In re: Lenore L. Albert-Sheridan ( 2019 )

FILED
DEC 18 2019
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. CC-19-1027-SGTa
LENORE L. ALBERT-SHERIDAN, Bk. No. 8:18-bk-10548-ES
Debtor.
LENORE L. ALBERT-SHERIDAN,
Appellant,
v. MEMORANDUM*
JEFFREY IAN GOLDEN, Chapter 7
Trustee,
Appellee.
Argued and Submitted on November 21, 2019
at Pasadena, California
Filed – December 18, 2019
Appeal from the United States Bankruptcy Court
for the Central District of California
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value. See 9th Cir. BAP Rule 8024-1.
Honorable Erithe A. Smith, Bankruptcy Judge, Presiding
Appearances: Appellant Lenore L. Albert-Sheridan argued pro se;
Aaron E. DE Leest of Dannin, Gill, Israel & Krasnoff, LLP
argued for appellee.
Before: SPRAKER, GAN, and TAYLOR, Bankruptcy Judges.
INTRODUCTION
Chapter 71 debtor Lenore L. Albert-Sheridan appeals from a 2019
order sustaining chapter 7 trustee Jeffrey I. Golden’s objections to Albert-
Sheridan’s amended exemptions in two estate assets: (1) accounts
receivable for fees and costs Albert-Sheridan incurred while rendering
services to her clients; and (2) her causes of action against Ford Motor
Credit Company LLC (“FMCC”). According to Albert-Sheridan, California
Code of Civil Procedure (“C.C.P.”) § 704.210 supported the exemption
claim in the accounts receivable, and C.C.P. §§ 704.140 and 704.210
supported the exemption claim in the FMCC causes of action.
Albert-Sheridan amended her exemption claims after the bankruptcy
court had entered two orders sustaining objections to her original
exemption claims in the same two assets under the same two California
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
2
statues. In its ruling on the original exemptions, the court specifically ruled
that C.C.P. § 704.210 did not apply to either the accounts receivable or the
FMCC causes of action because Albert-Sheridan had failed to identify any
California law that excepted either of these types of assets from judgment
enforcement. The court also ruled that under C.C.P. § 704.140 Albert-
Sheridan bore the burden of proof to show that the exemption was
necessary for her support or the support of her spouse or dependents. The
court found that Albert-Sheridan had presented no evidence to meet this
burden of proof.
Faced with the same exemption claims after Albert-Sheridan
amended her exemptions, the bankruptcy court held that the amendments
were precluded by its prior exemption orders. The bankruptcy court
properly applied issue preclusion to resolve Golden’s exemption objections
concerning the accounts receivable and the FMCC causes of action.
Accordingly, we AFFIRM.
FACTS
A. Albert-Sheridan’s Litigation History And Her Causes Of Action
Against FMCC.
Albert-Sheridan’s litigation history both inside and outside the
bankruptcy court is lengthy and tortuous.2 Albert-Sheridan’s dispute with
2
Much of the litigation history is detailed in two related decisions of this panel;
Albert-Sheridan v. Ford Motor Credit Co. LLC (In re Albert-Sheridan), BAP No.
(continued...)
3
FMCC has played a prominent role in the trajectory of her bankruptcy case.
For purposes of this decision, however, we only need to summarily
describe her claims against FMCC. Albert-Sheridan’s claims arose out of
what she characterizes as a failed retail installment sales transaction
between her and Friendly Ford, a Nevada automobile dealer. Friendly Ford
assigned the retail installment sales contract to FMCC.
According to Albert-Sheridan, Friendly Ford knew that she needed to
register the vehicle in California though she purchased it from Friendly
Ford in Nevada. She contends that even though she made over $20,000.00
in car payments neither Friendly Ford, nor FMCC, properly submitted the
vehicle title documents to the California Department of Motor Vehicles
necessary to register the vehicle in California. Albert-Sheridan maintains
that FMCC failed to help her resolve the vehicle registration issues.
Albert-Sheridan also alleges that FMCC acted in concert with a group
of individuals that were stalking and harassing her. She maintains that
FMCC conspired with these individuals to violate her privacy rights as part
of a wrongful repossession of the vehicle. She argues that FMCC’s actions
caused her to suffer severe emotional distress and potentially entitled her
to millions of dollars in damages. In addition to stating a cause of action for
2
(...continued)
CC-19-1000-STaL (9th Cir. BAP Dec. 18, 2019), and Albert-Sheridan v. State Bar of
California (In re Albert-Sheridan), BAP No. CC-18-1222-LSF, 2019 WL 1594012 (9th Cir.
BAP Apr. 11, 2019).
4
intentional infliction of emotional distress (“IIED”), she also asserted a
cause of action under the Rees-Levering Automobile Sales Finance Act
related to the sale of the vehicle.
