In re Hall

• Decision Date: 21 August 2008
• Docket Number: No. 06-40887.,06-40887.
• Citation: 394 B.R. 582
• Parties: In re David HALL and Linda M. Hall, Debtors.
• Court: U.S. Bankruptcy Court — District of Kansas

394 B.R. 582

In re David HALL and Linda M. Hall, Debtors.

No. 06-40887.

United States Bankruptcy Court, D. Kansas.

August 21, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Larry E. Schneider, Topeka, KS, for debtor.

Darcy D. Williamson, Topeka, KS, trustee.

MEMORANDUM OPINION AND ORDER PARTLY GRANTING, AND PARTLY DENYING, TRUSTEE'S MOTION FOR SUMMARY JUDGMENT ON TRUSTEE'S MOTION FOR TURNOVER AND OBJECTION TO EXEMPTIONS

JANICE MILLER KARLIN, Bankruptcy Judge.

This matter is before the Court on the Trustee's Motion for Summary Judgment.¹ The Trustee is seeking summary judgment on her Motion for Turnover of Real Estate and Personal Property,² in which she requested the turnover of specific personal property noted below, as well as turnover of any other property due Debtors as a result of the death of Linda Hall's father within 180 days of the filing of bankruptcy. The Trustee also seeks summary judgment on her Objection to Debtors' Homestead Exemption.³ Both parties have briefed the issues, and the Court is ready to rule. This is a core proceeding over which this Court has jurisdiction to enter a final order,⁴ and the parties stipulate to jurisdiction and proper venue.

I. FINDINGS OF FACT

The Trustee's summary judgment motion properly sets forth facts as to which she contends no material issue of fact exists, and Debtors have agreed to that statement of facts. Accordingly, based largely on the facts set out in the Trustee's motion, the Court makes the following findings of fact.

Debtors, David Hall and Linda M. Hall ("Debtors"), filed a Petition under Chapter 7 of the Bankruptcy Code on September 6, 2006. On the date of filing, Debtors jointly owned a 1.33 acre tract of land within the city limits of Centralia, Kansas. The land is commonly known as 1104 4th Street and 1104½ 4th Street. Debtors claim that most of the above described land is exempt, except for the West 81 feet.⁵ The subject real estate is valued at $40,000, and there is a mortgage balance of $7,500.

Situated on these 1.33 acres is a house and a mobile home. The house, which has an address of 1104 4th Street, was occupied by Linda Hall and two children on the date of filing. David Hall did not occupy that house on the date of filing, nor was he permitted to do so due to a substantiated finding of child abuse that prohibited him from then residing with his family. Instead, on the date of filing, David Hall lived in a mobile home also located on the 1.33 acres. This property was listed as 1104½ 4th Street in the telephone book.

On the date of filing, Debtors owned certain items of non-exempt real and personal property, many of which items were not initially listed on Debtors' bankruptcy schedules. Some of the property not listed included a riding lawn mower and key, window air conditioning units in campers and buildings, firearms, two campers (instead of the one listed), one above-ground pool with pool cover, pump and various equipment and accessories, and real estate lots.⁶

On September 24, 2006, just 18 days after this bankruptcy was filed, and thus clearly within 180 days of the bankruptcy filing, Linda Hall's father, Robert J. Frederick, Sr., passed away. As a result of her father's death, Linda Hall became entitled to receive the following property: certificates of deposit totaling $38,947.86; a one-fifth interest in a house located in Topeka, Kansas; U.S. bonds in the amount of $3,731.33; proceeds of two life insurance policies in the amounts of $6,651.19 and $4,005.75, respectively; an individual retirement account (IRA) in the amount of $2,858.54; Linda Hall's $4,386.45 pro rata share of certain personal property of the decedent, which was sold at auction; and Linda Hall's $370.74 pro rata share of the decedent's checking account. All of the property received by Linda Hall as a result of her father's death, with the exception of her share of the proceeds from the sale of her father's tangible personal property and his checking account, was received by her as a payable-on-death (POD) beneficiary or by means of some similar form of beneficiary designation. In other words, she did not receive the rest of the funds as a result of being the beneficiary of a will, or by intestate succession.

