Michael P. Klein v. Jesslyn AndersonMichael P. Klein v. Jesslyn Anderson
FOR PUBLICATION
MICHAEL P. KLEIN, Chapter 7 Trustee, Appellant, v. JESSLYN RENEE ANDERSON, Appellee.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel
Lafferty III, Brand, and Gan, Bankruptcy Judges, Presiding
Submitted February 5, 2021*
Seattle, Washington
Filed March 1, 2021
Before: M. Margaret McKeown and Richard A. Paez, Circuit Judges, and William Horsley Orrick,** District Judge.
Per Curiam Opinion
SUMMARY***
Bankruptcy
The panel affirmed the Bankruptcy Appellate Panel‘s judgment affirming the bankruptcy court‘s ruling that a debtor was entitled to a homestead exemption under Washington law.
The panel adopted in full the BAP‘s opinion and attached it as an appendix. The BAP concluded that the debtor, who occupied the homestead on the petition date, was entitled to her homestead exemption despite the fact that she moved out shortly thereafter and neither re-occupied the property nor filed a declaration of non-abandonment within six months of moving out.
COUNSEL
Thomas A. Buford and Richard B. Keeton, Bush Kornfeld LLP, Seattle, Washington, for Appellant.
Tom Lester, Lester & Associates P.C. Inc., Bellingham, Washington, for Appellee.
OPINION
PER CURIAM:
Appellant Michael P. Klein, Chapter 7 trustee of the bankruptcy estate of Jesslyn Renee Anderson (“Debtor“), appeals from a judgment of the Bankruptcy Appellate Panel affirming the bankruptcy court‘s ruling that Debtor was entitled to a homestead exemption under Washington law. We affirm for the reasons stated by the Bankruptcy Appellate Panel in its well-reasoned March 23, 2020 published opinion. In re Anderson, 613 B.R. 279 (B.A.P. 9th Cir. 2020). The opinion of the Bankruptcy Appellate Panel, which is attached as an appendix, is adopted in full.
AFFIRMED.
APPENDIX
Case: 19-1224, Document: 23, Filed: 03/23/2020 Page 1 of 14
ORDERED PUBLISHED
FILED MAR 23 2020
SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: JESSLYN RENEE ANDERSON, Debtor. BAP No. WW-19-1224-LBG, Bk. No. 2:17-bk-15492-MLB
MICHAEL P. KLEIN, Chapter 7 Trustee, Appellant, v. JESSLYN RENEE ANDERSON, Appellee.
OPINION
Argued and Submitted on February 27, 2020 at Pasadena, California
Filed - March 23, 2020
Appeal from the United States Bankruptcy Court for the Western District of Washington
Honorable Marc L. Barreca, Chief Bankruptcy Judge, Presiding
Appearances: Richard Keeton of Bush Kornfeld, LLP, argued for Appellant; Thomas E. Lester of Lester & Associates, P.S., Inc., argued for Appellee.
Before: LAFFERTY, BRAND, and GAN, Bankruptcy Judges.
LAFFERTY, Bankruptcy Judge:
Michael P. Klein, chapter 71 trustee (“Trustee“) of the bankruptcy estate of Jesslyn Renee Anderson (“Debtor“), appeals the bankruptcy court‘s order overruling his objection to Debtor‘s homestead exemption. Debtor was living in her homestead on the petition date, but she moved out shortly thereafter and neither re-occupied the property nor filed a declaration of nonabandonment within six months of moving out. Trustee contended that, despite the fact that Debtor occupied the homestead on the petition date, (1) she lacked the intent to reside there, and (2) under Washington law she had abandoned the property and was thus no longer entitled to claim the homestead exemption. The bankruptcy court distinguished the case law cited by Trustee and ruled that the Debtor was entitled to her homestead exemption despite the fact that she no longer
occupied the subject real property.
We AFFIRM.
