[00:00:00] Speaker 04:
Okay, let's call the next matter in ray thomas thomas j polis council for appellant william v thomas Rosendo Gonzales chapter 7 trustee appellee

[00:00:48] Speaker 02:
Uh, good morning, your honor.

[00:00:51] Speaker 02:
Uh, I'm Tom Polis on behalf of the appellant, uh, William Thomas, the debtor.

[00:00:55] Speaker 03:
Okay.

[00:00:56] Speaker 02:
And as far as the court's initial inquiry on the last matter, I guess I'll reserve five minutes.

[00:01:01] Speaker 02:
Okay.

[00:01:02] Speaker 02:
I appreciate the court's interplay because, as your honors are sure aware, by the time we get to this point, we're kind of

[00:01:08] Speaker 02:
argued out, so to speak, as far as other issues.

[00:01:11] Speaker 02:
Oh, I hope not.

[00:01:12] Speaker 02:
And not argued out, but as far as spinning it out, so to speak, I should say.

[00:01:16] Speaker 03:
No, no.

[00:01:16] Speaker 03:
It's very exciting to be standing where you are.

[00:01:18] Speaker 03:
And you can lose track of time.

[00:01:19] Speaker 03:
I get it.

[00:01:20] Speaker 03:
No, I appreciate that.

[00:01:21] Speaker 02:
OK.

[00:01:21] Speaker 02:
So five minutes.

[00:01:21] Speaker 02:
I'm in a bit of a schedule span, so I keep an eye on the clock.

[00:01:24] Speaker 02:
OK.

[00:01:24] Speaker 02:
I know everything happens in an NBA game in the last five minutes.

[00:01:27] Speaker 02:
OK.

[00:01:28] Speaker 02:
Again, I appreciate it.

[00:01:29] Speaker 02:
Again, we briefed this.

[00:01:32] Speaker 02:
I'm just going to maybe hit the highlights.

[00:01:34] Speaker 02:
And I'm sure your honors will have questions for me.

[00:01:37] Speaker 02:
We're here to deal with the issue of whether the debtors allowed an exemption in various accounts.

[00:01:45] Speaker 02:
We believe, notwithstanding Judge Brand, great judge.

[00:01:48] Speaker 02:
In fact, I sat next to her at a UCLA basketball game a couple weeks ago accidentally.

[00:01:53] Speaker 02:
Is that a disclosure?

[00:01:55] Speaker 02:
We can disclose that, sure.

[00:01:56] Speaker 02:
She's Class of 81, I'm Class of 82.

[00:01:59] Speaker 02:
Anyways, she kind of looked at me when I walked in and kind of rolled her eyes, but I'm used to it.

[00:02:03] Speaker 02:
Anyways, the point is, we believe, the debtor believes, I believe, on behalf of the debtor, that reversible error was committed.

[00:02:10] Speaker 02:
I know that's abuse of discretion.

[00:02:12] Speaker 02:
I know that's a very high burden, a very tough burden to match, but we believe in this case that that happened.

[00:02:20] Speaker 02:
Again, as we brief many times, we're talking about various accounts with approximately $113,000.

[00:02:26] Speaker 02:
The debtor, as we noted in various pleadings, and it's undisputed, is at the time of the objection, or time of the petition, a 68-year-old man, which isn't that old anymore.

[00:02:39] Speaker 02:
I know that now but the point is has health problems is basically unemployable and in a hundred thirteen thousand dollars of partial part of that is pre-tax money in an annuity that That he will need that money for his retirement and he doesn't have any dependencies just himself but the point is

[00:03:03] Speaker 02:
The court didn't focus like she should have on the needs issues.

[00:03:08] Speaker 02:
It was kind of glossed over.

[00:03:10] Speaker 02:
I mean, the debtor's schedules I and J showed that the debtor was running approximately a $2,000 a month deficit as of the date of the petition.

[00:03:19] Speaker 02:
And on an annual basis, what's 20, $25,000, $113,000 goes pretty quick.

