In re Shurley
| Decision Date | 06 October 1993 |
| Docket Number | Bankruptcy No. 92-70484-RBK. |
| Citation | 163 BR 286 |
| Parties | In re Billy R. SHURLEY and Jane Bryant Shurley, Debtors. |
| Court | U.S. Bankruptcy Court — Western District of Texas |
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John P. Higgins, Payne & Blanchard, L.L.P., Dallas, TX, for debtors, Billy R. Shurley and Jane Bryant Shurley.
Michael G. Kelly, Odessa, TX, for Dennis Elam, Chapter 7 Trustee.
Eric J. Taube, Austin, TX, for Texas Commerce Bank — Austin, N.A.
Henry H. McCreight, Jr., Houston, TX, for Texas Commerce Bank — San Angelo, N.A.
Objections to exemptions, filed by the Trustee and two creditors, raise two issues: (1) a factual issue regarding the value of certain jewelry and furs; and (2) a legal issue as to whether under Texas law an exemption of the cash surrender value of life insurance policies is limited under the Texas Property Code or unlimited under the Texas Insurance Code.
Billy R. Shurley and Jane Bryant Shurley (the "Debtors") filed a voluntary Chapter 7 bankruptcy case in 1992. Pursuant to section 522(b) of the Bankruptcy Code,1 the Debtors claimed exemptions pursuant to Texas law. Among the exemptions claimed on the Debtors' Amended Schedule C were various items of jewelry and furs listed at a total value of $14,927.75 and $650.00 respectively, and life insurance policies with cash surrender values of $30,710.36 and $14,742.86, respectively. The Trustee and two creditors, Texas Commerce Bank — San Angelo and Texas Commerce Bank — Austin (collectively "TCB"), filed similar objections to the claimed exemptions. All of the objections were agreed upon except those concerning the jewelry, furs, and life insurance policies. The questions to be decided are a factual determination as to the value of the jewelry and furs, and a question of law as to what extent cash surrender values in life insurance policies are exempt under Texas law.
Pursuant to the Texas personal property exemption scheme, a family may exempt up to $15,000 worth of jewelry as part of a $60,000 aggregate limitation. TEX.PROP.CODE ANN. §§ 42.001(a)(1) & 42.002(a)(6) (Vernon Supp.1993). A family may also exempt wearing apparel as part of the $60,000 aggregate limitation. In their Amended Schedule C, the Debtors claimed several items of jewelry with a total reported value of $14,927.75 and three furs with a total reported value of $650. Both the Trustee and TCB objected generally to the valuations of the jewelry and furs scheduled by the Debtors.
Under Bankruptcy Rule 4003(c), the party objecting to a debtor's exemptions has the burden of proving that the exemptions are not properly claimed. Because the Debtors' entitlement to exemption of the jewelry and furs in this case necessarily depends upon the value of such items, it follows that the objecting parties have the burden of proving that the jewelry and furs are worth more than the amounts claimed by the Debtors. In the schedules, the jewelry was divided into the categories of "Costume Jewelry," "Miscellaneous Jewelry," and "Jewelry."
The Trustee and TCB assert that the Debtors have undervalued the jewelry and furs claimed as exempt. One of the Debtors, Mrs. Jane Shurley, was responsible for valuing the jewelry and furs listed in the Debtors' schedules. Mrs. Shurley testified that the basis for her valuation was the price for which she thought she could sell the property in her hometown of Marfa, Texas on the date of filing of the bankruptcy case. In Mrs. Shurley's opinion, the values of the items were depressed because people in Marfa "are not buying anything." Mrs. Shurley formed her opinion based on conversations with "people in Marfa who have money" and a conversation with the manager of the Winn's department store in Marfa. Mrs. Shurley also testified concerning her rationale in valuing various individual items of jewelry.
TCB asserts that Mrs. Shurley's method of valuing the jewelry and furs was liquidation value rather than fair market value, and that the Debtors should therefore redesignate their claimed exemptions. The burden of proof is on TCB and the Trustee. FED.R.BANKR.P. 4003(c). TCB and the Trustee presented no specific opinion evidence of value to contradict the Debtors' valuation of specific items of jewelry or furs, with the exception of evidence of prior admissions by the Debtors as to the value of one lady's ring and a wedding band and the purchase price of a sapphire. Instead, TCB presented generalized evidence such as financial statements of the Debtors for the years 1989, 1990 and 1991 which all contained an asset entry entitled "Gems, art and other personal assets" with a reported value of $60,000.00. As it is impossible to ascertain which specific items of the Debtors' jewelry were included in this asset entry, the financial statements failed to carry the burden of proof.
