In re Rivera

• Decision Date: 03 May 2012
• Docket Number: No. 11–06567 (ESL).,11–06567 (ESL).
• Citation: 470 B.R. 109
• Parties: In re Lymari LOZADA RIVERA, Debtor.
• Court: U.S. Bankruptcy Court — District of Puerto Rico

470 B.R. 109

In re Lymari LOZADA RIVERA, Debtor.

No. 11–06567 (ESL).

United States Bankruptcy Court,

D. Puerto Rico.

May 3, 2012.

Eva Margarita Cortes Vazquez, Cortes Law Offices, PSC, Trujillo Alto, PR, for Debtor.

OPINION AND ORDER

ENRIQUE S. LAMOUTTE, Bankruptcy Judge.

This case is before the court upon ( i ) Debtor's Motion for Reconsideration(Docket No. 23) of the Order granting the Trustee's [Unopposed] Objection to [Debtor's] Exemption under 11 U.S.C. § 522(d)(1) ( Docket No. 16); ( ii ) the Trustee's Opposition to Debtor's Motion for Reconsideration (Docket No. 37); and ( iii ) Debtor's Short Reply thereto (Docket No. 39). The Trustee sustains that Debtor's claimed exemption on her real property should be denied because the structure being constructed there is not her residence and thus 11 U.S.C. § 522(d)(1) is inapplicable. The Trustee also alleges that Debtor's request for reconsideration should be denied given the strict and narrow criteria adopted by the Court of Appeals for the First Circuit on setting aside orders under Fed. Rs. Civ. P. 59(a) & 60(b). Conversely, Debtor contends that the real property does qualify as her residence under the criteria used by the courts when considering this exemption and that the court should allow the Motion for Reconsideration to review the merits of the homestead controversy because the explanations for her failure to submit a timely answer to the Trustee's objection constitute excusable neglect under Fed.R.Civ.P. 60(b). For the reasons stated below, the court denies Debtor's Motion for Reconsideration (Docket No. 16).

Procedural Background

Debtor filed a voluntary Chapter 13 petition on August 2, 2011 (Docket No. 1) along with her Schedules and Statements of Financial Affairs. In Schedule A, she listed one real property: Lot No. 1 measuring 1,164 m ² located at Road # 167, Km 1.6, Dejaos Ward, Bayamon, Puerto Rico, where a house is being constructed (the “Real Property”). Only the exterior walls of the house have been built, not the ceiling. Debtor reported the current value of her interest in the Real Property at $33,000.00 with a secured claim on it of $12,208.22. See Schedule A (Docket No. 1, p. 11). In her description of the Real Property, Debtor indicated that the value lot of land of the Real Property (not the house under construction) at $15,000, and claims to have invested $5,000 in the construction of the house. Id. (Docket No. 1, p. 11). In Schedule C, Debtor claimed a $20,791.78 homestead exemption on the Real Property pursuant to 11 U.S.C. § 522(d)(1).

On November 3, 2011, the Trustee filed an Objection to Debtor's Claim for Exemption (the “ Objection ”, Docket No. 16) arguing that Debtor's Real Property is not yet a residence because it is still under construction. Consequently, the Debtor is not actually using the Real Property as her primary residence and may not claim a homestead exemption over the same. After due notice and no opposition from Debtor, on November 23, 2011, the Court entered an Order granting the Trustee's Objection (Docket No. 21 referring to Docket No. 16).

On November 28, 2011, the Debtor filed a Motion for Reconsideration of Order Granting [the] Trustee's Objection to Exemption (the “ Motion for Reconsideration ”, Docket No. 23) alleging that she intended to file a timely answer to the Objection, but was unable to execute a sworn statement on or before November 23, 2011, the deadline to file an answer, due to personal circumstances. Debtor also alleges that she and her husband began constructing a residence in the Real Property through a personal loan secured by a mortgage, but that the process of construction is currently stayed for lack of funds due to the substantial medical expenses they have had to incur for the healthcare of their son, who has severe cerebral palsy. Debtor acknowledges that she sleeps with her family at her mother's house, which is adjacent to the Real Property. She argues, however, that for purposesof Section 522(d)(1), the term “homestead” cannot be limited to the place where her bed is located and that the Real Property can be claimed as exempt because the term includes adjacent lots that are used in connection with the residence, such as the land and structure where the Debtor and her family play, clean and park their automobiles, and use as a terrace and storage. Lastly, Debtor avers that pursuant to Fed. R. Bankr.P. 4003(c), the Trustee has the burden of proof of demonstrating that the exemption is not properly claimed and that the Trustee has not met that burden.

After requesting and obtaining an extension of time to reply to Debtor's Motion for Reconsideration (Docket Nos. 24, 25, 35 & 36), on January 17, 2012, the Trustee filed an Opposition (Docket No. 37) sustaining that the court should not even consider reviewing the merits of the Motion for Reconsideration because the relief afforded under Fed. Rs. Civ. P. 59 & 60 is sparingly granted and properly viewed as an extraordinary remedy. Regardless, the Trustee also briefed his objection to Debtor's claimed homestead exemption alleging that the Debtor admitted that she and her family do not live in the Real Property, that it is not their actual “residence”, but rather their residence is her mother's house. where they all actually live. The Trustee further asserts that the precedents cited by Debtor regarding the broad interpretation of the term “homestead” are not applicable to the instant case because of a crucial difference: the debtor in this case does not own both lots, and thus cannot subsume the two properties.

