White, In re
| Citation | 727 F.2d 884 |
| Decision Date | 08 March 1984 |
| Docket Number | No. 83-3729,83-3729 |
| Parties | In re Robert Lee WHITE, dba Aanco Fence Company, Debtor. Cheryl WHITE, Plaintiff-Appellee, v. Robert Lee WHITE, Defendant-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
George J. Gregores, Day & Prohaska, P.C., Portland, Or., for plaintiff-appellee.
Daniel F. Vidas, Portland, Or., for defendant-appellant.
Appeal from the United States District Court for the District of Oregon.
Before WRIGHT, TANG, and ALARCON, Circuit Judges.
White appeals from a district court order disallowing his claimed homestead exemption in federal bankruptcy proceedings.
In a divorce decree, an Oregon court awarded White's wife ownership of the family residence and, in return, awarded White a judgment lien against the property in the amount of $13,000. White later filed bankruptcy and claimed a homestead exemption in the value of that lien. The district court held that the lien was not a sufficient ownership interest to constitute a homestead under Or.Rev.Stat. Sec. 23.240.
We conclude that the order disallowing the exemption is appealable as a final judgment, and affirm the holding that the lien was not a sufficient ownership to constitute a homestead. We remand, however, for further consideration whether the lien was entitled to protection as the proceeds of the sale of a homestead.
Cheryl and Robert White were divorced by an Oregon court in December 1981. The court's decree provided that Cheryl be given ownership of the family residence. In payment for his interest in the residence, Robert was to be paid $13,000, secured by a judgment lien on the residence. The purchase price was to be paid within five years or upon sale of the residence, whichever happened first.
In mid-1982, Robert filed for bankruptcy. He submitted a chapter 13 plan that provided for less than full payment of his obligations to Cheryl under the property division order, and claimed a homestead exemption in the value of the lien on the residence. Cheryl objected to the homestead exemption.
The bankruptcy court allowed the homestead exemption and confirmed the plan. On appeal, the district court reversed, holding that the judgment lien was not a sufficient ownership interest in the residence to qualify for a homestead exemption under Or.Rev.Stat. Sec. 23.240.
Before reaching the merits, we must first determine whether the district court order denying the exemption is appealable. Under the Bankruptcy Act of 1978, we have no jurisdiction to hear interlocutory appeals in bankruptcy proceedings. In re Rubin, 693 F.2d 73, 76-77 (9th Cir.1982). An order denying an exemption does not meet the conventional test for a final judgment because it does not terminate the entire bankruptcy case. See In re Brissette, 561 F.2d 779 (9th Cir.1977). Recently, however, we adopted a test that emphasizes the need for immediate review, rather than whether the order is technically interlocutory, in determining what is appealable as a final judgment in bankruptcy proceedings. In re Mason, 709 F.2d 1313 (9th Cir.1983). Under Mason the order in the present case is appealable.
In Mason the debtor appealed the district court's refusal to set aside the order for relief on an involuntary petition for bankruptcy. The order for relief was technically interlocutory because it did not conclude the bankruptcy case. Id. at 1316. The court noted, however, that bankruptcy proceedings are unique and that the rules of finality developed for conventional litigation should not be applied mechanically. Those orders that " 'may determine and seriously affect substantive rights' and 'cause irreparable harm to the losing party if he had to wait to the end of the bankruptcy case' " are immediately appealable. Id. at 1316-17. The court concluded that an order for relief in an involuntary bankruptcy case is appealable under this test.
An order for relief effectively divests the debtor of his assets, creating an estate controlled by the bankruptcy court. In a Chapter 7 case the trustee is obligated to gather the assets of the estate, liquidate them, and to the extent possible satisfy creditors' claims.... During the administration of the estate the debtor's rights are limited. On entry of the order for relief he loses control of his assets, which may include a business. See 11 U.S.C. Sec. 303(f). Once property of the estate is liquidated there appears to be no way the debtor can force bona fide purchasers to return the assets. [Citations omitted.] A debtor may possibly attack the propriety of every sale by appeal, but to effectively do so he must seek to stay the sale.
We previously held that a similar need exists for immediate review of orders granting or denying exemptions. In re Brissette, 561 F.2d 779 (9th Cir.1977). Brissette did not determine that such orders were final. Under the law in effect at that time, this court could hear interlocutory appeals in certain bankruptcy matters. In concluding that the order was appealable, however, Brissette employed a need-for-immediate-review test almost identical to that adopted in Mason.
A decision that property is exempt may so deplete the potential estate that creditors will decline to participate further in the proceeding; a decision that it is not exempt will cause title to it to vest in the trustee during the pendency of the action, with all the attendant consequences of vesting. Although the exemption decision is technically interlocutory, it is frequently the final resolution of the rights of the parties for practical purposes. Erroneous determinations that property is nonexempt encourage creditors to press claims and to divide assets only to be told on appeal that there is nothing to divide. Of greater moment, however, the bankrupt may be thereby deprived of the necessities of life which Section 6 was designed to preserve to him during the pendency of the action. On the other hand, an erroneous decision of exemption will leave property in the hands of the bankrupt and subject to dissipation without the appropriate satisfaction of any creditor.
The present case is distinguishable from this court's recent decision in In re Martinez, 721 F.2d 262 (9th Cir.1983), in which we held that a bankruptcy appellate panel (BAP) decision regarding the allowance of an exemption was not a final judgment. In Martinez, the BAP did not allow or deny the exemption; it remanded for further findings on that issue. We explicitly relied upon the fact that the BAP remanded in concluding that the order was not final. Id. at 265. The district court order in the present case finally determined all issues regarding the claimed exemption.
We conclude that the order appealed from in the present case is a final judgment, affording this court jurisdiction.
White contends that the district court erred in holding that the lien was not a sufficient ownership interest to be the basis of a homestead exemption under Or.Rev.Stat. Sec. 23.240. 1 We do not agree.
No Oregon case has held that a non-possessory interest may be the basis of a homestead exemption. Moreover, sound policy suggests that the statute not be construed to allow a homestead exemption for such a lien. The purpose of the act is to allow an owner to keep his home. The lien does not preserve a roof over White's head; it gives him no right to live on the premises. To the contrary, the property division order gives sole possession to White's wife. Nor does White's lien preserve a home for his children. The children may continue to live in the home because White's wife now owns it and can claim a homestead exemption herself, not because of White's lien. There is no need to allow the exemption to prevent White's creditors from ejecting his children from the home. Because the lien gives White no right to possession, a creditor who obtains the lien cannot force out White's children.
White next argues that the lien represents the proceeds from the sale of his home, which are protected under Or.Rev.Stat. Sec. 23.240 to permit him...
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