Opinion
NOT FOR PUBLICATION
Argued and Submitted at Seattle, Washington: February 19, 2010
Appeal from the United States Bankruptcy Court for the Western District of Washington. Bk. No. 07-11283-SJS. Honorable Samuel J. Steiner, Bankruptcy Judge, Presiding.
Before HOLLOWELL, MONTALI and MARKELL, Bankruptcy Judges.
This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have (see Fed. R. App. P. 32.1), it has no precedential value. See 9th Cir. BAP Rule 8013-1.
The debtor in this case recorded a declaration of homestead stating she resided on property located in Flathead County, Montana and amended her bankruptcy schedules to take an exemption in that property. However, the bankruptcy trustee contended that the debtor did not reside on the property and filed a motion to void the homestead declaration. The bankruptcy court found the debtor's assertion of residence on the property was not credible and entered an order voiding the declaration of homestead. We AFFIRM.
I. FACTS
Bonnie Snavely (Snavely) filed an individual chapter 11 bankruptcy petition on March 25, 2007. Snavely listed her address and residence in King County, Washington, in the city of Black Diamond. She checked a box stating she had been domiciled in Western Washington and had a residence or principal place of business in Western Washington for at least 180 days prior to filing bankruptcy or for the longer part of the 180 days prior to filing bankruptcy than in any other district.
Unless specified otherwise, all Code, chapter, and section references are to the Bankruptcy Code, 11 U.S.C. § § 101-1532, and to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
Snavely's bankruptcy schedules indicated she did not pay rent. Her monthly expenses included $100 for home maintenance and $3,100 for real property taxes. Snavely's interest in real property (Schedule A) included: (1) commercial property in Montana; (2) cabins at Lake McDonald in Montana, subject to a partition claim (" Lake McDonald"); (3) Kona Ranch on Amigo Road in Missoula, Montana (" Kona Ranch"); and (4) mineral rights on real property in Montana. Snavely did not claim a homestead exemption. Pursuant to § 522(b)(1) and (2), she claimed federal exemptions under § 522(d) for: real property mineral rights, cash on hand, household goods , jewelry and furs, office equipment, and an automobile. The trustee did not object to any of the exemptions claimed by Snavely within 30 days after the § 341 meeting of creditors. See Rule 4003(b).
We have taken judicial notice of the bankruptcy case docket and underlying bankruptcy records. See O'Rourke v. Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 887 F.2d 955, 957-58 (9th Cir. 1989) (court may take judicial notice of underlying bankruptcy records with respect to an appeal).
Washington has not " opted out" of the federal exemption scheme. A debtor domiciled in Washington may select either the exemptions afforded by Washington law, or the federal exemption scheme. 11 U.S.C. § 522(b); 4 Collier on Bankruptcy ¶ 522.02 (Henry Somers & Alan Resnick, eds., 15th ed. rev. 2009).
Various household furnishings and goods to which Snavely claimed an exemption were listed as being located in Black Diamond, Washington, in Kalispell, Montana, at Kona Ranch and at Lake McDonald.
On her schedules, Snavely listed her business as a real estate developer and her business address, since 1989, as the Black Diamond address. She included Kona Ranch as a business address since 1999. In October 2008, Snavely recorded a declaration of homestead in Missoula, Montana, stating that Kona Ranch was her residence and homestead. Kona Ranch was foreclosed in November 2008.
At the time Snavely recorded the declaration of homestead, Kona Ranch had been the subject of motions for relief from stay filed by its secured creditor to conduct a foreclosure sale.
On May 22, 2009, the trustee sought permission to sell Lake McDonald for the benefit of the estate. The trustee proposed to sell Lake McDonald for $103,500 to in-laws of Snavely's ex-husband because the property would otherwise be difficult to sell as it was subject to a partition action and the septic system was in disrepair. Snavely filed an opposition on June 12, 2009. Snavely argued that the trustee was not adequately marketing Lake McDonald or realizing its full value. On June 19, 2009, the trustee filed a motion for approval of sale of Lake McDonald by auction. Again Snavely objected to the proposal, asserting the property would not realize its full market value if sold at auction. After a hearing on the matter, the bankruptcy court entered an order on June 29, 2009, approving the sale of Lake McDonald by auction. On July 8, 2009, the trustee filed a notice that the auction was scheduled for August 10, 2009. At the auction, Lake McDonald sold for $301,000; the bankruptcy court confirmed the sale by an order entered on August 14, 2009.
