the bankruptcy court entered an order
    18   consistent with its ruling and disallowed Debtors’ homestead
    19   exemption in its entirety.     Debtors filed a timely appeal from
    20   that order.
    21                            II.   JURISDICTION
    22        The bankruptcy court had jurisdiction over this proceeding
    23   under 28 U.S.C. §§ 1334 and 157(b)(2)(B).     We have jurisdiction
    24   under 28 U.S.C. § 158.
    25                                III.   ISSUE
    26        Did the bankruptcy court err by disallowing Debtors’
    27   homestead exemption in its entirety?
    28
    -16-
    1                         IV.      STANDARDS OF REVIEW
    2        We review questions regarding a debtor’s right to claim an
    3   exemption de novo.   Kelley v. Locke (In re Kelley), 
    300 B.R. 11
    ,
    4   16 (9th Cir. BAP 2003).
    5        The bankruptcy court’s factual findings, for purposes of
    6   determining the validity of a claimed exemption, are reviewed
    7   under the clearly erroneous standard.        
    Id. Factual findings
    are
    8   clearly erroneous if they are illogical, implausible or without
    9   support in the record.      Ret. v. Samson (In re Ret.), 
    606 F.3d 10
      1189, 1196 (9th Cir. 2010).
    11        “Clearly erroneous review is significantly deferential,
    12   requiring that the appellate court accept the [trial] court’s
    13   findings absent a definite and firm conviction that a mistake
    14   has been made.”    United States v. Syrax, 
    235 F.3d 422
    , 427 (9th
    15   Cir. 2000).   This deference is also given to inferences drawn by
    16   the trial court.   Beech Aircraft Corp. v. United States, 
    51 F.3d 17
      834, 838 (9th Cir. 1995).       The bankruptcy court’s choice among
    18   multiple plausible views of the evidence cannot be clear error.
    19   See Anderson v. City of Bessemer City, 
    470 U.S. 564
    , 573-74
    20   (1985) (“Where there are two permissible views of the evidence,
    21   the factfinder’s choice between them cannot be clearly
    22   erroneous.”).
    23        We may affirm the bankruptcy court’s orders on any basis
    24   supported by the record.       See ASARCO, LLC v. Union Pac. R. Co.,
    25   
    765 F.3d 999
    , 1004 (9th Cir. 2014).
    26                             V.    DISCUSSION
    27   A.   Exemptions: Burdens and Standard of Proof
    28        The bankruptcy code authorizes a debtor to exempt certain
    -17-
    1   assets.   § 522(b).   A claimed exemption is “presumptively
    2   valid.”   Carter v. Anderson (In re Carter), 
    182 F.3d 1027
    , 1029
    3   n.3 (9th Cir. 1999).    Once an exemption has been claimed, the
    4   objecting party has the burden of proving that an exemption is
    5   not properly claimed.    
    Id. (quoting Rule
    4003(c)).    The
    6   objecting party thus has the initial burden of production and
    7   the burden of persuasion.    
    Id. The Ninth
    Circuit further
    8   explained:
    9         The objecting party must produce evidence to rebut the
    presumptively valid exemption. If the objecting party
    10         can produce evidence to rebut the exemption, the
    burden of production then shifts to the debtor to come
    11         forward with unequivocal evidence to demonstrate that
    the exemption is proper. The burden of persuasion,
    12         however, always remains with the objecting party.
    13   
    Id. 14 The
    standard of proof is by a preponderance of the
    15   evidence.    See Leavitt v. Alexander (In re Alexander), 
    472 B.R. 16
      815, 821 (9th Cir. BAP 2012).      “The burden of showing something
    17   by a ‘preponderance of the evidence,’ . . . ‘simply requires the
    18   trier of fact to believe that the existence of a fact is more
    19   probable than its nonexistence before [he] may find in favor of
    20   the party who has the burden to persuade the [judge] of the
    21   fact’s existence.’”    Concrete Pipe & Prods. of Cal., Inc. v.
    22   Constr. Laborers Pension Tr. for So. Cal., 
    508 U.S. 602
    , 622
    23   (1993).
    24   B.    Nevada Homestead Exemption: Legal Standards
    25         Nevada has opted out of the federal exemption scheme
    26   provided under § 522(d).    See NRS 21.090(3).    Therefore, Nevada
    27   law governs substantive issues regarding the allowance or
    28   disallowance of Debtors’ homestead exemption.      See Elliott v.
    -18-
    1   Weil (In re Elliott), 
    523 B.R. 188
    , 192 (9th Cir. BAP 2014)
    2   (bankruptcy court must look to state law and not § 105(a) in
    3   determining whether there is a basis to disallow an exemption).
    4        Under Nevada law, exemptions are liberally construed in
    5   favor of the debtor.    In re 
    Christensen, 149 P.3d at 43
    .
