Gebhard Ebenhoech

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	No. 09-40466 TM
Chapter 7
GEBHARD EBENHOECH,
Debtor.
____________________________/
MEMORANDUM RE OBJECTION TO DEBTOR’S EXEMPTION CLAIMS
Creditors Charles and Patricia Schweng (“Creditors”) objected to
certain 	of 	the 	above-captioned 	debtor’s 	claims 	of 	exemption. 	The
objection (the “Objection”) came on for hearing on September 3, 2009.
Appearances were stated on the record. 	The hearing was continued to
give the parties an attempt to settle the objection. 	The purpose of
this 	Memorandum 	is 	to 	advise 	the 	parties 	of 	the 	Court’s 	tentative
rulings with regard to the Objection prior to the continued hearing
in the event the dispute has not been resolved by that time.
PROCEDURAL HISTORY
The 	above-captioned 	case 	was 	filed 	on 	January 	22, 	2009 	as 	a
chapter 13 case. 	Schedules of Assets and Liabilities were filed on
February 6, 2009, including a Schedule C, listing the debtor’s claims
of exemption. 	A meeting of creditors was held on April 9, 2009, but
Signed: September 08, 2009
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
September 09, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
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was continued to June 4, 2009 when the debtor failed to appear. 	On
May 22, 2009, a hearing was held on the chapter 13 trustee’s motion
to 	dismiss 	the 	case. 	The 	debtor 	appeared 	at 	the 	hearing 	through
counsel and requested conversion of the case to chapter 7. 	An order
converting the case to chapter 7 was entered on June 3, 2009.
A 	meeting 	of 	creditors 	in 	the 	chapter 	7 	case 	was 	held 	on 	July
15, 2009. 	On July 28, 2009, Creditors filed the Objection, and the
hearing 	on 	the 	Objection 	referred 	to 	above 	was 	duly 	noticed. 	On
August 	25, 	2009, 	the 	debtor 	filed 	a 	reply 	to 	the 	Objection 	(the
“Reply”). 	On August 31, 2009, Creditors filed the declaration of Ben
Schweng 	(the 	“Schweng 	Declaration”), 	responding 	to 	certain 	issues
addressed in the Reply.
DISCUSSION
On 	Schedule 	C, 	filed 	at 	the 	inception 	of 	the 	case, 	the 	debtor
listed the following claims of exemption, listing the amount of the
claimed 	exemption 	and 	the 	value 	of 	the 	property 	claimed 	as 	exempt.
He also cited the exemption statute upon which the claim was based.
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Description of Property 	Statute Relied Upon 	Exemption 	Property
Value 	Value
Checking, Savings, or Other Financial Accounts
checking and savings accounts at WAMU 	C.C.P. § 703.140(b)(5) 	500 	500
checking and savings accounts at BofA 	C.C.P. § 703.140(b)(5) 	100 	100
checking and savings accounts at Tech C/U 	C.C.P. § 703.140(b)(5) 	1,200 	1,200
Household Goods and Furnishings
misc. household goods and furnishings 	C.C.P. § 703.140(b)(3) 	1,500 	1,500
Wearing Apparel
ordinary wearing apparel 	C.C.P. § 703.140(b)(3) 	150 	150
Furs and Jewelry 	C.C.P. § 703.140(b)(4) 	25 	25
Firearms and Sports Equipment, etc.
.22 target pistol, .367 revolver, Sigsauer .40
semi-automatic 	C.C.P. § 703.140(b)(5) 	500 	500
Interests in Insurance Policies
term life insurance New York Life ($250k) 	C.C.P. § 703.140(b)(5) 	00 	00
Interests in IRA, ERISA, and Other Like Plans
IRS [sic] 	C.C.P. § 703.140(b)
(10)(E) 	1,700 	1,700
Stock and Interests in Businesses
50% TLS Enterprises, LLC (operates Pleasanton
and San Mateo Cyclepath bike shops) 	C.C.P. § 703.140(b)(5) 10,000 	10,000
50% ownership of Hayward Bicycles, LLC
(operates Hayward Cyclepath bike shop) 	C.C.P. § 703.140(b)(5) 5,000 	5,000
Other Liquidated Debts Owing Debtor
Including Tax Refund
possible state or federal tax refund 	C.C.P. § 703.140(b)(5) 1,000 	1,000
Automobiles, Trucks, Trailers, etc.