Included in the Debtors' Amended Schedule C were itemized lists of "Costume Jewelry" totaling $212.75, and "Miscellaneous Jewelry" totaling $195.00, which the Debtors claimed as exempt. At the hearing on objections to exemptions, neither TCB nor the Trustee produced evidence concerning the value of these items. Therefore, the objecting parties failed to carry their burden of proof and the objection is overruled as to the items in these categories.
In the Debtors' Amended Schedule C, three furs were itemized under the category of wearing appeal. At the hearing on objections to exemptions, the only evidence concerning the value of these items was Mrs. Shurley's testimony, which supported the Debtors' valuations. As such, the objectors again failed to carry their burden of proof and the objection is overruled as to the furs.
On the Debtors' Amended Schedule C — Exhibit "3," eleven items were included under the category of "Jewelry," three of which were as follows:
Scheduled Insurance
Value Value
1 lady's Marquise diamond ring with 10 round diamonds
1.94 cts., platinum mounting, Marquise — 1.96 cts $3,000.00 $12,950.00
1 lady's diamond and platinum mounting for sapphire
14.27 cts. with 16 round diamonds 1.47 cts. 3,500.00 Not listed
14 K gold open texture wedding band a/kw eternity
rings on lock side the bands are set with 54.005 ct
diamonds, 2.70 cts. approximately 1,500.00 3,416.00
At the hearing on objections to exemptions, counsel for TCB introduced into evidence copies of the Debtors' homeowners insurance policies for the years 1979-1980 and 1986-1987. Attached to each policy were listings of jewelry which were prepared by the Debtors for the purposes of obtaining casualty insurance. The valuations assigned to each item on the lists were based on an appraisal Mrs. Shurley obtained for insurance purposes. The two lists were identical except for the addition of a gold wedding band in the 1986-1987 policy attachment.
The valuations assigned to each item of jewelry in the insurance policy attachments constitute admissions of the Debtors as to the value of each item listed in the attachments. FED.R.EVID. 801(d)(2). Thus, the valuations have some evidentiary weight. Waring v. Commissioner, 412 F.2d 800 (3rd Cir.1969) (). Specifically, only two of the eleven articles of jewelry the Debtor attempted to exempt can be located in the attachments to the insurance policies: the lady's Marquise diamond ring and the gold wedding band. Mrs. Shurley valued these items in her schedules at $3,000.00 and $1,500.00, respectively. These items were valued in the insurance policies, however, at $12,950.00 and $3,416.00, respectively. In addition, Mrs. Shurley testified that she paid $12,000.00 or $14,000.00 for the sapphire which is now mounted on a platinum ring and valued in the Amended Schedule C at $3,500.00. Such evidence does indicate that the items may be worth more than Mrs. Shurley reported. Although the insurance valuations constitute admissions by the Debtors, however, they could represent retail replacement values in 1979-1980 or 1986-1987, rather than fair market values as of the date of the filing of the petition in 1992. Similarly, the purchase price of the sapphire at an unspecified time may have been in excess of its value in 1992.
Pursuant to the exemption provision of the Bankruptcy Code, value "means fair market value as of the date of the filing of the petition." 11 U.S.C. § 522(a)(2) (1988); In re Mitchell, 103 B.R. 819, 821 (Bankr. W.D.Tex.1989). Fair market value has been defined as "the price which a willing seller under no compulsion to sell, and a willing buyer under no compulsion to buy, would agree upon after the property has been exposed to the market for a reasonable amount of time." In re Markowitz Bldg. Co., 84 B.R. 484, 487 (Bankr.N.D.Ohio 1988). In determining fair market value, the Court must consider the evidence of value produced by the parties and determine the appropriate value. In re Rehbein, 49 B.R. 250, 253 (Bankr.D.Mass.1985). In making such determination, "the Court is not bound by any figure in particular, but merely guided by them all." Id. (citing In re Development, Inc., 36 B.R. 998, 1004 (Bankr.D.Haw.1984)).
The problem lies in the objectors' method of attacking the Debtors' valuations. While the Court must consider evidence of value produced by each party, neither TCB nor the Trustee produced appraisals or other expert opinion evidence of the value of specific items of jewelry. Rather, the objectors merely produced evidence, in the form of admissions, that the Debtors' valuations may be...
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