Opinion
Case No. 09-31055.
December 22, 2009
FOR THE DEBTOR: ROBERT R. REXRODE, ESQ., Knoxville, Tennessee.
FOR PROBUILD: DOUGLAS L. DUNN, ESQ., Knoxville, Tennessee.
FOR THE UNITED STATES TRUSTEE: PATRICIA C. FOSTER, ESQ., Howard H. Baker, Jr. United States Courthouse, Knoxville, Tennessee 37902.
MEMORANDUM OPINION
THE COURT: The record in this bankruptcy case reflects that Mr. Parton filed his Voluntary Petition under Chapter 7 on February 28, 2009. Schedule C to that Petition establishes that he did not claim a homestead exemption in any residential real property. According to the schedules, he jointly owns with his wife as tenants by the entireties a house and lot located at either 1709 or 1749 Floyd Way in Gatlinburg, Tennessee, the Motion and Petition give two different street addresses. The case was closed on July 9, 2009, without the granting of Mr. Parton's discharge because he failed to obtain the instructional course in personal financial management. Thereafter, on October 1, 2009, the Debtor filed a Motion to Reopen to allow the filing of the Certificate of Debtor Education and an Order reopening the case was entered on October 27, 2009. He did, on November 13, 2009, file the Certificate of Debtor Education. He also on November 13, 2009, filed the Motion to Avoid Judicial Liens on Residential Real Estate, which was amended on November 20, 2009, and by this Motion seeks to avoid pursuant to 11 U.S.C. § 522(f)(1)(A) judicial liens in the Floyd Way residence allegedly asserted by Exterior Systems/Norandex/Reynolds, two liens by that entity, by The Contractor Yard, and by Blalock Lumber Company d/b/a Blalock Ready Mix. Mr. Dunn, on behalf of The Contractor Yard, has filed a Response in Opposition to the Motion. That response was filed on December 7, 2009. The other entities, Blalock Lumber Company and Exterior Systems/Norandex/Reynolds have not responded, but they really are not required to respond. They have not been adequately served.
Mr. Rexrode, there are a number of procedural issues I am concerned about. Mr. Dunn in ProBuild, it is now, who succeeded to the interest of The Contractor Yard, raised the issue of Local Rule 4003-2. That local rule states:
A motion to avoid a judicial lien filed by a debtor pursuant to 11 U.S.C. § 522(f)(1)(A) must set forth — (1) the factual basis for the motion, including the amount of the lien; (2) the identity and fair market value of the property subject to the lien; (3) the nature and amount of any other debts or obligations secured by an interest in the property; and (4) the dollar amount of the exemption.
With the exception of a street address for the property, this rule has not been complied with. There has been no effort to comply with the rule. There is nothing in the Motion setting forth the value of the property; the Motion does not state whether there is or is not a first, second, or third mortgage on the property; does not set forth the amounts of any mortgages encumbering the property; and does not set forth the amounts of the judgment liens. It does identify where the judgments are recorded, but that is all. The Motion does not state whether the judgment liens are against both the Debtor and his non-debtor spouse or just against the Debtor. None of the required information has been alleged so there has been no compliance with Rule 4003-2.
Additionally, with the exception of ProBuild who has appeared, the other entities, as I have said, are not before the court. They were not properly served with the Motion. The Certificate of Service evidences that attorneys have been served for all these entities. Mr. Christopher Conner, attorney, was served for Systems/Norandex/Reynolds; Mr. Dunn for The Contractor Yard; and R.W. Brooks was served as attorney for Blalock Lumber Company. This does not comply with the Federal Rules of Bankruptcy Procedure. Rule 9014(b) of the Federal Rules of Bankruptcy Procedure says that motions shall be served in accordance with Rule 7004 of the Federal Rules of Bankruptcy Procedure. If one will look at service by mail, which is the way these were served, there is no provision for service of an attorney for a party unless that party happens to be the Debtor. In this case, the Debtor is the entity who filed the particular motion so those entities are not before the court.
There are substantive issues also. The Motion on its face, as Mr. Dunn alluded to in his argument, states clearly that the Debtor did not reside on the property at the time he filed the bankruptcy petition on February 28, 2009. If you look at my decision in In re Miller, 246 B.R. 564, 566 (Bankr. E.D. Tenn. 2000), I made this finding:
Exemptions to which a debtor is entitled are determined as of the commencement of a bankruptcy case. See, e.g., Armstrong v. Peterson (In re Peterson), 897 F.2d 935, 937 (8th Cir. 1990) (Bankruptcy exemptions are `fixed on the date of filing' and `only . . . the law and facts as they existed on the date of filing the petition' are to be considered.); In re Kollar, 218 B.R. 349, 352 (Bankr. E.D. Pa. 1998) (collecting cases). Thus, the homestead exemption to which the Debtor is entitled under Tennessee law is the exemption that could be claimed on . . . the date he filed his Voluntary Petition.
Tennessee Code Annotated § 26-2-301(a), if I am able to locate it, essentially provides for the homestead exemption in property in the amount of $5,000.00 individually or $7,500.00 for a couple on property used as a "principal place of residence." Here, again, the Debtor was not residing on this property at the commencement of his bankruptcy case so he was not entitled to claim a homestead exemption.
Another concern I have is he did not claim an exemption, as I have noted. There was no homestead exemption claimed on Schedule C. The Debtor is not entitled to avoid a judicial lien in property that is not claimed as exempt. That is one of the criteria, property has to be allowable as exempt and claimed as exempt.
More importantly is that this property was owned by Mr. Parton as a tenancy by the entireties. In my opinion In re Arwood, 289 B.R. 889 (Bankr. E.D. Tenn. 2003), I held:
Accordingly, § 522(b)(2)(B) does not entitle the Debtor to claim an exemption on entireties property; instead, it entitles him to exempt his possessory interest in the Real Property, allowing him to maintain possession of his home without the threat of a third party encumbering that right.
In summary, because the Debtor has filed for bankruptcy and his spouse has not, `his bankruptcy estate [includes] only his right of survivorship in the [Real Property].'
289 B.R. at 894. Again, quoting from Arwood:
The bankruptcy courts in Tennessee have consistently held that `[a] debtor has no homestead exemption in the right of survivorship.' (citations omitted)
[B]ased upon Tennessee law co-mingled with the Bankruptcy Code, the Debtor does not have a right to claim his homestead exemption in the Real Property because he does not actually have a fully vested interest in either the Real Property or the homestead exemption thereupon. If the Debtor survives his spouse, he will become fully vested in the Real Property, and at that time, he will also become fully vested in the homestead exemption provided by Tennessee's Homestead Statute.
For these procedural and substantive reasons, this Motion should not have been filed, Mr. Rexrode. You indicated you read the Arwood case. I do not believe you read it very thoroughly. The Motion will be denied.
This Memorandum constitutes findings of fact and conclusions of law as required by FED. R. CIV. P. 52(a), made applicable to this contested matter by Rule 9014(c) of the Federal Rules of Bankruptcy Procedure. I will see that an order is entered.
Note:
This transcript contains the court's edits, corrections, and non-substantive changes to the oral opinion given in open court on December 17, 2009.