Shirkey v. Leake

• Decision Date: 23 August 1983
• Docket Number: No. 82-1471,82-1471
• Citation: 715 F.2d 859
• Parties: , Bankr. L. Rep. P 69,339 Lester Shackman SHIRKEY, Jr., Appellant, v. John G. LEAKE, Trustee, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 859

715 F.2d 859

11 Bankr.Ct.Dec. 68, Bankr. L. Rep. P 69,339

Lester Shackman SHIRKEY, Jr., Appellant, v. John G. LEAKE, Trustee, Appellee.

No. 82-1471.

United States Court of Appeals Fourth Circuit.

Argued Jan. 12, 1983.

Decided Aug. 23, 1983.

Henry P. Dickerson, III, Staunton, Va. (Elder & Dickerson, Staunton, Va., on brief), for appellant.

Franklin R. Blatt, Harrisonburg, Va. (Julias, Blatt & Blatt, P.C., Harrisonburg, Va., on brief), for appellee.

Before WIDENER and CHAPMAN, Circuit Judges, and BUTZNER, Senior Circuit Judge.

BUTZNER, Senior Circuit Judge:

Lester S. Shirkey appeals from a judgment of the district court denying him a bankruptcy exemption for his 1980 federal and state income tax refunds. The district court, affirming an order of the bankruptcy court, ruled that Shirkey could not amend his homestead deed to correct his description of the refunds after his voluntary petition in bankruptcy was filed. We conclude: (1) Shirkey's description of the refunds in his original homestead deed satisfied the requirements of Virginia law; (2) his amendment of his homestead deed was not prohibited by Virginia law; (3) Shirkey's amendment of his homestead deed did not infringe any rights conferred on the trustee or the creditors by the Bankruptcy Reform Act of 1978; (4) our interpretation of Virginia law does not conflict with the Act, and, consequently, this case does not involve a constitutional issue under the supremacy clause; and (5) the court erroneously ordered Shirkey to pay his 1980 refund to the trustee. We reverse the judgment of the district court and remand this case for further proceedings.

I

On January 28, 1981, Shirkey filed a voluntary petition in bankruptcy. Attached to his petition were schedules of property which he claimed as exempt under 11 U.S.C. § 522 and Va.Code Ann. § 34-4. Included in these schedules was a claim for "1980 Federal and State Income Tax Refunds $800.00." At the same time, and as required by Va.Code Ann. § 34-17, Shirkey filed a homestead deed listing his exempt property. Included in the deed was a claim for "1978 Federal and State Income Tax Refunds $800.00."

Subsequently, Shirkey discovered the discrepancy between his federal schedules, which correctly referred to 1980 refunds, and his homestead deed, which erroneously referred to 1978 refunds. On April 15, 1981, he filed an amended homestead deed, correcting the date of his refunds to 1980. He then filed a complaint in bankruptcy court explaining that he had made a typographical error in his original homestead deed and requesting that his $800 be declared exempt property. The trustee objected, claiming that under Virginia law a homestead deed could not be amended after a voluntary petition in bankruptcy had been filed.

The bankruptcy court ruled against Shirkey. It noted Shirkey's explanation about the error. ¹ Nevertheless, it reasoned that "once bankruptcy and the rights of creditors have intervened, the amendment of [a] Homestead Deed after bankruptcy is ineffective." Thus, Shirkey could not amend his homestead deed to correct the error in the date of the refunds. The bankruptcy court ordered him to pay his 1980 refund to the trustee.

Shirkey then filed a complaint in federal district court, asking the court to declare his refund exempt. The district court concluded that postbankruptcy amendments of homestead deeds were not allowable under Virginia law. Relying on the language of Va.Code § 34-17 and In re Robinette, 34 F.Supp. 518 (W.D.Va.1932), the court ruled that "the Virginia statutes require that the bankrupt designate and describe in writing those items of his personal estate for which he wishes to claim an exemption and record that writing on or before the same day that his ... petition is filed." Consequently, the order of the bankruptcy judge was affirmed.

II

Pursuant to 11 U.S.C. § 522(b)(1), Virginia has provided that its residents may not exempt property specified in § 522(d). See Va.Code § 34-3.1. Consequently, Virginians may exempt only that property which is allowed by "State or local law." § 522(b)(2)(A). Virginia law allows a householder to exempt certain personal property, including "debts due him." Va.Code § 34-4. The parties agree that Shirkey's tax refund is a debt within the meaning of this statute. To claim an exemption in personal property under Virginia law, the householder must designate the property in writing, describe it "with reasonable certainty," and state its value. The writing must be recorded, usually as a homestead deed, in the county or city where the householder lives. Va.Code § 34-14. ² Generally, a homestead deed perfects the exemption if it is recorded any time before sale under a judgment, execution, or other legal process. Virginia law, however, provides that a voluntary bankrupt must record his deed on or before the day he files his petition in bankruptcy, but not thereafter. Va.Code § 34-17. ³ A homestead deed recorded in the wrong county is ineffective. Zimmerman v. Morgan, 689 F.2d 471 (4th Cir.1982).

