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In re Altick

November 13, 2012

IN RE: HARRY PALMER ALTICK, DEBTOR.
HARRY PALMER ALTICK, APPELLANT,
v.
LINDA S. GREEN, CHAPTER 7 TRUSTEE, APPELLEE.



Appeal from the United States Bankruptcy Court for the Northern District of California Honorable Alan Jaroslovsky, Chief Bankruptcy Judge, Presiding Bankr. No. 08-10419

MEMORANDUM*fn1

Argued and Submitted on October 18, 2012 at San Francisco

Before: PAPPAS, MARKELL and HOLLOWELL, Bankruptcy Judges.

Appellant Harry Palmer Altick ("Altick") appeals the order of the bankruptcy court sustaining the objection of chapter 7*fn2 trustee Linda S. Green ("Trustee") to Altick's claim of exemption. We AFFIRM.

FACTS

Altick is a senior investment advisor for Sperry van Ness/Commercial Realty Group, specializing in the sale of multifamily and office properties in Sonoma, Marin and Alameda counties. He has over thirty-three years of experience in such sales. Altick also personally invests in these properties.

Apparently, Altick's investments in certain properties had rapidly declined in value by 2008 and he was forced to file for bankruptcy. He was also involved in proceedings in state court at that time for the division of marital property with his former spouse. One of his investments was a 50 percent member's interest in Gold Dome, LLC ("Gold Dome"). Gold Dome owned a luxury home and three adjacent lots in Cabo San Lucas, Baja California Sur, Mexico. On March 11, 2008, the state court judge ordered the sale of Altick's interest in Gold Dome for $350,000. A wire transfer of $350,000 was sent that day from the purchaser, Sidney Ingram, to the special account authorized by the state court.

The sale was stopped when, that same day, Altick filed a petition for relief under chapter 11. According to the disclosures in Altick's original bankruptcy schedule B, he owned 50 percent of the equity in Gold Dome; he valued Gold Dome at $3 million with $960,000 in debt. Altick valued his member's interest in the LLC as "unknown." He did not claim an exemption in this interest; however, Altick did claim a homestead exemption under Cal. Code Civ. P. § 704.950 in his residential real property in Greenbrae, California. Altick's schedule F listed $43,115.95 in priority unsecured claims, and $423,073.14 in general unsecured claims.

On February 9, 2009, Altick filed a proposed chapter 11 plan and disclosure statement. The plan provided for payments of $43,200 to unsecured creditors, which presumably would all go to the priority unsecured claims, with nothing to the general unsecured claims. Altick's disclosure statement also stated: "The alternative liquidation in chapter 7 would likely net no distribution to unsecured creditors as set forth in the Liquidation Analysis attached hereto as Exhibit A." The liquidation analysis predicted a negative $26,400 for distribution after a hypothetical liquidation of Altick's nonexempt assets. Among the listed assets was Altick's member's interest in Gold Dome, which he indicated had a value of $900,000, debts of $960,000, no exemption, and no net equity. This disclosure statement, with a minor amendment not affecting the Gold Dome analysis, was approved by the bankruptcy court on February 24, 2009. The plan was confirmed by the bankruptcy court on April 20, 2009.

The United States Trustee ("UST") moved to dismiss or convert Altick's chapter 11 case to one under chapter 7 on January 27, 2011. The UST informed the bankruptcy court that Altick had failed to pay accrued UST fees, and alleged Altick was not current on payments under the plan. Altick filed a voluntary motion to convert the case to chapter 7 on March 4, 2011, admitting that he could not make the required payments under the confirmed plan. The bankruptcy court ordered conversion to chapter 7 the same day. Ms. Green was appointed to serve as chapter 7 trustee.

Altick was examined at a § 341(a) meeting of creditors on April 20, 2011. In response to Trustee's request for information about Gold Dome, Altick testified that:

It is a limited liability company that I own -- I have a 50 percent interest. Unfortunately, the property in Cabo which is -- the real estate has been a negative cash flow every year, and that market I have been told by the brokers has a 45-year supply of inventory of properties for sale, and things are not selling. So, in my opinion, I have really no equity in that property, or the LLC.

§ 341(a) Hr'g Tr. 4:20--5:2, April 20, 2011. Based on Altick's denial of equity in Gold Dome and other assets, Trustee filed a Notice of No Distribution on April 22, 2011.

Shortly after filing the No Asset report, Trustee was contacted by the other members of Gold Dome, Patrick and Yolanda Lopez, who offered to purchase the bankruptcy estate's interest in Gold Dome for $10,000. Trustee filed a motion to approve the sale on May 20, 2011 (the "Sale Motion").

Two weeks later, on June 2, 2011, Altick filed an Amended schedule C, and for the first time claimed a $21,000.00 "wildcard" exemption in his interest in Gold Dome under Cal. Code Civ. Proc. § 703.140(b)(5), listing the value of the asset as "Unknown." The amended schedule also omitted, and presumably withdrew, the homestead exemption Altick had previously claimed on the Greenbrae property. Altick also objected to the Sale Motion.

Trustee objected to Altick's attempt to amend his claim of exemptions on June 8, 2011 (the "Exemption Objection"). Trustee argued that Altick had acted in bad faith by filing the amended schedule C only after he learned that his interest in Gold Dome would be sold by Trustee. Trustee suggested that creditors, who relied on Altick's statements in the disclosure statement in the chapter 11 case that all his assets were declining in value, would be prejudiced by allowing the amended exemption claim. Finally, Trustee argued that under this Panel's ruling in In re Wolfberg, 255 B.R. 879 (9th Cir. BAP 2000), Altick could not amend his claim of exemption after the confirmation of his plan because the plan had the preclusive effect of a final judgment.

A hearing on Trustee's Sale Motion was conducted by the bankruptcy court on June 10, 2011. The court overruled Altick's objection to the sale for the "reasons for decision on the record." A transcript of that hearing is not in the record. After the Lopezes agreed to increase the purchase bid to $40,000, the court approved the sale. Altick has not appealed that ruling.

Also on June 10, Altick's attorney requested to withdraw from the case. In counsel's declaration attached to the request, counsel stated that "Debtors [sic] continue to 'have questions' and to desire to take positions inconsistent with his testimony which cannot be reconciled. It is not ethically possible for me to continue in the representation of the Debtor." Chandler Dec. at ¶¶ 6-7, June 10, 2011.

The bankruptcy court held its first hearing on the Exemption Objection on August 22, 2011. A transcript of that hearing is not in the excerpts of record or the court's docket. The bankruptcy court issued a Memorandum on Objection the same day ("Memorandum I"). In it, the court ruled in favor of Altick on the legal question argued by Trustee: "The court finds that confirmation of Altick's Chapter 11 plan did not divest Altick of his ability to amend his claim of exemptions on conversion to chapter ...


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