Lubin v. Mason (In re Mason)
| Decision Date | 26 August 2019 |
| Docket Number | CASE NO. 19-54424-PMB |
| Citation | 607 B.R. 360 |
| Parties | IN RE: Constance Gail MASON, Debtor. Jordan E. Lubin, Chapter 7 Trustee, Movant, v. Constance Gail Mason, Respondent. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
Michael R. Rethinger, Law Offices of Michael R. Rethinger, LLC, Atlanta, GA, for Debtor.
CONTESTED MATTER
This matter comes before the Court on the Trustee's Motion for Turnover and Objection to Debtor's Claim (sic) Exemptions (Docket No. 12)(the "Motion"), filed on April 22, 2019 by Jordan E. Lubin, the duly appointed Chapter 7 Trustee (the "Trustee") in this case. The Trustee also filed a Notice of Hearing on the same day, scheduling the Motion for a hearing at 2:00 p.m. on May 28, 2019 (the "Hearing")(Docket No. 13). On May 28, 2019, the day of the Hearing, the Debtor filed her Response to Chapter 7 Trustee's Motion for Turnover and Objection to Debtors (sic) Claim of Exemptions (the "Response")(Docket No. 23), and the Trustee filed his Brief in Support of Trustee's Motion for Turnover and Objection to Debtor's Claim (sic) Exemptions (the "Brief")(Docket No. 24).
The Hearing was held as scheduled. At the Hearing, the Court allowed the Debtor and the Trustee to submit post-hearing briefs. In response, the Debtor filed the Debtor's Post-Hearing Brief in Opposition to Chapter 7 Trustee's Motion for Turnover and Objection to Debtors (sic) Claim of Exemptions (the "Debtor's Post-Hearing Brief") on June 11, 2019 (Docket No. 25). The Trustee then filed the Trustee's Reply to Debtor's Brief in Opposition to Trustee's Motion for Turnover and Objection to Debtor's Claim of Exemptions (the "Reply Brief") on June 24, 2019 (Docket No. 26).
The material facts of this case are undisputed. On March 20, 2019 (the "Petition Date"), the Debtor filed a voluntary petition under Chapter 7 of Title 11 of the United States Code (the "Bankruptcy Code"). Prior to the Petition Date, on February 28, 2019, the Debtor quitclaimed her undivided one-half interest in her residence located at 320 Peters Street, SW, Unit 10, Atlanta, Georgia 30313 (the "Residence") to Brittany Morgan Whittemore, the joint owner of the Residence, pursuant to a settlement agreement executed by the Debtor and Ms. Whittemore on February 25, 2019.1 Five (5) days prior to the Petition Date, the Debtor received a $75,000.00 wire transfer from the sale of her interest in the Residence. The funds were deposited into a savings account at Fidelity Bank, which the Debtor had opened with an initial deposit of $50.00 on February 13, 2019 for the purpose of holding the sale proceeds.
On the Petition Date, the Debtor filed sworn schedules and statements, including Schedule A/B and Schedule C. See Docket No. 1, pp. 10-21. The Debtor represented in Schedule A/B that she did not "own or have any legal or equitable interest in any residence, building, land, or similar property." See Docket No. 1, p. 10. The Debtor scheduled financial accounts, including: Fidelity Bank (checking account) - $2,700.00; Wells Fargo (checking account) - $125.00; Fidelity Bank (savings account) - $72,000.00; and Wells Fargo (other financial account) - $25.00 (collectively, the "Accounts"). See Docket No. 1, p. 14. The balances in the Accounts totaled $74,850.00.
On Schedule C, the Debtor claimed exemptions in the Accounts under O.C.G.A. § 44-13-100, as follows:
Property Value Code Exemption
Section Value
Fidelity Bank (savings account) $72,000.00 O.C.G.A. § 44-13-100(a)(6) $11,200.00
Fidelity Bank (savings account) $72,000.00 O.C.G.A. § 44-13-100(a)(1) $11,500.00
See Docket No. 1 p. 21.
The Trustee filed the Motion on April 22, 2019, arguing that the only exemption available to the Debtor for the Accounts is under O.C.G.A. § 44-13-100(a)(6) and is limited to $11,200.00. The Trustee asserts that the exemption under O.C.G.A. § 44-13-100(a)(1) is not permitted, because the Accounts are not real or personal property that Debtor or a dependent of the Debtor uses as a residence.
In the Motion, the Trustee seeks turnover of $63,650.00 pursuant to 11 U.S.C. § 542, representing the non-exempt value of the Accounts (i.e. $74,850.00 - $11,200.00). The Trustee also moves for denial of the Debtor's claim of exemption under O.C.G.A. § 44-13-100(a)(1) in the Accounts in the amount of $11,500.00. On or about May 6, 2019, the Debtor turned over $52,300.00 to the Trustee, leaving a disputed balance of $11,350.00 (i.e. $63,650.00 - $52,300.00). See Response, Exhibit D (Docket No. 23); see also Reply to Brief, p. 9.
