In re Williams, 3:06-bk-71590.

• Decision Date: 22 May 2007
• Docket Number: No. 3:06-bk-71590.,3:06-bk-71590.
• Parties: In re Joe and Cheri WILLIAMS, Debtors.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Arkansas

Page 470

369 B.R. 470

In re Joe and Cheri WILLIAMS, Debtors.

No. 3:06-bk-71590.

United States Bankruptcy Court, W.D. Arkansas, Harrison Division.

May 22, 2007.

David L. Ethredge, Osmon & Ethredge, Mountain Home, AR, for Debtors.

Jill R. Jacoway, Jacoway Law Firm, Fayetteville, AR, Trustee.

ORDER

BEN T. BARRY, Bankruptcy Judge.

Before the Court is the Trustee's Motion For Summary Judgment filed on March 27, 2007, and the Debtor's Response to Trustee's Motion For Summary Judgment and Request For Partial Judgment and Opportunity to Amend Schedules B & C filed on April 13, 2007. The debtors lived in Iowa from August 2000 until March 2006, at which time they moved to Arkansas. They filed their chapter 7 bankruptcy petition in Arkansas on July 28, 2006, where venue was proper. Initially, the debtors elected the exemptions provided under 11 U.S.C. § 522(d), typically referred to as the federal exemptions. After the trustee objected to the debtors' use of the federal exemptions pursuant to § 522(b)(3)(A), the debtors amended their schedule C and elected the exemptions available to them under Iowa law. The trustee subsequently filed an amended objection to the debtors' exemptions, specifically objecting to the debtors' use of the homestead exemption under Iowa law. According to the trustee, and the Court agrees, the issue before the Court is whether the homestead exemption law of the state of Iowa can be applied to the debtors' residence located in Arkansas.

For the reasons stated below, the trustee's motion for summary judgment requesting the Court to deny the debtors' right to claim their home exempt as a matter of law, and the trustee's motion for the debtors to turn over their home for administration in this estate are denied. The debtors' motion for partial summary judgment is granted. The trustee's objection to the debtors' homestead exemption under Iowa law is overruled.

Jurisdiction

This Court has jurisdiction over this matter under 28 U.S.C. § 1334 and 28 U.S.C. § 157, and it is a core proceeding under 28 U.S.C. § 157(b)(2)(B). The following opinion constitutes findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052, made applicable to this proceeding under Federal Rule of Bankruptcy Procedure 9014.

Federal Rule of Bankruptcy Procedure 7056, which incorporates Federal Rule of Civil Procedure 56 and is made applicable in this proceeding by Federal Rule of Bankruptcy Procedure 9014, provides that summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. The burden is on the movant to establish the absence of a material fact and identify portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits that 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). The burden then shifts to the nonmoving party, who must then "go beyond the pleadings and by her own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 56(e)). In ruling on a summary judgment motion, the court views the facts in the light most favorable to the non-moving party and allows that party the benefit of all reasonable inferences to be drawn from the evidence. Ferguson v. Cape Girardeau Cty., 88 F.3d 647, 649-50 (8th Cir.1996).

Stipulations

The parties have submitted the following stipulations as a basis for their respective motions for summary judgment:

1. That the Debtors filed their voluntary Chapter 7 petition with this Court on July 28, 2006, and Jill Jacoway was appointed Trustee on that same day.

2 That the Debtors originally chose the exemptions provided to them under 11 U.S.C. § 522, the federal exemptions.

3. That on November 7, 2006, Trustee filed her Objection to Claim of Exemptions and Motion for Turnover asserting the Debtors were not entitled to claim the exemptions provided under the federal exemptions, but were properly entitled to exemptions under Iowa state law.

4 That on November 9, 2006, the Debtors amended their claims of exemptions to those available to them under Iowa law.

5. That on November 13, 2006, Trustee filed her Amended Objection to Claim of Exemption and Motion for Turnover, withdrawing her previous Objection to the Claim of Exemptions based on Debtors' November 9, 2006 Amendment.

