In re Greene

• Decision Date: 02 October 2009
• Docket Number: No. 07-16067.,No. BK-N-05-54727-GWZ.,07-16067.,BK-N-05-54727-GWZ.
• Citation: 583 F.3d 614
• Parties: In re Scott K. GREENE, Debtor(s). Scott K. Greene, Appellant, v. Anabelle Savage, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

583 F.3d 614

In re Scott K. GREENE, Debtor(s) Scott K. Greene, Appellant, v. Anabelle Savage, Appellee.

No. 07-16067.

No. BK-N-05-54727-GWZ.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 12, 2008.

Filed October 2, 2009.

David Rankine and Michael Lehners, Reno, NV, for the appellant.

Robert C. Vohl, Reno, NV, for the appellee.

Professors James J. White and John A.E. Pottow, Ann Arbor, MI, as amici curiae.

Appeal from the United States District Court for the District of Nevada, Howard D. McKibben, District Judge, Presiding. D.C. Nos. 06-CV-00567 HDM, 3:06-CV-00679-HDM-RAM.

Before: MARSHA S. BERZON and A. WALLACE TASHIMA, Circuit Judges, and ROBERT J. TIMLIN,^* District Judge.

TIMLIN, District Judge:

This case is an appeal of the district court's order affirming the bankruptcy court's decision limiting Debtor-Appellant Scott Greene's homestead exemption in his bankruptcy petition to $125,000 pursuant to 11 U.S.C. § 522(p), based on the fact that Greene established residency on his property and filed his homestead claim within 1215 days of filing his bankruptcy petition. We have jurisdiction pursuant to 28 U.S.C. §§ 158(d)(1) and 1291.

I. BACKGROUND

The material facts of this case are not in dispute. Greene purchased a parcel of undeveloped land at 450 Alamosa Drive in Sparks, Nevada, (the "Property") in May 1994. By August 11, 2004, Greene had moved a trailer onto the Property and was living in it. On that day, Greene recorded a declaration of homestead with the Washoe County Recorder's Office for a trailer and the Property. Sixteen days later, on August 27, 2004, Greene filed a Chapter 13 bankruptcy petition. Greene concedes that until early August 2004, he never lived on or made any improvements to the Property. On October 8, 2004, Rena Wells ("Wells"), a creditor, filed an objection to Greene's claim of a homestead exemption, asserting that Greene's homestead was not his bona fide residence. Greene voluntarily dismissed the petition on February 17, 2005.

On August 11, 2005, Greene was cited by Washoe County for illegally using a recreational vehicle for dwelling purposes. At that time, Greene told authorities he was no longer using the trailer as a dwelling but was sleeping on the Property in his tent.

On October 15, 2005, Greene filed a Chapter 7 bankruptcy petition (the petition at issue in this appeal), in which he claimed the market value of the Property— $240,000, the same amount as the market value he claimed for the Property in his initial Chapter 13 petition in 2004—as exempt pursuant to the Nevada homestead statute. Wells again filed an objection to the claim of exemption, challenging the validity of the homestead exemption and also contending that, even if the homestead was valid, it should be reduced to $125,000 pursuant to 11 U.S.C. § 522(p)(1), because the homestead was acquired within 1215 days of the filing of the petition.

The Bankruptcy Court for the District of Nevada concluded that Greene's homestead was a property interest acquired within 1215 days of his bankruptcy petition filing, because he filed his declaration of a homestead during that time period. Therefore, it held, Greene's homestead exemption was limited to $125,000 under Section 522(p). See In re Greene, 346 B.R. 835 (Bankr.D.Nev.2006). Greene appealed.

Subsequently, the trustee filed a motion for an order authorizing sale of the Property free and clear of liens and encumbrances. Greene filed an opposition to this motion, arguing, inter alia, that he was entitled to the post-acquisition appreciation in the market value of the Property. The bankruptcy court rejected Greene's contention, finding that there was no increase in the value of the Property from the time Greene acquired it until the time he filed his petition, and that any increase in value after that was available to the trustee as post-petition appreciation.

Greene appealed both orders of the bankruptcy court to the district court. The district court affirmed the bankruptcy court in all respects. Greene filed a timely notice of appeal to this Court.

II. DISCUSSION

A. Standard of Review

This court reviews de novo a district court's decision on appeal from a bankruptcy court. See Suncrest Healthcare Ctr. LLC v. Omega Healthcare Investors, Inc. (In re Raintree Healthcare Corp.), 431 F.3d 685, 687 (9th Cir.2005). Thus, this court applies the same standard of review applied by the district court. See id. The bankruptcy court's conclusions of law and interpretation of the Bankruptcy Code are reviewed de novo and its factual findings for clear error. See Salazar v. McDonald (In re Salazar), 430 F.3d 992, 994 (9th Cir.2005). This court must accept the bankruptcy court's findings of fact unless, upon review, the court is left with the definite and firm conviction that a mistake has been committed by the bankruptcy judge. See Latman v. Burdette, 366 F.3d 774, 781 (9th Cir. 2004).

