Court Opinion

ID: 9955982
Source: CourtListenerOpinion
Date Created: 2024-03-29 22:01:19.519557+00
Date Added: 2024-06-11T08:13:21.847954
License: Public Domain

FILED
                                                                   MAR 29 2024
                      ORDERED PUBLISHED
                                                              SUSAN M. SPRAUL, CLERK
                                                                U.S. BKCY. APP. PANEL
                                                                OF THE NINTH CIRCUIT
        UNITED STATES BANKRUPTCY APPELLATE PANEL
                  OF THE NINTH CIRCUIT

In re:                                    BAP No. CC-23-1120-SGC
MARIA TERESA MELENDEZ REY,
             Debtor.                      Bk. No. 2:22-bk-14119-WB

MARIA TERESA MELENDEZ REY,
             Appellant,
v.                                        OPINION
PETER URQUIJO,
             Appellee.

            Appeal from the United States Bankruptcy Court
                   for the Central District of California
            Julia Wagner Brand, Bankruptcy Judge, Presiding

                             APPEARANCES
Christopher J. Langley of Shioda, Langley & Chang LLP argued for
Appellant; Thomas H. Casey argued for Appellee.

Before: SPRAKER, GAN, and CORBIT, Bankruptcy Judges.

Opinion by Judge Spraker
Concurrence by Judge Corbit
SPRAKER, Bankruptcy Judge:

                                 INTRODUCTION

      Chapter 131 debtor Maria Teresa Melendez Rey appeals from the

bankruptcy court’s order sustaining the objection of creditor Peter Urquijo

to Rey’s homestead exemption claim. Her appeal presents a single legal

issue: when the real property in question includes two separate residential

structures, one of which is the debtor’s residence and the other is a rental

property, does California consider the two structures as a single unit for

purposes of applying its homestead exemption? We answer this question

in negative. Because Rey has not presented any other grounds to justify

reversal of the order on appeal, we AFFIRM.

                                       FACTS2

A.    Rey’s bankruptcy filing and her homestead exemption claim.

      The relevant facts are undisputed.3 Rey filed for relief under chapter

7 in July 2022. The court later granted Rey’s motion to convert to chapter

13, subject to reconversion to chapter 7 if Rey should fail to successfully

complete her chapter 13 case.

      Unless specified otherwise, all chapter and section references are to the
      1

Bankruptcy Code, 11 U.S.C. §§ 101–1532.
      2
          We exercise our discretion to take judicial notice of documents electronically
filed in the underlying bankruptcy case. See Atwood v. Chase Manhattan Mortg. Co. (In re
Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
        3 Because Rey has not disputed any factual findings on appeal, our recitation of

facts draws heavily from the bankruptcy court’s statement of facts contained in its
memorandum decision disposing of Urquijo’s exemption objection.
                                            2
      On her Schedule A/B, Rey listed her fee simple interest in 1922-1924

Bunker Ave (“Property”). Rey valued the Property at $930,000. In the

operative version of her schedules, she described the Property as: “Two

houses on parcel, front house is 920sq/ft, 1 bd plus den where debtor

resides. Back house is 2,300 sq/ft, 6 bd and 3 bath, currently rented to two

sisters. Property purchased in 1987.” Rey listed $583,518 in secured debt

against the Property owed to one creditor. In her Schedule C, she claimed a

homestead exemption in the Property for $626,400 based on the maximum

statutory amount set forth in California Code of Civil Procedure (“CCP”)

§ 704.730(a)(1), as adjusted for inflation pursuant to CCP § 704.730(b).4

      Rey listed Urquijo in her schedules as a disputed, contingent, and

unliquidated unsecured creditor for $494,000 in attorney fees. Urquijo filed

an unsecured proof of claim for $511,968.80.

B.    Urquijo’s objection to Rey’s claimed homestead exemption.

      Urquijo objected to Rey’s homestead exemption of the Property on

the basis that it did not extend to the rented duplex. He conceded that Rey

had resided in the smaller house at 1922 Bunker Avenue since 2017 and

was continuing to reside there at the time of her bankruptcy filing. But he

maintained that the six-bedroom duplex at 1924 Bunker Avenue had been

constructed and always used as a rental property. In fact, he pointed out

that each unit in the duplex had been rented out to the same two tenants

      4
        This is the maximum statutory amount of the homestead exemption rather than
the equity under the debtor’s valuation.
                                         3
since at least 2020, that Rey had not even entered the duplex since 2020,

and that the terms of her lease with the tenants prohibited her from

entering the duplex unless she gave advance written notice.

