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ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. WW-11-1484-HKiJu

)

JACK SHERMAN JEFFERIES, ) Bk. No. 11-42206

)

Debtor. )

______________________________)

)

JACK SHERMAN JEFFERIES, )

)

Appellant, )

)

v. ) O P I N I O N

)

CHARLES D. CARLSON, Chapter 7 )

Trustee, )

)

)

Appellee. )

______________________________)

Argued and Submitted on March 23, 2012

at Seattle, Washington

Filed - April 30, 2012

Appeal from the United States Bankruptcy Court

for the Western District of Washington

Honorable Brian D. Lynch, Bankruptcy Judge, Presiding

 

Appearances: Roger J. Sharp of Sharp Law Professional

Corporation argued for Appellant Jack Sherman

Jefferies. Charles D. Carlson of Carlson &

Thacker, PLLC, argued for Appellee Charles D.

Carlson, Chapter 7 Trustee.

 

Before: HOLLOWELL, KIRSCHER and JURY, Bankruptcy Judges.

FILED

APR 30 2012

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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 Unless otherwise indicated, all chapter and section 1

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 

All “Rule” references are to the Federal Rules of Bankruptcy

Procedure, Rules 1001-9037. The Federal Rules of Civil Procedure

are referred to as “Civil Rules.”

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HOLLOWELL, Bankruptcy Judge:

The debtor appeals the bankruptcy court’s order sustaining

the chapter 7 trustee’s objection to his homestead exemption 1

claim. The debtor contended that an equalizing judgment he

received in exchange for the transfer of his residence to his exwife in a dissolution decree constituted proceeds of the

voluntary sale of his homestead, protected by the Washington

homestead exemption statutes. The bankruptcy court disagreed. 

We AFFIRM.

I. FACTUAL BACKGROUND

Jack Jefferies (the Debtor) filed a chapter 7 bankruptcy

petition on March 22, 2011. Charles Carlson was appointed the

trustee (the Trustee).

Prior to filing bankruptcy, the Debtor and his now ex-wife

purchased and resided on real property in Ridgefield, Washington

(the Residence). After eight years of marriage, the Debtor moved

out of the Residence due to marital difficulties. He has not

lived at the Residence since April 2009; however, his ex-wife and

children continue to reside there.

In December 2010, the Washington state court entered a

Decree of Dissolution of Marriage (the Dissolution Decree). In

the Dissolution Decree, the Debtor was awarded an “equalizing
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 RCW 6.13.030 provides that: 2

A homestead may consist of lands, as described in RCW

6.13.010, regardless of area, but the homestead

exemption amount shall not exceed the lesser of (1) the

total net value of the lands, manufactured homes,

mobile home, improvements, and other personal property,

as described in RCW 6.13.010, or (2) the sum of one

hundred twenty-five thousand dollars in the case of

lands, manufactured homes, mobile home, and

improvements, or the sum of fifteen thousand dollars in

the case of other personal property described in RCW

6.13.010, except where the homestead is subject to

execution, attachment, or seizure by or under any legal

process whatever to satisfy a judgment in favor of any

state for failure to pay that state's income tax on

benefits received while a resident of the state of

Washington from a pension or other retirement plan, in

which event there shall be no dollar limit on the value

of the exemption.

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Judgment for his interest in the real property awarded to his

wife” in the amount of $40,800 (Equalizing Judgment). The

Equalizing Judgment was secured by a promissory note and deed of

trust on the Residence. In February 2011, in furtherance of the

terms of the Dissolution Decree, the Debtor conveyed his interest

in the Residence to his ex-wife by quitclaim deed.

On Schedule C, the Debtor listed $47,000 as exempt “Proceeds

from sale of homestead” under WASH. REV. CODE (RCW) 6.13.030 (the 2

Exemption). The Trustee objected to the Exemption. The Trustee

asserted that because the Debtor no longer lived at the Residence

and was divested of his interest in the Residence through the

Divorce Decree, he failed to meet the requirements of

Washington’s homestead exemption statutes and was unable to claim

the Exemption.
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The Debtor responded by asserting that although he was

divested of his interest in the Residence, his ex-wife’s

obligation to pay the Equalizing Judgment constituted proceeds of

the voluntary sale of his homestead, for which an exemption is

allowed. In reply, the Trustee asserted that “the divorce court

awarded the home to [the Debtor’s wife]. The debtor did not sell

his interest in the home to his former wife as he alleges.”

A hearing on the Exemption took place on July 5, 2011. The

bankruptcy court considered the Exemption under RCW 6.13.070(1),

which allows a debtor to exempt the proceeds from a voluntary

sale of a homestead for the purpose of acquiring a new homestead. 

