Are funds seized prepetition by a creditor, and now in the possession of the Sheriff, Property of the Estate?

tentative from Judge Maureen Tighe re the issue of whether funds seized by a creditor but still in possession of the Sheriff are property of the estate.

1:18-13040 Eric Rodriguez Chapter 7

Motion By Debtor For Order Authorizing And Instructing the Riverside County Sheriff’s Office to Return Levied Funds to Debtor

On December 13, 2018, Eric Rodriguez (“Debtor”) received a notice from his bank (“Chase”) that it had received a bank levy in the amount of $14,301.57 from the Riverside County Sheriff’s Office (the “Sheriff”) on behalf of judgment creditor Freddy Harrison. Debtor filed this case as a chapter 13 on December 20, 2018.  The Sheriff then sent Debtor a notice acknowledging the bankruptcy filing, but indicating that if Debtor wanted the funds to be returned, he must seek an order from the Bankruptcy Court; otherwise, the funds would be turned over to the Trustee. The total being held by the Sheriff is $11,367.68 (the “Funds”).

Debtor files this motion seeking the return of the Funds held by the Sheriff under the Court’s equitable powers.  The funds are not claimed as exempt.  The case has been converted to chapter 7, and the trustee has now filed a no asset report. Creditors Veronica Gamm, Marina Noorall, and Fredy Harrison (“Creditors”) filed an opposition to the Motion. They argue that the funds are not exempt and the claim is not dischargeable.  Creditors further argue that “title in the funds transferred immediately to Plaintiffs” upon the levy.

An execution lien arises upon service of a writ of execution and notice of levy. Cal. Civ. Proc. Code § 700.140(b). While the execution lien is in effect, there are limits placed upon withdrawals and payments of checks. Cal. Civ. Proc. Code § 700.140(d). That execution lien terminates when the funds levied upon are paid to the levying officer. Cal. Civ. Proc. Code § 700.140(f).

There is a complex body of authority regarding whether the funds are owned by the debtor or by the levying creditor once the levied funds are paid to the levying officer.  As the lead case on the issue states, “[a]lthough [CCP § 700.140] suggests that debtor’s interest in the funds was transferred when the funds were paid to the levying officer and the lien terminated, the statute does not plainly say so.”  In re Hernandez, 483 B.R. 713, 721 (B.A.P. 9th Cir. 2012).  The analysis in bankruptcy cases has turned on whether Debtor has an exempt property interest or other rights under applicable law, which must be determined on a case-by-case basis.  In re Hernandez, 483 B.R. at 724.  Construing the same provisions of California statutory law at issue here, the Hernandez court determined that levied funds were property of the estate because debtor had an automatic exemption in the funds because they were largely traceable to social security income. Id. at 723.  The BAP therefore ruled that because debtor had an exempt property interest in the funds, the creditor’s “levy did not operate to extinguish those interests.” Id. at 724.  “In short, debtor had grounds to recover the exempt funds and could have challenged the levy in the state court prepetition on that basis.” Id. at 725. Read more…

Quote I want to Remember – Figuring out Congressional Intent

“[T]he Ninth Circuit has cautioned that attempting “to divine congressional intent from congressional silence” is “an enterprise of limited utility that offers a fragile foundation for statutory interpretation.” Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 717 (9th Cir.2004).

Public Counsel Annual Report for 2018

You can find the annual report for this great organization here.  You can’t help but notice my picture on page 5.

Central District filings up – a little –

Total bankruptcy filings have been higher each month this year compared to the same month last year although in some months only slightly higher.  April 2019 was the highest number of filings for April since 2015 although, again, not really significantly higher in real numbers.

2019 2018 2017 2016 2015 2014
Jan 2,745 2,741 2,839 2,872 3,364 4,704
Feb 2,754 2,708 2,795 3,299 3,829 4,574
March 3,481 3,363 3,782 3,923 4,496 5,430
April 3,631 3,277 3,209 3,584 4,486 5,364
May 3,347 3,226 3,384 3,484 3,971 5,500
June 2,981 3,252 3,545 3,966 4,386
July 3,057 2,953 3,239 3,731 4,701
Aug 3,337 3,387 3,543 3,544 4,540
Sept 2,772 3,071 3,168 3,493 4,317
Oct 3,259 3,170 3,235 3,751 4,554
Nov 2,821 3,004 3,025 3,531 3,642
Dec 2,419 2,416 2,902 2,718 3,733
Total 15,958 35,961 37,262 39,819 44,880 55,445

Filings so far this year in the Central District by chapter.

