Fernandez v. Miller (In re Fernandez)
| Decision Date | 05 August 2011 |
| Docket Number | EP-11-CV-123-KC |
| Parties | In Re ALFRED L. FERNANDEZ, Debtor. ALFRED L. FERNANDEZ, Appellant, v. J. MARSHALL MILLER, Chapter 7 Trustee, Appellee. |
| Court | U.S. District Court — Western District of Texas |
On this day, the Court considered Alfred L. Fernandez's ("Debtor") appeal from a final order of the United States Bankruptcy Court for the Western District of Texas. Appellant has requested oral argument pursuant to Federal Rule of Bankruptcy Procedure 8012. However, after reviewing the briefs and the record, the Court has determined that oral argument is not needed because the briefs and record adequately present the facts and legal arguments. See Fed. R. Bankr. P. 8012.
For the reasons set forth below, the bankruptcy court's order is REVERSED and REMANDED.
The relevant facts of this case are undisputed. Debtor was born, raised, and educated in El Paso, Texas. He purchased a home in El Paso in 1987, and resided there while working in El Paso until 2000. At that time Debtor was laid off from his job in El Paso and moved to Nevadafor work. He lived in Nevada until 2009, but never sold his El Paso home. He continued to make the payments on it, and always intended to keep it as his homestead. In January 2009, Debtor moved back to El Paso and took up residence at his El Paso home. He filed a petition for bankruptcy approximately one year later, on December 31, 2009. As of the date of filing his petition, Debtor held approximately $70,000 in equity in the home.
In his petition, Debtor claimed the unlimited homestead exemption under Texas law for his home. The trustee, J. Marshall Miller ("Trustee"), objected, and Debtor amended his petition, with the consent of Trustee, to claim the $550,000 homestead exemption under Nevada law instead. Trustee again objected, and after a hearing, the bankruptcy court sustained the objection and held that Debtor was not eligible to claim the Nevada exemptions. See In re Fernandez, 445 B.R. 790 (Bankr. W.D. Tex. 2011); Order Denying Claim of Exemption, In re Alfred L Fernandez, No. 09-32896-C (Bankr. W.D. Tex. Mar. 4, 2011), ECF No. 35. Debtor now appeals the bankruptcy court's ruling.
District courts have jurisdiction to hear "appeals from final judgments, orders, and decrees . . . of bankruptcy judges entered in cases and proceedings" under the bankruptcy laws in Title 11 of the United States Code. 28 U.S.C. § 158(a). Such proceedings include so-called "core proceedings," such as rulings on the "allowance or disallowance of . . . exemptions from property of the estate." Id. § 157(b)(2)(B). Unlike in non-bankruptcy cases, a final order for the purposes of § 158 appellate jurisdiction need not dispose of the entire case; under § 158 a final order is any order that "ends a discrete judicial unit in the larger case." Smith v. Revie (In re Moody), 817 F.2d 365, 367-68 (5th Cir. 1987). An order of a bankruptcy court granting ordenying an exemption is a final order for the purposes of § 158(a). See England v. FDIC (In re England), 975 F.2d 1168, 1172 (5th Cir. 1992) (). Here, the order of the bankruptcy judge denied Debtor an exemption, so it is a final order and therefore this Court has jurisdiction over the appeal from that order. See Order Denying Claim of Exemption, In re Alfred L Fernandez, No. 09-32896-C (Bankr. W.D. Tex. Mar. 4, 2011), ECF No. 35.
"When reviewing a bankruptcy court's decision in a 'core proceeding,' a district court functions as a appellate court and applies the standard of review generally applied in federal court appeals." Webb v. Reserve Life Ins. Co. (In re Webb), 954 F.2d 1102, 1103-04 (5th Cir. 1992) (citing Griffith v. Oles (In re Hipp, Inc.), 895 F.2d 1503, 1517 (5th Cir. 1990)). Federal Rule of Bankruptcy Procedure 8013 provides that district courts shall not set aside a bankruptcy court's findings of fact unless clearly erroneous. Fed. R. Bankr. P. 8013. But the Court reviews the bankruptcy court's conclusions of law de novo, and is not required to extend any deference to the bankruptcy court's analysis. Milligan v. Trautman, 340 B.R. 773, 776 (W.D. Tex. 2006) (citing Coston v. Bank of Malvern, 987 F.2d 1096, 1099 (5th Cir.1992)).