1998 Volvo V70 (178k) 	C.C.P. § 703.140(b)(2) 3,000 	3,000
Creditors’ Objection:
Creditors objected to the following claims of exemptions on the
following grounds:
Bianchi 	bicycle: 	Creditors 	contended 	that 	the 	debtor 	owns 	a
Bianchi bicycle and that its value is at least $2,000, or $500 more
than the value ascribed to it.
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Debtor’s 	firearms: 	Creditors 	contended 	that 	the 	three 	guns
claimed 	by 	the 	debtor 	as 	exempt 	are 	collectively 	worth 	at 	least
$1,000, or $500 more than the value the debtor has ascribed to them.
50% Interest in TLS Enterprises, LLC: Creditors contended that
the value of this interest is at least $12,500, or $2,500 more than
the value ascribed to it by the debtor.
The Creditors contended that, to the extent that the value of these
items 	exceeds 	the 	amount 	of 	the 	exemption 	available 	to 	the 	debtor,
the excess value should be preserved for the benefit of the estate.
Debtor’s Reply:
The 	debtor 	contended 	that 	the 	Objection 	was 	frivolous. 	He
asserted 	that 	the 	Creditors 	appear 	to 	be 	objecting 	to 	the 	values
ascribed 	to 	the 	property 	in 	question 	rather 	than 	the 	claims 	of
exemption. 	He argued that they had not advanced any argument as to
why 	the 	exemptions 	in 	question 	could 	not 	be 	claimed 	under 	the
statutes 	cited. 	He 	also 	noted 	that 	there 	was 	no 	supporting
declaration or other evidence to support the objection.
Schweng Declaration:
In 	response 	to 	the 	Debtor’s 	reply, 	the 	Creditors 	filed 	the
Schweng Declaration. 	The declarant identified himself as the son of
Creditors and stated that he had known the debtor for ten years.
Bicycle: The declarant stated that the debtor had told him about
his bicycle collection, including the Bianchi bicycle referred to in
the Objection. 	He stated that, in late May or early June 2009, the
debtor had told him that he had acquired the Bianchi bicycle from an
employee of Hayward Bicycles, LLC. 	He asserted that the retail value
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of 	the 	Bianchi 	bicycle 	is 	at 	least 	$1,500, 	that 	the 	value 	of 	the
bicycle 	collection 	as 	a 	whole 	exceeds 	$2,000, 	and 	that 	he 	would 	be
willing to pay that amount for the collection. 	The declarant stated
that 	he 	believed 	that 	the 	bicycle 	collection 	was 	included 	in 	the
miscellaneous household goods and furniture category which the debtor
valued collectively at $1,500.
Guns: The declarant noted that the debtor valued his three guns
collectively at $500. 	He asserted that, based on advertised prices
of 	similar 	firearms, 	he 	is 	informed 	and 	believes 	that 	their 	fair
market value is at least $1,000.
Interest in TLS Enterprises, LLC (“TLS”): The declarant stated
that the debtor and Joel Davis (“Davis”) each own a 50% interest in
TLS which is engaged in the business of bicycle sales and repair in
Pleasanton 	and 	San 	Mateo. 	He 	asserted 	that 	TLS 	is 	an 	authorized
distributor of Trek bicycles. 	He asserted that Davis had previously
claimed 	that 	a 	distributor 	may 	not 	assign 	its 	distribution 	rights.
For 	that 	reason, 	he 	stated, 	he 	believes 	that 	the 	value 	of 	the
debtor’s 50% interest in TLS is worth more than $10,000, the amount
claimed by the debtor. 	The declarant stated that, since July 2009,
he has operated a bicycle sales and repair shop in Hayward, which is
an authorized distributor for Specialized bicycles. 	To date, he has
been unable to obtain the right to distribute Trek bicycles. 	Thus,
he believes that the Trek distributorship adds significant value to
TLS.