On July 21, 2009, after the trustee was granted the authority to sell Lake McDonald, but before the auction took place, Snavely recorded a declaration of homestead in Flathead County, Montana stating that Lake McDonald was her residence and homestead.
On September 11, 2009, the trustee filed a motion requesting that the bankruptcy court declare Snavely's homestead declaration for Lake McDonald void. The trustee argued that Snavely did not reside at Lake McDonald but at Kona Ranch. To support that contention, the trustee submitted Snavely's declaration of homestead for Kona Ranch along with a declaration from Mr. Samuel (who acquired Kona Ranch at the foreclosure sale), which stated that Snavely resided at Kona Ranch and a lease for an extension of the arrangement was being negotiated. Furthermore, the trustee contended that the declaration of homestead encumbered the trustee's ability to sell Lake McDonald and that the filing of the declaration violated the automatic stay.
In a filed opposition, Snavely asserted there was no evidence suggesting she did not reside at Lake McDonald. Snavely submitted her own declared testimony stating that the Lake McDonald property was purchased in 1973, with the intention of it being a retirement home, and that improvements on the property were made in anticipation of her retirement in the home. Snavely stated she stayed at Kona Ranch when in Missoula on business, but that she otherwise resided at Lake McDonald.
A hearing on the trustee's motion to void Snavely's recording of the homestead on Lake McDonald was set for September 25, 2009. Approximately one hour prior to the hearing, Snavely amended her bankruptcy schedules to claim Montana state exemptions, including a homestead exemption for Lake McDonald under MCA § 70-32-104. The bankruptcy court granted the trustee's motion, finding that " under all the circumstances, I don't think this homestead declaration is in good faith. I don't believe the debtor." The bankruptcy court entered an order on September 25, 2009, voiding Snavely's recorded declaration of homestead on Lake McDonald. Snavely timely appealed.
At the hearing, the trustee notified the bankruptcy court that Snavely had amended her schedules to switch from federal to state exemptions but did not specify that the state exemptions claimed were under Montana law.
II. JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 157. We have jurisdiction under 28 U.S.C. § 158.
III. ISSUE
Did the bankruptcy court err in voiding Snavely's declaration of homestead for the Lake McDonald property?
IV. STANDARDS OF REVIEW
A debtor's intent to reside on property, for purposes of determining the validity of a homestead exemption claim, is a factual issue, which we review under the clearly erroneous standard. Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th Cir. BAP 2003). Clear error will only be found if, on the entire evidence, we are " left with the definite and firm conviction that a mistake has been committed." Easley v. Cromartie, 532 U.S. 234, 242, 121 S.Ct. 1452, 149 L.Ed.2d 430 (2001). Therefore, we must affirm the bankruptcy court's findings of fact unless those findings are " illogical, implausible, or without support in inferences that may be drawn from the facts in the record." United States v. Hinkson, 585 F.3d 1247, 1263 (9th Cir. 2009). Moreover, we give findings of fact based on credibility particular deference. Anderson v. City of Bessemer, 470 U.S. 564, 573-75, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985); see also Rule 8013 (on appeal, " due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses").
Questions regarding the right of a debtor to claim exemptions are subject to de novo review. Arnold v. Gill (In re Arnold), 252 B.R. 778, 784 (9th Cir. BAP 2000).
V. DISCUSSION
The briefing in this appeal conflates whether Snavely had a valid declaration of homestead with whether she had a valid homestead exemption claim. However, Snavely had not amended her bankruptcy schedules to claim a homestead exemption until immediately prior to the hearing on the trustee's motion to void the homestead declaration. Nevertheless, at oral argument on appeal, the parties agreed that the issue here is ultimately whether Snavely's claim of a Montana state homestead exemption itself is allowable and valid.
Snavely asserts that the bankruptcy court refused to allow her to amend her bankruptcy schedules to claim state exemptions. That issue was not addressed by the bankruptcy court. Although exemption rights are determined by the facts as they exist on the petition date, a debtor may create a valid exemption postpetition if his or her declaration of homestead is recorded and the bankruptcy schedules are amended to claim the exemption. See Cisneros v. Kim ( In re Kim ), 257 B.R. 680, 684 (9th Cir. BAP 2000); Arkison v. Gitts (In re Gitts), 116 B.R. 174, 178-79 (9th Cir. BAP 1990) aff'd, and adopted by Arkison v. Gitts (In re Gitts), 927 F.2d 1109 (9th Cir. 1991); Martinson v. Michael (In re Michael), 163 F.3d 526, 529 (9th Cir. 1998).