FACTUAL BACKGROUND
Debtor filed a chapter 7 bankruptcy petition in December 2017. On her schedules, Debtor listed a 15 percent interest in real property on Brown Road in Ferndale, Washington (the “Property“), which she co-owns with her parents. She valued her interest in the Property at $90,000. On Schedule C, she claimed a homestead exemption of $125,000 under
In February 2018, Trustee filed an objection to Debtor‘s homestead exemption, objecting to the amount of the exemption and noting that Debtor was no longer living in the Property. He filed an amended objection in June 20192 in which he argued that Debtor was not entitled to a homestead exemption in the Property because (1) as of the petition date, she did not have a present intent to use the Property as her homestead; and
(2) under Washington law, she had abandoned the Property post-petition by failing to reside there for six months or to file a declaration of homestead. Debtor responded to the objection, arguing that, under the “snapshot rule,” bankruptcy exemptions are fixed as of the petition date and thus the fact that she had moved out of the Property shortly after filing was irrelevant.
The bankruptcy court held an initial hearing at which it heard argument and took the matter under advisement. At the final hearing on the objection held on August 22, 2019, the bankruptcy court overruled Trustee‘s objection.
Trustee timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under
ISSUE
Whether the bankruptcy court erred in overruling Trustee‘s objection to Debtor‘s homestead exemption.
STANDARD OF REVIEW
The bankruptcy court‘s application of state exemption law is a question of statutory construction that is reviewed de novo. See Cisneros v. Kim (In re Kim), 257 B.R. 680, 684 (9th Cir. BAP 2000). We also review de novo the question of whether property is included in a bankruptcy estate.
Id. De novo review is independent, with no deference given to the trial court‘s conclusion. Barclay v. Mackenzie (In re AFI Holding, Inc.), 525 F.3d 700, 702 (9th Cir. 2008).
DISCUSSION
Under
Washington law also provides that “[a] homestead is presumed abandoned if the owner vacates the property for a continuous period of at least six months.”
Washington exemption statutes are liberally construed in favor of protecting family homes. See Jefferies v. Carlson (In re Jefferies), 468 B.R. 373, 380 (9th Cir. BAP 2012) (citing In re Dependency of Schermer, 169 P.3d 452, 465-66 (Wash. 2007); Pinebrook Homeowners Ass‘n v. Owen, 739 P.2d 110, 113 (Wash. Ct. App. 1987)).
When the homeowner files bankruptcy, her right to claim an exemption is fixed as of the petition date; this is often referred
Cerchione (In re Cerchione), 414 B.R. 540, 548 (9th Cir. BAP 2009) (“A debtor‘s entitlement to claimed exemptions generally is determined as of the date of such debtor‘s bankruptcy filing.“). Under
In his appellate brief, Trustee did not dispute that, as of the petition date, Debtor was living in the Property and was thus entitled to the automatic homestead exemption on that date, and he seemed to have abandoned any argument that she was required to have an intent to continue to reside there. At oral argument on appeal, however, counsel for Trustee argued that because Debtor moved out shortly after the petition date, she could not have intended to continue living in the Property on that date. But, as the bankruptcy court aptly noted in its oral ruling, the plain language of Washington‘s homestead statute reflects that Debtor was entitled to an automatic homestead exemption on the petition date, so long as she was occupying the Property as her principal residence, regardless of her future plans: “Property included in the homestead must be actually
intended or used as the principal home for the owner.”
But Trustee‘s primary argument on appeal is that under Washington law, Debtor‘s right to claim the homestead exemption was conditional upon her remaining in the Property or filing a declaration of nonabandonment and, because she did not, she automatically lost the right to the exemption after six months had passed.
Trustee has not cited any controlling or analogous case law involving the specific provision of the Washington exemption statute at issue here, nor have we found any. Trustee relies on Ninth Circuit cases holding that, although exemption rights are fixed as of the petition date, those rights are subject to whatever contingencies may be placed upon them by other applicable provisions of state homestead law. See In re Jacobson, 676 F.3d 1193; In re Gitts, 116 B.R. 174; and England v. Golden (In re Golden), 789 F.2d
In Golden, the debtor had sold homestead property pre-petition and declared the proceeds exempt under California law,
In Jacobson, the Ninth Circuit expanded Golden to the situation where the homestead was sold post-petition. There, a chapter 7 debtor claimed a California homestead exemption in property that was her residence on the petition date. The bankruptcy court lifted the stay for a judgment creditor to foreclose on the residence, and the debtor received the amount of her homestead exemption from the proceeds of the sale. As in Golden, the
debtor did not reinvest the proceeds within six months, and the chapter 7 trustee sought turnover of the proceeds to the estate. The bankruptcy court denied the trustee‘s motion, reasoning that the exemption was fixed as of the petition date, and this Panel affirmed. The Ninth Circuit Court of Appeals reversed. It reasoned that, under Golden, the debtor‘s right to a homestead exemption was contingent on the proceeds being reinvested within six months of receipt. Because the debtor did not abide by that condition, the Circuit held that she had forfeited the exemption. In re Jacobson, 676 F.3d at 1199.
