England, Matter of

• Decision Date: 26 October 1992
• Docket Number: No. 91-7381,91-7381
• Citation: 975 F.2d 1168
• Parties: Bankr. L. Rep. P 74,979 In the Matter of Wesley R. ENGLAND, Debtor. Wesley R. ENGLAND, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Abrams Centre National Bank, and J. Gregg Pritchard, Chapter 7 Trustee in Bankruptcy, etc., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1168

975 F.2d 1168

Bankr. L. Rep. P 74,979

In the Matter of Wesley R. ENGLAND, Debtor Wesley R. ENGLAND, Appellant, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Abrams Centre National Bank, and J. Gregg Pritchard, Chapter 7 Trustee in Bankruptcy, etc., Appellees.

No. 91-7381.

United States Court of Appeals Fifth Circuit.

Oct. 26, 1992.

Philip I. Palmer, Jr., Palmer & Palmer, P.C., Dallas, Tex., for appellant.

Marilyn R. Chambers, F.D.I.C. Legal Div., Dallas, Tex., for FDIC.

Ruth A. Wagoner, Troy D. Phillips, Geary, Glast & Middleton, Dallas, Tex., for Pritchard.

Holly B. Guelich, Herman A. Lusky, Dallas, Tex., for Abrams.

Appeal from the United States District Court for the Northern District of Texas.

Before POLITZ, Chief Judge, JOHNSON and JOLLY, Circuit Judges.

JOHNSON, Circuit Judge:

This case calls on the Court to determine whether both a homestead and proceeds from the sale of a former homestead are exempt under section 41.001 of the Texas Property Code. Wesley R. England appeals, urging the Court to reverse the Northern District Court's holding that both are not exempt. Concluding that the language in section 41.001 clearly and unambiguously forbids the simultaneous exemption of both, we affirm.

I. Facts and Procedural History

For the twenty-seven years prior to October 16, 1990, Wesley R. England ("England" or "Appellant") and his wife, Virginia, lived in a home in Cedar Hill, Texas, which constituted their urban homestead. ¹ On October 16, 1990, England sold this property for $10,000 in cash and a $210,000 Note Receivable (Note). This Note required the buyers to pay Appellant $1843 per month for thirty-five months, with the balance due on October 16, 1993. England used the proceeds which he received to pay for improvements on his ranch ² and for living expenses.

Approximately two weeks after closing on the house, England and his wife moved onto their 869 acre ranch near Hico, Texas. Two days after this move, on November 1, 1990, England filed a petition for relief under Chapter 11 of the Bankruptcy Code. This was later converted to a Chapter 7 proceeding. Based upon 11 U.S.C. § 522(b)(2)(A), England elected to exempt property based upon Texas law. Among other things, he claimed his ranch as a rural homestead ³ and the Note as proceeds from the sale of homestead, both purportedly exempt property under section 41.001(a) and (c) of the Texas Property Code. The Federal Deposit Insurance Company and Abrams Centre National Bank ("creditors" ⁴ ) timely objected, arguing that to allow both exemptions would be tantamount to allowing the appellant two homestead exemptions. The bankruptcy court and, upon England's appeal, the district court agreed 141 B.R. 495. Both courts disallowed the exemption of the proceeds, holding that as presented by England, the proceeds constituted a second homestead, ⁵ something not countenanced by Texas law. England appealed to this Court, urging that we reverse the holdings of the courts below and hold that both are exempt.

II. Discussion

A. Jurisdiction

Each court must be satisfied that it has jurisdiction of each case it considers. Even if the parties fail to raise the question of subject matter or appellate jurisdiction, the court must do so sua sponte, if necessary. In re Moody, 849 F.2d 902 (5th Cir.), cert. denied, 488 U.S. 967, 109 S.Ct. 493, 102 L.Ed.2d 530 (1988). The bankruptcy judge's order disallowing exemption of the proceeds clearly did not dispose of England's entire bankruptcy case. We must therefore determine whether this Court has appellate jurisdiction over that order.

Jurisdiction over bankruptcy cases arises from 28 U.S.C. § 158(d), which grants courts of appeals appellate jurisdiction over "all final decisions, judgments, orders, and decrees" of bankruptcy judges. District courts also have appellate jurisdiction over bankruptcy cases; however, their jurisdiction includes interlocutory orders and decrees on which the court has granted leave to appeal. 28 U.S.C. § 158(a). Although the district court did not grant England leave to appeal this case, that court did not discuss the finality of the bankruptcy court's order.

The Supreme Court has defined final judgment, as used in 28 U.S.C. § 1291, as a decision which "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Firestone Tire and Rubber Co. v. Risjord, 449 U.S. 368, 373-74, 101 S.Ct. 669, 672-73, 66 L.Ed.2d 571 (1981) (quoting Coopers and Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 2456, 57 L.Ed.2d 351 (1978)). The Supreme Court has not defined final judgment with respect to section 158.

