Court Opinion

ID: 2644561
Source: CourtListenerOpinion
Date Created: 2013-12-03 01:01:17.596472+00
Date Added: 2024-06-11T12:31:35.545553
License: Public Domain

FILED
                                                           DEC 2 2013
 1
                                                       SUSAN M. SPRAUL, CLERK
 2                                                       U.S. BKCY. APP. PANEL
                                                         OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )        BAP No.   ID-13-1218-JuKiKu
                                   )
 6   STEPHANIE LYNN,               )        Bk. No.   ID-12-02896-TLM
                                   )
 7                   Debtor.       )
     ______________________________)
 8   STEPHANIE LYNN,               )
                                   )
 9                   Appellant,    )
                                   )
10   v.                            )        M E M O R A N D U M*
                                   )
11   JEREMY J. GUGINO, Chapter 7   )
     Trustee;                      )
12                                 )
                     Appellee.     )
13   ______________________________)
14               Argued and Submitted on November 22, 2013
                          at Pasadena, California
15
                            Filed - December 2, 2013
16
               Appeal from the United States Bankruptcy Court
17                        for the District of Idaho
18      Honorable Terry L. Myers, Chief Bankruptcy Judge, Presiding
                          _______________________
19
     Appearances:     Brian John Coffey, Esq. argued for appellant
20                    Stephanie Lynn; Matthew Todd Christensen, Esq.,
                      of Angstman, Johnson & Associates, PLLC argued
21                    for appellee Jeremy J. Gugino.
                           _________________________
22
23   Before:   JURY, KIRSCHER, and KURTZ, Bankruptcy Judges.
24
25
26        *
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
28   See 9th Cir. BAP Rule 8013-1.

                                      -1-
 1            Debtor Stephanie Lynn appeals from the bankruptcy court’s
 2   order sustaining the objection of appellee-chapter 71 trustee,
 3   Jeremy J. Gugino, to debtor’s homestead exemption of unimproved
 4   real property.     At issue is whether debtor “actually intended”
 5   to make unimproved real property her homestead within the
 6   meaning of Idaho Code § 55–1001(2).         For the reasons explained
 7   below, we AFFIRM.
 8                                  I.   FACTS
 9   A.       Prepetition Events
10            Debtor and her ex-husband, David Arthaud (Arthaud),
11   purchased unimproved property located on Placer Creek Road
12   (Place Creek property) near Boise, Idaho.        In 2006, debtor
13   initiated divorce proceedings and the parties subsequently
14   entered into a Stipulated Judgment and Decree of Divorce filed
15   July 31, 2007.     Attached to the divorce decree is a Martial
16   Property Settlement Agreement (MPSA) that deals with, among
17   other things, the Placer Creek property.        The terms of MPSA
18   require that the parties sell the property, deposit the proceeds
19   in debtor’s attorney’s trust account, and then distribute the
20   proceeds according to a distribution scheme.        Under the MPSA,
21   debtor and Arthaud have equal access to the property until it is
22   sold.
23            On August 24, 2012, debtor executed a declaration of
24   abandonment of her residence located on Elk Creek Road in Idaho
25
26        1
            Unless otherwise indicated, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     “Rule” references are to the Federal Rules of Bankruptcy
28   Procedure.

