Law v. Siegel

571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014)

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Law v. Siegel

United States Supreme Court
571 U.S. 415, 134 S.Ct. 1188, 188 L.Ed.2d 146 (2014)

Facts

Stephen Law (debtor) filed for Chapter 7 bankruptcy. Alfred H. Siegel (plaintiff) was appointed trustee. Law’s bankruptcy estate’s only real asset was a house in California. Law claimed that the house had a value of $363,348 but asserted that California’s homestead exemption covered $75,000 of the house’s value. According to Law’s filing, the house was subject to two liens with two separate creditors. One of the creditors was listed as “Lin’s Mortgage & Associates,” and Law represented that someone named Lili Lin had a deed of trust supporting the lien on the house. Law claimed that because the two mortgages exceeded the house’s nonexempt value, no equity existed in the house that could be used to satisfy Law’s other creditors. This would have allowed Law to keep the house. However, Siegel instituted an adversary proceeding asserting that the alleged Lin’s Mortgage lien on the house was fraudulent. Siegel sought to avoid the Lili Lin deed of trust and sell the house. During the proceeding, two different people claiming to be Lili Lin came forward. The first Lin stipulated that she had no interest in the house. The second Lin purportedly lived in China and spoke no English, but she engaged in litigation with Siegel for five years to keep him from avoiding the deed of trust and selling the house. The bankruptcy court eventually determined that the Lin’s Mortgage lien was a sham and that Law had made fraudulent misrepresentations about the lien. Siegel claimed he had incurred over $500,000 in attorney’s fees throughout the litigation to overcome Law’s misrepresentations and requested that the $75,000 homestead exemption be used to pay the fees. The bankruptcy court granted Siegel’s motion. A bankruptcy appellate panel and federal appellate court affirmed the bankruptcy court’s decision, and the United States Supreme Court granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Scalia, J.)

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