B. Albert-Sheridan’s Bankruptcy And Her Original Exemption
Claims.
Albert-Sheridan commenced her bankruptcy by filing a voluntary
chapter 13 petition on February 20, 2018. In her original Schedule C, she
asserted the following exemptions:
Brief description of Current value Amount of the Specific laws
the property and line of the portion exemption you that allow
on ScheduleA/B that you own claim exemption
lists this property
Claims Against 3P $500,000 TBD 100% of fair CCP §§ 704.140,
market value, 704.210
Line from Schedule up to any
A/B: 333 applicable
statutory limit
3
Line 33 of Albert-Sheridan’s Schedule A/B listed a host of claims, including
IIED, she asserted against unidentified third parties. Albert-Sheridan subsequently
indicated that these claims included those she asserted in her state court action against
FMCC.
5
Other Contingency $500,000 TBD 100% of fair CCP §§ 704.140,
market value, 704.210
Line from Schedule up to any
A/B: 344 applicable
statutory limit
Accounts Receivable $500,000 100% of fair CCP § 704.210
market value,
Line from Schedule up to any
A/B: 385 applicable
statutory limit
Albert-Sheridan relied on two California statutes to support her
exemption of the receivables and the litigation claims. C.C.P. § 704.140(b)
provides an exemption for matters relating to personal injuries, and, with
exceptions not applicable here, exempts “damages or a settlement arising
out of personal injury . . . to the extent necessary for the support of the
judgment debtor and the spouse and dependents of the judgment debtor.”
More generally, C.C.P. § 740.210 states; “Property that is not subject to
enforcement of a money judgment is exempt without making a claim.”
4
Line 34 of Albert-Sheridan’s Schedule A/B listed some of the same claims she
already had listed in line 33. Unlike line 33, line 34 included “Rees Levering” and
excluded “False light, extortion, public corruption, falsely impersonation, tort
interference, Employee Espionage, [and] Unfair Debt Collection.”
5
Line 38 of Albert-Sheridan’s Schedule A/B listed “fees and costs advanced due
from clients/former clients.”
6
C. The Exemption Objections.
In April 2018, both the chapter 13 trustee, Amrane Cohen, and FMCC
objected to the exemptions of the litigation claims and the accounts
receivable.6 Cohen contended that C.C.P. § 704.210 was inapplicable to the
assets Albert-Sheridan claimed as exempt. According to Cohen, C.C.P.
§ 704.210 required Albert-Sheridan to establish that the assets claimed as
exempt were “not subject to enforcement of a money judgment.” Cohen
argued that Albert-Sheridan had failed to meet this requirement, so the
subject assets did not qualify as exempt under the statute.
As for C.C.P. § 704.140, Cohen raised two issues: (1) the amount of
any assets arising from the award or settlement of the “claims against 3p”
or “other contingency” was unknown and unliquidated; and (2) the
exemption required proof that such an award or settlement was necessary
for her support (or that of any spouse or dependents).
FMCC filed a separate, more narrow objection to Albert-Sheridan’s
exemption claims. It objected only to the extent that she attempted to
exempt either the accounts receivable or the causes of action against FMCC.
FMCC reasoned that both the accounts receivable and the cause of action
would be subject to money judgments under California law, so C.C.P.
6
Cohen objected to additional exemptions claimed by Albert-Sheridan, but those
other objections are beyond the scope of this appeal. Albert-Sheridan did not address
these other objections in her appeal briefs.
7
§ 704.210 did not exempt either of these claims. With respect to exemption
of the causes of action under C.C.P. § 704.140, FMCC’s objection largely
mirrored Cohen’s noting that no damages or settlement had yet been
obtained and that Albert-Sheridan had not established whether any
amount would be necessary for her support. FMCC specifically argued that
Albert-Sheridan bore the burden of proof on the necessity for support issue
and failed to meet it.
Albert-Sheridan responded to both exemption claim objections. She
insisted that the objecting parties bore the burden of proof to establish that
she did not qualify for the claimed exemptions, citing Carter v. Anderson (In
re Carter), 182 F.3d 1027, 1029 (9th Cir. 1999). She additionally disputed
that any of her exemptions were limited to the amount necessary for
support. Rather, she contended: “Ms. Albert does not have to do an
accounting as stated by Ford. Ford is speculating. Ms. Albert gets every last
dime.” Debtor’s Response To Doc. No. 78 (Apr. 18, 2018) at 6.
Notably, Albert-Sheridan did not present any evidence regarding her
finances. Nor did she request an evidentiary hearing on the support issue
or request a continuance of the proceedings.
D. The Bankruptcy Court’s Rulings On The Original Exemption
Claims.