      In addition to having separate addresses, the two structures are

separated by a fence and have separate driveways, entrances, parking,

utilities, and mailboxes. As Urquijo put it, the only things the structures

had in common besides ownership were a single assessor’s parcel number,

and a mortgage encumbering the entire Property. Based on these facts,

Urquijo contended that Rey had a right to claim only 1922 Bunker Avenue

as her residence and her homestead. The rental duplex at 1924 Bunker

Avenue, he insisted, was not her residence and did not qualify for the

automatic residential homestead exemption. 5

      In support of his objection, Urquijo submitted two appraisals—one

appraising 1922 Bunker Avenue and the other appraising 1924 Bunker

Avenue. The appraisals separately valued the structures and concluded

that 1922 Bunker Avenue had a fair market value of $574,000 and 1924

Bunker Avenue had a fair market value of $830,000.

      Rey’s opposition to Urquijo’s objection focused on the fact that the

structures were situated on a single lot of land subject to a single assessor’s

      5
         Urquijo’s objection also discusses a separate garage structure, consisting of two
two-car garages separated by a wall but sharing a common roof. Though Rey used half
of the garage space for personal storage, one of Rey’s tenants leased and used the other
half of the garage space. Consequently, Urquijo asserted that Rey could claim as exempt
only 50% of the garage space.
                                            4
parcel number. Because it was undisputed that she resided in the house at

1922 Bunker Avenue, she maintained that she was entitled to the automatic

homestead exemption as to the whole of the Property. According to Rey,

the structures only could be sold as a single unit under current California

real property law. Therefore, she reasoned that it made no sense to

separately evaluate the structures in the process of determining whether

each individual structure qualified as part of her residence. Rather, she

maintained that the duplex and garage were “outbuildings” or

“appurtenances” that were part of her homestead regardless of the actual

use of those structures. She further argued that Urquijo relied on outdated

case law that was no longer applicable to a single lot. Instead, Rey insisted

that the entire lot was indivisible and exempt as her homestead.6

      Urquijo replied that Rey was attempting to expand the statutory

scope of the homestead to include all outbuildings and appurtenances

adjacent to the residence and the land on which they are situated. Urquijo

maintained that California case law had clarified that the inclusion of

outbuildings and land in the homestead was limited to those actual and

customary appurtenances necessary or convenient for personal household

      6 Rey also challenged Urquijo’s two separate appraisals as defective because they
incorrectly assumed that the two structures could be sold separately, and each had its
own separate fair market value. Rey posited that the two appraisals grossly inflated the
fair market value of each structure. The bankruptcy court made no determination as to
the value of the Property. The value, either as a single unit or as broken down between
1922 Bunker Avenue and 1924 Bunker Avenue, is largely irrelevant to the bankruptcy
court’s decision.
                                           5
use and enjoyment. Urquijo opined that whether the structures only could

be sold as part of a single legal plot of land was irrelevant to the exemption

issue. 7 As for the appraisals, he maintained that they demonstrated the

hypothetical value a chapter 7 trustee could receive by selling the two

residential structures for purposes of determining whether the proposed

chapter 13 plan satisfied the liquidation analysis required under

§ 1325(a)(4).8 Based on his appraisals Urquijo stated that such sales would

net unsecured creditors roughly $361,250.00 under his liquidation analysis.

C.    The bankruptcy court’s ruling on the exemption objection.

      After holding a hearing on the exemption objection, the bankruptcy

court entered a memorandum decision and an order sustaining the

objection. The court largely relied on Urquijo’s statement of the undisputed

facts and his view of California homestead exemption law. The court

specifically rejected Rey’s argument that California homestead exemption

law necessarily required the two separate structures to be treated as a

single unit because they both were part of a single legal plot of land.

      The bankruptcy court entered its order sustaining the exemption

objection on June 30, 2023. Rey timely appealed.

      7
         Urquijo further suggested that recent California legislation permits under
certain circumstances for homeowners to divide a single residential lot into two roughly
equal portions. The bankruptcy court did not address this issue. Nor is it relevant to our
analysis and resolution of this appeal.
       8 Again, this issue was not addressed by the bankruptcy court and is beyond the

scope of this appeal from the order sustaining Urquijo’s exemption objection.
                                            6
                               JURISDICTION

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

157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.

                                     ISSUE

      Whether California homestead exemption law requires a court to

determine the homestead nature of multiple structures as a single

indivisible unit when all of those structures are situated on a single plot of

land subject to a single assessor’s parcel number.

                          STANDARD OF REVIEW

      The sole issue properly raised by Rey requires us to interpret

California homestead exemption law. Though some homestead exemption

appeals present both questions of fact and law, see, e.g., Bhangoo v. Engs

Com. Fin. Co. (In re Bhangoo), 634 B.R. 80, 90 (9th Cir. BAP 2021), Rey’s issue

is a pure question of law, which we review de novo, see Elliott v. Weil (In re

Elliott), 523 B.R. 188, 195-96 (9th Cir. BAP 2014).

                                DISCUSSION

A.    California’s automatic homestead exemption—generally.

      California has opted out of the slate of federal exemptions set forth in

the Bankruptcy Code. See § 522(b); CCP § 703.130. Thus, Rey’s right to

claim an exemption is governed by California law. McKee v. Anderson (In re

McKee), 90 F.4th 1244, 1247 (9th Cir. 2024); In re Elliott, 523 B.R. at 192. Rey

claims California’s automatic homestead exemption as set forth in CCP

§ 704.710, et seq. The automatic homestead exemption is one of two

                                        7
partially overlapping homestead exemptions available under California

law.9 Amin v. Khazindar, 112 Cal. App. 4th 582, 588 & n.2 (2003); Harry D.

