William NMI Paul, Jr. v. Forrest C. Allred

Filing

OPINION FILED - THE COURT: Arthur B. Federman, Robert J. Kressel and Barry S. Schermer AUTHORING JUDGE:Arthur Federman (PUBLISHED) [4009662] [12-6068]

United States Bankruptcy Appellate Panel
For the Eighth Circuit

___________________________
No. 12-6068
___________________________
In re: William NMI Paul, Jr., also known as Bill Paul, also known as Bill Paul, Jr.,
also known as William Paul, doing business as Vision Construction, doing
business as Pauls Construction
lllllllllllllllllllllDebtor
-----------------------------William NMI Paul, Jr.
lllllllllllllllllllllDebtor - Appellant
v.
Forrest C. Allred
lllllllllllllllllllllTrustee - Appellee
____________
Appeal from United States Bankruptcy Court
for the District of South Dakota - Rapid City
____________
Submitted: January 22, 2013
Filed: February 28, 2013
____________
Before FEDERMAN, Chief Judge, KRESSEL and SCHERMER, Bankruptcy
Judges.
____________
FEDERMAN, Chief Judge.

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Debtor William Paul, Jr. appeals from the Order of the Bankruptcy Court1
granting summary judgment in favor of the Chapter 7 Trustee on his objection to
the Debtor’s claimed homestead exemption. For the reasons that follow, we
AFFIRM.
Factual Background
The undisputed facts are as follows: Debtor William Paul, Jr. filed a
voluntary Chapter 7 Petition on May 11, 2012. He listed his address on the
Petition as 126 Billings Avenue in Lead, South Dakota. The Debtor’s Statement
of Financial Affairs stated that he had not resided anywhere other than the Billings
Avenue address for three years prepetition. Among his assets, the Debtor listed
unencumbered real property located at 117 Spark Street in Lead, South Dakota,
with a value of $34,290. Debtor claimed the Spark Street property fully exempt as
his homestead pursuant to § 43-45-3(2) of the South Dakota Codified Laws.
Following the § 341 meeting of creditors, the Chapter 7 Trustee objected to
the homestead exemption. He stated that the Debtor testified at the § 341 meeting
that he has owned the Spark Street property since 1997 or 1998; that he did not live
in the property on the date of filing; that he has not lived in the property for 14 or
15 years; and that he had no intent to live in the property. Further, the Debtor
testified that the subject property was rented out, generating $550 per month of
gross rental income, which, we note, was consistent with what was reported on
Schedule I. The Debtor also testified he owns no other interests in real property.
The Trustee asserted that entitlement to exemptions is determined on the date of
filing and that, under South Dakota law, real property not actually occupied by the
debtor on the date of filing can be claimed as an exempt homestead only if the
debtor has, on the date of filing, an intention to occupy the property. Because the

1

The Honorable Charles L. Nail, Jr., United States Bankruptcy Judge for
the District of South Dakota.

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Debtor testified that he had no intent to occupy the property, the Trustee asserted
that he was not entitled to the homestead exemption claimed in it.
The Debtor responded. He did not dispute any of the Trustee’s factual
allegations, including that he was no longer living there, but contested the
Trustee’s statement of South Dakota homestead law, and disputed the
characterization that he had “abandoned” the property as his homestead.
The Trustee then filed a motion for judgment on the pleadings, pointing out
that the Debtor did not dispute the facts and that, based on those facts, the Debtor
was not entitled to the homestead exemption. The Debtor responded. Again, the
Debtor did not dispute the facts, but asserted that the Trustee was wrong on the
law. In his response to the motion, the Debtor further stated that he was living with
his new wife and child in the house his wife owned before the marriage –
presumably, the Billings Avenue property. He also said that “nothing prohibits
Debtor from moving out of his wife’s house today and into his real estate, the only
real estate Debtor owns, should that be required.”
The Bankruptcy Court viewed the Debtor’s acknowledgment in his response
to the motion for judgment on the pleadings that he lived with his wife and child in
property owned by his wife (the Billings Avenue property) as a material fact which
had not been pled in either the Trustee’s objection to the exemption or the Debtor’s
response to it and, thus, treated the Trustee’s motion for judgment on the pleadings
as a motion for summary judgment.2 As such, the Court afforded the parties an
opportunity to submit additional materials,3 which neither party did. The
Bankruptcy Court then granted summary judgment in favor of the Trustee and
denied the homestead exemption. The Debtor appeals.

2

See Fed. R. Civ. P. 12(d), made applicable here by Fed. R. Bankr. P. 7012.

