United States Bankruptcy Appellate Panel
FOR THE EIGHT CIRCUIT
_______________
No. 09-6083
_______________
In re: G. Yvonne Stephens, *
*
Debtor *
*
G. Yvonne Stephens, * Appeal from the United States
* Bankruptcy Court for the
Debtor - Appellant * District of Minnesota
*
v. *
*
John A. Hedback, *
Trustee of the Bankruptcy Estate *
of G. Yvonne Stephens, and *
Mary Jo A. Jensen-Carter, *
Trustee of the Bankruptcy Estate *
of Larry K. Alexander, *
*
Trustees - Appellees *
_______________
Submitted: February 26, 2010
Filed: March 12, 2010
_______________
Before SCHERMER, FEDERMAN, and MAHONEY, Bankruptcy Judges
FEDERMAN, Bankruptcy Judge
Debtor G. Yvonne Stephens appeals from the Order of the Bankruptcy Court1
approving a settlement entered between the Trustee in her Chapter 7 bankruptcy case,
John A. Hedback, and the Trustee in her husband’s separate Chapter 7 bankruptcy
case, Mary Jo A. Jensen-Carter. The Debtor asserts that the Bankruptcy Court’s
approval of the settlement was error because it failed to consider her claimed
homestead interest in the property involved. For the reasons that follow, we AFFIRM
the Bankruptcy Court’s Order.
G. Yvonne Stephens, also known as Georgina Yvonne Stephens, filed a Chapter
7 bankruptcy case in August 1998. Her case is related to a separate case filed in 1998
by her then-husband, Larry Kenneth Alexander. As the Bankruptcy Court in this case
has previously phrased it, these two cases have lengthy and thoroughly-litigated
histories,2 much of which involved property located at 875 Laurel Avenue in St. Paul,
Minnesota, which Ms. Stephens occupies as her residence and now claims is her
homestead.
The details concerning the Laurel property, and the litigation involving it, have
been recited numerous times,3 and, by an Order Granting Partial Summary Judgment
against Ms. Stephens entered on January 4, 2006 (the 2006 Order),4 the Bankruptcy
1
The Honorable Dennis D. O’Brien, Bankruptcy Judge, United States Bankruptcy Court
for the District of Minnesota.
2
Jensen-Carter v. Stephens (In re Alexander), Case No. 98-33694, Adv. No. 04-3468,
Order Granting Partial Summary Judgment at 2 (Doc. #26) (Bankr. D. Minn. Jan. 5, 2006).
3
See, e.g., In re Alexander, 239 B.R. 911, 916 (B.A.P. 8th Cir. 1999), aff’d 236 F.3d 431
(8 Cir. 2001); Alexander v. Jensen-Carter (In re Alexander), 270 B.R. 281 (B.A.P. 8th Cir.
th
2001), aff’d 44 Fed. Appx. 32 (8th Cir. 2002); Stephens v. Jensen Carter (In re Stephens), 276
B.R. 610 (B.A.P. 8th Cir. 2002), aff’d 53 Fed. Appx. 392 (8th Cir. 2002); Stephens v. Jensen-
Carter (In re Alexander), 288 B.R. 127 (B.A.P. 8th Cir. 2003); Alexander v. Jensen-Carter (In re
Alexander), 289 B.R. 711 (B.A.P. 8th Cir. 2003), aff’d 80 Fed. Appx. 540 (8th Cir. 2003).
4
The 2006 Order is found at Jensen-Carter v. Stephens (In re Alexander), Case No. 98-
33694, Adv. No. 04-3468, Order Granting Partial Summary Judgment (Doc. #26) (Bankr. D.
2
Court ultimately resolved all of the relevant facts regarding the Laurel property. That
2006 Order was affirmed by both the District Court for the District of Minnesota and
the Court of Appeals for the Eighth Circuit.5 Hence, we need not, and do not, discuss
in detail the events leading up to the 2006 Order but, instead, relate what the
Bankruptcy Court concluded in that Order, what the District Court said in its
Memorandum Opinion and Order affirming it, and the events occurring subsequent
to those decisions.
In sum, the Bankruptcy Court determined in the 2006 Order that neither Ms.
Stephens, nor Mr. Alexander, was entitled to claim an ownership interest in the Laurel
property, and, further, that neither of them had properly claimed a homestead
exemption in it.6 The Bankruptcy Court also found that Stephens’ trustee had not
abandoned the estate’s interest in the Laurel property.7 Consequently, the Bankruptcy
Court concluded that the fight over the house was between the trustees of the debtors’
respective bankruptcy estates.8
The Bankruptcy Court then concluded in the 2006 Order that summary
judgment was not appropriate as to the issues between the two trustees – i.e., whether,
by virtue of a March 1998 deed, Mr. Alexander properly conveyed an interest in the
875 Laurel property to Ms. Stephens, which would be an interest belonging to Ms.
Stephens’ bankruptcy estate, and whether such transfer could be avoidable by
Minn. Jan. 5, 2006).
