“[P]rinciples 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).”
How later courts described this case
- “[P]rinciples 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).”
Written by the judges who cited it.
The opinion
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE: LENORE L. ALBERT, ESQUIRE, No. 20-60006
Debtor,
BAP No.
19-1027
LENORE L. ALBERT, ESQUIRE, AKA
Lenore L. Albert-Sheridan, DBA Law
Offices of Lenore Albert, OPINION
Appellant,
v.
JEFFREY IAN GOLDEN, Chapter 7
Trustee,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Spraker, Gan, and Taylor, Bankruptcy Judges, Presiding
Submitted February 10, 2021 *
Pasadena, California
Filed June 10, 2021
*
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
2 IN RE ALBERT
Before: Richard C. Tallman, Consuelo M. Callahan, and
Kenneth K. Lee, Circuit Judges.
Opinion by Judge Callahan
SUMMARY **
Bankruptcy
The panel affirmed the Bankruptcy Appellate Panel’s
decision affirming the bankruptcy court’s rejection of a
debtor’s attempt to exempt two assets from her estate.
Debtor petitioned for Chapter 13 bankruptcy and sought
to exempt from her estate counterclaims she had filed in state
court against Ford Motor Credit Company, as well as
accounts receivable from former clients. The bankruptcy
court sustained the objections of the Chapter 13 trustee and
Ford on the grounds that the counterclaims and accounts
receivable failed to satisfy California’s exemption laws, and
debtor did not timely appeal those rulings. The bankruptcy
court converted the Chapter 13 proceeding to Chapter 7 and
appointed a new trustee. Debtor amended her exemptions,
and the trustee objected that the amended exemptions were
identical to those the court had previously rejected and that,
as a result, the doctrines of issue and claim preclusion barred
their relitigation. The bankruptcy court denied the amended
exemptions, and the BAP affirmed.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
IN RE ALBERT 3
The panel held that bankruptcy courts can deny
exemptions simply because they have denied the same
exemptions before. The panel held that Law v. Siegel, 571
U.S. 415 (2014) (bankruptcy courts’ equitable powers must
yield to the Bankruptcy Code’s more specific mandates),
does not bar courts from denying exemptions on the
judicially created doctrines of issue and claim preclusion
where, as here, the debtor is not statutorily entitled to the
exemptions. The panel further held that the bankruptcy court
properly disallowed debtor’s exemptions on issue preclusion
grounds.
COUNSEL
Lenore L. Albert, pro se, Westminster, California, for
Appellant.
Eric P. Israel, Aaron E. de Leest, and Sonia Singh, Danning,
Gill, Israel & Krasnoff, LLP, Los Angeles, California, for
Appellee.
4 IN RE ALBERT
OPINION
CALLAHAN, Circuit Judge:
Lenore Albert appeals the Bankruptcy Appellate Panel’s
rejection of her attempt to exempt two assets from her estate.
We affirm and, in doing so, clarify that a bankruptcy court’s
prior rejection of claimed exemptions carries preclusive
weight, even after Law v. Siegel, 571 U.S. 415 (2014). We
further hold that the bankruptcy court properly deemed
Albert’s claims precluded.
I.
Albert petitioned for Chapter 13 bankruptcy and, as
relevant here, sought to exempt from her estate
counterclaims she had filed in state court against Ford Motor
Credit Company, as well as accounts receivable from former
clients. In a schedule itemizing these exemptions, Albert
listed each asset as worth “$500,000 TBD.” She cited
California Code of Civil Procedure sections 704.140 and
704.210 as the bases for exempting her counterclaims, and
section 704.210 as the basis for exempting her accounts
receivable. Section 704.140 allows debtors to keep awards
arising from personal-injury suits, provided the money is
needed to support the debtor or her dependents. Section
704.210 automatically exempts “[p]roperty that is not
subject to enforcement of a money judgment.”
The Chapter 13 trustee and Ford, which in addition to
defending against Albert’s counterclaims was one of her
creditors, objected to the exemptions. They argued that
Albert had not shown that any recovery from her
counterclaims would be necessary for her support, as
section 704.140 requires, and that she identified no statute
immunizing her assets from the enforcement of a money
IN RE ALBERT 5
judgment, as section 704.210 requires. After a hearing the
bankruptcy court sustained the objections, and Albert did not
timely appeal those rulings.
Shortly thereafter, the bankruptcy court converted
Albert’s Chapter 13 proceeding to Chapter 7 and appointed
a new trustee, Jeffrey Golden. Golden moved to settle
Albert’s counterclaims, and Albert amended her exemptions
the following month. By and large the amended schedule
remained the same as the initial one. Albert again listed her
counterclaims and accounts receivable as exempt and valued
at $500,000 each. The purported bases for the exemptions
likewise went unchanged. But Albert now somehow
claimed for herself $1.93 million of her counterclaims’
purported $500,000 value.