3

Id.
3

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Standard of Review
We review the Bankruptcy Court’s grant of summary judgment de novo.4
Rule 56(a) provides that “[t]he court shall grant summary judgment if the movant
shows that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”5 The burden on the moving party “is only
to demonstrate, i.e., to point out . . . , that the record does not disclose a genuine
dispute on a material fact.”6 The non-moving party then must set forth specific
facts showing a genuine issue of material fact for trial.7 “A fact is material if it
might affect the outcome of the suit, and a dispute is genuine if the evidence is
such that it could lead a reasonable jury to return a verdict for either party.”8 “A
court considering a motion for summary judgment must view the facts in the light

4

Peter v. Wedl, 155 F.3d 992, 996 (8th Cir. 1998).

5

Fed. R. Civ. P. 56(a), made applicable here by Fed. R. Bankr. P. 7056.

6

City of Mt. Pleasant, Iowa v. Assoc. Elec. Cooperative, Inc., 838 F.2d 268,
273 (8th Cir. 1988) (citation, internal quotation marks, and brackets omitted).
7

Dico, Inc. v. Amoco Oil Co., 340 F.3d 525, 529 (8th Cir. 2003). See also
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d
202 (1986)) (holding that the nonmoving party “may not rest upon mere allegation
or denials of his pleading, but must set forth specific facts showing that there is a
genuine issue for trial.”); Brunsting v. Lutsen Mountains Corp, 601 F.3d 813, 820
(8th Cir. 2010) (“A mere ‘scintilla of evidence’ is insufficient to defeat summary
judgment.”); Fed. R. Civ. P. 56(c)(1)(A) (“A party asserting that a fact cannot be or
is genuinely disputed must support the assertion by . . . citing to particular parts of
materials in the record, including depositions, documents, electronically stored
information, affidavits or declarations, stipulations . . . , admissions, interrogatory
answers, or other materials. . . .”).
8

U.S. Bank Nat’l Assoc. v. U.S. Rent a Car, Inc., 2011 WL 3648225 at *3
(D. Minn. Aug. 17, 2011) (not reported) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248 (1986)).
4

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most favorable to the non-moving party and give that party the benefit of all
reasonable inferences that may be drawn from those facts.”9
The Homestead Exemption
“When a debtor files a Chapter 7 bankruptcy petition, all of the debtor's
assets become property of the bankruptcy estate . . . .”10 “The Code, however,
allows the debtor to prevent the distribution of certain property by claiming it as
exempt.”11 Section 522 of the Bankruptcy Code provides a list of property that the
debtor may exempt in a bankruptcy case. Although the general rule under the
Bankruptcy Code is that a debtor is permitted to choose between the scheme of
federal exemptions prescribed in § 522(d) of the Code or the exemptions available
under other federal law and the law of the state in which the debtor is domiciled,
states may opt out of the federal exemption scheme entirely.12 “If a State opts out,
then its debtors are limited to the exemptions provided by state law.”13 South
Dakota has opted out, and so debtors in South Dakota are limited to the exemptions
allowed under South Dakota law.14
9

Id. (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475
U.S. 574, 578 (1986)).
10

Nessan v. Lovald, 2012 WL 6029124 at *2 (8th Cir. Dec. 5, 2012) (slip
copy) (quoting Schwab v. Reilly, 560 U.S. ––––, 130 S.Ct. 2652, 2657, 177
L.Ed.2d 234 (2010); see also 11 U.S.C. § 541)).
11

Id. (quoting Taylor v. Freeland & Kronz, 503 U.S. 638, 642, 112 S.Ct.
1644, 118 L.Ed.2d 280 (1992); see also 11 U.S.C. § 522)).
12

Id.; 11 U.S.C. § 522(b)(2).

13

Id. (quoting Owen v. Owen, 500 U.S. 305, 308, 111 S.Ct. 1833, 114
L.Ed.2d 350 (1991)).
14

Id.; S.D. Codified Laws § 43–45–13 (“[R]esidents of this state are not
entitled to the federal exemptions provided in § 522(d) of the Bankruptcy Code of
5

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As relevant here, section 43-31-1 of the South Dakota Codified Laws
provides:
The homestead of every family, resident in this state, as hereinafter
defined, so long as it continues to possess the character of a
homestead is exempt from judicial sale, from judgment lien, and from
all mesne or final process from any court . . . .15
While the Spark Street property may have once been the Debtor’s
homestead, the Trustee asserts that it no longer continues to possess the character
of a homestead because he left the property and has no intent to return. In
Yellowhair v. Pratt, the South Dakota Supreme Court stated the following standard
regarding abandonment of a homestead:
The main question in all cases of this nature is the intent of the party
who has ceased to occupy the homestead. No general rule can be laid
down as a guide for a court in determining intent, but each case must
stand upon its own facts. Actual removal without intention to return
is a forfeiture of the homestead right. If one removes from homestead
property without any present intention of returning, but with a mere
possible, or at most probable, future purpose to do so, contingent upon
the happening or not happening of a particular event, the homestead is
abandoned. Long absence, while not conclusive proof of intent to
abandon, is a circumstance which may indicate such an intent in
absence of a showing of intent to return. The real question is: Did the
party have a fixed and actual purpose or intent to return and reside on
the property, and did that purpose or intent continue to exist to the
time in question?16
1978. . . .”).
15

S.D. Codified Laws § 43-31-1 (emphasis added).

