In re Campbell, BAP No. WY-03-057.

• Decision Date: 16 August 2004
• Docket Number: BAP No. WY-03-057.,Bankruptcy No. 03-20145.
• Citation: 313 B.R. 313
• Parties: In re Allison Phillips CAMPBELL, also known as Allison Phillips, Debtor. Allison Phillips Campbell, Appellant, v. Mark R. Stewart, Trustee, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Tenth Circuit

313 B.R. 313

In re Allison Phillips CAMPBELL, also known as Allison Phillips, Debtor Allison Phillips Campbell, Appellant, v. Mark R. Stewart, Trustee, Appellee.

BAP No. WY-03-057.

Bankruptcy No. 03-20145.

United States Bankruptcy Appellate Panel of the Tenth Circuit.

August 16, 2004.

Georg Jensen of the Law Offices of Georg Jensen, Cheyenne, WY, for Appellant.

Mark R. Stewart, Chapter 3 Trustee, Cheyenne, WY, pro se.

Before MICHAEL, THURMAN, and WEAVER¹, Bankruptcy Judges.

OPINION

THURMAN, Bankruptcy Judge.

The Chapter 13 debtor timely appeals a final Order of the United States Bankruptcy Court for the District of Wyoming denying her claim of a homestead exemption.² The parties have consented to this Court's jurisdiction because they have not elected to have the appeal heard by the United States District Court for the District of Wyoming.³ For the reasons stated below, the bankruptcy court's Order is VACATED.

I. Background

The debtor was unable to obtain financing to purchase a house. As a result, her former spouse, Kim Andrew Campbell (Campbell), purchased a house located in Cheyenne, Wyoming for her to use. The debtor contributed funds that she had received from the sale of the couple's former marital home as a down payment on the house, and Campbell financed the remainder of the purchase price. Campbell did not live in the house, but rather leased it to the debtor, and the debtor paid him rent. Campbell gave the debtor an irrevocable "Option to Purchase" the home from him in consideration for her contribution of the down payment. The Option to Purchase allowed the debtor to purchase the home when she was able to obtain the necessary financing.

When the debtor filed her Chapter 13 petition in January 2003, she continued to live in Campbell's house pursuant to the lease arrangement. She had not exercised the Option to Purchase.

The debtor listed the house as exempt under Wyoming homestead law in her Schedules. The Chapter 13 trustee (Trustee) timely objected to the claimed exemption, asserting that it should be disallowed because the debtor did not own the house (Exemption Objection). In response, the debtor conceded that she did not have a legal interest in the house, but maintained that she was entitled to a homestead exemption based on her equitable interest therein.

In the meantime, the bankruptcy court entered an order confirming the debtor's Chapter 13 plan. Several months later, the bankruptcy court held a hearing on the Exemption Objection. At that hearing, the debtor maintained that the bankruptcy court lacked jurisdiction to consider the Exemption Objection. She argued that the Exemption Objection was moot because her Chapter 13 plan had been confirmed, and under the terms of her plan and 11 U.S.C. § 1327(b)⁴ she had been revested of all property of the estate.

The bankruptcy court entered an "Order on Trustee's Objection to the Debtor's Claim of Exemption," sustaining the Trustee's Exemption Objection, and overruling the debtor's claim of exemption (Exemption Order). In so doing, the bankruptcy court expressly rejected the debtor's jurisdictional challenge. Acknowledging the effect of the debtor's confirmed Chapter 13 plan, the bankruptcy court stated that the Exemption Objection was not rendered moot because:

[I]f [the debtor] were to convert this case to a chapter 7 case, a chapter 7 trustee would not have the ability to object to the homestead exemption claimed. In re Ferretti, 230 B.R. 883, 891 (Bankr.S.D.Fla.1999), aff'd Dibraccio v. Ferretti, 268 F.3d 1065 (11th Cir.2001); but see In re Alexander, 236 F.3d 431, 432 (8th Cir.2001). Thus, the exemption would be deemed valid regardless of its factual and legal underpinnings to the possible detriment of the estate.⁵

The debtor's appeal of the Exemption Order followed. After considering the papers filed and hearing oral argument, this Court entered an Order of Limited Remand, remanding the case to the bankruptcy court for the purpose of entering supplemental findings of fact stating the value of the property claimed by the debtor as exempt. We requested supplemental findings because the record did not determine the value of the property to the estate and, absent value, no case or controversy existed on which to base jurisdiction.

The bankruptcy court entered a Supplemental Order on remand, establishing that the property has a value of approximately $15,500. This being the case, we are compelled to address the more difficult jurisdictional question presented in this case — whether the bankruptcy court erred in concluding that it had jurisdiction to consider the Exemption Objection. For the reasons stated below, we conclude that the bankruptcy court lacked jurisdiction to enter the Exemption Order.