The bankruptcy court issued separate written tentative rulings on
Cohen’s and FMCC’s exemption objections. In each tentative ruling the
8
court explained in detail why it would sustain most of Cohen’s and all of
FMCC’s objections.7 After holding a hearing on the objections, the
bankruptcy court entered orders adopting its tentative rulings as its final
rulings.
1. Ruling On FMCC’s Exemption Objections.
As a preliminary matter, in its written ruling on FMCC’s objections
the bankruptcy court noted that California places the burden of proof to
establish entitlement to California exemptions on the debtor. The court
pointed out that the burden of proof is a substantive element of the
exemption claim governed by state law. The court, therefore, held that
Albert-Sheridan bore the burden of proof to establish her entitlement to
exemptions under C.C.P. §§ 704.140 and 704.210. The court additionally
held that Albert-Sheridan had not met her burden, so FMCC’s objections
had to be sustained.
More specifically, the bankruptcy court explained that, under C.C.P.
§ 704.210, property only is exempt to the extent it is not subject to the
enforcement of a money judgment. According to the court, Albert-Sheridan
failed to point to any California law that would except either her accounts
7
The order on FMCC’s objections attached a copy of the court’s written tentative
ruling as Exhibit A. The order on Cohen’s objections referenced the written tentative
ruling and relied on its reasoning but did not attach a copy. We were able to obtain a
copy of this ruling online from the bankruptcy court’s website (available at
http://ecf-ciao.cacb.uscourts.gov/Posted/ES_050318.pdf (last visited December 17,
2019)).
9
receivable or her action against FMCC from judgment enforcement apart
from C.C.P. § 704.140.
As for C.C.P. § 704.140, the bankruptcy court identified three
threshold problems. First, it was unclear which of Albert-Sheridan’s causes
of action were covered by the exemption of “Claims Against 3p” and which
were covered by “Other Contingency.” Second, it was unclear to what
extent these two exemption categories overlapped. And third, both
exemption claims seemed premature unless and until Albert-Sheridan
obtained a settlement or an award on account of one or more of her causes
of action.
Notwithstanding the exemption claims’ threshold infirmities, the
bankruptcy court proceeded to consider the merits of the objections. The
court held that any exemption claim under C.C.P. § 704.140 had to be
supported by proof that the amount exempted was necessary for the
support of the judgment debtor or her spouse or dependents. According to
the court, Albert-Sheridan failed to make any showing that any amount
was necessary for support. For this reason, the court sustained FMCC’s
objection and denied Albert-Sheridan’s exemption claims under C.C.P.
§ 704.140.
2. Ruling On Cohen’s Exemption Objections.
The court’s written ruling on Cohen’s objections was a bit more
nuanced. Cohen’s objections covered additional exemption claims. With
10
respect to the two exemptions for “Claims Against 3p” and “Other
Contingency,” Cohen’s objections covered not only any exemption claimed
in the causes of action against FMCC but also causes of action against any
other third party. Because Albert-Sheridan’s papers lacked specificity it
was impossible to tell precisely what causes of action Albert-Sheridan
meant to cover under her exemption claims. As a result, the court’s ruling
on Cohen’s objections was less focused than its ruling on FMCC’s
objections. Addressing Cohen’s objections, the court considered several
different contingencies depending on the potentially varying nature of the
causes of action covered and Albert-Sheridan’s exemption arguments.
Regardless of the contingencies, the end result was substantially the
same as the court’s ruling on FMCC’s objections. In relevant part, the court
stated in its ruling on Cohen’s objections:
The objection is sustained because Debtor has not come
forward with statutory authority that this property is not
subject to enforcement of a money judgment, as contemplated
by C.C.P. § 704.210.8
* * *
Debtor’s opposition also fails to reach the merits of CCP
§704.140(b) regarding what portion of the "tbd $500,000.00" or
8
The court made the exact same statement with respect to all three contested
exemption categories: "Claims Against 3P," "Other Contingency," and "Accounts
Receivable." See Tentative/Final Ruling (May 3, 2018) at pp. 79-81.
11
"$500,000.00 TBD" is necessary for the support of the judgment
debtor (and spouse or dependents).
* * *
Based on the foregoing, Debtor has not met her burden of
showing that she is entitled to her claimed exemption under
CCP § 704.210 as to all Subject Assets, and her claimed
exemption under CCP § 704.140 as to the Claims Assets.
Tentative/Final Ruling (May 3, 2018) at pp. 79-81, 89-90 (available at
http://ecf-ciao.cacb.uscourts.gov/Posted/ES_050318.pdf (last visited
December 17, 2019)). The court identified the “Claims Assets” as those
jointly or severally covered by the "Claims Against 3P" exemption claim
and the "Other Contingency" exemption claim. See id. at 84.
