In re Martinez

• Decision Date: 18 June 2015
• Docket Number: No. 7-10-11101 JA,7-10-11101 JA
• Parties: In re: ELOY MARTINEZ and ROSINA T. MARTINEZ, Debtors.
• Court: U.S. Bankruptcy Court — District of New Mexico

In re: ELOY MARTINEZ and ROSINA T. MARTINEZ, Debtors.

No. 7-10-11101 JA

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW MEXICO

June 18, 2015

MEMORANDUM OPINION ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

The Debtors¹ unsuccessfully sought to avoid Mr. Gould's judicial lien while the Debtors' case was pending under Chapter 13. See Memorandum Opinion and Order - Docket Nos. 101 and 102. Now, more than four years after the Debtors filed their voluntary petition, and after converting the case to Chapter 7, the Debtors again seek to avoid Walter Gould's judicial lien under 11 U.S.C. § 522(f) as impairing Rosina Martinez's homestead exemption.

On cross-motions for summary judgment,² the Court is asked to determine whether the Debtors' conversion of her bankruptcy case from Chapter 13 to Chapter 7 requires the re-valuation of their residential real property for purposes of applying the lien avoidance provisions of 11 U.S.C. § 522(f). The Debtor contends that the property has significantly depreciated in value since the filing of the bankruptcy case in 2010, that the plain language of 11 U.S.C. § 348(f)(1)(B) negates all valuations made while the case was pending under Chapter 13 upon conversion of the case to Chapter 7, and that the property must be re-valued as of the conversion date to determine whether the creditor's lien impairs the Debtor's homestead exemption. Creditor Walter Gould asserts that the Debtors are bound by the stipulation of value that theparties entered into to resolve the Debtors' objection to Mr. Gould's claim while the case was proceeding under Chapter 13, and that 11 U.S.C. § 348(f)(1)(B) is in applicable.

After considering the relevant Bankruptcy Code sections and the applicable case law in light of the parties' arguments, the Court will deny both motions for summary judgment. The language of 11 U.S.C. § 348(f)(1)(B) plainly provides that "valuations of property . . . in the chapter 13 case" do not apply "in a case converted to a case under chapter 7." 11 U.S.C. § 348(f)(1)(B). Even though the parties stipulated to the property's value "for all purposes in the bankruptcy case,"³ the Court finds that the parties' stipulation is not specific enough to except it from the application of 11 U.S.C. § 348(f)(1)(B), absent extrinsic evidence of the parties' intent. As for the Debtor's request for summary judgment, the Debtor has failed to establish the value of the property as of the petition date as required for lien avoidance under 11 U.S.C. § 522(f).

SUMMARY JUDGMENT STANDARDS

Summary judgment will be granted when the movant demonstrates that there is no genuine dispute as to a material fact and that the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a), made applicable to adversary proceedings by Fed.R.Bankr.P. 7056 ("The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."). "[A] party seeking summary judgment always bears the initial responsibility of informing the ... court of the basis for its motion, and ... [must] demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In considering a motion for summary judgment, the Court must "examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summaryjudgment." Wolf v. Prudential Ins. Co. of America, 50 F.3d 793, 796 (10th Cir. 1995) (quoting Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F2d 1238, 1241 (10th Cir. 1990)). "[A] party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial" through affidavits or other supporting evidence. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Despite the filing of the cross-motions for summary judgment, which suggests that the material facts are not in genuine dispute, the Court must nevertheless determine whether a genuine issue of material fact prevents the entry of summary judgment. See Renfro v. City of Emporia, 948 F.2d 1529, 1534 (10^th Cir. 1991)(stating that "the filing of cross-motions for summary judgment does not necessarily concede the absence of a material issue of fact[,]" but that "cross-motions for summary judgment do authorize the court to assume that there is no evidence which needs to be considered other than that which has been filed by the parties.")(additional internal quotation marks and citations omitted); Harris v. Beneficial Oklahoma, Inc., (In re Harris), 209 B.R. 990, 998 (10^th Cir. BAP 1997)(a party's "cross-motion [for summary judgment] must independently satisfy the requirements of Rule 56(c).")(citing Renfo, 948 F.2d at 1534 and SEC v. American Commodity Exch., Inc., 546 F.2d 1361, 1365 (10^th Cir. 1976)); In re Rodriguez, 456 B.R. 532, 536 (Bankr. D.N.M. 2010)("Cross motions for summary judgment raise an inference that summary judgment may be appropriate[,]" but the court must nevertheless satisfy itself that the movant has satisfied the requirements of Rule 56 before granting summary judgment)(citations omitted).

