In re Felix

582 B.R. 915

IN RE: Austin Chidi FELIX; Dorothy Ify Felix, Debtors.

No. 17–8004

United States Bankruptcy Appellate Panel of the Sixth Circuit.

Decided and Filed: April 6, 2018

ON BRIEF: Nancy Ashbrook Willis, LAW OFFICE OF NANCY ASHBROOK WILLIS, Mount Vernon, Ohio, for Trustee. Austin Chidi Felix, Dorothy Ify Felix, Reynoldsburg, Ohio, pro se.

Before: DELK, HARRISON, and WISE, Bankruptcy Appellate Panel Judges.

MARIAN F. HARRISON, Bankruptcy Appellate Panel Judge.

This appeal concerns the bankruptcy court's order denying Austin and Dorothy Felix's (collectively "debtors," individually Mr./Mrs. Felix) homestead exemption based on its finding that the debtors were not domiciled in Ohio for the 730 days required by 11 U.S.C. § 522(b)(3)(A) before they filed their bankruptcy petition. Because the bankruptcy court's interpretation of the facts was not clearly erroneous, its ruling is affirmed.

ISSUES ON APPEAL

1. Whether this appeal should be dismissed because the debtors' brief was filed one day late and does not comport with the formatting requirements.

2. Whether the bankruptcy court erred in refusing to admit certain evidence offered by the debtors.

3. Whether the bankruptcy court erred in determining that the debtors were not entitled to claim the Ohio Homestead Exemption in their property located in Ohio because they were not domiciled in Ohio for the 730 days prior to filing their bankruptcy petition.

JURISDICTION

The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Southern District of Ohio has authorized appeals to the Panel, and none of the parties have timely elected to have this appeal heard by the district court. 28 U.S.C. § 158(b)(6), (c)(1). A final order of the bankruptcy court may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it " ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.’ " Midland Asphalt Corp. v. United States , 489 U.S. 794, 798, 109 S.Ct. 1494, 1497, 103 L.Ed.2d 879 (1989) (citation omitted). A bankruptcy court's order denying a claim of exemption is a final, appealable order. Menninger v. Schramm (In re Schramm ), 431 B.R. 397, 399 (6th Cir. BAP 2010) (citation omitted).

STANDARDS OF REVIEW

Conclusions of law are reviewed de novo . Mediofactoring v. McDermott (In re Connolly N. Am., LLC ), 802 F.3d 810, 814 (6th Cir. 2015) (citations omitted); Isaacs v. DBI–ASG Coinvester Fund III, LLC (In re Isaacs ), 569 B.R. 135, 139 (6th Cir. BAP 2017) (citation omitted). "Under a de novo standard of review, the reviewing court decides an issue independently of, and without deference to, the trial court's determination." Menninger v. Accredited Home Lenders (In re Morgeson ), 371 B.R. 798, 800 (6th Cir. BAP 2007) (citation omitted).

On the other hand, "[f]indings of fact ... must not be set aside unless clearly erroneous, and the reviewing court must give due regard to the trial court's opportunity to judge the witnesses' credibility." Fed. R. Civ. P. 52(a)(6) ; see In re Aubiel , 534 B.R. 300, 302 (6th Cir. BAP 2015) ; Lester v. Storey (In re Lester ), 141 B.R. 157, 160 (S.D. Ohio 1991). "Factual findings are clearly erroneous only when the reviewing court ‘is left with the definite and firm conviction that a mistake has been committed.’ " United States v. Ray , 803 F.3d 244, 265 (6th Cir. 2015) (quoting United States v. Navarro–Camacho, 186 F.3d 701, 705 (6th Cir. 1999) ). "Where there are two permissible views of the evidence, the factfinder's choice between them cannot be clearly erroneous." Anderson v. City of Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 1511, 84 L.Ed.2d 518 (1985) (citations omitted).

A dispute regarding domicile, as in the present case, is generally considered as a mixed question of law and fact. Morad v. Xifaras (In re Morad ), 323 B.R. 818, 822 (1st Cir. BAP 2005) (citations omitted). See also Ku v. Brown (In re Ku ), No. AZ–16–1174–BJuL, 2017 WL 2705301, at *3 (9th Cir. BAP June 21, 2017) (citations omitted) ("Domicile premised upon intent and presence involves mixed questions of law and fact[.]"). As the Supreme Court recently observed, "[m]ixed questions are not all alike"—those that rest primarily on the facts are reviewed for clear error and those that rest primarily on the law are reviewed de novo . U.S. Bank Nat'l Ass'n v. Vill. at Lakeridge, LLC , ––– U.S. ––––, 138 S.Ct. 960, 966, ––– L.Ed.2d –––– (2018). "[T]he standard of review for a mixed question all depends—on whether answering it entails primarily legal or factual work." Id.

