In re: Lisa Gay Mellem

FILED
FEB 22 2021

SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT

In re: BAP No. CC-20-1174-KTG
LISA GAY MELLEM,
Debtor. Bk. No. 8:09-bk-18441-ES

LISA GAY MELLEM,
Appellant,
v. OPINION
CARL J. MELLEM, Successor Trustee of
the Dorothy B. Mellem Revocable Trust,
Appellee.

Appeal from the United States Bankruptcy Court
for the Central District of California
Catherine E. Bauer, Bankruptcy Judge, Presiding

Before: KLEIN,1 TAYLOR, and GAN, Bankruptcy Judges.

KLEIN, Bankruptcy Judge:

We venture to the fringes of the bankruptcy discharge injunction in

this probate dispute to explore the meaning of “personal liability of the

debtor” in 11 U.S.C. § 524(a).

1
Hon. Christopher M. Klein, U.S. Bankruptcy Judge for the Eastern District of
California, sitting by designation.
 Here, the debtor contends that the chapter 7 1 discharge of a $75,000

debt to her mother prevented the mother from thereafter reducing her

legacy by $75,000. A probate court ruling that the deceased mother’s

intention was to treat $75,000 as an advance on an inheritance, prompted

the daughter to return to the bankruptcy court, alleging contempt of

discharge. The bankruptcy court ruled there was no “debt” being collected

“as a personal liability of the debtor;” hence, no contempt.

We agree and AFFIRM because a bankruptcy discharge does not

constrain an individual’s ability to make a testamentary disposition. We

publish to clarify the scope of the § 524 discharge injunction.

FACTS

Appellant Lisa Mellem is a self-represented discharged chapter 7

debtor who has been a member of the California Bar since 2003.

Lisa’s mother, Dorothy, who died in 2017, created a revocable family

trust in 1980 (hereafter “Trust”) into which she transferred all her assets as

an estate planning device. The beneficiaries included her three children

(Lisa, Carl, and Richard). Lisa’s brother, Carl Mellem, is trustee of the now-

irrevocable Trust.

In 2004, Lisa executed a promissory note in favor of her mother for

$75,000 (“$75,000 Note”) on account of inter vivos (or “lifetime”) transfers.

1
Unless specified otherwise: chapter and section references are to the Bankruptcy
Code, 11 U.S.C. §§ 101–1532; “Rule” references are to the Federal Rules of Bankruptcy
Procedure; and “Civil Rule” references are to the Federal Rules of Civil Procedure.
2
 In 2009, Lisa filed a chapter 7 bankruptcy case, receiving a discharge

in a no-asset case in which no deadline to file claims was fixed. She

scheduled about $248,000 in unsecured debt but did not schedule the

$75,000 Note to her mother. 2

Lisa excuses her omission by saying her mother had told her that she

did not have to repay the $75,000 Note, which she took to mean that it was

forgiven. Now she contends the debt existed but was discharged.

Dorothy amended the Trust in 2012 to provide for each of her

children to receive a 30% final distribution from the Trust and 10% to

another person.

The Trust permits Dorothy to designate lifetime transfers that she

wanted applied to an individual beneficiary’s share of her final estate. In

two holographic memoranda dated in 2012 and in 2013, Dorothy listed

lifetime transfers of $75,000 and $10,000 with respect Lisa and Richard.

Carl took over as successor trustee in 2014. Dorothy died in August

2017. Attorney Edward Goldkuhl represents Carl in Probate Court.

On April 5, 2018, Carl sent to Lisa and Richard a status report

projecting their respective Trust distributions: Carl, $172,920; Richard,

$162,920 (=$172,920-10,000); and Lisa, $97,920 (=$172,920-75,000).

2 Lisa’s bankruptcy schedules are not in the excerpts of record. We exercise our
discretion to take judicial notice of schedules and other documents filed in Lisa’s
bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227,
233 n.9 (9th Cir. BAP 2003).
3
 He explained the differences in distributions as accounting for

lifetime advances of $75,000 to Lisa and $10,000 to Richard.