                                         -2-
 1   City (Elk Creed Road property) and a declaration of homestead on
 2   the Placer Creek property.    She recorded both documents on
 3   August 27, 2012, in Boise County, Idaho.
 4   B.   Bankruptcy Events
 5           Not long after, on December 11, 2012, debtor filed her
 6   chapter 7 petition.    Gugino was appointed trustee.
 7           The Placer Creek property had not been sold by the petition
 8   date.    In Schedule A, debtor listed the Placer Creek property
 9   with a value of $32,872 and listed her ownership interest as fee
10   simple.    In Schedule C, debtor claimed the Placer Creek property
11   exempt for its full value under Idaho Code §§ 55-1001, 55-1002,
12   and 55-1003.
13           Trustee timely objected to debtor’s homestead exemption in
14   the Placer Creek property, asserting that:    (1) the property was
15   unimproved bare ground; (2) debtor was not living on or
16   otherwise occupying the property on the petition date; (3) the
17   property had been listed for sale almost continuously for
18   several years prior to the petition date; and (4) the MPSA
19   required debtor and her husband to sell the property and
20   distribute the proceeds according to a distribution scheme.
21   Based on these facts, trustee argued that the property did not
22   qualify as a homestead under Idaho law because debtor could not
23   have “actually intended” to use the property as her principal
24   home within the meaning of Idaho Code § 55–1001(2).
25           In response to the objection, debtor requested an
26   evidentiary hearing to determine her subjective intent to reside
27   on the property.    Debtor further asserted that to the extent
28   trustee was arguing that she could not have had the requisite

                                      -3-
 1   intent due to the language in the MPSA, that argument should
 2   fail as a matter of law.
 3        In his memorandum, trustee maintained that the facts were
 4   not substantially in controversy and that the adjudication of
 5   the matter would turn largely on the language in the MPSA which
 6   required the parties to sell the Placer Creek property.
 7   According to trustee, because debtor was under a court order to
 8   sell the property, her sale power rights were transferred to
 9   trustee on the date of debtor’s filing.   As a result, trustee
10   asserted that debtor’s requisite intent to make the property her
11   homestead “went away” as soon as her sale power rights were
12   transferred.
13        In her responsive memorandum, debtor contended that
14   although the divorce decree required the parties to sell the
15   Placer Creek property, there was no timeframe or deadline for
16   doing so.    Debtor further argued that the decree and MPSA made
17   clear that she and her ex-husband had equal access to the
18   property until it was sold.
19        On April 22, 2013, the bankruptcy court held an evidentiary
20   hearing.    The evidence consisted of the divorce decree, debtor’s
21   declarations of homestead and abandonment, debtor’s schedules
22   and statement of financial affairs, and debtor’s testimony.
23        After taking the matter under advisement, the bankruptcy
24   court orally entered its decision on the record, sustaining
25   trustee’s objection and disallowing debtor’s homestead
26   exemption.   The bankruptcy court found that:   (1) debtor
27   testified that the Placer Creek property had been listed for
28   sale for much of the time from and after 2007, although

                                     -4-
 1   occasionally it was taken off the market for strategic reasons
 2   during the winter season and again briefly when a real estate
 3   agent handling the property passed away; (2) debtor had occupied
 4   the Elk Creek Road property from December 2007 through October
 5   2011 and ceased occupancy some 14 months prior to her
 6   surrendering that property through her statement of intention;
 7   (3) debtor’s schedules showed the Elk Creek Road property was
 8   significantly underwater and that a mortgage was owed to Bank of
 9   America well exceeding the value of the property; (4) on
10   August 24, 2012, debtor executed the abandonment of the Elk
11   Creek Road property as her homestead and a declaration asserting
12   a homestead on the Placer Creek property; (5) the only occupancy
13   of the Placer Creek property was a few summer months prior to
14   debtor’s divorce in 2006; (6) debtor’s testimony did not
15   describe any steps that she had taken at any time, up to or
16   after the filing of the petition, to make the Placer Creek
17   property her primary residence; and (7) on the date of her
18   filing, debtor lived in rental property and worked in Meridian,
19   Idaho, which was some distance from the Placer Creek property.
20        Based on these facts, the bankruptcy court concluded that
21   the weight of the objective evidence, and the direct and
22   circumstantial evidence provided by trustee, successfully
23   impeached debtor’s testimony of her actual intent to reside on
24   the Placer Creek property.   In the end, the court concluded that
25   debtor did not have the actual intent required by the Idaho Code
26   in order to substantiate the homestead exemption.
27        On April 30, 2013, the bankruptcy court entered the order
28   sustaining trustee’s objection to debtor’s claim of exemption.

