In re Burke, 071417 FED6, 16-6603

Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
Attorney:Richard P. Jahn, Jr., Chattanooga, Tennessee, for Appellant. W. Thomas Bible, Jr., Chattanooga, Tennessee, for Appellees. Richard P. Jahn, Jr., Nancy A. Cogar, Chattanooga, Tennessee, for Appellant. W. Thomas Bible, Jr., William P. Glascock, Jr., Chattanooga, Tennessee, for Appellees. Tara Twomey...
Judge Panel:Before: MOORE, GILMAN, and COOK, Circuit Judges.
Opinion Judge:RONALD LEE GILMAN, CIRCUIT JUDGE.
Party Name:In re: Philip Craig Burke; Nekolia Swope Burke, Debtors. v. Philip Craig Burke; Nekolia Swope Burke, Appellees. Richard P. Jahn, Jr., Trustee, Appellant,
Case Date:July 14, 2017
Docket Nº:16-6603
 
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In re: Philip Craig Burke; Nekolia Swope Burke, Debtors.

Richard P. Jahn, Jr., Trustee, Appellant,

v.

Philip Craig Burke; Nekolia Swope Burke, Appellees.

No. 16-6603

United States Court of Appeals, Sixth Circuit

July 14, 2017

          Argued: June 13, 2017

         Appeal from the United States District Court for the Eastern District of Tennessee of Chattanooga. No. 1:15-cv-00246-Travis R. McDonough, District Judge.

         ARGUED:

          Richard P. Jahn, Jr., Chattanooga, Tennessee, for Appellant.

          W. Thomas Bible, Jr., Chattanooga, Tennessee, for Appellees.

         ON BRIEF:

          Richard P. Jahn, Jr., Nancy A. Cogar, Chattanooga, Tennessee, for Appellant.

          W. Thomas Bible, Jr., William P. Glascock, Jr., Chattanooga, Tennessee, for Appellees.

          Tara Twomey, NATIONAL CONSUMER BANKRUPTCY RIGHTS CENTER, San Jose, California, for Amicus Curiae.

          Before: MOORE, GILMAN, and COOK, Circuit Judges.

          OPINION

          RONALD LEE GILMAN, CIRCUIT JUDGE.

         Philip C. and Nekolia S. Burke encountered financial distress during the "Great Recession" that began in 2008. Unable to pay their debts, they filed for Chapter 7 bankruptcy seven years later. Richard P. Jahn Jr., as bankruptcy trustee of the Burkes' estate, sought to evict the Burkes from their residence in order to make the property easier to sell for the benefit of their creditors. In response, the Burkes moved to compel the trustee to abandon the property based on their contention that the fair market value of the residence, less the balance due on the mortgage loan, left no net equity for the estate. The bankruptcy court agreed that the net value of the residence was inconsequential from the viewpoint of the unsecured creditors. It therefore granted the motion to compel abandonment. The district court concurred. For the reasons set forth below, we AFFIRM the judgment of the district court.

         I. BACKGROUND

         The Burkes filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code in February 2015. In their bankruptcy schedules, the Burkes listed their residence in Chattanooga, Tennessee as being appraised for $108, 000, with a $91, 581 balance due on the mortgage.

         Jahn, the appointed trustee, moved for an order evicting the Burkes from the property in May 2015. In his motion, Jahn stated that he "desire[d] to sell the property, but c[ould] not do so with the Debtors still living there." He further asserted that the value of the residence was "close to $200, 000, " which would have made its sale considerably more valuable to the Burkes' unsecured creditors than if the property was worth only $108, 000 as claimed by the Burkes. Two weeks later, the Burkes filed a motion to compel the trustee to abandon the property. The Burkes argued that the property's value was in fact $108, 000, with a substantial existing mortgage that reduced the net equity to a point that "would provide little or no value to [the Burkes'] creditors." They asked in the alternative that their Chapter 7 case be converted to a case under Chapter 13 so that they could attempt to keep the residence.

         At a hearing on the parties' respective motions, Jahn tendered the Burkes a check for $7, 500, this being the value of their statutory homestead exemption in Tennessee. See Tenn. Code Ann. § 26-2-301(a). After the Burkes rejected the tendered payment, the bankruptcy court set a date for an evidentiary hearing on the motions. The court noted that the matter appeared to be "really just a factual issue about the value of the house and [its] condition." Jahn implicitly assented, pointing out that the Burkes "have the burden of proof to show that it's of inconsequential value" to the estate.

         An evidentiary hearing was held in July 2015. At the hearing, the Burkes and Jahn presented competing appraisals of the property. The Burkes called two different appraisers as witnesses. Joseph Ramirez, the Burkes' first witness, estimated that the residence would be worth $171, 000 after necessary repairs related to mold and roofing were made that would cost $63, 000, leaving a net value of $108, 000. The Burkes' second appraiser, E. Wells Blake Jr., also recognized mold issues and identified other necessary repairs in the home. Blake valued the home at roughly $185, 000 after making repairs estimated at $60, 000, arriving at a final appraisal of $125, 000.

         Jahn's realtor, on the other hand, testified that the Burkes' residence was worth $204, 000, which he based on his tour of the property. A home inspector also testified for Jahn. The inspector concluded that there was no problem with the roof of the residence and that the mold issue was overstated by the Burkes' appraisers. Jahn himself testified, asserting that, after repairs,...

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