In re Roberge

• Decision Date: 29 March 2004
• Docket Number: No. 03-11135.,03-11135.
• Citation: 307 B.R. 442
• Court: U.S. Bankruptcy Court — District of Vermont
• Parties: In re Rejean E. ROBERGE and Jeannett A. Roberge, Debtors.

307 B.R. 442

In re Rejean E. ROBERGE and Jeannett A. Roberge, Debtors.

No. 03-11135.

United States Bankruptcy Court, D. Vermont.

March 29, 2004.

Gleb Glinka, Glinka & Schwidde, Cabot, VT, for Debtors.

Douglas J. Wolinsky, Eggleston & Cramer, Ltd., Burlington, VT, Trustee, Pro Se.

ORDER OVERRULING TRUSTEE'S OBJECTION TO EXEMPTION

COLLEEN A. BROWN, Bankruptcy Judge.

This matter presents a question of Vermont exemption law of first impression: namely, whether, in the absence of fraud, spouses who have been living separate and apart prior to filing for bankruptcy relief, may each claim, under the Vermont homestead exemption statute, the real property in which they reside as exempt in their joint bankruptcy case. This Court answers the question in the affirmative and holds that the estranged spouses may each exempt the homestead in which they reside, notwithstanding that they are in a joint bankruptcy case, provided there has been a thorough scrutiny of the facts and a deliberate determination that no fraud is being perpetrated.

The Court has jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157(b)(2)(A) and 1334.

I. PROCEDURAL BACKGROUND

On October 2, 2003, Douglas J. Wolinsky, Esq., in his capacity as the chapter 7 trustee ("the Trustee"), filed an Objection to Debtors' Claims of Exemption, disputing the Debtors' exemption of two parcels of real estate as their separate homesteads. On November 10, 2002, the Debtors filed an Opposition to Trustee's Objection to Claimed Exemptions, asserting that since the Debtors were separated and living apart because of marital discord, and for reasons that had nothing to do with the treatment of their creditors, they were each entitled to an exemption under Vermont's homestead exemption statute. See 27 V.S.A. § 101. On December 18, 2003, the parties filed Stipulated Proposed Findings of Fact and, approximately one month thereafter, they each filed a memorandum of law.

II. THE FACTS

The essential material facts are undisputed. As set forth in their Stipulated Proposed Findings of Fact, the parties agree to the following facts for purposes of this contested matter.

On April 22, 1991, Rejean E. Roberge purchased real property at 56 Eastern Avenue in Newport Center, Vermont ("the Eastern Avenue Property") and he remains the sole owner of this property. The Eastern Avenue Property is subject to a first mortgage dated December 17, 1998, and to a second (home equity) mortgage dated February 24, 1995, on which Rejean E. Roberge is the sole obligor. Mr. Roberge makes the payments for both mortgages against the Eastern Avenue Property (including the property taxes and insurance).

On August 10, 1996, the Debtors were married and Jeannett Roberge moved into the Eastern Avenue Property.

On August 22, 2001, Rejean and Jeannett Roberge purchased real property on Searles Road in Newport Center, Vermont ("the Searles Road Property"), as husband and wife, for $25,000. The Roberges raised the money to purchase the Searles Road Property by drawing $5,000 from Mr. Roberge's home equity loan, taking cash advances from Mr. Roberge credit card, and utilizing savings the couple had accumulated.

On September 10, 2002, the couple permanently separated and Mrs. Roberge moved into the Searles Road Property. Since that date, Mr. Roberge has continued to reside in the Eastern Avenue Property with one of the couple's children, and Mrs. Roberge has resided in the Searles Road Property with the couple's three other children. Mrs. Roberge has paid the property taxes and insurance for the Searles Road Property since the date of separation.¹

On May 5, 2003, Mr. Roberge first contacted the office of attorney Gleb Glinka. Previously, in January 2003, Mr. Roberge had spoken by telephone with another attorney about his financial difficulties, but he did not attend the subsequently scheduled appointment with that attorney. Mrs. Roberge consulted Legal Aid and a divorce attorney by telephone around the time of her separation from Mr. Roberge, but she did not retain counsel. On July 29, 2003, the Roberges jointly filed for protection from their creditors under chapter 7 of the Bankruptcy Code.

The Trustee has not alleged that the Debtors' separate living arrangements were made for any fraudulent purpose or undertaken to manipulate the bankruptcy system, to hinder, delay or defraud creditors, or to violate the spirit of the Bankruptcy Code.