FACTS NOT IN GENUINE DISPUTE

1. The Debtors filed a voluntary petition under Chapter 13 of the Bankruptcy Code on March 8, 2010.

2. The Debtors live at 501 Roman Drive, Espanola, New Mexico, which includes a residence and an adjacent lot used as the backyard for the residence (the "Property").

3. The Property is Rosina Martinez's sole and separate property.

4. The Debtors scheduled the Property in their original Schedule A with a value of $90,000. See Docket No. 15.

5. The Debtors elected to take New Mexico exemptions, and claimed a $60,000 homestead exemption in the Property on Schedule C filed on April 2, 2010. See Docket No. 15.

6. Mr. Gould holds a judicial lien against the Property.

7. There are no contractual liens against the Property.

8. The Property was appraised as of September 30, 2010 with a value of $168,000, of which $130,000 is attributable to the residence, and $38,000 is attributable to the adjacent lot.

9. On April 14, 2011, the Debtors and Mr. Gould approved a Stipulated Order reflecting stipulations of the parties, including a stipulated value for the Property. See Docket No. 91.

10. The Stipulated Order includes the following stipulations:

a) Gould shall have an allowed claim of $85,000.00, secured by the Property, and that claim shall bear interest at the rate of 8.75% from the date of entry of the Stipulated Order. Gould's allowed claim is a secured claim to the extent of the value of the Property remaining after any allowed homestead exemption of the Debtors. See Stipulated Order, ¶ 4.

b) [T]he value of the residence at 501 Roman Drive Espanola, NM is $130,000.00. Debtors, Gould and the [Chapter 13] Trustee agree that the lot behind the residence owned by Debtor Rosina Martinez has a value of $38,000.00. Both the residence and the lot behind the residence are

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referred to as the Espanola Property, and together have a value of $168,000.00. This value is the agreed value for all purposes in this bankruptcy case and is binding on the Debtors, Gould, and the [Chapter 13] Trustee. See Stipulated Order, ¶ 6. See also, Stipulated Order, ¶ F ("the Espanola Property has described herein has a value of $168,000 for all purposes in this bankruptcy case.").

c) Rosina Martinez is entitled to a homestead exemption in the Property in the amount of $60,000. See Stipulated Order, ¶ 2.

11. On January 24, 2012, the Court entered a Memorandum Opinion on: 1) Mr. Gould's objection to the Debtors' claim of exemptions; 2) the Chapter 13 Trustee's objection to the Debtors amended claim of exemptions; and 3) the Debtors' motion to avoid judicial liens. See Docket No. 101. The Court determined, based on the parties' stipulations of fact, that Eloy Martinez is not entitled to claim a homestead exemption in the Property; that Mr. Gould's judicial lien had a value of $85,000.00 as of April 14, 2011, plus interest at the rate of 8.75%; that the Property was worth $168,000.00; and that Mr. Gould's judicial lien did not impair the Debtors' homestead exemption. Id.

12. Consistent with its Memorandum Opinion, the Court entered an order denying the Debtors' motion to avoid Mr. Gould's judicial lien. See Docket No. 102.

13. The Debtors confirmed their Chapter 13 plan on August 13, 2012. See Order Confirming Chapter 13 Plan ("Confirmation Order" - Docket No. 129).

14. The Confirmation Order included the following findings: 1) Walter Gould has an allowed $85,000.00 claim against the Debtors, plus interest at 8.75% from April 14, 2011 until the claim is paid in full, secured by the Property; 2) the Property has a value of $168,000.00; and 3) if the Debtors' Chapter 13 case is dismissed or converted without completion of the Plan, Mr. Gould's lien will be retained to the extent recognized under applicable nonbankruptcy law. See Confirmation Order, ¶¶ 4, 5, and 6.

15. The Debtors converted their case from one pending under Chapter 13 to a case under Chapter 7 on June 25, 2014. See Motion to Convert Chapter 13 Case to Chapter 7 (Docket No. 173) and Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors & Deadlines (Docket No. 177).

16. Following the conversion of the Debtors' bankruptcy case to Chapter 7, the Debtor filed an amended motion to avoid lien and a second amended motion to avoid lien seeking to avoid Mr. Gould's lien as impairing the Debtor's homestead exemption. See Docket Nos. 182 and 193.

17. The Debtors filed an Amended Schedule A on August 5, 2014. The Debtors scheduled the Property listed on their Amended Schedule A with a value of $75,000.00.

18. The Debtors had the Property appraised as of December 20, 2014 with a value of $75,000.00.

DISCUSSION

The cross motions for summary judgment...