In the Response, the Debtor asserts that the funds in the Accounts came directly and exclusively from the sale of the Residence, and requests that the Motion be denied. On the same day, the Trustee filed the Brief arguing that the Debtor's exemptions were fixed at the time of filing of the bankruptcy petition, and the Debtor did not own any residence on the Petition Date. Thus, the Trustee contends the Debtor is not entitled to a homestead exemption under O.C.G.A. § 44-13-100(a)(1).
At the Hearing, the Court noted that the Accounts did not appear to be real or personal property that the Debtor or a dependent of Debtor was using as a residence as contemplated by the text of Georgia's homestead exemption. However, the Debtor argued that upon the voluntary sale of her interest in the Residence, the homestead exemption attached to the proceeds of the sale. The Court allowed the Debtor and the Trustee to brief the issue concerning the Debtor's asserted claim of a homestead exemption in the proceeds of the sale of the Residence.
In the Post-Hearing Brief, the Debtor acknowledges that there is no Georgia authority addressing this issue under O.C.G.A. § 44-13-100(a)(1). Instead, the Debtor relies on a Florida case that allows a debtor to exempt homestead proceeds " ‘if, and only if, the vendor shows, by a preponderance of the evidence an abiding good faith intention prior to and at the time of the sale of the homestead to reinvest the proceeds in another homestead within a reasonable time.’ " In re Simms , 243 B.R. 156, 158 (Bankr. S.D. Fla. 2000), quoting Orange Brevard Plumbing & Heating v. La Croix , 137 So.2d 201, 206 (Fla. 1962). The Debtor argues that this Court should apply this holding to this case.
In the Reply Brief, the Trustee again emphasizes that the Debtor's exemptions were fixed at the time of the filing and the Debtor did not own any residence on the Petition Date. In addition, the Trustee contends that it is neither reasonable nor appropriate to consider Florida law because Florida and Georgia have very different exemption schemes and related exemption philosophies. Thus, the Trustee argues that there is no authority under Georgia law to extend the reach of O.C.G.A. § 44-13-100(a)(1) to the proceeds generated by the sale of the Residence.
The issue for decision, in short, is whether the Debtor can claim an exemption in the proceeds of the pre-bankruptcy sale of her Residence under O.C.G.A. § 44-13-100(a)(1) where the proceeds have been segregated in a separate account.2 Upon consideration of all the pleadings and briefs filed in this matter, and based on the undisputed facts, for the reasons discussed below, this Court holds that O.C.G.A. § 44-13-100(a)(1) does not allow the Debtor to exempt the segregated proceeds created by the pre-petition sale of the Residence. Therefore, the Trustee's Motion will be granted and the Trustee's objection to the Debtor's claimed exemption in the Accounts under this provision will be sustained.
Generally, a debtor may exempt certain property from the bankruptcy estate pursuant to 11 U.S.C. § 522(b) of the Bankruptcy Code. However, Section 522(b) entitles states to opt out of the federal exemptions in preference of their own exemptions, and Georgia has made such an election. See e.g. In re Rogers , 538 B.R. 158, 171 (Bankr. N.D. Ga. 2015). As a result, a debtor in Georgia must look to this state's exemption statute, O.C.G.A. § 44-13-100, to determine whether property may be exempted from the bankruptcy estate. The Georgia homestead exemption is codified in O.C.G.A. § 44-13-100(a)(1). Section 44-13-100(a)(1) allows a bankruptcy debtor to exempt her home from her bankruptcy estate as follows:
The debtor's aggregate interest, not to exceed $21,500.00 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence , in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor. In the event title to property used for the exemption provided under this paragraph is in one of two spouses who is a debtor, the amount of the exemption hereunder shall be $43,000.00.
O.C.G.A. § 44-13-100(a)(1) (2019)(emphasis added).
The Debtor's exemptions are determined at the time of filing of the bankruptcy petition. Under bankruptcy law, "the point of time which is to separate the old situation from the new in the bankrupt's affairs is the date when the petition is filed." White v. Stump , 266 U.S. 310, 313, 45 S.Ct. 103, 69 L.Ed. 301 (1924). According to the Eleventh Circuit Court of Appeals, "it is settled law that a ‘claim of exemption is to be determined as of the petition date.’ " In re Yerian , 927 F.3d 1223, 1229 (11th Cir. 2019).4
On the Petition Date, the Debtor did not own any property that would constitute a homestead under the exemption statute. The Debtor had already converted her ownership interest in the Residence to cash. The proceeds of the sale – the Accounts totaling $74,850.00 – are not "real or personal property that the Debtor or a dependent of the Debtor was using as a residence."
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... ... 522(d)."); In re Gandy , 327 B.R. 807, 809-10 ... (Bankr.S.D.Tex. 2005); cf. Lubin v. Mason ( In re ... Mason ), 607 B.R. 360, 365-66 (Bankr. N.D.Ga. 2019) ... ...
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