In re:
CASSERINO, MATTHEW J. and CASSERINO, JOANI M.,Debtor,
______________________________________________________
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
BAP number: OR-02-1512-MoRyBBK Number: 699-66978-aer7

ADV Number:

RONALD R. STICKA, Chapter 7 Trustee,Appellant,
______________________________________________________
OPINION
v.
MATTHEW J. CASSERINO and JOANI M. CASSERINO,Appellee.
______________________________________________________

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

Argued By Video Conference and Submitted

on January 23, 2003

Filed – February 28, 2003
Appeal from the United States Bankruptcy Court

for the District of Oregon

Honorable Albert E. Radcliffe, Bankruptcy Judge, Presiding.

Before: Montali, Ryan and Brandt, Bankruptcy Judges.

MONTALI, Bankruptcy Judge:

A debtor claimed a homestead exemption in the prepaid rent and the refundable portion of a security deposit paid by him to his landlord. The bankruptcy court overruled the trustee’s objection to the homestead exemption. Trustee appeals. We AFFIRM.

I.

FACTS

On November 22, 1999, appellee Matthew Casserino (“Debtor”) filed a joint Chapter 7 petition with his then wife. At the time of filing, Debtor was separated from his wife and was living in rental property. To obtain the rental housing, Debtor signed a rental agreement on September 24, 1999, and paid his landlord $2,000, representing the first month’s rent ($750), the last month’s rent ($750) (the “rent”), and a $500 security deposit, of which $400 was refundable (the “deposit”).

Debtor did not initially disclose the rent and deposit in his schedules, although the homestead exemption was claimed for the house in which his estranged wife separately resided. On November 6, 2001, Appellant Ronald R. Sticka (“Trustee”) filed an adversary proceeding against Debtor’s landlord for turnover of the rent and the deposit. Debtor thereafter amended his schedules to list the rent and the deposit as assets. He claimed their full value as exempt under Oregon law.

On March 1, 2002, Trustee filed his objection to the Debtor’s claimed exemptions (the “Objection”). Specifically, Trustee contended: “There is no statutory basis to claim homestead exemption in rental deposit and prepaid rent. Exemption should also be denied as in bad faith with sanctions awarded to trustee. This is amplified in trustee’s separate motion.” On March 19, 2002, Debtor filed a Request for Hearing on Objection to Claimed Exemption and a motion to compel abandonment of the deposit and rent.

On April 4, 2002, the court held a hearing on Trustee’s Objection. (1) At the hearing, the bankruptcy court attempted to clarify the nature of Debtor’s homestead exemption and of Trustee’s Objection:

Let me inquire, because I want to be clear if we’re going to go forward with the argument, on what we’re arguing about. My understanding was the argument turned on a deposit that had been made to the landlord. And I think we’re talking about $1,150 of a deposit. So, we’re not talking about claiming an exemption in the leased premises, but rather in the deposit. And if I don’t understand correctly, I need to be corrected.

In response, Trustee stated:

No, your understanding is correct, your Honor. That’s precisely the issue

[sic] is whether or not there can be a homestead exemption claim in rent deposits which had been posted at an earlier time, but which had not been earned, for which the trustee believes the landlord is accountable as holding money to which the landlord is not entitled.

I think the homestead exemption statute is pretty clear. I don’t think the issue we need to deal with here is what type of estate is involved. I’m not claiming something that relates to an estate in land, so I don’t think we need to deal with even the leasehold issue.

The bankruptcy court took the matter under advisement and issued a Memorandum Opinion on August 15, 2002, indicating that it would overrule Trustee’s Objection. In re Casserino, 282 B.R. 490 (Bankr. D. Or. 2002). The court entered its Order Denying Trustee’s Objections to Claimed Exemptions on August 15, 2002, and Trustee filed a timely notice of appeal on August 22, 2002. The order has been stayed pending appeal.

II.

ISSUE

Did the bankruptcy court err in concluding that Debtor may claim a homestead exemption in the rent and deposit?

III.

STANDARD OF REVIEW

“The scope of a state law exemption involves construction of state law, which is reviewed de novo.” Yaden v. Osworth (In re Osworth), 234 B.R. 497, 498 (9th Cir. BAP 1999) (citation omitted).

IV.

JURISDICTION

An order denying or granting a claimed exemption is final for appeal purposes and we therefore have jurisdiction to hear an appeal of that order. White v. White (In re White), 727 F.2d 884, 886 (9th Cir. 1984); 28 U.S.C. § 158(b).

V.

DISCUSSION

A debtor in bankruptcy is entitled to exempt ce