Redmond v. Kester

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
July 10, 2007
UNITED STATES CO URT O F APPEALS Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT

In re: DON ALD KENTON KESTER;
CHARLOTTE YVONN E KESTER,
No. 06-3114
Debtors,

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C HRISTO PH ER J. R ED M O N D ,
Trustee,

Appellant,

v.

DON ALD KENTON KESTER;
CHARLOTTE YVONN E KESTER,

Appellees.

In re: DON ALD KENTON KESTER;
CHARLOTTE YVONN E KESTER,

Debtors, No. 06-3116

-------------------------

C HRISTO PH ER J. R ED M O N D ,
Trustee,

Appellant,

v.
DON ALD KENTON KESTER;
CHARLOTTE YVONN E KESTER,

Appellees.

A PPE AL FR OM T HE UNITED STATES BANKRUPTCY
APPELLATE PANEL FO R TH E TENTH CIRCUIT
(BAP NO S. K S-05-107 & K S-05-95)

Submitted on the brief: *

Christopher J. Redmond, Eric J. Howe, Husch & Eppenberger, LLC, Kansas City,
M issouri, for Appellant.

Before T YM KOV IC H, A ND ER SO N, and BALDOCK , Circuit Judges.

T YM K O VIC H, Circuit Judge.

This case is before us following our certification of a novel and dispositive

issue of state law to the Kansas Supreme Court. In 1996, Donald and Charlotte

Kester transferred by quit claim deed ownership of their principal residence to

self-settled living revocable trusts (collectively, “the Trust”). Both of the K esters

were named as beneficiaries of the Trust. In 2002, they filed a joint petition for

*
After examining the brief and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.

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Chapter 7 bankruptcy, claiming their residence as exempt under the Kansas

homestead statute, Kan. Stat. Ann. § 60-2301. The trustee in bankruptcy

challenged the debtors’ assertion of a homestead interest in their residence and

filed an adversary proceeding to compel turnover of the residence held by the

Trust. The bankruptcy court held that the Kesters were entitled to the homestead

exemption, notwithstanding the fact that legal title to the real property was held

by the Trust. Redm ond v. Kester (In re Kester), 339 B.R. 764, 770 (Bankr. D.

Kan. 2005). The Bankruptcy Appellate Panel (BAP) affirmed. Redmond v.

Kester (In re Kester), 339 B.R. 749, 754, 756 (B.A.P. 10th Cir. 2006). The

trustee appeals to this court, asserting that the Kesters cannot claim the homestead

exemption in their residence because legal title to the residence is held by the

Trust, not by the debtors.

W e certified the following question to the Kansas Supreme Court:

M ay a Chapter 7 bankruptcy debtor claim the homestead
exemption allowed by Kan. Stat. Ann. § 60-2301 for real property
that was placed in a self-settled living revocable trust prior to the
bankruptcy, where the settlor and the beneficiary, as well as the
bankruptcy debtor, are the same person?

Acknowledging Kansas’ longstanding policy to protect its citizens from the

hardships of losing the family home, the Kansas Supreme Court answered the

question in the affirmative. Redmond v. Kester, 159 P.3d 1004, 1007, 1010

(Kan. 2007). The court noted that the homestead statute, § 60-2301, is derived

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from the Kansas Constitution and codifies a right that “has been zealously

guarded and enforced by the courts of [Kansas].” Id. at 1007.

As beneficiaries of the Trust, the Kesters hold an equitable interest in the

real estate owned by the Trust. “[A]n equitable interest is sufficient to claim the

homestead exemption as long as the claimant occupies the real estate.” Id. at

1010. Accordingly, under these circumstances, the Kesters are entitled to claim

the homestead exemption in their residence. Summary judgment therefore was

correctly denied in the trustee’s adversary proceeding. The answer to our

certified question is clear and requires us to affirm the bankruptcy court and the

BA P.

This holding also disposes of the trustee’s challenge to the order dismissing

Charlotte Kester’s bankruptcy case. The bankruptcy court found that after the

residence was exempted as a homestead, M rs. Kester had no assets of

consequential value for distribution to her creditors. Therefore, the court

determined that her situation was “one of the rare instances in which dismissal

operates as a benefit to creditors” because they were more likely to receive

satisfaction of their claims outside the bankruptcy proceeding. Redmond,

339 B.R. at 773. The BAP affirmed. Redmond, 339 B.R. at 756. The trustee’s

challenge to this ruling is based on his argument that M rs. Kester is not entitled to

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claim the homestead exemption. Because we have rejected this argument, we

affirm the bankruptcy court and the B AP on this point, as w ell. Appellant’s

motion to stay the case is denied as moot.

A FFIR ME D.

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