Arturo R. Carrasco

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1The Court previously issued a tentative ruling, approving
the fee applications of Mansdorf and his attorneys, Stromsheim &
Associates (“Stromsheim”). That ruling is now made final except
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re No. 04-46041 TM
Chapter 13
ARTURO R. CARRASCO,
Debtor.
_____________________________/
MEMORANDUM OF DECISION
The motion of Paul Mansdorf (“Mansdorf”), the former chapter
7 trustee in the above-captioned case before its conversion to
chapter 13, to reconvert the case to chapter 7 and to require the
attorney for the above-captioned debtor (the “Debtor”), Barbara A.
Smart (“Smart”), to disgorge her retainer came on before the Court
for an evidentiary hearing on June 3, 2005. Having heard the
evidence and argument presented, the Court concludes that the case
should be reconverted to chapter 7 but that the motion to disgorge
should be denied. The reasons for the Court’s decision are set
forth below.1
Signed: June 06, 2005
________________________________________
LESLIE TCHAIKOVSKY
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 06, 2005
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 04-46041 Doc# 56 Filed: 06/06/05 Entered: 06/06/05 14:50:32 Page 1 of 7

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that, given the reconversion of the case, Mansdorf’s fees are
subject to the statutory cap. In addition, although not listed
on the calendar, a status conference on Mansdorf’s adversary
proceeding objecting to the Debtor’s discharge had been
continued to the June 3, 2005 hearing date. Mansdorf is
directed to contact the Court’s calendar clerk promptly to
reschedule this status conference.
2Mansdorf filed a complaint seeking to sell the Hayward
Property as co-owned property pursuant to 11 U.S.C. § 363(h).
Neither the Debtor nor his wife responded to the complaint, and
Mansdorf obtained a judgment. However, on or about January 18,
2005, they executed a grant deed transferring the Debtor’s
interest in the Hayward Property to the Debtor’s wife as her
separate property. Since then, the Debtor’s daughter has
advised Mansdorf that the Debtor’s wife obtained approximately
$24,000 by refinancing the secured debt on the Hayward Property.
2
The Debtor filed a voluntary petition seeking relief under
chapter 7 of the Bankruptcy Code. He failed to schedule any real
property and, when asked whether he owned any real property at the
11 U.S.C. § 341 meeting of creditors, declared under oath that he
did not. In fact, at that time, he and his wife were the legal
owners of real property in Hayward, California (the “Hayward
Property”).2
The Hayward Property is a duplex. The Debtor obtained his
interest in the Hayward Property in 1998. Title was taken in
joint tenancy by the Debtor, the Debtor’s wife, and the Debtor’s
then son-in-law, Jose Parra (“Parra”). The Debtor’s daughter and
Parra occupied one of the units. The Debtor and his wife occupied
the other.
In or about 2000, the Debtor’s daughter and Parra divorced.
In 2004, Parra was removed from title but the Debtor and his wife
Case: 04-46041 Doc# 56 Filed: 06/06/05 Entered: 06/06/05 14:50:32 Page 2 of 7

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3
were not. The Debtor’s daughter has since remarried and lives in
one of the duplex units with her new husband. However, neither
the Debtor’s daughter nor her new husband has ever been placed on
title.
Before the case was converted, the Debtor’s daughter
negotiated a settlement with Mansdorf, ostensibly on behalf of the
Debtor, providing that the estate would receive $50,000 in return
for an abandonment of the Hayward Property and dismissal of a
complaint filed by the Mansdorf seeking to deny the Debtor’s
discharge. Any funds remaining after claims and administrative
expenses were paid would be paid to the Debtor. However, when
notice of the proposed compromise was sent with an opportunity to
request a hearing, the Debtor filed an objection to the proposed
compromise and a motion to convert the case to chapter 13.
At the hearing on the motion to reconvert the case, the Debtor
and the Debtor’s daughter both testified under oath that the
Debtor had never held any equitable interest in the Hayward
Property. They both stated that neither he nor his wife
contributed to the down payment for the Hayward Property or to any
of the monthly mortgage payments. The Debtor’s daughter testified
that she had included her mother on title because her mother had
better credit. She claimed that the title company told her that,
if her mother was on title, her father had to be too. No
documents were provided to support these statements.
The Court finds the evidence insufficient to establish that
the Debtor does not hold an equitable interest in the Hayward
Case: 04-46041 Doc# 56 Filed: 06/06/05 Entered: 06/06/05 14:50:32 Page 3 of 7

