In re Bennett, Bankruptcy No. 94-20638.
| Decision Date | 14 February 1996 |
| Docket Number | Bankruptcy No. 94-20638. |
| Citation | 192 BR 584 |
| Parties | In re Frank W. BENNETT, Jr. and Ann Marie Bennett, Debtors. |
| Court | U.S. Bankruptcy Court — District of Maine |
Joseph L. Goodman, Portland, ME, for Ann Marie Bennett and Frank W. Bennett.
Joseph V. O'Donnell, Trustee, The Pilot Group, Portland, ME.
Frank and Ann Marie Bennett ("Bennetts" or "debtors") assert exemption rights in a parcel of largely unimproved real estate. The Chapter 7 trustee objects. For the reasons set forth below, I conclude that, although the debtors' claim to a "residence" exemption in the property rest on a strong emotional foundation, its legal foundation is too shaky to support it. The trustee's objection will be sustained.1
In 1986 Mrs. Bennett's mother gave the debtors a house lot in Lisbon Falls, Maine, located next door to her own home.2 Since then, the debtors have expended considerable time, money and energy working toward their goal of eventually constructing a home there. As of their bankruptcy filing, however, the goal remained unattained.
At the time of the gift transfer, the property's title was clouded. With the assistance of counsel, the Bennetts established clear record ownership, a process that took about three years.
Mr. Bennett, a logger, firewood dealer and sometimes builder, cleared the land himself. He has purchased, dumped and spread many truckloads of gravel and fill on it, attempting to bring the lot up to grade for building, a process that has been in progress for "years and years."3 From 1987 to 1991 the Bennetts, at their own expense, had town sewer and water service extended to the property.4
Beginning in 1990, the Bennetts obtained estimates for construction of a variety of potential houses on the property. Starting with a proposed two-story home, they considered plans for increasingly modest structures. The debtors are now considering either building a house with the help of friends5 or placing a mobile or modular home on the property.
Plans notwithstanding, no meaningful construction has been accomplished on the lot. As of August 1994, when the bankruptcy petition was filed, the only building on the property was a small, prefabricated tool shed. The debtors have stationed two pickup truck campers, sans pickups, on the land. One camper affords temporary, rudimentary accommodations. The other serves as a workshop in which Mrs. Bennett repairs used and damaged toys and household goods for resale.
The Bennetts lived in one of the campers on the lot from April to August 1990 while they saved money so that they could rent an apartment. Since August 1990 they have resided in an apartment in Lisbon, Maine, not far from the Lisbon Falls property. In 1995, after the bankruptcy filing, Mr. Bennett spent several summer months living by himself in the camper. He has returned to the apartment.
The Bennetts do use the property regularly. Mr. Bennett splits wood on the lot. He parks an old truck there and hauls firewood, gravel and fill with it. During summer months, Mrs. Bennett conducts a running yard sale at the lot, selling the items she has repaired and refurbished. The debtors spend many, if not most, days on the property during summer months, returning to the apartment to sleep, shower and cook regular meals.6
The Bennetts still plan to reside permanently on their property, but their plans are far from certain. Mr. Bennett had no firm idea from whom he could purchase building supplies or a mobile home or how such purchases would be financed.7 Mrs. Bennett opined that she and her husband "might" now, in light of their bankruptcy discharge, be able to borrow from her mother sufficient funds to build.8
The resolution of this dispute does not turn on the burden of proof.9 Nor does it turn on resolving disputed facts.10 Moreover, the parties agree that the extent and scope of the debtors' exemption rights are set by Maine's statutory residence exemption11 (governing by way of opt-out).12
The way in which the exemption statute is to be construed and applied (liberally, in favor of the fresh-start policy) is clear.13 And the proposition that actual, physical occupancy of the premises is "neither necessary nor sufficient" to sustain the exemption claim is beyond dispute.14 In other words, the principle of "constructive occupancy" may sustain a residence exemption claim in appropriate circumstances, notwithstanding the fact that the debtor(s) or their dependant(s) did not live on the property on the bankruptcy date.15
The rub here comes in applying the law to the facts. This court recently observed that cases sustaining a residence exemption in property that debtors did not occupy at bankruptcy "all involve situations where the debtor actually resided on the property at one time, and, although not resident there on the petition date, demonstrated an intention to return." In re Cole, 185 B.R. at 97 (citing cases). Sustaining the trustee's objection to the exemption claim in Cole, a case in which the debtor was without any meaningful plans to move to property she had never before occupied and in which she had made a few historical improvements (installation of a septic system about one year before bankruptcy), I did not rule out the possibility that there may exist a case in which a debtor might sustain a residence exemption in never-before-occupied property, but observed:
Even if I were to accept (for the moment) the proposition that a residence exemption can be established without prior occupancy, the debtor has demonstrated nothing more than a vague intention to live on the . . . property and has shown no present plans or tangible, contemporary preparations to move there. That is not enough.