Miller and Marvin B. Starr, 12 Cal. Real Est. § 43:1 (4th ed. 2023). At the

time Rey filed her bankruptcy, the maximum statutory homestead

exemption available, as adjusted for inflation was $626,400. CCP

§ 704.730(a)(1), (b).

B.     Focus on use.

       The automatic homestead exemption is rooted in the statutory

definitions of “homestead” and “dwelling.” The statute defines a

homestead as “the principal dwelling (1) in which the judgment

debtor . . . resided on the date the judgment creditor’s lien attached to the

dwelling, and (2) in which the judgment debtor . . . resided continuously

thereafter until the date of the court determination that the dwelling is a

homestead.” CCP § 704.710(c). In turn, a “dwelling” for purposes of the

       9
           As Amin explained:

              In California, a homestead exemption may be asserted two ways. First, a
       declaration of homestead may be recorded. A recorded homestead protects the
       property from execution by certain creditors to the extent of the amount of the
       homestead exemption. Because many California debtors failed to file homestead
       exemptions, the legislature in 1974 enacted legislation which created an
       “automatic” homestead exemption. This exemption need not be memorialized in
       a recorded homestead declaration in order to be effective.

Amin, 112 Cal. App. 4th at 588 (cleaned up); see also Webb v. Trippet, 235 Cal. App. 3d
647, 651 (1991) (“An automatic residential exemption applies when a party has
continuously resided in a dwelling from the time that a creditor’s lien attaches until a
court’s determination that the exemption applies.”).
                                            8
homestead exemption is defined to mean “a place where a person resides

and may include but is not limited to . . . [a] house together with the

outbuildings and the land upon which they are situated.” 10 CCP

§ 704.710(a)(1) (emphasis added). Based on the statutory definition of

dwelling, California has not strictly limited the homestead exemption to

the dwelling house in which the family resides but also has included “the

usual and customary appurtenances, including outbuildings of every kind

necessary or convenient for family use and lands used for the purposes

thereof.” Gregg v. Bostwick, 33 Cal. 220, 227 (1867) (emphasis added).

       In Gregg, the debtors claimed a homestead exemption by declaration

in a block of real property comprised of four lots. Id. at 221. They resided

on one of these lots. The other lots included six other dwelling houses and

other buildings used for various purposes. The buildings were occupied by

tenants and separated from the debtors’ residence by fences. Id. at 222.

Construing the contours of the property subject to California’s homestead

exemption, the California Supreme Court explained that “the only tests are

use and value. The former is both abstract and statutory – the latter

statutory only.” Gregg, 33 Cal. at 228. As to the critical importance of a

debtor’s use in determining the homestead, the Gregg court further

explained:

       10CCP 704.710(a) sets forth a non-exhaustive laundry list of other types of
property the term “dwelling” may include. The only item in the laundry list relevant to
this appeal is the first one set forth in subsection (1) regarding the house, outbuildings,
and underlying land.
                                             9
      Whatever is used--being either necessary or convenient--as a
      place of residence for the family as contradistinguished from a
      place of business, constitutes the homestead, subject to the
      statutory limit as to value. If, however, it is also used as a place
      of business by the family, which frequently happens, it may not
      therefore cease to be a homestead, if it would be necessary or
      convenient for family use independent of the business.

Gregg, 33 Cal. at 228 (emphasis added). In Bond v. CIT Group/Sales

Financing, Inc. (In re Bond), 2006 WL 6810941, at *5 (9th Cir. BAP Apr. 26,

2006), we recognized that Gregg is still good law and observed that “there

is no formula for determining the propriety of the use of surrounding

property claimed, but it cannot be protected by the homestead if is it

neither necessary nor convenient for the enjoyment of the home.”

      Gregg also makes clear that a debtor’s use of the property is

inherently a factual question:

      How much of Block Eighteen was actually used by the
      plaintiffs as a homestead at any time prior to 1857 the Court
      does not find, and it does not follow that they used the entire
      block for that purpose merely from the fact that they resided
      upon a part of it, with no fence except upon its exterior lines;
      for, as we have already stated, the homestead is not measured
      by fences merely. As fences alone cannot limit the extent of the
      homestead, neither can they enlarge it. Its extent is measured
      by use and occupation as such, and not by imaginary or
      artificial lines.

Gregg, 33 Cal. at 228-229. Thus, the extent of Rey’s homestead exemption

ultimately hinges on how she used the Property. See In re Bond, 2006 WL

                                       10
6810941, at *6; Guernsey v. Douglas, 171 Cal. 329, 331 (1915); Payne v.

