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In re Brace

United States Court of Appeals, Ninth Circuit

November 8, 2018

In re Clifford Allen Brace, Jr., Debtor,
v.
Steven M. Speier, Chapter 7 Trustee, Appellee. Clifford Allen Brace, Jr., Individually and as the Trustee of the Crescent Trust; Ahn N. Brace, Individually and as the Trustee of the Crescent Trust, Appellants,

          Before: Consuelo M. Callahan and Jacqueline Nguyen, Circuit Judges, and David A. Ezra, [*] District Judge.

         ORDER CERTIFYING QUESTION TO THE SUPREME COURT OF CALIFORNIA

         SUMMARY [**]

         Certified Question In a bankruptcy case, the panel certified the following question to the Supreme Court of California:

Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate?

         The panel withdrew the case from submission and directed the Clerk to administratively close the docket, pending further order.

          ORDER

         We respectfully ask the Supreme Court of California to exercise its discretion to decide the certified question set forth in Part II of this Order, below. See Cal. R. Ct. 8.548. The answer to this question of California law will be dispositive of the appeal before us, and no clear controlling California precedent exists. Id. Moreover, because the question that we certify is of great importance to many debtors and creditors in California, considerations of comity and federalism suggest that the court of last resort in California, rather than our court, should have the opportunity to answer the question in the first instance. See Kilby v. CVS Pharmacy, Inc., 739 F.3d 1192, 1196-97 (9th Cir. 2013); Klein v. United States, 537 F.3d 1027, 1028 (9th Cir. 2008).

         I. Administrative Information We provide the following information as required by California Rule of Court 8.548(b)(1):

         The title of this case is: CLIFFORD ALLEN BRACE, Jr., individually and as the Trustee of the Crescent Trust dated July 30, 2004, and AHN N. BRACE, individually and as the Trustee of the Crescent Trust dated July 30, 2004, Appellants v. STEVEN M. SPEIER, Chapter 7 Trustee, Appellee (In re: CLIFFORD ALLEN BRACE, Jr.).

         The case number in our court is: 17-60032.

         The names and addresses of counsel are: for Appellants, William Derek May, Law Office of W. Derek May, 400 North Mountain Avenue, Suite 215b, Upland, CA 91786, and Stephen R. Wade, Law Offices of Stephen R. Wade, P.C., 350 W. 4th Street Claremont, CA 91711; for Appellee, Matthew W. Grimshaw, D. Edward Hays, and Judith E. Marshack, Marshack Hays LLP, 870 Roosevelt Avenue, Irvine, CA 92620; for Amicus Curiae the National Association of Consumer Bankruptcy Attorneys and the National Consumer Bankruptcy Rights Center, Tara Twomey, the National Consumer Bankruptcy Rights Center, 1501 The Alameda, Suite 200, San Jose, CA 95126, and Wayne A. Silver, Law Office of Wayne A. Silver, 643 Bair Island Rd., Suite 403, Redwood City, CA 94063.

         II. Certified Question

         We request a decision by the Supreme Court of California on the following question that is now before us:

Does the form of title presumption set forth in section 662 of the California Evidence Code overcome the community property presumption set forth in section 760 of the California Family Code in Chapter 7 bankruptcy cases where: (1) the debtor husband and non-debtor wife acquire property from a third party as joint tenants; (2) the deed to that property conveys the property at issue to the debtor husband and non-debtor wife as joint tenants; and (3) the interests of the debtor and non-debtor spouse are aligned against the trustee of the bankruptcy estate?

         Our phrasing of the question should not restrict the Supreme Court of California's consideration of the issues involved; that court may reformulate the question. Cal. R. Ct. 8.548(f)(5).

         We agree to accept and to follow the decision of the Supreme Court of California, as we are required by both California Rule of Court 8.548(b)(2) and our own precedent. See Klein, 537 F.3d at 1029.

         III. Statement of Facts

         Appellants, Clifford and Ahn Brace, have been married since 1972. Around 1977 or 1978, Appellants acquired their residence located at 470 E. Crescent Avenue in Redlands, California (the "Redlands Property"). Sometime before bankruptcy, Appellants also acquired a rental property located at 4250 N. F Street in San Bernardino, California (the "San Bernardino Property") (collectively, the "Properties") and a parcel of land located in Mohave, Arizona (the "Mohave Property").[1] Appellants took title to each property as "husband and wife as joint tenants."

         On July 30, 2004, Mr. Brace ("Debtor") formed the Crescent Trust, an irrevocable trust, which designated Mrs. Brace as the sole beneficiary and Debtor as the sole trustee. The Crescent Trust document was never recorded. A few months later, in August 2004, Debtor executed and recorded trust transfer deeds that transferred his interests in the Redlands and San Bernardino Properties into the Crescent Trust for no consideration. At the time of the transfers, Debtor was a defendant in a civil action in state court. Two weeks after Debtor transferred the Properties into the Trust, a default judgment was entered against him.

         On May 16, 2011, Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code, and Robert L. Goodrich was appointed Chapter 7 Trustee.[2] In December 2011, the Trustee filed an adversary proceeding against Appellants, individually and in their capacities as trustees of the Crescent Trust, [3] seeking: (1) a declaration that the Properties were property of the bankruptcy estate; (2) a judgment quieting title to the Properties in the bankruptcy estate; (3) turnover of any of the Properties determined to be property of the bankruptcy estate; (4) avoidance and recovery of Debtor's transfers of the Properties into the Crescent Trust as actually or constructively fraudulent transfers under the ...


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