                                    -5-
 1   Debtor timely appealed.
 2                               II.    JURISDICTION
 3        The bankruptcy court had jurisdiction over this proceeding
 4   under 28 U.S.C. §§ 1334 and 157(b)(2)(B).           We have jurisdiction
 5   under 28 U.S.C. § 158.
 6                                     III.    ISSUE
 7        Whether the bankruptcy court erred in sustaining trustee’s
 8   objection to debtor’s homestead exemption in the unimproved
 9   Placer Creek property.
10                         IV.    STANDARDS OF REVIEW
11        We review questions of fact, such as the bankruptcy court’s
12   ultimate decision regarding debtor’s actual intent to make the
13   Placer Creek property her homestead, under the clearly erroneous
14   standard.    Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th
15   Cir. BAP 2003).   We affirm the bankruptcy court’s factual
16   findings unless its interpretation of the facts was “illogical,
17   implausible, or without support in inferences that may be drawn
18   from the facts in the record.”            United States v. Hinkson,
19   585 F.3d 1247, 1261–62 & n.21 (9th Cir. 2009) (en banc).
20        We review a bankruptcy court’s conclusions of law,
21   including its interpretation of state law, de novo.           Hopkins v.
22   Cerchione (In re Cerchione), 414 B.R. 540, 545 (9th Cir. BAP
23   2009).
24                                V.     DISCUSSION
25        When debtor filed her chapter 7 petition, all her assets
26   became “property of [her] bankruptcy estate, see 11 U.S.C.
27   § 541, subject to [her] right to reclaim certain property as
28   ‘exempt.’”   Schwab v. Reilly, 560 U.S. 770, 130 S. Ct. 2652, 2657

                                              -6-
 1   (2010).   “Property a debtor claims as exempt will be excluded
 2   from the bankruptcy estate ‘[u]nless a party in interest’
 3   objects.”    Id. (citing § 522(l)).     Whether property qualifies as
 4   exempt is to be determined as of the date of the filing of
 5   debtors’ chapter 7 petition.    White v. Stump, 266 U.S. 310, 313
 6   (1924); In re Cerchione, 414 B.R. at 548.
 7        Section 522(b) allows debtors to choose the exemptions
 8   afforded by state law or the federal exemptions listed under
 9   § 522(d).    Idaho has elected to “opt out” of the federal
10   exemptions.     Idaho Code § 11–609.    Therefore, debtor was limited
11   to the exemption allowed under Idaho state law.
12   In re Steinmetz, 261 B.R. 32, 33 (Bankr. D. Idaho 2001).        Idaho
13   exemption statutes are to be liberally construed in favor of the
14   debtor.   Id.
15         Trustee, as the party objecting to debtor’s homestead
16   exemption, had the burden of production and persuasion, and
17   therefore must produce evidence to rebut the presumptively valid
18   exemption.    In re Kelly, 300 B.R. at 17.     “While the burden of
19   persuasion always remains with the objecting party, if the
20   objecting party can produce evidence to rebut the presumption,
21   then the burden of production shifts to the debtor to come
22   forward with unequivocal evidence to demonstrate that the
23   exemption is proper.”    Id.   To have his objection sustained,
24   trustee must prove by a preponderance of the evidence that
25   debtor lacked the intent required under the Idaho Code.        Id.
26        In Idaho, the homestead can be established automatically by
27   occupying a home as one’s principal residence or by recording a
28   proper declaration of homestead.       Idaho Code § 55–1004.   To