6. That Trustee's, November 13, 2006 Amended Objection to Exemptions, objected to Debtors' claim of exemption in their residence located 167 Lorraine Place, Mountain Home, Arkansas, pursuant to Iowa Code Section 561.2, 561.16, and 999 A.18 as the real estate which Debtors are claiming as exempt is not physically located in the State of Iowa, and hence the Debtors are not entitled to claim it as exempt.

7. That the Debtors moved to Arkansas from Iowa in March of 2006, having lived in Iowa continuously since August of 2000 prior to March, 2006.

8. That the parties agree that if the Debtors are not entitled to claim their homestead as exempt, they should be ordered to turn it over to Trustee for administration in this estate.

Positions of the Parties

The trustee objects to the debtors' claim of homestead under Iowa law because the debtors' home is located in Arkansas. According to the trustee, the Iowa homestead exemption is not extraterritorial and cannot be applied to property located outside the state of Iowa. Additionally, because the debtors are not eligible to take a homestead exemption under either Iowa law or Arkansas law, the trustee believes the debtors are not entitled to any homestead exemption. Her argument is based upon her interpretation of the hanging paragraph at the end of § 522(b), which states, "[i]f the effect of the domiciliary requirement under subparagraph (A) is to render the debtor ineligible for any exemption, the debtor may elect to exempt property that is specified under subsection (d)." 11 U.S.C. § 522(b)(emphasis added). The trustee believes that because no one objected to the debtors' claim of personal property exemption under Iowa law, the debtors have not been rendered ineligible for any exemption because they are entitled to all of their personal property exemptions. Thus, according to the trustee, the hanging paragraph does not permit the debtors to claim the federal exemptions under § 522(d) and, as such, are not entitled to any exemption for their homestead. It is from this argument that she bases her motion for turnover of the debtors' residence.

The debtors contend that as a result of the 730 day domiciliary requirement under § 522(b)(3)(A), they were left without a governing homestead exemption. They believe that the purpose of the savings clause located in the hanging paragraph at the end of § 522(b) is to allow debtors such as themselves the opportunity to take advantage of specific exemptions that are available to other debtors. To not allow them the opportunity to exempt their homestead under either § 522(d) or a particular state's exemption law denies them the opportunity to make a "fresh start" and maintain an appropriate standard of living.

Findings of Fact and Conclusions of Law

The exemption issue raised by the parties has its genesis in § 522(b) of the code, which states, in relevant part:

(b)(1) Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate the property listed in either paragraph (2) or, in the alternative, paragraph (3) of this subsection....

(2) Property listed in this paragraph is property that is specified under subsection (d), unless the State law that is applicable to the debtor under paragraph (3)(A) specifically does not so authorize.

(3) Property listed in this paragraph is

(A) subject to subsections (o) and (p), any property that is exempt under Federal law, other than subsection (d) of this section, or State or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile has been located for the 730 days immediately preceding the date of the filing of the petition or if the debtor's domicile has not been located at a single State for such 730-day period, the place in which the debtor's domicile was located for 180 days immediately preceding the 730-day period or for a longer portion of such 180-day period than in any other place;

. . .

If the effect of the domiciliary requirement under subparagraph (A) is to render the debtor ineligible for any exemption, the debtor may elect to exempt property that is specified under subsection (d).

11 U.S.C. § 522(b).

The debtors initially chose to exempt their real and personal property under the federal exemptions allowed under § 522(d). After an objection by the trustee, they amended their schedules to claim exemptions under Iowa law. Section 522(b) is the subsection that allows a debtor to choose the federal exemptions listed in subsection (d), if the state law referenced under paragraph (3) allows the debtor to take federal exemptions. Under the pre-BAPCPA code, the reference to the state law was straight forward. Because the domiciliary requirement of 180 days mirrored the venue requirements for filing a petition, see 28 U.S.C. § 1408,¹ the debtor typically did not have to be concerned with which state law would apply in determining his exemption choice.

BAPCPA altered that considerably. Under the BAPCPA code, a debtor is still allowed to choose the federal exemptions listed in subsection (d), again with the condition that the state law referenced under paragraph (3) allows the debtor to take federal exemptions. It is paragraph (3) that gives rise to new concern for the...