[00:03:27] Speaker 02:
The fact that the debtor, again, not old in this day and age, but still,

[00:03:33] Speaker 02:
not young either, and was essentially unemployable because of his health problems that we noted, his diabetic issues, his coronary issues, and the fact that the debtor's sole source of employment for the 20-plus years prior to the bankruptcy was a high-end outdoor furniture store that he had out in the desert, which we also had filed a Chapter 7 for that entity.

[00:03:56] Speaker 02:
So the assets the debtor had for his expected retirement, he needed it all.

[00:04:03] Speaker 02:
And as far as the court addressing, he won't need this because of this issue or that issue, there wasn't that specificity.

[00:04:13] Speaker 02:
I know the burden is on the debtor to show that I need this money, I need it for my future.

[00:04:18] Speaker 02:
I believe we met that burden.

[00:04:20] Speaker 02:
And as far as sort of shifting the burden to say, no, you don't need that, you don't need this, you don't need that.

[00:04:25] Speaker 02:
And when the debtor's schedules I and J showed at the time of the petition that he was running approximately a monthly $2,000 deficit that he had to get somewhere, I think speaks volumes.

[00:04:40] Speaker 02:
And keep in mind, this case was filed in early 2024.

[00:04:43] Speaker 02:
The trustee dealt with the, there were many.

[00:04:47] Speaker 02:
7, 8, 9, 10, continued 341A hearings where we kept providing documents to the trustee, bank statements, checks, et cetera.

[00:04:57] Speaker 02:
And the point is the objection to the exemption was finally filed, I believe, in March or April of 25, nearly a year and a half after the bankruptcy was filed, or maybe a year and two or three months, about a year and a half.

[00:05:10] Speaker 02:
From the point of the petition to the point that the objection was filed, the debtor had incurred, I think it was, we itemized it, approximately $20,000 in extraordinary expenses.

[00:05:21] Speaker 02:
He lives in a house that's 75 years old.

[00:05:23] Speaker 02:
Things will happen.

[00:05:25] Speaker 02:
He had car issues.

[00:05:27] Speaker 02:
He had to pay additional legal fees to deal with the objections.

[00:05:29] Speaker 02:
So things come up.

[00:05:31] Speaker 02:
Things will come up in life.

[00:05:33] Speaker 02:
Notwithstanding, we like certainty at certain points in our life.

[00:05:37] Speaker 02:
But the point is,

[00:05:39] Speaker 02:
We don't believe that the court, essentially the court did abuse her discretion when she did not find that the monies that the debtor was trying to say or trying to assert was exempt for his future retirement, that she didn't object or excuse me, meaningfully beat our burden, so to speak.

[00:06:03] Speaker 02:
And some of the issues that were brought up in the court's final ruling was, for example, that, oh, the debtor has excess equity in his homestead.

[00:06:13] Speaker 02:
Well, he has homestead equity protected.

[00:06:15] Speaker 02:
Excuse me.

[00:06:16] Speaker 02:
Equity in his homestead that's covered by the exemption.

[00:06:19] Speaker 02:
I don't think there's a case that says that the court can look at the

[00:06:24] Speaker 02:
Equity homes a homestead equity in a debtor's home.

[00:06:28] Speaker 05:
I mean let me let me interrupt you on that sure so This is under the california's code of civil procedure exemptions correct.

[00:06:36] Speaker 05:
This is a necessities Exemption it's it's necessary for the support of the the debtor judgment debtor

[00:06:45] Speaker 05:
But California CCP 703.115 says that there's an additional requirement when a judgment debtor asserts a necessities Exemption and it requires the court to take into account all property of the judgment debtor whether or not such property is subject to enforcement of the money judgment now I know that's not a quote, but that's my understanding of that section so This is a necessities exemption doesn't the California code require judge brand

[00:07:15] Speaker 05:
Take into account all other property of the judgment debtor whether or not such property is subject to enforcement of the money judgment So I think it required her to take into account What equity the debtor had in his property and the IRA that the debtor had?