On October 17, 2006, the Trustee filed the previously referenced Motion for Turnover of Real Estate and Personal Property and Objection to Debtors' Homestead Exemption. Almost seven months later, on May 9, 2007, Debtors filed Amended Schedules A through C, as well as an Amended Statement of Financial Affairs.⁷ The Trustee timely objected to the Amended Schedule C and Homestead Exemption.⁸ Debtors have never again amended Schedule C to claim any inherited property as exempt.

II. STANDARD FOR SUMMARY JUDGMENT

Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law."⁹ In applying this standard, the Court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party.¹⁰ An issue is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way."¹¹ A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim."¹²

The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law.¹³ In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim.¹⁴

If the movant carries this initial burden, the nonmovant who would bear the burden of persuasion at trial may not simply rest upon its pleadings; the burden shifts to the nonmovant to go beyond the pleadings and "set forth specific facts" that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant.¹⁵ To accomplish this, sufficient evidence pertinent to the material issue "must be identified by reference to an affidavit, a deposition transcript, or a specific exhibit incorporated therein."¹⁶

Finally, the court notes that summary judgment is not a "disfavored procedural shortcut;" rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action."¹⁷

III. ANALYSIS

A. Trustee's Objection to Debtors' Homestead Exemption

The Trustee objects to Debtors' homestead exemption on two bases: 1) because Debtors reside in two different structures located on the same 1.33 acre tract, and 2) because the tract of land exceeds one acre within the city limits. Only one acre within a city is exempt under Kansas law.¹⁸ The Trustee claims that David Hall's homestead is limited to the mobile home he occupied on the land on the date of filing, and that he cannot exempt his one-half interest in the house that his wife and children occupy. Similarly, the Trustee claims that Linda Hall's homestead is limited to the house that she and the children occupy, and that she cannot exempt her one-half interest in the mobile home that her husband occupied on the date of filing. The Trustee thus seeks turnover to the estate of a one-half interest in the mobile home and a one-half interest in the house.

Under Kansas law, the party claiming homestead protection has the burden of proving the establishment of the homestead.¹⁹ In bankruptcy, however, Federal Rule of Bankruptcy Procedure 4003 governs exemptions, and subsection (c) of Rule 4003 provides: "In any hearing under this rule, the objecting party has the burden of proving that the exemptions are not properly claimed." This means that the claimed exemption is presumed to be valid, and the Trustee then has the burden of producing evidence to rebut the presumption. If she does so, the burden thereafter shifts back to the debtor to come forward with evidence to demonstrate that the claimed exemption is proper.²⁰

To determine the validity of Debtors' claimed homestead exemption, the Court must look to applicable Kansas law.²¹ The Kansas Constitution provides for a homestead exemption of one acre within the city limits.²² The Kansas legislature's statutory version is a bit more expansive; K.S.A. 60-2301 provides, in pertinent part:

A homestead to the extent of 160 acres of farming land, or of one acre within the limits of an incorporated town or city, or a manufactured home or mobile home, occupied as a residence by the owner or by the family of the owner, or by both the owner and family thereof, together with all the improvements on the same, shall be exempted from forced sale under any process of law, and shall not be alienated without the joint consent of husband and wife, when that relation exists....

"In determining whether a debtor is entitled to claim an exemption, `the exemption laws are to be construed liberally in favor of exemption.'"²³

The Court must decide whether the fact that one of the two co-debtors, David Hall, occupied a different structure (a mobile home) on the same 1.33 acre tract where the house (in which his co-debtor wife and children reside) is situated impairs the homestead exemption on the house and/or the mobile home for one or both Debtors. In essence, the Trustee argues that by moving into the mobile home located on the same land that was previously considered part of the family homestead, David Hall effectively abandoned his homestead interest in the house, and created a separate homestead in the mobile home to which Linda Hall owned a one-half interest. In addition, the Trustee claims that Linda Hall may claim the house as her separate homestead, but that David Hall's one-half interest in "her" house is not exempt. Debtors...