Giles-Flores v. Braeburn Plaza, Inc. (In re Giles-Flores)
| Decision Date | 20 October 2022 |
| Docket Number | CASE NO: 16-34941,ADVERSARY NO. 21-4406 |
| Citation | 646 B.R. 787 |
| Parties | IN RE: Gustavo GILES-FLORES, Debtor. Gustavo Giles-Flores, Plaintiff, v. Braeburn Plaza, Inc., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
Charles Anthony Newton, Newtons Law, The Woodlands, TX, for Plaintiff.
Michael L. Weems, Hughes Watters Askanase, Houston, TX, for Defendant.
Gustavo Giles-Flores alleges that Braeburn Plaza, Inc. violated the automatic stay by foreclosing on his home. Mr. Giles-Flores exempted his home under the Texas homestead exemption. Braeburn moved to dismiss this adversary proceeding because the home was not property of the bankruptcy estate at the time of foreclosure. Because the home was "arguably" estate property, Braeburn should have obtained relief from the stay before foreclosure. See Brown v. Chesnut (In re Chesnut) , 422 F.3d 298, 304 (5th Cir. 2005). The motion to dismiss is denied.
Mr. Giles-Flores purchased his home on April 24, 2015. (ECF No. 1 at 1). That home is subject to fees imposed by the Braeburn Plaza, Inc. Homeowners’ Association. (ECF No. 1 at 2). On October 3, 2016, Mr. Giles-Flores filed a chapter 13 bankruptcy petition. (Case No. 16-34941, ECF No. 1). He did not include any payments to Braeburn in his original schedules. (Case No. 16-34941, ECF No. 13).
On October 3, 2016, Mr. Giles-Flores filed a plan providing for the total debt claim on the home. (Case No. 16-34941, ECF No. 2 at 3). The plan also provides that (Case No. 16-34941, ECF No. 2 at 8).
On October 17, 2016, Mr. Giles-Flores exempted his homestead pursuant to Texas Property Code § 41.001 as made applicable by 11 U.S.C. § 522(b)(3). (Case No. 16-34941, ECF No. 13 at 10). None of Mr. Giles-Flores’ creditors objected. (ECF No. 11 at 12; Case No. 16-34941, ECF No. 26). If no timely objections are filed, a claimed exemption is allowed 30 days after the later of (i) the conclusion of the § 341 creditors’ meeting; or (ii) the date that the exemption was claimed. See FED. R. BANKR . P. 4003(b)(1). The meeting of creditors concluded on November 18, 2016. (Case No. 16-34941, ECF No. 26). 30 days later, on December 18, 2016, the exemption was allowed. Mr. Giles-Flores amended his plan on December 12, 2016, and the Court confirmed the amended plan on December 15, 2016. (Case No. 16-34941, ECF Nos. 31; 36).
Mr. Giles Flores was required to pay, but did not pay, homeowners’ fees arising after he filed his bankruptcy petition. On December 3, 2019, Braeburn's attorney wrote to Mr. Giles-Flores demanding $2,841.54 within 30 days for post-petition homeowners’ association dues. (ECF No. 1 at 24–25). Braeburn then filed the foreclosure lawsuit in Harris County District Court on February 20, 2020. (ECF No. 1 at 13). The Harris County District Court permitted Braeburn to foreclose on September 27, 2021. (ECF No. 1 at 14). Braeburn appointed Carl Quezada as Trustee to foreclose on the home. (ECF No. 1 at 72–73). Mr. Quezada recorded a notice of his sale of the home on October 6, 2021. (ECF No. 1 at 75). Mr. Giles-Flores’ attorney warned Braeburn's attorney of Mr. Giles-Flores’ bankruptcy proceedings shortly thereafter. (ECF No. 1 at 78).
Mr. Giles-Flores filed an amended modification of his plan on October 14, 2021 proposing to add the post-petition homeowners’ association assessments. (Case No. 16-34941, ECF No. 85 at 1, 4, 17). Nonetheless, on November 2, 2021, Mr. Quezada foreclosed on the home and sold it to a third party. (ECF No. 1 at 16). Braeburn's attorney informed Mr. Giles-Flores of the sale a week later. (ECF No. 1 at 16–17).
Mr. Giles-Flores filed this adversary proceeding on November 22, 2021. (ECF No. 1). He maintains that the home was property of the bankruptcy estate at the time of the foreclosure. (ECF No. 1 at 17). The complaint alleges that Braeburn willfully violated the automatic stay by foreclosing on and selling the home. (ECF No. 1 at 18). In its motion to dismiss filed on November 30, 2021, Braeburn argues that the home was not estate property at the time of the foreclosure. (ECF No. 6 at 2). The Court heard oral argument on January 6, 2022 and took the matter under advisement following supplemental briefing.