Lisa objected to the $75,000 reduction from her share. She said

Dorothy forgave the $75,000 Note. Later, she interposed her bankruptcy

discharge, contending that the $75,000 Note was an unscheduled “debt”

that was discharged as a matter of law. 3

Lisa’s objection led Carl, as trustee represented by Goldkuhl, to file in

Probate Court4 a petition denoted a Request for Instructions as permitted

by California Probate Code § 17200. The petition sought a determination

that $75,000 and $10,000 should be deducted from Lisa’s and Richard’s

residual shares of the Trust based on Dorothy’s intent. The petition was

filed June 25, 2018, with hearing set for September 28, 2018.

Carl provided declaration testimony and documentary evidence that

Dorothy made writings that she kept in the same place and in the same

manner as she kept her trust documents, including holographic notations

dated October 15, 2012, and June 26, 2013, specifying $75,000 and $10,000

for Lisa and Richard, respectively. 5 Carl asserted that these handwritings,

3
In this appeal, we take Lisa at her word that the $75,000 Note was a discharged
debt, rather than a nonexistent forgiven debt. It is not usual for a lawyer to admit to
intentional omission of a debt in bankruptcy schedules signed under penalty of perjury.
4 Formally, the Superior Court of California for the County of Santa Cruz,

Probate Division.
5
Carl’s Probate Court declaration explained:

In the years that followed [settlement of her Trust], Mother made various loans
and advances to all of her children. Some of those notes were paid back, and
4
among other evidence, reflected Dorothy’s intent that the referenced

lifetime transfers be treated as advances on the transferees’ residual share

of the Trust as provided for in Cal. Probate Code § 21135.6

Lisa did not file written opposition, despite having had nearly three

months of notice of the hearing. Nor was she present at the appointed

hearing time on September 28, 2018. The Probate Court granted Carl’s

petition, determining that Dorothy intended that $75,000 and $10,000 in

lifetime transfers to Lisa and Richard be accounted as advances on their

residual shares of the Trust.

Lisa thereafter tried to persuade the Probate Court that her

bankruptcy discharge warranted reconsideration and revision of its order. 7

The Probate Court was not persuaded.

Resorting to bankruptcy court, Lisa obtained an order reopening her

chapter 7 case and requested an order of contempt. The court thereupon

some were forgiven outright. Mom was convinced that some of her offspring
simply needed more help than others, and she felt it was her prerogative, or
obligation, to provide that help. However, she also wanted the division of her
assets to be equal and fair to all of her children. This dichotomy created a great
deal of stress and concern for Mother. On numerous occasions, Mom would call
me and want to change her Will to reflect moneys that had gone to one or
another of her offspring ... sometimes she was just mad at one of us. Rather than
change her Will, she decided that she could give money to anyone that she
wanted, and then included in her Trust any note to an individual beneficiary that
she wanted applied to that beneficiary's share of her final estate.
6 Carl also noted there was evidence of another $22,000 in transfers to Lisa not

mentioned in Dorothy’s trust materials, for which Carl did not propose adjustments.
7 Although the excerpts of record do not detail the later state-court proceedings,

it is apparent the Probate Court did not regard the bankruptcy discharge as warranting
5
ordered Carl and Goldkuhl to show cause why they should not be held in

contempt for violation of the discharge injunction.

Upon considering the responses to the show cause order, the judge,

without otherwise explaining herself, observed that bankruptcy courts are

not appellate courts empowered to overturn Probate Court decisions, ruled

that there was no “debt,” and denied Lisa’s contempt motion. Lisa’s

motion to reconsider under Civil Rules 59(e) and 60(b), incorporated by

Rules 9023 and 9024, was also denied.

This appeal ensued.

JURISDICTION

The bankruptcy court had subject-matter jurisdiction under 28 U.S.C.

§§ 1334 and 157(b)(2)(O). Civil enforcement of the discharge injunction of

11 U.S.C. § 524(a)(2) is a core proceeding that a bankruptcy court may hear

and determine. We have jurisdiction under 28 U.S.C. § 158.

ISSUES

1. Does the bankruptcy discharge injunction of 11 U.S.C. § 524(a)(2)

forbid a testator or settlor of a family trust from reducing a legacy to the

discharged debtor?

2. Did the bankruptcy court abuse its discretion by refusing to find

contempt and refusing to reconsider its ruling?

relief from its order granting Carl’s petition.
6
 STANDARDS OF REVIEW

The scope of the bankruptcy discharge injunction is a mixed question

of law and fact to be reviewed either de novo or for clear error, depending

upon whether questions of law or questions of fact predominate. U.S. Bank

Nat’l Ass’n ex rel CWCapital Asset Mgmt. LLC v. Vill. at Lakeridge, LLC, ___

U.S. ___, 138 S.Ct. 960, 967-68 (2018). As questions of law predominate in

this instance, review is de novo.

