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In Matter of Odes Ho Kim

Case No. 10-10882 (C.A. 5, Apr. 9, 2014)

A non-debtor spouse contends that her homestead rights in the Texas residence that she shares with her husband, the debtor in bankruptcy, preclude a forced sale of the property and alternatively, that if a sale occurs, she must be compensated for the loss of her homestead interest in the property. The district court affirmed the bankruptcy court’s holding that the non-debtor spouse’s homestead rights were limited to the dollar amount of the exemption in 11 U.S.C. § 522(p). The district court also affirmed the bankruptcy court’s holding that there was no unconstitutional taking of the value of the non-debtor spouse’s interest in the homestead. We affirm.

I



Odes Ho purchased and took title in his name to a home in Irving, Texas where he and his wife Chong Ann Kim resided at all times pertinent to this case. The purchase price of the home was $1,048,028.36. At the time of the purchase, litigation was pending between Mr. Kim and Appellee Dome Entertainment Center, Inc. (Dome) in California, and approximately two years after Mr. Kim had purchased the residence, judgment was entered against him for more than $5,000,000. Less than 1,215 days after the residence was acquired by Mr. Kim, Dome instituted the underlying bankruptcy proceedings by filing an involuntary petition for relief against Mr. Kim. Following a trial, the bankruptcy court entered an order for relief under Chapter 7 of the Bankruptcy Code. Mr. Kim subsequently converted the case to a Chapter 11 proceeding and now operates as a debtor-in-possession.

Pursuant to 11 U.S.C. § 522(b)(3)(A), Mr. Kim claimed an unlimited homestead exemption under Texas law for the residence. Dome objected, asserting that, pursuant to § 522(p), the exemption should be limited to a $136,875. The bankruptcy court sustained the objection.

Mr. Kim then instituted the underlying adversary proceeding, seeking a declaratory judgment “to determine the extent of the interest of the Debtor’s bankruptcy estate in and to the Property pursuant to 11 U.S.C. § 541,” and to determine Mrs. Kim’s rights and claims to the residence by virtue of her claim that it constitutes her homestead under Texas law. Dome intervened, and Dome and Mrs. Kim filed cross motions for summary judgment seeking a determination of whether Mrs. Kim retained an exempt homestead interest in the residence and, if so, whether that interest precluded a trustee or debtor-in- possession from forcing a sale of the property or, alternatively, required Mrs. Kim to be compensated in the event of a forced sale.
 

 

Judge(s): Priscilla R. Owen
Jurisdiction: U.S. Court of Appeals, Fifth Circuit
Related Categories: Bankruptcy , Constitutional Law , Construction , Contracts , Damages , Domestic Relations , Entertainment , Finance / Banking , Government / Politics , Property , Shareholder , Taxation , Wills / Trusts / Estates
 
Circuit Court Judge(s)
Catharina Haynes
Patrick Higginbotham
Priscilla Owen

 

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see 11 u.s.c. § 522(b)(1), (3) (allowing debtor to exempt property under applicable 38 no. 10-10882 the sale of the estate’s interest and the interest of any co-owner in property in in this case, the kims’ residence constituted (a) the separate property of mr. 23 6 estate, courts may not impose a lien on the separate property of one spouse 33 partition sale as she could for the proceeds of any other type of sale of her homestead interest. dome instituted the underlying bankruptcy proceedings by filing an involuntary residence. both the united states supreme court and the supreme court of a life estate and homestead rights is that the former can be alienated81 spouse’s homestead rights. 4 the texas constitution and the texas property code protect property that rights in that real property. states that this section “restricts the so-called ‘mansion loophole’” that allows the kims contend that mrs. kim’s homestead rights are her separate absolute immunity issue.6 property that is currently their residence. amendment will occur unless she is compensated in accordance with the wallace v. rogers (in re rogers), 513 f.3d 212, 217 (5th cir. 2008). rights.89 simple interest in the residence is the property of the bankruptcy estate under 60 of the kims considers the basis for congress’s decision to allow a maximum reversal was that the trial court had “imposed a lien on ms. heggen’s homestead 68 28 kims’ residence resides in 11 u.s.c. § 363, and that statutory authority is case: 10-10882 document: 00512590659 page: 13 date filed: 04/09/2014 case: 10-10882 document: 00512590659 page: 16 date filed: 04/09/2014 v. dearing (in re perry), 345 f.3d 303, 314-15 (5th cir. 2003)). [she] has not been divested of her homestead rights.”). property, agreeing in pertinent part that, immediately prior to the petition date, 71 bankruptcy estate in and to the property pursuant to 11 u.s.c. § 541,” and to 72 spouse, or both, actually owns the fee interest in the homestead”); lucas v. lucas, 143 s.w. § 541(a) are plain and unambiguous. the words “interest” as used in these unless it is “to secure the other spouse’s right of reimbursement for community the lifetime of the surviving spouse, or so long as the survivor elects to use or occupy the same as bankruptcy court’s entry of the agreed final judgment, which incorporated the right and that she was not entitled to compensation, beyond her homestead 2003) (upon death of one spouse, a “homestead shall descend and vest in like manner as other impressed with homestead rights. it is beyond doubt that the intent and district court to order the sale of a texas family home in which a wife, who was the supreme court of texas has recognized that texas homestead laws the court concluded that “[t]he limited agreement kim to be compensated in the event of a forced sale. id. (emphasis in original). economic rights.65 no. 10-10882 therefore “remain[ed] definite and concrete, touching the legal relations of id. at 698 (emphasis in original). after the bankruptcy court issued its summary judgment order, the case: 10-10882 document: 00512590659 page: 1 date filed: 04/09/2014 benefit of the life tenant . . .”); see also tex. prop. code ann. § 5.009 (west 2003) (specifying the co-owners of such property, as the case may be, and to the partial taking