    6   Subject to specific exceptions, the Nevada Constitution exempts
    7   from a forced sale the homestead that is available to Nevada
    8   residents.    See Nev. Const. art. 4, § 30.   NRS 21.090(1)(1)
    9   permits Nevada residents to claim the “homestead as provided for
    10   by law . . . .”    Under NRS 115.020, a homestead is claimed by
    11   recording a declaration of homestead at any time before an
    12   execution sale of the property.    Under NRS 115.010(2), a
    13   homestead claimed as exempt from execution “extends only to that
    14   amount of equity in the property held by the claimant which does
    15   not exceed $550,000 in value . . . .”
    16        While the Nevada homestead exemption is liberally construed
    17   in favor of the debtor, protection of the homestead is not
    18   absolute.    In Maki, the Nevada Supreme Court rejected a
    19   homestead claim by a judgment debtor who was the sister of a
    20   Nevada prison inmate.    
    Maki, 75 P.3d at 390
    .   While her brother
    21   was in prison, she misappropriated his state insurance
    22   disability settlement funds and his monthly disability benefit
    23   checks.   She used the monies to purchase a residence and then
    24   claimed a Nevada homestead exemption after her brother obtained
    25   a fraud judgment against her.    In holding that the homestead
    26   exemption did not apply under the circumstances before it, the
    27   Maki court observed:
    28        There is a time-honored principle that states that he
    -19-
    1        who keeps property that he knows belongs to another
    must restore that property. This idea, manifested in
    2        the doctrine of equitable liens, permeates our entire
    system of justice regarding equity. ‘[O]ne who has
    3        purchased real property with funds of another, under
    circumstances which ordinarily would entitle such
    4        other person to enforce a constructive trust in, or
    equitable lien against, the property, cannot defeat
    5        the right to enforce such trust or lien on the grounds
    that [the homestead exemption applies].’
    6
    
    7 75 P.3d at 378-79
    .   The court went on to say:
    8        ‘The homestead exemption statute cannot be used as an
    instrument of fraud and imposition.’ Public policy
    9        supports our application of an exception to homestead
    exemptions for victims of fraud or similar tortious
    10        conduct. An individual using fraudulently obtained
    funds to purchase real property should not be
    11        protected by the homestead exemption because the
    exemption's purpose is to provide protection to
    12        individuals who file the homestead exemption in good
    faith. 
    Id. 13 14
           The Maki court concluded:
    15        Under equitable lien principles, the homestead
    exemption is inapplicable when the proceeds used to
    16        purchase real property can be traced directly to funds
    obtained through fraud or similar tortious conduct.
    17        
    Id. 18 In
    making its decision, the Maki court relied upon Webster
    19   v. Rodrick, 
    394 P.2d 689
    (Wash. 1964).    In Webster, a married
    20   couple claimed a homestead exemption.    The wife had embezzled
    21   funds from her employer and the funds may have been used to
    22   purchase and improve the couple’s residence.     The employer
    23   obtained a judgment against the wife and the marital community
    24   based on misappropriation.   The employer sufficiently traced the
    25   embezzled funds to the residence to support the imposition of an
    26   equitable lien against the debtors’ residence.     The Washington
    27   Supreme Court rejected the debtors’ claim of a homestead
    28   exemption, concluding that the Washington “homestead exemption
    -20-
    1   statute cannot be used as an instrument of fraud and
    2   imposition.”    
    Webster, 394 P.2d at 692
    .
    3        The holding in Henry v. Rizzolo, 
    2012 WL 4092604
    (D. Nev.
    4   2012) is also persuasive.    Rizzolo, a Nevada debtor faced with
    5   execution of a judgment, asserted an exemption in certain
    6   annuity contracts under NRS 687B.290.1.        That statute included a
    7   specific exception for “amounts paid for or as premium on any
    8   such annuity with intent to defraud creditors . . . .”       The
    9   federal court interpreting Nevada law concluded that the
    10   exception to the annuity contracts exemption required proof of
    11   intent to defraud creditors.      
    Id. at *5.
      A judgment under
    12   NRS 112.180(1)(a) had been entered in favor of the executing
    13   creditors determining that the same debtor had received a
    14   fraudulent transfer of funds owned by her stepson.       Applying the
    15   statutory exception and “the equitable lien principals set forth
    16   in Maki,” the court rejected the claimed exemption of the
    17   annuity contracts as there was a sufficient basis to conclude
    18   that the contracts had been purchased in whole or in part with
    19   funds owned and fraudulently transferred by the judgment
    20   debtor’s stepson.    
    Id. at *8.
       The court also concluded that
    21   dollar for dollar tracing was not required for the entire
    22   exemption to be precluded.    
    Id. at *7.
    23        As was the case in Maki and Webster, in Rizzolo the funds
    24   used to acquire the property claimed exempt did not belong to
    25   the judgment debtor.