                                      -7-
 1   claim a homestead exemption in bare land or improved property
 2   which he or she does not yet occupy, the debtor must record a
 3   proper declaration.   Idaho Code § 55–1004(2).   In the case of a
 4   debtor who owns more than one parcel of property and who desires
 5   to claim a homestead exemption in a parcel he or she does not
 6   yet occupy, the debtor must execute and record two different
 7   declarations: a declaration of homestead as to the unoccupied
 8   property, and a declaration of abandonment as to the occupied
 9   property.
10        Trustee does not dispute that debtor recorded the requisite
11   declarations or that the declarations were in the proper form.
12   Rather, the trustee asserts that to prove debtor “actually
13   intended” to make the Placer Creek property her homestead within
14   the meaning of Idaho Code § 55–1001(2), debtor needs more than a
15   mere declaration of homestead.    We agree.
16        Idaho Code § 55–1001(2) states:
17        ‘Homestead’ means and consists of the dwelling house
          or the mobile home in which the owner resides or
18        intends to reside, with appurtenant buildings, and the
          land on which the same are situated and by which the
19        same are surrounded, or improved; or unimproved land
          owned with the intention of placing a house or mobile
20        home thereon and residing thereon .... Property
          included in the homestead must be actually intended or
21        used as a principal home for the owner.
22        The plain language of the statute states that property
23   included in the homestead must be “actually intended” as a
24   principal home for the owner.    Black’s Law Dictionary defines
25   “actual” as “existing in fact; real.”   Thus, the phrase
26   “actually intended” involves an examination of external
27   verifiable facts as opposed to examining only an individual’s
28   subjective intention.   As a result, determining a debtor’s

                                      -8-
 1   “actual” intent to establish a homestead on property is a
 2   factually intensive endeavor.   In re Kelley, 300 B.R. at 16;
 3   In re Moore, 269 B.R. 864, 868 (Bankr. D. Idaho 2001).     However,
 4   in analyzing the debtor’s actual intent to occupy the property,
 5   the exemption does not require proof of an ability to actually
 6   occupy.   See In re Ramsey, 2013 WL 3205415, at *4 (9th Cir. BAP
 7   2012) citing In re Conley, 1999 WL 33490228, at *12 (Bankr. D.
 8 Idaho 2001) (finding that the debtor’s decade long litigation
 9   concerning the unimproved property was indicative of his
10   subjective intent to make the property his homestead).
11        As the trier of fact, the bankruptcy court had to determine
12   whether debtor’s testimony was credible, which of the
13   permissible competing inferences it would draw from the evidence
14   presented, and ultimately whether the party with the burden of
15   persuasion — here the trustee — had persuaded it that the
16   requisite facts showing intent or lack thereof were proven.     The
17   record shows that the bankruptcy court performed this function
18   properly.
19        The bankruptcy court summarized the evidence in support of
20   the trustee’s position and debtor’s countervailing evidence that
21   it considered.   The court did not find debtor’s testimony
22   persuasive regarding her actual intent to occupy the Placer
23   Creek property in light of other evidence in the record that
24   suggested the contrary.   The bankruptcy court noted that other
25   than debtor’s declarations regarding the abandonment and
26   declaration of her homestead, debtor did not testify that she
27   had taken any steps to occupy the property.   Moreover, debtor
28   did not refute the terms of the divorce decree or that she had

                                     -9-
 1   been continually marketing the Placer Creek property prior to
 2   filing her bankruptcy petition.     Instead, debtor hung her hat on
 3   the fact that the divorce decree did not specify a time when the
 4   property was to be sold.    However, contrary to debtor’s
 5   suggestion, the bankruptcy court did not solely rely on the
 6   divorce decree to either establish or refute debtor’s intent
 7   because it was silent as to the occupancy of the property, not
 8   even addressing it.
 9        In sum, the bankruptcy court did not clearly err in finding
10   that debtor did not have the actual intent to make the Placer
11   Creek property her homestead.     The record as a whole supports
12   the bankruptcy court’s inferences and findings.    “Where there
13   are two permissible views of the evidence, the factfinder’s
14   choice between them cannot be clearly erroneous.”    Anderson v.
15   City of Bessemer City, N.C., 470 U.S. 564, 574–75 (1985).
16                              VI.   CONCLUSION
17        For these reasons, we AFFIRM.
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