of homestead rights to the extent that the real property had a value in excess 14 5 remainder of her life, if she so chooses (and subject to certain exceptions and decision rogers, and relied upon by dome, does not support the proposition that in the next section of this opinion whether mrs. kim is entitled to compensation texas constitution; that is, it was not a tax lien, it was not a purchase money total minatome corp. v. jack/wade drilling, inc. (in re jack/wade drilling, inc.), rights under state law and that mrs. kim has no right, as a non-debtor, to assert case: 10-10882 document: 00512590659 page: 11 date filed: 04/09/2014 whether the residence has a market value of $1,000,000 or $136,875, the value adjusted depending on the resolution of issues in the “final order [on appeal] id. the commencement of a case under section 301, 302, or 303 of this title $136,875 exemption under § 522(p). under the bapcpa, a texas debtor must the discount rate. but she cannot sell her homestead rights in the residence. and conclusions of law as the district court applied.”8 litigation was pending between mr. kim and appellee dome entertainment 1153, 1155-56 (tex. 1912) (stating that “the surviving wife is as fully protected in the use and mrs. kim has homestead rights in that property. such as mr. kim would not be just compensation for mrs. kim’s homestead judgment. rights when that spouse has only a possessory interest in the real property by as provided in this chapter or by other rules of law.”); tex. prob. code ann. §§ 283, 284 (west and becker v. tidewater, inc.,3 see gonzales v. gonzales, 273 s.w. 798, 798 (tex. 1925) (indicating that the that are not at issue here. other texas statutes provide in benchmark bank, the internal f i l e d property of the bankruptcy estate, notwithstanding the fact that a third party 78 moot the controversy). id. part of the market value of her residence. as already noted, if she had a life 25 purpose of the bapcpa was to limit the dollar amount of homestead 50 spouse’s homestead rights in the separate property of the other spouse was not the bankruptcy code similarly contains express authorization to sell the sale of a texas residence that is the homestead of a non-debtor spouse would case: 10-10882 document: 00512590659 page: 6 date filed: 04/09/2014 either of them transferred any previous interest in a principal residence to the interest in the homestead. we affirm. used to enhance the wife’s separate property, and the trial court’s award to the 8 id. for the fifth circuit interests that are not part of the bankruptcy estate. mrs. kim’s homestead see murphy v. slaton, 273 s.w.2d 588, 596 (tex. 1954) (“a life tenant is entitled to enumerated exceptions such as a purchase money lien, property taxes, and home no. 10-10882 homestead within that period, there is no question that the cap in §522(p)(1) surviving heirs.74 the 1,215-day period. the only interest that came into being within the 1,215- mr. kim elected to exempt the residence that he and indicated that when a federal statute permits a person’s property to become misunderstand the holding in rogers. occur unless mrs. kim is compensated more than the $136,875 exemption. 40 authorities indicate that even a “life estate could not [be] worth more than the although whether a bankruptcy court has the between the parties left both petitioner and respondent with a considerable pursuant to which settlement amount was contingent on outcome of issue on appeal, did not creates an estate. such estate is comprised of all the following property, and mrs. kim filed cross motions for summary judgment seeking a id. of the capped homestead exemption under § 522(p) ($136,875 at the time of the latter cannot. when a spouse no longer possesses the real property that was she designated this separate property as her homestead after her case: 10-10882 document: 00512590659 page: 15 date filed: 04/09/2014 husband’s homestead rights, and never became part of the bankruptcy estate. rights, they maintain, are her separate property, entirely independent of her from our examination of texas law, it is not entirely clear that texas bankruptcy and has a homestead interest independent of her husband’s in the is the exact economic equivalent of a life estate.”78 the surviving spouse is entitled to live interests through the mechanism of judicial valuation and distribution”). come within more than one of the sale provisions in § 363, such as subsection (g), id. our decision in id. id. the statutory authority of the bankruptcy court to authorize the sale of the rogers, 513 f.3d at 215. “[p]ermitting [the husband] to enforce his judgment lien could lead to the 2 select between federal exemptions set forth in § 522(d) and the exemptions id. see rodgers, 461 u.s. at 680 (holding that 26 u.s.c. § 7403 requires “complete 20 11 u.s.c. § 522(m); davis v. davis (in re davis), 170 f.3d 475, 478 (5th cir. 1999) proceeds required under § 7403”); id. at 693-94 (reading § 7403 “to contemplate, not merely to exist.82 directly pertains to the calculation of the economic value of a spouse’s homestead liens.33 no. 10-10882 of the texas constitution (as it existed at the time of the facts giving rise to the and was therefore not part of the bankruptcy estate under 11 u.s.c. § 541. 61 divorced.49 the sale of the kims’ residence and to apply all proceeds above the dollar amount laster, 826 s.w.2d at 129. the irs may obtain a valid federal tax lien and enforce its lien against a texas and the supreme court of texas has said that the iii it could be argued that a forced sale of property in bankruptcy is more cases are inapposite. the legal issues on which the bankruptcy court’s order bankruptcy abuse prevention and consumer protection act (bapcpa).13 it may be more comfortable and enjoyable to reside in a residence the bankruptcy court could require the sale of the kims’ homestead, and if so, case: 10-10882 document: 00512590659 page: 3 date filed: 04/09/2014 see united states v. rodgers, 461 u.s. 677, 685 (1983) (recognizing that “the rights this paragraph addressed the trial court’s award of $301,500 to the wife, which revenue service (irs) assessed liens against a husband’s property, including united states court of appeals the kims simply assert that if their residence is sold, a taking of mrs. an ownership interest in the real property on which homestead rights are impressed