    26   C.   Analysis
    27        Debtors contend that the bankruptcy court erred in finding
    28   that Holt met his burden of proof for disallowance of their
    -21-
    1   homestead exemption and argue that the holding in Maki does not
    2   apply under these circumstances.      We are not persuaded.
    3            The bankruptcy court considered all of the testimony and
    4   documentary evidence presented and then chose between two
    5   permissible views of the evidence.       “Where there are two
    6   permissible views of the evidence, the fact finder’s choice
    7   between them cannot be clearly erroneous.”       Anderson, 
    470 U.S. 8
      at 574.      The record supports the bankruptcy court’s implicit
    9   finding of fact that it was more likely than not that the monies
    10   transferred from THFT accounts into Debtors’ personal account
    11   were not based on a loan.      Green acknowledged that there were no
    12   documents regarding the loan, no security interest for the loan,
    13   and that he did not provide for a liability to himself on the
    14   2008 or 2009 accounting provided to the probate court.        He also
    15   testified that he never disclosed the loan to the beneficiaries.
    16   Other than his testimony, there was no corroborating evidence
    17   that Green actually made any such loan or that it was a valid
    18   and existing debt of the trust.      As the bankruptcy court found,
    19   the loan was “undocumented.”7     Accordingly, based on the
    20   evidence before it, the bankruptcy court could reasonably infer
    21
    7
    In federal tax cases, courts consider a number of factors
    22
    to determine whether a particular payment must be characterized
    23   as a loan, although no one factor is controlling. While this is
    not a federal tax case, the factors are relevant. They include:
    24   (1) the existence of a note or other evidence of indebtedness,
    (2) whether the prepaid loan amount is determinable, (3) whether
    25   a definite time for repayment exists, (4) whether interest is
    26   paid on the “indebtedness,” (5) whether there is a provision for
    security, (6) the borrower’s ability to repay, and (7) how the
    27   parties treat the transaction. See United States v. Williams,
    
    395 F.2d 508
    (5th Cir. 1968); Kohler-Campbell Corp. v. United
    28   States, 
    298 F.2d 911
    (4th Cir. 1962).
    -22-
    1   there was no loan.
    2        Furthermore, while Green testified that the trust agreement
    3   gave him almost unlimited discretion, including transferring
    4   money into Debtors’ personal account, his testimony also showed
    5   that he could not remember or fully explain what happened to
    6   certain trust funds.   Green admitted that he mistakenly paid
    7   some personal expenses with trust funds and that he could not
    8   account for over $29,000 which was received for the sale of
    9   trust property.   Finally, nowhere in the record is there a full
    10   accounting of trust assets or liabilities.
    11        Without evidence of a loan or an accounting, the bankruptcy
    12   court could reasonably infer that there was no legitimate reason
    13   for transferring THFT’s funds into Debtors’ personal account.
    14   Because Green admitted that he used funds from THFT’s account to
    15   purchase the Loma Property, the bankruptcy court properly
    16   applied the holding in Maki.   Debtors’ attempt to distinguish
    17   Maki on the basis that Holt did not obtain a default judgment
    18   against them or obtain an equitable lien against the Loma
    19   Property is unavailing.   Maki simply applied equitable lien
    20   principles to disallow the homestead exemption.    There is
    21   nothing in Maki that requires a judgment.    Maki essentially
    22   concludes that the Nevada legislature never contemplated or
    23   intended that a homestead interest could be created or
    24   maintained with wrongfully appropriated property.
    25        Finally, the bankruptcy court issued an alternative ruling
    26   allowing Debtors’ homestead exemption to the extent Holt did not
    27   trace THFT’s funds dollar for dollar into the Loma Property.
    28   While Holt had the initial burden of tracing THFT’s funds into
    -23-
    1   Debtors’ homestead, “[t]he burden of tracing does not require
    2   ‘dollar-for-dollar accounting’ . . . ., and the party seeking
    3   recovery may meet this burden by identifying the relevant
    4   pathways.”     Rizzolo, 
    2012 WL 4092604
    , at *7.   Without an
    5   accounting of trust assets and liabilities, the commingling of
    6   THFT’s funds with Debtors’ personal funds made it impossible to
    7   sort out on a dollar-for-dollar basis which funds were used to
    8   purchase the Loma Property.      The fact that Debtors cannot
    9   account for over $300,000 of THFT’s funds supports the
    10   conclusion that the homestead was purchased with its funds.     
    Id. 11 In
    sum, the bankruptcy court’s disallowance of Debtors’
    12   homestead exemption in its entirety was proper.8
    13                              VI.   CONCLUSION
    14           For the reasons stated, we AFFIRM.
    15
    16
    17
    18
    19
    20
    21
    22
    23
    24
    25
    26
    27
    8
    Neither § 522(o) nor (p) applies under these
    28 circumstances.
    -24-