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Riddell Williams Wins Case of First Impression before Washington Supreme Court

On April 2, 2015, the Washington Supreme Court held that Washington’s homestead exemption law did not apply to real property outside of the state.  (Click here to read the decision.)  This decision has important ramifications for all creditors seeking to enforce judgments in Washington, along with creditors in any bankruptcy case where Washington law could apply.

The case arose from a certified question from the United States Bankruptcy Court for the Western District of Washington:  does Washington’s homestead exemption law, chapter 6.13 RCW, apply extraterritorially to real property located in other states?  In the underlying bankruptcy matter, the debtors claimed an exemption under Washington’s homestead law on real property located in Alaska.  At the request of a creditor (represented by Riddell Williams P.S.), the bankruptcy court certified the question of first impression to the Washington Supreme Court.  The Supreme Court heard oral argument on October 14, 2014, with Riddell Williams associate James H. Wendell arguing for the creditor against extraterritorial application.  (Click here to watch the oral argument.)

Last week, writing for the 8-1 majority, Justice Stephens held that Washington’s homestead exemption law did not apply to real property located outside the state.  While acknowledging that a minority of bankruptcy courts had applied other states’ homestead laws extraterritorially, Justice Stephens not only found that the majority of bankruptcy courts did not apply homestead statutes extraterritorially, but that such “cases arise in a bankruptcy context and are thus of limited value here.”  Justice Stephens then turned to the statutory text of Washington’s homestead law, and held that “the context of [Washington’s] homestead exemption law shows a legislative scheme that limits its application to property located in Washington.”  In particular, Justice Stephens relied on, among other things, the enforcement mechanisms of the homestead exemption law (which necessitate the real property being located in Washington), and the statute’s location in the chapter about enforcing judgments in Washington.

Riddell Williams’ team was led by Bruce Borrus, a Principal in the firm’s Bankruptcy and Creditors’ Rights group, with support from Gavin W. Skok, Brett Durbin, and James H. Wendell.  (Click here to view copies of the briefs in this case.)