5
Stephens v. Jensen-Carter, 2007 WL 2885813 (D. Minn. Sept. 27, 2007); Stephens v.
Hedback, 321 Fed. Appx. 536 (8th Cir. 2009).
6
See, e.g., 2006 Order at 9 (“Neither debtor properly claimed an exemption in the Laurel
property and neither maintains an ownership interest in that property.”).
7
2006 Order at 7-8.
8
2006 Order at 9.
3
Alexander’s bankruptcy trustee.9 However, because there was “no fact or legal
question now undetermined relative to either Larry Alexander or Georgina Stephens
with respect to the property,” summary judgment was appropriate as to her claimed
interests in it.10 In its disposition, the Court expressly ordered that “G. Yvonne
Stephens and Larry Kenneth Alexander are each declared to have no exemption in and
no ownership interest in the property at issue herein, the real property commonly
described as 875 Laurel Avenue in Saint Paul, Minnesota.”11 The Bankruptcy Court
ordered that the property be sold, with the net proceeds to be held by Alexander’s
trustee pending a final determination of the issues remaining as between the two
bankruptcy estates as to their claimed interests in the property.
As stated, the District Court affirmed the 2006 Order, expressly and
unambiguously agreeing with the conclusion that neither Alexander, nor Ms.
Stephens, had an ownership or exemption interest in the property.12 Moreover, the
District Court found that Ms. Stephens and Mr. Alexander were vexatious litigants
who were congesting the courts’ dockets, and barred them from making “any further
filings of any kind relating to 875 Laurel Avenue, the Stephens bankruptcy, the
Alexander bankruptcy, or the Jensen-Carter adversary proceeding” in either the
Bankruptcy Court or the District Court, unless the filing was signed by an attorney
pursuant to Rule 11 of the Federal Rules of Civil Procedure, or they had obtained the
court’s advance authorization to file such pleading.13 Ms. Stephens appealed the
9
2006 Order at 8.
10
2006 Order at 9.
11
2006 Order at 10.
12
Stephens v. Jensen-Carter, 2007 WL 2885813 at *2 (“In short, Judge O’Brien found
that the Debtors have no valid claim to 875 Laurel, and that at this point, the fight over the house
is essentially between the trustees of their bankruptcy estates, Jensen-Carter and Hedback. The
Court agrees wholeheartedly with Judge O’Brien.”).
13
Stephens v. Jensen-Carter, 2007 WL 2885813 at *6-7.
4
Bankruptcy Court and District Court’s decisions to the Eighth Circuit, which affirmed
in all respects.14
Meanwhile, on March 28, 2006, while the Bankruptcy Court’s 2006 Order was
on appeal to the District Court, Ms. Stephens filed amended schedules listing the
Laurel property and claiming it exempt as her homestead. Both trustees objected to
the claimed exemption. The objections to exemptions were stayed by the Bankruptcy
Court pending the outcome of the appeal of the 2006 Order. Although the appeal of
the 2006 Order was decided in the trustees’ favor, as discussed above, these latest
objections to exemptions were never placed back on the Court’s docket.
Then, in November 2009, the two trustees entered into an agreement which
resolved the issues between the two bankruptcy estates as to how the proceeds from
the sale of the Laurel property were to be divided. On November 20, 2009, they filed
motions to approve the settlement in the two bankruptcy cases. On December 14,
2009, Ms. Stephens, pro se, without prior court approval, filed an objection to the
settlement, in contravention of the District Court’s bar against her filing such
pleadings. The Bankruptcy Court conducted a hearing on the settlement on December
17, 2009, and allowed Ms. Stephens to argue her position. The Bankruptcy Court then
ruled that the prior orders had been conclusive that neither Stephens nor Alexander
had an interest in the property and, further, that Ms. Stephens’ attempt in 2006 to
claim the Laurel property exempt had no effect. In addition, although the Bankruptcy
Court had allowed Ms. Stephens to argue her position in court, he admonished her for
filing her objection to the settlement in total disregard of the orders of the courts. That
14
Stephens v. Hedback, 321 Fed. Appx. 536 (8th Cir. 2009). Recently, despite being
repeatedly told that they have no interest in the property, and warned by the courts to cease
litigation involving the property, on January 4, 2010, Mr. Alexander filed an action against
Trustee Hedback in the Ramsey County District Court, seeking a declaratory judgment that he
owns the Laurel property. Hedbeck removed that action to the District Court, which dismissed
the case with prejudice, once again determining that “[a]ll of the theories now advanced have
been or could have been raised in the prior actions” involving the Laurel property. Alexander v.
