In re Hodgson

• Decision Date: 19 May 1994
• Docket Number: No. 92-4169-RDR. Bankruptcy No. 89-42002-7. Adv. No. 90-7095.,92-4169-RDR. Bankruptcy No. 89-42002-7. Adv. No. 90-7095.
• Parties: In re Donald F. HODGSON and Betty D. Hodgson, Debtors. FARM CREDIT BANK OF WICHITA, Plaintiff, v. Donald Frank HODGSON and Betty Dianne Hodgson, Defendants.
• Court: U.S. District Court — District of Kansas

167 B.R. 945 (1994)

In re Donald F. HODGSON and Betty D. Hodgson, Debtors FARM CREDIT BANK OF WICHITA, Plaintiff, v. Donald Frank HODGSON and Betty Dianne Hodgson, Defendants.

No. 92-4169-RDR. Bankruptcy No. 89-42002-7. Adv. No. 90-7095.

United States District Court, D. Kansas.

May 19, 1994.

COPYRIGHT MATERIAL OMITTED

Jan M. Hamilton, Hamilton, Peterson, Tipton & Keeshan, Topeka, KS, for debtors/defendants.

Max M. Hinkle, Guilfoyle, Hinkle, Guilfoyle & James, Abilene, KS, for plaintiff Farm Credit Bank of Wichita.

Darcy D. Williamson, Topeka, KS, Trustee.

MEMORANDUM AND ORDER

ROGERS, District Judge.

This is an appeal from an order of the bankruptcy court. The bankruptcy court's order addressed two matters raised by the parties and both issues have been appealed. Appellants Farm Credit Bank of Wichita (FCB) and the Trustee contend that the bankruptcy court erred in concluding that the debtors were domiciled in Kansas at the time they filed their Chapter 7 bankruptcy petition. FCB also asserts that the bankruptcy court erred in an adversary proceeding arising from the bankruptcy when it found that the debtors had not concealed certain property from it with the intent to hinder or delay FCB's collection efforts. Having carefully reviewed the record and briefs of the parties, the court is now prepared to rule.

The factual findings of the bankruptcy court cannot be disturbed unless they are clearly erroneous. In re Jones, 9 F.3d 878, 880 (10th Cir.1993). A factual finding is clearly erroneous "`when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.'" Anderson v. City of Bessemer, 470 U.S. 564, 573, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)). The bankruptcy court's conclusions of law are reviewed de novo. Jones, 9 F.3d at 880. On mixed questions of whether the facts satisfy the proper legal standard, we conduct a de novo review if the question primarily involves the consideration of legal principles and apply the clearly erroneous standard if the question is primarily a factual inquiry. In re Wes Dor, Inc., 996 F.2d 237, 241 (10th Cir.1993).

DOMICILE OF THE DEBTORS

The bankruptcy court found that the Hodgsons were domiciled in Kansas at the time of the filing of the bankruptcy petition and, therefore, the exemptions provided for in Kansas law applied. FCB and the Trustee contend that the bankruptcy court erred in that determination.

With one exception that the court shall discuss later, the parties have no dispute with the facts found by the bankruptcy court concerning the domicile of the Hodgsons. The court shall set those forth as a starting point for consideration of the arguments of the parties:

The Hodgsons resided in the Wetmore, Kansas area from 1958 to 1986. Clearly, Kansas was their domicile during this period. Dr. Hodgson was a practicing Doctor of Veterinary Medicine until 1982, when he was forced to retire because he had developed an allergy to all animals and suffered a total loss of hearing in one ear and 60% loss in the other. From that point on, the Hodgsons\' income was derived from a disability insurance policy which terminates when Dr. Hodgson reaches age 65, social security benefits and interest paid on deposits. At the time of the bankruptcy filing, Dr. Hodgson was 59 years of age.

In March of 1986, the Hodgsons sold their farm near Wetmore on contract, later assigning the contract to the First National Bank of Junction City on September 23, 1987 for $82,500.00. They purchased a lot in Junction City, Kansas, had a home built on it, and moved in during May of 1986.

Mrs. Hodgson was raised in Junction City, her mother still lives there, and Dr. Hodgson was raised in nearby Manhattan, Kansas. They lived in the Junction City home for approximately one and a half years but sold it in October of 1987 because the taxes and maintenance costs were higher than they expected. They then stored their furniture and other personalty with a Junction City moving company.