[00:07:33] Speaker 02:
Well as far as to address your honors issue on the equity in the homestead that's not a liquid asset I mean he would have to sell that home and

[00:07:41] Speaker 05:
I don't, but that's not what the code requires.

[00:07:46] Speaker 05:
The California code requires the court to take it into effect.

[00:07:49] Speaker 05:
It doesn't say you have to liquidate it.

[00:07:51] Speaker 05:
It just says what other property does the debtor have when you're analyzing whether or not the exemption is something that's necessary for the support of the debtor.

[00:08:00] Speaker 05:
I don't think the California, it says whether or not it's subject to enforcement of a money judgment.

[00:08:07] Speaker 02:
Well, that wouldn't be available for enforcement.

[00:08:10] Speaker 02:
In the event of a money judgment, theoretically, as you raised on the last case, if there was no bankruptcy filing, the debtor could assert that homestead exemption, and there's nothing a judgment creditor could do.

[00:08:24] Speaker 05:
I understand that.

[00:08:25] Speaker 05:
I'm not disagreeing with that.

[00:08:28] Speaker 05:
What I'm saying is that under California law,

[00:08:31] Speaker 05:
under the California Civil Procedure Code, Section 703.115, when the court is looking at a necessities exemption, where the exemption is to the extent of the support of the judgment debtor, among other things, the court's required to take into account all property of the judgment debtor, whether or not that property

[00:08:53] Speaker 05:
is subject to enforcement.

[00:08:55] Speaker 05:
So what I'm saying is doesn't California Civil Procedure Code section 703.115 require Judge Brand to look at the equity of the residents and to look at the IRA in her evaluation of whether or not the deposit accounts were necessary for the support of the debtor?

[00:09:22] Speaker 02:
causing additional problems for my case here, since I am the appellant.

[00:09:25] Speaker 02:
You referred to CCP 703, but I believe the debtor asserted various exemptions under 704.

[00:09:32] Speaker 02:
We have, as Your Honor was aware, we have the two different tracks in California, and my debtor has asserted the 704 exemptions.

[00:09:40] Speaker 05:
So the 703 exemption you're referring to, I don't know if that's... I will double check, but I'm pretty sure that that is how you interpret the exemptions under 703 and 704.

[00:09:52] Speaker 02:
Again, using the sort of illiquid homestead exemption.

[00:10:01] Speaker 01:
You say it's illiquid, okay, but if you're looking at what is needed, you know, the necessity of this debtor to survive after bankruptcy, if a debtor has a homestead and they don't have and they're not going to lose their home because they can protect it from their homestead, they don't have to go out and spend money to rent a property.

[00:10:20] Speaker 01:
I mean, isn't that?

[00:10:21] Speaker 01:
related to their necessity, they need money to survive what's necessary to survive.

[00:10:29] Speaker 01:
And if they don't, and because if they have a homestead, they may not need to spend money on rent.

[00:10:36] Speaker 02:
Well, yeah, of course, yeah, you get the choice.

[00:10:40] Speaker 02:
Are you going to pay rent or are you going to pay a mortgage payment and own a home?

[00:10:43] Speaker 02:
This debtor owns a home, he pays a mortgage.

[00:10:46] Speaker 01:
Well, but the equity that you're exempting is above

[00:10:50] Speaker 01:
is the value over and above the mortgage?

[00:10:54] Speaker 02:
Yeah, it's the equity within the debtor's homestead exemption.

[00:10:58] Speaker 02:
I mean, it was substantially below.

[00:10:59] Speaker 02:
In this case, it was filed in 24.

[00:11:01] Speaker 02:
In early 24, the homestead exemption in California, after I believe it was 1-1 to 21, jumped to 600,000 plus.

[00:11:10] Speaker 02:
But I don't, again, I don't see that we're sort of mixing apples and oranges here that, oh, debtor, you're kind of low on cash but you have a sizable home set exemption or equity in your home set.

