In re Stanton

Decision Date19 July 2011
Docket NumberNo. BK–S–10–33338–BAM.,BK–S–10–33338–BAM.
Citation457 B.R. 80
PartiesIn re Marian Mildred STANTON, Debtor.
CourtU.S. Bankruptcy Court — District of Nevada

457 B.R. 80

In re Marian Mildred STANTON, Debtor.

No. BK–S–10–33338–BAM.

United States Bankruptcy Court, D. Nevada.

July 19, 2011.


[457 B.R. 84]

A.J. Kung, Las Vegas, NV, for Debtor.
REVISED OPINION
BRUCE A. MARKELL, Bankruptcy Judge.
I. Introduction and Facts

All siblings fight. Rich siblings fight interminably.

This case involves the continuing efforts of Carolyn Weidman to drive her sister Marian Mildred Stanton into penury. Stanton is 71 years old and a debtor in this court.

It's not that Weidman doesn't have cause to be vexed and irritated at her sister. Weidman holds a Colorado state court judgment of over $525,000 against her sister for, among other things, fraud and breach of fiduciary duty involving their now-deceased mother.1 She also holds another judgment for approximately $518,000 representing attorneys' fees and costs incurred in obtaining the first judgment. These judgments were hard won; the Colorado trial court, after noting that Stanton was “argumentative and evasive throughout the entire trial,” stated that Stanton “lives in a different reality and has little capacity to perceive the actual reality.” 2

Weidman obtained her judgment against her sister in 2008. It appears that Stanton had over $500,000 in assets at that time. Since then, Weidman has been actively enforcing her judgment and seeking to reduce her sister's wealth. She has levied upon Stanton's bank accounts, upon her stocks and other financial assets, and upon Stanton's rental real estate.

Stanton filed bankruptcy in December 2010, seeking to save some of her remaining wealth. Weidman has sought to deny her that goal. This contested matter is one of several actions Weidman has initiated against Stanton in this court.3 In this particular contested matter, Weidman objects to Stanton's claimed homestead exemption.

Stanton bought the house she claims as exempt in 2002. She paid $252,000 for it, borrowing approximately $175,000, and paying the rest in cash. By 2008, when the events relevant to this motion occurred, Stanton had, through a pattern of irregular lump sum payments, paid down the principal amount of the loan to approximately $89,000.

Stanton indirectly paid the loan off in 2008 soon after the entry of the Colorado judgment. She obtained the funds necessary for the payment by selling some nonexempt investments and then giving some of the proceeds to her son with the understanding that he would pay off the loan. As a result, Stanton has owned her Nevada house free and clear since 2008.

[457 B.R. 85]

Stanton filed a homestead declaration for the house in 2003. That might have settled her entitlement to a Nevada homestead interest but for the fact that, in 2004, she obtained a Colorado driver's license and registered to vote in Colorado. Both of these acts required her to renounce her Nevada domicile, and affirm, under penalty of perjury, that Colorado was then her home. She reversed these decisions in January 2008, when she changed her voter registration back to Nevada. She obtained a Nevada driver's license in 2009. Throughout this time period, however, her federal tax returns listed her Nevada address, and she continued to receive utility and other bills at her Nevada residence.

When her sister's state court enforcement actions became too pointed, Stanton filed for chapter 7 bankruptcy relief. She listed the Nevada house as her residence, stated its value was $244,000, and sought to exempt this entire amount under Nevada's homestead exemption.

Weidman objected. After the court held an initial status conference, but before an evidentiary hearing could be held, Stanton filed a new declaration of homestead on March 31, 2011, which, in form if not in substance, complied with Nevada law.

II. Legal Analysis

Weidman has raised three objections: (i) that Stanton had not resided in Nevada for the 730 days preceding her filing and, thus, could not take advantage of Nevada's exemptions; (ii) that Stanton's 2004 actions broke the continuity of her Nevada residence, and, thus if Nevada exemptions apply, she needed to file a new homestead declaration before she filed bankruptcy, which she did not do, in order to validly claim a Nevada homestead; and (iii) that even if she has a valid Nevada homestead, Section 522( o ) of the Bankruptcy Code requires reduction of that homestead exemption by the amount of her son's 2008 payoff.4

As explained in this opinion, the court finds that Stanton is entitled to claim a homestead in her residence under Nevada law, but that the value of her interest in that homestead must be reduced by the amount of the 2008 payoff of the note secured by the residence.