Golden objected that Albert’s amended exemptions were
identical to those the court had previously rejected and that,
as a result, the doctrines of issue and claim preclusion barred
their relitigation. Golden also urged the court to reject
Albert’s amended exemptions on the merits. Albert then
tried to appeal to the BAP the orders sustaining the original
objections. She argued that those orders were not final,
given that the bankruptcy judge had commented at the
hearing that its denial would be without prejudice. The BAP
disagreed and dismissed Albert’s appeal as untimely—a
decision Albert never appealed.
While Albert was belatedly litigating the denial of her
initial exemptions before the BAP, she failed to timely
oppose Golden’s objections to her amended schedule in the
bankruptcy court. The night before a hearing on the matter,
she submitted a 419-page document incorporating portions
of her previous filings. The court declined to consider this
late-filed material and denied her amended exemptions,
deeming them precluded by dint of their earlier rejection.
6 IN RE ALBERT
Albert unsuccessfully appealed that decision to the BAP.
She then appealed to this court.
II.
We review BAP decisions de novo, applying “the same
standard of review that the BAP applied to the bankruptcy
court’s ruling.” In re Boyajian, 564 F.3d 1088, 1090 (9th
Cir. 2009). Accordingly, we review the bankruptcy court’s
legal conclusions de novo, its factual findings for clear error,
and its application of issue preclusion for an abuse of
discretion. In re Cherrett, 873 F.3d 1060, 1064 (9th Cir.
2017); Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006).
III.
A.
The filing of a bankruptcy petition creates an estate
comprising the debtor’s property, including the debtor’s
claims against third parties. 11 U.S.C. § 541(a); Sierra
Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705,
709 (9th Cir. 1986). In Chapter 7 proceedings, an appointed
trustee liquidates the estate to satisfy creditors. 11 U.S.C.
§§ 704(a)(1), 726. The debtor can, however, seek to
“exempt” certain assets from the estate, and thus from
liquidation, to allow for a “fresh start” after bankruptcy. Id.
§ 522(b)(1); United States v. Sec. Indus. Bank, 459 U.S. 70,
72 & n.1 (1982). The Bankruptcy Code lists exemptable
property, but since California has opted out of the federal
exemptions and promulgated its own, the state’s exemptions
apply. See 11 U.S.C. § 522(b)(2); Cal. Code Civ. Proc.
§ 703.130; see also Gladstone v. U.S. Bancorp, 811 F.3d
1133, 1142 (9th Cir. 2016).
IN RE ALBERT 7
B.
We first address whether bankruptcy courts can deny
exemptions simply because they have denied the same
exemptions before. The question seems straightforward.
After all, the Bankruptcy Code empowers its courts to “issue
any order, process, or judgment . . . to carry out” its
provisions, 11 U.S.C. § 105(a), and the Supreme Court has
long applied preclusion doctrines in the bankruptcy setting,
see, e.g., Katchen v. Landy, 382 U.S. 323, 334 (1966);
Heiser v. Woodruff, 327 U.S. 726, 736 (1946).
Unsurprisingly, then, the BAP has often invoked the
doctrines to reject repeatedly claimed exemptions. See, e.g.,
In re Cogliano, 355 B.R. 792, 802–05 (B.A.P. 9th Cir.
2006); In re Magallanes, 96 B.R. 253, 256–57 (B.A.P. 9th
Cir. 1988). Albert nonetheless contends that Law v. Siegel,
571 U.S. 415 (2014), abrogated those decisions by barring
courts from denying exemptions on equitable grounds. In
her view, this prohibition includes the judicially created
doctrines of issue and claim preclusion.
We disagree, as Law involved a markedly different
situation. The debtor in that case unquestionably qualified
for the disputed exemption under California’s exemption
statutes. Id. at 423, 426. But based on the debtor’s
misconduct, the bankruptcy court decided to apply the
exemption’s value to fees the trustee had incurred sorting out
the situation. Id. at 420. The Supreme Court reversed.
Pointing out that the Bankruptcy Code prohibits using
exemption funds for administrative expenses like the
trustee’s fees, the Court held that the bankruptcy court
lacked authority to “surcharge” the debtor’s exemption. Id.
at 420–22 (discussing 11 U.S.C. § 522(k)). The Court thus
reiterated the “hornbook” rule that the bankruptcy courts’
equitable powers must yield to the Code’s more specific
8 IN RE ALBERT
mandates. Id. at 421; accord SEC v. U.S. Realty &
Improvement Co., 310 U.S. 434, 455 (1940) (“A bankruptcy
court . . . is guided by equitable doctrines and principles
except in so far as they are inconsistent with the Act.”). And
because no Code provision bars bankruptcy courts from
deeming prior orders preclusive, the conflict animating Law
is not present here.
Certainly, the Court in Law went on to explain that there
must be a “valid statutory basis” for refusing to honor a
debtor’s exemptions. 571 U.S. at 424; see also id. (“[C]ourts
are not authorized to create additional exceptions [to
exemptions].”). But this does not help Albert. In its initial
orders, the bankruptcy court determined that her
counterclaims and accounts receivable failed to satisfy
California’s exemption laws. These were final judgments
“determin[ing] all issues regarding the claimed
exemption[s].” In re Gilman, 887 F.3d 956, 961 (9th Cir.