Offer 	to 	Purchase: 	The 	declarant 	stated 	that 	in 	July 	2009 	he
authorized 	his 	attorney 	to 	offer 	to 	purchase 	from 	the 	bankruptcy
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estate 	for 	$15,500 	the 	debtor’s 	50% 	interest 	in 	TLS, 	his 	guns, 	the
debtor’s bicycle collection and the other property categorized in the
debtor’s 	bankruptcy 	schedules 	as 	miscellaneous 	household 	goods 	and
furnishings. 	He attached a copy of a cashier’s check for this amount
payable 	to 	the 	chapter 	7 	trustee. 	Apparently, 	the 	trustee 	has 	not
yet 	responded 	to 	this 	offer 	and 	may 	be 	waiting 	for 	a 	ruling 	on 	the
objection to do so.
CONCLUSIONS OF LAW AND IDENTIFICATION OF FACTUAL ISSUES
Bicycles
As 	noted 	above, 	Creditors 	objected 	to 	the 	debtor’s 	claim 	of
exemption with respect to a Bianchi bicycle. 	In the Objection, the
Creditors 	contended 	that 	the 	bicycle 	was 	worth 	at 	least 	$2,000 	or
$500 	more 	than 	the 	value 	the 	debtor 	had 	ascribed 	to 	it. 	In 	the
Schweng 	Declaration, 	the 	declarant 	stated 	that 	the 	retail 	of 	the
Bianchi bicycle was at least $1,500. 	This portion of the Objection
must 	be 	overruled. 	The 	debtor 	did 	not 	list 	any 	bicycle 	as 	his
personal 	property 	on 	Schedule 	B 	of 	his 	Schedules 	of 	Assets 	and
Liabilities nor did he claim an exemption in one.
At the hearing, the debtor contended that the Bianchi was the
property of TLS. 	The debtor did claim an exemption in his 50 percent
interest 	in 	TLS. 	The 	Creditors 	have 	filed 	a 	separate 	objection 	to
this 	exemption 	claim. 	If 	the 	Creditors 	are 	able 	to 	establish 	that
the 	Bianchi 	is 	the 	debtor’s 	personal 	property, 	the 	Bianchi 	will
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1The debtor’s failure to list the Bianchi bicycle as his
personal property in Schedule B might be grounds for denial of his
discharge. 	However, to date, no adversary proceeding or contested
matter has been filed, raising this issue.
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constitute 	property 	of 	the 	estate 	as 	to 	which 	the 	debtor 	has 	not
claimed an exemption. 1
Guns
In 	Schedule 	C, 	the 	debtor 	listed 	three 	guns–-a 	.22 	target
pistol, a .367 revolver, and a .40 Sigsauer semi-automatic–-as exempt
under Cal. Civ. Proc. Code § 703.140(b)(5). 	Their collective value
was asserted to be $500. 	The Creditors asserted that the collective
value of the guns was at least $1,000. 	The debtor responded that the
Creditors had failed to offer any evidence in support of this value.
In 	response 	to 	the 	debtor’s 	observation 	that 	the 	Creditors 	had
submitted 	no 	evidence 	in 	support 	of 	this 	valuation, 	the 	Creditors
filed 	the 	Schweng 	Declaration. 	In 	the 	Schweng 	Declaration, 	the
declarant stated that his estimate of the value of the guns was based
on advertised prices of similar firearms.
The debtor also noted that he was not categorically claiming the
guns as exempt. 	He was only claiming $500 of their value as exempt.
Thus, the Objection was not well taken. 	However, the Court does not
find the Objection to be frivolous.
First, in the Objection, the Creditors requested that any excess
value over the exemption amount to which the debtor was entitled be
preserved 	for 	the 	benefit 	of 	the 	estate. 	Second, 	in 	the 	Ninth
Circuit, a trustee’s failure to object to a claim of exemption that
is limited in amount when the value claimed by the debtor is within
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that 	limit 	does 	not 	prevent 	the 	trustee 	from 	administering 	the
property. 	See In re Hyman, 967 F.2d 1316 (9th Cir. 1992). 	However,
other Circuits have ruled to the contrary. 	That issue is before the
United 	States 	Supreme 	Court 	this 	term. 	See 	In 	re 	Reilly, 	534 	F.3d
173 (3rd Cir. 2008), cert. granted in part by Schwab v. Reilly, 129
S.Ct. 	2049 	(2009). 	By 	objecting 	to 	the 	claim 	of 	exemption, 	the
Creditors 	are 	preserving 	their 	rights 	in 	case 	the 	Supreme 	Court
affirms Reilly.
