Haggerty, In re

Citation448 N.W.2d 363
Decision Date01 December 1989
Docket NumberNo. C0-89-821,C0-89-821
PartiesIn re Mark Eugene HAGGERTY and Linda Jean Haggerty, Debtors.
CourtSupreme Court of Minnesota (US)

Syllabus by the Court

Based upon an unbroken line of decisions dating from 1866 and the social policies supporting a homestead exemption, the Minnesota homestead exemption, which includes platted and unplatted area limits, contains objective criteria restricting the exemption to a "reasonable amount of property" as required by article 1, section 12 of the Minnesota Constitution.

Hubert H. Humphrey, III, Atty. Gen., Scott R. Strand, Asst. Atty. Gen., St. Paul, for appellant.

Edward W. Bergquist, Minneapolis, for respondent.

William J. Coughlin, Minneapolis, for debtors.

Heard, considered, and decided by the court en banc.

POPOVICH, Chief Justice.

The debtors filed a Chapter 7 bankruptcy petition and claimed their homestead as exempt from creditors pursuant to Minn.Stat. Secs. 510.01-510.02 (1988). The bankruptcy trustee objected, contending the Minnesota homestead exemption is unconstitutional under Minn. Const. art. 1, Sec. 12, and In re Tveten, 402 N.W.2d 551 (Minn.1987), because it has only area limits but no value or dollar limit. The en banc United States Bankruptcy Court, District of Minnesota, certified to us the following question of state law:

Are Minn.Stat. Secs. 510.01 and 510.02 unconstitutional as violative of Article 1, Sec. 12, of the Minnesota Constitution?

We answer the certified question in the negative.

I.

On January 10, 1989, the debtors, Mark and Linda Haggerty, husband and wife, filed a petition for relief under Chapter 7 of the U.S. Bankruptcy Code. The Code permits a debtor to shield from the bankruptcy estate available for distribution to creditors, property either exempt under the Code or under "[s]tate or local law that is applicable on the date of the filing of the petition at the place in which the debtor's domicile [is] located." 11 U.S.C. Sec. 522(b)(2)(A) (1982). The debtors chose Minnesota law for their exemptions. Among their claimed exemptions the debtors included their homestead, located on a .22 acre lot in New Hope, Minnesota (an urban area), pursuant to Minn.Stat. Secs. 510.01-510.02. In their exemption schedules the debtors valued their unencumbered homestead at $139,000; the Hennepin County Assessor estimated the 1989 market value at $112,700.

The bankruptcy trustee, on February 21, 1989, objected to the debtors' claimed homestead exemption. The trustee conceded the statutory requirements for the homestead exemption had been met, but contended the Minnesota homestead exemption was unconstitutional under Minn. Const. art. 1, Sec. 12, and Tveten because the statutes failed to limit the exemption to a "reasonable amount." The Attorney General of the State of Minnesota, who intervened pursuant to 28 U.S.C. Sec. 2403(b) (1982) and Fed.R.Civ.P. 24(a) to defend the constitutionality of the homestead statutes, requested the issue be certified to this court. On May 4, 1989, the U.S. Bankruptcy Court, District of Minnesota, sitting en banc, certified to us the above question of state law, pursuant to Minn.Stat. Sec. 480.061, subd. 1 (1988).

II.

Minnesota statutes are presumed constitutional, and our power to declare a statute unconstitutional should be exercised with extreme caution and only when absolutely necessary. City of Richfield v. Local No. 1215, 276 N.W.2d 42, 45 (Minn.1979). The party challenging a statute has the burden of demonstrating beyond a reasonable doubt a violation of some provision of the Minnesota Constitution. McGuire v. C & L Restaurant, Inc., 346 N.W.2d 605, 611 (Minn.1984).

It was originally proposed that the Minnesota Constitution contain a homestead exemption with a specific dollar limit, Minnesota Convention Debates 99 (1857) (debates of July 24, 1857), but it was determined the constitution should not contain perfect or specific laws. Since its adoption in 1857, the Minnesota Constitution has empowered the legislature to determine what property is exempt from creditors, but has imposed a "reasonable amount" limit on any legislated exemption:

A reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability. The amount of such exemption shall be determined by law.

Minn. Const. art. 1, Sec. 12. Thus, the area homestead exemption is a "creature of statute." Dimke v. Finke, 209 Minn. 29, 38, 295 N.W. 75, 81 (1940). In 1858, the first Minnesota legislature enacted a homestead exemption shielding 80 acres from creditors. Act of August 12, 1858, ch. 35, Sec. 1, 1858 Minn.Laws 12. The homestead exemption has been exclusively area limited since 1858, although the area's size has changed several times, most recently in 1986. Act of March 21, 1986, ch. 398, art. 16, Sec. 1, 1986 Minn.Laws 400, 467. The challenged statutes 1 currently limit the homestead exemption to one-half acre in platted areas or 160 acres in unplatted areas. Minn.Stat. Sec. 510.02.