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3See Weaver v. Weaver, 224 Cal. App. 3d 478, 487 (1990),
quoting from Sheean v. Sullivan, 126 Cal. 189, 193 (1899),
(describing the “clear and convincing” standard as requiring
evidence that is “‘sufficiently strong to command the
unhesitating assent of every reasonable mind.’”)
4Several people referred to the Debtor as “slow.” The
Court did not perceive the Debtor to be “slow.” Although
relatively unsophisticated, the Debtor did not seem lacking in
intelligence or to be mentally impaired in any way. His primary
language is Spanish and, at the hearing, he used a translator.
However, the Debtor’s bankruptcy attorney communicated with him
in Spanish when he prepared the schedules. At the hearing, the
Debtor’s chapter 7 attorney testified that he asked the Debtor
whether he owned any real property and that the Debtor said that
his wife owned real property but that it had always been her
separate property. This is at odds with the story presented
currently.
4
Property. California law creates a rebuttable presumption that
equitable ownership of real property is consistent with legal
title. This presumption can only be overcome with clear and
convincing evidence. Cal. Evidence Code § 662; Schindler v.
Schindler, 126 Cal. App. 2d 597, 601-02 (1954).3 The evidence
presented was neither clear nor convincing.
In particular, the series of deeds executed is at variance
with the story told by the Debtor and his daughter. If the only
equitable owner of the Hayward Property has always been the
Debtor’s daughter (and one or other of her husbands), it makes no
sense that, in 2004, when Parra was removed from title, the
Debtor’s daughter was not placed on title. It makes even less
sense that, in January 2005, when the Debtor attempted to remove
himself from title, he transferred his interest in the Hayward
Property to his wife, not to his daughter.4
Case: 04-46041 Doc# 56 Filed: 06/06/05 Entered: 06/06/05 14:50:32 Page 4 of 7

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5The Debtor now represents that the bulk of his income
comes from disability payments. The Debtor also failed to
schedule these payments. He blames this omission on his
bankruptcy attorney. His attorney testified that the Debtor
told him that his disability payments had been terminated. The
Court believed the Debtor’s attorney and did not believe the
Debtor’s claim that he had told his attorney that he received
disability payments.
5
Given the Court’s assessment that the Debtor has not only
failed to schedule real property in which he owns an interest and
has more recently lied under oath about his interest in that real
property, the Court does not believe that the Debtor is a good
candidate for chapter 13. The Debtor has proposed a plan to pay
his creditors in full over 58 months at the rate of $900 per
month.5 However, the equity in the Hayward Property appears to be
sufficient to pay creditors in full in short order.
Alternatively, the Debtor may choose to withdraw his objection to
the compromise and permit the Trustee to use whatever portion of
the $45,000 currently held to pay creditors. Mansdorf is directed
to confer with the Debtor to determine his preference after the
claims bar date has passed.
However, Mansdorf’s motion for an order requiring Smart to
disgorge the $2,500 retainer obtained in connection with her
representation of the Debtor will be denied. She has obviously
expended at least this much obtaining conversion of the case to
chapter 13 and defending the motion to reconvert. The facts of
this case were not so clear cut that Smart had an ethical duty to
refuse to represent the Debtor in the conversion or in defending
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the motion to reconvert. To require her fees to be disgorged
simply because her efforts were unsuccessful would be unfair and
would have a chilling effect on her desire to represent deserving
debtors in the future.
CONCLUSION
Mansdorf is directed to submit a proposed form of order,
granting the motion to reconvert the case to chapter 7, denying
the motion to disgorge, and granting the fee applications (subject
to Mansdorf’s statutory cap).
END OF DOCUMENT
Case: 04-46041 Doc# 56 Filed: 06/06/05 Entered: 06/06/05 14:50:32 Page 6 of 7

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COURT SERVICE LIST
Elizabeth Murphy
Stromsheim & Associates
353 Sacramento St., Ste. 860
San Francisco, CA94111
Howard L. Hibbard
Law Offices of Howard L. Hibbard
22693 Hesperian Blvd., #210
Hayward, CA 94541
Barbara A. Smart
Smart Legal Services
22693 Hesperian Blvd., #210
Hayward, CA 94541
Case: 04-46041 Doc# 56 Filed: 06/06/05 Entered: 06/06/05 14:50:32 Page 7 of 7