with homestead rights had been acquired by the debtor long before to continue to live in a home having a market value of $136,875, should not be prejudice or in anywise interfere with the rights of the other tenants in common.”). $125,000 to $136,875 in 2007, from $136,875 to $146,450 in 2010, and from $146,450 to take advantage of the loophole.18 construction of streets, the spouse is entitled to have all of the proceeds from the 55 debtor must acquire vested economic interests in the homestead property during id. at 660. constituted mrs. kim’s separate property or sole managed community property priscilla r. owen, circuit judge: see generally 11 u.s.c. § 363. mrs. kim share under state law.41 foreclosure of [the wife’s] homestead, a result contrary to the protections plainly no. 10-10882 the couple then defaulted on the bank loan, and the bank foreclosed on in the widow during her life or for such period as she may elect to use same as petition was filed in this case in december 2007, the relevant dollar amount was $136,875. consent of the claimant’s spouse”); tex. fam. code ann. § 5.001 (west 2006) (“whether the the texas court 49 homestead interest. we said in rogers that “‘it is a well-recognized principle of appeal of an order denying absolute immunity, the supreme court evaluated the led to the bankruptcy court’s denial of summary judgment in that same order haber oil co. v. swinehart (in re haber oil co.), 12 f.3d 426, 435 (5th cir. 1994) bestow subject matter jurisdiction on federal courts by waiver or consent.” (citation omitted)). however, the supreme court of texas has held that when homestead interest since $136,875 in proceeds would be impressed with her homestead (a) under the sole, equal, or joint management and control of n.9 (5th cir. 1984), and zimzores v. veterans admin., 778 f.2d 264, 267 (5th cir. 1985)). “the bank is subrogated to a valid federal tax lien against the [couple’s] substantive nature of the property rights held by a bankrupt and its creditors the second basis for the court’s the land” that is “a separate homestead interest.” the supreme court of texas law may be enforced as against a non-debtor spouse, in spite of the non-debtor 88 holder to foreclose and required third parties to be compensated for their the judicial conference of the united states adjusted the dollar amount from lien, nor was it an improvement lien for which the ‘work and material [had been] “debtors living in certain states [to] shield from their creditors virtually all of the 9 from the forced sale were to be reinvested in another homestead, which would 461 u.s. 677 (1983). law that one’s homestead right in property can never rise any higher than the window would never become part of the bankruptcy estate even though both the where he and his wife chong ann kim resided at all times pertinent to this case. whether the residence is mr. kim’s separate property or the couple’s community passed. possessory interest in the 26-acre tract against all creditors—except the owner, or one with of the date of the bankruptcy filing. dome contends that it is entitled to force in 2005, however, congress enacted 11 u.s.c. § 522(p) as part of the texas supreme court’s statement that a homestead right “gives protective legal judgment order. dome argues that the parties’ settlement agreement and the 14 case: 10-10882 document: 00512590659 page: 17 date filed: 04/09/2014 protection from all but the three types of constitutionally permitted reimbursement, gives protective legal security rather than vested calculations of the value of texas homestead rights in the rodgers decision.77 deed of trust provided that to the extent that the loan proceeds were used to pay the remaining question is whether, upon a forced sale of the kims’ court rejected the contention of a deceased husband’s heirs that the proceeds, 12 residence that she shares with her husband, the debtor in bankruptcy, preclude “the homestead estate is not identical to a life estate because one’s homestead 457 u.s. 731, 743-44 (1982). 125, 130 (tex. 1991) (observing that the “homestead protection . . . can arise only in the person awarded to the other spouse. the homestead interest is a legal the kims have provided no id. at 148 (alteration in original) (quoting tex. const. art. xvi, § 50). as an initial matter, dome contends that both the district court and this homestead property, for taxes he owed, although his wife was not liable for those interests, even those in real property acquired during the statutory 1,215-day or family who has a present possessory interest in the subject property”); see generally in re lyle w. cayce residence, citing the methodology applied in the rodgers hypothetical. neither black, 22 f.3d at 570 (reaffirming wells v. hico indep. sch. dist., 736 f.2d 243, 251 alone, is not a vested economic interest in property, cannot be expanded to mean under texas law. transferred from the debtor’s previous principal residence (which was acquired interests in the property.70 section applies, the trustee shall distribute to the debtor’s spouse or debtors to take full advantage of the unlimited homestead exemption under state 62 was acquired before the bapcpa was enacted. the supreme court has odes ho kim; chong ann kim, homestead character.”75 24 19 state, law, the supreme court of texas recognized in benchmark bank v. dome entertainment center, inc., 29 64 79 were subsequently resolved by stipulation. there has been no jury trial on the the kims contend that because mrs. kim was not a party to her husband’s 3 governed by the same laws of descent and distribution, but it shall not be the cap on the dollar amount of that election to mean that unless a person has some interest in real property, there can be no not hold the property in fee simple in order to invoke homestead protection” and that there can the parties have not cited any specific the 17 estate in the residence, she would be entitled to sell that life estate for its market principal residence, if the debtor’s previous and current residences are located acquired the real property within the 1,215-day period and designated it as her no. 10-10882 9 accorded by the homestead laws vest independently in each spouse regardless of whether one interest in the other spouse’s separate property even after the spouse who owns or tenant by the entirety,26 law, if the residence were not a homestead, it would be property that mr. kim’s may sell, convey, or encumber the homestead without the joinder of the other spouse except reasons.62 its provisions to the facts before us. we therefore do not resolve today whether 22 f.3d 568, 570 (5th cir. 1994). 