In re Cole, 185 B.R. at 98 (citing cases).
When evaluating a constructive occupancy based residence exemption claim, assaying a debtor's intention to occupy is an essential inquiry. In re Grindal, 30 B.R. at 653; see also In re Snook, 134 B.R. 424, 425 (D.Kan.1991); In re Eckols, 63 B.R. at 527; 2 Norton § 46:10 at 46-17; 3 Collier ¶ 522.10 at 522-54. The Bennetts have, through actions spanning nearly ten years, objectively demonstrated their intention (someday) to make the Lisbon Falls lot their home.16
But examining intent is not the exclusive inquiry. A debtor must also demonstrate a meaningful ability to occupy the property imminently or within a reasonable time. See, e.g., Hillock Homes, Inc. v. Claflin (In re Claflin), 761 F.2d 1088, 1091 (5th Cir.1985) (Texas homestead exemption) (debtors must show (1) intention to occupy and (2) ability to control time of occupation); In re Dennison, 129 B.R. 609, 610 (Bankr. E.D.Mo.1991) (Missouri homestead exemption) (exemption requires intent to occupy and "ability to control or strongly influence" time of occupation); In re Winegarten, 101 B.R. 705, 707 (Bankr.E.D.Okl.1989) (Oklahoma homestead exemption) (intent to occupy and actual occupancy "without unreasonable delay"); In re Cottingim, 7 B.R. 56, 58 (Bankr.S.D.Ohio 1980) (Ohio exemption) (present intent to occupy at a definite date); see also In re Crippen, 36 B.R. 7, 8 (Bankr. E.D.Mo.1983) (Missouri homestead exemption) (intent and "reasonable possibility" of use as a homestead).17 It is on this point that the Bennetts' exemption claim fails.18
The Bennetts can demonstrate no ability to occupy their Lisbon Falls lot as a residence imminently or without unreasonable delay after the filing of their bankruptcy. Indeed, it is now over a year since they filed for relief and, although they have continued to add fill to the property and have continued to use it for various nonresidential purposes, they have made no meaningful progress actually residing there.
A "contingent, future intent to move" to the property is not enough. In re Claflin, 761 F.2d at 1091. The Maine statute provides an exemption in property that a debtor "uses as a residence."19 Even liberally construed, employing the constructive occupancy principle, it does not extend so far as the "attempted" or the "hoped for" residence. The state's exemption framework prefers homeowners over non-homeowners, including aspiring homeowners. In re Grindal, 30 B.R. at 653. Thus, it cannot aid the debtors here.20
For the reasons set forth above, the trustee's objection to the debtors' claim of exemption will be sustained. A separate order consistent with this memorandum shall enter forthwith.
1 This memorandum sets forth findings of fact and conclusions of law in accordance with Fed. R.Bankr.P. 7052 and Fed.R.Civ.P. 52. Unless otherwise noted, all statutory citations are to the Bankruptcy Reform Act of 1978 (the "Bankruptcy Code" or "Code"), as amended, 11 U.S.C. § 101, et seq.
2 The lot is titled in Ann Marie Bennett's name.
3 Because the property is located near municipal water supplies, local officials have informed Mr. Bennett that substantial filling and grading is required before building may commence.
4 See Ex. 8 (); Ex. 18 (). Mr. Bennett testified that the sewer extension alone cost approximately $4,800.00.
5 One such friend, David Bulmer, testified credibly that he was ready, willing and able to assist Mr. Bennett in building a house — just as soon as the Bennetts are able.
6 In warm weather, the Bennetts often take lunches to the lot and occasionally cook out there.
7 He admitted that the debtors' previous building plans had been frustrated by their inability to obtain financing.
8 She testified that they hadn't borrowed the money from family before because they "had too many bills."
9 As the party objecting to the debtors' exemption claim, the trustee bears the burden of proof. Fed.R.Bankr.P. 4003(c)...
To continue reading
Request your trial