The requirement that personal property be described with "reasonable certainty" cannot be defined by a universal standard. Nonetheless, courts cannot be allowed to make wholly subjective determinations of reasonableness. Whether a description is reasonably certain involves a judgment that takes into consideration the purpose of exemption statutes and the characteristics of the object to be described. Certain clearly defined principles exist to assist a court in the exercise of its discretion. In Goldburg v. Salyer, 188 Va. 573, 50 S.E.2d 272 (1948), the Supreme Court of Virginia explained that Virginia's exemption statutes "are enacted to insure an unfortunate debtor and his equally unfortunate, but more helpless, family a means of shelter and a measure of existence." The Court admonished that provisions for exemption "must be liberally construed in favor of the debtor and strictly against the creditor." 50 S.E.2d at 274. It cautioned that courts are not authorized "to reduce or enlarge the exemption, or to read into the exemption laws an exception not found there." 50 S.E.2d at 277.

The exemption statutes were not designed simply to inform a potential creditor of the financial status of a prospective debtor. By their express terms, an exemption can be claimed after a debt has been incurred and even after it has been reduced to judgment and execution issued. § 34-17. Wilson v. Virginia Nat'l Bank, 214 Va. 14, 196 S.E.2d 920 (1973). This is true although the debtor subsequently becomes a bankrupt. In re Baum, 15 B.R. 538, 539-40 (Bkrtcy.E.D.Va.1981). The purpose of requiring a reasonably certain description and valuation of property is to enable existing creditors to determine whether the claim is honestly asserted or whether the debtor is improperly seeking to insulate his property from the payment of his debts. See In re Wilson, 108 F. 197, 198 (W.D.Va.1901).

Guided by these principles, a court has allowed a Virginia bankrupt to amend his homestead deed to properly itemize, describe, and value property which he had previously claimed in bulk. See In re Wilson, 108 F. 197 (W.D.Va.1901). Although Wilson was decided before the Virginia statute was amended in 1944 to require bankrupts to file homestead deeds at a specified time, other courts, ruling after the amendment to § 34-17, have not applied the amendment pertaining to bankrupts mechanically. For example, a referee in bankruptcy allowed an involuntary bankrupt to claim his homestead exemption, although his deed, which was timely executed, was not recorded until one day after the time prescribed by the Virginia statute. Under these circumstances, the district court held that it was within the equitable discretion of the referee in bankruptcy to allow the exemption notwithstanding the express provision of the Virginia statute. See In re Davies, 96 F.Supp. 416, 419-20 (W.D.Va.1949). Again, a voluntary bankrupt sought to amend his timely homestead deed to increase the value of his equity in a car by over $500 to reflect information about a lien that was disclosed during the bankruptcy proceedings. The district court, overruling the referee, held that § 34-17 did not prohibit the amendment despite the statutory requirement that the exempt property be set apart, described, and valued by a recorded deed on or before the day the bankruptcy petition is filed and not thereafter. See In re Waltrip, 260 F.Supp. 448 (E.D.Va.1966).

III

Applying the general principles and precedents summarized in Part II, we conclude that Shirkey should be allowed the exemption that he claims. His homestead deed was timely recorded in the county where he resided. There is no suggestion that his claim for exemption was fraudulent. He has not attempted to claim tax refunds for both 1978 and 1980. Indeed, the record establishes that the only tax refunds in issue were those attributable to his return for 1980, which he correctly described on his bankruptcy schedule. Because only one year's tax refunds are involved, the date of the refunds is immaterial. By describing the debt due him as federal and state income tax refunds in the amount of $800, Shirkey satisfied the requirement of Va.Code § 34-14 that the article of personal property be designated, described with reasonable certainty, and valued. Neither § 34-14, nor any other provision of Virginia law, requires disclosure in the deed of the date of a transaction giving rise to a debt owed to the bankrupt. We will not by judicial gloss add this requirement to the statute when the date serves no critical purpose. Such a gloss would be contrary to the Virginia Supreme Court's canons of statutory interpretation explained in Goldburg v. Salyer, 188 Va. 573, 577, 582, 50 S.E.2d 272, 274, 277 (1948). Parenthetically, we note that in Goldburg the Supreme Court, without mentioning the absence of a date, validated exemptions that simply named the debtor and assigned a value to the...