The bankruptcy court entered its order sustaining FMCC’s
exemption claim objections on May 18, 2018. In turn, the bankruptcy court
entered its order sustaining Cohen’s exemption claim objections on June 1,
2018.9
E. The Case Is Converted to Chapter 7, And The Trustee Settles The
Claims Against FMCC.
On June 26, 2018, the bankruptcy court converted Albert-Sheridan’s
bankruptcy case from chapter 13 to chapter 7. Golden was appointed to
9
Albert-Sheridan filed an amended Schedule A/B on May 31, 2018, in which she
valued her action against FMCC at “$500,000 tbd” and itemized it as one of her
“Contingent or Unliquidated Claims Against Third Parties.” See Attachment For Item
34, accompanying Albert-Sheridan’s May 31, 2018 amended Schedule A/B.
12
serve as chapter 7 trustee. Golden administered the claims against FMCC
and negotiated a settlement. At a hearing held on December 13, 2018, the
bankruptcy court approved Golden’s motion to compromise and sell the
FMCC claims to FMCC in exchange for $167,000.00. Albert-Sheridan
appealed the sale and compromise order, and we have affirmed that order.
F. Amended Exemptions And The Objection Thereto.
Prior to the hearing on the FMCC settlement, on November 29, 2018,
Albert-Sheridan filed an amended Schedule C. She once again exempted
property listed as “Claims Against 3P,” “Other Contingency,” and
“Accounts Receivable.” There were only two differences in the way these
assets were listed in her amended Schedule C: (1) for Claims Against 3P,
Albert-Sheridan listed the amount of the exemption she claimed as
$500,000.00 (the full stated value of the claimed asset); and (2) for Other
Contingency, she listed the amount of the exemption she claimed as
$1,930,000.00 (more than three times the full stated value of the claimed
asset).
On December 21, 2018, Golden objected to Albert-Sheridan’s
amended exemption claims. Golden’s objection focused exclusively on
Albert-Sheridan’s exemption claims for “Claims Against 3P,” “Other
Contingency,” and “Accounts Receivable” under C.C.P. §§ 704.140 and
704.210 (collectively, the “Contested Exemption Claims”). According to
Golden, the Contested Exemption Claims stated in the amended Schedule
C were identical to those exempted in Albert-Sheridan’s original Schedule
13
C. Golden asserted that Albert-Sheridan was barred from relitigating the
same exemption claims based on claim preclusion and issue preclusion. As
Golden put it, both the claims raised and the issues to be decided were
identical to the claims and issues the court disposed of in its 2018
exemption orders. The preclusive effect of the bankruptcy court’s prior
exemption rulings was the sole ground stated for Golden’s objection.
G. Appeal From Orders On Original Exemption Claims.
Contemporaneously with Golden’s objection to the amended
exemptions, Albert-Sheridan decided to appeal the 2018 exemption orders.
She filed her notice of appeal challenging the 2018 exemption orders on the
same day Golden filed his objection – December 21, 2018. See Albert-
Sheridan v. Golden (In re Albert-Sheridan), BAP No. CC-19-1002, at Doc. Nos.
1, 3.10
This Panel questioned whether Albert-Sheridan timely appealed from
the exemption objection orders. Albert-Sheridan’s response was twofold:
(1) she claimed the orders were not final; and (2) she claimed that
comments the bankruptcy court made during the December 13, 2018
10
Albert-Sheridan’s December 21, 2018 notice of appeal referenced only the order
sustaining Cohen’s objections. But Albert-Sheridan’s subsequent papers filed in that
appeal indicated that she meant to appeal the order sustaining FMCC’s objections as
well. See Albert-Sheridan v. Golden (In re Albert-Sheridan), BAP No. CC-19-1002, at Doc.
Nos. 1, 3. For purposes of our analysis, we will interpret Albert-Sheridan’s December
21, 2018 notice of appeal liberally to cover both orders. We note, however, that whether
the notice of appeal included both 2018 exemption orders or just the order on Cohen’s
exemption objections does not alter our analysis.
14
hearing on the motion to approve the compromise with FMCC amended
both orders.
On April 17, 2019, this Panel issued an order dismissing the
exemption appeal as untimely. Though the Panel did not explain its
reasoning, we specifically held that the order on Cohen’s exemption claim
objections was a final and appealable order. Albert-Sheridan did not appeal
this Panel’s dismissal of her appeal from the 2018 exemption orders.
H. The Hearing On The Amended Exemptions And The Ruling On
Golden’s Objections.
Albert-Sheridan did not respond to Golden’s objections until January
30, 2019 – the eve of the hearing on the objections. She alleged that she
never received her service copy of Golden’s objections to her exemptions.