If the discharge injunction is violated, the bankruptcy court’s decision

regarding contempt sanctions is reviewed for abuse of discretion. Knupfer

v. Lindblade (In re Dyer), 322 F.3d 1178, 1191 (9th Cir. 2003); Freeman v.

Nationstar Mortg. LLC (In re Freeman), 608 B.R. 228, 233 (9th Cir. BAP 2019).

Denial of a motion for relief under Civil Rules 59 and 60 is reviewed

for abuse of discretion. Hansen v. Moore (In re Hansen), 368 B.R. 868, 875 (9th

Cir. BAP 2007); United Student Funds, Inc. v. Wylie (In re Wylie), 349 B.R. 204,

208 (9th Cir. BAP 2006).

A bankruptcy court abuses discretion if it applies the wrong legal

standard or makes factual findings that are illogical, implausible, or

without support in the record. TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d

820, 832 (9th Cir. 2011); United States v. Hinkson, 585 F.3d 1247, 1262 (9th

Cir. 2009) (en banc).

DISCUSSION

As this appeal is from a bankruptcy court’s ruling that contempt was

not appropriate because the discharge injunction did not forbid the

7
challenged conduct, we begin with basic bankruptcy-related contempt

principles before describing pertinent state law and drilling down on the

scope of the bankruptcy discharge.

I

Bankruptcy contempt principles subdivide into law and procedure.

A

A bankruptcy court may hold a creditor in contempt for violation of

the discharge injunction if “there is no objectively reasonable basis for

concluding that the creditor’s conduct might be lawful under the discharge

order.” Taggart v. Lorenzen, ___ U.S. ___, 139 S. Ct. 1795, 1801 (2019).

Subjective good or bad faith is not controlling. While subjective bad

faith is not necessary to impose civil contempt sanctions, it sometimes may

be sufficient to impose contempt sanctions. Id., at 1802.

Conversely, a contemnor’s subjective good faith will not prevent a

civil contempt finding when no objectively reasonable basis is present, but

good faith may be considered in determining the extent of sanctions to be

imposed. Freeman, 608 B.R. at 234 (citing Taggart, 139 S. Ct. at 1802); In re

LeGrand, 612 B.R. 604, 613 (Bankr. E.D. Cal. 2020) (same).

The Taggart refinements of the civil contempt standard in the

bankruptcy discharge context did not otherwise alter a movant’s threshold

burden of going forward. The moving party still must show at the outset

that the alleged contemnor: (1) knew the discharge injunction applied; and

(2) intended the actions that violated the injunction. Ocwen Loan Servicing,

8
LLC v. Marino (In re Marino), 577 B.R. 772, 782-83 (9th Cir. BAP 2017), aff'd

in part & appeal dismissed in part, 949 F.3d 483 (9th Cir. 2020) (citing Zilog,

Inc. v. Corning (In re Zilog, Inc.), 450 F.3d 996, 1007 (9th Cir. 2006)).

If the movant establishes the threshold elements, the burden of going

forward then shifts to the responding party to show that it was impossible

comply with the discharge order. Id. at 783.

The ultimate burden of persuasion remains on the movant to show,

per Taggart, no objectively reasonable basis for concluding that the alleged

contemnor’s conduct might be lawful under the discharge order.

B

Rule 9020 prescribes that a motion for an order of contempt made by

a party in interest or the United States trustee qualifies as a contested

matter under Rule 9014. Fed. R. Bnkr. P. 9014 & 9020.

In contrast, an adversary proceeding under Rule 7001 is the proper

procedure to obtain a declaratory judgment that a nonbankruptcy court’s

order is void. Fed. R. Bankr. P. 7001; see Sterling-Pac. Lending, Inc. v. Moser

(In re Moser), 613 B.R. 721, 727 (9th Cir. BAP 2020); Ruvacalba v. Munoz (In re

Munoz), 287 B.R. 546, 551 (9th Cir. BAP 2002).

C

Civil Rule 52(a) requiring findings of fact and conclusions of law

applies in contested matters, including a motion for an order of contempt.

