Sandra Bruess v. Michael Dietz ( 2015 )

United States Bankruptcy Appellate Panel
For the Eighth Circuit
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No. 15-6019
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In re: Sandra Jo Bruess, formerly known as Sandy B. Macho, formerly known as
Sandra J. Rolloff
lllllllllllllllllllllDebtor
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Sandra Jo Bruess
lllllllllllllllllllllDebtor - Appellant
v.
Michael S. Dietz
lllllllllllllllllllllTrustee - Appellee
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Appeal from United States Bankruptcy Court
for the District of Minnesota - St. Paul
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Submitted: October 9, 2015
Filed: October 29, 2015
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Before SCHERMER, SALADINO and NAIL, Bankruptcy Judges.
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SALADINO, Bankruptcy Judge.
The Appellant, Sandra Jo Bruess, appeals from an order of the bankruptcy
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court sustaining the bankruptcy trustee’s objection to her claim of an exemption in
certain real property and limiting the exemption to $155,675.00. We have jurisdiction
over this appeal from entry of the bankruptcy court’s final order pursuant to 28 U.S.C.
§ 158(b). For the reasons set forth below, we affirm.
Factual Background
This case arises out of the Chapter 7 bankruptcy proceeding filed by Ms.
Bruess in the District of Minnesota on December 15, 2014. On Schedule C of her
bankruptcy filing, Ms. Bruess claimed as exempt, pursuant to Minnesota law, her
one-third interest in her homestead property located in Minnesota. Ms. Bruess
acquired her interest in the property by quitclaim deed from her father and his wife
dated April 5, 2010, which was filed for record in Brown County, Minnesota, on
January 14, 2013.2 The value of her claimed exemption was $562,760.33.
The bankruptcy trustee objected to the homestead exemption claim asserting
that Ms. Bruess did not acquire her interest in the property until her father caused the
quitclaim deed to be recorded on January 14, 2013, which was only 700 days prior
to bankruptcy filing. As such, according to the trustee, Ms. Bruess acquired the
property within the 1215-day window of 11 U.S.C. § 522(p)(1), thereby limiting her
state law exemption to $155,675.00 in value. Ms. Bruess, on the other hand, argued
that she acquired the property when the deed was executed on April 5, 2010, which
1
The Honorable Gregory F. Kishel, Chief Judge, United States Bankruptcy
Court for the District of Minnesota.
2
Under the terms of the quitclaim deed, Donn Bruess (Ms. Bruess’ father) and
his wife, conveyed a life estate in the property to Donn Bruess and the remainder
interest to Ms. Bruess and her brothers, Steven and William.
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was substantially more than 1215 days prior to the bankruptcy filing. Therefore, her
state law homestead exemption should not be limited pursuant to 11 U.S.C. 522(p)(1).
On March 31, 2015, the bankruptcy court held a hearing on the trustee’s
objection and Ms. Bruess’ resistance. The parties submitted a Stipulation of Fact
under which they agreed:
1. That the quit claim deed filed as document
number 391317 of the Brown County, Minnesota Recorder
was executed by the Debtor’s father, Donn Bruess, and his
wife, Audrey Bruess, on April 5, 2010.
2. Attorney Robert D. Hinnenthal of New Ulm,
Minnesota, drafted said deed, and notarized it on the date
that it was executed.
3. That the deed remained in the possession of
Attorney Hinnenthal from April 5, 2010 to the date that it
was recorded on January 14, 2013.
4. That on or about January 14, 2013, Donn
Bruess directed Attorney Hinnenthal to record the deed.
5. That Donn Bruess died on April 21, 2013.
6. That Audrey Bruess died in October, 2013.
The trustee also submitted affidavits, along with a transcript of Ms. Bruess’
testimony at her § 341 meeting. Ms. Bruess did not submit any evidence, and the
parties submitted the matter to the bankruptcy court for consideration. The
bankruptcy court issued its oral ruling on the record sustaining the trustee’s objection.
Specifically, the bankruptcy court found that, until he instructed his attorney to record
it, “Donn Bruess retained complete control over the fate of that deed.” Therefore,
delivery (and transfer of interest) did not take place until January 14, 2013, when he
directed his attorney to record it.
Ms. Bruess appealed, asserting that the bankruptcy court erred in determining
that she did not acquire her interest in the property, and the deed from her father was
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not “delivered” under Minnesota law, until her father instructed his attorney to record
it.
Standard of Review
We review the bankruptcy court’s conclusions of law de novo and its findings
of fact for clear error. Addison v. Seaver (In re Seaver), 540 F.3d 805, 809 (8th Cir.