By her own admission, her last-minute response duplicated her prior
papers filed in her first exemption appeal dismissed as untimely by this
Panel and also duplicated other papers she filed in various bankruptcy
proceedings. But she also included with her response a declaration in
which she set forth for the first time some cursory statements about her
financial condition. She apparently provided this financial information as a
tardy attempt to address the necessity for support issue.
The remainder of Albert-Sheridan’s response papers reiterated her
arguments that the 2018 exemption orders were not final and that the
court’s comments during the hearing on motion to approve the settlement
15
amended those exemption orders. Her response otherwise failed to address
Golden’s preclusion arguments. She also requested an evidentiary hearing
and a continuance of the objection hearing to provide her with additional
time to submit a more complete response to the objections.
At the hearing on Golden’s objections, the bankruptcy court mostly
focused on Albert-Sheridan’s late-filed response papers. The court said
that, under the “mailbox rule,” Golden’s service of his objection on Albert-
Sheridan was presumed valid. The court noted that Albert-Sheridan had
not presented anything to rebut this presumption. The court held that, in
the absence of any valid excuse for Albert-Sheridan’s tardily-filed response
papers, it would not consider them.
At the conclusion of the hearing, the bankruptcy court sustained
Golden’s objections in part and overruled them in part. The bankruptcy
court sustained the objection as to Albert-Sheridan’s amended exemption
in the accounts receivable under C.C.P. § 704.210. The bankruptcy court
also sustained the objection as to Albert-Sheridan’s amended exemption in
her causes of action against FMCC under C.C.P. § 704.140 and 704.210. But
the bankruptcy court overruled the objection to the extent it was directed to
Albert-Sheridan’s amended exemptions in causes of action against third
parties other than FMCC. According to the bankruptcy court, Golden had
abandoned the estate’s interest in these other causes of action, as reflected
in an order entered on December 27, 2018.
16
On February 7, 2019, the bankruptcy court entered its order on
Golden’s objection. Albert-Sheridan timely appealed from this order.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A) and (B). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court correctly apply issue preclusion to dispose
of Golden’s exemption objections concerning Albert-Sheridan’s accounts
receivable and the causes of action against FMCC?
STANDARDS OF REVIEW
The preclusive effect of the bankruptcy court’s prior ruling presents
mixed questions of fact and law where the legal issues predominate.
Knupfer v. Wolfberg (In re Wolfberg), 255 B.R. 879, 881 (9th Cir. BAP 2000),
aff'd, 37 F. App’x 891 (9th Cir. 2002). We review such determinations de
novo. Id.DISCUSSION
A. Issue Preclusive Effect Of Prior Exemption Rulings.
Albert-Sheridan raises a number of issues on appeal, but none of
those issues are material if the bankruptcy court’s 2018 denial of her
exemptions in the accounts receivable and the FMCC causes of action
precluded her amended exemption claims. Debtors are provided a liberal
right to amend their exemptions and may amend their schedules at any
17
time before the case is closed. Rule 1009(a). Still, a debtor may not simply
amend her exemption in order to evade an adverse ruling on a prior
exemption claim.
Exemption orders are final orders for purposes of appeal. See Phillips
v. Gilman (In re Gilman), 887 F.3d 956, 961–62 (9th Cir. 2018). As such,
principles of preclusion apply to prevent relitigation of the same exemption
issues (issue preclusion) as well as those that could have been litigated as
to the exemptions at issue (claim preclusion). Cogliano v. Anderson, (In re
Cogliano), 355 B.R. 792, 806 (9th Cir BAP 2006) (claim preclusion);
Magallanes v. Williams (In re Magallanes), 96 B.R. 253, 256 (9th Cir. BAP 1988)
(same). Furthermore, this Panel has held that a debtor’s right to amend
schedules under Rule 1009(a) does not vitiate the preclusive effect of the
bankruptcy court’s prior final rulings. In re Wolfberg, 255 B.R. at 883 & n.6
(citing Andermahr v. Barrus (In re Andermahr), 30 B.R. 532, 534 (9th Cir. BAP
1983)).
Issue preclusion refers to the preclusive effect of an order or
judgment in “foreclosing relitigation of issues that have been actually and
necessarily decided in earlier litigation.” Frankfort Digital Services, Ltd. v.
Kistler (In re Reynoso), 477 F.3d 1117, 1122 (9th Cir. 2007) (quoting Frank v.
United Airlines, Inc., 216 F.3d 845, 850 n.4 (9th Cir. 2000)); see also Robi v. Five
Platters, Inc., 838 F.2d 318, 326 (9th Cir. 1988) (stating that issue preclusion
applies to both issues of fact and law). Issue preclusion bars relitigation of
18
issues if three requirements are met:
(1) the issue necessarily decided at the previous proceeding is
identical to the one which is sought to be relitigated;
(2) the first proceeding ended with a final judgment on the
merits; and
(3) the party against whom [issue preclusion] is asserted was a
party or in privity with a party at the first proceeding.