On January 23, 2012, Debtor filed a Short Reply to Trustee's Opposition (Docket No. 39) indicating that her mishap to execute the sworn statement to submit a timely answer to the Trustee's Objection constituted excusable neglect under Fed.R.Civ.P. 60(b). In addition, Debtor revamped all her previous arguments in the Motion for Reconsideration regarding the claimed homestead exemption. No further sur-replies were filed.

Applicable Law & Analysis

(A) Debtor's Motion for Reconsideration

Although Debtor did not denominate any particular rule as the springboard for her Motion for Reconsideration (Docket No. 23), she subsequently indicated in her Short Reply that she “is not requesting a new trial under Rule 59 of the Federal Rules of Civil Procedure” but was rather “requesting the relief from the order granting the Trustee's objection to the exemption under Rule 60(b) of the Federal Rules of Civil Procedure” arguing that “answering the Trustee's [ Objection ] just a few days later due to Debtor's impossibility to execute the sworn statement was excusable neglect that warrants the revision of the order” (Docket No. 39, pp. 4–5).

Motions to reconsider are not recognized by the Federal Rules of Civil Procedure or the Federal Rules of Bankruptcy Procedure in haec verba. See Jimenez v. Rodriguez (In re Rodriguez), 233 B.R. 212, 218–219 (Bankr.D.P.R.1999), conf'd17 Fed.Appx. 5 (1st Cir.2001); Van Skiver v. United States, 952 F.2d 1241, 1243 (10th Cir.1991); Lavespere v. Niagara Mach. & Tool Works Inc., 910 F.2d 167, 173 (5th Cir.1990), cert. denied510 U.S. 859, 114 S.Ct. 171, 126 L.Ed.2d 131, abrogated on other grounds by Little v. Liquid Air Corp., 37 F.3d 1069, 1075–76 (5th Cir.1994). Rather, federal courts have considered motions so denominated as either a motion to “alter or amend” under Fed.R.Civ.P. 59(e) or a motion for relief from judgment under Fed.R.Civ.P. 60(b). See Fisher v. Kadant, Inc., 589 F.3d 505, 512 (1st Cir.2009) (noting a motion for reconsideration implicated either Fed. R. Civ. Pro. 59(e) or 60(b)); Equity Security Holders' Committee v. Wedgestone Financial (In re Wedgestone Financial), 152 B.R. 786, 788 (Bankr.D.Mass.1993). “These two rules are distinct; they serve different purposes and produce different consequences. Which rule applies depends essentially on the time a motion is served. If a motion is served within [fourteen] ¹ days of the rendition of judgment, the motion ordinarily will fall under Rule 59(e). If the motion is served after that time, it falls under Rule 60(b).” Van Skiver, 952 F.2d at 1243. The substance of the motion, not the nomenclature used or labels placed on motions, is controlling. Thus, for example, even if filed within the time limit for a motion under Fed.R.Civ.P. 59(e), a motion seeking relief on grounds of excusable neglect will be treated as a Rule 60(b)(1) motion, because Rule 59(e) does not provide a vehicle for a party to undo its own procedural failures. See 12–60 Moore's Federal Practice Civil § 60.03. Also see United States v. $23,000 in U.S. Currency, 356 F.3d 157, 164–165 (1st Cir.2004) (even if timely filed under Fed.R.Civ.P. 59(e), a motion seeking relief on grounds of excusable neglect will be treated as Fed.R.Civ.P. 60(b)(1) motion, because Fed.R.Civ.P. 59(e) does not provide a vehicle for party to undo its own procedural failures); Jennings v. Rivers, 394 F.3d 850, 854–856 (10th Cir.2005) (a motion timely filed under Fed.R.Civ.P. 59(e) but asserting ground for relief specified under Fed.R.Civ.P. 60(b), should be evaluated under standards applicable to Fed.R.Civ.P. 60(b) motions).

Having the Debtor expressly waived the remedies provided in Fed.R.Civ.P. 59, the court will entertain her Motion for Reconsideration under Fed.R.Civ.P. 60(b), made applicable in bankruptcy cases by Fed. R. Bankr.P. 9024. Although in her citation of Fed.R.Civ.P. 60(b) Debtor emphasized subsections (1) and (6) to apparently seek relief under both [ Short Reply, Docket No. 39, p. 5], the Supreme Court has ruled that “clause (6) and clauses (1) through (5) are mutually exclusive” and thus, a party may not seek relief in a Rule 60(b)(6) motion for any of the reasons enumerated in clauses one through five, such as excusable neglect. Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 864, 108 S.Ct. 2194, 100 L.Ed.2d 855 (1988). Also see Ungar v. PLO, 599 F.3d 79, 85 (1st Cir.20...