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            United States Bankruptcy Appellate Panel
                        FOR THE EIGHTH CIRCUIT

                                    ______

                                  No. 10-6075
                                    ______

In re: Jody May Walters,              *
                                      *
      Debtor.                         *
                                      *
Jody May Walters,                     * Appeal from the United States
                                      * Bankruptcy Court for the Southern
      Debtor – Appellant,             * District of Iowa
                                      *
            v.                        *
                                      *
Bank of the West,                     *
                                      *
      Creditor – Appellee.            *
                                    ______

                             Submitted: May 3, 2011
                               Filed: June 2, 2011
                                     ______

Before KRESSEL, Chief Judge, FEDERMAN and VENTERS, Bankruptcy
Judges.
                             ______

KRESSEL, Chief Judge.
     Jody May Walters appeals from an order of the bankruptcy court 1 on
October 1, 2010, sustaining Bank of the West’s objection to her claim of a
homestead exemption as to the bank’s claim.

                                                               Standard of Review

      The issue of whether the bankruptcy court properly construed the Iowa
homestead exemption statute is a question of law, which we review de novo.
Kukowski v. Wagner (In re Kukowski), 356 B.R. 712, 714 (B.A.P. 8th Cir. 2006).
We review the court’s findings of fact for clear error. Kaelin v. Bassett (In re
Kaelin), 308 F.3d 885, 888 (8th Cir. 2002); Barrows v. Christians (In re Barrows),
408 B.R. 239, 243 (B.A.P. 8th Cir. 2009). “Findings of fact may be clearly
erroneous if we have a definite and firm conviction that the bankruptcy court
committed a mistake.” Cadlerock Joint Venture II, L.P. v. Sandiford (In re
Sandiford), 394 B.R. 487, 489 (B.A.P. 8th Cir. 2008).

                                                                BACKGROUND

      Jody Walters and her husband, David Walters, owned a number of
residential properties in Iowa and Florida between 1999 and 2010. Walters and her
husband lived together at several of those properties. They often built or
remodeled houses and then sold them for profit. It was typical for them to own
more than one house at a time.

                The properties included the following:




                                                            

              1
            The Hon. Anita L. Shodeen, United States Bankruptcy Judge for the
Southern District of Iowa. 
                                                                       2
 
 



          Iowa Properties                            Florida Properties


      Address               Dates                 Address              Dates

3437 Scenic Valley    Sept. 1999 –          ____ Falling Waters June 2000       –
Dr.,    West   Des    Oct. 2004             Dr., Naples         Nov. 2001
Moines
259 62nd St., West    Oct. 2004     –       4717 Shinecock Dr.,    Nov. 2001    –
Des Moines            Dec. 2005             Naples                 June 2003
116 62nd St., West    Dec. 2005     –       5050 Cerromar Dr.,     June 2003    –
Des Moines            Sept. 2006            Naples                 May 2005
3800 Fuller Rd.,      Sept. 2006    –       117 Forrest Hill       Dec. 2005    –
West Des Moines       July 2008             Blvd., Naples          Sept. 2006
1650 Lakeview Dr.,    July 2008     –       5051 Cerromar Dr.,     Dec. 2005    –
Pleasant Hill         Present               Naples                 Sept. 2006
                                            100721       Mirasol   Mar. 2007    –
                                            Ave., Miramar          Oct. 2008

       Walters identified 3437 Scenic Valley Drive as her homestead from
September of 1999 through October of 2004. In 2002 and 2004, the Walters
executed guarantees in favor of Bank of the West in connection with loans
involving their business, Walters Investments International, Inc. d/b/a Walters
Homes Ltd. In October of 2004, the Walters moved from 3437 Scenic Valley
Drive to 259 62nd Street, but that house was destroyed by fire in December of
2005. After the fire, they moved to 116 62nd Street. In 2006, they moved to 3800
Fuller Road.

      In August of 2006, the Walters sold a house at 5051 Cerromar Drive,
Naples, Florida. They received net sale proceeds of $470,908.98. Walters
maintains that this was her homestead at the time.




                                        3
 
       In August of 2007, Walters Investments International, Inc. transferred the
Pleasant Hill property and $204,000 to Joseph and Deborah Sloan. The Walters
reimbursed the Sloans for the expenses relating to the property, including real
estate taxes and insurances. They admitted that the purpose of the transaction was
to protect the house from attachment by their creditors. They built a house at the
Pleasant Hill property in the Sloans’ name, although it was built to the Walters’
specifications.