In re Reynoso, 477 F.3d at 1122 (quoting Reyn's Pasta Bella, LLC v. Visa USA,
Inc., 442 F.3d 741, 746 (9th Cir. 2006)).
Albert-Sheridan does not dispute that the bankruptcy court’s original
orders on her same exemptions necessarily decided that: (1) she bore the
burden of proof with respect to whether any of the allegedly exempt causes
of action against FMCC were necessary for the support of the debtor, her
spouse, or her dependents under § C.C.P. 704.140(b); (2) she failed to
satisfy this burden of proof; and (3) she also failed to establish that her
causes of action against FMCC and her accounts receivable were not
subject to judgment enforcement under California law, so as to render
C.C.P. § 704.210 applicable. These are the exact same issues raised by the
objection to Albert-Sheridan’s amended exemptions.11 In fact, Golden
11
The burden of proof issue was disposed of by the 2018 exemption orders,
which Albert-Sheridan did not timely appeal. At oral argument, Albert-Sheridan again
argued that federal law placed the burden of proof on the objecting party. Ordinarily,
the party objecting to an exemption bears the burden of proof. Diaz v. Kosmala (In re
(continued...)
19
specifically incorporated the prior objections into his objection to the
amended exemptions.12
Nor does Albert-Sheridan deny that she was party to all of the
exemption objections. The party against whom issue preclusion is asserted
is clearly the same party to the original decision.
Albert-Sheridan does dispute that the bankruptcy court’s 2018
exemption rulings were final. According to her, the bankruptcy court
11
(...continued)
Diaz), 547 B.R. 329, 336 (9th Cir. BAP 2016). But where the debtor asserts exemption
claims based on state law, the burden of proof is a substantive part of the exemption
claim, so “where a state law exemption statute specifically allocates the burden of proof
to the debtor, Rule 4003(c) does not change that allocation.” Id. at 337. Because
California places the burden of proof for exemptions on the debtor, see C.C.P.
§§ 703.580(b), 704.780(a), Albert-Sheridan had the burden of proving her compliance
with C.C.P. §§ 704.140 and 704.210.
12
For the first time in her reply brief on appeal, Albert-Sheridan attempted to
argue that the bankruptcy court never determined whether either of the exemption
statutes she invoked were applicable. This belated argument is at odds with the
bankruptcy court’s written rulings, as set forth above. Also for the first time in her reply
brief, Albert-Sheridan argued that her causes of action, and hence her exemption claim,
changed as a result of FMCC’s postpetition conduct in relation to the settlement it
reached with Golden providing for its payment of $167,000.00 in exchange for the
dismissal with prejudice of the remaining causes of action against FMCC. But this
argument is without merit. Exemption claims are fixed as of the petition date, so any
postpetition conduct by FMCC could not as a matter of law or logic have altered Albert-
Sheridan’s exemption claim in the causes of action. See generally Gaughan v. Smith (In re
Smith), 342 B.R. 801, 806 (9th Cir. BAP 2006) (noting “general rule that exemption rights
are determined as of the petition date”); Cisneros v. Kim (In re Kim), 257 B.R. 680, 688 (9th
Cir. BAP 2000), aff'd, 35 F. App’x 592 (9th Cir. 2002) (recognizing “long-standing
bankruptcy principle that the property of the estate and exemptions are determined as
of the petition date”).
20
expressed an intention that the rulings would not be final. In support of
this argument, she points to the following statement made during the
course of the May 3, 2018 hearing on Cohen’s exemption objections:
THE COURT: And this really isn’t about disclosure as an asset,
this has to do with the exemption and the fact that under
California law there is a restriction when it comes to personal
injury that it is necessity for support.
And so that, as you say, can’t really be proven at this point, so I
am going to sustain the objection. Obviously it’s without
prejudice. If you’re able to liquidate this and you get the
500,000, you want to claim that the entire amount is exempt,
and you file an amended exemption at that point, we’ll deal
with any objections that follow.
Hr’g Tr. (May 3, 2018) at 32:14-23.
There are several problems with Albert-Sheridan’s reliance on this
statement. First, it is unclear what the court meant by its reference to
“without prejudice”; whether the debtor simply retained its right to amend
her exemptions under Rule 1009(a) subject to all objections including
preclusion, or if it meant that its decision would not be final. The court’s
discussion concerning the failure to prove a necessity for support under
California law immediately prior to the reference suggests that the
bankruptcy court was referring simply to the debtor’s right to amend in
general rather than finality. More importantly, the bankruptcy court did
not make a similar “without prejudice” comment during the hearing on
21
FMCC’s exemption objections. Nor was such a limitation expressed in
either of the tentative rulings.