5 u.s.c. § 522(p). the district court also affirmed the bankruptcy court’s holding 76 23 22 including any compensation of the trustee, of such sale, according 80 bankruptcy filing) to satisfy its judgment against mr. kim. authority that texas law would value homestead rights as “the exact economic preceding the filing of bankruptcy], without more, does not fall within the the fifth amendment of the united states constitution would occur if the that, based on the record, did not fit into any of the categories allowed by the authorized the judicial sale of property to satisfy the tax indebtedness of (2) all interests of the debtor and the debtor’s spouse in community id. which the debtor had an undivided interest as a tenant in common, joint tenant, amount of interest that was acquired by the debtor during the id. property on which a surviving spouse lives is condemned and taken for the § 541(a), to exclude real property acquired within the statutory window that is the purchase price of the home was $1,048,028.36. at the time of the purchase, interest in the capped exemption under § 522(p), upon the sale of the residence. wherever located and by whomever held: statutory period,55 such as a rural or business homestead might, which could affect the value of 16 id. agreement and stipulation as to fact issues. the district court’s order affirming we note at the outset that this constitutional argument is likely limited fifth circuit id. § 363(g). heggen v. pemelton, 836 s.w.2d 145, 148 (tex. 1992). moorhouse v. crew, 273 s.w.2d 654, 655-56 (tex. civ. app.—san antonio 1954,writ ref’d) 13 economic right to reimbursement. the supreme court of texas emphasized that the determination by congress to permit an exemption of $136,875 for a debtor rights can be lost through abandonment.”80 granted summary judgment in favor of dome are on appeal; the fact issues that mrs. kim does not contend that she would be entitled to compensation for totaling $1,800, should be partitioned so that the complaining heirs would id. at 146. restrictions on partition appeals from the united states district court debts and signed a deed of trust creating a lien on the couple’s homestead.32 either subsection (a)(1) or (a)(2)(a) of 11 u.s.c. § 541.43 receive the value of their respective interests in one-half of the community courts would place exactly the same economic value on homestead rights as it while the as already discussed above, that court has also said see tex. fam. code ann. § 3.202 (west 2006). 44 17 reiterated in benchmark bank v. crowder that a “spouse has a vested estate in compensation” under the fifth amendment,86 entered an order for relief under chapter 7 of the bankruptcy code. mr. kim 34 spouse, mrs. kim did not have a “separate and distinct exempt homestead april 9, 2014 no. 10-10882 virtue of its homestead character. case: 10-10882 document: 00512590659 page: 7 date filed: 04/09/2014 community property of mr. and mrs. kim. it is undisputed that under texas rogers, 513 f.3d at 216. we also note that the kims have failed to address the applicability of 11 47 no. 10-10882 dome and the district court 1 $5,000,000. less than 1,215 days after the residence was acquired by mr. kim, than one person owns an interest in homestead property, there is a cotenancy.27 neither argues that the kims’ residence was purchased before bapcpa was on the death of the husband or wife, or both, the homestead shall descend and the kims have not contended in these proceedings that court by applying the same standard to the bankruptcy court’s findings of fact said in heggen: vest in like manner as other real property of the deceased, and shall be her separate, vested interest in the homestead upon foreclosure.”39 the district court subsequently affirmed the summary judgment order, we express no opinion as to whether a debtor could validly claim that, as to real exemptions. the words congress chose to express this intent in § 522(p) and his separate property, community property he solely managed, or jointly residence that they share, the texas supreme court’s decision in benchmark a federal tax statute, 26 u.s.c. § 7403, sale of the property.” the bankruptcy court also denied dome’s motion in part, which transferred mr. pemelton’s reimbursement right in one in lucas the texas equity in their homes” and results in some debtors relocating to those states to parties having adverse legal interests.”7 united states v. rodgers, 461 u.s. 677, 698-99 (1983). a spouse cannot transfer her homestead rights and receive value in 75 property under state or local law, a debtor may not exempt any to sell and reinvest life tenancy property). 919 s.w.2d 657, 662 (tex. 1996) (citing united states v. rodgers, 461 u.s. 677, 680 odes ho purchased and took title in his name to a home in irving, texas wife and no tax liens attached to her property.37 “analogous to a life tenancy, with the holder of the homestead right possessing no. 10-10882 prior to the beginning of such 1215-day period) into the debtor’s current 48 59 41 of the cap in § 522(p). see tex. prop. code ann. § 41.004 (“a homestead cannot be abandoned without the no. 10-10882 no. 10-10882 homestead rights in heggen precluded a court from impressing upon her may be permitted, under the order of the proper court having the jurisdiction, bankruptcy.50 homestead exemption of $136,875 for a spouse who is a debtor in bankruptcy, or id. at 659. on the decision of our court in in re rogers,46 by in re rogers, 513 f.3d at 227. even if the kims’ residence is mr. kim’s separate property, 1215-day period preceding the date of the filing of the petition that 18 delinquent taxpayers. the issue was whether § 7403 empowered a federal financial stake in the resolution of the question presented,” and that the case kim, (b) mr. kim’s sole management community, or (c) the joint management would on a life estate. one significant difference between the economic value of analysis of the trial court’s judgment by confusing the “right of “interest” to mean a vested economic interest in property acquired within the tex. const. art. xvi, § 50; see also tex. prop. code ann. § 41.001 (west 2000) we explained that congress intended for the term “dependent” is defined in § 522 to include a spouse. 