Cummings, 146 Cal. 426, 430–31 (1905); In re Ligget, 117 Cal. 352, 352–53,

(1897); Arendt v. Mace, 76 Cal. 315, 316–17 (1888); Vincenzini v. Fiorentini, 2

Cal. App. 2d 739, 740–42 (1934); Lorenz v. Hunt, 91 Cal. App. 78, 83–84

(1928); see also 12 Cal. Real Est. § 43:23.11

C.    Rey’s arguments.

      1.     Statutory construction argument.

      Rey concedes that she has used the 1924 Bunker Avenue duplex

exclusively as a rental. She has never resided in the duplex. Nor has she

claimed any intent to do so. 12 Instead, Rey argues that the duplex is part of

her homestead because it is situated on a single legal plot of land and,

therefore, is indivisible for both sale and homestead purposes. She claims

that this necessarily follows from the statutory inclusion of outbuildings

and the land on which those structures are situated in the definition of

“dwelling.” CCP § 704.710(a)(1). In her view, no part of the single legal plot

of land on which her house is situated can be evaluated separately under

California homestead law because it remains the land on which her

      11  As the Miller and Starr treatise explains, though most of the California
decisions that have considered the amount of property covered by the homestead
exemption have been declared-homestead cases, the automatic homestead exemption
should afford the same amount of protection “for interests in mixed use or excess
property.” 12 Cal. Real Est. § 43:17. Rey has not argued otherwise. Therefore, we
consider ourselves bound by the declared-homestead caselaw for purposes of
considering the amount of property protected by the automatic homestead exemption.
       12 In fact, under her current rental agreements with her tenants, she could not

even enter the duplex without providing them with advance written notice.
                                          11
residence is situated.

      In making this argument, Rey misconstrues the statutory definition

of dwelling. She ignores the use of the permissive phrase that a dwelling

“may include” the outbuildings and land on which it is situated. Instead,

she substitutes a nonexistent mandatory term that the dwelling “must”

include all outbuildings situated on the same land. Her argument is

inconsistent with Gregg and roughly 150 years of California case law

evaluating the extent of the homestead exemption applicable to multiple

structures. Regardless of whether those structures are situated on one or

more lots, courts have engaged in a fact-intensive investigation focusing on

how the debtor actually has used the structures and the land on which they

are situated. Compare Lubbock v. McMann, 82 Cal. 226, 229 (1889) (single lot);

Maloney v. Hefer, 75 Cal. 422, 424–25 (1888) (same); and Bodden v. Cmty. Nat’l

Bank, 271 Cal. App. 2d 432 (1969) (same); with Guernsey, 171 Cal. at 331

(multiple lots); In re Ligget, 117 Cal. at 352–53, (1897) (same); and Gregg, 33

Cal. at 227 (same).

      2.    Argument based on California case law.

            a. In re Estate of Schmelz.

      Rey primarily relies on Schmelz v. Schmelz (In re Estate of Schmelz), 259

Cal. App. 2d 440 (1968). There, the California Court of Appeal held that a

single lot with two houses and a six-unit apartment structure would be

treated in its entirety as the widow’s probate homestead. Id. at 442, 444-

                                       12
46.13 But Schmelz explained at length that, but for the parties’ stipulation

that the property could not be divided for homestead purposes, it would

have been an abuse of discretion for the superior court to find that the

entire parcel was the widow’s homestead. Id. at 444-45.14 As Schmelz

pointed out, in all other homestead cases it found (both probate and non-

probate), there were none in which the appellate court determined that the

homestead “was properly impressed upon [the entire] piece of property

where there are multiple dwellings, each or any of which is complete as a

proper residence for homestead purposes.” Id. at 444.

      Schmelz does not help Rey. In fact, it supports the bankruptcy court’s

decision. It was only the stipulated indivisible nature of the multiple

dwellings in Schmelz which permitted the superior court to find that they

all as a single unit qualified as the widow’s homestead. Schmelz reasoned

that this indivisibility rendered the widow’s multiple dwelling structures

akin to those cases assessing a single dwelling structure containing

multiple residential units. Relying on California Supreme Court authority,

      13
          Rey’s reliance on Schmelz—a probate homestead case—is somewhat ironic.
Elsewhere in her briefing, she complains that the bankruptcy court should not have
relied on probate homestead cases. Without explaining why, she suggests that such
cases are inapt for purposes of determining the amount of property properly
comprising the homestead in non-probate cases. We are not aware of any meaningful
analytical distinction for purposes of determining the extent or amount of the claimed
homestead. In fact, Schmelz itself relied on both probate and non-probate cases in
analyzing the extent of the widow’s probate homestead. Id. at 444-45.
       14 Schmelz never states the converse proposition: that it would have been an abuse

of discretion if the superior court had found only some but not all of the dwelling
structures on the lot qualified as the widow’s homestead.
                                           13
Schmelz noted that there is an “obvious” distinction between homestead

cases involving multiple dwellings on a single parcel of land and those

involving a single, multi-unit dwelling. Id. at 445 (citing Rosenblum v. Levy

(In re Est. of Levy), 141 Cal. 646, 651 (1904)). As Schmelz further observed:

      While [the homestead] definition may include . . . the land on which
      the dwelling-house stands and . . . also such other land as may be
      necessary to its convenient use and occupation, it does not, when
      fairly construed with a view to the objects of the homestead law,
      include such other land as has resting thereon, as a part thereof, a
      building or buildings devoted to other purposes than those of a
      family home.

