Court Opinion

ID: 2797289
Source: CourtListenerOpinion
Date Created: 2015-04-29 15:01:04.48647+00
Date Added: 2024-06-11T11:29:22.578706
License: Public Domain

Case: 14-11457    Date Filed: 04/29/2015   Page: 1 of 12

                                                                        [PUBLISH]

               IN THE UNITED STATES COURT OF APPEALS

                       FOR THE ELEVENTH CIRCUIT
                         ________________________

                                No. 14-11457
                          ________________________

                      D.C. Docket No. 2:13-cv-00171-SPC,
                        Bkcy No. 9:12-bkc-02265-FMD

In Re: Michael Valone,
        a.k.a. Michael K. Valone,
        a.k.a. Michael Keith Valone,
        Kristie Valone,
        a.k.a. Kristie N. Valone,
        a.k.a. Kristie Noel Valone,

                                        Debtors,
____________________________________________________

MICHAEL VALONE,
a.k.a. Michael K. Valone,
a.k.a. Michael Keith Valone,
KRISTIE VALONE,
a.k.a. Kristie N. Valone,
a.k.a. Kristie Noel Valone,

                                                 Plaintiffs - Appellants,

versus

JON WAAGE,

                                                 Defendant - Appellee.
               Case: 14-11457        Date Filed: 04/29/2015      Page: 2 of 12

                               ________________________

                      Appeal from the United States District Court
                          for the Middle District of Florida
                            ________________________

                                       (April 29, 2015)

Before WILSON, FAY, and RIPPLE,* Circuit Judges.

WILSON, Circuit Judge:

       This is an appeal from a district court order affirming a bankruptcy court’s

disallowance of an exemption claimed by Michael and Kristie Valone in their

Chapter 13 bankruptcy petition. The Chapter 13 trustee, Jon Waage, objected to

their personal property exemption, arguing that, as homeowners filing under

Chapter 13 of the Bankruptcy Code, the Valones were ineligible for the exemption.

The bankruptcy and district courts agreed. We reverse the district court and

remand with instructions to remand to the bankruptcy court for proceedings

consistent with this opinion.

                                               I.

       The Valones are Florida residents who filed jointly for bankruptcy under

Chapter 13 of the Bankruptcy Code. In their petition, they claimed exemptions for

personal property under section 222.25(4) of the Florida Statutes, 1 known as the

       *
          Honorable Kenneth F. Ripple, United States Circuit Judge for the Seventh Circuit,
sitting by designation.
        1
          In Florida, exemptions available to bankruptcy debtors are governed by state law. See
11 U.S.C. § 522(b); Fla. Stat. § 222.20.
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“wildcard” exemption. The wildcard exemption permits a debtor to exempt from

legal process “[a] debtor’s interest in personal property, not to exceed $4,000, if

the debtor does not claim or receive the benefits of a homestead exemption under s.

4, Art. X of the State Constitution.” Fla. Stat. § 222.25(4). At the date of their

petition, the Valones owned a home, but they did not claim the homestead

exemption in their petition, presumably because they had no equity in the home.

       Waage objected to the Valones’ wildcard exemption claim, arguing that

because Chapter 13, like the homestead exemption, protects debtors’ homes,

debtors who file under Chapter 13 receive the benefits of the homestead

exemption.2 The bankruptcy court sustained the objection. In the bankruptcy

court’s memorandum opinion sustaining the objection, it cited Osborne v.

Dumoulin, 55 So. 3d 577 (Fla. 2011). In Osborne, the Florida Supreme Court

answered a question certified to it by this court and held that a debtor may still

receive the benefits of the homestead exemption without claiming it on the

bankruptcy petition, rendering the debtor ineligible for the wildcard exemption.