2008); Doeling v. Nessa (In re Nessa), 426 B.R. 312, 314 (B.A.P. 8th Cir. 2010). The
parties are in agreement that the resolution of this appeal turns on when the deed was
delivered under Minnesota law, which is a question of fact. Under long-standing
Minnesota case law:
It is, of course, very elementary law that a deed does not
take effect until there is a delivery to the grantee, . . . .
Delivery is a question of fact, . . . . The important question
in determining whether there has been a delivery is the
intent of the grantor that the instrument shall pass out of
his control, and operate as a conveyance.
Babbitt v. Bennett, 71 N.W. 22, 22-23 (Minn. 1897).
A factual finding is clearly erroneous if, after examining the entire record, we
are left with a definite and firm conviction that the bankruptcy court has made a
mistake. Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985) (quoting
United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). This standard
plainly does not entitle a reviewing court to reverse the finding of the trier of fact
simply because it is convinced that it would have decided the case differently.
Anderson, 470 U.S. at 573. Where there are two permissible views of the evidence,
the fact finder’s choice between them cannot be clearly erroneous. Id. at 574.
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Discussion
Under 11 U.S.C. § 522, a debtor who files bankruptcy may exempt from
property of the estate the property delineated in 11 U.S.C. § 522(d),3 or may use the
exemptions available under state law and other federal laws. 11 U.S.C. § 522(b)(1)-
(3). Here, Ms. Bruess elected to use the exemptions available under state and federal
law other than bankruptcy law.
One of the exemptions claimed by Ms. Bruess is the Minnesota homestead
exemption as set forth in Minnesota Statutes §§ 510.01 and 510.02. “The homestead
may include any quantity of land not exceeding 160 acres. The exemption per
homestead, whether the exemption is claimed by one or more debtors, may not exceed
$390,000 or, if the homestead is used primarily for agricultural purposes, $975,000
. . . .” Minnesota Statutes § 510.02. In Schedule C, Ms. Bruess claimed her entire
interest in her homestead property, valued at $562,760.33, as exempt.
The trustee does not dispute Ms. Bruess’ entitlement to a homestead exemption
under Minnesota law. The trustee only argues that the limitation of 11 U.S.C. §
522(p) should apply. That section was added by the 2005 BAPCPA amendments to
the Bankruptcy Code and provides a limitation on the dollar value of certain state law
exemptions for recently acquired property. Specifically, for purposes of this appeal,
that section limits a state law exemption in real property as follows:
[A] debtor may not exempt any amount of interest that was
acquired by the debtor during the 1215-day period
preceding the date of the filing of the petition that exceeds
in the aggregate $155,675 in value in —
3
This choice among exemption schemes is not available for debtors living in
states that have opted out of the right to use the Bankruptcy Code exemptions. 11
U.S.C. § 522(b)(2). Minnesota has not opted out.
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(A) real or personal property that the debtor or a
dependent of the debtor uses as a residence[.]
11 U.S.C. § 522(p)(1)(A). The only issue in this appeal is whether Ms. Bruess
“acquired” the property in which she claims her homestead exemption within the
1215-day period preceding the filing of the petition thus limiting her homestead
exemption to $155,675.00.
In bankruptcy, property rights are determined by reference to state law. Butner
v. United States, 440 U.S. 48, 55 (1979). Minnesota law is well-settled that the
transfer of an interest in real property does not occur until the delivery of the deed.
Under Minnesota law, to transfer title to real
property, a deed must be delivered to the intended
recipient. Slawik v. Loseth, 207 Minn. 137, 290 N.W. 228,
229 (1940); In re Estate of Savich, 671 N.W.2d 746, 750
(Minn. Ct. App. 2003). A physical delivery of the deed is
not necessary to convey title, all that is required is to show
an unconditional intention by the grantor to part with
ownership. Barnard v. Thurston, 86 Minn. 343, 90 N.W.
574, 576 (1902). In Barnard, the court stated “To
constitute a complete delivery thereof, the grantor must
deal with it in a way evincing an intention to part presently
and unconditionally with all control over it, and that it shall
take effect according to its terms.” Id.
The two essential elements to delivery of a deed are,
(1) surrender of control by the grantor, and (2) an intent to
convey the title. Exsted v. Exsted, 202 Minn. 521, 279
N.W. 554, 557 (1938). The delivery depends on the intent
of the grantor “as appears from the contents of the deed and
all the surrounding circumstances.” Vessey v. Dwyer, 116
Minn. 245, 133 N.W. 613, 614 (1911).
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Georgen-Running v. Bidwell (In re Bidwell), 326 B.R. 759, 764-65 (Bankr. D. Minn.
2005) (footnote omitted).
Thus, the fact question for the bankruptcy court was whether Donn Bruess
intended to surrender control of the deed with an intent to convey title when he signed
it and left it with his attorney. As the party objecting to the homestead exemption, the
trustee had the burden of proving that the exemption was not properly claimed. Fed.