The Court has subject matter jurisdiction over this adversary proceeding under 28 U.S.C. § 1334. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A). Venue is proper in this District consistent with 28 U.S.C. §§ 1408 and 1409.
A court may dismiss a complaint for "failure to state a claim upon which relief can be granted." FED. R. CIV. P. 12(b)(6). Federal Rule of Bankruptcy Procedure 7012 incorporates Federal Rule of Civil Procedure 12(b) in adversary proceedings. FED. R. BANKR . P. 7012.
In evaluating a complaint under Rule 12(b)(6), a court must examine whether the pleading "state[s] a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Powers v. Northside Indep. Sch. Dist. , 951 F.3d 298, 305 (5th Cir. 2020) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). "Although a district court must assume the veracity of well-pleaded facts, a complaint that fail[s] to show more than mere conclusory allegations is properly met with dismissal for failure to state a claim." Smith v. Dep't of Health & Hosps. La. , 581 F. App'x 319, 321 (5th Cir. 2014) (quoting City of Clinton v. Pilgrim's Pride Corp. , 632 F.3d 148, 155 (5th. Cir. 2010) (internal quotation marks omitted)). Rule 12(b)(6) "authorizes a court to dismiss a claim on the basis of a dispositive issue of law." Turner v. AmericaHomeKey Inc. , 514 F. App'x 513, 516 (5th Cir. 2013) (quoting Neitzke v. Williams , 490 U.S. 319, 326, 109 S.Ct. 1827, 104 L.Ed.2d 338 (1989) ).
Braeburn moved to dismiss this adversary proceeding because (i) the foreclosure did not violate the automatic stay when the estate had no interest in Mr. Giles-Flores’ home; (ii) if Braeburn violated the automatic stay, it was not willful; and (iii) Mr. Giles-Flores was not injured. (ECF No. 6 at 6). Bankruptcy courts in this Circuit disagree whether the estate retains legal title to property exempted under an "in-kind" exemption statute. Given the chronology of events, the Court need not weigh in. Because the home was arguably estate property on the foreclosure date, the automatic stay applied. See Chesnut , 422 F.3d at 304. Because Braeburn had knowledge of the bankruptcy, Braeburn should have petitioned this Court before proceeding with the foreclosure. Braeburn's actions were willful, and Mr. Giles-Flores plausibly alleges injury.
The commencement of Mr. Giles-Flores’ bankruptcy created a bankruptcy estate. The bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). Debtors may exempt certain property from the estate. 11 U.S.C. § 522(b). "An exemption is an interest withdrawn from the estate ... for the benefit of the debtor." Owen v. Owen , 500 U.S. 305, 308, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991) ; Schwab v. Reilly , 560 U.S. 770, 785, 130 S.Ct. 2652, 177 L.Ed.2d 234 (2010) (). The parties agree that Mr. Giles-Flores properly exempted his home under the Texas homestead statute.
Exemptions may be categorized as either "in-kind" or an exemption of an interest in property. In re Luckham , 464 B.R. 67, 72 (Bankr. D. Mass. 2012). In-kind exemptions allow a debtor to "exempt certain property ... in full regardless of value." Schwab , 560 U.S. at 784, 130 S.Ct. 2652 ; see, e.g. , 11 U.S.C. §§ 522(d)(9) (), 522(d)(10)(C) (disability benefits), 522(d)(7) (). Relevant to this matter is whether both beneficial and legal title1 left the bankruptcy estate when Mr. Giles-Flores exempted his home under the Texas homestead exemption. Under § 541 of the Bankruptcy Code, the estate was initially vested with both legal and equitable title to the home as of the commencement of the case.
Under § 522(b)(2), a debtor must choose between federal and state homestead exemptions under § 522(d). NCNB Tex. Nat'l Bank v. Volpe (In re Volpe) , 943 F.2d 1451, 1452 (5th Cir. 1991). Section 522(d)(1) provides the federal homestead exemption: as of April 1, 2022, a debtor may exempt "[t]he debtor's aggregate interest, not to exceed $27,900 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence...." Alternatively, Texas Property Code § 41.001 provides that "[a] homestead ... [is] exempt from seizure for the claims of creditors...."
The Texas homestead exemption exempts the home itself, not the debtor's interest in the home. See Hawk v. Engelhart (In re Hawk) , 871 F.3d 287, 294 (5th Cir. 2017) ; In re Parsons , 530 B.R. 411, 417 (Bankr. W.D. Tex. 2014) (); In re Moore , 442 B.R. 865, 867 (Bankr. N.D. Tex. ...
To continue reading
Request your trial