"The bankruptcy court's decision to admit or exclude evidence is reviewed for an abuse of discretion." Lebovitz v. Hagemeyer (In re Lebovitz ), 360 B.R. 612, 615–16 (6th Cir. BAP 2007) (citation omitted). " ‘A court abuses its discretion when it commits a clear error of judgment, such as applying the incorrect legal standard, misapplying the correct legal standard, or relying upon clearly erroneous findings of fact.’ " Gourlay v. Sallie Mae, Inc. (In re Gourlay ), 465 B.R. 124, 126 (6th Cir. BAP 2012) (quoting Auletta v. Ortino (In re Ferro Corp. Derivative Litig. ), 511 F.3d 611, 623 (6th Cir. 2008) ). Where an objection to the admission of evidence is not raised at the trial court level, however, the standard of review is plain error. United States v. Olano , 507 U.S. 725, 733, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993). To prove that a lower court made a plain error in admitting evidence, the party who failed to object must show (1) an error (2) that is "clear or obvious," (3) that affected the party's "substantial rights," and (4) that "seriously affects the fairness, integrity or public reputation of judicial proceedings." Puckett v. United States , 556 U.S. 129, 135, 129 S.Ct. 1423, 173 L.Ed.2d 266 (2009) (internal quotations omitted).

FACTS

The debtors filed their chapter 7 bankruptcy petition in the Southern District of Ohio on January 2, 2015. On Schedule A, the debtors listed two properties: 973 Mueller Drive, Reynoldsburg, Ohio ("Ohio Home") and 14700 Elberfeld Court, Upper Marlboro, Maryland ("Maryland Home"). The debtors listed the Ohio Home as their residence, and on Schedule C, the debtors claimed a $265,800 homestead exemption pursuant to Ohio Revised Code Ann. § 2329.66(A)(1). On their Statement of Intent, the debtors asserted their intent to retain the Ohio Home and surrender their Maryland Home.

During the 11 U.S.C. § 341 Meeting of Creditors (" § 341 Meeting") held on February 10, 2015, the debtors informed the chapter 7 trustee ("Trustee") of their desire to move to Maryland and indicated they had been commuting between Ohio and Maryland. The debtors stated that they previously owned a home health care business in Ohio. They sold that business to their son several years prior to filing bankruptcy but continued to help him manage the business. The debtors attempted to start a similar business in Maryland but were unsuccessful. When questioned, Mrs. Felix gave confusing responses as to where she currently lived and where the family intended to live. The debtors' attorney at the time stated the debtors' intent to "offer the house in Ohio as an ... [offer] of compromise to the IRS.... [D]o a loan modification in Maryland.... Then [the debtors are] going to move there.... That's the master plan." ( § 341 Meeting Tr. at 23:24–24:7). Mrs. Felix testified that the debtors would not stay in the Ohio Home because of the IRS' tax lien. (Id. at 22:6–13). When asked if the Maryland Home was ever a residence, Mrs. Felix answered "I stayed there a lot." (Id. at 22:24–23:1). When asked further about living in both places, Mrs. Felix answered "I moved to Maryland.... I was commuting .... I really wanted to leave Ohio." (Id. at 23:5–14). In a follow-up question, Mrs. Felix was asked about plans for the family to move and responded: "Yes, they were going to meet us in Maryland but the house in Maryland is in foreclosure at this point, so." (Id. at 23:17–22). At that point, the debtors' attorney interrupted and stated: "The plan is to hopefully offer the house in Ohio as an [offer] of compromise to the IRS. Hope it clears it. And then hope [the debtors] can do a loan modification in Maryland.... Then they're going to move there.... That's the master plan." (Id. at 23:24–24:7).

Following the initial § 341 Meeting, the Trustee objected to the debtors' homestead exemption in the Ohio Home, arguing that it was not their domicile during the 730 days immediately preceding their chapter 7 filing (i.e., from January 2, 2013, through January 2, 2015). The Trustee argued that the debtors' domicile was located at the Maryland Home during the relevant period. The debtors filed a response to the objection, noting that "they would like to eventually move to Maryland when the case was over, but they identified as currently being Ohio residents." (Debtors' Resp. at 1, March 31, 2015, Case No. 15–50016, ECF No. 16). The Ohio homestead exemption is preferable, as it permits each debtor to claim a $132,900¹ exemption in a primary residence, or $265,800 for a joint bankruptcy case, whereas Maryland limits the exemption to $6,000, and that amount may not be claimed by both a husband and wife in the same bankruptcy proceeding. See Ohio Rev. Code Ann. § 2329.66(A)(1)(b) and Md. Code Ann., Cts. & Jud. Proc. § 11–504(f)(1)(i)(2)(A) and (f)(3).

After the objection and response were filed, the Trustee took Rule 2004 examinations of the debtors, and the bankruptcy court heard five days of testimony on the Trustee's objection to the debtors' homestead exemption. Prior to the first and second hearings, the parties stipulated to a number of facts. On January 23, 2017, the bankruptcy court entered an order sustaining the Trustee's objection to exemption. On February 6, 2017, the debtors timely filed a notice of appeal of the order sustaining the Trustee's objection to exemptions.

DISCUSSION

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