A panel on the Ninth Circuit saw “no justification in federal law, state law, or logic” for the appeals court’s own precedents that result in the loss of debtors’ homestead exemptions.
The December 3 per curiam opinion is nothing short of an implicit recommendation that the Ninth Circuit grant rehearing en banc and reverse Wolfe v. Jacobson (In re Jacobson), 676 F.3d 1193 (9th Cir. 2012), and England v. Golden (In re Golden), 789 F.2d 698 (9th Cir. 1986).
Scholars and practitioners who are partial to the plight of debtors may wish to consider submitting amicus briefs if the case returns to the circuit en banc.
The Homestead Exemption Vanishes After Filing
In Golden, the earlier of the two cases, the chapter 7 debtor sold her home before bankruptcy and claimed an exemption to cover the proceeds. However, the debtor did not reinvest the proceeds in another home within six months, as required by California law. The Ninth Circuit ruled that the failure to reinvest under state law resulted in the loss of the homestead exemption, even though she would have been entitled to exempt the proceeds on the filing date.
In Jacobson, the Ninth Circuit expanded on Golden. The chapter 7 debtor sold her home after filing but did not reinvest the proceeds within six months as required by California law. Interpreting Golden, the Ninth Circuit reversed the Bankruptcy Appellate Panel and held that the debtor lost the exemption, even though she would have been entitled to the exemption on the filing date.
The case on appeal in the Ninth Circuit was much the same. The debtor had confirmed a chapter 13 plan and later sold his home, with a portion of the exempt sale proceeds to be paid in settlement with a creditor.
The bankruptcy court overruled the chapter 13 trustee’s objection to the homestead exemption, but the district court reversed. Citing Jacobson and Golden as binding precedent, the district court reasoned that the debtor had lost his homestead exemption in the proceeds because he did not reinvest the proceeds in another homestead within one year, as required by Idaho law.
The debtor appealed, but the Ninth Circuit reluctantly affirmed in a nonprecedential opinion, also based on Jacobson and Golden.
The panel characterized Jacobson and Golden as holding that a “debtor must comply with the State’s time limit for reinvesting the sales proceeds in a new homestead.” The judges said that the district court ruled correctly because Jacobson “remains good law.”
The Critique of Jacobson and Golden
The panel said, “[W]e recognize . . . that our decisions have been criticized, questioned, and rejected by many.” They cited decisions by Bankruptcy Judges Jim D. Pappas and Christopher M. Klein as having questioned the validity of the two opinions. They also cited a law review article by Bankruptcy Judge Alan M. Ahart, who, they said, published a “point-by-point critique of the decision and explained his view that the decision is both wrong and poor policy.”
The panel cited the Norton treatise as saying that Jacobson was “questionable” and the Collier treatise for saying that the consideration of a postpetition sale should be irrelevant when considering the validity of an exemption as of the filing date.
Next, the panel cited the First Circuit, which, the judges said, “recently rejected our rule, expressly disagreeing with our decision and labeling it ‘unpersuasive.’” Rockwell v. Hull (In re Rockwell), 968 F.3d 12, 23 (1st Cir. 2020), cert. denied, 141 S. Ct. 1372 (2021). To read ABI’s report on Rockwell, click here.
Even the Ninth Circuit itself has been critical. This year, a panel of the Ninth Circuit itself called Jacobson “an ‘outlier’[] and agreed with the BAP that In re Golden’s holding is ‘limited to its facts.’” Klein v. Anderson (In re Anderson), 988 F.3d 1210, 1214 n.4, 1216 (9th Cir. 2021) (per curiam). To read ABI’s report on Anderson, click here. [Note: None of the judges on the Anderson panel were also on the panel in the new case.]
Although per curiam, Anderson was precedential. Notably, the circuit judges adopted the opinion by the BAP “in full.” In short, Anderson undercut both Jacobson and Golden by affirming the so-called snapshot rule where exemptions are judged as of the filing date and are unaffected by later events.
The panel in the December 3 circuit opinion said that applying Jacobson “in a case like this one leads to arguably peculiar results.” The panel said that Jacobson would have “the perverse result that debtors in . . . jurisdictions [like California and Idaho] have only a contingent homestead exemption such that, practically, they have fewer rights during bankruptcy than debtors in other jurisdictions.”
The panel said, “We see no justification in federal law, state law, or logic for that result.”
The panel affirmed. We will report when (and if) rehearing en banc is granted.
A panel on the Ninth Circuit saw “no justification in federal law, state law, or logic” for the appeals court’s own precedents that result in the loss of debtors’ homestead exemptions.
The December 3 per curiam opinion is nothing short of an implicit recommendation that the Ninth Circuit grant rehearing en banc and reverse Wolfe v. Jacobson (In re Jacobson), 676 F.3d 1193 (9th Cir. 2012), and England v. Golden (In re Golden), 789 F.2d 698 (9th Cir. 1986).
Scholars and practitioners who are partial to the plight of debtors may wish to consider submitting amicus briefs if the case returns to the circuit en banc.