Id. at 445 (quoting In re Est. of Levy, 141 Cal. at 651).

             b. In re Jarrell.

      Rey also relies on In re Jarrell, 34 F. 2d 970 (S.D. Cal. 1929), in which

the parcel in question included four houses built straddling several

different lots of land. Id. at 972-73. Rey points out that Jarrell held that the

parcel could not be divided for homestead purposes. Id. at 974. Jarrell

involved four houses; the debtor resided in one and rented the other three.

The court assessed the homestead nature of the parcel as a single unit even

though only one of the four houses was used as the debtor’s residence. Id.

at 975. According to Jarrell the use of the other houses as rentals was

incidental to the homestead purpose of the entire parcel. Id. at 975 (“The

bankrupt and his family use all the premises in controversy, and all of the

property is necessary and convenient for the use of the bankrupt and his

family as a place of residence, independent of the smaller residences
                                         14
upon said property which are rental properties.” (Emphasis added.))

However, the Jarrell court based its determination that the entire parcel was

indivisible for homestead purposes on its finding that the entire parcel was

covered by lawns, gardens, and “pagodas” that were part of debtor’s

residence. Id. at 974.

      Jarrell appears out of step with the California precedent we rely on

above. But even if we assume that Jarrell can be reconciled with that

precedent and represents good California law, it does not establish error.

Rather, Jarrell merely stands for the proposition that whether rental

structures situated on the same land as the debtor’s residence are part of

the homestead is a question of fact. See generally Gregg, 33 Cal. at 228-29

(identifying issue of extent of homestead as an inherently factual question

based on how the property is actually used). Jarrell held that as a matter of

fact the debtor’s use of the property established that the rental buildings

were incidental to, and part of, the debtor’s dwelling. But the record here

stands in stark contrast as the undisputed facts established that Rey has

always rented the duplex, which is distinct and separate from Rey’s

residence. Both enjoy separate driveways, entrances, parking, utilities,

landscaping, and mailboxes—and were separated by a fence.

      3.    Division and sale of legal lots.

      Rey claims that her duplex must be considered part of her dwelling

for purposes of determining her homestead because it is situated on the

same legal lot as her residence. She argues, therefore, that the duplex

                                      15
cannot be sold separately. 15 She points to California’s Subdivision Map Act,

California Government Code § 66410, et seq., as restricting the division and

sale of existing legal lots of land.16 She further posits that the inability to

sell the house and the duplex separately would prevent a judgment

       15
          Urquijo has disputed this point, claiming that it might be possible for the house
and the duplex to be sold separately. We express no opinion on this issue. The sale of
any portion of the Property is speculative, was not before the bankruptcy court, and is
beyond the scope of this appeal.
       16 “The Subdivision Map Act is a statutory scheme regulating subdivision

approvals and land use planning by local governments. The Act is designed to promote
orderly community developments and involves an application process that culminates
in public hearings to determine whether a subdivision map will be approved.” Cnty. of
Marin v. Martha Co., 2018 WL 5279583, at *5 (N.D. Cal. July 6, 2018) (cleaned up). Rey
describes the impact of the Subdivision Map Act on parcels of real property as follows:

               Up until Feb. 1, 1972, anyone wishing to divide a property into four or
       fewer parcels could simply deed that portion to the buyer. As soon as a new
       deed was recorded, that portion forever became a separate legal lot of record. It
       could be used or developed the same as any other lot with similar zoning. A
       person could create up to four parcels in this manner; assuming they complied
       with the minimum lot size requirements as they were conveyed.
               In 1972, however, this situation changed with adoption of the State Map
       Act, which went into effect on February 1, 1972, and from that date forward the
       only way to create new lots was through approval of a subdivision map. While
       many lots divided by deed prior to that time were (and are) recognized as legal
       lots, properties could no longer be divided by deed. Properties, anyone wishing
       to split a lot or sell off a portion of property, would then be required to go
       through a formal subdivision process or boundary adjustment process.

        Aplt. Opn. Br. at 19 & n.6 (quoting “An Assessor’s Parcel may not be a Legal
Lot,” Cnty. of San Diego Planning and Dev. Servs. Notice PDS-358 (revised Mar. 8,
2022), available at
https://www.sandiegocounty.gov/content/dam/sdc/pds/zoning/formfields/PDS-PLN-
358.pdf (last visited March 29, 2024)).

