Opinion
Bankruptcy No. 03-11077DWS
October 7, 2003
David A. Scholl, Esquire, Newtown, PA, FOR DEBTOR
Timothy A. Gallogly, Esquire, Peter A. Lesser, Esquire, SIRLIN GALLOGLY LESSER, P.C., Philadelphia, PA, FOR WATERTOWER
William C. Miller, Esquire, Philadelphia, PA, TRUSTEE
Dave P. Adams, Esquire, Philadelphia, PA, UNITED STATES TRUSTEE
ORDER
AND NOW, this 7th day of October 2003, upon consideration of the objection of Watertower Office Associates, L.P. to confirmation of Debtor's Chapter 13 plan (the "Objection"), after notice and hearing and for the reasons set forth in the accompanying Memorandum Opinion;
It is hereby ORDERED that the Objection is SUSTAINED and confirmation is DENIED. An amended Chapter 13 plan shall be filed by October 28, 2003. If a plan is not timely filed, this case will be dismissed without further notice and hearing.
MEMORANDUM OPINION
Before the Court is the objection (the "Objection") of Watertower Office Associates, L.P. ("Watertower") to confirmation of Debtor's Chapter 13 plan on the grounds that Debtor's improper exemption of a vacation home with admitted equity of $200,000 has deprived the estate of property, the value of which should be distributed to creditors. The Chapter 13 trustee joins in the Objection. At the confirmation hearing held on October 2, 2003, no evidence was elicited. Rather the parties focused their arguments on the timeliness of the Debtor's exemption. The Debtor does not appear to refute Watertower's contention that the exemption is improper but only its timeliness. Both parties have submitted memoranda on the issue, and thus the matter is ripe for decision.
While objecting to the plan on the grounds of inequitable treatment, the legal ground arises under 11 U.S.C. § 1325(a)(4) (as recognized by the Debtor) which requires a plan to provide for distributions to creditors not less than the amount that would be paid if the property were liquidated under Chapter 7. Since the Court shall only confirm a plan if all the confirmation requirements are met, Watertower's failure to identify the relevant statutory provision is not fatal.
BACKGROUND
On January 23, 2003 the instant Chapter 13 case was filed by James P. Peters, an attorney. In his Schedules that were filed on February 21, 2003, he listed two parcels of real property which he owns with his wife. The first, his residence, was valued at $360,000 subject to a mortgage of $260,000. The second, a vacation home in Scarboro, Maine (the "Vacation Home"), was valued at $300,000 with a mortgage of $100,000. On Schedule C, he claimed "Pennsylvania Entireties Law" to exempt both his residence located in Pennsylvania and the Vacation Home located in Maine. His Chapter 13 plan proposes to pay $50 per month for 36 months based on monthly income of $9,400 and expenses of $9,350. Watertower, a former landlord with a disputed unsecured claim of $137,000, see Schedule F, filed an objection to confirmation on April 15, 2003, fifteen days after the § 341 meeting was held and prior to the date objections to the Debtor's exemptions had to be filed. Watertower did not, however, file a separate document objecting to Debtor's exemption, an omission that Debtor contends is fatal to its objection to confirmation. For the reasons that follow, I disagree.
I shall take judicial notice of the docket entries in this case. Fed.R.Evid. 201, incorporated in these proceedings by F.R.Bankr.P. 9017.See Maritime Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194, 1200 n. 3 (3d Cir. 1991); Levine v. Egidi, 1993 WL 69146, at *2 (N.D. 111. 1993); In re Paolino, 1991 WL 284107, at *12n. 19 (Bankr. E.D. Pa. 1991): See generally In re Indian Palms Associates, Ltd., 61 F.3d 197 (3d Cir. 1995). While a court may not take judicial notice sua sponte of facts contained in the debtor's file that are disputed, In re Augenbaugh, 125 F.2d 887 (3d Cir. 1942), it may take judicial notice of adjudicative facts "not subject to reasonable dispute . . . [and] so long as it is not unfair to a party to do so and does not undermine the trial court's factfinding authority." In re Indian Palms Assoc., 61 F.3d 197, 205 (3d Cir. 1995) (citing Fed.R.Evid. 201(f) advisory committee note (1972 proposed rules). Moreover, "factual assertions in pleadings, which have not been superceded by amended pleadings, are judicial admissions against the party that made them. Larson v. Gross Bank, 204 B.R. 500, 502 (W.D. Tex. 1996) (statements in schedules). See also In re Musgrove, 187 B.R. 808 (Bankr. N.D. Ga. 1995) (same); In re Leonard, 151 B.R. 639 (Bankr. N.D.N.Y. 1992) (same).
The Debtor's memorandum makes reference to an objection by the Chapter 13 trustee to confirmation based on disposable income. No one argued that issue at the confirmation hearing. Since I am not confirming the plan on the grounds Watertower asserted, I need not address any other impediment to confirmation. Hopefully all issues will be taken into account in an amended plan.
