Barker, Matter of

• Citation: 768 F.2d 191
• Decision Date: 23 July 1985
• Docket Number: No. 84-1744,84-1744
• Parties: Bankr. L. Rep. P 70,653 In the Matter of Richard E. BARKER, Debtor-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 191

768 F.2d 191

Bankr. L. Rep. P 70,653

In the Matter of Richard E. BARKER, Debtor-Appellant.

No. 84-1744.

United States Court of Appeals Seventh Circuit.

July 23, 1985.

James S. Brannon, Peoria, Ill., for plaintiff.

Andrew W. Covey, Baymiller, Christison & Radley, Peoria, Ill., for defendant.

Before ESCHBACH and FLAUM, Circuit Judges, and DOYLE, Senior District Judge. ^*

FLAUM, Circuit Judge.

This case presents the issue of whether a debtor is entitled to claim multiple exemptions, or to "stack" exemptions, for a single automobile under the Illinois personal property exemption statute. The district court affirmed the bankruptcy judge's decision disallowing the stacking of exemptions. For the reasons set forth below, we reverse the decision of the district court.

I.

On September 12, 1983, Barker filed a voluntary petition for relief pursuant to Chapter 7 of the Bankruptcy Code, 11 U.S.C.A. Secs. 701-766 (1979 & West Supp.1985). In his petition, Barker claimed that he was entitled to exempt his equity interest in a 1979 Oldsmobile Toronado up to the maximum statutory amount, $1,200, under the Illinois personal property exemption statute. Ill.Rev.Stat. ch. 110, Sec. 12-1001(c) (1983). The trustee in bankruptcy did not object to this claim, and the bankruptcy judge granted the exemption. In addition to the $1,200, Barker claimed that under subsection (b) of the exemption provision, which permits a debtor to exempt his equity interest of up to $2,000 in "any other property," he was entitled to exempt his remaining $1,022.72 equity in the Toronado. Id. Sec. 12-1001(b). The trustee objected to this additional claim on the ground that a debtor could only exempt $1,200 in any one motor vehicle. The bankruptcy judge entered an order denying the $1,022.72 excess equity exemption, and Barker appealed.

The district court issued an order on April 14, 1984, affirming the order of the bankruptcy judge and thereby preventing Barker from stacking the exemptions of subsections (b) and (c) in order to increase his total exemption for the Toronado. On appeal, Barker claims that he is entitled to stack the maximum $1,200 equity in his car under subsection (c) and his additional equity of $1,022.72 in the same car under subsection (b), for a total personal property exemption of $2,222.72.

II.

A. Jurisdiction of Appeal

The only reference to this court's jurisdiction in the parties' briefs is in the jurisdictional statement of the debtor's brief, wherein he states that appellate jurisdiction is invoked under 28 U.S.C. Sec. 1294 (1982). That section, however, deals with the appropriate circuit venue rather than with appellate jurisdiction. Even though neither party has challenged the jurisdiction of this court on appeal, we nevertheless will examine the jurisdictional issue at the outset since we must raise that issue sua sponte when it appears that jurisdiction may be lacking. Fed.R.Civ.P. 12(h)(3); Liberty Mutual Insurance Co. v. Wetzel, 424 U.S. 737, 740, 96 S.Ct. 1202, 1204, 47 L.Ed.2d 435 (1976); In re Bassak, 705 F.2d 234, 236 (7th Cir.1983).

The jurisdictional provision of the Bankruptcy Act of 1978, which was effective when the debtor filed his appeal to this court, ¹ provides that "a court of appeals shall have jurisdiction of an appeal from a final judgment, order, or decree of ... a District court of the United States" following an appeal from a bankruptcy court. 28 U.S.C. Sec. 1293(b) (1982). Thus, the jurisdictional issue presented here is whether the district court's order affirming the bankruptcy court's decision denying the stacking of exemptions is final.

