In re Kim

• Decision Date: 19 May 2009
• Docket Number: Adversary No. 08-03440.,Bankruptcy No. 07-36293-HDH-11.
• Citation: 405 B.R. 179
• Parties: In re Odes Ho KIM, Debtor. Odes Ho Kim, Plaintiff, and Dome Entertainment Center, Inc., Intervenor-Plaintiff, v. Chong Ann Kim, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Texas

405 B.R. 179

In re Odes Ho KIM, Debtor.

Odes Ho Kim, Plaintiff, and Dome Entertainment Center, Inc., Intervenor-Plaintiff, v. Chong Ann Kim, Defendant.

Bankruptcy No. 07-36293-HDH-11.

Adversary No. 08-03440.

United States Bankruptcy Court, N.D. Texas, Dallas Division.

May 19, 2009.

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Christina Walton Stephenson, Gerrit M. Pronske, Pronske & Patel, P.C., Dallas, TX, for Plaintiff.

Howard Marc Spector, Howard Marc Spector, P.C., Nathan Matthew Johnson, Spector & Johnson, PLLC, Dallas, TX, for Intervenor-Plaintiff.

Monica Susan Blacker, Andrews Kurth LLP, Dallas, TX, for Defendant.

MEMORANDUM OPINION ON MOTIONS FOR SUMMARY JUDGMENT

HARLIN DeWAYNE HALE, Bankruptcy Judge.

The question presented in this opinion is whether the changes brought about by Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 affect a Debtor's spouse's homestead exemption claim. The Court held a hearing on the Motion For Summary Judgment filed by Defendant Chong Ann Kim (the "Kim Summary Judgment Motion") and the Cross-Motion For Summary Judgment filed by Intervenor-Plaintiff Dome Entertainment Center, Inc. (the "Dome Summary Judgment Motion"), and took them under advisement for further consideration and invited supplemental briefing by the parties. After consideration, the Court finds that the Kim Summary Judgment Motion should be denied, and the Dome Summary Judgment Motion Should be granted in part.

I. JURISDICTION

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 151, and the standing order of reference in this district. The matter is core, pursuant to 28 U.S.C. § 157(b)(2)(A), (B) & (O).

II. BACKGROUND

This bankruptcy case was commenced upon the filing of an involuntary petition for relief by Dome Entertainment Center, Inc. ("Dome") against Odes Ho Kim ("Odes Kim" or the "Debtor") on December 21, 2007. Dome is a judgment creditor of the Debtor, with over a $5 million dollar claim in the Debtor's bankruptcy case. Following a trial on the involuntary petition, the Court entered an order for relief under Chapter 7 of the Bankruptcy Code on April 22, 2008. The Debtor subsequently converted the case to a Chapter 11, and now operates as debtor-in-possession.

The Debtor claimed a homestead exemption under Texas law, pursuant to section 522(b)(3)(A) of the Bankruptcy Code, for his residence at 2013 Cottonwood Valley Circle, Irving, Texas 75038 (the "Property"). The Defendant, Anne Kim, is the Debtor's spouse, and also resides at the Property. The Debtor listed the value of the Property on his schedules at $1,127,880.00. Dome objected to the Debtor's claim that the Property was fully exempt, and asserted that the exemption should be limited to an interest not to exceed $136,875.00, pursuant to section 522(p) of the Bankruptcy Code, which limits a debtor's homestead exemption if the interest in the property was acquired within the 1215-day period preceding the date of the filing of the petition.

The Debtor challenged the applicability of section 522(p) to the involuntary petition filed in the bankruptcy case and the constitutionality of using an involuntary petition to circumvent the homestead protections provided in the Texas Constitution, and stripping the Debtor's spouse of her homestead protections without initiating an adversary proceeding.

The Court sustained Dome's objection to the Debtor's claim of any exemption in the property above the $136,875.00 threshold, but specifically did not address Anne Kim's claims as part of its order, leaving that determination to this proceeding. The Debtor instituted this adversary proceeding on October 20, 2008 by filing Plaintiff's Original Complaint for Declaratory Judgment to determine the extent of the interest of the Debtor's bankruptcy estate in and to the Property pursuant to 11 U.S.C. section 541, and "to determine what rights, claims, charges, encumbrances and the like that the Defendant has to the Property by virtue of her claim of homestead to the Property under Texas law, including the Texas Constitution and the Texas Property Code."

