In re Martinez

• Decision Date: 24 January 2012
• Docket Number: No. 13–10–11101 JA.,13–10–11101 JA.
• Citation: 469 B.R. 74
• Parties: In re Eloy T. MARTINEZ and Rosina T. Martinez, Debtors.
• Court: U.S. Bankruptcy Court — District of New Mexico

469 B.R. 74

In re Eloy T. MARTINEZ and Rosina T. Martinez, Debtors.

No. 13–10–11101 JA.

United States Bankruptcy Court, D. New Mexico.

Jan. 24, 2012.

Jennie D. Behles, Albuquerque, NM, for Debtors.

Denise Trujillo, Albuquerque, NM, for Creditor Walter Gould.

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, Bankruptcy Judge.

THIS MATTER is before the Court on Walter R. Gould's Objection to Claim of Exemptions filed May 19, 2010 (Docket No. 31), the Chapter 13 Trustee's Objection to Amended Schedule C, filed June 7, 2010 (Docket No. 35); and the Debtor's Motion to Avoid Liens Pursuant to 11 U.S.C. § 522(f), filed June 8, 2010 (Docket No. 36). Walter R. Gould (“Gould”) and the Chapter 13 Trustee objected to the Debtors' claim of homestead exemption. The Debtors seek to avoid a judicial lien filed by Gould under 11 U.S.C. § 522(f) on the ground that the lien impairs their homestead exemption.

The Debtors had objected to the Gould's claim in this case. See Objection to the Claim of Creditor Gould, filed October 6, 2010. By a stipulated order, the Debtors and Gould resolved the claim objection. See Stipulated Order entered April 14, 2011. (Docket No. 91). Subsequently, Gould, the Debtors and the Chapter 13 Trustee stipulated to entry of an order in which they stipulated to certain facts, and jointly requested the Court to decide the objections to claim of homestead exemption and the Debtors' motion to avoid judicial lien upon the stipulated facts. See Stipulated Order entered July 15, 2011. (Docket No. 97).

After consideration of the Stipulated Findings of Fact, the Debtors' and Gould's briefs in support of their respective positions, and applicable statutes and relevant case law, the Court finds that the Debtor, Eloy T. Martinez, is not entitled to claim a homestead exemption in the property located at 501 Roman Drive, Espanola, New Mexico 87532 (“Espanola Property” or “Property”). Based on the stipulated value of the Property, and because the Debtors are only entitled to claim one homestead exemption in the Property, the judicial lien does not impair the Debtors' exemption. Consequently, the Court will deny the Debtors' motion to avoid the judicial lien held by Gould.

STIPULATED FACTS

The Stipulated Order entered July 15, 2011 contains a finding that the Debtors, Gould, and the Chapter 13 Trustee have stipulated and agreed to the following: ¹

1. Creditor Gould claims a debt secured by a judgment taken against Debtor Rosina Martinez prior to her marriage to Debtor Eloy Martinez.

2. Gould filed a suit to foreclose this judgment lien on February 4, 2007 and filed a lis pendens on the same date.

3. Debtors filed their petition for Chapter 13 relief on March 8, 2010 (the “Petition Date”).

4. The Debtors reside in a home that is part of the Espanola Property. The Debtor Rosina Martinez–Archuleta inherited the Property from her mother's estate on May 17, 1995.

5. The Debtors were married on March 3, 2003.

6. On the date that Debtors filed for bankruptcy relief (March 8, 2010), Debtor Rosina Martinez' name was the only name on the title to the deed to the Espanola Property and she held it as her sole and separate property.

7. Debtor Rosina Martinez executed a quitclaim deed to the Espanola Property to Debtor Eloy Martinez on March 18, 2010. There was no prior Court approval for this post-petition transfer.

8. Debtor Eloy Martinez executed a warranty deed to transfer the Espanola Property back to Debtor Rosina Martinez and himself on August 26, 2010. There was no prior Court approval for this transfer.

9. Debtor Eloy Martinez caused payments close to $18,000 to be made by checks from a joint bank account, which Debtor Eloy Martinez shares with his son Eloy Martinez Jr., to pay for repairs, changes or additions on the Espanola Property. Such payments for repairs were made within the last few years during which time the Debtors were already married, but after Gould's judicial lien was recorded and before the foreclosure suit was filed by Gould.

10. According to Debtors, Debtor Eloy Martinez was not aware of the debt or the lien Creditor Gould had against Debtor Rosina Martinez at the time he assisted in paying for repairs on the Espanola Property or at any time until he accepted service for Debtor Rosina Martinez of the foreclosure suit.

11. Debtor Rosina Martinez initially claimed a $60,000 homestead exemption in the Espanola Property when both Debtors filed for bankruptcy relief, but the Debtors later amended Schedule C and are currently claiming a homestead exemption of $60,000 each for a total of $120,000 of homestead exemptions.