This court has recognized that the term "final" does not have the same meaning in bankruptcy cases as it does in other cases brought in federal court. See, e.g., In the Matter of Fox and Fox, 762 F.2d 54, 55 (7th Cir.1985). We have noted that the different meaning of finality in the bankruptcy context results from the unique nature of bankruptcy cases and may sometimes justify a more liberal reading of finality under section 1293(b). Firestone Tire & Rubber Co. v. Goldblatt Bros., 758 F.2d 1248, 1251 (7th Cir.1985). Thus, we have held that a proceeding to establish a claim against a bankrupt estate will be considered final under section 1293(b) when that proceeding is completed, even though the bankruptcy case continues. In the Matter of Fox, 762 F.2d at 55. In In the Matter of Fox, we held that a district court's order reversing a bankruptcy court's disallowance of the claims of two banks against a bankrupt estate was not a final order because the district court reversed and remanded the case for further proceedings to determine how much the banks were entitled to and how much each of them would actually receive from the remaining assets of the estate. Id. at 55-56. We held that if the district court had affirmed the bankruptcy judge's disallowance of the banks' claims, however, the district court's order would have been final. Id. at 55. We concluded that even though a district court's order remanding a case to a bankruptcy judge would not normally be considered final for appellate purposes, such an order would be final if all that remained to be done on remand was a purely mechanical, computational, or ministerial task that was unlikely to result in a new appeal or to affect issues that the losing party might want to raise on appeal following the remand. Id.

The circuits that have examined the issue presented in the present appeal have held that an order by a district court granting or denying an exemption is appealable as a final judgment. See In re White, 727 F.2d 884, 885-86 (9th Cir.1984); John T. Mather Memorial Hospital v. Pearl, 723 F.2d 193, 194 n. 1 (2d Cir.1983). See also 1 Collier on Bankruptcy 3-124 (L. King 15th ed. 1984) (courts have considered orders disallowing homestead exemptions as appealable). The Ninth Circuit held in In re White that the district court's reversal of a bankruptcy court's allowance of a homestead exemption was appealable as a final judgment because the district court had finally determined all of the issues regarding the claimed exemption. 727 F.2d at 886. The court concluded that even though the district court's order denying the exemption did not meet the conventional test for a final judgment, since it did not terminate the entire bankruptcy case, the order finally determined and seriously affected the substantive rights of the parties and would cause irreparable harm to the losing party if he had to wait until the end of the entire bankruptcy proceeding to appeal. Id. at 885-86. The Ninth Circuit's decision in In re White is distinguishable from its earlier decision in In re Martinez, 721 F.2d 262 (9th Cir.1983), where it had held that a bankruptcy appellate panel's ² decision concerning the allowance of an exemption was not final because the panel in that case did not allow or deny the exemption, but rather remanded the case for further findings as to the central issue of whether the debtors' homesteaded residence was held in community or joint tenancy. In re White, 727 F.2d at 886.

In In the Matter of Brissette, 561 F.2d 779 (9th Cir.1977), the Ninth Circuit also held that orders granting or denying exemptions should be immediately reviewable. ³ The court noted that decisions about the status of exempt property can and frequently do determine the entire course of the bankruptcy proceeding because they involve disputes over what belongs in the bankrupt estate. Id. at 781-82. The court reasoned that even though the exemption decision is technically interlocutory, it is frequently the final resolution of the parties' rights for practical purposes. Id. at 782. The court explained that a decision that property is exempt could deplete the potential estate to such a degree that creditors would decline to participate further in the proceeding. Id. On the other hand, a decision that the property is not exempt would cause title to such property to vest in the trustee during the pendency of the action with all the attendant consequences of vesting. Id.

In the present case, we join the other circuits that have considered this issue and conclude that we have jurisdiction to hear the debtor's appeal from the district court's affirmance of the bankruptcy court's decision denying the stacking of exemptions. The district court's order results in the debtor's excess equity in the car vesting in the trustee during the pendency of the action, thereby permitting the trustee to administer this equity as an asset of the bankruptcy estate and to sell the vehicle to a third party. Since the district court's order finally determines all of the issues regarding the claimed exemptions and seriously affects the substantive rights of the parties even though it does not terminate the entire bankruptcy proceeding, we hold that the district court's order is final under section 1293(b).

B. Stacking of Exemptions

The Illinois personal property exemption provision exempts in part the following items from judgment, attachment, or distress for rent: (1) the necessary wearing apparel, Bible, school books, and family pictures of the debtor and the debtor's dependents; (2) the debtor's equity interest, not to exceed $2,000 in value, in any other property; and (3) the debtor's interest, not to exceed $1,200 in value, in any one motor vehicle. Ill.Rev.Stat. ch. 110, Sec. 12-1001(a)-(c) (1983). ⁴ The trustee, relying on the precedent established by the district court of the Central District of Illinois, argues that Barker cannot claim the additional equity in his car, $1,022.72, under subsection (b) of the personal property exemption statute, but rather can only claim the $1,200 statutory maximum under subsection (c). See, e.g., In re Pastorek, Jr., 33 B.R. 406 (C.D.Ill.1983). Barker, on the other hand, cites cases from the Northern and Southern Districts of Illinois that have allowed a debtor to stack his exemptions under subsections ...