Smith v. Kennedy (In re Smith) , 221 F.3d 1101 ( 2000 )

O’SCANNLAIN, Circuit Judge:

We must decide whether objections filed following adjournment of the bankruptcy creditors’ meeting “until further notice” were timely.

I

This appeal arises out of the bankruptcy of John Douglas Smith (“Smith”), a physician who is one of the two co-founders of Wilshire Oncology Medical Group Inc. (“Wilshire”). On November 6, 1992, the objecting creditors (“Appellees”) filed an action against Wilshire in state court for abuse of pension funds, breach of fiduciary-duty, employee lockouts, and self-dealing. On August 4, 1995, Appellees obtained a jury verdict for more than $4 million.

Smith filed for Chapter 11 bankruptcy on August 7,1995. On August 9, 1995, the bankruptcy court granted Appellees leave to prosecute their case to completion and they obtained a corrected judgment for $5.5 million on September 9, 1995. That state court action remains on appeal.

In his bankruptcy, Smith timely filed exemptions for various assets, including his limited partnership interest in Bell-wood Limited Partnership (“Bellwood”). The assets in Bellwood consist of three real estate properties that were purchased by Smith and his wife during the period from 1975 through 1981. Smith contends that these investments were held exclusively for retirement purposes. On November 7, 1994, Smith and his wife transferred these properties to Bellwood in exchange for 100% ownership of Bell-wood. Smith indicates that he transferred the properties to Bellwood for tax and estate planning reasons. In this bankruptcy, Smith claimed that Bellwood is a “private retirement plan” under California law and is therefore exempt from the bankruptcy estate.

Under the Bankruptcy Code and Rules, a claimant must object to a debtor’s claimed exemptions within thirty days after the conclusion of the creditors’ meeting held under Bankruptcy Code § 341. The creditors’ meeting in Smith’s bankruptcy was initially held on September 8, 1995. The meeting was continued to September 22 and then to October 27, 1995. At this October 27 hearing, after questioning Smith about these omissions, the trustee adjourned the meeting “until further notice.”

Appellees filed their objections to Smith’s exceptions on June 19, 1996. Among these was an objection to the exemption of Bellwood from the bankruptcy estate. Smith filed a motion to dismiss these objections on the ground that they were not timely filed, which the bankruptcy court denied. The bankruptcy court also sustained Appellees’ objection to Smith’s exemption of Bellwood.

On November 12, 1996, Smith appealed the bankruptcy court’s order. On February 13, 1998, the district court entered its order denying Smith’s appeal on the ground that it was moot in light of Smith’s conversion of his Chapter 11 bankruptcy to a Chapter 7 bankruptcy on April 23, 1997.

Upon conversion from Chapter 11 to Chapter 7, Bankruptcy Code § 341(a) requires that a new creditors’ meeting be held. The § 341(a) creditors’ meeting for Smith’s Chapter 7 bankruptcy was held on June 9, 1997. The trustee continued the creditors’ meeting until July 7, 1997 and again until August 4, 1997. The appellees filed supplemental objections in July of 1997, and the Trustee objected to Smith’s exemptions on August 12, 1997. Both sets of objections were filed within thirty days of the continued creditors’ meeting. On September 15, 1997, the bankruptcy court entered its order sustaining the objections to Smith’s exemptions. On September 8, 1998, the district court affirmed the order of the bankruptcy court, Smith v. Kennedy, No. CV-97-7173 (C.D.Cal. Sep. 3, 1998).

Smith filed a timely appeal.

II

We review the district court’s decision on an appeal from a bankruptcy court de novo. See Richmond v. United States, 172 F.3d 1099, 1101 (9th Cir.1999). Thus, we apply the same standard of review that the district court applied. See In re Chang, 163 F.3d 1138, 1140 (9th Cir.1998). We review the bankruptcy court’s findings for clear error and its conclusions of law de novo. See In re Filtercorp, Inc., 163 F.3d 570, 576 (9th Cir.1998).

