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In re Kahan

argued submitted pasadena california: March 8, 1994.


Appeal from the United States District Court for the Central District of California. D.C. No. CV 92-2607 WDK. William D. Keller, District Judge, Presiding.

Before: Harry Pregerson, Diarmuid F. O'Scannlain, and Ferdinand F. Fernandez, Circuit Judges. Opinion by Judge Pregerson.

Author: Pregerson


PREGERSON, Circuit Judge:

Chapter 7 debtor Joseph Kahan ("Mr. Kahan") appeals the district court's judgment affirming the bankruptcy court's order finding that Mr. Kahan's homestead exemption under California law is limited to $45,000.00. Mr. Kahan holds his residence in joint tenancy with his wife, Frieda L. Kahan ("Mrs. Kahan"), who did not declare bankruptcy. He contends that his entire one-half interest in the property is exempt from the bankruptcy estate. We have jurisdiction under 28 U.S.C. § 158(d). White v. White (In re White), 727 F.2d 884, 885-86 (9th Cir. 1984) (an order granting or denying a homestead exemption is immediately appealable). We affirm.


On March 31, 1986, Appellant Mr. Kahan filed a Chapter 11 petition for bankruptcy relief. With his petition, Mr. Kahan filed a schedule entitled Schedule B-1 - Real Property, that listed as his asset the real property at 177 South Poinsettia Place, Los Angeles, California 90036 [hereinafter the Property]. Mr. Kahan holds the Property in joint tenancy with his wife; Disposition of her interest in the Property is not before us. He listed $375,000.00 as the Property's fair market value and listed four trust deed obligations which together exceeded $375,000.00. Mr. Kahan also filed a schedule entitled Schedule B-4 - Property claimed as exempt, that listed the Property as exempt under Cal. Civ. Proc. Code § 704.740, to the extent of $45,000.00. A creditors' meeting was held on May 16, 1986, after which nobody filed objections to the claimed exemption.

Four years later, on July 23, 1990, Mr. Kahan's bankruptcy was converted from a Chapter 11 (reorganization) proceeding, 11 U.S.C. §§ 701-66, into a Chapter 7 (liquidation) proceeding, 11 U.S.C. §§ 1101 -46. Respondent David Seror [hereinafter the Trustee] was appointed as Trustee to administer Mr. Kahan's estate. The Trustee commenced an adversary proceeding against Mrs. Kahan to enable him to sell the Property free and clear of her interest.*fn1

On August 29, 1991, Mr. Kahan filed and served a document entitled Amended Schedules, which consisted of a Schedule B-4 form. Under the Amended Schedule B-4, Mr. Kahan claimed an exemption for his entire joint tenancy interest in the Property; the stated fair market value of his one-half interest was $187,500.00. For authority, Mr. Kahan relied on Cal. Civ. Proc. Code §§ 704.710(c) and 704.720(a), as well as § 522(b)(2)(B) of the Bankruptcy Code as interpreted by our court in Schwaber v. Reed (In re Reed), 940 F.2d 1317 (9th Cir. 1991), and by the California court of appeal in Schoenfeld v. Norberg, 11 Cal. App. 3d 755, 90 Cal. Rptr. 47 (Cal. Ct. App. 1970).*fn2 In addition, the Amended Schedule stated that if the Property were sold, Mr. Kahan would be entitled to $45,000.00 of the sale proceeds pursuant to § 704.730(a)(2).

On September 24, 1991, the Trustee filed an Objection to Amended Homestead Exemption, asserting that Mr. Kahan's homestead exemption is limited to $45,000.00. The bankruptcy court entered an Order sustaining the Trustee's objections to Mr. Kahan's Amended Schedule.

Mr. Kahan appealed to the district court. The district court agreed with the bankruptcy court's analysis and affirmed the Order. Mr. Kahan appeals.*fn3


We review the bankruptcy court's findings of fact for clear error and its Conclusions of law de novo. Briggs v. Kent (In re Professional Inv. Properties of America), 955 F.2d 623, 626 (9th Cir.), cert. denied, 113 S. Ct. 63 (1992).

The bankruptcy estate includes all of the debtor's interests in property at the commencement of the case, except property that the debtor elects to exempt based on applicable federal or state law. 11 U.S.C. §§ 541(a), 522 (b)(2). California has a homestead exemption statute. Under that statute, "the proceeds of sale [of a homestead] . . . are exempt in the amount of the homestead exemption provided in Section 704.730." Cal. Civ. Proc. Code § 704.720(b) (West 1982). When Mr. Kahan filed his Chapter 11 petition, section 704.730 provided for a homestead exemption in the amount of $45,000. Cal. Civ. Proc. Code § 704.730(a)(2) (exemption for judgment debtor who, at the time of an attempted sale, is a member of a family unit, if at least one family member owns no interest in the homestead); Hyman v. Plotkin (In re Hyman), 967 F.2d 1316, 1318 n.2 (9th Cir. 1992) (ignoring as irrelevant post-petition statutory amendment that increases the applicable exemption amount) (citing Harris v. ...

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