B. Interpretation of 11 U.S.C. § 522(p)(1)

Under 11 U.S.C. § 522, a debtor in bankruptcy can exempt certain property from the bankruptcy proceedings and protect that property from creditors. See 11 U.S.C. § 522(b). Section 522 contains a list of various interests in property that a debtor can exempt. See § 522(d). However, the Bankruptcy Code provides an opt-out provision whereby the state can either require the debtor to exempt property under the state law exemptions or grant the debtor the option of choosing between state exemptions and the § 522(d) exemptions. See § 522(b)(2).¹

In 2005, Congress amended the Bankruptcy Code by enacting Section 522(p)(1), which limits a debtor's ability to take advantage of the state homestead exemptions. Section 522(p)(1) provides as follows:

Except as provided in paragraph (2) of this subsection and sections 544 and 548, as a result of electing under subsection (b)(3)(A) to exempt property under State or local law, a debtor may not exempt any amount of interest that was acquired by the debtor during the 1215-day period preceding the date of the filing of the petition that exceeds in the aggregate $136,875² in value in—

(A) real or personal property that the debtor or a dependent of the debtor uses as a residence;

(B) a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence;

(C) a burial plot for the debtor or a dependent of the debtor; or

(D) real or personal property that the debtor or dependent of the debtor claims as a homestead.

Section 522(p) was part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), enacted on April 20, 2005.³ Although the bulk of BAPCPA became effective on October 17, 2005, Section 522(p) became effective on the date of enactment. See, e.g., In re McNabb, 326 B.R. 785, 788 n. 7 (Bankr. D.Ariz.2005). As Greene's petition was filed on October 15, 2005, Section 522(p) applies to this case.

Section 522(p) was intended to "address the well-documented and often-expressed concern by members of Congress about the so-called `mansion loophole' by which wealthy individuals could shield millions of dollars from creditors by filing bankruptcy after converting nonexempt assets into expensive and exempt homesteads in one of the handful of states that have unlimited homestead exemptions...." In re Kane, 336 B.R. at 481-82. In a report issued in 1997, the National Bankruptcy Review Commission identified the problem and found: "`In deferring to state law exemptions, the current system ... multiplies the opportunities for forum shopping and prebankruptcy asset conversion. ...'" Id. at 482 (quoting Nat'l. Bankr.Rev. Comm'n, Bankruptcy: The Next Twenty Years, National Bankruptcy Review Commission Final Report, Oct. 20, 1997, at 124).

Applying Section 522(p)(1), the bankruptcy court held—and the district court agreed—that the $125,000 cap does apply in this case, and that Greene's homestead exemption is limited to the cap amount. In so holding, the bankruptcy and district courts reasoned that the "interest" stated in Section 522(p)(1) includes the homestead, which was "acquired" by Greene when he moved onto the Property to establish his residence and filed a homestead declaration with the Washoe County Recorder's Office. Greene contends, to the contrary, that establishing a residence on real property and recording a homestead declaration does not establish a property "interest," but rather is a property classification. The phrase "amount of interest," as used in Section 522(p)(1), Greene contends, should be construed as a quantifiable measure and therefore as applicable only to an ownership interest in a property.

The amici brief of certain bankruptcy law professors takes a slightly different analytical tack: it emphasizes the use of the term "acquire" in the statute, and argues that the claiming of a homestead designation on an interest in property is different from the acquisition of the underlying property interest in the property. Amici contend that it is only the latter legal event with which Section 522(p) concerns itself.

We find these analyses helpful, and using them as well as other interpretive aids, conclude that perfection of a homestead exemption does not constitute acquisition of a property interest for purposes of Section 522(p)(1).

A recent Fifth Circuit case, Wallace v. Rogers, 513 F.3d 212 (5th Cir.2008), is a particularly useful starting place in determining the applicability of Section 522(p)(1) to a claimed homestead exemption. There, the debtor inherited property outside the 1215-day window prior to filing a bankruptcy petition, and subsequently moved onto it within the 1215-day period of time, but still before filing her bankruptcy petition. In her petition, the debtor elected to take the Texas homestead exemption which had no monetary limit. A judgment creditor objected, asserting that Section 522(p)(1) applied because the debtor's current residence had not been her homestead for the 1215-day period...