                                            16
creditor from being able to comply with California’s enforcement of

judgment procedures for obtaining an order authorizing the forced sale of

the house. Aplt. Opn. Br. at 26 (citing CCP § 704.780(b)). According to her,

these procedures require the judgment creditor seeking to force the sale of

the homestead to prove its fair market value. Id.17 As Rey reasons, there is

no way to prove the fair market value of her house by itself because it

cannot legally be sold by itself. Id. at 26-27 (citing CCP § 1263.320). She

concludes that this necessarily means the entire Property is indivisible for

purposes of the determining the extent of her homestead exemption. 18

       Though clever, this argument is not supported by California case law,

       17
            In relevant part, CCP § 704.780(b) provides that:

              The court shall determine whether the dwelling is exempt. If the court
       determines that the dwelling is exempt, the court shall determine the amount of
       the homestead exemption and the fair market value of the dwelling. The court
       shall make an order for sale of the dwelling subject to the homestead exemption,
       unless the court determines that the sale of the dwelling would not be likely to
       produce a bid sufficient to satisfy any part of the amount due on the
       judgment . . . .
       18 As Rey puts it:

               The necessity of determining a fair market value is critical to this
       appeal . . . . A California case could not support the severability of the homestead
       exemption as the bankruptcy court has done because such decision would be
       inconsistent with these California statutory provisions regarding fair market
       value. When that impossibility is coupled with the policy to construe homestead
       exemptions broadly in favor of debtors, the only logical deduction is this ruling
       is not supported by California case law.

Aplt. Opn. Br. at 30.
                                              17
and we simply do not find it persuasive. California cases uniformly have

focused on the debtor’s use of property to determine whether it is a single

dwelling for purposes of the homestead exemption. See, e.g, Wagner v.

Ulrich, 204 Cal. 452, 452–53 (1928); In re Ligget, 117 Cal. at 352–53; Maloney,

75 Cal. at 424–25; Gregg, 33 Cal. at 228-29. To the extent Rey is correct about

the effect of the Subdivision Map Act on some forced sales of homesteads

by judgment creditors, it is a problem best addressed by the California

legislature.

      Rey insists that the bankruptcy court was required to focus on the

inability to sell the two structures separately. Rey would have us treat her

homestead exemption as if it were an interest in the real property that

outright prohibited its sale. This is incorrect. It is true that CCP §§ 704.780

and 704.800 only permit sale of the subject property when the sale of that

property will yield sufficient proceeds “to pay out all encumbrances on the

property and the debtor’s homestead exemption in full.” In re McKee, 90

F.4th at 1247. Yet the principal attribute of a California automatic

homestead exemption is the preservation for the judgment debtor of a

specific amount of value in the real property’s equity, if any, up to the

statutory ceiling. See Wells Fargo Fin. Leasing, Inc. v. D & M Cabinets, 177 Cal.

App. 4th 59, 68 (2009) (“A homestead exemption does not preclude sale of

the home but entitles the homesteader to receive the value of the

exemption if the property is sold to satisfy a judgment lien.”); see also

Hyman v. Plotkin (In re Hyman), 967 F.2d 1316, 1318 (9th Cir. 1992) (noting

                                       18
that the homestead statutes effectively define “homestead exemption” as “a

fixed dollar amount generated from the sale of the homestead”); Stohlman

& Rogers, Inc. v. Anderson (In re Anderson), 2006 WL 6810946, at *3 (9th Cir.

BAP Aug. 9, 2006) (stating that “neither type of [California] homestead

exemption wholly prevents a forced sale; rather, the exemption protects a

portion of the proceeds”).

      The question here is the scope of the allowed homestead exemption.

Under well established California precedent, that exemption is limited by

use and value. The objection to the exemption focuses on use not value.

The bankruptcy court held that Rey’s homestead exemption was limited to

the structure and land that she used as her residence and did not extend to

the duplex that she has separated and used as rental property. Rey owns

the Property, which has not been divided. But the absence of any division,

or even the indivisibility of the property, does not expand or contract the

applicable exemption. In short, we reject Rey’s argument based on the

alleged indivisibility of her Property for sale purposes as fundamentally

inconsistent with California homestead exemption law.

      4.    Economic necessity argument.

      Rey also argues that the duplex is necessary and convenient for her

household use because she depends on the rents to pay debt secured by the

Property. Without the duplex, she argues, she would not be able to reside

in her house. Rey did not argue in the bankruptcy court that the rent she

collected was economically essential to her ability to pay her mortgage.

                                      19
Nor did she present any evidence to this effect as part of her response to

Urquijo’s exemption objection. On appeal, she baldly assumes this fact to

be true. We decline to address this factual issue for this first time on appeal.

See Oyama v. Sheehan (In re Sheehan), 253 F.3d 507, 512 n.5 (9th Cir. 2001).

      Even assuming that Rey depends on the rental of the duplex to make

her mortgage payments on the Property, this does not transform the

duplex into her dwelling for purposes of the homestead exemption. Rey

cites Bodden, 271 Cal. App. 2d at 432, and In re Shepardson, 28 F. 2d 353 (S.D.