From October of 1987 to October of 1988, the Hodgsons neither rented nor owned a Kansas residence. Instead, they used the Emporia address of their son, Thomas, to receive mail and for tax and voting purposes. They also stored a motor vehicle there for some period of time. In October of 1988, they rented an apartment in Emporia within 100 yards of Thomas\' home, and they received their telephone calls at his home. That same month, they moved about 500 pounds of their stored personalty to their Emporia apartment and had the remaining 4,500 pounds transported to a home they were buying in Mesa, Arizona. Sometime later, Thomas moved to Lawrence, Kansas, and the debtors moved from Emporia and rented another apartment in Junction City, which they were still renting when they filed for bankruptcy. As indicated earlier, Mrs. Hodgson\'s mother still lives in Junction City.

In 1983, the Hodgsons\' son, James, had been attending a vocational school in the Phoenix, Arizona area. After visiting him, the Hodgsons purchased a park model dwelling and lot in an RV park in Apache Junction, Arizona and spent the winter there. Since then, they have spent most of every winter in Arizona. During the winters and springs, they have returned to Kansas from time to time and made excursions to other areas of the United States and Canada. In early 1987, to facilitate their travels, they purchased a motor home for $85,000.00. They considered selling the Apache Junction trailer and living solely in this motor home, but after experiencing a full winter in it rethought that plan. They went ahead and sold the Apache Junction property but purchased a lot in Mesa, Arizona in April of 1988, had a house built there, and closed on a loan for the house that September. This is the house where they sent the bulk of their personalty in October. They sold the motor home in mid-1989.

The debtors\' vehicles are titled in Kansas, and they maintain Kansas driver\'s licenses, vote in Kansas, have a Kansas insurance agent, and file their income tax returns using a Kansas address. Their bank accounts are currently kept in Arizona banks, the majority of their medical services are obtained in Arizona, and much of their mail is received in Arizona, though they do receive some mail in Kansas. A majority of their personalty is in Arizona, and the only house they own is located there. Nevertheless, they state that Kansas is their home, the place to which they always intend to return.

Based upon these facts, the bankruptcy court reached the following conclusion:

Clearly, the debtors\' domicile was Wetmore, Kansas from 1958 until they sold their farm in March of 1986. Then Junction City became their domicile until they sold their home there in October of 1987. Beginning in 1983, the debtors spent most of every winter in Arizona. Nevertheless, their domicile remained Kansas at least until the sale of their Junction City home. At that time, they embarked on an extremely nomadic life, but continued to spend winters in Arizona. They continued to vote and pay income taxes in Kansas and maintain Kansas vehicle registrations and driver\'s licenses. No matter how often they have left Kansas, they have always returned here and say it is their home. They own a house, do most of their banking, and spend winters in Arizona, but no evidence conclusively establishes it to be their domicile. They began spending winters there long before anyone might have said they had given up their Kansas domicile, and their increased traveling does not mean their domicile must now be where they spend the greatest part of the year. At most, all the evidence establishes is that there may be some doubt whether Kansas or Arizona is their domicile. In this situation, their testimony of their intent, which the Court found to be credible, is enough to tip the balance in favor of a Kansas domicile. See In re Estate of Phillips, 4 Kan.App.2d 256, 262-65, 604 P.2d 747 (1980). The FCB and the trustee have failed to establish that the debtors ever intended to abandon Kansas as their domicile.

FCB complains that there is no factual support for the bankruptcy court's finding that "the debtors moved from Emporia and rented another apartment in Junction City which they were still renting when they filed their bankruptcy." The FCB points out that the record shows that the apartment in Junction City was not rented until after the Hodgsons had filed for bankruptcy. We agree. The record shows that the debtors continued to rent the apartment in Emporia until June 1990, over five months after they had filed for bankruptcy. They then rented another apartment in Junction City. The slight misstatement of the facts by the bankruptcy court has no impact on the ultimate decision since under either scenario the debtors had a residence in Kansas at the time they filed for bankruptcy.

The appellants also point out that the bankruptcy court either overlooked or failed to consider numerous other facts that show that the Hodgsons were domiciled in Arizona. In addition, they contend that the bankruptcy court erred in allowing the Hodgsons' testimony that they always intended to return to Kansas to tip the scales in favor of Kansas as their domicile.

A debtor may exempt from his bankruptcy estate property that is exempt under the state law which is applicable on the date of the debtor's petition "at the place in which the debtor's domicile has been located for the 180 days immediately preceding the filing of the petition, or for the longer portion of such 180 day period than in any other place." 11 U.S.C. § 522(b)(2)(A). The burden of proving that a debtor may not claim state law exemptions based upon his domicile at the time of the filing of the petition rests with his creditors. Fed.R.Bankr.P. 4003(c).

The first issue...