       2
          In bankruptcy, the automatic stay protects the debtor’s assets from execution by
creditors and is effective when the petition is filed. 11 U.S.C. § 362(a). The stay generally
remains in effect until discharge of the debtor’s debts. Id. § 362(c). In Chapter 7, discharge
occurs after liquidation of assets in the estate and payment of creditors. Id. §§ 725–727. In
Chapter 13, there is no liquidation—the debtor simply pays creditors on a modified payment
plan—and discharge occurs “as soon as practicable after completion by the debtor of all
payments under the plan.” Id. § 1328(a); see id. § 1322 (listing plan contents). Thus, in Chapter
13 cases, unsecured creditors never have the chance to force a liquidation of debtors’ assets to
satisfy their claims.
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See id. at 589–90. After citing Osborne, the bankruptcy court then noted that

federal courts applying Osborne

      have uniformly ruled that a Chapter 7 debtor who intends to retain his
      residence does not receive the benefit of the homestead exemption if
      he has not claimed the residence as exempt and there is no other
      impediment to the Chapter 7 trustee’s administration of the residence
      as an asset of the estate.

The bankruptcy court concluded that the Valones’ election of Chapter 13, like the

homestead exemption, constituted an impediment to the trustee’s administration of

the residence. Therefore, according to the bankruptcy court, because the Valones

received the benefits of the Chapter 13 automatic stay, they received the benefits of

the homestead exemption.

      The Valones appealed to the district court pursuant to 28 U.S.C. § 158(a).

During the pendency of the appeal in the district court, the bankruptcy court

confirmed the Valones’ plan after they amended it to exclude the wildcard

exemption. The district court affirmed the bankruptcy court’s disallowance of the

wildcard exemption, largely adopting the bankruptcy court’s analysis. The order

referenced the confirmation and directed the clerk “to terminate any pending

motions and close the file.”

      We hold, in accordance with the Florida Supreme Court’s holding in

Osborne, that the filing of a petition under Chapter 13 of the Bankruptcy Code by a

Florida debtor who owns, or debtors who own, homestead property does not

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foreclose the availability of Florida’s wildcard exemption to that debtor or those

debtors. Courts should consider the facts of each case to determine whether it is

the Florida homestead exemption or some other source that protects the residence

from forced sale. Under the facts presented in this appeal, the Valones’ residence

was protected from creditors by the Bankruptcy Code’s automatic stay, not by the

homestead exemption, and they are accordingly eligible to claim the wildcard

exemption.

                                          II.

       We first consider whether we have jurisdiction to reach the merits of this

appeal. Our precedent dictates that, generally, a district court order affirming the

bankruptcy court’s disallowance of an exemption is not final and thus does not fall

within our appellate jurisdiction. See Wisz v. Moister (In re Wisz), 778 F.2d 762,

763–64 (11th Cir. 1985) (per curiam). Like Wisz, this is an appeal from a district

court order affirming a disallowance of an exemption by the bankruptcy court.

Unlike Wisz, however, the district court order was final, and we accordingly have

jurisdiction to consider it.

       In Wisz, we applied the Supreme Court’s definition of a final order—one

that “‘ends the litigation on the merits and leaves nothing for the court to do but

execute [the] judgment’”—in concluding that the district court order in that case

did not fall within our appellate jurisdiction. See id. at 764 (quoting Catlin v.

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United States, 324 U.S. 229, 233, 65 S. Ct. 631, 633 (1945)). Because the

bankruptcy court still had to take further action to complete Wisz’s bankruptcy

case, the district court’s affirmance simply sent the case back to the bankruptcy

court. See id. at 763–64. Thus, it did not meet the definition of a final, appealable

order. See id. at 764.

       Here, however, the bankruptcy court confirmed the Chapter 13 plan, which

is a final order, before the district court affirmed. See Whaley v. Tennyson (In re

Tennyson), 611 F.3d 873, 875 (11th Cir. 2010). The district court order expressly

referenced the confirmation. Moreover, the district court order directed the clerk

“to terminate any pending motions and close the file.” The posture here, then, is

very similar to that present in Tennyson, the difference being that Tennyson

involved an appeal from confirmation, while we currently have a district court

order that effectively affirmed the confirmation despite the lack of an appeal

directly from that confirmation order. See id. at 875. Based on these indicia of

finality, it is clear that the district court order “end[ed] the litigation on the merits

and [left] nothing for the court to do but execute [the] judgment.” See Wisz, 778

F.2d at 764 (internal quotation marks omitted). Therefore, we will consider the

merits of this appeal.