[00:11:24] Speaker 02:
Well, there's nothing that debtor can do with that equity.

[00:11:28] Speaker 01:
And I just think... Yeah, you take a mortgage.

[00:11:30] Speaker 01:
Let's say the mortgage is $100,000 and the debtor takes the equity in the house above that and claims it is exempt.

[00:11:38] Speaker 01:
The payments on $100,000 mortgage turn out to be a lot less than what it would be to rent a property as an alternative.

[00:11:45] Speaker 01:
So you look at that, the fact that they can save the home and by doing it, by using that homestead exemption, they are eliminating the necessity to pay more for a piece of property.

[00:11:57] Speaker 01:
Doesn't that all work together in determining whether or not it was necessary for this debtor to save these other funds?

[00:12:05] Speaker 01:
Because they wouldn't have need some of it to pay rent.

[00:12:09] Speaker 02:
Well, I guess, I mean, I guess my response to that is, okay, he owns a home, the debtor owns a home, owns a half-interest in a home, and the debtor doesn't have to pay rent.

[00:12:21] Speaker 02:
But by owning that home, to keep this 75-plus-year-old home in Long Beach, you know, things will happen.

[00:12:27] Speaker 02:
And we talked about that in expenses that were incurred from the date of the petition until the objection came up, the exemption objection.

[00:12:36] Speaker 03:
There's you know there was roofing issues and things that will happen so Maybe then you want to think about this and reserve time I?

[00:12:46] Speaker 03:
Think to judge Neiman's point what the California legislature told judge brand to do was look at the overall assets including those that might have been protectable You know under exemptions theories and that when you're talking about necessity the question wasn't could he get a reverse mortgage and

[00:13:01] Speaker 03:
Which is kind of where you're going here, right?

[00:13:03] Speaker 03:
That's not up to her.

[00:13:05] Speaker 03:
What's up to her is, were there assets?

[00:13:07] Speaker 03:
And the answer was yes.

[00:13:09] Speaker 03:
So if you want to pause at that point and think about that, you're at three minutes now.

[00:13:13] Speaker 02:
I reserve five, so I'm underneath.

[00:13:15] Speaker 02:
Yeah.

[00:13:16] Speaker 02:
So I guess I will, unless your honors have a question for me, I guess.

[00:13:20] Speaker 03:
You want to reserve now?

[00:13:20] Speaker 03:
Yeah, I'll make you the other side.

[00:13:22] Speaker 02:
Okay.

[00:13:22] Speaker 02:
Do I hit the buzzer?

[00:13:23] Speaker 02:
No, no, you're all good.

[00:13:24] Speaker 02:
We're good?

[00:13:24] Speaker 03:
Okay, thanks.

[00:13:25] Speaker 03:
Thank you.

[00:13:27] Speaker 03:
Okay.

[00:13:32] Speaker 00:
Good morning.

[00:13:33] Speaker 00:
May it please this panel?

[00:13:35] Speaker 00:
My name is Rosina Gonzalez.

[00:13:36] Speaker 00:
I'm the Chapter 7 trustee.

[00:13:38] Speaker 00:
I'm accompanied by Sergeant Gonzalez of Gonzalez-Gonzalez Law, who's my general bankruptcy counselor in this case.

[00:13:44] Speaker 00:
I'm going to try to cover the points that Mr. Paul has raised, but I want to start with Judge Neiman's point.

[00:13:51] Speaker 00:
Actually, the statute, CCP 703-580, which is the one that requires the burden of proof on the debtor regarding the exemption, actually says,

[00:14:02] Speaker 00:
If a claim of exemption assets that money in a judgment debtor's deposit account is or was necessary for support of the judgment debtor as provided in section 704.225, the court shall review

[00:14:17] Speaker 00:
The judgment debtor financial statement, it made findings thereon.

[00:14:20] Speaker 00:
So it ties that 703.115 with the 704.225, which was the point that Judge Dingman was trying to raise, just because the debtor is asserting the 704.225 to the extent necessary.

