In re Beck

• Court: U.S. Bankruptcy Court — Western District of Washington
• Writing for the Court: Karen A. Overstreet
• Decision Date: 02 October 2012
• Docket Number: Case No. 12-13990
• Citation: In re Beck, Case No. 12-13990 (Bankr. W.D. Wash. Oct 02, 2012)
• Parties: In re Matt Wendell Beck, Debtor(s).

In re Matt Wendell Beck, Debtor(s).

Case No. 12-13990

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE

Date: October 2, 2012

Below is the Order of the Court.

______________________

Karen A. Overstreet

U.S. Bankruptcy Judge

(Dated as of Entered on Docket date above)

Karen A. Overstreet

Bankruptcy Judge

United States Courthouse

ORDER DENYING RECONSIDERATION

This matter comes before the Court on the debtor's Motion to Reconsider Order Denying Claim of Homestead Exemption and Brief in Support ["Motion for Reconsideration", Dkt. No. 46]. The debtor seeks reconsideration of the Order Denying Claim of Homestead Exemption entered August 13, 2012 ["Order", Dkt. No. 43]. Debtor argues that the Order should be reconsidered and set aside because he properly claimed real property at 1157 Fowles Lane exempt as a homestead under Washington law.

Facts

The debtor filed a petition for relief under Chapter 7 of the Bankruptcy Code on April 18, 2012. On Schedule C filed with his bankruptcy petition, the debtor claimed his interest in real property at 1154 Fowles Lane, Bellingham, WA, exempt as his homestead pursuant to RCW 6.13.030, in the amount of $24,141.00. The debtor listed 508 Darby Drive, #315, Bellingham, WA, however, as his address on the petition. The Chapter 7 Trustee (the "Trustee") filed an Objection to Exemptions [Dkt. No. 13] in which he asserted that the property at 1154 Fowles Lane could not be claimed exempt as a homestead because the debtor did not reside on the property and because the debtor sold his interest in the property pre-petition. The Trustee argued that in order to claim real property exempt under RCW 6.13.030, the debtor or his dependent must reside on the property or intend to reside on the property.

Debtor filed Amended Schedules on May 10, 2012. Dkt. No. 16. In the Amended Schedules, the debtor changed his exemptions to claim a homestead interest in real property at 1157 Fowles Lane, Bellingham, WA. The 1157 Fowles Lane property is partially developed real property which was originally part of a single parcel which also included the lot at 1154 Fowles Lane. In his amended Schedule C, the debtor claimed the 1157 Fowles Lane property exempt up to $11,786 in value as a homestead pursuant to RCW 6.13.030. The debtor recorded a declaration of homestead on the 1157 Fowles Lane property on May 9, 2012, the day prior to filing the Amended Schedules, declaring his intention to live on the property. Dkt. No. 16, attachment 2. In his response to the Trustee's objection to exemption, the debtor stated that he no longer claimed the 1154 Fowles Lane property as his homestead, and that instead he claimed the 1157 Fowles Lane property exempt as property on which he intended to reside in the future.

In reply to the debtor's response, the Trustee pointed out that the debtor sold the propertyat 1157 Fowles Lane to Marv and Ruthi Stemler pursuant to a vacant land purchase and sale agreement dated March 20, 2012, and that the debtor was receiving $321 per month under the agreement at the time the bankruptcy petition was filed. The Trustee's reply argued that the property at 1157 Fowles Lane could not be claimed exempt as homestead property under RCW 6.13.010, which requires that "[p]roperty included in the homestead must be actually intended or used as the principal home for the owner." The Trustee contended that the 1157 Fowles Lane property could not be homestead property because the debtor did not reside on the property or intend to use it as his principal home in the future, as evidenced by the fact that he sold the property pre-petition.

At a hearing on May 23, 2012, the Court agreed with the Trustee, and held that the debtor could not exempt either the 1154 or 1157 Fowles Lane property under RCW 6.13.010 because he did not reside on either property as of the petition date and because he sold both properties prior to filing, indicating a lack of intent to reside on either property in the future. On August 24, 2012, the Court entered the Order which sustained the Trustee's objection to the debtor's claim of exemption as to both the 1154 or the 1157 Fowles Lane properties.

Standards on Reconsideration.

Motions for reconsideration are disfavored in this district. The local federal district court rules direct that a court should:

[O]rdinarily deny such motions in the absence of a showing of manifest error in the prior ruling or a showing of new facts or legal authority which could not have been brought to its attention earlier with reasonable diligence.

Civil Rule 7(h)(1), Local Rules W.D. Wash. Local Rule 7(h) is the functional equivalent of a motion to alter or amend a judgment under Fed. R. Civ. P. 59(e). Aronson v. Dog Eat Dog Films, Inc., 738 F. Supp 2d 1104, 1118 (W.D. WA 2010); Fuller v. M.G. Jewelry, 950 F.2d 1437, 1442(9th Cir. 1991).

