Klein v. Anderson (In re Anderson)

IN RE JESSLYN RENEE ANDERSON, Debtor,

MICHAEL P. KLEIN, Chapter 7 Trustee, Appellant, v. JESSLYN RENEE ANDERSON, Appellee.

No. 20-60014

BAP No. 19-1224

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Submitted: February 5, 2021

March 1, 2021

FOR PUBLICATION

OPINION

Appeal from the Ninth Circuit Bankruptcy Appellate Panel

Lafferty III, Brand, and Gan, Bankruptcy Judges, Presiding

Submitted February 5, 2021^* Seattle, WashingtonBefore: M. Margaret McKeown and Richard A. Paez, Circuit Judges, and William Horsley Orrick,^** District Judge.

Per Curiam Opinion

SUMMARY^***

Bankruptcy

The panel affirmed the Bankruptcy Appellate Panel's judgment affirming the bankruptcy court's ruling that a debtor was entitled to a homestead exemption under Washington law.

The panel adopted in full the BAP's opinion and attached it as an appendix. The BAP concluded that the debtor, who occupied the homestead on the petition date, was entitled to her homestead exemption despite the fact that she moved out shortly thereafter and neither re-occupied the property nor filed a declaration of non-abandonment within six months of moving out.

COUNSEL

Thomas A. Buford and Richard B. Keeton, Bush Kornfeld LLP, Seattle, Washington, for Appellant.

Tom Lester, Lester & Associates P.C. Inc., Bellingham, Washington, for Appellee.

OPINION

PER CURIAM:

Appellant Michael P. Klein, Chapter 7 trustee of the bankruptcy estate of Jesslyn Renee Anderson ("Debtor"), appeals from a judgment of the Bankruptcy Appellate Panel affirming the bankruptcy court's ruling that Debtor was entitled to a homestead exemption under Washington law. We affirm for the reasons stated by the Bankruptcy Appellate Panel in its well-reasoned March 23, 2020 published opinion. In re Anderson, 613 B.R. 279 (B.A.P. 9th Cir. 2020). The opinion of the Bankruptcy Appellate Panel, which is attached as an appendix, is adopted in full.

AFFIRMED.

APPENDIX

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: JESSLYN RENEE ANDERSON, Debtor.

MICHAEL P. KLEIN, Chapter 7 Trustee, Appellant,

v.

JESSLYN RENEE ANDERSON, Appellee.

BAP No. WW-19-1224-LBG

Bk. No. 2:17-bk-15492-MLB

OPINION

Argued and Submitted on February 27, 2020 at Pasadena, California

Filed - March 23, 2020

Appeal from the United States Bankruptcy Court for the Western District of Washington

Honorable Marc L. Barreca, Chief Bankruptcy Judge, Presiding

Appearances: Richard Keeton of Bush Kornfeld, LLP, argued for Appellant; Thomas E. Lester of Lester & Associates, P.S., Inc., argued for Appellee.

Before: LAFFERTY, BRAND, and GAN, Bankruptcy Judges.

LAFFERTY, Bankruptcy Judge:

INTRODUCTION

Michael P. Klein, chapter 7¹ trustee ("Trustee") of the bankruptcy estate of Jesslyn Renee Anderson ("Debtor"), appeals the bankruptcy court's order overruling his objection to Debtor's homestead exemption. Debtor was living in her homestead on the petition date, but she moved out shortly thereafter and neither re-occupied the property nor filed a declaration of nonabandonment within six months of moving out. Trustee contended that, despite the fact that Debtor occupied the homestead on the petition date, (1) she lacked the intent to reside there, and (2) under Washington law she had abandoned the property and was thus no longer entitled to claim the homestead exemption. The bankruptcy court distinguished the case law cited by Trustee and ruled that the Debtor was entitled to her homestead exemption despite the fact that she no longeroccupied the subject real property.

We AFFIRM.

FACTUAL BACKGROUND

Debtor filed a chapter 7 bankruptcy petition in December 2017. On her schedules, Debtor listed a 15 percent interest in real property on Brown Road in Ferndale, Washington (the "Property"), which she co-owns with her parents. She valued her interest in the Property at $90,000. On Schedule C, she claimed a homestead exemption of $125,000 under RCW §§ 6.13.010, 6.13.020, and 6.13.030. At her § 341 meeting, Debtor testified that shortly after filing bankruptcy, she got married and moved out of the Property to live with her husband.

In February 2018, Trustee filed an objection to Debtor's homestead exemption, objecting to the amount of the exemption and noting that Debtor was no longer living in the Property. He filed an amended objection in June 2019² in which he argued that Debtor was not entitled to a homestead exemption in the Property because (1) as of the petition date, she did not have a present intent to use the Property as her homestead; and(2) under Washington law, she had abandoned the Property post-petition by failing to reside there for six months or to file a declaration of homestead. Debtor responded to the objection, arguing that, under the "snapshot rule," bankruptcy exemptions are fixed as of the petition date and thus the fact that she had moved out of the Property shortly after filing was irrelevant.