16

Yellowhair v. Pratt, 182 N.W. 702, 704 (S.D. 1921). See also Knittel v.
G. Sommers & Co., 28 N.W.2d 878, 879 (S.D. 1947) (holding that the general rule
is that temporary absence from the premises will not itself cause an abandonment
6

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And, in Hewitt v. Carlson, the South Dakota Supreme Court said:
While a party leaving a homestead must, in good faith, intend to
return to it at some future date, such date need not be “fixed or
definite” as to time; neither need such intent be an intent to return
regardless of all possible contingencies; but, if there is an honest
belief that at some time in the future the party will reoccupy the
property as a home, and such party does no act inconsistent with such
belief and intent, the homestead right is not forfeited.17
First, the Debtor points out that he has not abandoned his ownership of the
Spark Street property, and that the Bankruptcy Court so found. However, that is
not the issue here. The question is whether, despite the fact that he still owns the
Spark Street property, he has abandoned – or forfeited – that property as his
homestead. On that question, the Debtor does not deny that he moved from Spark
Street to his wife’s home years ago, lives there with his wife and child, and that he
had no intent to return to the Spark Street home either at the time he moved out, or
at the time he filed his Petition. His assertion that “nothing prohibits [him] from

of the homestead, but to retain the homestead exemption, one leaving the
homestead must in good faith intend to return, albeit the intent to return need not
be at any particular time in the future); Hewitt v. Carlson, 244 N.W. 108 (S.D.
1932) (holding that removal for temporary employment, with intent to return, was
not abandonment); Feucht v. Pierce, 2006 WL 3354507 at *4 (D. S.D. Nov. 15,
2006) (not reported) (holding that debtor, who was separated from her husband,
and who testified that she would only return to the marital home if her husband
vacated the house or died, or if she was required to care for him or her adult son
there, or if the couple reconciled, was an abandonment of the marital home as her
homestead); In re Dice, 1997 WL 1125702 at *2 (Bankr. D. S.D. April 2, 1997)
(not reported) (holding that debtor could not claim homestead in rural property
which he owned but did reside and to which he indicated no intent to return).
17

Hewitt v. Carlson, 244 N.W. 108, 109 (S.D. 1932) (quoting Yellowhair
v. Pratt, 182 N.W. 702, 704 (S.D. 1921)).
7

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moving out of his wife’s house today and into his real estate, the only real estate
Debtor owns, should that be required” does not state any fixed or actual purpose or
intent to return and reside there. He has, therefore, abandoned the Spark Street
property as his homestead.18
The Debtor asserts that the Bankruptcy Court’s denial of his homestead
exemption violates his rights under the South Dakota Constitution and statutes.19
We do not question his assertion that the South Dakota Constitution guarantees
South Dakotans’ right to a homestead or that South Dakota law permits debtors to
claim a homestead exemption in bankruptcy cases; rather, the question here is
whether the property in which the Debtor claimed a homestead exemption was, in
fact, his homestead. Under well-established South Dakota precedent, because the
Debtor removed himself from the Spark Street property with no fixed or actual
intent to return, it is no longer his homestead.

18

Indeed, in Yellowhair, the Supreme Court posed a hypothetical in which
the debtor remarried and moved into her new husband’s home, concluding that
doing so would have been an abandonment of her prior home. 182 N.W. at 704.
We also note that, in South Dakota, a “family” may claim a homestead exemption,
but only one homestead exemption per family is allowed. Feucht v. Pierce, 2006
WL 3354507 at *4 (D. S.D. Nov. 15, 2006) (not reported) (citing In re Johnson, 61
B.R. 858, 865 (D. S.D. 1986), and Beck v. Lapsley, 593 N.W.2d 410, 413 (S.D.
1999)). Clearly, the Debtor’s wife could claim a homestead in the Billings Avenue
property because they live there.
19

S.D. Const. Art. XXI, § 4 (“The right of the debtor to enjoy the comforts
and necessaries of life shall be recognized by wholesome laws exempting from
forced sale a homestead, the value of which shall be limited and defined by law, to
all heads of families, and a reasonable amount of personal property, the kind and
value of which to be fixed by general laws.”); S.D. Codified Laws §§ 43-31-1 et
seq., and 43-45-3.
8

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Conclusion
For the foregoing reasons, the Bankruptcy Court did not err in concluding
that the Debtor has abandoned the Spark Street property as his homestead and is
not, therefore, permitted to claim a homestead exemption in it. The Order of the
Bankruptcy Court is AFFIRMED.

9

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