In re Cofer

• Decision Date: 08 January 2021
• Docket Number: Bankruptcy Case No. 19-40361-JMM
• Citation: 625 B.R. 194
• Parties: IN RE: Michelle Louise COFER Debtor.
• Court: U.S. Bankruptcy Court — District of Idaho

625 B.R. 194

IN RE: Michelle Louise COFER Debtor.

Bankruptcy Case No. 19-40361-JMM

United States Bankruptcy Court, D. Idaho.

Signed January 8, 2021

Daniel C. Green, RACINE OLSON, Pocatello, Idaho, Attorney for chapter 7 trustee.

Paul Ross, Paul, Idaho, Attorney for Debtor.

MEMORANDUM OF DECISION

JOSEPH M. MEIER, CHIEF U. S. BANKRUPTCY JUDGE

Introduction

Before the Court is "Trustee's Motion for an Order Confirming the Amount of Debtor's Homestead Exemption Following Conversion to Chapter 7," Dkt. No. 97 (the "Motion"), filed by Gary Rainsdon ("Trustee").¹ The Motion seeks a determination that Debtor's homestead exemption is limited to the value determined when the case was under chapter 13, $32,020.56, and that appreciation inures to the chapter 7 estate. Id . Michelle Cofer ("Debtor") objects to the Motion, arguing property which vested in the Debtor upon confirmation of its chapter 13 plan is not property for the estate upon conversion, and, alternatively, that appreciation inures to the Debtor. Dkt. No. 98 (the "Objection"). Trustee submitted a brief in reply to the Objection. Dkt. No. 102. A hearing was held on December 8, 2020, and the parties made oral arguments. The Court took the matter under advisement. The Court has now considered the parties arguments and the applicable law and issues the following decision which resolves the matter. Fed. R. Bankr. P. 7052 ; 9014.

Facts

Debtor filed a chapter 13 petition on April 17, 2019. Dkt. No. 1. Her schedules reflect that she owns real property located at 28 West Clark Street in Paul, Idaho (the "Home"), valued on the date of the petition at $100,250. Id. at 10. Debtor claimed an exemption of $100,000 in the Home. Id. at 16. The Home was encumbered by a $61,073.75 mortgage held by Ditech and an $868.79 judgment lien owed to Outsource Materials. Id. at 20–21. On June 6, 2020, the Court granted Debtor's motion to avoid the judgment lien under § 522(f) held by Outsource Materials.² Dkt. No. 27. On September 24, 2019, the Court issued an order limiting the amount of the Debtor's exemption in the Home to $32,020.56. Dkt. No. 59.³

On September 25, 2019, the Court entered an order confirming Debtor's chapter 13 plan. Dkt. Nos. 3, 60 (the "Plan"). Debtor's Plan provided that all property of the estate vested in the debtor upon confirmation. Dkt. No. 3 at 4. On March 6, 2020, the chapter 13 trustee moved to dismiss the chapter 13 case because Debtor was delinquent in making plan payments. Dkt. No. 66. After initially objecting to the motion to dismiss, Debtor filed a motion to convert to chapter 7. Dkt. No. 68. The Court granted Debtor's motion to convert on March 27, 2020. Dkt. No. 70.

Trustee now seeks an order "limiting the amount of Debtor's exemption in the Property in the Chapter 7 case to $32,020.56, and that any appreciation in the value of the Property is property of the Chapter 7 bankruptcy estate." Dkt. No. 97. Trustee seeks this relief so he may sell the Home for the benefit of the estate.

Debtor objects, arguing the vesting provision in the plan and under § 1327(b) prevents the Home from becoming property of the chapter 7 estate under § 348(f)(1)(A). Dkt. No. 98 at 3. Alternatively, Debtor argues even if the Home revested to the estate under § 348(f)(1)(A), any appreciation in the value of the home belongs to the Debtor and the amount of the homestead exemption is determined based on the date of conversion. Id. at 3–5.

Analysis and Disposition

A. Property of the Estate Upon Conversion

Property of the estate is broadly defined by § 541 and includes "all legal or equitable interests of the debtor in property as of the commencement of the case," and "[p]roceeds, product, offspring, rents, or profits of or from property of the estate, except such as are earnings from services performed by an individual debtor after the commencement of the case." § 541(a)(1), (6). In a chapter 13 case, property of the estate also includes earnings and property defined in § 541 acquired postpetition. § 1306(a). Upon conversion from a case under chapter 13, "property of the estate in the converted case [ ] consist[s] of property of the estate, as of the date of filing of the petition, that remains in the possession of or is under the control of the debtor on the date of conversion." § 348(f)(1)(A). The phrase "date of the petition" means the date of the filing of the original petition because "[c]onversion of a case from a case under one chapter of this title to a case under another chapter of this title ... does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief." § 348(a).