11 u.s.c. § 522(a)(1). to use and occupy the same. by settlement. for example, in nixon v. fitzgerald,5 22 i 16 the possession of the property are contingent upon the spouse’s use and possession of the property for homestead no. 10-10882 (noting that “[a]fter the partition sale, [a wife’s] homestead right carries over to her portion property as of the commencement of the case that is— the supreme court held that § 7403 expressly permitted a forced sale and that the residence constituted (a) mr. kim’s separate property, (b) mr. kim’s sole among clerk independent of her husband’s interest in that property, the bankruptcy court 20 declaratory judgment “to determine the extent of the interest of the debtor’s the loss of a homestead right is inconsequential because such a right is not a debtor. a homestead.”85 the district court, the parties entered into a settlement agreement and resolved qualifies as a homestead from “forced sale[] for the payment of all debts,” with compensated for the loss of her homestead interest in the property. the district court further held that mrs. kim’s homestead exemption is not a vested property even though federal tax liens were not identified in the provisions meaning of § 541 and § 522(p) if it is impressed with homestead rights. 11 u.s.c. § (b)(1). texas could, under the bapcpa, force texas debtors to utilize the homestead.35 dome cites black v. j.i. case co.2 the question was whether a $146,450 cap51 § 363. we do note that the supreme court of texas has held that when more homestead a lien to enforce a money judgment representing the husband’s vested (holding that spouse’s homestead interest was not abandoned because right to possession be a homestead in “the possessory estate of a tenancy at will [that] protects [a debtor’s] impressed. the supreme court of texas has described homestead rights as liable for the debts of another, a takings clause objection could not be property retained its separate property characteristics under texas law after she perry, 345 f.3d at 314 (5th cir. 2003) (explaining that “[u]nder texas law . . . a claimant need for the foregoing reasons, the district court’s judgment is affirmed. that mrs. kim’s homestead interest is worth more than 50% of the value of their no. 10-10882 of the proceeds of sale. [she] may seek continued homestead protection for the proceeds of the 10 not moot, and we have jurisdiction to decide the merits of the issues presented. we note that a passage in our decision in rogers arguably could be read that it constitutes her homestead under texas law. dome intervened, and dome compensation for her homestead interest above and beyond the maximum property. she maintains that a taking in violation of the due process clause of the residence and, if so, whether that interest precluded a trustee or debtor-in- 11 u.s.c. § 522(p)(2)(b). pursuant to 11 u.s.c. § 522(b)(3)(a), mr. kim claimed an unlimited before the filing of bankruptcy proceedings in not an “interest” within the 21 id. at 660. determined solely on the market value of the real property. the kims have in rogers, the debtor inherited property before she married,48 43 but the court assumed “only for the sake of illustration, that a homestead estate determination of whether mrs. kim retained an exempt homestead interest in that there was no unconstitutional taking of the value of the non-debtor spouse’s the kims rely upon the united states supreme court’s hypothetical derived from the bankruptcy power of congress under article i, section 8, tex. prop. code ann. § 41.001(c); zibman v. tow (in re zibman), 268 f.3d 298, 305 divorce, but this designation was made within 1,215 before she filed for continued). under consideration in rogers. under texas law, a spouse has a homestead 57 7 before higginbotham, owen, and haynes, circuit judges. indicate that homestead rights have no value. to the contrary, the wife’s we consider the sale of the delinquent taxpayer’s own interest, but . . . the recognition of third-party the court directed that all of the proceeds or another, more generally applicable, subsection of section 522(p) expressly “limits the [texas] homestead exemption under certain to cases, like this one, in which the real property that constituted the homestead possible events not relevant here), even though legal title is held by other 87 owen v. owen, 500 u.s. 305, 308 (1991). district court granted each of the parties leave to file an interlocutory appeal of commencement of the case. case: 10-10882 document: 00512590659 page: 4 date filed: 04/09/2014 through foreclosure,36 the husband and his wife obtained a loan from a bank to pay the tax see perry v. dearing (in re perry), 345 f.3d 303, 308 n.5 (5th cir. 2003); see also $136,875. the bankruptcy court sustained the objection. for her homestead interest in her residence upon forced sale of that property in 42 recognized that “in the absence of controlling federal bankruptcy law, the homestead is the separate property of either spouse or community property, neither spouse concluded, however, that “the bank must compensate [the wife] for the loss of order the sale of the kims’ residence, even though mrs. kim is not a debtor in the texas court explained that “vested economic right.”60 85 the rights similar to those of a life tenant for so long as the property retains its in a bankruptcy appeal, this court “review[s] the decision of the district necessities may require or his judgment dictate, where a will gives a life estate for the use and section 52 - descent and distribution of homestead; her community property interest in the residence if a forced sale occurred. she improvements to that [separate] property.”63 value, which might well be calculated using assumptions based on her age and homestead and may enforce its lien through foreclosure.”38 any outstanding liens, the bank would be subrogated to any and all rights and succeeded to her former husband’s 26.17% fee simple interest); sayers v. pyland, 161 s.w.2d 2 as a debtor-in-possession. during the course of discussing the bases for its holdings, the texas court a homestead is “exempt from seizure for the claims of creditors”). foreclosure upon, a homestead.28 69 bankruptcy code. congress did not intend for “interest,” as used in § 522(p) and in effect at the time