The trustee contends that the bankruptcy court treated the hearing on the motion to void the homestead declaration as a hearing on an objection to the claim of homestead exemption. Appellee's Opening Brief at 3. However, neither the transcript of the hearing nor the subsequent order that was entered by the bankruptcy court support the trustee's contention.
Under many state exemption statutes, the declaration of homestead must comply with specific requirements, which are necessary to establish and obtain a homestead exemption. For example, in order to claim a homestead exemption under Montana law, as Snavely did here, there must be a declaration of homestead recorded in the real property records where the property is located. MCA § 70-32-105. Thus, because the declaration of homestead is entwined with the homestead exemption itself, we address both issues.
A. Declaration of Homestead
The validity of a declaration of homestead depends upon its compliance with statutory requirements. United States Fid. & Guar. Co. v. Alloway, 173 Wn. 404, 406, 23 P.2d 408 (1933); Wilson v. Arkison (In re Wilson), 341 B.R. 21, 27 (9th Cir. BAP 2006). Snavely's declaration of homestead was executed and properly recorded in Flathead County. The declaration stated that Snavely " resides in Lake McDonald as a homestead."
Although the copy of the declaration of homestead included in the record on appeal does not contain the " attached Exhibit A" that describes the real property claimed as a homestead, we assume for purposes of this appeal that it properly references Lake McDonald.
On appeal, Snavely contends she " satisfied the requirements for a declaration of homestead under Montana law." Opening Brief at 8. Additionally, in a footnote in her opening brief, Snavely asserts that because " Washington law arguably applies to determine the validity of her homestead declaration, " the declaration of homestead was also valid under Washington law. After reviewing the statutory requirements for a declaration of homestead under both Montana and Washington law, we conclude that under either state's law, the bankruptcy court correctly identified Snavely's residency at Lake McDonald as necessary to a valid homestead declaration and a claim of homestead exemption.
It is unclear what law the bankruptcy court applied in making its determination that Snavely did not reside at Lake McDonald. Snavely referred to both Montana and Washington law in her briefing before the bankruptcy court. The actual exemption statute under which Snavely claimed her homestead exemption was not referenced in Snavely's pleadings before the bankruptcy court.
Snavely is entitled to claim Washington state exemptions or the federal exemptions of § 522(d). 11 U.S.C. § 522(b)(1). Section 522(b)(3)(A) provides that the exemptions are those available under applicable state law, which is defined as where the petition is filed. See Arrol v. Broach (In re Arrol), 170 F.3d 934, 935 (9th Cir. 1999).
1. Montana Law
Montana law defines a homestead as the dwelling house in which the person resides and the land on which it is situated. MCA § 70-32-101. A valid recorded declaration of homestead is required to establish a homestead exemption. MCA § 70-32-105. The declaration of homestead must be executed and acknowledged in the same manner as a grant of real property. Id . It must contain a statement that the person making it is residing on the premises (description provided) and claims them as a homestead. MCA § 70-32-106. Then, the declaration must be recorded in the office of the county clerk of the county in which the land is situated. MCA § 70-32-107.
2. Washington Law
Similarly, in Washington, a " homestead consists of real or personal property that the owner uses as a residence" or " the dwelling house or a mobile home in which the owner resides or intends to reside. . . . Property included in the homestead must be actually intended or used as the principal home for the owner." RCW 6.13.010(1). For improved or unimproved land not yet occupied, a recorded homestead declaration is necessary to establish the homestead. A declaration of homestead must contain a statement that the person making it is residing on the premises or intends to reside on the premises. RCW 6.13.040(3)(a). The declaration must provide a legal description of the premises, an estimate of the actual cash value of the premises, and must be recorded in the recording office for the county where the land is located. RCW 6.13.040(2) and (3); In re Wilson, 341 B.R. at 26.
3. Declarant Must Reside On The Property
Snavely argued she was entitled to a homestead at Lake McDonald because she resided there. Montana has statutory guidelines for determining residency. Umland v. Nat'l Cas. Co., 2003 MT 356, ¶ 20, 319 Mont. 16, 81 P.3d 500. A residence is considered to be " the place where a person remains when not called elsewhere for labor or other special or temporary purpose and to which the person returns in seasons of repose." MCA § 1-1-215. Washington has no general statutory definition of a residence.