The bankruptcy court held an initial hearing at which it heard argument and took the matter under advisement. At the final hearing on the objection held on August 22, 2019, the bankruptcy court overruled Trustee's objection.

Trustee timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(1) and (b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.

ISSUE

Whether the bankruptcy court erred in overruling Trustee's objection to Debtor's homestead exemption.

STANDARD OF REVIEW

The bankruptcy court's application of state exemption law is a question of statutory construction that is reviewed de novo. See Cisneros v. Kim (In re Kim), 257 B.R. 680, 684 (9th Cir. BAP 2000). We also review de novo the question of whether property is included in a bankruptcy estate. Id. De novo review is independent, with no deference given to the trial court's conclusion. Barclay v. Mackenzie (In re AFI Holding, Inc.), 525 F.3d 700, 702 (9th Cir. 2008).

DISCUSSION

Under § 522(b)(2), each state may "opt out" of the federal exemption scheme and limit its residents to the state-created exemptions. Washington has not "opted out." Therefore, a debtor in Washington may choose either the exemptions afforded under state law or the federal exemptions under § 522(d). Here, Debtor selected the Washington exemption scheme, which provides, in relevant part, that a "homestead consists of the dwelling house or the mobile home in which the owner resides or intends to reside, with appurtenant buildings, and the land on which the same are situated . . . . Property included in the homestead must be actually intended or used as the principal home for the owner." RCW § 6.13.010(1). Washington has two methods for claiming a homestead. Arkison v. Gitts (In re Gitts), 116 B.R. 174, 178 (9th Cir. BAP 1990), aff'd, 927 F.2d 1109 (9th Cir. 1991). "Property described in RCW 6.13.010 constitutes a homestead and is automatically protected by the exemption described in RCW 6.13.070³ from and after the time the property is occupied as a principal residence by the owner . . . ."RCW § 6.13.040(1). In other words, if the owner resides on the property as her principal residence, the property is automatically protected by the homestead exemption. Alternatively, if the owner is not residing in the property, she may establish a homestead by recording a declaration of homestead stating that she intends to reside on the premises and, if applicable, by recording a declaration of abandonment of any automatic homestead or any existing declared homestead. In re Gitts, 116 B.R. at 178; RCW § 6.13.040.

Washington law also provides that "[a] homestead is presumed abandoned if the owner vacates the property for a continuous period of at least six months." RCW § 6.13.050. The owner may avoid the presumption of abandonment by filing a declaration of nonabandonment of homestead with the appropriate county recorder. Id.

Washington exemption statutes are liberally construed in favor of protecting family homes. See Jefferies v. Carlson (In re Jefferies), 468 B.R. 373, 380 (9th Cir. BAP 2012) (citing In re Dependency of Schermer, 169 P.3d 452, 465-66 (Wash. 2007); Pinebrook Homeowners Ass'n v. Owen, 739 P.2d 110, 113 (Wash. Ct. App. 1987)).

When the homeowner files bankruptcy, her right to claim an exemption is fixed as of the petition date; this is often referred to as the "snapshot rule." Wolfe v. Jacobson (In re Jacobson), 676 F.3d 1193, 1199 (9th Cir. 2012) (citing White v. Stump, 266 U.S. 310, 313 (1924)); see also Hopkins v. Cerchione (In re Cerchione), 414 B.R. 540, 548 (9th Cir. BAP 2009) ("A debtor's entitlement to claimed exemptions generally is determined as of the date of such debtor's bankruptcy filing."). Under § 522(b)(3)(A), exemptions are to be determined in accordance with the state law applicable on the date of filing. In re Jacobson, 676 F.3d at 1199. The entire state law applicable on the filing date is determinative of whether an exemption applies. Id. (citing Zibman v. Tow (In re Zibman), 268 F.3d 298, 304 (5th Cir. 2001)). See also In re Wieber, 347 P.3d 41, 44 (Wash. 2015) (court must consider the entire homestead exemption chapter to answer certified question of whether homestead applies extraterritorially to real property in other states).

In his appellate brief, Trustee did not dispute that, as of the petition date, Debtor was living in the Property and was thus entitled to the automatic homestead exemption on that date, and he seemed to have abandoned any argument that she was required to have an intent to continue to reside there. At oral argument on appeal, however, counsel for Trustee argued that because Debtor moved out shortly after the petition date, she could not have intended to continue living in the Property on that date. But, as the bankruptcy court aptly noted in its oral ruling, the plain language of Washington's homestead statute reflects that Debtor was entitled to an automatic homestead exemption on the petition date, so long as she was occupying the Property as her principal residence, regardless of her future plans: "Property...