Even if we were to read the bankruptcy court’s “without prejudice”
comments at the May 3, 2018 hearing favorably to Albert-Sheridan, they
would conflict with the written rulings, which specifically denied the
exemptions for failure to provide any evidence that the proceeds of the
FMCC claims were necessary for support or that the exemptions were
exempt from judgment. When there is a conflict between the court’s oral
ruling and its written order, the formal written order controls. See Cashco
Fin. Servs., Inc. v. McGee (In re McGee), 359 B.R. 764, 774 n.9 (9th Cir. BAP
2006). The written orders fail to suggest in any way that they were not
final.
The court’s intention as to finality was also confirmed at the
December 13, 2018 hearing on Golden’s compromise with FMCC. The
bankruptcy court remarked that Albert-Sheridan had filed amended
exemptions that duplicated the exemptions the court previously had
denied. During oral argument, Albert-Sheridan referenced the court’s
“without prejudice” comment from the May 3, 2018 hearing. Nonetheless,
the court noted that its 2018 rulings presumably were entitled to preclusive
effect.13 In other words, contrary to Albert-Sheridan’s interpretation, the
13
In response to a question from Golden regarding how to proceed with the
(continued...)
22
bankruptcy court indicated that the 2018 exemption orders were final
orders. Indeed, Albert-Sheridan proceeded to file her appeal of the 2018
exemption orders shortly thereafter.
The court’s December 13, 2018 interpretation is consistent with other
comments the court made during the course of the May 3, 2018 hearing.
The court noted at the hearing that because there is no deadline for debtors
to amend their schedules, an order sustaining an exemption objection
always technically is without prejudice to amendment of the exemption
claim. This certainly applies to the ultimate determination of the amounts
of any recovery. But as the court found, Albert-Sheridan had completely
failed to address the issue of support or to identify any other basis for
exemption of the accounts receivable and the FMCC claims.
Our conclusion that the 2018 exemption orders were final when
13
(...continued)
objection to the amended exemption, the court stated:
On that, I would say -- because I thought about that, and, you know,
exemption is filed, and then there’s a hearing on an objection to claim -- to
the claim of exemption, and there’s a ruling and there’s an order, and the
same exemption is filed again. I think by definition you're going to have
issues with res adjudicata [sic], because this was brought up before. Now, I
don’t know how else to treat my order, I mean, because I can’t ignore the
fact that the order was entered, and that I went through, you know, a
whole analysis there, and that basically it’s the same exemption that was
filed again, so, I mean, I would say the May 18th order would have to
apply to the amended exemption. That said, I leave up to you as to
whether or not you want to rest on [preclusion doctrine].
23
entered is further compelled by this Panel’s dismissal of Albert-Sheridan’s
appeal of those exemption orders. See In re Albert-Sheridan, BAP No.
CC-19-1002 (Apr. 17, 2019). In the process of dismissing that appeal as
untimely, this Panel held that the 2018 exemption orders were final orders
for appeal purposes. Albert-Sheridan did not appeal our dismissal order to
the Ninth Circuit, and our ruling is now final and non-appealable.
Consequently, Albert-Sheridan’s current finality challenge is an
impermissible collateral attack on this Panel’s prior ruling. See Alakozai v.
Citizens Equity First Credit Union (In re Alakozai), 499 B.R. 698, 704 (9th Cir.
BAP 2013); Woods & Erickson, LLP v. Leonard (In re AVI, Inc.), 389 B.R. 721,
731 (9th Cir. BAP 2008); see also Valley Nat'l Bank of Ariz. v. Needler (In re
Grantham Bros.), 922 F.2d 1438, 1442 (9th Cir. 1991) (rejecting as frivolous
appellant's attempted collateral attack on bankruptcy court's final,
non-appealable sale order).
Alternately, Albert-Sheridan argued that the bankruptcy court’s
commentary at the December 13, 2018 hearing about the potential
preclusive effect of its 2018 exemption orders amounted to an amendment
of those orders. This argument lacks merit. First, though the court and
parties discussed the exemptions, no exemption matter was before the
court at that time. Indeed, the court told Golden that it was up to him how
he wanted to proceed with his objection to the amended exemption.
Second, there is absolutely nothing in the text of the formal written orders
24
suggesting that the court meant for them to be non-final orders.
Accordingly, the bankruptcy court could not have amended the orders
simply by expressing the opinion that they were final orders for preclusion
purposes in a hearing on a different motion.