                                            III.

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      Because the parties do not dispute the facts, whether the Valones received

the benefits of the homestead exemption and are consequently barred from

asserting the wildcard exemption is a question of law we review de novo. See

Orlick v. Kozyak (In re Fin. Federated Title & Trust, Inc.), 309 F.3d 1325, 1328–

29 (11th Cir. 2002).

      When construing the language of a statute, we “begin[] where all such

inquiries must begin: with the language of the statute itself,” and we give effect to

the plain terms of the statute. United States v. Ron Pair Enters., Inc., 489 U.S.

235, 241, 109 S. Ct. 1026, 1030 (1989); Osborne, 55 So. 3d at 581. The wildcard

exemption exempts “[a] debtor’s interest in personal property, not to exceed

$4,000, if the debtor does not claim or receive the benefits of a homestead

exemption under s. 4, Art. X of the State Constitution.” Fla. Stat. § 222.25(4).

The parties’ dispute centers on the meaning of the phrase “receive the benefits of a

homestead exemption under s. 4, Art. X of the State Constitution.” It is

exceedingly clear that this phrase is triggered only if the homestead exemption—

and the homestead exemption alone—protects the debtor’s home from creditors.

Because the homestead exemption does not reference Chapter 13, the Bankruptcy

Code, federal law, or any other source that might implicate Chapter 13, receiving

the protection of the automatic stay and discharge simply cannot trigger the

limiting phrase.

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      The bankruptcy court’s holding to the contrary is likely rooted in the

language in Osborne noting the possibility that a debtor who does not claim the

homestead exemption may yet receive its benefits. See 55 So. 3d at 589. Nothing

in that opinion, however, would extend the potential for receiving benefits to

situations—like this one—where the protection of the home emanates from a

source other than the homestead exemption. In fact, the Court clearly ruled out

disallowance under § 222.25(4) when the protection comes from any source

besides the homestead exemption: “[I]f under the facts of the case the article X

homestead exemption does not otherwise present an obstacle to the bankruptcy

trustee’s administration of the estate, then the debtor in bankruptcy is not receiving

the benefits of the homestead exemption and is eligible to claim the [wildcard

exemption].” See id. at 590 (emphasis added).

      Moreover, the example cited by the Florida Supreme Court drives the point

home. That example involved a debtor who indirectly received the benefits of the

homestead exemption through his nondebtor spouse’s retention of the right to

exercise the homestead exemption. See id. at 589. This example reinforces the

straightforward command of § 222.25(4) that requires protection from the

homestead exemption for a debtor to be ineligible for the wildcard exemption.

      Alternatively, Waage argues, because the homestead exemption is “self-

executing,” see id. at 582–83, 585, 587, the very act of owning a home that

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constitutes homestead property under the Florida Constitution may make a debtor

ineligible for the wildcard exemption. Though the Florida Supreme Court rejected

such an understanding of § 222.25(4) as it applies to bankruptcy debtors, see id. at

587, that opinion addressed Chapter 7 debtors. Chapter 7 typically results in

liquidation of non-exempt assets, including homesteads in cases where the

homestead exemption is not claimed. On the other hand, Chapter 13 is designed to

permit debtors to keep their assets, including their homes, so long as they complete

their payment plans.

      When a debtor files for bankruptcy, all of the debtor’s property becomes

property of the bankruptcy estate. 11 U.S.C. § 541. The debtor may affirmatively

exempt certain property from the estate, including property that is exempt under

the law of the debtor’s domicile. Id. § 522(b)(1), (b)(3)(A). In other words, if the

debtor fails to claim an exemption, the property remains in the estate and is subject

to administration by the trustee. Osborne, 55 So. 3d at 588.These considerations

led the Florida Supreme Court to conclude that

      the additional step of actual abandonment of the real property or an
      expression of intent to abandon the homestead is not required to bring
      the debtor within the category of those debtors who do not claim or
      receive the benefits of . . . [the] homestead exemption. . . . [W]hen the
      real property which has been occupied by a debtor as his homestead
      becomes subject to administration by the bankruptcy trustee, the
      debtor has lost the benefits of the homestead exemption.