The bankruptcy court determined that the Equalizing Judgment

constituted proceeds of the Debtor’s former homestead. However,

the bankruptcy court concluded that the criteria for the

Exemption under RCW 6.13.070(1) was not satisfied because the

transfer of the Residence to the debtor’s ex-wife was not a

voluntary sale. Therefore, the bankruptcy court determined that

although the Debtor may have intended to use the proceeds for the

purpose of acquiring a new homestead, the proceeds did not

qualify for a homestead exemption. The bankruptcy court

subsequently sustained the Trustee’s objection to the Exemption

by written order entered on July 28, 2011.

On August 9, 2011, the Debtor filed a motion for

reconsideration (Reconsideration Motion). In the Reconsideration

Motion, the Debtor argued that the bankruptcy court erred in its

determination that the transfer of the Residence was not

voluntary. The Debtor asserted that, through a consensual

agreement with his ex-wife, he voluntarily transferred his
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 The Debtor filed the Reconsideration Motion within 14 days 3

of the bankruptcy court’s order sustaining the Trustee’s

objection to the Exemption. Therefore, it tolled the time for

appeal until 14 days from the final order disposing of the

Reconsideration Motion. Dicker v. Dye (In re Edelman), 237 B.R.

146, 151 (9th Cir. BAP 1999). Because the Debtor filed his

notice of appeal within 14 days of order denying the

Reconsideration Motion, the Debtor’s appeal was timely. Rule

8002(b)(2).

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interest in the Residence to her and the Equalizing Judgment

simply memorialized the consensual agreement to transfer the

Residence. In a written order, the bankruptcy court clarified

its analysis supporting its determination that the transfer of

the Residence did not constitute a voluntary sale and denied the

Reconsideration Motion. The Debtor timely appealed.3

II. JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. § 1334

and 28 U.S.C. § 157(b)(2)(B). We have jurisdiction under 28

U.S.C. § 158.

III. ISSUE

Did the bankruptcy court err in determining that the Debtor

could not claim a homestead exemption for the Equalizing

Judgment?

IV. STANDARDS OF REVIEW

The bankruptcy court’s conclusions of law are reviewed de

novo. Decker v. Tramiel (In re JTS Corp.), 617 F.3d 1102, 1109

(9th Cir. 2010). The scope of a statutory exemption is a

question of law subject to de novo review. Gonzalez v. Davis (In

re Davis), 323 B.R. 732, 734 (9th Cir. BAP 2005); Kelley v. Locke

(In re Kelley), 300 B.R. 11, 16 (9th Cir. BAP 2003). The
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validity of the claimed exemption is controlled by the applicable

state law. In re Kelley, 300 B.R. at 16. Additionally, whether

a sale is considered a forced or voluntary sale for purposes of a

homestead exemption is a question of law reviewed de novo. See

generally, In re Cole, 93 B.R. 707, 708-09 (9th Cir. BAP 1988). 

De novo review requires that we consider the matter anew, as if

it had not been heard before, and as if no decision had been

rendered previously. Dawson v. Marshall, 561 F.3d 930, 933 (9th

Cir. 2009).

The bankruptcy court’s denial of a motion for

reconsideration is reviewed for an abuse of discretion. Ta Chong

Bank Ltd. v. Hitachi High Techs. Am., Inc., 610 F.3d 1063, 1066

(9th Cir. 2010); Clinton v. Deutsche Bank Nat’l Trust Co. (In re

Clinton), 449 B.R. 79, 83 (9th Cir. BAP 2011). A bankruptcy

court abuses its discretion if it bases a decision on an

incorrect legal rule, or if its application of the law was

illogical, implausible, or without support in inferences that may

be drawn from the facts in the record. United States v. Hinkson,

585 F.3d 1247, 1262 (9th Cir. 2009) (en banc); Ellsworth v.

Lifescape Med. Assocs., P.C. (In re Ellsworth), 455 B.R. 904, 914

(9th Cir. BAP 2011).

V. DISCUSSION

A. Eligibility For Exemption

Washington has not “opted out” of the federal exemption

scheme. Thus, a debtor domiciled in Washington may select either

the exemptions afforded by Washington law, or the federal

exemption scheme. 11 U.S.C. § 522(b); 4 COLLIER ON BANKRUPTCY
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 Property described in RCW 6.13.010 constitutes a homestead 4

and is automatically protected by the homestead exemption of RCW

6.13.070 from and after the time the property is occupied. If

the homestead is unimproved or improved land that is not yet

occupied as a homestead, the homestead is exempted from and after

the time the declaration of homestead is recorded. 

RCW 6.13.040(1), (2).

-7-

¶ 522.02 (Henry Somers & Alan Resnick eds., 15th ed. rev. 2009). 

