Opinion
Case No. 01-14559-SSM, Chapter 7
March 7, 2002
Gordon P. Peyton, Esquire, Redmon, Peyton Braswell, L.L.P., Alexandria, VA, Chapter 7 trustee.
Calvin F. Larson, Esquire, Reston, VA, Counsel for the debtor.
MEMORANDUM OPINION
A hearing was held in open court on March 5, 2002, on the objection of Gordon P. Peyton, chapter 7 trustee, to the debtor's claimed homestead exemption. The trustee was present in person and represented himself. The debtor was present by his attorney of record. The issue is whether a homestead deed which was mailed to the appropriate clerk's office the day following the meeting of creditors, but not admitted to record until 28 days later, was timely under the relevant Virginia statute. For the reasons stated, the court concludes that it was not.
Facts
Albert Beatty ("the debtor") is a resident of the City of Alexandria, Virginia. He filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code in this court on November 29, 2001. On his schedules, he listed, among other assets, $4,000.00 of the equity in Condominium Unit 11, 726 S. Fayette Street, Alexandria, Virginia, as well as $100.00 in a Wachovia Bank checking account. Both the condominium unit and the checking account were claimed exempt under § 34-4, Code of Virginia.
The date set for the meeting of creditors under § 341, Bankruptcy Code, was January 7, 2002. Gordon P. Peyton was appointed and has qualified as chapter 7 trustee. On February 6, 2002, he filed an objection to the exemption of the condominium unit and checking account on the ground that a homestead deed was not timely recorded in order to perfect the exemption claim. The original homestead deed, which was admitted in evidence at the hearing, contains a certificate of the Clerk, Circuit Court of the City of Alexandria, Virginia, stating that it was recorded on February 5, 2002 at 9:00 a.m.
In his written response to the trustee's objection, debtor's counsel represents that the homestead deed was mailed from his office in Reston, Virginia, to the Clerk of the Alexandria Circuit Court on January 8, 2002, the day following the meeting of creditors. He further represents that when he subsequently telephoned the clerk's office to inquire if the homestead deed had been admitted to record, he was told that the land records division was "running a month behind" in recording documents received by mail and that mail is not date-stamped when received. Debtor's counsel confirmed that no form of delivery receipt had been obtained evidencing the date the homestead deed was delivered.
As explained by debtor's counsel, a homestead deed had earlier been mailed to the clerk of the Fairfax County Circuit Court. When debtor's counsel realized he had sent the homestead deed to the wrong court, he had the debtor sign a file copy, which counsel then notarized and sent to the Alexandria Circuit Court for recordation.
Discussion A.
An individual debtor may exempt from property of the bankruptcy estate — and thus retain, free from the claims of the bankruptcy trustee and most creditors — certain property. § 522(b), Bankruptcy Code. For Virginia residents, this includes property that is claimed exempt under the Virginia homestead exemption. Va. Code Ann. § 34-4 et seq. The homestead exemption allows a "householder" — defined as any resident of Virginia — to hold up to $5,000 of real or personal property exempt from creditor process by filing for record an instrument known as a homestead deed in the clerk's office of the Circuit Court for the city or county where the real property is located or, if personal property is claimed, where the debtor resides. Va. Code Ann. §§ 34-4, 34-6, 34-13, and 34-14. Additional amounts may be claimed exempt if the householder supports dependents or is a disabled veteran. Va. Code Ann. § 34-4 (additional $500 for each dependent) and § 34-4.1 (additional $2,000 for disabled veteran).
In the case of a debtor who has filed for bankruptcy, the homestead exemption must be "set apart" no later than 5 days after the first date set for the meeting of creditors in the bankruptcy case. Va. Code Ann. § 34-17. The procedure by which the homestead exemption is "set apart" is specified as follows:
Intervening Saturdays and Sundays are included in the five-day computation. Va. Code Ann. § 1-13.3. However, if the day upon which an act is required to be done is a Saturday, Sunday, or legal holiday when the clerk's office is closed, the act is timely if performed on the next day the clerk's office is open. Va. Code Ann. § 1-13.3:1. The first date set for the meeting of creditors in this case was January 7, 2002. The literal fifth day was therefore January 12, 2002. Because that day was a Saturday, the debtor actually had until Monday, January 14, 2002, to set apart his homestead exemption.
Such personal estate selected by the householder . . . shall be set apart in a writing signed by him. He shall, in the writing, designate and describe with reasonable certainty the personal estate so selected and set apart and each parcel or article, affixing to each his cash valuation thereof. Such writing shall be admitted to record, to be recorded as deeds are recorded in the county or city wherein such householder resides.
§ 34-14, Code of Virginia. Failure to strictly comply with the requirements of setting apart a homestead exemption results in the loss of that exemption in bankruptcy. Zimmerman v. Morgan, 689 F.2d 471, 472 (4th Cir. 1982); In re Freedlander, 93 B.R. 446, 448-49 (Bankr. E.D. Va. 1988) (Shelley, J.).
B.