mr. kim purchased the homestead property allowed texas acquire homestead rights in the common property, the rights so acquired are not superior to is defined by state law.”45 case: 10-10882 document: 00512590659 page: 14 date filed: 04/09/2014 the order and consolidated the three appeals. while that appeal was pending in offered no insight into this question either as a general proposition or when “not a homestead interest” standing alone.56 hypothetical in rodgers. mrs. kim devotes one and one-half pages of her brief lien.34 made the election. the surviving spouse to remain in possession of the homestead property for the 81 id. that “a homestead interest established within the statutory period [1,215 days probably was engendered by the trial court's problematic judgment 89 case: 10-10882 document: 00512590659 page: 18 date filed: 04/09/2014 the supreme court of texas’ decision in heggen v. pemelton,59 by stipulation the outstanding fact issues regarding the nature of the residential see laster v. first huntsville properties co., 826 s.w.2d 125, 131 (tex. 1991) (holding character is maintained by the surviving spouse.73 partitioned among the heirs of the deceased during the lifetime of the surviving 27 contends only that she has a homestead interest in the residence that has value a bankruptcy court. with regard to the authority of the bankruptcy court to case: 10-10882 document: 00512590659 page: 23 date filed: 04/09/2014 in conjunction with that purpose, the 3 82 bank supports the unremarkable proposition that a right of sale under federal id. at 148. 15 not liable for any of the taxes owed by her husband, had a homestead interest.22 the value of the right to continue when a federal tax law, 26 u.s.c. § 7403, permitted a lien 56 32 law.12 tailored to mrs. kim’s own specific circumstances. mrs. kim is not seeking any real property,” but “shall not be partitioned among the heirs of the deceased during the holding that the bankruptcy code preempts mrs. kim’s homestead property continued homestead rights of a spouse following the death of the owner of the homestead prerogative . . . ultimately grounded in the constitutional mandate to ‘lay and the interlocutory summary judgment order and reflected the parties’ settlement heggen had imposed a lien on a woman’s separate property to secure an award this case presents only questions of law, which are whether 19 case: 10-10882 document: 00512590659 page: 25 date filed: 04/09/2014 equivalent of a life estate,”79 may have an interest in that property.24 in the matter of: odes ho kim, by a spouse who has contributed to the improvement of property no. 10-10882 66 exceeds in the aggregate [$136,875]15 25 586 f.3d 358, 365 n.4 (5th cir. 2009). to live in a home having a market value of $1,000,000 as compared to the right (citations omitted). dome argues, and the district court held, that based the kims have not adequately briefed their claim that a taking would as a result, it is also undisputed that the fee controversy) as valid against a homestead.30 case: 10-10882 document: 00512590659 page: 9 date filed: 04/09/2014 that “[t]he homestead interest . . . gives protective legal security rather than right, title, or interest that he owns in the property attempted to be impressed bankruptcy court filing and the statutory 1,215-day period.58 (5th cir. 2001); laster v. first huntsville properties co., 826 s.w.2d 125, 132 (tex. 1991) purposes); laster, 826 s.w.2d at 129 (“this homestead protection, however, can arise only in to compensation in the event of a forced sale.47 with a homestead right.’”71 real property and the homestead rights in that real property were acquired 769, 773 (tex. 1942) (holding that it is “well settled that, while one tenant in common may case: 10-10882 document: 00512590659 page: 24 date filed: 04/09/2014 had the debtor homestead rights. 10 successfully interposed if the property interest “came into being after enactment no. 10-10882 iv 30 impressed with homestead rights, the homestead rights in that property cease additional homestead protections to spouses.11 improvement debts10 58 11 creditors could reach to satisfy debts he incurred because the residence is either pub. l. no. 109-8, § 322, 119 stat. 23, 96-97 (2005). which provides for the sale of property “free and clear of any vested or contingent compensation for the loss of the homestead estate” to a spouse “as part of the distribution of on property that belonged to their community estate”). the person or family who has a present possessory interest in the subject property.”); see also interest created by the constitution that provides prophylactic as a homestead, or so long as the guardian of the minor children of the deceased that former wife’s interest in her homestead was held in cotenancy with a mortgagee who the rights and remedies of the other joint owners. he can acquire no such rights as will similarly, the parties before us $273,750 when both spouses are debtors in bankruptcy.88 security rather than vested economic rights”67 the bankruptcy court’s 7 v center, inc. (dome) in california, and approximately two years after mr. kim u.s. const. amend. v. within the 1,215-day period. this is an unreasonable construction of the the bankruptcy court denied mrs. kim’s motion and granted dome’s ii to the takings issue. mr. kim’s briefing is equally succinct, though he asserts other decisions, for the general proposition that “an interlocutory order denying window, are not “interests” within the meaning of § 522(p) or § 541(a), then a full fee simple title to the property dies.72 providing in pertinent part: that an interest in real property that was acquired within the statutory window 39 see tex. const. art. xvi, § 52, which provides: * * * summary judgment is not to be reviewed where final judgment adverse to the estate, the proceeds of such sale, less the costs and expenses, not interlocutory summary judgment order and was not separately appealed, homestead exemptions under 11 u.s.c. § 522(p)(1) applied.52 despite the parties’ settlement agreement, the settlement terms subsequently converted the case to a chapter 11 proceeding and now operates homestead rights to prevent the forced sale of the residence. the district a homestead”), now codified at tex. estates code ann. §§ 102.003, 102.005 (west 2014). of $150,000 to her former husband.61 it is undisputed that the kims acquired their residence within 1,215 days court lack jurisdiction over the appeal of the bankruptcy court’s summary next. the right of reimbursement is an economic interest possessed the heggen opinion’s rationale vindicated, rather and this courts have held that such arrangements prevent an appeal from being mooted case: 10-10882 document: 00512590659 page: 10 date filed: 04/09/2014 were any takings clause objection to § 7403, such an objection could not be invoked on behalf breath and then awarded him an amount equal to that right in the the couple paid the loan proceeds to the irs, and the irs released its sections include a debtor’s interest in real property that was acquired within the 836 s.w.2d 145 (tex. 1992). 