III

Section 522© of the Bankruptcy Code states the procedure for claiming exemptions and objecting to claimed exemptions: “The debtor shall file a list of property that the debtor claims as exempt. ... Unless a party in interest objects, the property claimed as exempt on such list is exempt.” 11 U.S.C. § 522(i). Federal Rule of Bankruptcy Procedure 4003(b) specifies that “[t]he trustee or any creditor may file objections to the list of property claimed as exempt within 30 days after the conclusion of the meeting of the creditors held pursuant to Rule 2003(a) ... unless, within such period, further time is granted by the court.” Fed. Rule Bkrtcy. Proc. 4003(b). After thirty days, a creditor or trustee “cannot contest the exemption at this time whether or not [ ] [there is] a colorable statutory basis for claiming it.” Taylor v. Freeland & Kronz, 503 U.S. 638, 643-44, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992). If a meeting of creditors is adjourned, however, the thirty-day period for objections does not begin to run.

According to Federal Rule Bankruptcy Procedure 2003(e), “[t]he meeting may be adjourned from time to time by announcement at the meeting of the adjourned date and time without further notice.” Fed. Rule Bkrtcy. Proc. 2003(e) (emphasis added). Smith argues that the meeting of creditors was concluded rather than adjourned on October 27, 1995, because the trustee adjourned the meeting until further notice without specifying a new meeting date. He contends, consequently, that the property should be exempt as the objections did not occur until seven months later.

Smith’s contention is not persuasive. In In re Bernard, 40 F.3d 1028 (9th Cir.1994), we stated that a trustee “has broad discretion whether to adjourn or conclude the meeting,” which depends on the degree to which the debtor has furnished satisfactory information relating to the bankruptcy. Id. at 1031 n. 4. “The scant available authority agrees that ‘may’ in Rule 2003(e) is permissive and not mandatory.” In re Flynn, 200 B.R. 481, 483 (Bankr.D.Mass.1996); see also In re DiGregorio, 187 B.R. 273, 275 (Bankr.N.D.Ill.1995); In re Havanec, 175 B.R. 920, 922 (Bankr.N.D.Ohio 1994) (finding that limiting adjournments to a specific date is “unduly constrictive”). The meeting is not concluded until the trustee so declares or the court so orders. See In re Flynn, 200 B.R. at 484; In re DiGregorio, 187 B.R. at 276. But see In re Levitt, 137 B.R. 881, 883 (Bankr.D.Mass.1992) (“[W]here the trustee fails to announce an adjourned date and time within thirty days of the date on which the meeting of creditors was last held, the meeting will be deemed to have concluded on the last meeting date.”). We decline to follow Levitt in favor of the more recent pronouncements in Flynn, Di-Gregorio, and Havanec. We hold that an adjournment of a § 341(a) hearing does not conclude the hearing merely due to the absence of a future specified date.

Adjournments “until further notice” are permissible for two reasons. First, “[s]ince the debtor has the greatest interest in concluding the meeting so as to trigger the 30-day objection period, this Court deems it appropriate to place the burden on the debtor to move for a court order concluding the § 341 meeting.” In re DiGregono, 187 B.R. at 276; see also In re Bernard, 40 F.3d at 1031 n. 4. Second, a court allowing an adjournment until an unspecified date retains control and may cut off the time for objections in the case of unreasonable delay. See In re Flynn, 200 B.R. at 484.

Yet, the permissibility of such adjournments does not mean that they are to be commended or that the bankruptcy court should allow them in all cases. Often, a trustee can easily adjourn the meeting to a time certain, as provided in Rule 2003(e). A case-by-case analysis is appropriate. Trustees cannot keep these meetings open indefinitely without “legitimate grounds for believing that further investigation will prove fruitful.” In re Bernard, 40 F.3d at 1031 n. 4.