Cal. 1928) in support of her economic necessity argument. A careful

reading of these decisions reveals that they provide insufficient support for

her argument. Like Jarrell, the Bodden court held that it would treat the

entirety of the claimed homestead land as one unit based on factual

findings that the debtor used the entire property for household purposes:

      [T]he occupants of both houses make use of the entire lot. The
      distance between the back of the front house and the front of the rear
      house is 29 feet, and there is no fence or other physical object
      dividing the front and rear houses unless it would be two spruce
      trees that grow in the space between them. Respondent’s clothes line
      is located partly alongside the rear house on the back part of the lot,
      and trash and other waste material is carried across the rear lot and
      stacked at the back of the property. A picnic table located between
      the two houses is used by both respondent and her tenants.

Bodden, 271 Cal. App. 2d at 434. The Bodden court further noted that access

to the rear house only could be accomplished by crossing over the land

appurtenant to the front house. In contrast, as noted by the bankruptcy

                                       20
court, Rey’s house and the duplex enjoyed separate driveways, entrances,

parking, utilities, landscaping, and mailboxes—and were separated by a

fence. 19

       In Shepardson, the debtor filed a declaration claiming 10 acres of land

as her homestead. The debtor resided on the property, but also operated a

country store, a gas station, and had nine small cabins often rented to

travelers. In re Shepardson, 28 F.2d at 354. The bankruptcy referee found that

the entire property was primarily used as the debtor’s residence and that

the business use of some the structures “was incidental and subordinate to

the use by the bankrupt and her family of said premises for a home, and

that the entire premises were impressed with the homestead.” Id. at 354-55.

       19
          The Bodden court found that excluding the rental house from the debtor’s
homestead exemption “would deprive respondent of this means of preserving her
homestead.” Id. at 435. If evidence had been presented to support an economic necessity
justification like that relied on in Bodden and the bankruptcy court had made such a
factual finding, we may have been hard pressed to articulate a justification for reversal.
At the same time, Bodden explicitly extended the economic necessity justification from
Phelps v. Loop, 64 Cal. App. 2d 332 (1944), which was a homestead case involving a
single dwelling structure as opposed to the two separate dwelling structures involved
in Bodden. As we indicated above citing Levy and Schmelz, the California Supreme court
has long recognized a critical distinction in homestead cases between single and
multiple dwelling structures. See In re Est. of Levy, 141 Cal. at 651; see also In re Est. of
Schmelz, 259 Cal. App. 2d at 445. As a result, it is difficult to predict that the California
Supreme Court ultimately will depart from its view expressed in Levy regarding the
“obvious” distinction between single and multiple dwelling structure cases, and instead
will follow Bodden’s pronouncement that it saw “no valid reason for distinguishing” a
homestead property with a single dwelling from those with multiple dwellings. Bodden,
271 Cal. App. 2d at 435. In any event, Bodden does not appear to require, so much as
permit, a finding that the rental was incidental to the entire property’s use as a
homestead based on economic necessity.
                                             21
In the process of upholding the referee’s decision, Shepardson was careful to

note that cases concerning “the quantity of land to be deemed appurtenant

and necessary to the use of the dwelling house” turn on the facts and

circumstances of the specific case and how the claimed property is situated

and actually used: “that matter has been regulated for the most part by

considering the character of the ground and its location, whether in a

thickly settled section, as city lots, or in rural locations, where agricultural

pursuits are common, and it is said that each case must be determined

upon its own facts.” Id. at 355.

       As the above discussion demonstrates, a handful of decisions have

held that all structures on a multiple-dwelling parcel were incidental to the

debtor’s residence based on the facts of those cases. These cases are the

exception to the general rule in California, which assesses the homestead

character of multiple dwellings on the claimed homestead separately.

Absent unusual circumstances, California treats separate dwellings not

used as the debtor’s residence as not part of the debtor’s homestead. See In

re Est. of Schmelz., 259 Cal. App. 2d at 444-45; Lubbock, 82 Cal. at 229

(following general rule); Maloney, 75 Cal. at 424–25 (same). As Maloney

aptly held, when only one of two houses on a single lot is used as a family’s

homestead, the house not so used “forms no part of the homestead claim,

in the sense of the statute.” Id. at 424.20 Based on the record presented to the

        Rey cites a number of cases involving a multiple-unit dwelling structure and
       20

found that the single structure qualified in its entirety as the debtor’s homestead. See,
                                            22
bankruptcy court, it did not err by applying the general rule separately

assessing the homestead character of the two dwellings on Rey’s Property.