DISCUSSION
Watertower contends, and Debtor does not dispute, that it is Maine law where the Vacation Home is located that determines the Debtor's ability to exempt the equity in the Vacation Home. In In re Kaplan (First Options of Chicago. Inc.), 162 B.R. 684 (Bankr. E.D. Pa. 1993), aff'd 189 B.R. 882 (E.D. Pa. 1995), former Bankruptcy Judge David A. Scholl who is present counsel to the Debtor herein, stated as follows:
While Schedule C refers to "Pa. Entireties Law," Debtor never addressed the significance of that notation, and did not advance such a proposition at the hearing.
"the state law applicable to a claim of exemptions in a debtor's real estate is the law of the state in which the property is located, [citations omitted]. Otherwise, the exemptions in realty to which a debtor would be entitled would depend on the choice of venue of a bankruptcy case, thus encouraging forum-shopping. Therefore, although Pennsylvania law applies to Debtor's personal residence, which is located in Pennsylvania, the Debtor's right to exemptions in the two condominiums, which are located in New Jersey, are subject to the application of New Jersey law.
The United States Supreme Court long ago made clear that notwithstanding the filing of bankruptcy, property rights are defined by state law, not bankruptcy law. It reasoned that "the uniform treatment of property interests by both state and federal courts within a state serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving' a windfall' merely by reason of the happenstance of bankruptcy." Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918 (1979). As Maine, not Pennsylvania, determines the form of ownership of the Vacation Home, the Pennsylvania exemption for entireties property is not dispositive.
As Watertower correctly observes, property may not be owned as tenants by entireties in Maine. Poulson v. Poulson, 145 Me. 15, 70 A.2d 868 (1950) (tenancy by entirety has not existed in Maine since 1844). The only recognized joint interests in real or personal property recognized in Maine are copartners, joint tenants or tenants in common. Id. Thus, the Vacation Home is not held as tenants by entireties, and the Pennsylvania exemption for such ownership is not available to Debtor.
In response, Debtor argues that as no objection to such exemption has been filed, Taylor v. Freeland Kronz, 503 U.S. 638, 643-46, 112 S.Ct. 1644, 1648-49 (1992) forecloses consideration of the objection now without regard to whether or not the exemption has merit. Debtor is correct that an objection filed later than the deadline set forth in F.R.Bankr.P. 4003(b) may not be considered. Debtor is incorrect in concluding that Watertower's objection to Debtor's exemption lodged within its objection to confirmation which was filed within the required 30 days after the conclusion of the § 341 meeting is untimely.
This assumes no timely request for an extension has been made or the exemption schedule has not been amended.
Debtor cites no authority that supports his narrow view of what constitutes the filing of an objection. As the cases he does cite make clear, it is not uncommon that an objection to an exemption is incorporated in an objection to confirmation. So long as the document is properly served as required by Rule 2003(b) and it complies with the time deadlines of Rule 4003(b), there is no basis to dismiss it because it was not labelled "Objection to Exemption" and made the subject of a hearing separate and apart from confirmation.
Debtor cites two cases, neither of which support his view but rather stand for the proposition with which no issue is taken, that untimely objections may not be considered. In In re Granzow, 210 B.R. 989 (E.D. Mich. 1997) and In re Smith, 179 B.R. 437 (Bankr. E.D. Pa. 1995), the objections were lodged as part of an objection to confirmation. Both courts held that these objections to confirmation were filed after the bar date for objections to exemptions and were untimely. The courts never stated that because the objections to the exemptions were included in objections to confirmation, they did not qualify as objections to exemptions. Contrary to the timely filing by Watertower, the objections to exemptions (contained in the objections to confirmation) were simply too late.
Nothing in Taylor v. Freeland Kronz, supra, compels the result urged by the Debtor. The rationale of the Supreme Court in construing the Rule 4003(b) deadline strictly was to prompt parties to act so as to produce finality for debtors, a result not obtainable if exceptions, such as the bad faith urged by Taylor, were allowed. Here Watertower acted promptly, and Debtor does not contend that he was not put on notice that his exemption was being challenged by the Objection filed and served consistent with the requirements of Rule 4003(b). To ignore Watertower's objection to exemption on the technical grounds asserted by Debtor would be to elevate form over substance without any principled reason for so doing. As noted by Watertower, a similar argument was made and rejected in Liberty State Bank and Trust v. Grosslight (In re Grosslight), 757 F.2d 773, 777 (6th Cir. 1985) (timely filing of adversary proceeding treated as an objection to claim of exemptions); and In re Stanley, 143 B.R. 900, 903 (Bankr. W.D. Mo. 1992) (timely filing of motion for relief from stay claiming that debtor had no equity in property to preclude her from claiming the homestead exemption put debtor on notice of objection to exemption so that failure to file formal objection to the claim was not fatal). It will be rejected here as well.
As Debtor does not have a valid exemption in the Vacation Home, his Chapter 13 Plan may not be confirmed under § 1325(a)(4). However, I will allow him to file a further Chapter 13 plan should he choose to do so. Such amended plan must be filed promptly since the meager $50 per month he has been paying for the benefit of enjoying the automatic stay and seeking to confirm his inequitable plan may not be allowed to persist. If an amended plan consistent with the value of debtor's non-exempt property and his disposable income is not filed as ordered, this case will be dismissed without further notice or hearing.
An Order consistent with this Memorandum Opinion shall be entered.