In re Dill
| Decision Date | 01 October 1980 |
| Docket Number | Bankruptcy No. 4-79-03260WL,4-79-03235WL and 4-79-03057WL. |
| Citation | 6 BR 396 |
| Parties | In re Arthur Gary DILL, Claudia Lee Dill, James Edward Emmerich, Ann Louise Emmerich, Gerald A. Aguilar, Sr., Lorretta Mae Aguilar, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of California |
Robert L. Ward, Oakland, Cal., for the Dills.
Michael D. Cooper, Hayward, Cal., for the Emmerichs.
Paul R. Bernhardt, Hayward, Cal., for the Aguilars.
Bill H. Lampi, Hayward, Cal., in pro per.
MEMORANDUM RE TRUSTEE'S OBJECTIONS TO CLAIMS OF EXEMPTIONS
The trustee's objections to the debtors' claims of exemptions were heard together on February 14, 1980. By agreement, the three objections were heard together, and it was agreed further that the arguments of counsel, both oral and written, would be considered by the court with respect to the three matters.
In each instance, married debtors filed a joint petition in which one spouse under 11 U.S.C. § 522(b)(2) claimed a head of family California homestead exemption in real property used by both spouses as the family residence, title of the property being in joint tenancy and claimed by the parties to be the separate property of each person as to his or her interest, and the other spouse claimed the federal exemptions including the $7,500 residential exemption § 522(d)(1).
The trustee's position is that under these circumstances the California Homestead Exemption may be allowed in full to the debtor claiming it but is applicable only to that debtor's equity in the property, namely, one-half of the total equity of the spouses in the property. The other spouse would then be entitled to claim the federal residential exemption of $7,500 (plus $400 if not otherwise used § 522(d)(5)), as against his or her one-half interest in the total equity. This result is said to result from § 522(m): "This section shall apply separately with respect to each debtor in a joint case." He concludes that any conflict between the California law and the Bankruptcy Code must be resolved in favor of the Code, U.S. Const. Art. I, § 8, Clause 4.
Debtors maintain that by California law, the Homestead Exemption protects the interests of both parties in the amount of $40,000 (unless reduced by the doctrine of England v. Sanderson, 236 F.2d 641 (9th Cir. 1956) and that the other spouse who has not claimed California exemptions can have the use of the $7,500 residential exemption under Federal law for application to whatever purpose desired including the exemption of equity in the home in excess of the California homestead protection.
Counsel for debtors argue that under well-established California law, either spouse may claim a homestead in any property in which either or both of them has an interest, whether separate or community, that the exemption inures to the benefit of the spouse not claiming it as well as to the claiming spouse and that the non-claiming spouse cannot unilaterally impair the protection of the family home, citing Walton v. Walton, 59 Cal.App.2d 26, 138 P.2d 54; Johnson v. Brauner, 131 Cal.App.2d 713, 281 P.2d 50; and Strangman v. Duke, 140 Cal. App.2d 185, 295 P.2d 12. To sustain the trustee's position, they say, would effectuate a severance of the interests of the parties in the homestead protection contrary to this law. They also point out that the California courts have enunciated a strong policy in support of liberally construing the protection of the homestead. Schoenfeld v. Norberg, 11 Cal.App.3d 755, 90 Cal.Rptr. 47.
Their argument is reinforced by the language of the federal exemption, 11 U.S.C. 522(d)(5), permitting debtor to exempt "the debtor's aggregate interest, not to exceed in value $400 plus any unused amount of the exemption provided under ¶ (1) the $7,500 residential exemption of this subsection, in any property," and the plain statement of subsection (m) quoted above that the exemptions shall apply separately to each debtor.
The trustee's position would result in the spouse claiming the California Homestead effecting a protection of up to $40,000 in that spouse's interest in the property and the other spouse claiming the federal exemption having only up to $7,900 exemption in his equity. Debtors say they are entitled to exempt their equity in their home up to $47,900, adding the California and federal exemptions.
In the opinion of this court, the statutory language under consideration should be interpreted to carry out the Congressional purpose of affording to debtors the benefits of the exemption statutes of their state of residence or of the Bankruptcy Code, whichever they deem to their advantage. In interpreting the California exemption, California law should be applied as the effect of § 522(b) is to incorporate such law into the Bankruptcy Code thereby rendering it federal law on this subject. As relevant here, California affords to either spouse the right to protect property both use as a residence without reference to the wishes of the other spouse who is barred from subjecting his equity in the homestead to claims of his or her creditors without the consent of the selecting spouse. Moreover, only one homestead may be claimed by the spouses. Strangman v. Duke, 140 Cal. App.2d 185, 295 P.2d 12. The California courts consistently have stated the policy favoring the protection of the family home from creditors by means of the homestead exemption in the strongest terms. For example, in the case of Phelps v. Loop, 64 Cal.App.2d 332, 148 P.2d 674, the court stated:
"The tranquility of society and the prevalence of a healthy social order are factors that must have been paramount in the legislative mind in ordaining the right of a family to hold and enjoy, without let or hinderance, the realty they have designated as their terrestrial abode."
The decisions of Rich v. Ervin, 86 Cal. App.2d 386, 194 P.2d 809, and Schmidt v. Denning, 117 Cal.App. 36, 3 P.2d 322, contain statements to the same effect. See Lee v. Brown, 18 Cal.3d 110, 132 Cal.Rptr. 649, 553 P.2d 1121:
Thus, in each of the cases at bar, one spouse having claimed a California homestead, the jointly owned property is protected up to an equity of $40,000 for the benefit of both spouses and the non-claiming spouse cannot by filing a petition for relief claiming federal exemptions or otherwise alter his or her situation as being included in the protection of the California homestead. I conclude that the $40,000 exemption (subject to possible England v. Sanderson, as modified by Swenor v. Robertson, 452 F.Supp. 673 (N.D.Cal.1978) considerations) protects the equity interests of both spouses and the trustee cannot jeopardize the homestead by asserting a claim resulting from the unilateral act of one of the spouses. The question remains as to the status of the Federal claiming spouse's $7,500 federal residential exemption. To the extent that this spouse is receiving the benefit of a greater protection by virtue of the California homestead which is expressly designed to protect the entire interests of both spouses for the benefit of both, it appears manifestly unfair to permit this claimant the benefit of an additional $7,500 residential exemption. The problem, however, is the above-quoted language of § 522(d)(5) allowing the debtor to apply any unused amount of the residential exemption to any property. In a detailed analysis of the exemption system contained in the Bankruptcy Code, my colleague, the Hon. ROBERT L. HUGHES, has traced the legislative history of this portion of the statute as a compromise between the exponents of a uniform federal exemption and those favoring retention of the system of allowing only state exemptions, referring to the statement in the report of the House of Representatives that this clause was included "in order not to discriminate against the non-homeowner." H.R.Rep. 595, 95th Congress, First Session, page 361." Code Exemptions: Far-Reaching Achievement" 28 DePaul Law Review 1025.
In construing a statute innumerable cases instruct that the language of the statute is to be construed if reasonably possible to carry out the intent of the lawmakers and its meaning is to be arrived at not only by consideration of the words themselves but by considering the context, the purposes of the law, and the circumstances under which the words are employed. See for example, Puerto Rico v. Shell Co., 302 U.S. 253 at p. 258, 58 S.Ct. 167, 82 L.Ed. 235 at p. 169 (1937). In Vermilya-Brown Co. v. Connell, 335 U.S. 377, 69 S.Ct. 140...
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