28 U.S.C. § 586 may commit to UST discretion [to choose] among otherwise available means; but it does not give the UST “discretion” to use any means she fancies in any way she pleases. No part of 28 U.S.C. § 586 authorizes the UST to act in an otherwise unlawful or abusive manner and excuse herself by pleading “discretion.”

In re Vance, 120 B.R. 181, 194 (Bankr.N.D.Okla.1990).

In this case, an adjournment “until further notice” was appropriate. As the district court stated,

[a]t the end of the October 27, 1995 creditors’ meeting, several issues were left open for later resolution. Further, Smith represented that he would amend his schedules to correct errors and omissions. At the conclusion of the meeting, the trustee stated “this 341(a) hearing in John Douglas Smith is hereby adjourned until further notice.” Given the context, the Court finds that the trustee’s initial decision to leave the date of the next meeting open until the requested information was available was both clearly stated and reasonable.

Smith v. Kennedy, No. CV 97-7173 at 10. There is no indication that Smith objected to the length of the continuance, and he did not move to conclude the § 341(a) hearing. Additionally, on appeal, Smith has not attempted to rebut the district court’s factual findings. Thus, we agree with the district court that the Trustee did not err by granting an adjournment to an unspecified date and that the thirty-day objections period had not yet begun to run.²

IV

Next, we must evaluate Smith’s substantive argument that his Bellwood holdings constitute a “private retirement plan” under California law. Pursuant to 11 U.S.C. § 522(b), a debtor may exempt from the bankruptcy estate any assets that are exempted under the law of the debtor’s state. 11 U.S.C. § 522(b)(2)(A); see In re MacIntyre, 74 F.3d 186, 187 (9th Cir.1996). California law provides for the exemption of “private retirement plans” from bankruptcy estates. See § Cal.Code Civ. P. § 704.115(a).

We have explored the definition of such a plan before, concluding that the appropriate analysis is whether the retirement plan at issue was “designed and used for a retirement purpose.” In re Bloom, 839 F.2d 1376, 1379-80 (9th Cir.1988). Of course, this “designed and used” inquiry presumes that the entity at issue is in fact a retirement plan. Before we proceed to the issue of whether this plan was of the retirement variety, we must decide the liminal question of whether it was a plan at all.

Smith points to Webster’s to ground his conclusion that the Bellwood property constituted a plan. Alas, the task of adjudication is not as simple as looking up words in the dictionary. We must turn instead to judicial precedent and the reasoning of our fellow jurists. In In re Phillips, 206 B.R. 196 (Bankr.N.D.Cal.1997), the court declined to consider a plan the debtors’ informal and unwritten sentiments. Subjective intent alone, the court concluded, does not constitute a plan. See id.

Similarly, in In re Rogers, 222 B.R. 348 (Bankr.S.D.Cal.1998), the court concluded that the annuity at issue was not a private retirement plan. The court reasoned that the language of § 704.115 “does not extend to protect anything a debtor unilaterally chooses to claim as intended for retirement purposes.” Id. at 351.

We agree with these precedents and with the bankruptcy court in concluding that Smith needed to offer more than merely his illusory intentions and dictionary definitions to satisfy the courts that the property was acquired as part of his private retirement plan. Such an instantiation of the purported plan is required to prevent an abuse of this exemption. Finding none, we reject Smith’s appeal and uphold the bankruptcy court’s decision.³

AFFIRMED.

2 . Having determined that the June 19, 1995 objections were timely, we do not reach the issue of whether the conversion from Chapter 11 bankruptcy to Chapter 7 bankruptcy restarted the period in which to file objections.

3 . Smith also argues that the bankruptcy court should have granted a continuance for sixty days to allow for further briefing on the issue of whether Bellwood was exempt from the bankruptcy estate (in particular, to introduce evidence concerning the suitability of the use of limited partnership interests for retirement plans), and that the Trustee did not sustain his burden of proving that Smith's exemption was not properly claimed. These contentions are without merit inasmuch as we have determined that Bellwood was not exempt because this property did not constitute a private retirement plan.