and Submitted February 15, 2018 Honolulu, Hawaii
from the United States District Court for the District of
Hawaii Susan O. Mollway, District Judge, Presiding D.C. No.
Pettit (argued), Case Lombardi & Pettit, Honolulu,
Hawaii, for Plaintiff-Appellant.
W. Painter Jr. (argued), Honolulu, Hawaii; Simon Klevansky
and Nicole D. Stucki, Klevansky Piper LLP, Honolulu, Hawaii;
Before: Diarmuid F. O'Scannlain, Richard R. Clifton, and
Sandra S. Ikuta, Circuit Judges.
panel affirmed the district court's affirmance of the
bankruptcy court's turnover order compelling a debtor to
relinquish possession of two properties.
filing his petition in bankruptcy, the debtor transferred his
interests in the two properties into a
tenancy-by-the-entirety estate. He subsequently claimed an
exemption for those interests under 11 U.S.C. §
522(b)(3). The bankruptcy trustee successfully brought an
adversary proceeding to set aside the debtor's transfers
of the property interests.
debtor argued that the trustee had failed to make a timely
objection to his claimed exemptions, and therefore the
exemptions were valid notwithstanding the avoidance of the
transfer. The panel held that the trustee's adversary
complaint contesting the basis for the exemptions qualified
as an objection to those exemptions under Federal Rule of
Bankruptcy Procedure 4003. The bankruptcy court therefore
properly granted the turnover order, thus denying the claimed
filing a petition in bankruptcy, Adam Lee transferred his
interests in two properties into a tenancy-by-the-entirety
estate, and subsequently claimed an exemption for those
interests under 11 U.S.C. § 522(b)(3). The trustee
successfully brought an adversary proceeding to set aside
Lee's transfers of those interests. When the trustee
sought a turnover order to compel Lee to relinquish
possession of the properties, Lee resisted. He argued that
the trustee had failed to make a timely objection to the
exemptions under Rule 4003 of the Federal Rules of Bankruptcy
Procedure, and therefore Lee's exemptions were valid
notwithstanding the court's avoidance of the transfer.
The bankruptcy court disagreed. It granted the turnover
order, thus denying the claimed exemptions. We hold that the
trustee's adversary complaint contesting the basis for
Lee's exemptions qualified as an objection to those
exemptions under Rule 4003. We therefore affirm.
begin by setting out the applicable bankruptcy law. The
Bankruptcy Code allows debtors to exempt certain property
from the bankruptcy estate, in order to avoid distribution to
the estate's creditors. See Taylor v. Freeland &
Kronz, 503 U.S. 638, 642 (1992). A debtor may claim an
exemption for "any interest in property in which the
debtor had, immediately before the commencement of the case,
an interest as a tenant by the entirety or joint tenant to
the extent that such interest . . . is exempt from process
under applicable nonbankruptcy law." 11 U.S.C. §
522(b)(3)(B). As relevant here, Hawaii law allows for the
creation of tenancy-by-the-entirety interests. Haw. Rev.
Stat. § 509-2. "A tenancy by the entirety is a
unique form of ownership in which both spouses are jointly
seized of property such that neither spouse can convey an
interest alone . . . ." Traders Travel Int'l,
Inc. v. Howser, 753 P.2d 244, 246 (Haw. 1988). Hawaii
law exempts such interests from creditors of an individual
spouse. Sawada v. Endo, 561 P.2d 1291, 1296-97 (Haw.
1977); see also In re Cataldo, 224 B.R. 426, 429
(B.A.P. 9th Cir. 1998).
Bankruptcy Code requires the debtor to file a list of claimed
exemptions, and provides that "[u]nless a party in
interest objects, the property claimed as exempt on such list
is exempt." 11 U.S.C. § 522(1). The Supreme Court
has made clear that if the time period set out in the
applicable bankruptcy rules expires without a qualifying
objection, the exemption becomes final regardless
"whether or not [the debtor] had a colorable statutory
basis for claiming it." Taylor, 503 U.S. at
644; see also Law v. Siegel, 134 S.Ct. 1188, 1196
(2014) ("[A] trustee's failure to make a timely
objection prevents him from challenging an exemption.").
As a general rule, "exempt property immediately revests
in the debtor" upon expiration of the objection period.
In re Mwangi, 764 F.3d 1168, 1175 (9th Cir. 2014).
4003 of the Federal Rules of Bankruptcy Procedure requires
that a party in interest, including a trustee, "file an
objection" to a claimed exemption "within 30 days
after the meeting of creditors held under [11 U.S.C.] §
341(a) is concluded." Fed.R.Bankr.P.
4003(b)(1). "However, Rule 4003(b), unlike some
other bankruptcy rules, proscribes no particular form for
objections to exemption claims." In re Spenler,
212 B.R. 625, 629 (B.A.P. 9th Cir. 1997). In addition, Rule
4003 imposes some procedural requirements. For instance,
"[a] copy of any objection" must "be delivered
or mailed to the trustee, the debtor and the debtor's
attorney, and the person filing the list [of exemptions] and
that person's attorney." Fed.R.Bankr.P. 4003(b)(4).
Moreover, Rule 4003(c) provides that in any hearing under the
rule, "the objecting party has the burden of proving