A. Insufficient Residency Under 11 U.S.C. § 522(b)(3)

Section 522(b)(3) states that the state in which the debtor's domicile has been located for the 730 days immediately preceding the date of the filing of the petition provides the applicable slate of exemptions. The key concept is “domicile.” As stated in Collier:

The residence of a debtor may be nothing more than a place of sojourn. While ordinarily used in a sense of fixed and permanent abode, as distinguished from a place of temporary occupation, the term “residence” does not include the intention required for domicile. Domicile means actual residence coupled with a present intention to remain there.

4 Collier on Bankruptcy ¶ 522.06 (Henry Sommer & Alan Resnick, eds., 16th ed. 2011) (emphasis supplied); see also Lowenschuss v. Selnick (In re Lowenschuss), 171 F.3d 673, 684 (9th Cir.1999), cert. denied, 528 U.S. 877, 120 S.Ct. 185, 145 L.Ed.2d 156 (1999) (debtor satisfied both

[457 B.R. 86]

physical presence and intent requirements for establishing domicile); Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 48, 109 S.Ct. 1597, 104 L.Ed.2d 29 (1989) (“For adults, domicile is established by physical presence in a place in connection with a certain state of mind concerning one's intent to remain there.”).

Here, Weidman contends that Stanton did not make Nevada her domicile until she applied for a Nevada driver's license on December 28, 2009. As she filed on December 15, 2010, the 730–day period began on December 15, 2008. Since, by Weidman's reckoning, Stanton only began her domicile in Nevada on December 28, 2009, Stanton has not been domiciled in Nevada for the required 730 days.

This argument is not supported by either the hearing testimony or by Weidman's prior statements. Stanton testified that while she spent extended time in Colorado (the location of her rental property, her sister's litigation against her, and the residence of her now-deceased mother), she never really intended to relocate there permanently. She explains her 2004 voter and driver's registration as part of an effort to vote in Colorado rather than in Nevada in the 2004 presidential election.5 Against this background, Stanton's obtaining a Colorado driver's license and registering to vote in Colorado were simply part of a political effort to make her presidential vote count more by relocating to a swing state; they were not, she contends, indications of an intent to reside permanently thereafter in Colorado.6 In any event, she returned to, and registered to vote in, Nevada by at least January 2008. To the extent these actions bear on Stanton's alleged intent to remain in Colorado permanently, the court credits Stanton's testimony, and leaves for other courts the consequences of her contrary statements made under penalty of perjury.7

As to physical residence, one of Stanton's long-time friends testified that Stanton has been playing duplicate bridge with

[457 B.R. 87]

her in Nevada continuously since 2002, sometimes as often as three times a week. Stanton also produced utility bills from before 2004 in her name for the Nevada house, as well as various medical bills sent to the Nevada house. Her federal tax returns all list a Nevada address. All of this evidence indicates a continuous presence in Nevada.

Finally, Weidman herself acknowledged that by late 2008 Stanton had relocated to Nevada. In paragraph 2 of her complaint filed against Stanton in Colorado state court on October 19, 2008, she stated: “Stanton is an individual who resides [in] Henderson, Nevada....”

All this leads the court to conclude that at all times since the acquisition of her Nevada house in 2002, Nevada has been Stanton's domicile. Even if incorrect, the evidence is even stronger that from at least mid–2008, if not sooner, Stanton has resided in Nevada, and that Nevada has been Stanton's domicile. Either of these findings subsume more than enough time to allow Stanton to select Nevada exemptions under Section 522(b)(3).

B. Effect of Homestead Declaration Filed Post–Petition

As stated by the Nevada Supreme Court:

Nevada has a constitutional imperative that homestead property be exempt from legal process and placed outside the reach of creditors. Nevada Constitution Article 4, Section 30 provides, in relevant part and with emphasis added, that “[a] homestead as provided by law, shall be exempt from forced sale under any process of law.” To comply with this constitutional mandate, the Nevada Legislature enacted what is now NRS 21.090, which specifically exempts a homestead from execution.

Contrevo v. Mercury Fin. Co. (In re Contrevo), 123 Nev.20, 153 P.3d 652, 654 (2007) (emphasis in original). The Nevada legislature has implemented the constitutional imperative by defining a homestead as “[a] quantity of land, together with the dwelling house thereon and its appurtenances.” Nev.Rev.Stat. § 115.005(2)(a). This homestead extends to the claimant's equity in the homesteaded property up to a maximum of $550,000. Id. § 115.010(2).

To secure the benefits of Nevada's homestead protection, a debtor must record a declaration of homestead. Id. § 115.020. Such a declaration is necessary to enjoy the full benefits of the homestead exemption. I.H. Kent Company v. Busscher, 277 F.2d 901, 905 (9th Cir.1960) (“ ‘To secure the benefits of the constitutional...

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