Snavely stated in her September 22, 2009, declaration that since the time she and her former spouse bought Lake McDonald, she intended to use it as a retirement home. However, the intention to reside on a declared homestead, under Washington law, is measured at the time the declaration is filed. See In re Wilson, 341 B.R. at 26. The bankruptcy court found that Snavely could not have reasonably intended to reside at Lake McDonald at the time she filed the declaration of homestead: " She's filed a declaration of homestead -- on a piece of property which she can never live on." H'rg. Tr. at 7:15-19. Indeed, at the time Snavely filed the declaration of homestead, the order granting the trustee authority to sell Lake McDonald had already been entered and an auction was pending.
The evidence that Snavely resided at Lake McDonald consisted of her declaration, dated September 22, 2009, attached to her opposition to the trustee's motion to void the homestead declaration. In it she stated that: (1) she and her husband purchased Lake McDonald in 1973, with the intention of making it their retirement home; (2) improvements were made in anticipation of retiring in the home; (3) she stays at Kona Ranch when in Missoula and " when [she] is not in Missoula [she] reside[s] at the Lake McDonald cabin"; and finally, (4) she is essentially destitute and Lake McDonald is the only place she has to go.
For her part, the trustee contended Snavely did not actually reside at Lake McDonald based upon Snavely's prior recorded homestead declaration for Kona Ranch and a declaration from Mr. Samuel, who acquired Kona Ranch in foreclosure. Mr. Samuel's declaration stated that Snavely continued to reside on Kona Ranch after the foreclosure and that he and Snavely were in negotiations for her to continue to live there in the future.
A homestead declaration must be filed in good faith, which is construed as meaning that " 'it must speak the truth' in order to be valid." In re Wilson, 341 B.R. at 27 (citation omitted); see also, Blagg v. Bass, 261 F.2d 631, 635 (9th Cir. 1958). At the close of hearing, the bankruptcy court found that Snavely's declaration of homestead was not truthful:
All the while the trustee is selling this property, going through all kinds of contortions, finally sells it, then all of a sudden, boom, I have a homestead. . . . [U]nder all the circumstances, I don't think this homestead declaration is in good faith. I don't believe the debtor.
The bankruptcy court presided over Snavely's previously filed chapter 11 bankruptcy case in 2002. During the course of that bankruptcy, Snavely opposed a change of venue to Montana on the basis that she resided in Washington and intended to always reside in Washington. The bankruptcy court alluded to this during the September 25, 2009, hearing, stating:
H'rg. Tr. at 9:7-10; 10:2-5.
The briefing and evidence submitted to the bankruptcy court were sparse. As a result, the bankruptcy court's findings were few. The bankruptcy court found that the declaration of homestead was not filed in good faith because: (1) Snavely did not raise the issue of a homestead on Lake McDonald during the sale motions and objections; (2) she filed the bankruptcy petition stating she resided in Washington, and (3) she could have no intention to reside on Lake McDonald in the future because it was set for sale at auction. Additionally, the bankruptcy court found Mr. Samuel's declaration that Snavely resided at Kona Ranch was more credible than Snavely's declaration that she resided at Lake McDonald.
We must defer to the bankruptcy court's findings of fact based on credibility. We do not find the bankruptcy court's conclusion that Snavely did not actually reside at Lake McDonald clearly erroneous. " Where there are two permissible views of the evidence, the fact finder's choice between them cannot be clearly erroneous." Anderson v. City of Bessemer, 470 U.S. at 574.
The only evidence of Snavely's residency at Lake McDonald was her own assertion that she splits her time between Kona Ranch and Lake McDonald. There is no other evidence in the record to support that contention. For example, Snavely's bankruptcy schedules do not indicate that she resided in Montana at the time the petition was filed. During the course of the bankruptcy case, Snavely asserted she resided at Kona Ranch (a place where a portion of her business was located). Snavely's recorded homestead for Kona Ranch was not abandoned (although the property was foreclosed). Snavely did not file any amendment or document in the bankruptcy case changing her address or residence to Lake McDonald until September 25, 2009, when she amended her schedules to claim an exemption for Lake McDonald as a homestead. Moreover, Snavely did not assert, in her objections to the sale of Lake McDonald, that she resided or spent any time on the property, or that she claimed a homestead exemption in the property. Since Montana and Washington law both provide for a homestead exemption in excess of $125,000, knowing that Snavely intended to assert a homestead would have had a bearing on the trustee's decision to sell Lake McDonald.
