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In re Calderon

United States Bankruptcy Appellate Panel For the Ninth Circuit

February 28, 2014

In re: AMADO G. CALDERON, Debtor. AMADO G. CALDERON, Appellant,
BETH LANG, Chapter 7 Trustee, Appellee

Argued and Submitted at Tempe, Arizona January 23, 2014

Page 725

Appeal from the United States Bankruptcy Court for the District of Arizona. Bk. No. 4:12-bk-16880-EWH. Honorable Eileen W. Hollowell, Bankruptcy Judge, Presiding.

Barry W. Rorex argued for appellant Amado G. Calderon.

Trudy A. Nowak argued for appellee Beth Lang, chapter 7 trustee.

Before: KURTZ, DUNN and PAPPAS, Bankruptcy Judges.


Page 726

KURTZ, Bankruptcy Judge:


In his chapter 7[1] bankruptcy case, debtor Amado Calderon claimed as exempt his former family residence. Chapter 7 trustee Beth Lang objected to Calderon's homestead exemption claim because, at the time of Calderon's bankruptcy filing, Calderon no longer was living at the residence, nor was he storing his personal possessions there. Instead, Calderon was living elsewhere and renting out the residence.

The bankruptcy court sustained the trustee's objection and disallowed Calderon's homestead exemption claim, opining that Arizona law did not permit Calderon to hold and retain a homestead exemption in the residence based solely on a vaguely expressed intent to return someday to the property. Calderon appealed.

We disagree with the bankruptcy court's interpretation of Arizona homestead exemption law. Arizona law permits debtors to move out of their homesteads for up to two years and retain preexisting homestead exemption rights, so long as they don't manifest a clear intent for their absence from the homestead to be permanent. Because the bankruptcy court incorrectly interpreted Arizona homestead exemption law, we VACATE AND REMAND.


Calderon and his wife Sheri purchased the residence in 2002, and Calderon lived in the residence until he and Sheri divorced in 2011. Pursuant to the couple's divorce settlement, Sheri conveyed her interest in the residence to Calderon in March 2011, and he thereafter became the sole owner of the residence. In April or May 2011, Calderon moved out of the residence and moved into a different house that he rented from a man named Paul Berkley (" Berkley House" ). Meanwhile, Calderon rented out the residence to a couple named Brian and Lisa Torma. The Tormas and Calderon entered into a written twelve-month lease agreement that commenced on May 1, 2012 and was scheduled to end on April 30, 2013. However, the lease agreement also contained an annual renewal option, which the Tormas apparently exercised.

Calderon commenced his bankruptcy case in July 2012. In the initial version of his schedules, Calderon listed his ownership interest in the residence, but identified the Berkley House as his home address and the location where he kept all of his personal property. Calderon also scheduled the income he derived from renting the residence as $1,895 per month and his monthly mortgage expense for the residence, referred to in Schedule J as his " rental property," as $2,209 per month. Even though Calderon's monthly mortgage

Page 727

payments for the residence exceeded the rental income he was receiving from the residence, Calderon filed a statement of intention indicating that he desired to keep the residence.

Calderon did not attempt to claim as exempt his equity in the residence in the initial version of his schedules. However, he filed an amended Schedule C in September 2012 in which he claimed a homestead exemption in his interest in the residence under Arizona Revised Statutes (" A.R.S." ) § 33-1101(A). According to his amended Schedule C, the residence was worth roughly $300,000, and he had roughly $84,000 in equity in the residence, in which he claimed the exemption.

The trustee filed an objection to Calderon's homestead exemption claim, asserting that Calderon could not claim a homestead exemption in the residence under A.R.S. § 33-1101 because he had moved out of the residence in May 2011 and because he was renting the residence to the Tormas.

Calderon filed a response opposing the objection. Calderon disputed that he had abandoned his homestead. He claimed that he moved out of the residence and was renting it as a temporary measure to reduce his housing expenses. He further claimed that he intended to return to the residence as soon as his lease with the Tormas expired.

The bankruptcy court scheduled the matter for an evidentiary hearing on May 1, 2013. In addition to setting the hearing date, the court's scheduling order contained deadlines for completing various aspects of pre-hearing procedure, including a deadline for exchanging lists of witnesses and exhibits and a deadline for submitting to the court a joint pre-hearing statement. The court's scheduling order further warned the parties that sanctions might be imposed if either party failed to cooperate or comply with the pre-hearing procedures.

The trustee duly filed a list of witnesses and exhibits and a unilateral pre-hearing statement. The trustee also filed a legal brief in support of her objection. Calderon, on the other hand, did not participate in the filing of the required joint pre-hearing statement, nor did he otherwise comply with the court's pre-hearing requirements. The only thing Calderon filed in advance of the hearing was a one-page motion, filed two days before the hearing, seeking to convert his bankruptcy case from chapter 7 to chapter 13. The trustee opposed the motion to convert, contending that it was part of Calderon's bad-faith tactics aimed at obstructing the resolution of the trustee's exemption claim objection.

The bankruptcy court held the hearing on the exemption claim objection on May 1, 2013, as scheduled. As a sanction for Calderon's noncompliance with the scheduling order, the bankruptcy court prohibited Calderon from presenting any evidence or argument in support of his exemption claim.[2] As a result, the bankruptcy court relied entirely on the evidence and testimony presented by the trustee. The trustee was the sole witness to testify, and her testimony largely consisted of what she learned from various documents ...

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