The Debtor selected state law exemptions.

In Washington, a “homestead consists of real or personal

property that the owner uses as a residence” or “the dwelling

house or the mobile home in which the owner resides or intends to

reside . . . . Property included in the homestead must be

actually intended or used as the principal home for the owner.” 

RCW 6.13.010(1). Property occupied as a homestead is 4

automatically protected by the exemption. RCW 6.13.040.

Here, since the Debtor transferred his interest in the

Residence prior to filing bankruptcy, he was not eligible for an

automatic homestead exemption. Wilson v. Arkison (In re Wilson),

341 B.R. 21, 27 (9th Cir. BAP 2006) (debtor not entitled to

homestead exemption because he did not live in the marital home

at the time he filed bankruptcy and could not reside there in the

future due to the divorce decree that divested him of his

property interest). However, the Debtor based the Exemption on

RCW 6.13.070, which exempts a homestead from attachment,

execution, or forced sale for the debts of the owner up to

$125,000, as well as the same amount in proceeds from a voluntary

sale of the homestead, in good faith for the purpose of acquiring

a new homestead. RCW 6.13.030, 6.13.070(1). Proceeds from a
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voluntary sale of a homestead are exempt under RCW 6.13.070(1)

for up to one year. Any new homestead acquired with the proceeds

during that time may also be exempted. Id.

The Debtor claimed that the Equalizing Judgment constituted

the proceeds of a voluntary sale of his Residence for the purpose

of acquiring a new homestead. We agree that any property taken

in exchange for the transfer of a homestead is considered to be

“proceeds” as contemplated by the homestead exemption statute. 

Vojta v. Buhre, 165 Wash. 384, 387 (1931). Accordingly, the

Equalizing Judgment, secured by the note and deed of trust,

constitutes proceeds for purposes of RCW 6.13.070(1). 

Additionally, the Debtor submitted an uncontroverted declaration

stating that he intended to use the proceeds to purchase a new

homestead. Therefore, in order to meet the remaining criterion

entitling the Debtor to the Exemption, the Debtor’s transfer of

the Residence to his ex-wife must have been a voluntary sale.

The legal authority guiding our analysis on this issue is

scant. However, the Washington Supreme Court has provided an

explanation of the difference between a forced and voluntary

sale:

[A forced sale is] a transaction in which there is an

element of compulsion on the part of either the seller

or the buyer. If the element of compulsion is based

upon purely economic reasons, the sale is generally

considered voluntary . . . . Where, however, a seller

or buyer is forced to act under a decree, execution or

something more than mere inability to maintain the

property, the element of compulsion is based upon

legal, not economic factors . . . .

Felton v. Citizens Fed. Sav. & Loan Ass’n of Seattle, 101 Wash.

2d 416, 422 (1984) (quoting State v. Lacey, 8 Wash. App. 542, 549

(1973)).
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 The court in Felton was construing what is now RCW 5

6.13.080, which provides that the homestead is not available

against an execution or forced sale in satisfaction of judgments

obtained on, among other things, debts secured by a vendor’s lien

on the property or debts secured by mortgages on the property.

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In Felton, the court concluded that a nonjudicial trustee’s

sale was a voluntary sale because the debtors indirectly

consented to the sale through the power of sale granted the

trustee in the loan documents. Id. at 422-23. The court 5

determined that when a property owner consents, either directly

or indirectly, to a sale under execution or other legal process,

the sale is not a forced sale for purposes of the homestead

statutes. The Debtor seizes on this language and contends that

“[t]here is no reason [his] consent to this legal process [of

dissolution] should be treated as any less consensual or

voluntary than the consent of one signing a mortgage or deed of

trust.”

However, in Felton, it was the debtors’ inability to

maintain the property that led to the trustee’s sale. The sale

was therefore compelled due to economic factors. Thus, it fell

squarely within the court’s definition of a voluntary sale. 

Here, the Debtor transferred the Residence to his ex-wife, not

because of purely economic reasons or an inability to maintain

the Residence. He transferred the Residence to his ex-wife as

part of a state court dissolution process and allocation of

marital property.

The Debtor asserts that because there was a voluntary predecree agreement with his ex-wife to transfer the homestead, the
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Dissolution Decree did not transform that voluntary agreement

into a forced sale. The Debtor’s assertion might have more merit

if the Debtor had quitclaimed the Residence prior to the entry of

the Dissolution Decree. But even if there was some agreement,

cooperation, and consent between the Debtor and his ex-wife as to

who would retain the Residence, there remained an element of

legal compulsion in the property division.

For example, the Debtor stated that the agreement did not

come quickly (“We eventually agreed that the family home should

be awarded to her so she could continue to reside there with our

children.”), and that he and his ex-wife disagreed about the

amount that he would be paid for transferring his interest. 