Although the language of Section 34-14, could be read to require that the homestead deed actually be admitted to record by the clerk within the statutory five-day period, see, e.g., In re Franklin, 214 B.R. 826 (Bankr.E.D.Va. 1997), the Fourth Circuit reached a contrary conclusion in In re Nguyen, 211 F.3d 105 (4th Cir. 2000) and held that "under Virginia law a debtor has `set apart' property claimed as exempt once he has delivered a properly executed homestead deed, with fees paid, to the appropriate clerk[,]" even though the clerk does not record the document until after the five-day period has passed. Id at 108. In Nguyen, the meeting of creditors was held on October 1, 1997. The debtor mailed his homestead deed to the clerk of the proper state court that same day by certified mail, return receipt requested. Id. at 106. It was received by the clerk on October 3, 1997, but was not admitted to record until October 7, 1997, which was six days after the meeting of creditors. Id.
What distinguishes the present case from Nguyen is the lack of any evidence that the homestead deed was received by the clerk of the Alexandria Circuit Court within five days of the meeting of creditors. In Nguyen, the date of delivery was proved by a signed receipt, since the debtor had taken the precaution of mailing the homestead deed by a form of mail that required a receipt. Here, the homestead deed was sent by ordinary first-class mail, with no requirement for a delivery receipt, and there is no other direct evidence that would allow the court to determine that the homestead deed was actually received by the clerk of the Alexandria Circuit Court on or before January 14, 2002.
Debtor's counsel argues, however, that a chain of inferences would support a finding of timely delivery. In particular, he points to his own representation that the homestead deed was mailed on January 8, 2002; that three days is a reasonable period for delivery of mail within Northern Virginia; that he was told that the land records division of the Alexandria Circuit Court clerk's office was "running a month behind" in recording documents received by mail; and that the homestead deed was recorded on February 5, 2002, which is consistent with a one-month delay. There are several problems, however, with this argument.
First, no evidence was offered as to the date of mailing, let alone whether the envelope was properly addressed. All that is before the court is the representation of counsel that he mailed the homestead deed on a particular date to the Alexandria Circuit Court. The debtor here is attempting to rely on the evidentiary presumption that mail properly addressed, stamped, and deposited in an appropriate receptacle is presumed to have been received by the addressee in the ordinary course of the mails. Barry Russell, Bankruptcy Evidence Manual § 301.8 at 434 (West Group 2002), citing Hagner v. United States, 285 U.S. 427, 430, 52 S.Ct. 417, 419, 76 L.Ed 861 (1932). For the presumption to arise, however, there must first be admissible evidence of the predicate facts: i.e., that the mail was properly addressed, stamped, and deposited in an appropriate receptacle. Here, we have no formal evidence in the form of testimony, affidavits, stipulations, or otherwise, but only the representations of counsel. While
Incomplete addresses or errors in the address — particularly ZIP Code errors — can result in substantial delays even if the mail is ultimately received. the court obviously assumes that counsel, as officers of the court, will be truthful in representing facts within their knowledge, representations of counsel are nevertheless not evidence.
But even if the court were to accept representations of counsel as a basis for finding that the homestead deed was deposited in the mail on January 8, 2002, and that the envelope was correctly addressed, there is no evidence that would permit the court to find that the homestead deed was in the clerk's hands by January 14, 2002. Although proof of mailing gives rise to a presumption of delivery, there is no presumption as to "when" a properly mailed notice was received. Id. at 448 (citing In re Bush, 169 B.R. 34 (W.D.Va. 1994)).
Debtor's counsel does not actually state what address was placed on the envelope.
Particularly in light of the terrorist attacks of September 11, 2001, and the subsequent anthrax scare that has disrupted mail delivery in the Washington, D.C., metropolitan area, the court is unwilling to assume that mail deposited in January 2002 was being delivered locally within some arbitrary period of time, whether three days or six days.
Finally, the court declines to deduce a date of delivery by measuring backwards from the date of recording. The predicate for the debtor's argument is the assertion that the Alexandria clerk's office was "running a month behind" in recording documents received by mail. Since the homestead deed was recorded on February 5, 2002, this would be consistent with the deed having been received in the clerk's office well before January 14, 2002. The problem, of course, is that there is no evidence supporting the assertion that the clerk's office was "a month behind" in recording documents. Counsel's representation to this effect is not only not evidence; but even if counsel had been sworn and had testified, the testimony would necessarily have been excluded as hearsay, since it represents the statement of an out-of-court declarant (the unnamed person answering the telephone in the clerk's office) which is offered for the truth of the matter asserted and does not appear to fall within any of the traditional exceptions to the hearsay rule.
The factual issue here as to the date the homestead deed was received by the Alexandria clerk's office could easily have been avoided had the homestead deed been sent by certified mail, return receipt requested, as was done in Nguyen, or had it been delivered by some other means (messenger service, overnight express, or the like) that provides a delivery receipt. In the absence of a receipt, the court is left with the stark fact that the homestead deed was not admitted to record until 29 days after the first date set for the meeting of creditors.
Even accepting that it was mailed to the clerk of the Alexandria Circuit Court the day following the meeting of meeting of creditors, the court is simply unable to find that the homestead deed was received by the clerk within five days of the meeting of creditors. Since the evidence does not support a finding that the debtor properly set apart his homestead exemption within the five-day period mandated by Virginia law, the trustee's objection must be sustained and the exemption disallowed.
A separate order will be entered consistent with this opinion.