Fed. R. Civ. P. 52(a), as incorporated by Fed. R. Bankr. P. 7052 and 9014(c).

9
 There is merit to Lisa’s complaint that the bankruptcy judge did not

“find the facts specially” and did not render conclusions of law separately

as required by Civil Rule 52(a)(1), incorporated by Rules 7052 and 9014(c).

The court’s conclusory assertion that there was no debt involved

came without explanation.

The primary cost of deficient findings plays out on appeal. Without

findings of fact, a reviewing court is not constrained by Civil Rule 52(a)(6)’s

clear error standard and need not give “due regard to the trial court’s

opportunity to judge the witnesses’ credibility.” Fed. Civ. P. 52(a)(6), as

incorporated by Fed. R. Bankr. P. 7052 and 9014(c).

While the bankruptcy court’s ruling that no “debt” was involved in

the Probate Court petition seeking instructions lacked detailed findings of

fact and conclusions of law, the record is sufficient for this Panel fairly to

decide this appeal. The essential facts are not in dispute. The crucial

analysis entails questions of law that we are equipped to determine de

novo.

II

The California Probate Code governs probate and family trust

matters.

Family trusts are covered by Probate Code Division 9, “Trust Law.”

Cal. Prob. Code §§ 15000-19530.

Discerning differences among gifts, loans, and transfers requires

reference to Probate Code Division 11, “Construction of Wills, Trusts, and

10
Other Instruments,” Part 1, “Rules for Interpretation of Instruments.” CAL.

PROB. CODE §§ 21101-21140.

A

California probate law recognizes that lifetime transfers (i.e., inter

vivos transfers) to trust beneficiaries may ultimately be treated as loans,

gifts, or advancements on an inheritance.

A testator or settlor of a revocable family trust may change a debt or

loan into an advancement, convert an advancement into a pure gift, or

change a pure gift to an advancement. 64 Cal. Jur. 3d Wills § 591.

The terms “Advancement [or Advance] on an Inheritance” and

“Ademption by Satisfaction” have come to be used interchangeably by

California courts. Id.

The seminal California Supreme Court decision on the subject is In re

Hayne’s Estate, 165 Cal. 568, 573 (1913). That decision retains vitality. Sachs

v. Sachs, 44 Cal. App. 5th 59, 61 (2020), review denied (Apr. 1, 2020) (lifetime

gifts as advances on inheritances). The current codification of Hayne’s Estate

rule (which also applies to family trusts per Probate Code § 21101) is

Probate Code § 21135 (“Lifetime gifts; satisfaction of at-death transfer;

conditions”).8

8
The key provisions are in Probate Code § 21135(a):

(a) Property given by a transferor during his or her lifetime to a person is treated
as a satisfaction of an at-death transfer to that person in whole or in part only if
one of the following conditions is satisfied:
11
 In his petition requesting instructions, Carl relied on Probate Code

§ 21135(a)(2). He pointed to Dorothy’s 2012 and 2013 holographic writings

as contemporaneous writings by Dorothy to demonstrate that the $75,000

in lifetime transfers to Lisa were “to be deducted from the value of the at-

death transfer.” Cal. Prob. Code § 21135(a)(2).

B

Judicial procedure for family trust matters is governed by Probate

Code Division 9, Part 5, “Judicial Proceedings Concerning Trusts.” Cal.

Prob. Code §§ 17000-17457.

The superior court having jurisdiction over the trust has exclusive

jurisdiction of proceedings concerning the internal affairs of a trust. Cal.

Prob. Code § 17000(a). As noted, the Probate Court in this instance is the

Superior Court of California for Santa Cruz County Probate Division.

(1) The instrument provides for deduction of the lifetime gift from the at-death
transfer.

(2) The transferor declares in a contemporaneous writing that the gift is in
satisfaction of the at-death transfer or that its value is to be deducted from the
value of the at-death transfer.

(3) The transferee acknowledges in writing that the gift is in satisfaction of an at-
death transfer or that its value is to be deducted from the value of the at-death
transfer.

(4) The property given is the same property that is the subject of a specific gift to
that person.

Cal. Prob. Code § 21135(a).

12
 A trustee or beneficiary of an irrevocable trust may petition the

Probate Court concerning the internal affairs of the trust. Cal. Prob. Code

§ 17200(a).

