Court Opinion

ID: 802327
Source: CourtListenerOpinion
Date Created: 2012-06-15 15:37:45+00
Date Added: 2024-06-11T15:25:07.525180
License: Public Domain

United States Bankruptcy Appellate Panel
                             FOR THE EIGHTH CIRCUIT

                                    No. 12-6012

In re:                                    *
                                          *
Andrew William Shirley,                   *
                                          *
         Debtor.                          *
                                          *
Andrew William Shirley,                   *    Appeal from the United
                                          *    States Bankruptcy Court for
         Debtor-Appellant,                *    the Southern District of Iowa
                                          *
               v.                         *
                                          *
Charles L. Smith,                         *
                                          *
         Trustee-Appellee.                *

                               Submitted: May 8, 2012
                                   Filed: June 15, 2012

Before FEDERMAN, SALADINO, and NAIL, Bankruptcy Judges.

NAIL, Bankruptcy Judge.
      Debtor Andrew William Shirley ("Debtor") appeals the January 12, 2012 order
of the bankruptcy court1 sustaining the chapter 7 trustee's objection to Debtor's
claimed homestead exemption. We affirm.

                                 BACKGROUND

       In March 1995, Debtor and his spouse purchased a house on Southwest 16th
Street in Des Moines, Iowa.2 Debtor formally declared this house was his homestead.
Debtor lived there with his spouse and children until October 2007.

       In June 2005, Wells Fargo Bank commenced foreclosure proceedings against
Debtor's mother's house on Kendallwood Circle in Des Moines, Iowa. In November
2005, Debtor purchased his mother's house from the bank, using funds his mother
gave him from a trust that was created upon his father's death.3 Debtor's mother has
lived in the house on Kendallwood Circle, which is two-and-a-half miles from the
house on Southwest 16th Street, since 1974.

      In June 2007, Debtor's spouse commenced divorce proceedings in state court.
In October 2007, in compliance with the divorce court's order directing him to vacate
the house on Southwest 16th Street, Debtor moved into the house on Kendallwood
Circle and resided there with his mother.

      1
        The Honorable Lee M. Jackwig, Chief Judge, United States Bankruptcy Court
for the Southern District of Iowa.
      2
       Debtor and his spouse agreed to purchase the house for $60,000.00 on a
contract for deed with Debtors' parents. They never paid the $60,000.00.
      3
      The family's original intent was to transfer ownership of the house on
Kendallwood Circle to the trust. That never occurred.
                                         -2-
      In late December 2008 and again in early January 2009, while a creditor was
attempting to enforce a judgment against him, Debtor formally declared the house on
Kendallwood Circle was his homestead. Debtor did not discuss these declarations
with his spouse or obtain her consent to change the family homestead.

       Debtor's divorce was finalized on April 22, 2009. That same day, in
compliance with the divorce court's decree of dissolution, Debtor quitclaimed his
interest in the house on Southwest 16th Street to his former spouse. Debtor's former
spouse in turn quitclaimed any interest she may have had in the house on
Kendallwood Circle–which was titled only in Debtor's name–to Debtor.

       On May 11, 2009, Debtor filed a petition for relief under chapter 7 of the
bankruptcy code and claimed the house on Kendallwood Circle exempt as his
homestead under Iowa Code § 561.2.4 Donald F. Neiman, the chapter 7 trustee at the
time,5 timely objected to Debtor's claimed homestead exemption, arguing because
Debtor had not acquired the house on Kendallwood Circle with the proceeds from an
"old" homestead, it could be sold pursuant to Iowa Code § 561.21 to satisfy debts that
were contracted prior to its acquisition. In response, Debtor argued under Iowa Code
§ 561.20, he had the right to change the "metes and bounds" of his homestead and
transfer his homestead rights to the new property.

      Following an evidentiary hearing on February 4, 2010, the bankruptcy court
took the matter under advisement. On Trustee Smith's motion–based on Debtor's
allegedly inconsistent testimony at the September 10, 2010 trial in an adversary
proceeding (09-30099) in his mother's chapter 7 bankruptcy (09-02206)–the

      4
      In reality, Iowa Code § 561.2 is only a limitation on the extent and value of
a homestead. The actual homestead exemption is set forth in Iowa Code § 561.16.
      5
      On May 19, 2011, the United States Trustee appointed Charles L. Smith to
succeed Trustee Neiman.
                                         -3-
bankruptcy court re-opened the record and held a continued hearing on January 12,
2012. After hearing the testimony of Debtor, his uncle, and his mother and receiving
various exhibits, the bankruptcy court ruled from the bench and memorialized its
decision in a docket text order sustaining the chapter 7 trustee's objection to Debtor's
claimed homestead exemption. Debtor timely filed a notice of appeal.

