In re Wolfe
| Decision Date | 11 May 2023 |
| Docket Number | 22-01075-FPC13 |
| Parties | In re: REBECCA E. WOLFE, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Washington |
FINDINGS OF FACT, CONCLUSIONS OF LAW & ORDER DENYING OBJECTIONS TO DEBTOR'S HOMESTEAD EXEMPTION
Rebecca E. Wolfe is the Debtor in this Chapter 13 Proceeding. In her schedules, Debtor claimed a homestead exemption in proceeds from the sale of the home she owned with her ex-husband John Alex Bies ("Dr. Bies"). Diane Bies,[1]John Bies,[2] and Dr. Bies (together, the "Objecting Parties") have objected to Debtor's claimed homestead exemption. At issue is whether Debtor is entitled to claim, and if so to what extent, a homestead exemption in the sale proceeds. An in-person evidentiary hearing was held on April 13, 2023, during which Debtor and Dr. Bies testified. After hearing the testimony of Debtor and Dr. Bies, the arguments of counsel, and reviewing the evidence presented by the parties, the Court took the matter under advisement.
Based on the record, and the Findings of Fact and Conclusions of Law, as set forth below, the Court denies the objections to Debtor's claimed homestead exemption. In short, Rebecca E. Wolfe's homestead claim is allowed in full.
1. Debtor and Dr. Bies were married on June 21, 2013. (ECF No 77 at 18-19, 41; see also ECF No. 57, Ex J)[3]
2. On June 1, 2018, during their marriage, Debtor and Dr. Bies purchased a family home located in Spokane County (the "Real Property").[4] (ECF No. 77 at 19; see also ECF Nos. 53 at 1; 59 at 1)
3. Debtor petitioned for dissolution of her marriage on August 28, 2019, (the "Divorce Proceedings") in the Spokane County Superior Court (the "Superior Court"). (See ECF Nos. 77 at 18-19; 71 at Cred. Ex. 3)
4. In April of 2020, Debtor's parents purchased a house located at 4110 South Martin Street in Spokane Washington, where Debtor and her children currently reside. )
5. On August 13, 2020, after initiating, but prior to trial in the Divorce Proceedings, Debtor and Dr. Bies voluntarily sold the Real Property. (ECF Nos. 77 at 19-20, 42-43; 71 at Cred. Ex. 2; see also ECF Nos. 53 at 2; 59 at 1)
6. The sale resulted in $505,807 in net proceeds (the "Sale Proceeds"). (ECF Nos. 77 at 22-23; 71 at Cred. Ex. 1; see also ECF Nos. 53 at 3; 59 at 1)
7. Per the agreement of Dr. Bies and Debtor, on August 14, 2020, the Sale Proceeds were deposited into the escrow account of the Hogan Law Group (the "Closing Agent") until such time the Sale Proceeds could be divided and disbursed in the Divorce Proceedings. (ECF Nos. 77 at 23-24; 71 at Cred. Exs. 1, 5)
8. On May 10, 2021, a three-day trial commenced in the Divorce Proceedings. (ECF No. 71 at Cred. Ex. 4) 9. On May 27, 2021, the Superior Court made its oral decision and set presentment for June 25, 2021.[5] The Superior Court formalized its oral decision on June 25, 2021, entering its Findings of Fact and Conclusions of Law about a Marriage ("Findings and Conclusions About a Marriage") and Final Divorce Order (Dissolution Decree).
10. In its Findings and Conclusions About a Marriage, the Superior Court stated:
Prior to trial, the parties sold their real property. The proceeds from that sale, in the amount of $505,807.18 is held in the escrow account of Hogan Law Group, pending distribution as a result of this dissolution.
(ECF No. 57 at Ex. B, emphasis added)
11. The Final Divorce Order divided the Sale Proceeds equally between the Debtor and Dr. Bies, each receiving $252,903.50 as personal property.
12. Mr. Dudley, Debtor's attorney in the Divorce Proceedings, signed both the Findings and Conclusions About a Marriage and the Final Divorce Order. However, Ms. Watts, Dr. Bies's attorney, did not sign either document and instead wrote "objected to by written memorandum" on the signature line.