III. THE VERMONT STATUTE AND CASE LAW

There is no dispute that Vermont has "opted out" of the federal bankruptcy exemption scheme and that the Debtors have the right to declare exemptions in their bankruptcy case under Vermont law. The pertinent Vermont exemption statute provides:

§ 101. Definition; exemption from attachment and execution

The homestead of a natural person consisting of a dwelling house, outbuildings and the land used in connection therewith, not exceeding $75,000.00 in value, and owned and used or kept by such person as a homestead together with the rents, issues, profits and products thereof, shall be exempt from attachment and execution except as hereinafter provided.

27 V.S.A. § 101. It is settled law that one must reside in the subject property at the time he or she files a bankruptcy petition in order to declare it exempt as one's homestead. See Pierce v. Pierce (In re Pierce), 2003 WL 22860034 (Bankr.D.Vt.2003); In re Brent, 68 B.R. 893, 895 (Bankr.D.Vt.1987); In re White, 18 B.R. 95, 97 (Bankr.D.Vt.1982). In those states which have opted out of the bankruptcy exemption scheme set forth in 11 U.S.C. § 522, the language of the relevant state exemption statute determines the scope and application of the exemption provision. See In re Brent, 68 B.R. at 895.

Since Vermont is an opt-out state, this Court has been called upon to interpret Vermont's homestead exemption statute under different scenarios. For example, shortly after the enactment of the Bankruptcy Code, this Court was asked to determine whether a husband and wife, residing in the same property, could file separate bankruptcy cases and each take the full homestead exemption on the same property. See In re D'Avignon, 34 B.R. 790 (Bankr.D.Vt.1981) (Marro, J.). After ordering the spouses' cases to be administered jointly, Judge Marro ruled that where a husband and wife are living in the same home, they are limited to one homestead exemption under 27 V.S.A. § 101. See id. at 794. One of the grounds for his ruling was that the intention of Vermont's homestead exemption statute was "to preserve a home for the family." Id. at 793. Judge Marro relied upon the Vermont Supreme Court case of Hyser v. Mansfield, 72 Vt. 71, 47 A. 105 (1899), in which a single male acquired property to use as a residence for himself and his mother, for the proposition "that the purpose of the homestead statute is to protect the family as a unit whether it consists of a husband and wife or any other natural person." Id. On appeal, the district court affirmed this Court's ruling, stating, "Debtors, as husband and wife, living together in the same family home, are only entitled to one homestead exemption not to exceed $30,00 [now, $75,000] in value." D'Avignon v. Palmisano (In re D'Avignon), 34 B.R. 796, 800 (D.Vt.1982). Amalgamating the rationale of D'Avigon with that of Hyser v. Mansfield leads me to conclude that the Vermont statute limits debtors to one homestead per family. This conclusion is the foundation for my analysis.

IV. THE ISSUES PRESENTED

Against the backdrop of the Vermont homestead statute and Vermont's opting out of the federal exemption scheme, the instant Objection to Exemptions presents two issues: (1) how may the Vermont homestead exemption statute be used "to protect the family as a unit" when a husband and wife are not living together in the same family home?; and (2) can each spouse claim a homestead exemption in his or her own family home if the two spouses have filed a joint bankruptcy case?

V. DISCUSSION

In constructing my rationale for answering these questions, I rely on building blocks available from five sources: (1) case law from other jurisdictions addressing similar questions regarding similar statutes; (2) general principles about how Vermont's exemption provisions should be construed; (3) basic rules of statutory construction; (4) the universe of relief available via alternative procedural vehicles; and (5) the legislative intent underlying the Vermont homestead provision.

Other courts have addressed very similar questions, and though their rulings turn upon the specific language of their respective state exemption laws, they have reached conclusions about how to allocate homestead exemptions between spouses which inform the instant dispute. First, the Second Circuit has held that the New York homestead exemption statute allows each spouse to take full advantage of the homestead exemption limit in a joint case, thus permitting a husband and wife to aggregate their homestead exemptions. See John T. Mather Memorial Hosp. v. Pearl, 723 F.2d 193, 194 (2d Cir.1983) (finding that the language of the State's opt-out statute specifically allowed an "individual debtor" to exempt property, supporting the legislature's intent to allow aggregation of the homestead exemption). Subsequently, our sister bankruptcy court in Colorado held that under Colorado state law, debtors in a joint case who live apart can each claim a homestead exemption in the property in which he or she resides. See In re Pastrana, 216 B.R. 948 (Bankr.D.Colo.1998). Then, more recently, and most similar to the instant issue, the Eleventh Circuit ruled that Florida's constitutional homestead exemption allows estranged spouses, living apart and absent evidence of any fraud suggesting that they were not legitimately living apart, to each claim an exemption in his or her separate homestead. See In re Colwell, 196 F.3d 1225 (11th Cir.1999). Thus, there is precedent for the position advocated by the Debtors.

...