487 B.R. 539
Bankr. W.D. Wis.2012Background
- Debtor Dean R. Coenen owns 100% of K-D of Fair Valley, LLC, which holds title to a Sauk City property used as a bar and residence.
- Debtor lists the property value at $188,586.56 and claims a $25,656.90 Wisconsin homestead exemption under 11 U.S.C. § 522(b)(3) and Wis. Stat. § 815.20.
- Trustee objects to the exemption contending Coenen does not own the property because K-D holds legal title.
- Wisconsin law defines homestead to include the dwelling and nearby land reasonably necessary for use as a home, with a $75,000 exemption, subject to exceptions.
- Court must determine whether ownership lies with the debtor or solely with the LLC, and whether the debtor’s equitable interest can qualify for an exemption.
- Court concludes the debtor cannot use an exemption based on ownership of the LLC’s assets; the true owner is the LLC, and equitable interests do not bypass that ownership.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who must own the property for the exemption? | Trustee: LLC owns property; no exemption. | Coenen: sole LLC ownership gives him control and use. | Owner is the LLC; exemption denied. |
| Does equity in corporate assets allow exemption when ownership is in a separate entity? | Trustee: equitable interest does not exempt property held by the LLC. | Coenen: equitable interest should allow exemption. | Equitable interest cannot override LLC ownership for exemption. |
| What is the effect of tenancy status on the exemption? | Trustee: tenancy at will is insufficient to vest homestead exemption. | Coenen: tenancy at will could support exemption (less common). | Tenancy at will does not provide a valid homestead exemption against the trustee. |
Key Cases Cited
- In re Arnhoelter, 431 B.R. 453 (Bankr.E.D.Wis.2010) (ownership required; debtor not title owner cannot exempt)
- Fowler v. Shadel, 400 F.3d 1016 (7th Cir.2005) (equitable interest follows shares; cannot exempt corporate assets)
- In re Kaufmann, 142 F.2d 898 (E.D.Wis.1906) (life estate considered for exemption; tenancy nuances)
- Schivanz v. Teper, 66 Wis.2d 157, 223 N.W.2d 896 (Wis. 1974) (strong public policy favoring liberal homestead exemptions)
- Anchor Sav. & Loan Assoc. v. Week, 62 Wis.2d 169, 213 N.W.2d 737 (Wis. 1974) (liberal construction of homestead exemptions)
- Northwestern Securities Co. v. Nelson, 191 Wis. 580, 211 N.W. 798 (Wis. 1927) (liberal construction of exemptions in Wisconsin)