[00:14:34] Speaker 03:
So that's a rule of construction that would be recoverable.

[00:14:36] Speaker 00:
That's right.

[00:14:36] Speaker 00:
That's right.

[00:14:37] Speaker 00:
That's right.

[00:14:37] Speaker 00:
So it's not just because it's 704, you can't look at the 703 statute, which is on point, the 703.115.

[00:14:45] Speaker 00:
The argument about this schedule INJ, the 2000 deficit, that's absolutely not true.

[00:14:52] Speaker 00:
There were three sets of amended schedules, INJ, and as Judge Brand specifically noted as part of on the record and on her ruling, the final schedule INJ, the deficit was 477.14, not $2,000.

[00:15:10] Speaker 00:
In addition to that, as Judge Brand also pointed out, there was a double counting because there were

[00:15:15] Speaker 00:
counting for the property taxes, even though they already counted another $2,400 that had been paid for the property taxes.

[00:15:22] Speaker 00:
So it's probably lower than the $4,7714, not $2,000 deficit, as Mr. Apolo stated.

[00:15:29] Speaker 00:
That's not true.

[00:15:30] Speaker 00:
The argument about any expense incurred after the bankruptcy petition is irrelevant.

[00:15:36] Speaker 00:
There's case law that I set forth on my appellate brief where exemptions are determined as of the day of the bankruptcy filing.

[00:15:43] Speaker 00:
Anything afterwards, it's irrelevant.

[00:15:46] Speaker 00:
And Judge Brand focused as of the day of the bankruptcy filing, what was the evidence before her at that time.

[00:15:53] Speaker 00:
Regarding the medical expenses, and again, Judge Brand and I cover that in the hearings, and it's on the record.

[00:16:00] Speaker 00:
Judge Wren specifically asked, give me evidence showing these medical expenses.

[00:16:06] Speaker 00:
And the whole argument was specific to those three years before the bankruptcy filing.

[00:16:11] Speaker 00:
where within 60 days before their bankruptcy filing, the debtor disappeared $93,000.

[00:16:16] Speaker 00:
And there was no evidence how that was spent.

[00:16:18] Speaker 00:
But Judge Brand gave him three opportunities.

[00:16:20] Speaker 00:
Give me evidence how you have these extraordinary expenses that somehow is going to create an additional necessity going forward, even though that the debtor had insurance, I said, for in Schedule J. The only thing that was provided in respect to any medical expenses was $5,000 for the three years

[00:16:39] Speaker 00:
Prior to the bankruptcy filing and out of that 2000 was for the dental expenses so there was no evidence regarding all these extraordinary medical expenses not zero.

[00:16:52] Speaker 00:
about this whole discussion about the assets at no time that Judge Brand said you need to get a refinance or you need to sell the property.

[00:17:02] Speaker 00:
I know that Mr. Paulus made that point on his appellate brief, but there was nothing on the record.

[00:17:07] Speaker 00:
Judge Brand simply noted, as she's required, and in fact, I actually quoted case law, State Court O'Brien, where you're supposed to look and you're required to look,

[00:17:19] Speaker 00:
the debtor's assets, the totality of those assets.

[00:17:23] Speaker 00:
Judge Brand simply stated for the record, which is accurate, the debtor had not only the equity on the property of almost $400,000, the debtor also has his IRA.

[00:17:33] Speaker 00:
They had over $300,000.

[00:17:35] Speaker 00:
She didn't say you have to sell it.

[00:17:37] Speaker 00:
She didn't say you have to get a finance.

[00:17:39] Speaker 00:
She just looked at the totality of the debtor's assets to make that conclusion.

[00:17:45] Speaker 00:
If we take Mr. Paula's argument, what about if there was no bankruptcy filing?

[00:17:50] Speaker 00:
In state court, it would be the same thing.

[00:17:53] Speaker 00:
A creditor can still go after these CDs, the bank accounts, the annuity under the same argument.