The Court proceeds by first setting out as background the general operation of bankruptcy law in this area. Then, the Court examines the specific bankruptcy law provision that is at issue in this case. Because the precise meaning of that provision is unclear, the Court considers in turn the three different approaches courts have taken when interpreting the statute. After determining which interpretation best reflects Congress's intent, the Court proceeds to apply it to the facts ofthis case.
The estate in a bankruptcy proceeding consists of the property belonging to a debtor, which is to be distributed, or sold and the proceeds distributed, to the Debtor's creditors. See Owen v. Owen, 500 U.S. 305, 308 (1991). However, debtors may exempt certain property from the estate so that they might have the minimal resources needed to regain their financial footing and have a "fresh start." See In re Williams, 369 B.R. 470, 476 (Bankr. W.D. Ark. 2007); Owen, 500 U.S. at 308 (). Congress has long allowed debtors to claim as exempt either the property listed in federal bankruptcy statutes or in state exemption laws. Camp v. Ingalls (In re Camp) (Camp II), 631 F.3d 757, 759-60 (5th Cir. 2011) (citing 11 U.S.C. § 522(b)(1)). However, bankruptcy law permits states to "opt-out" of the federal set of exemptions and thereby limit debtors governed by such states' law to the use of that state's exemptions. 11 U.S.C. § 522(b)(1)-(2) (). Most states have in fact opted out, and restrict debtors subject to their laws to using the state exemptions. Graziadei v. Graziadei (In re Graziadei), 32 F.3d 1408, 1410 n.3 (9th Cir. 1994) ().
Prior to 2005, the bankruptcy statute specified that the applicable state exemption law was the law of the state that had been the debtor's domicile for the greater part of 180 days preceding the filing of the petition. 11 U.S.C. § 522(b)(2)(A) (2004); Stephens v. Holbrook (In re Stephens), 402 B.R. 1, 3 (B.A.P. 10th Cir. 2009). In 2005, through the Bankruptcy AbusePrevention and Consumer Protection Act of 2005 ("BAPCPA"), Congress amended this section of the bankruptcy laws to extend the time that a debtor must live in a state before being able to claim that state's exemptions, from the greater part of 180 days to 730 days. See BAPCPA, Pub. L. No. 109-8, § 307, 119 Stat. 23, 81 (2005); In re Varanasi, 394 B.R. 430, 434 n.5 (Bankr. S.D. Ohio 2008) (citing In re Virissimo, 332 B.R. 201, 203 (Bankr. D. Nev. 2005)). Congress's purpose in extending the "look-back" window was to prevent debtors from forum-shopping by moving to a state with generous exemption laws, living there for 91 days (that being the greater part of 180 days), and then filing for bankruptcy. Stephens, 402 B.R. at 3 n.8; Drummond v. Urban (In re Urban), 375 B.R. 882, 889 (B.A.P. 9th Cir. 2007) (citing H.R. Rep. No. 109-31, pt. 1, at 15-16 (2005), reprinted in 2005 U.S.C.C.A.N. 88, 102) (describing BAPCPA as closing the "so-called 'mansion loophole,'" whereby debtors relocate to states where they can shield virtually all of the equity in their homes from their creditors); In re Bingham, No. 06-40990, 2008 WL 186277, at *5 (Bankr. D. Kan. Jan. 18, 2008) ().
11 U.S.C. §522(b).
The effect of the amended statute is that if a debtor has not lived in one state for the requisite 730 days preceding the filing of the petition, the law requires the debtor to use the exemption laws of the state where he lived for the greater part of the 180 days preceding that 730 day period. Stephens, 402 B.R. at 4. If that state's opt-out law prevents a debtor from choosing the federal exemptions and also prevents the debtor from...
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