Debtor contends the vesting provision in the Plan, which is consistent with § 1327(b)–(c), vested absolute ownership of the Home in Debtor upon confirmation of the Plan, and the Home ceased to be property of the estate. Dkt. No. 98 at 2–3. Debtor claims this precludes the Home from being property of the estate in the converted case. Id. Debtor's position, which, in effect, implies an inherit conflict exists between § 348(f)(1) and § 1327(b), misconstrues the plain language of § 348(f)(1). This Court recently summarized the standards for interpreting provisions of the Code:

When interpreting a statute, the court's "task is to construe what Congress has enacted." Duncan v. Walker , 533 U.S. 167, 172, 121 S. Ct. 2120, 2124, 150 L.Ed. 2d 251 (2001). Courts will "look first to the plain language of the statute, construing the provisions of the entire law, including its object and policy, to ascertain the intent of Congress." Nw. Forest Res. Council v. Glickman , 82 F.3d 825, 830 (9th Cir. 1996) (internal quotation marks and citation omitted). "A primary canon of statutory interpretation is that the plain language of a statute should be enforced according to its terms, in light of its context." ASARCO, LLC v. Celanese Chem. Co. , 792 F.3d 1203, 1210 (9th Cir. 2015) (citing Robinson v. Shell Oil Co. , 519 U.S. 337, 340, 117 S. Ct. 843, 846, 136 L.Ed. 2d 808 (1997) ; Wilshire Westwood Assocs. v. Atl. Richfield Corp. , 881 F.2d 801, 803 (9th Cir. 1989) ). "If the terms are ambiguous, [the Court] may look to other sources to determine congressional intent, such as the canons of construction or the statute's legislative history." United States v. Nader , 542 F.3d 713, 717 (9th Cir. 2008) (citing Jonah R. v. Carmona , 446 F.3d 1000, 1005 (9th Cir. 2006) ). However, courts will resort to legislative history, even where the plain language is unambiguous, "where the legislative history clearly indicates that Congress meant something other than what it said."

Perlman v. Catapult Entm't, Inc. (In re Catapult Entm't, Inc. ), 165 F.3d 747, 753 (9th Cir. 1999).

In re Evans , 615 B.R. 290, 294 (Bankr. D. Idaho 2020). Further, "[u]nder accepted canons of statutory interpretation, we must interpret statutes as a whole, giving effect to each word and making every effort not to interpret a provision in a manner that renders other provisions of the same statute inconsistent, meaningless or superfluous." Boise Cascade Corp. v. U.S. E.P.A. , 942 F.2d 1427, 1432 (9th Cir. 1991).

For Debtor's argument to hold water, § 348 would have to read "property of the estate in the converted case shall consist of property of the estate, as of the date of conversion⁴ , that remains in the possession of or is under the control of the debtor on the date of conversion." However, § 348(f)(1)(A) states that "property of the estate in the converted case shall consist of property of the estate, as of the date of filing of the petition , that remains in the possession of or is under the control of the debtor on the date of conversion" Id . (emphasis added). A plain language reading of § 348(f)(1)(A) results in the Home, which was owned by the Debtor on the date she filed her chapter 13 petition, and remained in the Debtor's possession on the date of conversion, being property of the chapter 7 estate upon conversion.

Further, interpreting § 1327(b)–(c) as preventing the operation of § 348(f)(1)(A) on conversion would create an inconsistency in the code. Such an inconsistency can be prevented because these two sections can be read in harmony with one another. That harmony is that a debtor is vested with property of the chapter 13 estate upon plan confirmation, but upon conversion, any such property that was property of the estate as of the date of the petition that a debtor still possesses or controls (i.e. , has not already exercised rights to sell the property) is recaptured into the chapter 7 estate.

This reading is consistent with the case law on point. The Debtor cited several cases in support of her argument that the Home is not property of the estate. Only one, however, Sender v. Golden (In re Golden) , 528 B.R. 803 (Bankr. D. Colo. 2015), discussed the suggested conflict between § 348(f)(1)(A) and § 1327(b). Golden cuts deeply against Debtor's argument:

Property of the estate vests in the debtor upon confirmation of a Chapter 13 plan. 11 U.S.C. § 1327(b). Pursuant to the revesting provision of Section 1327(b), upon confirmation, the debtor enjoys full ownership and control over such revested property. Section 1327(b), however, must be reconciled with Section 348, which mandates the effect of conversion. Section 348(f)(1)(A) provides that when a Chapter 13 case is converted to Chapter 7, property of the estate in the Chapter 7 case includes "property of the estate, as of the date of the filing of the petition, that remains in the possession or is under the control of the debtor on the date of conversion " (emphasis added).

Based on the Black's Law definition of "revesting," the Ninth Circuit concluded that the automatic stay did not apply to property that revested in the debtor upon confirmation of the Chapter 13 plan. Cal. Franchise Tax Bd. v. Kendall (In re Jones), 657 F.3d 921, 928–29 (9th Cir. 2011). See alsoIn re Van Stelle, 354 B.R. 157, 168 (Bankr. W.D. Mich. 2006) (finding that the term

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