WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on
June 17 granted certiorari in a case involving the question of whether a
bankruptcy court has the power to levy a financial charge against a Chapter 7
debtor's residential property, which he has claimed falls under the homestead
exemption, despite the suggestion of the U.S. solicitor general that the high
court deny hearing the case (Stephen
Law v. Alfred Siegel, No.
12-5196, U.S. Sup.) (lexis.com subscribers may access Supreme Court briefs for this case)'.
In 2004, Stephen Law
filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the Central
District of California. He listed his home property value as $363,348 and
sought a homestead exemption.
The Chapter 7 trustee,
Alfred Siegel, did not object to the homestead exemption, but two years later,
the trustee moved to surcharge Law's homestead exemption $75,000.
Law argued that he was
not properly served in the process.
The trustee had argued
that Law defrauded his creditors by filing a phony lien against his property to
take value out of the property.
The Bankruptcy Court
granted the trustee's surcharge, and Law appealed to the U.S. Bankruptcy
Appellate Panel (BAP) for the Ninth Circuit. The BAP reversed the surcharge
order, concluding that it was "not warranted."
The trustee appealed to
the Ninth Circuit U.S. Court of Appeals, which reversed the BAP's ruling and
determined that the surcharge was proper. Law appealed to the Supreme
Law argues that the
Supreme Court should reverse the Ninth Circuit's ruling and order the trustee
to pay him the $75,000 surcharge pertaining to the homestead exemption.
Law maintains that the
surcharge in question is not permitted against his property because it is
protected by the homestead exemption.
The solicitor general
had contended that the case should not be granted certiorari because it
did not present the question on which courts of appeals are divided. Specifically,
the solicitor general said the equitable surcharge at issue in the case at hand
was independently supported by the Bankruptcy Court's inherent authority to
sanction fraudulent and abusive litigation conduct.
Law is represented by
Matthew Hellman of Jenner & Block in Washington. The trustee is represented
by David Seror of Ezra Brutzkus Gubner in Woodland Hills,
Calif. The solicitor general is represented by Solicitor General Donald B.
Verrilli Jr., Acting Assistant Attorney General Stuart F. Delery, Deputy
Solicitor General Malcolm L. Stewart, Assistant to the Solicitor General Sarah
E. Harrington, Michael S. Raab and Anne Murphy of the U.S. Department of
Justice. All are in Washington.
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