R. Bankr. P. 4003(c). The trustee’s evidence included the Stipulation of Fact between
the parties. Under the terms of that stipulation, the parties agreed that the deed was
executed by Donn Bruess and his wife on April 5, 2010; that it was notarized by his
attorney; that the deed remained in the attorney’s possession from April 5, 2010, until
it was recorded on January 14, 2013; and that on January 14, 2013, Donn Bruess
directed his attorney to record the deed.
The trustee also presented affidavits from each of Ms. Bruess’ two brothers,
William and Steven. Steven’s affidavit stated: “I was party to discussions with my
father about various considerations that influenced how he intended to finalize his
estate plan. There were several factors that he was weighing. These included my
brother’s severe illness and my sister’s poor record regarding financial matters.” The
affidavit further stated: “My understanding is that my father did not make a final
decision to pass title to his real estate to his children by deed until he instructed his
lawyer to record the deed in January of 2013.”4 William’s affidavit echoed those
statements.
4
It is not clear whether the attorney for Ms. Bruess objected to the use or
admissibility of the affidavits, although the transcript indicates the bankruptcy judge
found that a hearsay exception should apply and the affidavits were admissible. Ms.
Bruess did not appeal that evidentiary ruling.
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Finally, the trustee presented the transcript of the § 341 meeting of creditors
at which Ms. Bruess testified on January 7, 2015. In part, that transcript reveals the
following testimony by Ms. Bruess regarding the deed:
Q: So it had been sitting with your dad’s attorney –
A: It had been sitting there –
Q: – for a while –
A: – for a while until dad made his decision to have it filed.
Q: Okay.
A: It was an issue because dad held off on things for quite
some time my brother was very ill with cancer and he just
wasn’t sure how he was going to handle the estate. So –
Q: Okay.
A: – then he gave the go ahead, he wanted it filed, and
that’s what happened. So . . . .
Q: Okay. Fair enough. Dad just – so I understand your
version of it, dad had the Deed prepared –
A: Yes.
Q: – and then his attorneys held it because he was
concerned about William’s –
A: Uh-huh.
Q: – health issues –
A: Uh-huh.
Q: – and then at some point he was satisfied that he wanted
to move forward and then he had [attorney] file the Deed?
A: Yes.
Q: Thank you. Okay. And did you ever have the Deed? Did
he give it to you and you held it?
A: Never.
Q: All right. When did he tell you about it?
A: Oh, I don’t know.
Q: Did you find out about it before it was recorded?
A: He had said he was going to make the decision to record
it, yeah, but – no.
Q: Okay. When did he tell you he was going to make the
decision to record it?
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A: I don’t even know when it was recorded.
Q: It was recorded January 14th of 2013. So roughly a year
ago, I guess.
A: Yeah.
Q: Before then, did he tell you?
A: Shortly. Yeah.
Q: Okay.
In summary, the trustee presented evidence from three sources, including Ms.
Bruess herself, to the effect that instead of recording the deed immediately after
execution, Donn Bruess left it with his attorney until he determined whether to go
forward with that conveyance. As Ms. Bruess said, prior to contacting his attorney in
January 2015 to instruct him to record the deed, “he just wasn’t sure how he was
going to handle the estate.” Notably, Ms. Bruess did not present any evidence at the
hearing. Upon consideration of the trustee’s evidence, the bankruptcy court found that
Donn Bruess had not surrendered control of the deed with the intent to irrevocably
convey the property.
Ms. Bruess argues on appeal that even in the absence of an effective escrow
agreement, delivery of a deed to a third party can be sufficient to pass title under
Minnesota law. While that statement may be true in and of itself, it does not affect the
outcome of this appeal. As the attorney for Ms. Bruess even acknowledged in her
appellate brief, “the crucial question is the grantor’s intent, which is a question of
fact.” At oral argument, the attorney for Ms. Bruess suggested that another possible
interpretation of the evidence is that Donn Bruess intended to convey a remainder
interest to his children at the time he executed the deed and delivered it to his
attorney, as evidenced by the fact that he ultimately told the attorney to record it.
Even if that were a plausible interpretation of the evidence, a fact finder’s choice
between two permissible views of the evidence cannot be clearly erroneous. Anderson
v. City of Bessemer City, 470 U.S. 564, 574 (1985).
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The only evidence presented at the hearing overwhelmingly supports the
bankruptcy judge’s finding of fact that Donn Bruess did not intend to convey the
property until he instructed his attorney to record the deed. There being no evidence
to the contrary, the bankruptcy court’s fact findings were not clearly erroneous.
Therefore, we affirm.
Conclusion
For the reasons stated above, we affirm.
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