       In February of 2008, Bank of the West obtained judgments in excess of two
million dollars against Walters, her husband, and others. Also in 2008, the Fuller
house was returned to the lender. The Walters did not receive any proceeds.
Walters moved from the Fuller house to the Pleasant Hill house in July of 2008. In
June of 2009, the Sloans transferred the Pleasant Hill property to the Walters by
quitclaim deed.

      Walters filed an individual chapter 7 petition on January 3, 1010. On her
Schedule C, she claimed as exempt an interest the Pleasant Hill property. Bank of
the West filed an objection her claim of homestead exemption. The court stated at
the onset of the evidentiary hearing, “The bank bears the burden to prove the
debtor’s claim of exemption is not proper.” The bank proceeded first at trial,
although the court allowed the parties to combine their direct examinations of the
witnesses. After the bank rested, Walters’ attorney indicated that the debtor would
not be presenting any additional evidence. After additional briefing, the court
issued a memorandum opinion and order sustaining the bank’s objection to
Walters’ homestead exemption. This appeal ensued.

                                    Discussion

I.    Burden of Proof

      The parties argue at length about the proper burden of proof. Bankruptcy
Rule 4003(b) provides: “In any hearing under this rule, the objecting party has the

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burden of proving that the exemptions are not properly claimed.” Fed. R. Bankr. P.
4003(c); see also Peoples’ State Bank of Wells v. Stenzel (In re Stenzel), 301 F.3d
945, 947 (8th Cir. 2002) (citing Fed. R. Bankr. P. 4003(c) and stating, “The party
objecting to a claimed exemption, here the Bank, has the burden of proving the
debtor is not entitled to the exemption.”). According to the advisory committee
notes, “The Code changes the thrust of [the former Rule 403] by making it the
burden of the debtor to list his exemptions and the burden of parties in interest to
raise objections in the absence of which ‘the property claimed as exempt on such
list is exempt;’ § 522(l).” Fed. R. Bankr. P. 4003. advisory committee’s note
(1983). “[I]f the objecting party fails to produce evidence in support of the
objection, any factual issue must be resolved in favor of the debtor.” 9 Collier on
Bankruptcy, ¶ 4003.04 (Alan N. Resnick & Henry J. Sommer eds., 16th ed.). Once
the objector meets its burden, the burden of production shifts to the debtor to
produce evidence that the claimed exemption is proper, though the burden of
persuasion remains with the objector. Carter v. Anderson (In re Carter), 182 F.3d
1027, 1029 n3 (9th Cir. 1999). However, the burden of proof is largely irrelevant
in this case, because the bankruptcy court found that the bank had provided
sufficient evidence and it found that there was no credible evidence to rebut the
bank’s showing. The burden of proof only would have made a difference if the
evidence had been in equipoise or if the bank had failed to offer any credible
evidence to support its case.

II.           Applicable Iowa Law

      The issue on appeal is whether the bankruptcy court properly sustained the
bank’s objection to Walters’ homestead exemption.2 Because Iowa has opted out

                                                            

              2
              The bank raises several alternative legal arguments in support of its
position that the debtor is not entitled to exempt the Pleasant Hill property and only
concedes that the Pleasant Hill property was the debtor’s primary residence at the
time she filed her petition. Because the bankruptcy court decided the issue on
other grounds, it did not reach those issues and neither do we. 
                                                               5
 
of the federal exemption scheme, debtors in Iowa must claim exemptions under
Iowa state law. 11 U.S.C. § 522(b); Iowa Code § 627.10 (2010). Under Iowa law,
“The homestead of every person is exempt from judicial sale where there is no
special declaration of statute to the contrary.” Iowa Code § 561.16. “The
homestead must embrace the house used as a home by the owner, and, if the owner
has two or more houses thus used, the owner may select which the owner will
retain.” Iowa Code § 561.1 (2010).

       Walters claims the Pleasant Hill property as her homestead. It is undisputed
that the bank obtained its judgment on the defaulted loans prior to the acquisition
of the Pleasant Hill property and the bank argues that pursuant to § 561.21(1) of
the Iowa Code, Walters is not entitled to exempt the homestead from execution by
the bank because the bank’s debts arose prior to the acquisition of the Pleasant Hill
property.