Ultimately, it was the state court who decided, after a trial,

the amount of the payment. Thus, the Equalizing Judgment was

made through the Dissolution Decree as part of the state court’s

fair allocation of the marital property.

The Debtor, however, argues that the Dissolution Decree was

not the operative document that divested him of his interest in

the Residence. Nevertheless, it was the state court’s final

decisions on the allocation and distribution of the marital

property that triggered the Debtor’s obligation to transfer the

Residence. Indeed, the Debtor admits he was “disappointed by

[the state court judge’s] decision and contemplated an appeal.” 

However, since he did not appeal the Dissolution Decree, he was

obligated by its terms to transfer the Residence, which resulted

in the quitclaim deed to his ex-wife in exchange for the note and

deed of trust.
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 The Debtor’s reliance on In re Marriage of Foley, 84 Wash. 6

App. 839 (1997) to support his argument is off-point. There, Mr.

Foley was awarded the family home and ordered through a

dissolution decree to pay Mrs. Foley an equalization award that

was to be paid by refinancing or selling the home. Mr. Foley

argued that the forced sale violated his homestead rights but the

court held that “[a] judgment in owelty is an equitable lien on

the property specified in the nature of a vendor’s lien. It

prevails over a homestead exemption.” Id. at 845; see also RCW

6.13.080 (cannot claim homestead exemption against a forced sale

in satisfaction of vendor’s lien).

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Homestead and exemption statutes are favored in the law and

should be liberally construed. In re Dependency of Schermer, 161

Wash. 2d 927, 953 (2007); Pinebrook Homeowners Ass’n v. Owen, 48

Wash. App. 424, 427 (1987). Nevertheless, in applying the

definitions of voluntary and forced sales set forth in Felton, we

agree with the bankruptcy court that the sale or transfer by the

Debtor of the Residence to his ex-wife was made with an element

of legal, not purely economic, compulsion and was, therefore, not

a voluntary sale. Consequently, the Debtor cannot claim the

Exemption under RCW 6.13.070(1).6

B. Reconsideration Motion

The Debtor sought reconsideration pursuant to Rule 9023,

incorporating Civil Rule 59(e). He asserted that the issue of

whether the transfer of the Residence to his ex-wife was

considered a voluntary or a forced sale was not fully briefed

before the bankruptcy court because it was raised by the Trustee

for the first time at the hearing on the objection to the

Exemption. The Debtor asserted that the bankruptcy court erred

in its determination that the sale was a forced sale, which
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 Additionally, under Local Bankruptcy Rule 9013-1(h), which 7

incorporates Local Civil Rule for the U.S. District Court for the

Western District of Washington (Local Civil Rule) 7(h), motions

for reconsideration are disfavored and not granted unless there

is a showing of manifest error, or, new facts or legal authority

that could not have been brought to the court’s attention earlier

with reasonable diligence.

-12-

resulted in the Debtor’s ineligibility to claim a homestead

exemption under RCW 6.13.070(1).

Although Civil Rule 59(e) permits a court to reconsider and

amend a previous order, “the rule offers an ‘extraordinary

remedy, to be used sparingly in the interests of finality and

conservation of judicial resources.’” Kona Enters., Inc. v. 7

Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000) (internal

citation omitted). Thus, a motion for reconsideration should not

be granted absent “highly unusual circumstances,” unless the

court is presented with: (1) newly discovered evidence, (2)

committed clear error, or (3) there is an intervening change in

the controlling law. Marlyn Nutraceuticals, Inc. v. Mucos Pharma

GmbH & Co., 571 F.3d 873, 880 (9th Cir. 2009). A Civil Rule

59(e) motion may not be used to raise arguments or present

evidence for the first time when they could reasonably have been

raised earlier in the litigation. Kona Enters., Inc., 229 F.3d

at 890.

The Debtor presented no new evidence or intervening change

in the law that required the alteration of the bankruptcy court’s

order sustaining the Trustee’s objection to the Exemption. For

the reasons discussed above, the bankruptcy court did not err in

determining that the Debtor’s transfer of the Residence to his
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ex-wife, in exchange for an Equalizing Judgment through the

Dissolution Decree, was a forced sale. Thus, the bankruptcy

court did not err in concluding that the Debtor was ineligible

for the Exemption. Consequently, there was no basis for the

Debtor to prevail on his Reconsideration Motion. As a result, we

conclude that the bankruptcy court did not abuse its discretion

when it denied the Reconsideration Motion.

VI. CONCLUSION

For the reasons stated, we AFFIRM the bankruptcy court’s

order sustaining the Trustee’s objection to the Exemption.