Section 	703.140(b)(5) 	gives 	the 	debtor 	an 	exemption 	in 	any
property in the amount of $925 plus any unused portion of the $17,425
homestead 	exemption. 	The 	debtor 	has 	not 	claimed 	a 	homestead
exemption. 	Thus, this section gives the debtor an exemption in the
amount of $18,350, which he may apply to any property, including his
guns. 	However, 	the 	debtor 	has 	also 	claimed 	exemptions 	in 	other
personal property under this Code section. 	Thus, the total value of
all 	items 	claimed 	under 	this 	section, 	including 	the 	debtor’s 	50
percent interest in the two bicycle shop entities, must be considered
together.
50% Interest in TLS
The 	Creditors’ 	final 	objection 	is 	to 	the 	debtor’s 	claim 	of
exemption in the debtor’s 50 percent interest in TLS, which operates
two bicycle shops. 	Again, the statutory basis for the exemption is
Section 703.140(b)(5). 	The asserted value of the 50 percent interest
is 	$10,000. 	The 	Creditors 	contended 	that 	the 	value 	is 	at 	least
$12,500. 	As noted in the preceding section, the extent to which this
alleged 	excess 	value 	presents 	a 	triable 	issue 	of 	fact 	must 	be
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considered in conjunction with all of the property claimed as exempt
under Section 703.140(b)(5).
Application of Section 703.140(b)(5)
The 	debtor 	claimed 	the 	following 	property 	as 	exempt 	under
Section 703.140(b)(5) with the following stated values:
Description of property 	Stated Value
Checking and savings accounts at
WAMU, BofA, and Tech C/U 	$ 1,800
Three guns 	500
Term life insurance policy 	0
Interests in IRS [sic? IRA] 	1,700
50% interest in TLS Enterprises, LLC 	10,000
50% ownership of Hayward Bicycles, LLC 	5,000
Possible state or federal tax refund 	1,000
Total: 	$19,000
As 	noted 	above, 	Section 	703.140(b)(5) 	gives 	the 	debtor 	an
exemption 	of 	$18,350 	to 	apply 	to 	any 	property. 	Thus, 	even 	under
Hyman, the Objection to the claim of exemption in either the guns or
the 50 percent interest in TLS has merit to the extent of $650. 	In
addition, 	it 	would 	have 	merit 	as 	to 	an 	additional 	$500 	if 	the
Creditors 	are 	correct 	about 	the 	valuation 	of 	the 	guns 	and 	an
additional $2,500 if they are correct about the valuation of the 50
percent 	interest 	in 	TLS. 	Thus, 	this 	excess 	value 	would 	constitute
property of the estate if established.
The 	Creditors 	have 	indicated 	an 	interest 	in 	purchasing 	the 	50
percent interest in TLS and the other disputed items. 	The Court has
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continued 	the 	hearing 	to 	permit 	the 	parties 	to 	investigate 	this
possibility. 	Given the amount in controversy, the Court is hopeful
that the matter will be settled without the need for an evidentiary
hearing. 	However, if it is not settled before an evidentiary hearing
is 	set, 	the 	Court 	would 	require 	the 	Creditors 	to 	submit 	appraisal
evidence supporting their asserted values.
END OF DOCUMENT
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COURT SERVICE LIST
James A. Pixton
Law Offices of James A. Pixton
1524-A Lincoln Ave.
Alameda, CA 94501
W. Michael Celestre
3650 Mt. Diablo Blvd., Ste. 180
Lafayette, CA 94549
Paul Mansdorf
Chapter 7 Trustee
1563 Solano Ave., #703
Berkeley, CA 94707
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