Appeal from the United States Bankruptcy Court for the Southern District of California Honorable Margaret M. Mann, Bankruptcy Judge, Presiding Bk. No. 11-15921
The opinion of the court was delivered by: Jury, Bankruptcy Judge:
SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Argued and Submitted on November 15, 2012 at Pasadena, California
Filed - December 14, 2012
Before: JURY, MARKELL, and PAPPAS Bankruptcy Judges.
Appellant-creditor, Collect Access LLC (Collect), levied on funds in chapter 7*fn1 debtor's deposit account in the amount of $712.39. Twenty days later, debtor filed his bankruptcy petition and claimed the funds exempt. Debtor sought an ex parte turnover order requiring Collect to surrender the funds. The bankruptcy court found that debtor had an interest in the funds despite the levy and ordered turnover. Collect moved to vacate the turnover order which the bankruptcy court denied.
Collect appeals from that order.*fn2
For the reasons stated, we AFFIRM the bankruptcy court's result, but we rely on different grounds.
On August 30, 2002, the California state court entered a judgment in favor of First Select, Inc. (First Select) and against Jose J. Hernandez, the debtor in this case.
On January 22, 2008, First Select recorded an abstract of judgment for the sum of $2,091.71 in the County of San Diego.
On May 19, 2008, First Select renewed the judgment for the sum of $3,723.19.
On July 12, 2011, apparently as a successor to First Select,*fn3 Collect submitted a writ of execution to the Los Angeles County Sheriff's Department (Sheriff). On August 26, 2011, the writ was served on Wells Fargo Bank (Bank). On September 7, 2011, the Sheriff received from the Bank $712.39 that was in debtor's deposit account.
On September 27, 2011, debtor filed his bankruptcy petition. At the time of his filing, the levied funds were in the Sheriff's possession. Debtor claimed the funds exempt under Cal. Civ. Proc. Code (CCP) § 703.140(b)(5).*fn4
On October 29, 2011, the chapter 7 trustee filed her report of no distribution.
1 On November 3, 2011, debtor filed an ex parte motion for 2 turnover of the funds under § 542, contending they were property 3 of his estate, had been exempted, and therefore belonged to him. 4 The next day the bankruptcy court entered an order requiring the 5 Sheriff to turn over $712.39 to debtor (Turnover Order I). 6 On November 7, 2011, before receiving the order, the 7 Sheriff transferred the funds to Zee Law Group (Zee), the 8 attorney for Collect.
9 On November 11, 2011, debtor sought ex parte a second 10 turnover order, this time directed at Zee. The bankruptcy court 11 granted debtor's request by order entered on November 30, 2011 12 (Turnover Order II).
13 On December 1, 2011, Collect filed an opposition to 14 debtor's turnover request. First, relying on the holding in Del 15 Riccio v. Super. Ct. of L.A. Cnty., 115 Cal.App. 2d 29, 31 (Cal. 16 Ct. App. 1952), Collect argued that the funds were no longer 17 property of debtor or his estate because ownership of the funds 18 passed from debtor to the judgment creditor once the Sheriff 19 received the funds. Second, Collect maintained that the chapter 20 7 trustee neither asserted a preference claim nor sought to 21 recover the levied funds. Third and last, Collect argued that 22 debtor had waived his claim of exemption ...