In re Bush

593 B.R. 600

IN RE: Marlon Cecil BUSH, Debtor.

Case No: 18-bk-02532

United States Bankruptcy Court, M.D. Tennessee, Nashville Division.

Signed October 2, 2018

Rodney Lewis Caldwell, Flexer Law, PLLC, Murfreesboro, TN, Daniel Castagna, Flexer Law, PLLC, Nashville, TN, for Debtor.

Denis Graham (Gray) Waldron, Niarhos & Waldron, PLC, Nashville, TN, for Trustee.

MEMORANDUM OPINION

Charles M. Walker, U.S. Bankruptcy Judge

Chapter 7 bankruptcy trustees are charged with the duty of, among other things, maximizing the value of a bankruptcy estate.¹ An essential part of that process is an investigation into the legality of the Debtor's claimed exemptions. An objection to a claimed exemption can work to "free-up" an asset for liquidation for the benefit of creditors. Here, the Debtor has claimed an enhanced exemption of $25,000 under Tennessee homestead exemption law based on his custody of a minor child. The Trustee has challenged the Debtor's claim of custody as a basis for his objection to the claimed exemption. The Court conducted an evidentiary hearing, and the matter was fully briefed. For the reasons stated below, the Court finds that the Debtor has properly claimed his exemption, and the Trustee's objection is overruled.

BACKGROUND

Marlon Cecil Bush (herein "Debtor") filed for relief under Chapter 7 of the Code on April 13, 2018. On schedule C, the Debtor claimed a $25,000 exemption pursuant to Tennessee state law. Tenn. Code Ann. § 26-2-301(f)² . The Debtor asserts custody of his granddaughter as a basis for the claimed exemption. The Trustee objects to the claim because the Debtor does not have custody of his granddaughter as the term custody is defined under Tennessee law. The Court conducted an evidentiary hearing, and the parties stipulated to the admission of evidence, including two state court orders.

The first order was entered on December 29, 2004. In that order, the Juvenile Court of Rutherford County, Tennessee awarded temporary custody of the granddaughter to Sue Jackson,³ the grandmother of the child. The Debtor testified that the child's mother sought entry of this order as she was terminally ill and the child's father was incarcerated at the time.

The second order was entered on December 13, 2017 by the same court ("Second Order"), and appointed the Debtor and Sue Bush ("Sue") as guardians of the granddaughter. The Debtor testified that he and Sue sought this order after Sue's daughter passed away, and Sue herself was diagnosed with a terminal disease. They wanted to ensure the security of the granddaughter in the home and with the Debtor in light of Sue's health issues.

At the hearing, the Debtor testified that the granddaughter lived in his home with him and Sue for approximately thirteen years, and continues to reside with them. He stated that while the granddaughter resides with them, they are responsible for providing food, shelter, medical care, emotional support, transportation, and all the necessities that go along with raising a child. The granddaughter's father does not exercise visitation, has not been ordered to - nor does he - pay child support, and does not provide for the child in any way. The Trustee did not challenge the Debtor's assertions on cross-examination.

The Trustee argues that this is a matter of law, and that the statute is clear with no ambiguity as to the definition of the term "custody," and, therefore, statutory interpretation is not appropriate. Applying the definition of the term "custody" stated in the Tennessee Code, the Trustee concedes that someone has custody of the granddaughter, but contends it is not the Debtor. Alternatively, he urges this Court to certify the question of defining the term "custody" to the Tennessee Supreme Court if this ruling is to be based on a finding of ambiguity in the definition of the term in Tennessee statutes.

The Debtor argues that because the term "custody" is not defined in the applicable exemption statute, it is appropriate for this Court to look to other Tennessee statutes, and the legislative intent behind those statutes, to determine the meaning of the term "custody" in the exemption statute. The Debtor points to provisions in Tennessee domestic law that define custody, and asserts that the same definition is used interchangeably with the term "guardianship" throughout the Tennessee statutes. This, coupled with the legislative intent of protecting families and providing security for minor children, parents and guardians, means the Debtor meets the requirements of the enhancement by having custody of a minor child.

STATUTORY PREDICATE

The meaning of the word "custody" as it is used in Tennessee's enhanced homestead exemption for an individual with custody of a minor child is a term undefined in that statute, and is the issue before this Court.