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Id. (internal quotation marks omitted). Because the debtor loses the benefits of the

homestead exemption by subjecting his home to the trustee’s administration, he is

eligible for the wildcard exemption. It makes no difference whether the debtor

elects Chapter 7 or Chapter 13. In either situation, the debtor may decline to claim

the homestead exemption.

       Implicit in Waage’s argument, however, is the assertion that, because

Chapter 13 protects a debtor’s home until conclusion of the case, the homestead

exemption survives and is present throughout bankruptcy, even if the automatic

stay is what is protecting the home when the debtor files. This, however, does not

distinguish Chapter 13 from Chapter 7 in any meaningful way. Under Florida law,

the relevant period for determining whether a debtor receives the benefits of the

homestead exemption is “the period when the debtor asserts the personal property

exemption.” Id. at 588. “Accordingly, whether a debtor in bankruptcy could claim

the homestead exemption, previously received the benefits of the homestead

exemption, or may receive such protection after discharge from bankruptcy does

not constitute receiving the benefits of the article X homestead exemption within

the meaning of the personal property exemption.” Id. at 588–89. In other words,

the fact that the homestead exemption becomes effective after the bankruptcy case

closes is irrelevant.

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      Moreover, even if the relevant period were extended beyond case closure,

any distinction between Chapters 7 and 13 remains immaterial. In either case, if

the debtor retains ownership of the homestead after the close of the bankruptcy

case, the homestead exemption continues to protect the home from creditors after

the case is closed. Said differently, whether the debtor files under Chapter 7 or 13,

the homestead exemption lies dormant during the bankruptcy case, and its

protections reactivate after the case closes should the debtor retain ownership of

the residence. See id. at 582–83 (describing the self-executing nature of the

homestead exemption).

      Ultimately, where a bankruptcy debtor does not expressly claim the

homestead exemption, he must receive the homestead exemption’s protection to be

ineligible for the wildcard exemption. See id. at 589. Courts must determine,

based on the facts of each case, whether a debtor who does not claim the

homestead exemption on his bankruptcy petition still receives the homestead

exemption’s benefits. Id. Such a situation may arise, for example, where a

married debtor does not claim the homestead exemption in his petition but his

“nondebtor spouse retain[s] the right to the homestead exemption.” Id. Thus, the

debtor must receive his protection against creditors from the homestead exemption,

even if that protection is indirect, to be ineligible for the wildcard exemption;

similar protection from any other source is insufficient.

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      Finally, the purpose of exemptions in Chapter 13 mandates like treatment in

both Chapters 7 and 13. Chapter 13 requires the debtor to pay to creditors an

amount equal to or greater than the amount those creditors would receive in a

Chapter 7 liquidation. 11 U.S.C. § 1325(a)(4). This “liquidation test” accounts for

exemptions applicable in Chapter 7 to calculate that amount. If we were to side

with Waage, the amount calculated under the Chapter 13 liquidation test would

exceed the amount the Valones’ creditors would receive from liquidation.

Waage’s interpretation of § 222.25(4), then, contravenes not just the plain

language of that statute; it would also defeat one of the basic tenets of Chapter 13.

      Section 222.25(4) is clear. The wildcard exemption is available to debtors

as long as they do not claim or receive the benefits of the homestead exemption. It

is irrelevant that a debtor receives protection from other sources, including Chapter

13. Therefore, the Valones did not claim or receive the benefits of the homestead

exemption, and we reverse and remand to the district court with instructions to

remand to the bankruptcy court for proceedings consistent with this opinion.

      REVERSED and REMANDED.

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