United States District Court, District of Montana, Missoula Division
In re Warren Charles Bodeker, Debtor.
WARREN CHARLES BODEKER, Appellee. CHRISTY L. BRANDON, Trustee, Appellant, Bankruptcy No. 12-60137
MEMORANDUM AND ORDER
BRIAN MORRIS UNITED STATES DISTRICT COURT JUDGE
Appellant Chapter 7 Trustee Christy L. Brandon (Brandon) appeals from the final order of the United States Bankruptcy Court for the District of Montana allowing Debtor Warren Bodeker (Bodeker) to rescind his waiver of homestead exemption. The Court possesses jurisdiction under 28 U.S.C. § 158(a).
Bodeker filed a voluntary Chapter 7 bankruptcy petition on February 2, 2012. Brandon was appointed Trustee. Bodeker listed his home on Schedule A. He listed a claim of homestead exemption on Schedule C for his home near Plains, Montana. He signed his Schedules and Statements of Financial Affairs stating under penalty of perjury that they were true and correct. They were not. Bodeker failed to disclose on Schedule B tens of thousands of dollars worth of gold and silver coins and other assets.
Brandon learned of Bodeker’s undisclosed assets. She questioned Bodeker about them at the § 341 meeting. Bodeker admitted that he had failed to disclose the coins and other assets.
Bodeker sought advice from counsel as to the possible adverse consequences that could result from his fraudulent conduct. Counsel advised Bodeker as to the potential consequences. Counsel advised Bodeker he could face criminal charges. Counsel further advised Bodeker that his homestead exemption could be subject to an equitable surcharge as Ninth Circuit decisional law permitted a bankruptcy court to equitably surcharge a debtor’s homestead exemption for payment of administrative expenses, when “reasonably necessary . . . to protect the integrity of the bankruptcy process . . .”. See Latman v. Burdette, 366 F.3d 774, 785-86 (9th Cir. 2004).
Bodeker entered into a stipulation with Brandon and the United States Trustee on or about April 5, 2012, to avoid these possible adverse consequences. Bodeker expressly waived both his homestead exemption and his right to a discharge as part of the settlement. The parties filed the stipulation with the bankruptcy court on April 6, 2012. The bankruptcy court approved the stipulation by order dated April 9, 2012. The bankruptcy court determined that the stipulation was “fair and equitable, ” and satisfied the requirements of Fed. R. Bank. P. 9019(a). (Doc. 6-1 at 1).
Brandon filed a motion for permission to sell Bodeker’s homestead on May 3, 2012. Brandon also moved for an order to require Bodeker to vacate his property. The bankruptcy court granted the motions.
Brandon attempted to sell Bodeker’s homestead. Bodeker disrupted the sale attempt. No sale occurred. Brandon concluded that any further attempt to sell the homestead would be too dangerous in light of Bodeker’s resistance. Brandon instead focused on selling certain gold and silver coins that Bodeker previously had provided to her. Bodeker sold the coins in June of 2012.
The proceeds from the sale of the coins proved insufficient to pay the allowed claims against Bodeker’s bankruptcy estate. Brandon sought to sell Bodeker’s homestead to make up for the deficiency. Brandon hired a real estate agent. Bodeker objected to the hiring of the real estate agent.
Nineteen months after the waiver of homestead exemption had been approved by the bankruptcy court, Bodeker moved, on October 31, 2013, to set aside his waiver of homestead exemption. Bodeker made the following arguments: 1) he had signed the waiver under coercion; 2) he had not understood the meaning and consequences of the waiver when he signed it; 3) he had filed a second homestead exemption after having executed the waiver; and 4) the waiver of homestead exemption did not comply with Montana law. Bodeker also moved, under Fed.R.Civ.P. 60(b)(4), to have the bankruptcy court’s order approving the waiver set aside. Bodeker argued that the bankruptcy court’s failure to conduct a hearing on the proposed stipulation violated Fed. R. Bank. P. 9019(a). Brandon and the United States Trustee opposed the motions.
The United States Supreme Court issued its decision in Law v. Siegel, 134 S.Ct. 1188 (2014), before the bankruptcy court issued its ruling on Bodeker’s motions. The Court in Siegel overturned the Ninth Circuit’s equitable surcharge rule under Latman. The Court held that no equitable surcharge could be applied against a debtor’s homestead exemption for administrative expenses. A surcharge imposed for such purposes would contravene the prescriptions of 11 U.S.C. § 522(k). Siegel, 134 S.Ct. at 1195.
Brandon informed the bankruptcy court of the Supreme Court’s decision in Siegel. Brandon asserted, however, that Siegel had no impact on Bodeker’s pending motions due to the fact that Bodeker had waived his right ...