                             STANDARD OF REVIEW

       We review the bankruptcy court's findings of fact for clear error and its legal
conclusions de novo. Islamov v. Ungar (In re Ungar), 633 F.3d 675, 678-79 (8th Cir.
2011). More specifically, we review de novo the bankruptcy court's interpretation of
a statute. See Ferrell v. West Bend Mut. Ins. Co., 393 F.3d 786, 796 (8th Cir. 2005).

                                    DISCUSSION

      Under Iowa law, "[t]he homestead of every person is exempt from judicial sale
where there is no special declaration of statute to the contrary." Iowa Code § 561.16.
A homestead may be sold to satisfy debts "contracted prior to its acquisition, but then
only to satisfy a deficiency remaining after exhausting the other property of the
debtor, liable to execution." Iowa Code § 561.21(1). However,

             [w]here there has been a change in the limits of the
             homestead, or a new homestead has been acquired with the
             proceeds of the old, the new homestead, to the extent in
             value of the old, is exempt from execution in all cases
             where the old or former one would have been.

Iowa Code § 561.20.

     Debtor argues his move from the house on Southwest 16th Street to the house
on Kendallwood Circle–over two miles away–was a change in the limits of his
homestead. The bankruptcy court correctly concluded otherwise. When he moved,

                                          -4-
Debtor did not change the limits, i.e., the boundaries, of his homestead. He claimed
an entirely different homestead on Kendallwood Circle, while his spouse and children
continued to occupy the family's original homestead on Southwest 16th Street.

      In a recent case involving the same Iowa statutes and a similar move from one
house to another, the Eighth Circuit Court of Appeals rejected any interpretation of
Iowa Code § 561.20 that would extend its protection to debtors who move and claim
a new homestead that was not acquired with the proceeds of their old homestead:

             We agree with the bankruptcy court and the [bankruptcy
             appellate panel] that the plain language of [Iowa Code] §
             561.20 limits the "new homestead" exemption to cases
             where, in the words of the statute, "a new homestead has
             been acquired with the proceeds of the old."

Walters v. Bank of the West (In re Walters), 675 F.3d 1142, 1145 (8th Cir. 2012).
The court of appeals did not directly address the "change in the limits" argument
Debtor raises in this appeal. The absence of any such discussion is telling: Had the
court of appeals–in its de novo review of the bankruptcy court's and the bankruptcy
appellate panel's interpretation of Iowa Code § 561.20–considered a move from one
house to another to be a change in the limits of the debtor's homestead, the debtor in
Walters would have prevailed. She did not prevail, however, because the court of
appeals instead considered such a move to be an acquisition of a new homestead.
Consequently, Debtor's argument fails. When he moved from the house on Southwest
16th Street to the house on Kendallwood Circle, Debtor did not change the limits of
his homestead; he acquired a new homestead.

      Alternatively, Debtor also argues he acquired the house on Kendallwood Circle
with the proceeds of the house on Southwest 16th Street. The bankruptcy court
correctly found otherwise. The record is abundantly clear: Debtor acquired the house
on Kendallwood Circle in November 2005–while he still owned and was still living
with his spouse and children in the house on Southwest 16th Street–using funds his

                                         -5-
mother gave him from a trust that was created upon his father's death; Debtor did not
sell the house on Southwest 16th Street; and he did not exchange it for the house on
Kendallwood Circle.

      The bankruptcy court identified debts Debtor incurred prior to October 2007,
when the house on Kendallwood Circle became his homestead. Debtor has not
challenged that finding on appeal. Pursuant to Iowa Code § 561.21(1), therefore, the
house on Kendallwood Circle may be sold to satisfy those debts, notwithstanding
Debtor's claimed homestead exemption.

                                  CONCLUSION

      For the foregoing reasons, we affirm the bankruptcy court's order sustaining
the chapter 7 trustee's objection to Debtor's claimed homestead exemption.

                                         -6-