The “internal affairs” of the trust are defined in a nonexclusive list of

23 categories set forth as § 17200(b).

Instructing the trustee is a specified internal affair for which there

may be a petition. Cal. Prob. Code § 17200(b)(6).

Carl availed himself of this authority when he petitioned the Probate

Court for “Instructions” regarding whether $75,000 and $10,000 should be

treated as advances on inheritances based on Dorothy’s expressions of

intent. He presented evidence that Dorothy declared in contemporaneous

writings that the respective values were to be deducted from the value of

the at death transfers. Cal. Prob. Code § 21135(a)(2).

The applicable substantive law is that the transferor’s intent controls.

Cal. Prob. Code § 21102.

The Probate Court was persuaded of Carl’s position and did not

regard Lisa’s bankruptcy discharge as an impediment to its ruling.

III

The oddity that this is a probate situation prompts us to revisit our

jurisdiction regarding the Probate Court activity in light of the so-called

“probate exception” to federal jurisdiction.

13
 A

Our navigational star regarding the probate exception is the Supreme

Court decision in Marshall v. Marshall, 547 U.S. 293, 311-12 (2006).

Marshall clarified that the judge-made probate exception is to be

understood as a statement of the general principle that when one court is

exercising in rem jurisdiction over a res, a second court will not assume in

rem jurisdiction over the same res. Id. Probate of a will, annulment of a

will, and administration of a decedent’s estate are matters reserved to state

probate courts. Id.

Here, the Probate Court was exercising in rem jurisdiction over the

res of the Trust to rule regarding the internal affairs of the Trust within the

scope of Probate Code § 17200.

B

It is, of course, plausible that Probate Court decrees could be void by

virtue of § 524(a)(1), especially if collection of a debt is implicated.

Likewise, it is plausible that participants in Probate Court activity could

offend the § 524(a)(2) discharge injunction.

To be sure, the power to enforce the discharge injunction does entitle

bankruptcy courts to determine whether judgments rendered by

nonbankruptcy courts operate to determine the personal liability of a

debtor with respect to a discharged debt or entail the collection, recovery,

or offset of a discharged debt as a personal liability of the debtor. This

14
enforcement power extends to subterfuges and circumventions. Heilman v.

Heilman (In re Heilman), 430 B.R. 213, 220 (9th Cir. BAP 2010) (2-1 decision).

In Heilman, in the context of the analogous domestic relations

exception to federal jurisdiction, we discerned invalid subterfuge and

circumvention in financial provisions of a marital dissolution decree to the

extent it operated to revive a discharged debt. Id.

In describing the interplay between state and federal courts with

respect to the § 524(a)(1) discharge injunction, the Ninth Circuit has

explained that if a state court construes the discharge correctly, then its

judgment will be enforced and not be vulnerable to being upset by means

outside the normal appellate channels. Conversely, if the state court

construes the discharge incorrectly, then its judgment may be void to the

extent it offends the discharge and is subject to collateral attack in federal

court. McGhan v. Rutz (In re McGhan), 288 F.3d 1172, 1179-80 (9th Cir. 2002)

(citing with approval Pavelich v. McCormick, Barstow, Sheppard, Wayte &

Carruth LLP (In re Pavelich), 229 B.R. 777, 783 (9th Cir. BAP 1999)); cf. Gruntz

v. Cnty. of L.A. (In re Gruntz), 202 F.3d 1074, 1082-84 (9th Cir. 2000) (en banc)

(applying similar principles to the automatic stay).

C

The bankruptcy court also noted that it was not a court of appeals

with power to review or overturn Probate Court decisions. This correct

observation pertains to Lisa’s attack on the merits of the Probate Court

decision, appellate review of which is the province of California state

15
courts. E.g., Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 283-

84 (2005); Lopez v. Emerg. Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99, 103-

04 (9th Cir. BAP 2007).

It follows that the probate exception does not necessarily constrain

bankruptcy court jurisdiction to police subterfuges and enforce the

bankruptcy discharge so long as there is no exercise of in rem jurisdiction

over the res of the family trust or invasion of the legitimate province of

state appellate courts.

IV

The crucial question in this appeal is the scope of the protection

afforded by the bankruptcy discharge.

A

The discharge umbrella protects only the “personal liability with

respect to any debt discharged” under the Bankruptcy Code.