12. Debtors, Creditor Gould, and Trustee signed and agreed to a stipulated order that resolves Debtors' objection to the Claim of Creditor Gould, Gould's Motion for Summary Judgment, Debtors' Motion for Additional Time Regarding Summary Judgment, and the value of the Espanola Property. In this stipulation, which was subsequently approved by the Court, the Debtors and Creditor Gould have stipulatedthat Debtor Rosina Martinez is entitled to one homestead exemption on the Espanola Property in the amount of $60,000. The homestead exemption of Debtor Eloy Martinez in the Espanola Property has not been resolved and is pending the resolution of the objections filed by the Chapter 13 Trustee and Creditor Gould.

13. The amount of Gould's allowed claim is stipulated to be $85,000, bearing interest at the rate of 8.75% per annum from the date of the stipulated order and secured to the extent of the value in the Espanola Property remaining after the allowance of any homestead exemptions of Debtors. See Docket No. 91.

14. Debtors originally valued the Espanola Property at $90,000. However, in the stipulated order referenced above (after an appraisal), the parties have stipulated that the value of the residence is $130,000 and the adjacent lot has a value of $38,000; therefore, the total value of the Espanola Property is $168,000. These properties have always been used together and were transferred to the Debtor in one conveyance. The adjacent lot is used for a back yard to the residence.

15. Pursuant to this stipulated order, certain other real property once owned by Debtor Rosina Martinez was transferred to her son Greg, has been devoted by Greg to the Plan, and will be sold. This property has recently been listed by Greg as required pursuant to the terms of the stipulation and the plan to be re-formatted. Proceeds from the sale of this property will be used to fund the plan; and, if this pays the Gould claim, per the stipulation of the parties, the Espanola Property will not have to be liquidated.

16. Debtor Rosina Martinez, in an attempt to transfer the Espanola Property to herself and Debtor Eloy Martinez, may have not effectively completed that transfer, and was advised by her counsel that, at the least, a correction deed needed to be filed. It is unclear at this point whether that has been accomplished.

17. Debtors, Creditor Gould, and Trustee have all agreed to a Joint Request for the Court to decide Debtors' Motion to Avoid Lien and Trustee and Creditor Gould's Objection to Exemptions based upon material facts stipulated to herein and legal arguments submitted separately.

18. It is the opinion testimony of Debtor Rosina Martinez that the repairs, changes, and additions to the Espanola Property resulting from Debtor Eloy Martinez's payments increased value of the Espanola Property by as much as $54,000 (three times the repaid, improvement cost). Creditor Gould does not agree with this opinion testimony.

The Stipulated Order entered April 14, 2011 includes the following stipulation by the Debtors, Gould and the Chapter 13 Trustee:

19. The value of the residence at 501 Roman Drive Espanola, NM 87532 is $130,000. The lot behind the residence owned by Debtor Rosina Martinez has a value of $38,000.00. The residence and the lot behind the residence together comprise the Espanola Property and together have a value of $168,000. This value is the agreed value for all purposes in this bankruptcy case and is binding on Debtors, Gould, and the Chapter 13 Trustee.

The Court also finds:

20. Eloy Martinez claimed a homestead exemption under N.M.S.A.1978 § 42–10–9.

OTHER STIPULATIONS

The Stipulated Order entered April 14, 2011 includes the following additional stipulations and determinations by the Court based on those stipulations:

21. Gould is a secured creditor to the extent that his lien is not avoided in regard to Espanola Property under 11 U.S.C. § 522(f).

22. Debtor Rosina Martinez is entitled to one homestead exemption in the Espanola Property for herself in the amount of $60,000.

23. Gould has an allowed claim of $85,000.00, secured by the Espanola Property, and that claim shall bear interest at the rate of 8.75% from the date of entry of the stipulated order (April 14, 2011) (“Gould's Allowed Claim”). Gould's Allowed Claim is a secured claim to the extent of the value of the Espanola Property remaining after any allowed homestead exemption of Debtors.

DISCUSSION

A. Whether Eloy Martinez is Entitled to Claim a Homestead Exemption in the Property

The parties do not dispute that Rosina Martinez is entitled to a homestead exemption against the Espanola Property in the amount of $60,000. Eloy Martinez claims his own homestead exemption in the in the amount of $60,000 against the Espanola Property. If his claim of exemption is allowed, the total amount of the Debtors' homestead exemption against the Espanola Property would be $120,000.

Eloy Martinez asserts that his pre-petition use of his separate property to pay for repairs to the Espanola Property during his marriage to Rosina Martinez gave rise to an equitable lien in favor of Eloy Martinez against the Property. On the petition date, Eloy Martinez and Rosina Martinez resided at the Espanola Property, and Rosina Martinez continued to own the Espanola Property as her separate property. Eloy Martinez maintains that his equitable lien against the...