In sum, Albert-Sheridan has not demonstrated any error in the
bankruptcy court’s application of issue preclusion to the 2018 exemption
orders. Therefore, we AFFIRM the bankruptcy court’s order on Golden’s
exemption objections on that basis.14
B. Albert-Sheridan’s Other Arguments On Appeal.
Albert-Sheridan asserts that the court improperly denied her request
for an evidentiary hearing. Generally speaking, evidentiary hearings are
necessary in bankruptcy court contested matters if the matter cannot be
14
Though we dispose of this appeal on issue preclusion grounds, claim
preclusion also applies. Under the federal common law, the elements for claim
preclusion are: “(1) a final judgment on the merits; (2) the judgment was rendered by a
court of competent jurisdiction; (3) a second action involving the same parties [or their
privies]; and (4) the same cause of action involved in both cases.” In re Wolfberg, 255 B.R.
at 881–82. There is no challenge to the bankruptcy court’s jurisdiction to decide the 2018
objections to exemptions. Albert-Sheridan’s “amended” exemption claims in the
accounts receivable and the FMCC causes of action cover the exact same property and
rely on the exact same statutory basis as the original exemption claims. Thus, the claims
are identical. Nor is there any genuine dispute that Albert-Sheridan is the same party
and that Cohen, Golden and FMCC shared a sufficient identity of interest with respect
to Albert-Sheridan’s exemption claims to qualify as parties in privity. As for the
requirement of a final judgment on the merits, for the same reasons we found the
bankruptcy court’s 2018 exemption orders final for issue preclusion purposes, we also
find them final for claim preclusion purposes. See generally In re Magallanes, 96 B.R. at
256 (applying claim preclusion to previously-litigated exemption claims).
25
resolved without deciding disputed material factual issues. Caviata Attached
Homes, LLC v. U.S. Bank, N.A. (In re Caviata Attached Homes, LLC), 481 B.R.
34, 44 (9th Cir. BAP 2012) (citing Rule 9014(d) and accompanying Advisory
Committee Notes). However, when the controlling facts are undisputed,
the bankruptcy court may dispense with the evidentiary hearing
requirement and may resolve the matter “‘on the pleadings and arguments
of the parties, drawing necessary inferences from the record.’” In re Caviata
Attached Homes, LLC, 481 B.R. at 45-46 (quoting Tyner v. Nicholson (In re
Nicholson), 435 B.R. 622, 636 (9th Cir. BAP 2010)).
Here, the bankruptcy court relied on preclusion to dispose of
Golden’s exemption objections. Albert-Sheridan has not identified any
disputed material factual issue the bankruptcy court needed to resolve in
order to apply preclusion doctrine to the 2018 exemption orders. To the
contrary, in applying issue preclusion the bankruptcy court relied on the
procedural history in the record concerning Albert-Sheridan’s original
exemption claims, the objections thereto, and the 2018 exemption orders.
Accordingly, the absence of an evidentiary hearing on Golden’s exemption
objections does not support reversal in this appeal.
Finally, Albert-Sheridan contends that she was denied due process
and that the court should have considered her late-filed response to
Golden’s exemption objections. However, her due process argument
mostly concerns her grievance that she was deprived of the opportunity to
26
prove the merits of her causes of action against FMCC and has absolutely
nothing to do with the preclusion grounds the bankruptcy court relied on
in deciding Golden’s exemption objections.
An appellant cannot prevail on a due process claim in the absence of
prejudice. See Rosson v. Fitzgerald (In re Rosson), 545 F.3d 764, 776 (9th Cir.
2008) (rejecting debtor’s due process claim because he could “show no
prejudice arising from the defective process afforded him”); City Equities
Anaheim, Ltd. v. Lincoln Plaza Dev. Co. (In re City Equities Anaheim, Ltd.), 22
F.3d 954, 959 (9th Cir. 1994) (also rejecting due process claim for lack of
prejudice). Similarly, an alleged procedural error does not support reversal
on appeal in the absence of harm. Litton Loan Serv’g, LP v. Garvida (In re
Garvida), 347 B.R. 697, 704 (9th Cir. BAP 2006) (citing 28 U.S.C. § 2111 and
Rule 9005). We have reviewed Albert-Sheridan’s late-filed response.
Virtually nothing in the response touches on the controlling preclusion
issues. As a result, the bankruptcy court’s refusal to consider the response
did not harm Albert-Sheridan and cannot justify reversal of the order on
appeal.15
15
Albert-Sheridan has not challenged the bankruptcy court’s application of the
mailbox rule or its finding that she did not overcome the presumption that Golden duly
served her with his exemption objections. Consequently, we decline to address these
issues. See generally Faden v. Segal (In re Segal), BAP No. CC–14–1224–KuPaTa, 2015 WL
400643, at *7 (9th Cir. BAP Jan. 29, 2015) (describing application of mailbox rule).
27
CONCLUSION
For the reasons set forth above, we AFFIRM the bankruptcy court’s
order sustaining Golden’s exemption objections concerning Albert-
Sheridan’s accounts receivable and her causes of action against FMCC.
28