Hedback, Case No. 10-cv-227, Order (Doc. #6) (D. Minn. February 23, 2010).
5
same day, December 17, 2009, the Bankruptcy Court entered an Order approving the
settlement. Ms. Stephens appeals from that Order.
The trustees15 point out first that Ms. Stephens’ objection to the settlement was
filed in contravention of the District Court’s bar against her filing pleadings pro se,
and suggest that we not consider this appeal on that basis. However, it bears mention
here that she is represented by counsel in this appeal, and that the Bankruptcy Court
did permit her to make her argument to it pro se at the hearing on the settlement. In
any event, we believe it preferable to consider her appeal on the merits.
As to the merits of the appeal, Ms. Stephens asserts that, because the
Bankruptcy Court has not expressly sustained the trustees’ objections to her 2006
amended schedules purporting to claim the Laurel property exempt, she has
successfully exempted the property, thereby removing it from her estate and depriving
the trustees of the authority to administer it through the settlement.
Ms. Stephens is correct that Rule 1009 permits debtors to amend their schedules
“as a matter of course at any time before the case is closed.”16 Further, in In re Ladd,
the Eighth Circuit held that the denial of a debtor’s claimed exemptions under one
provision is not, generally, res judicata as to the debtor’s subsequent attempt to claim
alternative or amended exemptions.17 Moreover, as a general principle, claimed
exemptions are presumptively valid.18 Based on that, Ms. Stephens asserts that her
2006 attempt to claim the Laurel property exempt stands, regardless of any prior
orders, and the property is therefore out of the reach of the trustees.
15
Mr. Hedback filed an Appellee Brief in this matter, with which Ms. Jensen-Carter
joined.
16
Fed. R. Bankr. P. 1009(a).
17
450 F.3d 751, 753-55 (8th Cir. 2006).
18
In re Grueneich, 400 B.R. 680, 684 (B.A.P. 8th Cir. 2009).
6
The patent flaw in this argument is that a debtor cannot claim an exemption in
property in which she has no interest.19 As outlined above, the Bankruptcy Court , the
District Court, and the United States Court of Appeals for the Eighth Circuit have very
clearly, and finally, determined that Ms. Stephens has no interest in the Laurel
property. Filing the amended schedules claiming the property exempt does not serve
to undo the prior orders declaring that she has no interest in it in the first place. In
other words, while a subsequent attempt to amend exemptions is generally not barred
by res judicata, any attempt to assert an exemption in any property is meaningless if
the debtor does not have an interest in such property. Therefore, the Bankruptcy
Court was correct when it announced at the December 17 hearing that her attempt to
subsequently claim the exemption in the property was of no effect – in other words,
a nullity.
Ms. Stephens next points out that the Bankruptcy Court has not found that she
amended her exemptions in 2006 in bad faith. While the general rule allows liberal
amendment to exemptions, the ability to amend is not absolute, and bad faith on the
part of the debtor is one exception to the general rule.20 Here, the record is rife with
evidence of Ms. Stephens’ bad faith with regard to the Laurel property and, had the
Bankruptcy Court been required to decide the merits of the 2006 attempt to amend her
exemptions, it easily could have denied the amended exemptions on the basis of bad
faith. But, because Ms. Stephens has no interest in the Laurel property in the first
place, and the attempted exemption is thus a nullity, it was not necessary for the
Bankruptcy Court to reach the issue of bad faith. In other words, Ms. Stephens’ bad
faith (or good faith) on the issue whether she can exempt the Laurel property is
entirely irrelevant at this point. Consequently, her suggestion that the trustees failed
19
In re Eagle, 373 B.R. 609, 612 (B.A.P. 8th Cir. 2007) (“The Debtor is not entitled to a
homestead exemption in property which he does not own.”); In re Moss, 258 B.R. 427, 430
(Bankr. W.D. Mo. 2001) (“[D]ebtors are only allowed to claim an exemption in property in
which they have an interest.”).
20
In re Ladd, 450 F.3d at 755.
7
to meet their burden on the propriety of the claimed exemption, and that she was
deprived of a hearing on that issue, are without merit.
Remarkably, the remainder of Ms. Stephens arguments are based on the premise
that she does, in fact, have an interest in the Laurel property. Essentially, she asserts
that the Court’s directing the trustees to administer the property is inconsistent with
a finding that she had no interest, and that the various courts have given insufficient
attention to the 1998 deed mentioned above. For reasons that should be more than
obvious at this point, these arguments have no merit and bear no further discussion.
For the foregoing reasons, the Bankruptcy Court’s December 17, 2009 Order
approving the settlement between John A. Hedback and Mary Jo A. Jensen-Carter, as
trustees of the bankruptcy estates of G. Yvonne Stephens and Larry K. Alexander, is
AFFIRMED.
8