If the property owner resides or claims a homestead on another parcel of property, he or she must also execute and record a declaration of abandonment of homestead (in the same manner as a declaration of homestead is recorded) on that property. See RCW 6.13.040(2) and (4); MCA § 70-32-302. A homestead may also be abandoned by a grant of the homestead property. Id.
Accordingly, the bankruptcy court's findings of fact were supported by the evidence and declaration testimony. The bankruptcy court applied the correct rule of law (the determination of residency on the property) to the facts and it did not err in the conclusion it reached. Therefore, we agree with the bankruptcy court that Snavely's homestead declaration is void.
B. Homestead Exemption
Snavely filed her bankruptcy petition and declared she was domiciled in Washington. Therefore, Snavely is only entitled to claim Washington state exemptions or the federal exemptions of § 522(d). 11 U.S.C. § 522(b)(1). Section 522(b)(3)(A) provides that the exemptions are those available under applicable state law, which is defined as where the petition is filed. See In re Arrol, 170 F.3d at 935. Accordingly, Snavely is not entitled to claim a Montana state homestead exemption. Even if she were so entitled, the lack of a valid homestead declaration precludes her from doing so. MCA § 70-32-105.
Snavely is also not entitled to claim a homestead exemption in Lake McDonald under Washington law. In Washington, there are two methods of creating a homestead exemption. " An automatic homestead exemption is created under RCW 6.13.040(1) for '[p]roperty described in RCW 6.13.010 [which] constitutes a homestead and is automatically protected by the exemption described in RCW 6.13.070 from and after the time the property is occupied as a principal residence by the owner.'" In re Gitts, 116 B.R. at 178. Alternatively, a property owner may establish a homestead for exemption purposes by declaration. In re Wilson, 341 B.R at 26. To declare a homestead in property " that is not yet occupied as a homestead, " the property owner must execute and record a declaration establishing his or her intent to reside on the property in the future. Id .; RCW 6.13.010(1), 6.13.040(2) and (3).
A debtor's entitlement to an exemption is determined based upon facts as they existed at the time of the bankruptcy filing, and subsequent changes to those facts typically are irrelevant for exemption determination purposes. See Hopkins v. Cerchione (In re Cerchione), 414 B.R. 540, 548 (9th Cir. BAP 2009); In re Kim ), 257 B.R. at 684. At the time Snavely filed her bankruptcy petition, she did not occupy the residence at Lake McDonald. Therefore, she was not eligible to qualify for the " automatic" homestead exemption afforded under RCW 6.13.040(1); In re Wilson, 341 B.R. at 26.
The bankruptcy court did not err in finding that Snavely did not reside or intend to reside at Lake McDonald. " [U]nder Washington law . . . a 'declaration of homestead is a right or privilege given a property owner by statute, so that its validity depends upon compliance with the statutory requirements and only by such compliance does the homestead come into existence.'" In re Wilson 341 B.R. at 27 (quoting Bank of Anacortes v. Cook, 10 Wn.App. 391, 395, 517 P.2d 633, 636 (1974)). Here, Snavely did not comply with the statutory requirement that she actually reside or intend to reside at Lake McDonald. Therefore, she is not entitled to claim a homestead exemption for Lake McDonald under Washington law. See In re Wilson, 341 B.R. at 27.
VI. CONCLUSION
For the foregoing reasons, we AFFIRM the bankruptcy court's order voiding Snavely's declaration of homestead for Lake McDonald, which precludes Snavely from claiming a homestead exemption for Lake McDonald.
The trustee subsequently filed an objection to Snavely's claimed Montana state exemptions on October 5, 2009. See e.g., Seror v. Kahan (In re Kahan), 28 F.3d 79, 82 (9th Cir. 1994) (trustee timely objected to exemption claim by filing objection within 30 days of amendment, which was not a mere clarification of initial exemption claim).
Sometimes I have a pretty good memory. . . she took the position [then] that she was a resident of Black Diamond. She had always been a resident of Black Diamond. She would always be a resident of Black Diamond. And when this case was filed, she -- the petition showed she was a resident of Black Diamond. Now, how does all of a sudden she have a homestead over in Lake McDonald?
Hr'g Tr. at 3:14-4:1.