70 asserting that, pursuant to § 522(p), the exemption should be limited to a 15 appellants, . . . power to dispose of the whole of [the property] or of so much of the principal as his united states v. rodgers, 461 u.s. 677, 697 n.24 (1983) (explaining that “[i]f there 6 id. § 363(h). is given as [the husband’s] interest in the homestead of the parties. . . .”66 that has a market value of $1,000,000 than to reside in a residence worth no. 10-10882 analysis of the bankruptcy court’s authority to order a forced sale of the kims’ case: 10-10882 document: 00512590659 page: 2 date filed: 04/09/2014 residence were sold and she is not compensated for the loss of her homestead in re rogers was narrow and is limited to the facts of that case, which were that rendered the appeal to the district court moot. although dome raised this issue of property interests that came into being after enactment of the provision.”) (citing united involving an interlocutory amount as “part of the division of community property between the parties and authority to order the sale of a texas homestead is a question of federal, not property, she asserts, is not an interest of “the debtor [or] the debtor’s spouse in the limiting language that we used in rogers, i.e. in the same state.”19 compensation under this section of the bankruptcy code. findings of fact are reviewed for clear error, and its conclusions of law are homestead estate”69 contracted for in writing, with the consent of both spouses.’”64 issues. nor is there any evidence that the kims’ residence produces income, circumstances,”14 id. at 225-26. holding that fact issues remained as to whether a portion of the residence residence. 51 that state law would exempt the value of a homestead in excess of the amount 45 to $146,450. 75 fed. reg. 8747-01 (feb. 25, 2010) (raising the amount of the cap from $136,875 the texas supreme court reversed for two movant is rendered on the basis of a subsequent full trial on the merits.”4 31 forced sale reinvested in another homestead property.83 case: 10-10882 document: 00512590659 page: 22 date filed: 04/09/2014 37 67 id. at 146 n.1. (1) except as provided in subsections (b) and (c)(2) of this section, all effect of a settlement reached by the parties after the petition for certiorari and could not order a forced sale of their home. they argue that texas law is statutory window, even if that real property is a homestead.57 themselves are dependent on the outcome of the appeal. mr. kim agreed to the district court. homestead at the time of the other spouse’s death is a sufficient interest to allow federal government’s tax lien against the homestead and could enforce the lien vested economic rights.”76 property of mr. and mrs. kim. based in part on this stipulation, the bankruptcy id. at 744 (internal quotation marks and citation omitted). cf. keefe v. prudential mrs. kim’s homestead rights are the parties have not cited a texas decision that u.s.c. § 363(j), which provides: had purchased the residence, judgment was entered against him for more than case: 10-10882 document: 00512590659 page: 20 date filed: 04/09/2014 _______________________________ id. (citing tex. const. art. xvi, § 50). in the united states court of appeals state law); tex. prop. code ann. § 41.001 (providing homestead exemption under texas law 63 11 u.s.c. § 541(a) provides: reviewed de novo.9 the texas court held that the bank was subrogated to the 26 homestead rights have some value to a spouse, separate and apart from 83 54 18 id. at 224 (emphasis added). id. id. at 146. v. for the first time on appeal, subject matter jurisdiction cannot be waived.1 id. at 697 (quoting u.s. const., art. i, § 8, cl. 1; u.s. const. amend. xvi) 24 would have applied. our reasoning in rogers that a homestead right, standing [a]s a result of electing under subsection (b)(3)(a) to exempt exchange. this is not true of a life estate. the assumptions used only for the 1,215-day period.”54 a forced sale of the property and alternatively, that if a sale occurs, she must be 11 the debtor; . . . determine mrs. kim’s rights and claims to the residence by virtue of her claim (1983)). 36 for the northern district of texas purview of § 522(p)(1).”53 46 of § 541(a)(2).20 motion in part, holding that 11 u.s.c. § 522(p) overrides state law to the extent (“both husband and wife may claim exemptions individually.”). no. 10-10882 8 management community property, or (c) the joint management community 52 no. 10-10882 513 f.3d 212 (5th cir. 2008). see 11 u.s.c. § 363(j). mr. kim then instituted the underlying adversary proceeding, seeking a if our decision in rogers stood for the proposition that all homestead the parties have stipulated that, when the bankruptcy petition was filed clause 4 of the constitution. id. § 522(p)(1)(d). right in the nature of dower or curtesy,”25 h.r. rep. 109-31, pt. 1, at 15-16 (2005), reprinted in 2005 u.s.c.c.a.n. 88, 102, cited 21 it is undisputed that the kims’ a non-debtor spouse contends that her homestead rights in the texas specified in § 522(p). the bankruptcy court held that, as mr. kim’s non-debtor tex. const. art. xvi, § 52; cf. laster v. first huntsville properties co., 826 s.w.2d in united states v. rodgers,21 court entered an agreed final judgment, which was not separately appealed to petition for relief against mr. kim. following a trial, the bankruptcy court paramount and that the bankruptcy code does not provide for the sale of four years after heggen was decided, the supreme court of texas kim v. kim (in re kim), no. 3:09-cv-01082-n, slip op. at 11 (n.d. tex. aug. 11, 2010). of the provision.”44 limitation on the homestead exemption “does not include any interest case: 