In Re: Messina ( 2010 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 08-1134
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IN RE: STERGIOS AND RENEE MESSINA,
Debtors
STEVEN R. NEUNER,
Appellant
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On Appeal from the United States District Court
for the District of New Jersey
(D.C. No. 07-cv-01677)
District Judge: Honorable Jerome B. Simandle
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Argued March 3, 2009
Before: SLOVITER, SCIRICA and HARDIMAN, Circuit Judges.
(Filed: July 9, 2010)
David A. Kasen [Argued]
Kasen & Kasen
1874 East Marlton Pike, Suite 3
Cherry Hill, NJ 08003
Attorney for Appellees
Steven R. Neuner [Argued]
Neuner & Ventura
750 Route 73 South
Suite 210
Marlton, NJ 08053-0000
Attorney for Appellant
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OPINION OF THE COURT
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HARDIMAN, Circuit Judge.
Bankruptcy Trustee Steven Neuner (the Trustee) appeals the District Court’s order
barring his motion to value at zero the exemption claimed by Debtors Stergios and Renee
Messina. We held this appeal c.a.v. pending the Supreme Court’s decision in Schwab v.
Reilly, __ S.Ct. __, No. 08-538, 2010 WL 2400094 (U.S. June 17, 2010). We will vacate
the District Court’s Order and remand for redetermination in light of Schwab.
I.
Because we write for the parties, we will recount only those facts essential to our
decision. On May 26, 2006, the Messinas filed their bankruptcy schedules, wherein they
claimed a $36,900 homestead exemption under 11 U.S.C. § 522(d)(1) on Schedule C.
Separately, Schedule D identified a secured mortgage in the amount of $113,657.86 held
by Litton Loans and Schedule F listed an unsecured claim of $396,171.13 for a disputed
mortgage held by National Penn Bank. The Trustee did not object initially to the
homestead exemption.
On June 14 and 21, the Messinas sent the Trustee two letters outlining the alleged
defects in the National Penn mortgage. On July 5, the Trustee initiated an adversary
proceeding against National Penn to avoid the mortgage. On August 21, the Trustee
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submitted for court approval a $200,209.64 offer to purchase the Messinas’ residence,
which the Bankruptcy Court approved on September 11, and the Trustee completed the
sale on September 13. On October 18, the Trustee settled the avoidance action, whereby
National Penn consented to avoid its mortgage with regard to the bankruptcy estate and to
other lien-holders with valid, perfected and unavoidable liens on the property.
The Messinas then claimed their homestead exemption should be satisfied by the
remaining proceeds from the sale of their home. On November 17, the Trustee moved for
a court order valuing the Messinas’ exemption at zero,1 on the grounds that the Messinas
had no equity in their home to which the homestead exemption could attach. The
Messinas cross-moved for a court order to have the Trustee pay them the amount of their
exemption. The Bankruptcy Court granted the Trustee’s motion and valued the Messinas’
exemption at zero. The Messinas appealed to the United States District Court for the
District of New Jersey, which reversed the Bankruptcy Court, holding the Messinas were
entitled to their exemption because the Trustee’s motion was an untimely objection under
11 U.S.C. § 522(l) and Rule 4003 of the Federal Rules of Bankruptcy as interpreted by
Taylor v. Freeland & Kronz, 503 U.S. 638 (1992).
In Schwab v. Reilly, the Supreme Court modified Taylor. Relevant to this appeal,
Schwab held that Rule 4003’s thirty-day time limit applies to objections based on “three,
and only three” elements of a claimed Schedule C exemption: (1) the description of the
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There is no dispute that this motion is to be treated as an objection to the
exemption.
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exempted property; (2) “the Code provisions governing the claimed exemptions;” and (3)
the amount “listed in the column titled ‘value of claimed exemption.’” Schwab, slip op.
at 12-13. But when the objection is based on other elements—in that case, the debtor’s
market value estimation and “the estate’s right to retain any value in the [property]
beyond the value of the exempted interest”—the thirty-day time limit does not apply. Id.
at 18-19, 22-23.
Because the District Court did not have the benefit of Schwab, we will vacate its
order and remand for further proceedings in light of Schwab.
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