Trustee also cites In re Gitts, a case decided under Washington exemption law. There, chapter 7 debtors did not reside in their intended homestead as of the petition date because they were in the process of renovating it, but they nevertheless claimed an exemption in it and, one day post-petition, filed a declaration of homestead for that property. The chapter 7 trustee filed an objection to the exemption, which the bankruptcy court overruled. This Panel affirmed, reasoning that, as of the petition date, the debtors had the right to file a declaration of homestead for their intended residence and
thus create a valid homestead exemption against a judgment creditor up to the date of an execution sale. Under Myers [v. Matley, 318 U.S. 622 (1943)] which looks at the rights of the debtor on the filing date to make and record the necessary declaration of homestead and which holds that the trustee has no greater rights than a state law judgment creditor, the
debtors’ post-petition declarations are sufficient to create a homestead exemption under Washington law which is valid against the trustee.
Id. at 180 (footnotes omitted).
Read together, these cases support Trustee‘s position that the right to a homestead exemption is subject to whatever rights and limitations are provided by the particular state‘s exemption statutes. But that conclusion does not lead to the result Trustee proposes. He urges us to read
We decline to read the statute so broadly, particularly in light of the principle that Washington exemption statutes are to be interpreted liberally
in favor of protecting family homes. Schermer, 169 P.3d at 465. The provision does not impose a requirement or condition; it simply creates an evidentiary presumption, which may be rebutted. See
Debtor resided in the Property as her principal residence on the petition date, and under Washington exemption law, this was sufficient to confer automatic protection of the homestead. As such, the fact that she moved out of the Property shortly after filing and failed to return is simply irrelevant to the determination of whether she is entitled to claim the homestead exemption in her chapter 7 case. Trustee cites no policy that would be served by denying Debtor her exemption under these facts. Unlike the “reinvestment of proceeds” scenario, here there is no danger that Debtor will squander her homestead funds on nonexempt property. She cannot access the funds representing the exemption without a sale,
which is made more complicated here by the fact that she co-owns the Property with her parents, who may or may not have the ability to buy out her interest. Further, a debtor‘s right to a homestead exemption in a chapter 7 case should not be predicated on the happenstance of how long the case remains pending. We thus AFFIRM the bankruptcy court‘s conclusion that Debtor is entitled to claim a homestead exemption in the Property.
As for the amount of the exemption, Trustee requests that if we affirm the bankruptcy court‘s ruling that Debtor is entitled to the homestead exemption, we should find that the bankruptcy court erred in not sustaining Trustee‘s objection to the amount of Debtor‘s exemption. Trustee contends the exemption should have been limited to $90,000, the amount of her claimed equity in the Property, citing Wilson v. Rigby, 909 F.3d 306, 312 (9th Cir. 2018), in which the Ninth Circuit held that the value of the exemption is limited to the value that lawfully may be claimed as of the petition date. But the bankruptcy court did not make a finding as
the trial court to rule upon it). In any event, in the bankruptcy court‘s October 31, 2019 order granting a limited stay pending appeal, it explicitly reserved the issue of the value of the claimed homestead exemption.
CONCLUSION
The bankruptcy court did not err in ruling that Debtor was entitled to a homestead exemption under Washington law. Accordingly, we AFFIRM. We leave the question of the appropriate amount of the exemption for determination by the bankruptcy court.
Notes
A homestead is presumed abandoned if the owner vacates the property for a continuous period of at least six months. However, if an owner is going to be absent from the homestead for more than six months but does not intend to abandon the homestead, and has no other principal residence, the owner may execute and acknowledge, in the same manner as a grant of real property is acknowledged, a declaration of nonabandonment of homestead and file the declaration for record in the office of the recording officer of the county in which the property is situated.