[00:18:01] Speaker 00:
It will still be the same thing.

[00:18:02] Speaker 00:
So if you're not filing for bankruptcy, a creditor can still try to go after those assets.

[00:18:08] Speaker 00:
And it will still be the same analysis under state law under 703, 115, whether it's necessary.

[00:18:14] Speaker 00:
So the analysis doesn't change whether it's in bankruptcy court or state court.

[00:18:21] Speaker 00:
I know that Mr. Polisario with the argument that somehow George Brown abused his discretion.

[00:18:27] Speaker 00:
There's nothing on the record showing that she abused her discretion.

[00:18:30] Speaker 00:
She didn't commit any error.

[00:18:31] Speaker 00:
She looked at the evidence she's required to look at.

[00:18:34] Speaker 00:
I understand.

[00:18:35] Speaker 00:
The debtor in an appellant doesn't like the result, but that's not a basis to show abuse of discretion.

[00:18:42] Speaker 00:
You actually have to show where she made a mistake.

[00:18:45] Speaker 00:
And this is, and again, I'm a bankruptcy trustee, and I probably ran involved, I don't know, 30, 40,000 cases.

[00:18:51] Speaker 00:
In this case, Judge Brand bent backwards.

[00:18:54] Speaker 00:
She allowed three different sets of supplemental breathing.

[00:18:57] Speaker 00:
She allowed three hearings on this.

[00:19:00] Speaker 00:
She gave the debtor over and over an opportunity to provide evidence, which by law, he has the burden of proof.

[00:19:07] Speaker 00:
There's nothing before Judge Brand to justify that these $116,000 of cash is necessary in view of all the assets.

[00:19:17] Speaker 00:
And I don't have anything more to add unless this panel has any questions.

[00:19:21] Speaker 05:
Thank you very much.

[00:19:23] Speaker 00:
Thank you for giving me the opportunity.

[00:19:25] Speaker 05:
Thank you.

[00:19:33] Speaker 02:
I have nothing further unless the court has any, the panel has any questions of me again.

[00:19:39] Speaker 02:
I believe the debtor sustained his burden to show that these funds were necessary.

[00:19:45] Speaker 02:
And as far as the trustee's comments

[00:19:50] Speaker 02:
Yeah, it's standard bankruptcy.

[00:19:52] Speaker 02:
We all know this, all of us bankruptcy specialists, that exemptions are determined on the petition date.

[00:19:58] Speaker 02:
But what we showed the court, that the necessity, the need for future unknown expenses, wherever they would come from, that occurred from the date of the petition until the objection was filed sometime a year, year and a half later.

[00:20:14] Speaker 02:
I think it was very much relevant to show that who knows what will happen in the future and that this $113,000 that we're asserting should be fully exempt would be needed in the future based on what the debtor incurred from the petition date to the date of the objection.

[00:20:32] Speaker 02:
It wasn't as if the debtor was, you know, going to tropical islands, you know, sitting on beaches at $1,000 a night hotels, the necessity issues.

[00:20:42] Speaker 02:
as far as car expenses, house expenses, et cetera, health expenses, et cetera.

[00:20:47] Speaker 02:
We believe those all fall within the necessity requirement.

[00:20:51] Speaker 02:
I have nothing further unless the panel has anything of me.

[00:20:54] Speaker 03:
I do not.

[00:20:55] Speaker 03:
No.

[00:20:56] Speaker 02:
Thank you.

[00:20:56] Speaker 02:
Thank you.

[00:20:56] Speaker 02:
Thank you.

[00:20:57] Speaker 02:
Thank you both.

[00:20:57] Speaker 02:
Thank you.

[00:20:58] Speaker 03:
The matter is submitted and we'll get your written decision as soon as we can.

[00:21:01] Speaker 03:
Thank you very much.

[00:21:02] Speaker 03:
Thank you.

[00:21:02] Speaker 03:
Nice to see you all.

[00:21:03] Speaker ?:
Okay.