2018) (quoting In re White, 727 F.2d 884, 886 (9th Cir.
1984)). As Albert appealed those orders too late to the BAP,
and never to this court, they are binding, even if Albert
believes them wrongly decided. See Federated Dep’t Stores,
Inc. v. Moitie, 452 U.S. 394, 398 (1981) (“Nor are the res
judicata consequences of a final, unappealed judgment on
the merits altered by the fact that the judgment may have
been wrong . . . .”). Hence, unlike Law, where the debtor
was statutorily entitled to the exemption, here Albert, by
operation of the earlier orders, is not. Nothing in Law
prevented the bankruptcy court from giving preclusive effect
to that determination.
To hold otherwise would not only undermine the finality
of exemption orders, In re Gilman, 887 F.3d at 961–64, but
would considerably frustrate the trustee’s duty to
expeditiously close the debtor’s estate, see In re Riverside-
IN RE ALBERT 9
Linden Invest. Co., 925 F.2d 320, 322 (9th Cir. 1991).
Debtors can amend their exemptions as a matter of course,
Fed. R. Bankr. P. 1009(a), so if orders denying exemptions
carry no preclusive weight, debtors could delay matters by
claiming the same property as exempt time and time again.
Debtors could also decline to meaningfully press their
claims, and creditors would bear the brunt of such behavior,
as the relitigation of resolved issues would drain estate—not
to mention judicial—resources. Those burdens are precisely
what the preclusion doctrines were designed to avoid, see
Taylor v. Sturgell, 553 U.S. 880, 892 (2008), and they
remain available to the bankruptcy courts when ruling on
previously denied claims.
C.
Having established that the bankruptcy court could
disallow Albert’s exemptions on preclusion grounds, we
turn to whether it properly did so. Because the BAP focused
on issue preclusion, we do the same. That doctrine “bars
successive litigation of an issue of fact or law actually
litigated and resolved in a valid court determination.”
Taylor, 553 U.S. at 892 (internal quotations and citation
omitted). To prevail, the party asserting preclusion must
show that the earlier issue is “identical to the one which is
sought to be relitigated,” that the “first proceeding ended
with a final judgment on the merits,” and that “the party
against whom [issue preclusion] is asserted was a party” to
the first proceeding. In re Reynoso, 477 F.3d 1117, 1122
(9th Cir. 2007) (quoting Reyn’s Pasta Bella, LLC v. Visa
USA, Inc., 442 F.3d 741, 746 (9th Cir. 2006)).
Golden satisfied these requirements. First, Albert’s
initial and amended exemptions are legally identical. Her
amended schedule sought to exempt the same assets as her
earlier one—the counterclaims and accounts receivable—
10 IN RE ALBERT
and it cited to the same California statutes in support—
sections 704.140 and 704.210. So similar are the claims, in
fact, that Golden incorporated the Chapter 13 trustee’s
earlier arguments into his brief opposing Albert’s amended
exemptions, and Albert herself imported parts of her prior
filings into her later one. Second, the bankruptcy court’s
initial, unappealed orders denying Albert’s exemptions were
final orders establishing the parties’ rights as to the assets in
question. 1 See In re Gilman, 887 F.3d at 961–64; see also
Offshore Sportswear, Inc. v. Vuarnet Int’l, B.V., 114 F.3d
848, 851 (9th Cir. 1997) (predicating preclusion on an
unappealed, but appealable, order). And third, Albert was
obviously a party to the proceeding in which her claims had
originally been rejected.
Albert asserts, however, that the issues are not identical
because her amended schedule claimed for herself $1.93
million, rather than “$500,000 TBD,” following Golden’s
settlement of her personal-injury claims against Ford. It is
unclear where she got this number, considering that Ford
settled for $167,500, but the change is immaterial. Whatever
the estimated value of Albert’s counterclaims, she had to
show that the amount she claimed as exempt would be
necessary for her support. In re Gose, 308 B.R. 41, 47–48
(B.A.P. 9th Cir. 2004). Moreover, “the nature and extent of
a debtor’s exemption rights are determined as of the date of
the [bankruptcy] petition.” In re Reaves, 285 F.3d 1152,
1156 (9th Cir. 2002) (quoting In re Herman, 120 B.R. 127,
130 (B.A.P. 9th Cir. 1990)). So regardless of whether the
claims remained contingent or had been reduced to a
1
Albert insists that the bankruptcy court’s initial orders were not
actually final. We need not dwell on this argument because the BAP
rejected it, and Albert never appealed that decision. She cannot
collaterally attack it now. See In re Liu, 611 B.R. 864, 881 (B.A.P. 9th
Cir. 2020).
IN RE ALBERT 11
settlement post-petition, Albert’s interest in them remained
the same.
IV.
In conclusion, we do not read Law as undermining the
bankruptcy courts’ ability to invoke issue and claim
preclusion as bases for rejecting previously denied
exemptions. The BAP’s order affirming the bankruptcy
court’s denial of Albert’s amended exemptions is therefore
AFFIRMED.