       Section 561.21(1) provides: “The homestead may be sold to satisfy debts of
each of the following classes: Those contracted prior to its acquisition, but then
only to satisfy a deficiency remaining after exhausting the other property of the
debtor, liable to execution.” Iowa Code 561.21(1) (2010); In re Allen, 301 B.R.
55, 59 (Bankr. S.D. Iowa 2003) (“It is important to note that section 561.21(1)
speaks in terms of ‘debts,’ meaning a creditor holding an antecedent claim need
not have reduced that claim to judgment in order to raise an objection to the
debtor's homestead exemption.”); In re Marriage of McMorrow, 342 N.W.2d 73,
76 (Iowa 1983) (“Ordinarily a homestead may be sold in satisfaction of a judgment
rendered before its acquisition.”); James v. Weisman, 143 N.W. 428, 429 (Iowa
1913) (“The judgment obtained on an indebtedness, contracted prior to the
acquisition of a homestead, becomes a lien on all real estate owned by the debtor at
the time of its rendition. It becomes a lien on the homestead only, because the debt
was contracted prior to the acquisition of the homestead.”); In re Marriage of
Armetta, 417 N.W.2d 223 (Iowa App. 1987) (although the mother’s child support
judgment was not obtained until after the father’s acquisition of the homestead
property, the debt was incurred upon the birth of their child and therefore the

                                         6
 
father’s homestead was subject to judicial sale to satisfy the child support
obligation).

       Walters acquired the Pleasant Hill property in July of 2008, several months
after the bank obtained its judgments and several years after the underlying debts
were contracted. Walters argues that although the Pleasant Hill property was
acquired after she became indebted to the bank and after the bank obtained its
judgments, she is nonetheless entitled to protect her interest in the property under §
561.20 of the Iowa Code as an exempt homestead because the Pleasant Hill
property was acquired with the proceeds of a former homestead, the Cerromar
property in Florida, which was acquired prior to the bank’s judgments.

       Section 561.20 provides: “Where [. . .] a new homestead has been acquired
with the proceeds of the old, the new homestead, to the extent in value of the old,
is exempt from execution in all cases where the old or former one would have
been.” Iowa Code § 561.20 (2010). This section “gives to the owner of the
homestead the right to change homesteads, and when a homestead is disposed of
for the purpose of investing the proceeds in a new homestead the proceeds are
exempt from execution, and there is reasonable time allowed to make the change.”
Elliott v. Till, 259 N.W. 460, 463 (Iowa 1935). See also Blakeslee v. Paul, 238
N.W. 447, 448 (Iowa 1931) (“It is [. . .] well settled that the debtor has a
reasonable time after the sale of his homestead to invest the proceeds in a new
homestead.”). “The question of the exemption of the proceeds of a homestead
intended to be used in acquiring a new homestead is wholly one of the intention of
the owner.” Fardal v. Satre, 206 N.W. 22, 25 (Iowa 1925). “Failure to reinvest the
sale proceeds in another homestead would, of course, mean the sale proceeds
would lose their exempt status and be subject to execution.” Braunger v. Karrer,
563 N.W.2d 1, 4 (Iowa 1997). A creditor whose debt was contracted prior to a
debtor’s acquisition of a homestead property can therefore prevail on an objection
to a claimed homestead exemption by proving: 1) the previous property was not
the debtor’s homestead; 2) the debtor failed to reinvest those proceeds in the new


                                          7
 
homestead; or 3) the debtor failed to reinvest the proceeds within a reasonable
time.

III.   Debtor Not Entitled to Homestead Exemption

       To summarize, it is uncontested that the Pleasant Hill property was the
debtor’s domicile when she filed her petition, which might otherwise entitle her to
a homestead exemption. However, the bank has established that its debt was
incurred before the debtor acquired the Pleasant Hill property, which means the
property would not be exempt from the bank’s judgment. However, the debtor
claims that the Pleasant Hill property was acquired with the proceeds of a
homestead acquired before she incurred the debt to the bank and therefore it is
exempt from the bank’s judgment. It is on this last factual issue that this appeal
turns. Can the bank establish one or more of the exclusions provided by the Iowa
legislature in § 521.20 and the Iowa Supreme Court in Elliott v. Till?

        The bankruptcy court found that Walters had always considered Iowa her
domicile, and that she never intended to claim Florida as her domicile. The court
only found evidence of temporary or sporadic stays in Florida. This was not
clearly erroneous. Walters executed an affidavit on May 17, 2010 stating that the
Fuller location was “her most recent primary residence” prior to Pleasant Hill.
Walters and her husband offered conflicting and ambiguous testimony at trial and
at their depositions regarding where she had lived during the relevant time periods
and which locations she had considered to be her homestead, domicile or primary
residence. Walters testified that she never had a Florida driver’s license. She
testified that she moved to Pleasant Hill after living at the Fuller home, and that
prior to moving to Pleasant Hill, her address was at the Fuller home. Based on its
findings of fact, the bankruptcy court found the Cerromar property in Florida had
not been Walters’ homestead, and we agree.