13. That same day, June 25, 2021, counsel for Dr. Bies requested a hearing date "in order to address continuation of the [Wash. Super. Ct. Civ. R.] 62(a) automatic ten-day stay on any judgement prior to, or at the time such judgment stay would expire." The Superior Court denied the stay request. (ECF No. 71 at Cred. Ex. 4)
14. On July 1, 2021, Dr. Bies filed a Notice of Appeal to the Court of Appeals, Division III, followed by the filing of an emergency motion on July 9, 2021, seeking review of the Superior Court's Final Divorce Order and Findings and Conclusions About a Marriage, (ECF No. 71 at Cred. Ex. 4)
15. In his appeal, Dr. Bies sought, amongst other things, to have the Sale Proceeds, which were still being held by the Closing Agent, transferred to the Superior Court as a bond pending appeal, or alternatively that the appellate court remand the matter back to the Superior Court for issuance of a supersedeas bond. (ECF No. 71 at Cred. Ex. 4)
16. On July 14, 2021, Commissioner Geske of the Court of Appeals, Division III, entered an order declining to enter a stay of the trial court orders and instead remanded the matter back to the Superior Court to "grant the stay and set the amount of the supersedeas bond." (ECF No. 71 at Cred. Ex. 4)
17. On remand, Dr. Bies argued that that the Superior Court should set the supersedeas bond in the amount of $65,522.63, stay any distribution of any funds to Debtor pending appeal, and that the remaining balance of $187,380.87, nearly 74% of the total amount awarded by the Superior Court, should be distributed to Dr. Bies within ten days. Debtor argued that the bond should be in the amount of $505,807.18 and that neither party should receive any distribution of funds pending appeal. (ECF No. 71 at Cred. Ex. 4)
18. On August 31, 2021, the Superior Court entered an order setting the supersedeas bond in the amount of $505,807.18. The order directed the Closing Agent to, within seven days, deposit the $505,807.18 with the Clerk of Spokane County Superior Court, where the funds were to be held until further order of the Superior Court. Pursuant to the August 31, 2021, order, the Closing Agent deposited the Sale Proceeds into the Spokane Country Superior Court's registry. (ECF No. 71 at Cred. Ex. 4)
19. On September 22, 2021, Diane Bies filed suit in the Washington County Superior Court against Dr. Bies and Debtor for money owed (the "Garnishment Proceedings"). (ECF No. 57 at Ex. G)
20. A portion of the Sale Proceeds became subject to a writ of garnishment on November 2, 2022, following a judgment in favor of Diane Bies. (Case No. 21202701-32) On November 7, 2022, the Superior Court issued a check to Diane Bies in the amount of $194,367.63. (ECF Nos. 57 at Ex. H; 59)
21. The balance of the Sale Proceeds remains in the Spokane County Superior Court's registry. (ECF No. 77 at 7-12)
22. On April 8, 2022, Dr. Bies filed his opening brief in the Court of Appeals, Division III, regarding the Divorce Proceedings. In his brief, Dr. Bies claimed that the Superior Court erred when it declined to characterize and distribute the assets/liabilities, including the Sale Proceeds. In her response brief, filed on August 16, 2022, Debtor agreed that the Superior Court failed to characterize and distribute the assets and liabilities. (ECF Nos. 53 at 4; 57 at Ex. F)
23. Debtor filed for bankruptcy under Chapter 13 on November 16 2022, in the Eastern District of Washington. Her bankruptcy schedules and chapter 13 plan were timely filed.[6] (ECF Nos. 1-2)
24. Debtor elected state and federal nonbankruptcy exemptions pursuant to 11 U.S.C. § 522(b)(3). (ECF No. 1)
25. Debtor claimed a $252,903.50 homestead exemption in the Sale Proceeds pursuant to RCW 6.13.010; 020; 030; 070. Next to this claimed exemption, Debtor explained:
The Clerk of the Court is holding proceeds from sale of homestead real property located at 2415 S. Manito Blvd., Spokane WA 99203, held pursuant to court order. Approximately $505, 807. All funds held are proceeds of sale of homestead property.
(ECF No. 20 at Schedule C)
26. Per the Washington center for real estate research, the median sale price of a single-family home in Spokane County in 2021 was $390,200.[7]
27. Debtor's schedules list Diane Bies as holder of a $97,184 nonpriority unsecured claim arising from a loan and John Bies as holder of a $60,405 nonpriority unsecured claim also arising from a loan. Debtor did not list Dr. Bies as a creditor. (ECF No. 1 at Schedule E/F)
28. John Bies, Diane Bies, and Dr. Bies have all filed proof of claims in this bankruptcy proceeding. On December 23, 2022, John Bies filed Proof of Claim 2-1, an unsecured nonpriority claim in the amount of $124,041.55. (POC 2-1) On January 23, 2023, Diane Bies filed Proof of Claim 4-1, an unsecured nonpriority claim in the amount of $0. Under basis for claim, Diane Bies noted, "Judgment satisfied prior to the bankruptcy." (POC 4-1) Finally, on January 25, 2023, Dr. Bies filed Proof of Claim 6-1, an unsecured priority claim in the amount of "unknown." Dr. Bies's claim included allegations that the Superior Court awarded Debtor a disproportionate amount of the net marital assets, erroneously awarded Dr. Bies's separate property to Debtor, and wrongly assigned community debt. (POC 6-1)
29. Two objections to confirmation of Debtor's chapter 13 plan were filed. The first, by Dr. Bies on December 5, 2022. The second, by John Bies on December 23, 2022. Debtor responded to the objections and the matter was set for hearing. (ECF Nos. 17-18; 26-27; 30-32)
30. On January 11, 2023, a hearing on the objections was held. Julie C. Watts and Christell Casey, attorneys for...
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