This court has previously addressed challenges to the homestead exemption under Minn. Const. art. 1, Sec. 12. The leading case, Cogel v. Mickow, 11 Minn. 475 (Gil. 354) (1866), was decided only nine years after the Minnesota Constitution was adopted and eight years after enactment of the homestead exemption. In Cogel, this court first addressed a challenge to the homestead exemption under article 1, section 12, and held the exemption was constitutional because either an area or value limit was a reasonable "amount." Id. at ___ (Gil. at 356). The court later confirmed the first legislature enacted the homestead statute "in obedience to an express mandate of the constitution, art. 1, Sec. 12." Barton v. Drake, 21 Minn. 299, 302 (1875). Relying on stare decisis, the Barton court concluded the constitutionality of the homestead exemption "since the judgment in Cogel v. Mickow, ought to be considered as laid at rest forever." Id. at 303 (emphasis added). Thus, in both of these cases, which obviously were decided with a better perspective on the meaning and policies behind the constitutional limit and the homestead exemption, we upheld Minnesota's homestead area exemption. The trustee argues Cogel and Barton are distinguishable because they involved rural (or unplatted) homesteads, but these interpretations undeniably apply to the question before us.

Although we have not directly addressed the constitutionality of the homestead exemption since 1875, we have acknowledged numerous times the continued vitality of Cogel and Barton. E.g., Title Ins. Co. v. Agora Leases, Inc., 320 N.W.2d 884, 885 (Minn.1982) ("In Cogel v. Mickow, we rejected the argument that, constitutionally, the homestead must be measured by value rather than area."); How v. How, 59 Minn. 415, 419, 61 N.W. 456, 457 (1894) ("[T]he statute limiting the homestead exemption by area alone is valid * * * there is a limit, and a natural and proper one as far as it goes."); see also In re Johnson, 880 F.2d 78, 82-83 (8th Cir.1989) (noting Minnesota homestead exemption constitutional), reh'g denied (Aug. 16, 1989). Absent overwhelming evidence to the contrary, we are compelled to reaffirm 123 years of consistent and indisputable interpretation of the constitutionality of the Minnesota homestead exemption.

This court's recent dispositive decision--and the case that apparently caused this question to be certified--on the "reasonable amount" constitutional limit on exemptions is In re Tveten, 402 N.W.2d 551 (Minn.1987). 2 In Tveten, four questions were certified by a bankruptcy judge to this court. The first three questions concerned whether the requirements for the fraternal benefits exemption were met and whether pre-bankruptcy planning is permissible, all of which we answered affirmatively. Id. at 553-56. The fourth question was: "Are Minn.Stat. Secs. 550.37, subd. 11, and 64B.18 unconstitutional as violative of article 1, section 12 * * * of the Minnesota Constitution?" Id. at 552-53. The challenged statutes granted an unlimited exemption for annuities and unmatured life insurance policies issued by a fraternal benefit society, whereas annuities and insurance policies were only partly exempt when issued by a for-profit insurance company. We unanimously found these statutes unconstitutional because they failed to limit this exemption to a "reasonable amount" as required by Minn. Const. art. 1, Sec. 12. Id. at 558. Relying on How, 59 Minn. at 419, 61 N.W. at 457, which had declared an unlimited insurance proceeds exemption unconstitutional, we reasoned that:

Adoption of Tveten's contention that the constitutional limitation on "reasonable amount" is satisfied by a mere designation of types of property, as How I demonstrated, would allow legislatures to exempt all kinds of monetary and other accounts without regard to the value of those accounts. Certainly, such a result was beyond the intention of the framers of article 1, section 12 of the Constitution. When determining whether annuities or unmatured life insurance are exempt from creditor's levy by being a "reasonable amount," by necessity "reasonable amount" must be synonymous with "reasonable value."

However, it does not follow that just because the "reasonable amount" language of the constitution requires some value limitation, that it requires a specific value limit.

402 N.W.2d at 558. In addition, we emphasized the need for an exemption to be based on some objective criteria. Id.

Relying on principles enunciated in Tveten, three bankruptcy court decisions have ruled other Minnesota exemptions unconstitutional for failing to provide any limit. In re Netz, 91 B.R. 503, 504-05 (Bankr.D.Minn.1988) (unlimited exemption of stock bonuses, pensions, profit-sharing plans, or annuities unconstitutional); In re Bailey, 84 B.R. 608, 610-12 (Bankr.D.Minn.1988) (unlimited personal injury right of action exemption unconstitutional for special damages; exemption of general damages never unreasonable);...

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