Non-Comm’l Commercial Chapter 7 Chapter 13 Chapter 11
14,493 1,274 12,329 3,275 163
91% 8% 77% 21% 1%

The Northern District of Illinois leads us in total filings for the year.  It has 17,134 total filings.  Next behind us is Northern District of Georgia, 11,871.

Discharging Student Loans in Bankruptcy – Public Counsel program

Email from Christian Cooper:

You are invited to attend “Discharging Student Loans in Bankruptcy,” an MCLE program that will cover the fundamentals of litigating student loans in adversary proceedings.  It is approved for four (4) hours of general MCLE credit.

The program is presented by Public Counsel, and is cosponsored by the Central District Consumer Bankruptcy Attorney Association (cdcbaa) and the United States Bankruptcy Court for the Central District of California.

Lunch will be provided.  See the flyer for additional information. 

DATE: Tuesday, July 9, 2019
TIME: 10:00 a.m. to 2:00 p.m.
LOCATION: Roybal Federal Building, 255 E. Temple St., Los Angeles, CA 90012
FLOOR: 2nd Floor
ROOM: Room 283

There is no cost, but you must complete at least two (2) pro bono hours in order to attend.

US Trustee Report on Audits

Central District of California had 91 audits last year.  There was “at least one material misstatement” in 18 of the cases or 20% of the total.  Some pretty interesting stuff.  You can get the report here.

Properly mailed item is presumed to have been received.

Wonder where it says that?  “The law presumes that a properly mailed item was received by the addressee.”  Hagner v. United States, 285 U.S. 427, 430 (1932).

Disclosure of tax returns in litigation: privileged or not?

It doesn’t seem as clear as it use to be that you don’t have to turnover your tax returns to your opponents in litigation.  The below quote is from a recent memorandum from one of our judges (bankruptcy judges).  I want to make sure I can find it some day when I need it.

As explained in Weingarten v. Superior Court, 102 Cal. App. 4th 268, 274, 125 Cal. Rptr. 2d 371, 375 (2002):

California courts … have interpreted state taxation statutes as creating a statutory privilege against disclosing tax returns. The purpose of the privilege is to encourage voluntary filing of tax returns and truthful reporting of income, and thus to facilitate tax collection.   But this statutory tax return privilege is not absolute. The privilege will not be upheld when (1) the circumstances indicate an intentional waiver of the privilege; (2) the gravamen of the lawsuit is inconsistent with the privilege; or (3) a public policy greater than that of the confidentiality of tax returns is involved.  This latter exception is narrow and applies only “when warranted by a legislatively declared public policy.” (Ibid.) A trial court has broad discretion in determining the applicability of a statutory privilege.

Great cdcbaa Program June 8, 2019 – Handling Trial from Pre-Trial Proceedings until the Appellate Review

Please join us on June 8, 2019 as we present:
Judges on Trial! 
Hon. Catherine E. Bauer | U.S. Bankruptcy Court – Central District of California, Santa Ana Division 
Hon. Ernest M. Robles | U.S. Bankruptcy Court – Central District of California, Los Angeles Division  
Hon. Martin R. Barash| U.S. Bankruptcy Court – Central District of California, San Fernando Valley Division  
Moderator – Anerio V. Altman, Esq. 

Judges Bauer, Robles and Barash will discuss their approaches to handling trial from the Pre-Trial Proceedings until the Appellate Review.  The judges will submit themselves to the jurisdiction of the cdcbaa and answer questions from the audience.  Now the tables are turned!
Registration: 10:30 a.m. - 11:00 a.m.
Program: 11:00 a.m. - 1:30 p.m.
Southwestern Law School
Bullocks Wilshire Building Read more…

Nice Judicial Profile of Judge Scott Clarkson

The Business Law Section of the California Lawyers Assn has a nice Judicial Profile of Judge Scott Clarkson in its April 2019 eNews.  You can access that here.