The first facet of the effect of a bankruptcy discharge is § 524(a)(1),

which relates to court judgments. The discharge “voids” all judgments “at

any time obtained,” -- i.e., past, present, and future – “to the extent that”

the judgment is a “determination of the personal liability of the debtor”

with respect to a discharged “debt.” 11 U.S.C. § 524(a)(1).

The second facet is § 524(a)(2), which relates to the World. The

discharge “operates as an injunction” against commencement or

continuation of an action, employment of process, or an act to collect,

16
recover, or offset any discharged debt “as a personal liability of the debtor.”

11 U.S.C. § 524(a)(2).

In each case, the extent the discharge is limited to “personal liability

of the debtor.”

B

Back to basics. In assessing whether there is a discharged “debt” that

is being collected, recovered, or offset “as a personal liability of the debtor”

within the meaning of the § 524(a)(2) injunction one must refer to the

statutory definition of “debt.”

1

The term “debt” is defined for Bankruptcy Code purposes: “The term

‘debt’ means liability on a claim.” 11 U.S.C. § 101(12).

2

In turn, the term “claim” is likewise defined:

The “term” claim means --

(A) right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed,
legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured, or unsecured.

11 U.S.C. § 101(5).

17
 3

The Supreme Court has explained that a “claim” is a right to

payment and a “debt” is a “duty to pay.” Ohio v. Kovacs, 469 U.S. 274, 280-

84 (1985).

Anything that does not qualify as a “claim” for purposes of § 101(5)

probably is not a “debt” for purposes of the § 524(a)(2) injunction.

V

The question becomes whether Dorothy was collecting, recovering,

or offsetting a discharged “debt.”

Although there may be little economic difference between a $75,000

discharged debt and a $75,000 advancement on an inheritance, legal

differences matter. The key legal requirement is that the intent of the settlor

of the trust takes precedence. Cal. Prob. Code § 21102(a).

The legal difference here is that Dorothy, as the settlor of the Trust or

as testator of a will, was entitled as a matter of law to direct the disposition

of her assets at death in any manner she chose. Id.

The fact that she intended and directed the adjustment of otherwise

equal distributions by treating $75,000 and $10,000 lifetime gifts to two of

her three children as advancements on an inheritance does not amount to

collecting a debt “as a personal liability” of the debtor within the meaning

of § 524(a)(2). Lisa’s argument to the contrary incorrectly conflates

advancements with loans – two legally distinct concepts.

18
 Nothing suggests that Dorothy was directing the trustee to enforce a

“right to payment” within the meaning of § 101(5)(A).

Nor does anything suggest that Dorothy was directing the trustee to

assert a “right to an equitable remedy for breach of performance” giving

rise to a right to payment within the meaning of § 101(5)(B).

Instead, in the exercise of her personal autonomy over her assets as

recognized by Probate Code § 21102(a), Dorothy, at most, was

implementing what she must have regarded as her own moral obligation to

assure just distributions to her children. The “as-a-personal-liability” limit

on the reach of the § 524(a)(2) discharge injunction accommodates

Dorothy’s right to direct how distributions from her Trust are to be made.

Accepting Lisa’s position would amount to ruling that the discharge

of a debt in bankruptcy forever bars a testator or settlor of a trust from

adjusting a legacy or distribution. Adherence to such a position would

stretch the concept of “personal liability of the debtor” beyond reasonable

bounds and stray into the realm of testamentary dispositions. Just as there

was nothing to prevent Dorothy from entirely disinheriting Lisa, there was

nothing to prevent Dorothy from requiring that $75,000 in lifetime transfers

be considered advances on an inheritance.

In short, after parsing the definition of “debt” through the matrix of

§ 101(5) and § 101(12) and the concept of “personal liability,” we are

convinced that the bankruptcy judge correctly ruled that no “debt” was

implicated in the Probate Court instructions.

19
 VI

Back to burdens.

A

As we explained above, Taggart teaches that Lisa had the burden of

persuasion to demonstrate there is no objectively reasonable basis for

concluding that the offending conduct might be lawful under the discharge

order. Taggart, 139 S. Ct. at 1801.

Ordinarily, the court’s determination whether there was an

objectively reasonable basis for concluding the offending conduct might be

lawful under the discharge, would be reviewed for abuse of discretion.