However, a determination that appellate jurisdiction arises only when the bankruptcy judge enters an order which ends the entire bankruptcy case, leaving nothing for the court to do but execute the judgment, would substantially frustrate the bankruptcy system. This is so particularly when, as here, one independent decision materially affects the rest of the bankruptcy proceedings. Separate and discrete orders in many bankruptcy proceedings determine the extent of the bankruptcy estate and influence creditors to expend or not to expend effort to recover monies due them. The reversal of such an order would waste exorbitant amounts of time, money, and labor and would likely require parties to start the entire bankruptcy process anew. This potential waste of judicial and other resources has influenced this Court and other courts of appeals to view finality in bankruptcy proceedings in a more practical and less technical light. See In re Moody, 849 F.2d 902, 904 (5th Cir.), cert. denied, 488 U.S. 967, 109 S.Ct. 493, 102 L.Ed.2d 530 (1988); In re Brayshaw, 912 F.2d 1255, 1256 (10th Cir.1990); In re Apex Oil Co., 884 F.2d 343, 347 (8th Cir.1989); In re Cottrell, 876 F.2d 540, 541 (6th Cir.1989); F/S Airlease II, Inc. v. Simon, 844 F.2d 99, 103-04 (3d Cir.), cert. denied, 488 U.S. 852, 109 S.Ct. 137, 102 L.Ed.2d 110 (1988); In re Charter Co., 778 F.2d 617, 621 (11th Cir.1985); Sumy v. Schlossberg, 777 F.2d 921, 923 (4th Cir.1985). But see In re Wisz, 778 F.2d 762, 763-64 (11th Cir.1985). The Court has determined that an order which ends a discrete judicial unit in the larger case concludes a bankruptcy proceeding and is a final judgment for the purposes of section 158(d). In re Moody, 849 F.2d 902, 904 (5th Cir.1988); In re Moody, 817 F.2d 365, 368 (5th Cir.1987). Finality in bankruptcy cases is contingent upon the conclusion of an adversarial proceeding within the bankruptcy case, rather than the conclusion of the entire litigation. In re Louisiana World Exposition, Inc., 832 F.2d 1391 (5th Cir.1987).

Other courts have explicitly held that the grant or denial of an exemption in a bankruptcy proceeding is a final order under section 158(d). In re Brayshaw, 912 F.2d 1255, 1256 (10th Cir.1990); Sumy, 777 F.2d at 923; In re Jones, 768 F.2d 923, 925-26 n. 3 (7th Cir.1985); In re White, 727 F.2d 884, 886 (9th Cir.1984); John T. Mather Memorial Hospital, Inc. v. Pearl, 723 F.2d 193, 194 n. 1 (2d Cir.1983). ⁶ Although this Court has reviewed a district court's determination that certain property was exempt in a bankruptcy proceeding, it has not expressly held that such an order is final. There was an implicit finding that the bankruptcy court's order was final. In re Dyke, 943 F.2d 1435 (5th Cir.1991). That which In re Dyke implied, the Court now holds: An order which grants or denies an exemption will be deemed a final order for the purposes of 28 U.S.C. § 158(d).

B. Homestead and Proceeds Exemption

1. Standard of Review

The determination of whether both homestead and proceeds of former homestead are exempt is a question of law, which this Court reviews de novo. Frame v. S-H, Inc., 967 F.2d 194, 202 (5th Cir.1992).

2. Proceeds of Former Homestead

From the beginning of Texas' statehood in 1845, its constitutions have provided homestead protection to its residents. See TEX. CONST. of 1845, art. VII, § 22. The first constitution, as well as those which followed it, protected homestead from forced sale for the payment of debts, except in specific circumstances which are not relevant in this case. In 1897, the legislature passed article 2396, a predecessor to section 41.001, which also protected proceeds from the sale of a homestead ⁷ from creditors ("proceeds exemption statute"). The Texas Legislature amended the proceeds exemption statute in 1985. ⁸ That statute, section 41.001 of the Texas Property Code, presently reads:

(a) A homestead and one or more lots used for a place of burial of the dead are exempt from seizure for the claims of creditors except for encumbrances properly fixed on homestead property.

(b) Encumbrances may be properly fixed on homestead property for:

(1) purchase money;

(2) taxes on the property; or

(3) work and material used in constructing improvements on the property if contracted for in writing before the material is furnished or the labor is performed and in a manner required for the conveyance of a homestead, with joinder of both spouses if the homestead claimant is married.

(c) The homestead claimant's proceeds of a sale of a homestead are not subject to seizure for a creditor's claim for six months after the date of sale.

TEX.PROP.CODE ANN. § 41.001 (Vernon Supp.1992).

The creditors argue that sections (a), (b), and (c) of the statute are disjunctive, allowing the exemption of homestead or proceeds, but not both. England argues that the sections are conjunctive such that the statute clearly and unambiguously exempts homestead in section (a) and proceeds in section (c). He asseverates that construing the statute to exempt both the homestead and the proceeds is consistent with the legislature's intent that courts liberally construe homestead laws, "even if the results are personally distasteful." No Texas court has answered this question, so this Court ventures out into uncharted territory in determining whether ...