In re Rockwell

590 B.R. 19
CourtUnited States Bankruptcy Court, D. Maine
DecidedAugust 23, 2018
DocketCase No.: 15-20583
StatusPublished
Cited by3 cases

This text of 590 B.R. 19 (In re Rockwell) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Maine primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Rockwell, 590 B.R. 19 (Me. 2018).

Opinion

Chief Judge Peter G. Cary.

*21This case examines the permanence of an exemption claim in proceeds resulting from the sale of the debtor's homestead in a converted chapter 7 case in a jurisdiction with a temporal limit to its homestead proceeds exemption, also known as a "vanishing" exemption. The applicable exemption for Maine debtors who seek to protect the proceeds from the sale of their homesteads requires that the proceeds be reinvested in a residence within six months of the sale. Here, Mr. Rockwell filed for chapter 13 relief, received proceeds from the sale of his house during the pendency of the chapter 13, but failed to reinvest all of the proceeds in a new residence before he converted his case to one under chapter 7 and before six months passed from the date of the sale. The chapter 7 trustee lodged an objection to Mr. Rockwell's claim of exemption pursuant to Fed. R. Bankr. P. 4003(b) and a trial was held on May 22, 2018.

For the reasons set forth below, the trustee's objection is overruled.

I. Facts.1

In 2001, Mr. Rockwell bought the real estate and buildings located at 24 B Street, South Portland, Maine. When he filed for relief under chapter 13 of the Bankruptcy Code2 on August 19, 2015, he owned the property and resided there. On his bankruptcy schedules, Mr. Rockwell claimed he was entitled to an exemption of $47,500 of equity in the property pursuant to the Maine homestead exemption statute, 14 M.R.S.A. § 4422(1). This court confirmed Mr. Rockwell's chapter 13 plan of reorganization in November 2015 and his plan anticipated that he would pay the holder of the first mortgage on that property directly and would retain the B Street property. However, by December of 2016, Mr. Rockwell sought permission to sell the B Street property for $160,000 and contribute any non-exempt proceeds of the sale to his chapter 13 plan. At the hearing on the motion to sell the B Street property, the chapter 13 trustee, in his words, "mildly" voiced his concerns about the sale price but expected the court to grant the motion to sell as being a proper exercise of Mr. Rockwell's business judgment. On January 12, 2017, the court entered an order authorizing Mr. Rockwell to sell the B Street property and to pay from the proceeds of the sale (1) his ordinary and customary closing expenses, (2) the balance due to U.S. Bank, and (3) to contribute any non-exempt proceeds of the sale to his chapter 13 plan.

The closing for the sale of the B Street property occurred on March 6, 2017, and after the payment of the closing costs and the first mortgage obligation, the amount of $51,682.87 remained and was distributed between Mr. Rockwell ($47,500) and the chapter 13 trustee ($4,182.87). The chapter 13 trustee never objected to Mr. Rockwell's exemption claims and on August 7, 2017, Mr. Rockwell converted his case to *22one under chapter 7. As of the conversion date, Mr. Rockwell had spent $18,806.23 of the cash proceeds of the sale, leaving a balance of $28,693.77.3 Upon conversion, the Federal Rules of Bankruptcy Procedure permitted the chapter 7 Trustee an opportunity to object to Mr. Rockwell's exemption claims, Fed. R. Bankr. P. 1019(2)(B), 4003(b), and on December 4, 2017, he did so after the court granted his motion to enlarge the time to file such objections, to which Mr. Rockwell consented. Mr. Rockwell resided at the B Street property until September 2017, when he established his residence at 25 Bancroft Court, Portland, Maine, which was owned by Lorraine H. Flint. Mr. Rockwell has never held an ownership interest in the Bancroft Court property.

II. Jurisdiction and Venue.

This court has jurisdiction of this matter pursuant to 28 U.S.C. § 1334, and the general order of reference entered in this district pursuant to 28 U.S.C. § 157(a). D. Me. Local R. 83.6(a). Venue here is proper pursuant to 28 U.S.C. § 1408(1). This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and (b)(2)(B).

III. Burden of Proof.

As the objecting party, the burden of proof is on the chapter 7 trustee to establish that Mr. Rockwell is not entitled to an exemption in the $47,500 cash proceeds. Fed. R. Bankr. P. 4003(c) ; In re Gourdin, 431 B.R. 885, 891 (1st Cir. BAP 2010) ; see also In re Chaney, Case No.15-20725, 2016 WL 4446007, at *1 (Bankr. D. Me. Aug. 23, 2016) ; In re Toppi, 378 B.R. 9, 11 (Bankr. D. Me. 2007), as amended (Nov. 15, 2007); In re Cole, 185 B.R. 95, 96 (Bankr. D. Me. 1995).

IV. Positions of the Parties.

The chapter 7 trustee objects to Mr. Rockwell's exemption claim on the basis that Mr. Rockwell failed to reinvest the cash proceeds from the sale of his B Street property in a new residence within six months of the sale of the property, as required by 14 M.R.S.A.§ 4422(1)(C) which provides: "That portion of the proceeds from any sale of property which is exempt under this section shall be exempt for a period of six months from the date of receipt of such proceeds for purposes of reinvesting in a residence within that period."4 Given the temporal limits of the Maine exemption, the chapter 7 trustee argues, the cash proceeds lost their exempt status when Mr. Rockwell failed to reinvest in a residence in a timely manner. Therefore, these funds must be delivered to the chapter 7 trustee to be administered under chapter 7 of the United States Bankruptcy Code.

Mr. Rockwell counters that the chapter 7 trustee's objection must be overruled because (1) the vanishing nature of the six month rule of 14 M.R.S.A.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
590 B.R. 19, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-rockwell-meb-2018.