Opinion
NOT FOR PUBLICATION
Argued and Submitted at Pasadena, California: May 18, 2006
Appeal from the United States Bankruptcy Court for the Central District of California. Honorable Ellen Carroll, Bankruptcy Judge, Presiding. Bk. No. LA 01-42025-EC.
Before: PAPPAS, BRANDT and KLEIN, Bankruptcy Judges.
MEMORANDUM
Appellants Patrick Mbaba and Lynette Mbaba (" Mbabas") appeal the decision of the bankruptcy court denying their Motion to Avoid Liens under 11 U.S.C. § 522(f) of Clark Fergus & Associates Profit Sharing Trust (" Fergus") and American Contractors Indemnity Company (" ACIC"). We VACATE the order of the bankruptcy court and REMAND the case to the bankruptcy court to conduct an evidentiary hearing.
FACTS
Mbabas filed for protection under chapter 7 of the Bankruptcy Code on October 24, 2001. In their Schedule C, they claimed a homestead exemption for a residence located in Bakersfield, CA (the " Exempt Property"), of $22, 284.78, pursuant to Cal. Code Civ. Proc. § 704.730. No timely objection was made to this exemption claim. The chapter 7 trustee filed a report indicating that this was a " no asset" bankruptcy case on December 13, 2001. Mbabas were granted a discharge on February 4, 2002, and the bankruptcy case was closed on February 22, 2002.
About three years later, on March 25, 2005, Mbabas moved to reopen the bankruptcy case to allow them to pursue a motion to avoid certain judgment liens on the Exempt Property under § 522(f) and/or § 506. One of the judgment lien creditors, Fergus, objected to reopening the case, primarily because Mbabas were no longer the owners of the Exempt Property, which they had allegedly transferred to Margret Effion Mbaba on August 27, 2002.
The bankruptcy court held its first hearing on the motion to reopen on March 30, 2005. The hearing was ordered continued because one of the lien creditors had not been given notice. However, a transcript indicates that, prior to the hearing, the court had issued a tentative ruling on the motion to reopen. While the tentative ruling is not part of the record, it was discussed by Mbabas' counsel and the court at the hearing on March 30. One aspect of that tentative ruling concerned whether the chapter 7 petition had been properly filed in Los Angeles. Mbabas' counsel argued that the petition had been correctly filed in Los Angeles because the debtor's principal place of business, an engineering company, was located there, and thus venue was appropriate under 28 U.S.C. § 1408. The bankruptcy court asked whether Mbabas' business was a separate entity from their personal affairs and was apparently satisfied when Mbabas' counsel said " no."
On June 20, 2005, Mbabas filed a Motion to Avoid Lien under § 522(f) (the " Avoidance Motion"). In the Avoidance Motion, Mbabas allege that judgment liens held by Fergus and ACIC impair their exemption in the Exempt Property and should, therefore, be avoided pursuant to § 522(f).
On June 29, 2005, Fergus filed an Opposition to Motion to Avoid Lien (the " Fergus Opposition"). The gist of the Fergus Opposition is that Mbabas did not own the Exempt Property and that it had been transferred to Margret Effiong Mbaba by deed executed on August 27, 2002. Therefore, Fergus argued, Mbabas could not utilize § 522(f) to avoid its lien.
The bankruptcy court held its first hearing on the Avoidance Motion on August 3, 2005. The court addressed the Fergus Opposition, noting that the relevant date for determining the debtors' ownership of the Exempt Property was the petition filing date, and that Mbabas' subsequent transfer of the property to a new owner did not affect the exemption on the filing date. However, the bankruptcy court continued the hearing and required that Mbabas submit an appraisal of the Exempt Property, together with evidence of the debt owed on each of the liens, as of the petition date.
On September 14, 2005, Fergus filed a further response to the Avoidance Motion (the " Fergus Response") alleging that Patrick Mbaba's declaration concerning the value of the Exempt Property did not consider the " reasonable current value" of the Exempt Property. The Fergus Response acknowledges Mbabas' claim of exemption of $22, 284.78, and admits: " The homestead exemption was not objected to by any creditor within the time constraints of the Bankruptcy Code."
On September 15, 2005, ACIC filed a Joinder to the Fergus Response. ACIC repeated Fergus' allegation that Mbabas' Avoidance Motion did not comply with the court's order of June 24, 2005, that " any motion under 11 U.S.C. § 506 will be based on current value of the real property." Further, ACIC argued that Mbabas had failed to prove that the Exempt Property was their principal residence. ACIC attached a copy of Mbabas' petition in support of its argument that the Exempt Property was not Mbabas' homestead and therefore, if the Exempt Property was not a homestead, ACIC's lien was not subject to avoidance under § 522(f).