       5.     Policy arguments.

       Finally, Rey relies on policy arguments to support her claim that the

homestead character of the dwellings on the Property must be assessed as a

single unit. She points out that the homestead statutes must be liberally

construed. Amin, 112 Cal. App. 4th at 588. Liberal construction of the

statutes serves to effectuate the statute’s goal of helping to prevent

Californians from losing their homes through hyper-technical

interpretation. Canino v. Bleau (In re Canino), 185 B.R. 584, 590 (9th Cir. BAP

1995). “However, liberal construction in favor of the debtor does not give a

court license to rewrite the statutory language.” Id. (citing Seror v. Kahan (In

re Kahan), 28 F.3d 79, 83 (9th Cir. 1994)). Nor does it permit us to ignore

roughly 150 years of California precedent.

       Finally, Rey contends that there is a strong policy in California to

enact and facilitate laws that encourage homeowners to improve their

properties to include “Accessory Dwelling Units” (“ADUs”). 21 According

e.g., In re Est. of Levy, 141 Cal. at 651-53; Nelson v. King (In re Nelson’s Est.), 224 Cal App.
2d 138, 144-45 (1964), superseded by statute on other grounds as stated by Benson v. Benson,
36 Cal. 4th 1096, 1107-08 (2005); Oppenheim v. Goodley, 148 Cal App. 2d 325, 330 (1957);
Phelps, 64 Cal. App. 2d at 333-34. But binding California case law clearly distinguishes
between the multiple dwelling structures and the single, multi-unit dwelling scenario.
In re Est. of Levy, 141 Cal. at 651 (“The distinction between [the multiple dwelling] cases
and the case of a single building is obvious.”). Rey has not presented any persuasive
reason to depart from this precedent.
         21 Cal. Gov’t Code § 65852.2(j)(1) defines the term “Accessory dwelling unit” as,

                                               23
to Rey, this policy—meant to combat the scarcity of affordable housing in

California—is reflected in the 2021 enactment of laws providing for

nondiscretionary, ministerial approval of applications to construct an ADU

on property otherwise zoned only for single family residences. Aplt. Opn.

Br. at 33 (citing Cal. Gov’t Code §§ 65852.21, 66411.7). Rey maintains that

this policy is undermined by the bankruptcy court’s ruling that it was

permissible to assess the homestead character of multiple dwellings on a

single legal lot individually rather than as a single unit.

      Rey posits that the bankruptcy court’s decision, unless reversed, will

chill homeowners from building ADUs because homeowners might not be

able to invoke the homestead exemption to protect the value of the ADU if

it is separately assessed as not part of the homestead. This supposition is

entirely speculative. But to the extent there is any such concern, it does not

permit us to rewrite California’s homestead laws or interpret them any

differently than the California courts have long interpreted them. The

carefully crafted balancing of debtors’ and creditors’ rights reflected in the

statutes and the case law is best altered, if necessary, by the California

legislature.

“an attached or a detached residential dwelling unit that provides complete
independent living facilities for one or more persons and is located on a lot with a
proposed or existing primary residence.” The statute further identifies two additional
types of residential structures that can qualify as ADUs, neither of which is relevant
here.

                                           24
                            CONCLUSION

     For the reasons set forth above, we AFFIRM.

Concurrence begins on next page.

                                   25
CORBIT, Bankruptcy Judge, concurring:

      As correctly stated by my colleagues, the controlling cases from the

California Supreme Court, which date back to the 1800s, hold that a

homestead in California is limited to only the structures that a debtor uses,

Gregg, 33 Cal. at 229, even if it is necessary to divide one lot because the

debtor lives in and uses only one of two houses on a lot, Maloney, 75 Cal. at

424-25. Accordingly, I join in the above opinion. 1

      However, unlike in the 1800s, single family lots are no longer easily

divided for sale and in some instances cannot be divided. 2 Moreover, now

California residents are encouraged to build Accessory Dwelling Units

(“ADUs”).3 As a result, given all the changes over the past 150 years, I

write separately to emphasize the need for the California legislature to

      1
          The outcome may not be the same if a homestead statute from a state without
similar historic precedents was being reviewed.
        2 After the California Supreme Court’s 1867 decision in Gregg and the 1888

decision in Maloney, the California legislature enacted its first subdivision map statue
with statewide effect in 1893. See Gardner v. Cnty. of Sonoma, 29 Cal. 4th 990, 995-96
(2003). Further, the law regarding subdivisions has continued to evolve to the point
where the Appellant argues that her residence cannot be legally divided from the
rented duplex on the same lot.
        3 ADUs are independent residences located on the same lot as a single-family

house. In 2016, the California legislature passed a pair of statewide bills (A.B. 2299 and
S.B. 1069) that required cities and counties to allow ADUs on most residential lots,
preempting local zoning ordinances and permitting processes. As the first reforms from
2016 took effect, ADU development in California has rapidly and steadily increased
from just over 1,000 ADUs permitted in 2016 to over 24,000 permitted in 2022. See
Bipartisan Policy Center, “Accessory Dwelling Units (ADUs) in California,”
https://bipartisanpolicy.org/blog/accessory-dwelling-units-adus-in-california/ last
visited March 29, 2024).
                                            1
address how the California homestead statute applies to debtors who live

in only one of the multiple residences on a single lot.

                                       2