II. Discussion

Other than to acknowledge the debtor's jurisdictional argument below, the parties have not raised any issues regarding jurisdiction. We must, however, satisfy ourselves that the bankruptcy court did not err in determining that it had jurisdiction to enter its Exemption Order prior to considering the merits of this appeal.⁶ For the reasons stated herein, we conclude that the bankruptcy court lacked jurisdiction over the Exemption Objection; accordingly, we will not review the merits of the resulting Exemption Order. Rather, the Exemption Order must be vacated.⁷

Article III of the United States Constitution limits the jurisdiction of federal courts to the adjudication of actual "cases" and "controversies."⁸ Accordingly, federal courts cannot give advisory opinions that do not have an impact on the parties to the controversy,⁹ nor can they address issues are not germane to a real dispute between the parties before the court.¹⁰

The parties agree that a decision in this appeal as to the merits of the Exemption Order will have no impact on the debtor's Chapter 13 case, but they have raised no jurisdictional challenges.¹¹ The bankruptcy court's jurisdictional ruling is premised upon the belief that the merits of the Exemption Objection must be decided now because objections to the allowance or disallowance of the debtor's claim of exemption would be time-barred under Federal Rule of Bankruptcy Procedure 4003(b) if the case were ever converted to Chapter 7. As discussed below, the bankruptcy court's conclusion is based on good law. Yet, we disagree with that non-binding law. We hold that the time to object to claimed exemptions under Bankruptcy Rule 4003(b) recommences when a Chapter 13 case is converted to Chapter 7. Accordingly, it was unnecessary for the bankruptcy court to resolve the Exemption Objection given that, but for the potential conversion of the case to Chapter 7, its resolution would have no effect in the Chapter 13 case. With no live controversy existing in the Chapter 13 case, the bankruptcy court lacked jurisdiction to consider the Exemption Objection. The Exemption Order sustaining the Exemption Objection, having been entered by a court without jurisdiction, must be vacated.

It is well-established that a debtor may claim property exempt pursuant to § 522(b), and that absent timely objection, the property is exempt under § 522(l) regardless of the validity of the claimed exemption.¹² The timeliness of an objection to a debtor's claim of exemption is not addressed in § 522(l) or anywhere else in the Bankruptcy Code. Rather, it is set forth in Bankruptcy Rule 4003(b), which provides, in relevant part, that:

A party in interest may file an objection to the list of property claimed as exempt only within 30 days after the meeting of creditors held under § 341(a) is concluded or within 30 days after any amendment to the list or supplemental schedules is filed, whichever is later.¹³

Under Bankruptcy Rule 4003(b), therefore, parties in interest have a thirty-day period after the conclusion of a meeting of creditors to object to a debtor's claim of exemption. In Taylor v. Freeland & Kronz,¹⁴ the United States Supreme Court held that this thirty-day period was strictly interpreted in conjunction with § 522(l) to bar any objections not made within that period of time. It stated: "Deadlines may lead to unwelcome results, but they prompt parties to act and they produce finality."¹⁵

Not expressly addressed by the Bankruptcy Code or the Bankruptcy Rules, and not addressed at all by the Court in Taylor or any decision of our Court of Appeals, however, is how the thirty-day deadline set forth in Bankruptcy Rule 4003(b) operates when a Chapter 13 case has been converted to Chapter 7. There is a split of authority on this issue.

Under one line of cases, designated as a "minority rule," the thirty-day period to object to a debtor's claimed exemptions recommences when a Chapter 13 case is converted to Chapter 7.¹⁶ Courts adopting this minority rule state it is supported by relevant Bankruptcy Code and Bankruptcy Rule provisions. In particular, under § 348(a), the conversion of a Chapter 13 to Chapter 7 "constitutes an order for relief under the chapter to which the case is converted, but ... does not effect a change in the date of the ... order for relief."¹⁷ Because the conversion of a Chapter 13 case to Chapter 7 constitutes an order for relief, a new meeting of creditors must be called in the converted Chapter 7 case pursuant to § 341(a) and Federal Rule of Bankruptcy Procedure 2003(a). The objection period set forth in Bankruptcy Rule 4003(b) runs within thirty days after the "meeting of creditors held under § 341(a) is concluded...."¹⁸ Given that there is nothing in Bankruptcy Rule 4003(b) limiting the "meeting of creditors" to the initial meeting of creditors in the Chapter 13 case, courts adopting the minority view hold that parties in interest have thirty days from the conclusion of the meeting of creditors called in the converted Chapter 7 case to object to a debtor's claimed exemption. Under this view, exemptions claimed by a debtor in his or her Chapter 13 case may be objected to within thirty days of the...