10-10882 document: 00512590659 page: 5 date filed: 04/09/2014 65 no. 10-10882 no. 10-10882 disposing of [the adversary proceeding].” the supreme court and several circuit see benchmark bank v. crowder, 919 s.w.2d 657 (tex. 1996). we held in rogers appellee. husband or wife, or so long as the survivor may elect to use or occupy the same no. 10-10882 rogers, 513 f.3d at 216. id. § 541(a)(2). elam v. kan. city s. ry. co., 635 f.3d 796, 802 (5th cir. 2011) (“litigants cannot 13 illustrative purposes in rodgers would seem to overvalue homestead rights 84 occupancy of a homestead on the separate property of her deceased husband as she would be community property as of the commencement of the case” within the meaning better title”). homestead.17 day window was the homestead interest, standing alone. we held that “the rules with respect to the fiduciary duties of a life tenant of a life estate who is given the power 73 merits, and the bankruptcy court’s final judgment adopted and incorporated residence is their homestead under texas law. the bankruptcy code provisions cannot preclude the enforcement of a federal law that permits the sale of, or states v. security industrial bank, 459 u.s. 70, 81 (1982)). of the right to live in the residence is intrinsic to mrs. kim, though texas taxes.31 no. 10-10882 possession from forcing a sale of the property or, alternatively, required mrs. reimbursement” with the “homestead interest.” this confusion 90 afforded homesteads by our [texas] constitution.”68 cannot be read out of context to the bankruptcy court was entered after the bankruptcy court entered its final for homestead property under § 522(p) was $136,875 at the time that mr. kim 4 id. at 680 687. to her separate and apart from the market value of the residence, regardless of subsections of 11 u.s.c. § 363, nor have they briefed the applicability of any of the exercise of the power granted by § 7403 was “the exercise of a sovereign or subsection (h), which provides for heggen, 836 s.w.2d at 148. akin to a regulatory taking and that for purposes of determining “just id. at 226. id. mrs. kim has a state-law homestead interest in her residence. we have debtor’s homestead “interest” in real property acquired within the 1,215-day case: 10-10882 document: 00512590659 page: 21 date filed: 04/09/2014 homestead”29 their state, rather than federal, exemptions, but texas has not done so. kim’s homestead rights in violation of the due process clause of the fifth residence in the bankruptcy proceedings, mrs. kim would be entitled to case: 10-10882 document: 00512590659 page: 12 date filed: 04/09/2014 than extinguished, homestead rights. in a divorce decree, the trial court in property that they had inherited.84 case: 10-10882 document: 00512590659 page: 19 date filed: 04/09/2014 35 property acquired before the enactment of the bapcpa, there has been an unconstitutional no. 10-10882 that is unlimited in amount). half by her husband’s heirs, but which would be “subject to the homestead use 12 the house committee report on the bapcpa, which has been cited by this court, 53 id. at 148. see lucas v. lucas, 143 s.w. 1153, 1156 (tex. 1912). also held in that case that the spouse “must be compensated for the loss of the court affirmed the bankruptcy court’s holding that the non-debtor spouse’s damages, the amount of which was contingent upon the court’s resolution of the “without more,” was critical to our decision. the real property that later became be owned one-half by the widow (representing her community one-half) and one- finally, the court of appeals erred in its constitutional of the debtor claims as a after a sale of property to which subsection (g) or (h) of this $136,875, but the kims have not provided any argument that addresses these managed community property.42 id. opposition were filed. the agreement provided for payment of liquidated 258 f.3d 385, 387 (5th cir. 2001). laster, 826 s.w.2d at 129 (tex. 1991). clemons v. clemons, 45 s.w. 996, 998 (tex. 1898). homestead rights were limited to the dollar amount of the exemption in 11 legal or equitable interests of the debtor in property as of the cited in our in value in . . . real or personal 12089-01 (feb. 21, 2013); 75 fed. reg. 8747-01 (feb. 25, 2010). at the time the bankruptcy represented the value of community funds, time, toil and talent that had been whether mrs. kim must be compensated for her homestead interest in the liens against homesteads. this interest, unlike the right of on state-law 86 case: 10-10882 document: 00512590659 page: 8 date filed: 04/09/2014 we express no opinion as to whether mrs. kim might be entitled to even were we to accept this argument, it would not affect our no. 10-10882 no. 10-10882 on what was the deceased spouse’s separate property so long as its homestead prop. & cas. ins. co., 203 f.3d 218, 223-24 (3d cir. 2000) (parties’ settlement agreement, interest in the property that would entitle her to compensation or to prevent the id. at 662. collect taxes.’”23 those husband of approximately one half ($150,000) of this community reimbursement this statement must be considered in context. a the real property had been owned by the debtor many years before the 74 property and never became part of the bankruptcy estate. her separate property that the debtor or dependent16 continue to have a financial stake in the outcome of this appeal. the appeal is bankruptcy proceedings and her homestead interest in the residence was crowder that “[u]nder the supremacy clause of the united states constitution, texas have rejected arguments similar to those urged by the kims. in re rogers, 513 f.3d 212, 225 (5th cir. 2008) (emphasis in original) (quoting perry $155,675 in 2013. id. at 217 n.2 (citing 72 fed. reg. 7082-01 (feb. 14, 2007)); 78 fed. reg. land itself.”87 homestead exemption under texas law for the residence. dome objected, not a vested economic interest in the residence, and therefore, she is not entitled execute a secured promissory note payable to dome, the amount of which will be (providing that, with a few exceptions similar to those contained in the texas constitution, even though the irs had assessed no taxes against the 77 it first held that in ensuring “a just and right division” of the marital provided under state law.40 to the interests of such spouse or co-owners, and of the estate.90


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