      Under Florida law, “no debtor is automatically ‘receiving the benefits of’ the
Florida Constitutional homestead exemption simply by owning a home. A debtor

                                         8
 
must take affirmative steps to take advantage of the Florida Constitutional
homestead exemption, and the failure to do so subjects the home to sale.” In re
Fyock, 391 B.R. 882, 886 (Bankr. M.D. Fla. 2008); see generally Fla. Stat. §§
222.01 et seq.; Fla. Admin. Code R. 12D-7.007 (2010) (“Homestead Exemptions -
Residence Requirement. (1) For one to make a certain parcel of land his permanent
home, he must reside thereon with a present intention of living there indefinitely
and with no present intention of moving therefrom.”); Matthews v. Jeacle, 61 Fla.
686, 55 So. 865 (Fla. 1911) (“The homestead intended by our Constitution to be
exempted is the place of actual residence of the party and his family.”). We agree
with the bankruptcy court that the bank sufficiently proved that Walters never
intended to make the Cerromar property her homestead, and that at all times, her
intention was to remain domiciled in Iowa. Therefore, the Cerromar property was
not legally her homestead, and she cannot avail herself of the protection of §
561.20.

       Even if the Cerromar property had been Walters’ homestead, the bankruptcy
court found that the Pleasant Hill property was not acquired with the proceeds from
the sale of the Cerromar property. Section 561.20 only applies where the new
“homestead has been acquired with the proceeds of the old.” Iowa Code § 561.20.
The plain meaning of the statute excludes situations such as this, where the debtor
has not only commingled the funds in numerous accounts, but also transferred the
property to other people.

       The facts of this case are analogous to those in Peninsular Stove Co. v.
Roark, in which a couple sold their homestead with the intention of reinvesting the
funds in a new homestead, but a year later, invested the money in a firm in which
the husband was a member. Peninsular Stove Co. v. Roark, 94 Iowa 560, 63 N.W.
326 (1895). When a creditor obtained a judgment against the firm, the couple
withdrew the original investment and bought land, which they wanted to claim as
exempt. The Iowa Supreme Court denied the exemption, stating: “What ever may
have been the intention originally, it clearly appears that the defendants abandoned
their intention to immediately purchase a homestead, and proceeded to hazard the

                                         9
 
funds.” Id. at 327. See also In re White, 293 B.R. 1, 6 (Bankr. N.D. Iowa 2003)
(“As long as the funds are traceable and the transaction is carried out with the
intent to preserve the exemption, this fact will not constitute abandonment of the
exemption.”); Harm v. Hale, 206 Iowa 920, 221 N.W. 482, 584 (Iowa 1928)
(although a strict tracing is not required, there must be a “sufficient showing [. . .]
that the homestead character of the proceeds from the old property continues into
the new, so far as the reinvestment thereof is concerned.”).

        Both Walters and her husband testified that they would have no way to
prove that they actually used the Cerromar proceeds to acquire the Pleasant Hill
property. The bank provided evidence that Walters and her husband, under oath,
had offered ambiguous and at times contradictory testimony regarding the
disposition of the proceeds from the sale of the Cerromar property. Walters
testified that the only way she knew that the Pleasant Hill property was acquired
with the sale proceeds from the Cerromar property is that she was assuming her
husband put it there. The bankruptcy court found, “It is clear that funds from any
and all sources were utilized by Walters in an effort to maintain both personal and
business expenses.” In re Walters, 2010 WL 3909230 (Bankr. S.D. Iowa 2010).
The bankruptcy court’s finding that the funds were appropriated for other expenses
and not preserved for the Pleasant Hill homestead was supported by the record.
Walters’ husband testified that he ran the proceeds through approximately “50
different accounts.” In addition, it is undisputed that Walters and her husband
transferred the Pleasant Hill property and a large sum of cash to the Sloans prior to
building the house and during construction.

      Finally, while the debtor argues that the bank must satisfy its debts from
nonexempt assets first, that issue is not properly before us. The issue before the
bankruptcy court was whether Walters is entitled to her homestead exemption.
The bank will still have to exercise its rights under state law, and Walters and her
husband will be entitled to raise their other defenses at that time




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                                CONCLUSION

      Because the bankruptcy court properly sustained the bank’s objection to the
debtor’s claim of homestead exemption as to the bank’s preexisting debts, we
affirm.
                          ______________________




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