Dome intervened into this adversary proceeding by agreement of the parties, and both Dome and Defendant have filed summary judgment motions to determine: (1) whether Ann Kim retains an exempt homestead interest in the Property; (2) if she does retain an exempt homestead interest, whether that interest precludes a trustee or debtor-in-possession from forcing a sale of the Property; and (3) if Mrs. Kim retains an exempt homestead interest but that interest does not preclude sale of the Property, whether Mrs. Kim is entitled to remuneration from the bankruptcy estate, and, if so, in what amount.

In response to the Dome Summary Judgment Motion, Mr. and Mrs. Kim assert that a portion of the money used to purchase the Property, $548,128.96, was a distribution of Ann Kim's separate property from the Kim Family Partnership, Ltd. ("KFP"). Ann Kim owns fifty percent of the KFP as her separate property pursuant to a Marital Property Agreement entered into by Mr. and Mrs. Kim in 1995. Thus, Ann Kim now asserts that 25.65% of the Property is owned by her separately, or constitutes her sole managed community property, and is thus not property of the estate. By agreement of the parties, Ann Kim amended her answer to the complaint and Dome filed an amended complaint in intervention.

These responses raise the additional issues of: (1) whether Mrs. Kim owns a portion of the Property as her separate property, or as sole management community property; (2) if so, whether her separate ownership interest in the property was transferred to the estate; and (3) whether Mrs. Kim is entitled to compensation for this separate property interest, should the trustee be able to force a sale of the property. Because these new issues arose after the time of the filing of the initial motions, Dome requested, and the Court allowed some short additional briefing by the parties after the hearing on the summary judgment motions.

III. Summary Judgment Standard

Summary judgment is proper if the pleadings, deposition, answers to interrogatories, and admissions on file, together with the affidavits, if any, and other matters presented to the court show that there is no genuine issue of material fact, and that the moving party is entitled to a judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The movant bears the initial burden of articulating the basis for its motion and identifying evidence, which shows that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. at 322, 106 S.Ct. 2548; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Material issues are those that could affect the outcome of the action. Wyatt v. Hunt Plywood, Co. Inc., 297 F.3d 405, 409 (5th Cir.2002).

If the moving party meets this burden, Rule 56(c) requires the nonmovant to go beyond the pleadings and show by affidavits, depositions, answers to interrogatories, admissions on file, or other admissible evidence that specific facts exist over which there is a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Wallace v. Texas Tech Univ., 80 F.3d 1042, 1046-47 (5th Cir.1996). The burden is on the non-movant to make a showing sufficient to establish an issue of fact for each element as to which that party will have the burden of proof at trial. Epps v. NCNB Texas Nat'l Bank, 838 F.Supp. 296, 299 (N.D.Tex.1993), aff'd 7 F.3d 44 (5th Cir.1993) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-25, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The nonmovant's burden may not be satisfied by conclusory allegations and denials, speculation, improbable inferences, unsubstantiated assertions, metaphysical doubts as to the facts, or a mere scintilla of evidence; and legalistic arguments are not adequate substitutes for specific facts showing that there is a genuine issue for trial. Matsushita, 475 U.S. at 586-87, 106 S.Ct. 1348; Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428 (5th Cir.1996) (en banc); SEC v. Recile, 10 F.3d 1093, 1097 (5th Cir.1993); Wallace, 80 F.3d at 1047.

The court must draw inferences in the light most favorable to the party opposing the motion. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. However, factual controversies are resolved in favor of the nonmovant "only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." McCallum Highlands, Ltd. v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir.), revised on other grounds upon denial of reh'g, 70 F.3d 26 (1995); see also Wallace, 80 F.3d at 1048; S.W.S. Erectors, Inc. v. Infax, Inc., 72 F.3d 489, 494 (5th Cir.1996). The Court will not, "in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts." McCallum, 66 F.3d at 92. Once a summary judgment motion is made and properly supported, the nonmovant must go beyond the pleadings and designate specific facts in the record showing that there is a genuine issue for trial. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc).

IV. Analysis

A. Homestead Issues

Texas Has a Broad Homestead Exemption

Except for certain enumerated exceptions, in Texas, a family's urban homestead of up to 10 acres and a rural homestead of up to 200 acres is protected from forced sale, for the payment of all debts and exempt from seizure for the claims of creditors. See TEX. CONST. art. XVI, § 50; see also TEX. PROP.CODE §§ 41.001 and 41.002 (Vernon 2000).

The Texas Supreme Court has said that the homestead exemption confers on a debtor "a home as an asylum—a refuge which cannot be invaded nor its tranquility or serenity disturbed.... [It was designed] to cherish and support in the bosoms of individuals, those...