Dyer, 322 F.3d at 1191; Freeman, 608 B.R. at 233.

The absence of findings by the bankruptcy judge in this instance

means that we need not afford any form of deference to the bankruptcy

judge’s implicit view that there was an objectively reasonable basis for

concluding the targeted conduct was lawful because no “debt” was

involved. Affording no deference, we nevertheless agree.

Applicable nonbankruptcy law authorizing a settlor of a family trust

to dictate that specified lifetime transfers be deemed advancements on

inheritances, the handwritten notes of the settlor, and the trustee’s

adherence to proper procedures for requesting instructions coalesce to

provide an objectively reasonable basis for concluding that the conduct of

the alleged contemnors was lawful under the discharge order.

20
 On this record, we do not have occasion to assess whether the

bankruptcy judge abused discretion regarding its determination of

contempt, because, as a matter of law, the discharge injunction was not

violated.

B

We turn to review of the motions for reconsideration under Civil

Rules 59(e) and 60(b) that also are the subject of this appeal.

To support a motion seeking relief under Civil Rule 59(e), a movant

must show: “(1) a manifest error of fact; (2) a manifest error of law; or

(3) newly discovered evidence.” Hansen, 368 B.R. at 878.

A motion for relief under Civil Rule 60(b)(2) and (3) requires

demonstration of: “(2) newly discovered evidence that, with reasonable

diligence, could not have been discovered in time to move for a new trial

under Rule 59(b); [or] (3) fraud . . . misrepresentation, or other misconduct

of an adverse party. . . .” Wylie, 349 B.R. at 210.

In her opening appeal brief, aside from some generic references to

fraud, Lisa did not specifically and distinctly argue that the bankruptcy

court committed reversible error when it denied her motion for relief under

Civil Rules 59 and 60. Her failure to do so permits forfeiture of all issues

related to her appeal from the denial of her motion. Dietz v. Ford (In re

Dietz), 760 F.3d 1038 (9th Cir. 2014)(aff’g & adopting 469 B.R. 11, 25 (9th

Cir. BAP 2012)); Leigh v. Salazar, 677 F.3d 892, 897 (9th Cir. 2012).

21
 Lisa tries to leverage what she brands as Carl’s inconsistent positions

regarding whether the $75,000 Note was forgiven or remained an

obligation. The irony is that she blames Carl for repeating her inconsistent

positions. By omitting to schedule the $75,000 Note in her chapter 7 case,

Lisa represented that debt did not exist, and a discharge was granted on

the assumption she was truthful; now she says the debt did exist and was

discharged. Principles of judicial estoppel – the estoppel of inconsistent

positions – teach that she should not have it both ways. Cheng v. K & S

Diversified Invs., Inc. (In re Cheng), 308 B.R. 448, 453-54 (9th Cir. BAP 2004),

aff’d, 160 F. Appx. 644 (9th Cir. 2005) (standards for judicial estoppel).

The inconsistent positions, however, are not material. O’Donnell v.

Tristar Esperanza Props., LLC (In re Tristar Esperanza Props., LLC), 488 B.R.

394, 405 (9th Cir BAP 2013), aff’d, 782 F.3d 492 (9th Cir. 2015). Regardless of

whether the debt was discharged or forgiven by Dorothy in 2009, it is

plausible that Dorothy intended as of 2009 that $75,000 would eventually

be treated as an advancement on an inheritance. Even if that was not on

Dorothy’s mind in 2009, nothing prevented her in 2012 and 2013 from

treating $75,000 as an advancement on an inheritance.

As Lisa did not carry her burden to show manifest error, newly-

discovered evidence, fraud, or misrepresentation, the bankruptcy court did

not abuse discretion in denying relief under Civil Rules 59(e) and 60(b).

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 CONCLUSION

The § 524(a)(2) bankruptcy discharge injunction against any act to

collect, recover, or offset any discharged debt “as a personal liability of the

debtor” does not prevent a testator or settlor of a family trust from

requiring that an amount equal to the discharged debt, or any other sum,

be treated as an advancement on an inheritance. Such treatment is not with

respect to a “debt” as defined at Bankruptcy Code § 101(12) or an act to

collect, recover, or offset a discharged debt “as a personal liability of the

debtor” under § 524(a).

AFFIRMED.

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