Rule 59(e), Fed.R.Civ.P., made applicable to bankruptcy adversary proceedings by Bankruptcy Rule 9023, provides a mechanism for a court to alter, amend, or vacate a prior order. Hamid v. Price Waterhouse, 51 F.3d 1411, 1415 (9th Cir. 1994). Although Rule 59(e) permits a court to reconsider and amend a previous order, "the rule offers an extraordinary remedy, to be used sparingly in the interests of finality and conservation of judicial resources." Carroll v. Nakatani, 342 F.3d 934, 945 (9th Cir. 2003); Kona Enters. v. Estate of Bishop, 229 F.3d 877, 890-91 (9th Cir. 2000).

A motion under F.R.Civ.P. 59(e) 'should not be granted absent highly unusual circumstances, unless the district court is presented with newly discovered evidence, committed clear error, or if there is an intervening change in the controlling law.' McDowell v. Calderon, 197 F.2d 1253, 1255 (9th Cir. 1999)(en banc)(quoting 389 Orange St. Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999); see also F.R.Civ.P. 60(b).

Herbst v. Cook, 260 F.3d 1039, 1044 (9th Cir. 2001). Matters that were not presented in the first instance by a well-represented party are not considered on a motion for reconsideration. Aronson v. Dog Eat Dog Films, Inc., 738 F. Supp. 2d at 1118, citing 389 Orange Street Partners v. Arnold, 179 F.3d 656, 665 (9th Cir. 1999). The Ninth Circuit has stated that a motion for reconsideration "may not be used to raise arguments or present evidence for the first time when they could reasonably have been raised earlier in the litigation." Kona Enter., Inc. v. Estate of Bishop, 229 F.3d 877, 890 (9th Cir. 2000).

Analysis

In his Motion for Reconsideration, the debtor argues that the Order should be set aside on the ground that debtor validly claimed the property at 1157 Fowles Lane exempt as a homestead under Washington law. The debtor says he always intended to reside on the 1157 Fowles Laneproperty, that he took steps to develop the property prior to filing, and that he only attempted to sell the property pursuant to the purchase and sale agreement because he got bad legal advice and/or was financially desperate. Since the purchase and sale agreement on the property did not close and expired shortly after this case was filed, the debtor argues that he was free to file a declaration of homestead under Washington law and then amend his schedules and claim the property exempt in this bankruptcy case. The debtor relies on In re Gitts, 927 BR F.2d 1109 (9th Cir. 1991), which holds that a homestead declaration filed after the petition is valid if the debtor would otherwise be entitled to claim the property as a homestead. Debtor also relies on the recent case of In re Jacobson, 676 F. 3d 1193 (9th Cir. 2012), which holds that bankruptcy exemptions must be determined in accordance with the state law applicable on the date of filing. Debtor argues that under Washington law, a declaration of homestead can be filed on property at any time up to the date of an execution sale and that all that is required under Washington law to claim unimproved property exempt is that the debtor file a proper declaration of homestead.¹ Citing the federal district court decision in In re Kays, 49 F. 2d 345 (D.Wash. 1930), debtor argues that under Washington law, actions that manifest an intent to reside on the property are sufficient to establish a homestead on unimproved property. In this case, the debtor argues that subdivision of the larger lot into separate parcels, drawing up plans for a house, and staking the property evidence his intent to live there. The debtor asserts that but for his financial difficulties he would be living on the property now.

The Motion for Reconsideration is supported by debtor's declaration, in which he states that he bought the original lot, which included both the current 1154 and 1157 parcels, hoping tosubdivide it so that he could have one of his children live in the current house (1154), and then build two more homes, one for another of his three children, and one for himself. The subdivision took longer than expected, and by the time it was complete, the debtor did not have the resources to build. When the holder of the note secured by the 1157 property threatened to foreclose, the debtor consulted lawyer Matt Beaty. The debtor ultimately decided to sell the property. The debtor states in his declaration:

I don't know what I would have done if they had actually proceeded to closing because I did not want to sell it. However, Mr. Beaty told me that filing bankruptcy would not be a detriment and that I could amend my schedules later to claim the property as a homestead.

Declaration of Matt W. Beck, Dkt. No. 47, page 3. The debtor further states that had he understood that he would not be able to claim the property exempt as a homestead, he would never have filed bankruptcy.

In support of the Motion for Reconsideration, the debtor also submitted the declarations of Steve Storm (a land use consultant) and Patrick Locker (a real estate agent), which state that each of them understood that the debtor's desire was to purchase the property, divide it into additional lots, and...