United States Bankruptcy Appellate Panel

FOR THE EIGHTH CIRCUIT

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No. 10-6042

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In re: *

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Lawrence D. Danduran, Jr., *

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Debtor. *

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Lawrence D. Danduran, Jr., *

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Debtor – Appellant, *

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v. *

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Kip M. Kaler, Chapter 7 Trustee for the *

Estate of Lawrence Danduran, Jr., *

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Defendant – Appellee. *

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Submitted: November 4, 2010

Filed: November 23, 2010

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Before FEDERMAN, VENTERS, and SALADINO, Bankruptcy Judges.

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VENTERS, Bankruptcy Judge.

The Debtor appeals the bankruptcy court’s order sustaining the Trustee’s

objection to a portion ($7,700) of the Debtor’s homestead exemption. For the reasons

set forth below, we reverse.
1 In re Waterman, 248 B.R. 567, 570 (B.A.P. 8th Cir. 2000). 

2 In re McGowan, 226 B.R. 13, 16 (B.A.P. 8th Cir. 1998).

3

 Based on the figures stated by the parties, the balance of the account would

be slightly less ($87,218.66), but no issue has been made of this discrepancy. 

4

A pool table, hot tub, washer, dryer, deck patio furniture, barbecue grill,

theater seating, mirror, area rub, wreaths, audio equipment, chair and ottoman,

mission style table, and coffee table. 

2

I. STANDARD OF REVIEW

Findings of fact are reviewed for clear error, and legal conclusions are reviewed

de novo.1

 A bankruptcy court's denial of a claim of exemption is a final, appealable

order.2

II. BACKGROUND

On September 15, 2009, the Debtor sold his homestead for $225,000. From the

proceeds, the Debtor paid $140,860.38 to satisfy a mortgage held by Washington

Mutual and deposited $83,139.62 into a savings account he established for the specific

purpose of receiving the proceeds of his homestead. The only other money placed in

the account was $1,000 from the buyers’ down payment and $3,079.04 Washington

Mutual refunded from his escrow account. Thus, the entire balance of the Debtor's

savings account – $87,501.55 – constituted proceeds of the Debtor's homestead.3

On December 31, 2009, the Debtor filed a voluntary petition for Chapter 7

bankruptcy relief in the Bankruptcy Court for the District of North Dakota. The

Debtor claimed a homestead exemption pursuant to N.D. Cent. Code § 28-22-02(7)

in the entire $87,501.55 in his savings account. The Chapter 7 trustee, Kip Kaler

(“Trustee”), objected to this exemption claim, asserting that $7,700 of the money in

his savings account wasn’t exempt because those funds were proceeds of certain nonexempt personal property4

 included in the sale of Debtor's homestead. 
5

 The Debtor also argues that certain items the bankruptcy considered

personal property (i.e., the hot tub and the pool table) constituted fixtures under

North Dakota law and, therefore, were real property unquestionably covered by his

homestead exemption. Because we reverse on other grounds, we do not need to

reach this issue, although we note that we are unpersuaded that the hot tub and pool

tables were, in fact, fixtures.

6

 The Debtor testified that neither he nor the buyers attributed any value to

the personal property and did not adjust the sale price when the personal property

was included in the sale. The real estate contract did not apportion any part of the

sale price to the personal property. 

3

The bankruptcy court held an evidentiary hearing on the Trustee's objection on

May 26, 2010, at which time the Debtor testified that the personal property was

included in the sale only at the buyers’ request and that no value was attributed to it.

The Debtor’s testimony was uncontradicted and corroborated by the real estate

contract which did not apportion any of the purchase price to the personal property.

 

At the conclusion of the hearing, the Bankruptcy Court found that $7,700 of the

money in the Debtor's savings account constituted proceeds from the sale of personal

property and were therefore not exempt as proceeds from his homestead. This appeal

ensued.

III. DISCUSSION

The Debtor’s primary argument on appeal is that the Trustee’s objection should

have been overruled because, in the absence of any evidence or allegation that he

intended to hinder, delay, or defraud his creditors, the Debtor’s alleged sale of the

personal property was a permissible conversion of non-exempt assets into exempt

homestead proceeds.5

 In other words, to the extent any proceeds from the sale of his

home are attributable to the personal property,6

 the Debtor maintains that those

proceeds went to the mortgage lender, thereby increasing the amount of equity the

Debtor could claim as exempt under N.D. Cent. Code § 47-18-01.
7 See e.g., Larson v. Cole, 33 N.W.2d 325, 328-29 (N.D. 1948).

8 Farstveet v. Rudolph ex. rel. Eileen Rudolph Estate, 630 N.W.2d 24, 30 n.1

(N.D. 2001). See generally N.D. Cent. Code § 47-18-16 (stating that the proceeds

of a sale beyond the amount necessary to satisfy a lien, and not exceeding the

amount of the homestead exemption, are entitled to the same protection against

legal process as the law gives to the homestead).

9 Hanson v. First Nat’l Bank, 848 F.2d 866, 868 (8th Cir. 1988) (“It is well

established that a debtor's conversion of non-exempt property to exempt property

on the eve of bankruptcy for the express purpose of placing that property beyond

the reach of creditors, without more, will not deprive the debtor of the exemption

to which he otherwise would be entitled.”). See also In re Addison, 540 F.3d 805,

813 (8th Cir. 2008); In re Ladd, 450 F.3d 751, 755 (8th Cir. 2006) (citation

omitted) (“Maximization of exemptions, especially the homestead exemption, is a

fundamental policy of the Bankruptcy Code. . . .”); Norwest Bank Nebraska, NA v.

Tveten, 848 F.2d 871, 873-74 (8th Cir. 1988) (“It is well established that under the

Code the conversion of non-exempt to exempt property for the purpose of placing

the property out of the reach of creditors, without more, will not deprive the debtor

of the exemption to which he otherwise would be entitled.”).

4

The Trustee counters here, as he did at trial, that the non-exempt proceeds of

the personal property were not converted into exempt homestead proceeds because the

Debtor did not indicate his intent to engage in such pre-bankruptcy planning at the

time of the transaction. We disagree.

As with most exemptions, the North Dakota homestead exemption is to be

construed liberally in favor of a debtor.7

 And under North Dakota law, the proceeds

from the sale of a homestead are exempt to the same extent as the homestead.8

In view of these principles and the Eighth Circuit’s permissive approach to nonfraudulent, pre-bankruptcy planning,9

 we find the Debtor’s establishment of a savings

account for the specific purpose of depositing the proceeds of his homestead and his

subsequent deposit into that account of the proceeds from the personal property
5

(allegedly) sold with his homestead sufficient indicia of his intent to convert nonexempt personal property into exempt, homestead property. Because the record is

devoid of any contrary evidence or evidence that the Debtor acted with fraudulent

intent when he converted non-exempt property into exempt property, the Debtor is

entitled to claim the entire $87,501.55 in his savings account as his homestead

exemption claim. 

CONCLUSION

For the reasons stated above, we reverse the bankruptcy court’s order sustaining

the Trustee’s objection to the Debtor’s homestead exemption claim.