Harry Palmer Altick

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
HARRY PALMER ALTICK, 	No. 08-10419
Debtor(s).
______________________________________/
Memorandum on Objection to Claim of Exemption
_________________
Debtor Harry Palmer Altick filed his Chapter 11 petition on March 11, 2008. He filed
primarily to stop the sale of his interest in Gold Dome, LLC, for $350,000.00 which had been ordered
by a state family law court. Altick scheduled the value of his interest in Gold Dome as “unknown,”
but did note that it had assets worth $3 million and debts of a little under $1 million. While he was in
Chapter 11, he showed his interest in Gold Dome as having a value of $900,000.00 on his operating
reports, which were consistent with his schedules. However, his disclosure statement, filed on
February 6, 2009, was inconsistent with his schedules and operating reports and patently false. In it,
he represented that his interest in Gold Dome was over-encumbered so that it had zero value. On April
3, 2009, the court confirmed his plan of reorganization.
Three years later, Altick converted his case to Chapter 7. At his 341 hearing, the Chapter 7
trustee, Linda Green, asked Altick about Gold Dome. He told her basically the same thing as he had
represented in his disclosure statement, that his interest in Gold Dome had no value. He did not
mention that at the time of his bankruptcy filing there was a sale of his interest in Gold Dome pending
for $350,000.00.
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Entered on Docket
February 15, 2012
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-10419 Doc# 216 Filed: 02/15/12 Entered: 02/15/12 15:04:09 Page 1 of
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Altick’s original exemption claims were not controversial. The only significant asset he
claimed as exempt was his residence, which his schedules showed was over-encumbered. After
conversion, Green asked the court to approve the sale of Altick’s interest in Gold Dome to the other
partner for $10,000.00. Altick then amended his schedules to delete the claim of exemption as to the
residence and add an exemption of $21,000.00 in Gold Dome.1 Green objected to this claim of
exemption on the grounds of bad faith and on the grounds of claim preclusion (res judicata).
The court elected to decide the legal issue first, and determined that the exemption was not
barred as a matter of law. It then set a hearing on whether the evidence established that Altick was
barred from asserting his exemption due to bad faith. That hearing was concluded today, and the court
accordingly proceeds to decide the matter.
Claims of exemption are supposed to be liberally allowed in order to afford the debtor a fresh
start. In re Ageton, 14 B.R. 833, 836 (9th Cir. BAP 1981). However, notwithstanding this policy a
debtor must act equitably before he can be allowed an exemption. In re Glass, 60 F.3d 565, 570 (9th
Cir. 1995). A claim of exemption may be denied where the debtor has acted in bad faith. In re
Michael, 163 F.3d 526, 529 (9th Cir. 1998). 	Bad faith may include placing false values on assets
claimed as exempt. In re Hannigan, 409 F.3d 480, 482 (1st Cir. 2005)[Bad faith undervalue of asset
resulted in loss of right to claim it exempt]; In re Bauer, 298 B.R. 353 (8th Cir. BAP 2003)[Attempt to
claim an exemption only after the trustee learned the true value of the asset disallowed]; 4 Collier on
Bankruptcy (16 th Ed.), ¶ 522.08[1]. The burden of proof is on the objecting party to demonstrate bad
faith or prejudice to creditors by a preponderance of the evidence. Rule 4003(c), F.R.Bkr.Proc; In re
Nicholson, 435 B.R. 622, 634 (9th Cir. BAP 2010).
In this case, the evidence established that Altick was not truthful with the creditors or the
trustee. At his original 341 hearing, Altick told counsel for the U.S. Trustee that his interest in Gold
1The sale price was later increased to $40,000.00, after Green learned of the partnership’s true
value.
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Case: 08-10419 Doc# 216 Filed: 02/15/12 Entered: 02/15/12 15:04:09 Page 2 of
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Dome was his “one asset” with “significant equity.” Ten months later, he represented to all creditors
that the interest had no value, without any explanation or disclosure that it had significant value so
recently. Altick told Green at his Chapter 7 examination in 2011 that in his opinion his interest in
Gold Dome had no value, without revealing to her that it had been ordered sold to a ready, willing and
able buyer for $350,000.00 just before his Chapter 11 filing in 2008.
If the only evidence of falsity was Altick’s testimony at his 2011 examination, the court doubts
that it would rule in favor of Green and sustain her objection to the claim of exemption; the passage of
three years might well have erased the equity. Altick’s failure to volunteer the sale ordered by the
state court was evidence of a lack of forthrightness, but not enough for the court to find bad faith.
However, the representation in the disclosure statement that Gold Dome had no value was patently
false and had a direct adverse impact on the creditors. It gave the creditors the false impression that
liquidation of his assets would result in little or no dividend. Had they known the truth, Altick’s plan
would not have been confirmed and the case would have been converted two years earlier.
The court is convinced that Altick intentionally misrepresented the value of his interest in Gold
Dome to his creditors in his disclosure statement in order to induce them to go along with his plan. At
that time, Altick knew that his interest in Gold Dome had significant value. The delay in liquidating
the interest in Gold Dome resulted in a greatly diminished dividend to unsecured creditors. It would
be unjust to allow Altick to benefit from the fruits of his misrepresentation by claiming an exemption
in Gold Dome. Accordingly, Green’s objection will be sustained.
Counsel for Green shall submit an appropriate form of order.
Dated: February 15, 2012
SAlan Jaroslovsky
U.S. Bankruptcy Judge
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