Homestead exemption statutes have been enacted with the purpose of protecting the value of homes of certain owners in certain circumstances. "Homestead" is the primary residence of a person, and exemption laws regarding residences protect residential values from such things as property taxes and forced sales for the benefit of creditors, as well as securing housing for a surviving homeowner spouse.

Under the Code, a debtor may claim exemptions as authorized by state law.

11 U.S.C. 522(b)(2). The state of Tennessee does not authorize the use of the federal exemption scheme, but instead has enacted its own required homestead exemption statute that expands the protections provided under the Code:

(f) Notwithstanding subsection (a) to the contrary, an individual who has one (1) or more minor children in the individual's custody shall be entitled to a homestead exemption not exceeding twenty-five thousand dollars ($25,000) on real property that is owned by the individual and used by the individual as a principal place of residence.

Tenn. Code Ann. § 26-2-301 (West)

The term "custody" is not defined in the exemption statute itself, therefore, the Court must turn to other provisions contained in the Tennessee Code for the definition of "custody." Title 37 of the Tennessee Code relates to juvenile courts and proceedings. This section provides a definition of the word "custody" with regard to minors:

(b)(9) "Custody" means the control of actual physical care of the child and includes the right and responsibility to provide for the physical, mental, moral and emotional well-being of the child. "Custody," as herein defined, relates to those rights and responsibilities as exercised either by the parents or by a person or organization granted custody by a court of competent jurisdiction. "Custody" shall not be construed as the termination of parental rights set forth in § 37-1-147. "Custody" does not exist by virtue of mere physical possession of the child[.]

Tenn. Code Ann. § 37-1-102 (West)

The Debtor, pursuant to the Second Order, has been appointed guardian of his granddaughter. Title 34 of the Tennessee Code contains those statutes relating generally to guardianships and conservatorships⁴ . The definition of the term guardian applicable therein is as follows:

(9) "Guardian" or "coguardian" means a person or persons appointed by the court to provide partial or full supervision, protection and assistance of the person or property, or both, of a minor[.]

Tenn. Code Ann. § 34-1-101 (West)

Title 36 of the Tennessee Code contains the domestic relations statutes. The purpose of these provisions is to provide the "procedures for the adoption of children" and generally to ensure the best interests of the child are secured. Tenn. Code Ann. § 36-1-101. Although this title does not explicitly provide a definition for the word "custody," it does define what it means to be a guardian. In relevant part, it states:

(24)(A) "Guardian" ... means a person ... other than the parent of a child, appointed by a court or defined by law specifically as "guardian" ... to provide supervision, protection for and care for the person or property, or both, of a child or adult.

Tenn. Code Ann. § 36-1-102 (West)

(25)(A) "Guardianship" or "co-guardianship" means, for purposes of subdivision (24), a person or entity having the status of being a guardian or co-guardian who or which is responsible for the provision of supervision, protection, and assistance to the person of a child under this part or under other law of this or any other jurisdiction.

Tenn. Code Ann. § 36-1-102 (West)(25)(C)(ii) Complete guardianship ... pursuant to the entry of an order of guardianship as provided in this part, shall entitle the person or entity to the right to care for the child as provided under § 37-1-140 or as otherwise provided by the court order ...[.]

Tenn. Code Ann. § 36-1-102 (West)

This last provision refers to a section titled "Legal Custodian – Duties", defining the rights of a guardian by referencing the duties of a legal custodian:

(a) A custodian to whom legal custody has been given by the court under this part has the right to the physical custody of the child, the right to determine the nature of the care and treatment of the child, including ordinary medical care and the right and duty to provide for the care, protection, training and education, and the physical, mental and moral welfare of the child, subject to the conditions and limitations of the order and to the remaining rights and duties of the child's parents or guardian.

Tenn. Code Ann. § 37-1-140 (West)

DISCUSSION

The Trustee is correct in his argument that if this Court finds ambiguity in the Tennessee statute as to the definition of the term "custody," it must turn to legislative history to resolve the conflict, or certify the question to the Supreme Court of the State of Tennessee. Thankfully, no ambiguity exists here.

Ambiguity exists where two or more enacted provisions or statutes are inconsistent. The context of the statutory language at issue, along with the context of the entire statute form the inquiry when determining if statutory ambiguity exists. U.S. v. Chafin , 808 F.3d 1263,...