The final hearing on the Avoidance Motion occurred on September 26, 2005. Counsel for Mbabas, Fergus and ACIC participated. The court began by noting that ACIC had brought to the court's attention that Mbabas may not have resided at the Exempt Property when they filed the bankruptcy petition. Apparently agreeing with ACIC, the bankruptcy judge stated that " it seems pretty clear to me that the debtors didn't reside in Bakersfield when they filed the petition."
In addition to the court's concern about Mbabas' residence when they filed the petition, the court found that:
In addition to that being an issue I think I have to deny this motion because I don't have any information. . . . I don't have any information regarding the amount of the lien[s] as of the petition date. I don't' have any information regarding the amount of the tax lien - mortgage lien or tax lien as of the petition date. So I can't do an analysis to determine to what extent, if any, these other liens impair a homestead exemption because I don't know . . . the amount of the underlying liens as of the petition date. . . . I don't have enough information. . . . I thought at prior meetings . . . I made it clear I needed information as of the filing date. . . . I still don't have it. I'm going to deny this motion.
Tr. Hr'g 4:25 - 6:7 (September 26, 2005).
ISSUES ON APPEAL
1. Whether the bankruptcy court made adequate findings of fact concerning Mbabas' place of residence in relation to their claim of a homestead exemption.
2. Whether the bankruptcy court erred in denying Mbabas' Avoidance Motion because Mbabas failed to provide information concerning the amount due on the liens as of the petition date.
STANDARD OF REVIEW
Whether a creditor's judicial lien is avoidable pursuant to § 522(f) is a question of law that the Panel reviews de novo. Law Offices of Moore v. Stoneking (In re Stoneking), 225 B.R. 690, 691 (9th Cir. BAP 1998); Yerrington v. Yerrington (In re Yerrington), 144 B.R. 96, 98 (9th Cir. BAP 1992), aff'd, 19 F.3d 32 (9th Cir. 1994).
" The standard for adequacy of factual findings in the Ninth Circuit is 'whether they are explicit enough on the ultimate issues to give the appellate court a clear understanding of the basis of the decision and to enable it to determine the grounds on which the trial court reached its decision.'" Leavitt v. Soto (In re Leavitt), 171 F.3d 1219, 1223 (9th Cir. 1999), citing Amick v. Bradford (In re Bradford), 112 B.R. 347, 353 (9th Cir. BAP 1990) and quoting Louie v. United States, 776 F.2d 819, 822-23 (9th Cir. 1985).
DISCUSSION
1. The bankruptcy court did not make adequate findings of fact concerning Mbabas' place of residence in relation to their homestead exemption claim.
Mbabas argue that the bankruptcy court improperly based its decision to deny the Avoidance Motion in part upon a finding that Mbabas did not reside at the Exempt Property when they filed the bankruptcy petition. Indeed, the bankruptcy court commented at the hearing that " it seems pretty clear to me that the debtors didn't reside in Bakersfield when they filed the petition, " Tr. Hr'g 3:17-18. And the court again referred to the residence question as an " issue:" " I still . . . have an issue regarding what was the debtor's residence as of the time of filing of the petition." Tr. Hr'g 3:14-16.
The parties attribute different interpretations to the court's statements concerning Mbabas' residence when the bankruptcy case was commenced. In their Opening Brief, Mbabas argue that the court viewed the residence issue as a venue matter, and they question " whether the venue of Mbabas which was unopposed in the bankruptcy filing can be used as a reason to deny the Avoidance Motion." Fergus, on the other hand, regards the court's comments as a ruling concerning the validity of Mbabas' homestead exemption: " Debtors do not qualify for a homestead exemption on the Bakersfield property because they can not show continuous residence until the filing of the petition in bankruptcy and the date of the recording of the lien. It was obvious to the trial court that debtors had been residing in Los Angeles and not in Bakersfield at the time they filed their petition in bankruptcy."
Arguably, the bankruptcy court based its decision to deny the Avoidance Motion, at least in part, on the " residence issue." But the court provided no explicit findings concerning Mbabas' residence at the time of filing, nor did it explain the importance it assigned to the residence issue in its decision to deny the Avoidance Motion.
The determination of entitlement to a California homestead is a multi-faceted and intensely factual process, which, in part, focuses upon the debtor's intent. See, e.g., Kelley v. Locke (In re Kelley), 300 B.R. 11, 21 (9th Cir. BAP 2003), citing Ellsworth v. Marshall, 196 Cal.App.2d 471, 474, 16 Cal.Rptr. 588 (Ct. App. 1961). And where a debtor resides for purposes of the homestead exemption law under Cal. Code Civ. P. § 704.730 is not always obvious. See, e.g., Arrol v. Broach (In re Arrol), 170 F.3d 934 (9th Cir. 1999)(California homestead exemption can apply to out-of-state domicile); Redwood Empire Prod. Credit Ass'n v. Anderson (In re Anderson), 824 F.2d 754 (9th Cir. 1987)(extended absence from homestead to attend college may defeat homestead exemption); In re Pham, 177 B.R. 914 (Bankr. C.D. Ca. 1994)(six-month absence