In re Evans, Bankruptcy No. 94-50037M.
| Decision Date | 25 August 1995 |
| Docket Number | Bankruptcy No. 94-50037M. |
| Parties | In re Charles and Sylvia EVANS, Debtors. |
| Court | United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Eastern District of Arkansas |
Walter M. Dickinson, Trustee, Little Rock, AR.
Frederick S. Wetzell, III, Little Rock, AR, for the Trustee.
Joseph A. Strode, Little Rock, AR, for Worthen National Bank of Pine Bluff.
Charles E. Clawson, Jr., Conway, AR, for Debtors.
On January 21, 1994, Charles and Sylvia Evans (debtors) filed a voluntary petition for relief under the provisions of chapter 7 of the United States Bankruptcy Code. Walter M. Dickinson, Esq., was appointed trustee. The debtors claimed certain real property as an exempt rural homestead pursuant to 11 U.S.C. § 522(b)(2) (1988), Ark.Code Ann. § 16-66-218 (Michie Supp.1993), and Ark. Const. art. 9, § 4.
On March 8, 1994, the trustee filed an objection to the debtors' claim of homestead exemption alleging that the property does not qualify for a rural homestead exemption but rather the exemption should be limited to an urban homestead.
On April 15, 1994, Worthen National Bank of Pine Bluff (Worthen) filed an objection to the debtors' claim of homestead exemption alleging that the property does not qualify for a rural homestead but should be limited to an urban homestead exemption.
On February 27, 1995, a hearing was held on the trustee's and Worthen's objections to exemptions and the matter was taken under advisement. The proceeding before the Court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B) (1988), and the Court has jurisdiction to enter a final judgment in the case.
The debtors claimed the following real property as an exempt rural homestead pursuant to 11 U.S.C. § 522(b)(2) (1988), Ark. Code Ann. § 16-66-218 (Michie Supp.1993), and Ark. Const. art. 9, § 4:
Commencing at the North corner of Section 24, Township 6 South, Range 9 West in Jefferson County, Arkansas; thence 28 minutes West 383.8 feet; thence South 31 degrees 50 minutes East 340.35 feet; thence South 40 degrees East 260 feet; thence South 48 degrees 12 minutes East 320 feet to a point of beginning, said point being on the West R-O-W of County Rd. # 51 (Grider Field-Ladd Rd.); thence South 44 degrees 17 minutes West 770 feet; thence South 47 degrees 12 minutes East 160 feet; thence North 44 degrees 17 minutes East 770 feet; thence 47 degrees 12 minutes West 160 feet to the point of beginning, and containing 2.8 acres more or less.
The debtors' residence is located on the east end of the property and on the west end of the property are located metal buildings that were used in the business of manufacturing new buses and rebuilding used buses.
Both the trustee and Worthen object to the debtors' claim of a rural homestead exemption alleging that the homestead should be limited to an urban homestead because the property is located in an area which is essentially urban. Both objecting parties also argue that the debtors' use of the property is more consistent with an urban rather than a rural homestead. Worthen also alleges that by designating the west part of the property to be used for business purposes, the debtors have segregated that portion of the property from their homestead and are no longer entitled to claim that portion of the property as a homestead.
The parties have submitted stipulations in which they have agreed to the relevant facts regarding the property. The property consists of a 2.8 acre tract of land located on Grider Field Ladd Road in Jefferson County, Arkansas. The debtors purchased the property in 1981 and first used it as a single family residence. A modular home was placed on the property and a fence and drive-way were added.
The debtors operated a business on Main Street, Pine Bluff, Arkansas, known as Evans Motor Company. In 1980, Arkansas Bus Exchange, Inc., a closely-held corporation, (Arkansas Bus) was incorporated and began operations with Evans Motor Company on Main Street. Arkansas Bus was in the business of building new buses and rebuilding used buses. A personal shop was built on the property for use by Mr. Evans in connection with the Arkansas Bus business. The debtors eventually sold the property on Main Street and moved their business to the subject property. The debtors built a paint booth shop and added other shops to the personal shop already on the property to make one large shop, later known as Arkansas Bus. Arkansas Bus operated its business on the property until January 1994.
The debtors' residence is located on the east end of the debtors' property and has an appraised value of $64,000.00. The metal buildings located on the west end of the property have an appraised value of $200,000.00. The debtors arranged for Arkansas Bus to lease the metal buildings from them for $2,500.00 per month. The metal buildings are located about 300 feet from the debtors' residence. The stipulations regarding the metal buildings conflict with other evidence. Paragraph 8 of the stipulations states that the metal buildings were built by Arkansas Bus with proceeds from the operation of the business. Paragraph 8 also states that Arkansas Bus and its subsidiaries claimed depreciation for the buildings on their consolidated tax returns. Contrary to these statements, paragraph 46 of the stipulations states:
If the Debtors were called to testify at trial their testimony would be: "The improvements on the property were built with the Debtors\' funds from Evans Motor Company and from the sale of the Main Street property. $100,000.00 of which was placed in a certificate of deposit and withdrawn as needed." Furthermore, $14,000.00 inherited from Ms. Evans\' mother\'s estate and some funds obtained through Arkansas Bus Exchange as shown as an officer\'s draw were used to build the improvements on the property.
The stipulations also state that if the debtors were to testify at trial they would testify that Arkansas Bus leased the property on the west end from the debtors and made lease payments to the debtors. The debtors would also testify that Arkansas Bus did not build any improvements, but the improvements were made using proceeds from the debtors' draw accounts.
According to the stipulations, the utility services for the residence and the metal buildings are measured by the same meter. The corporation has paid all utility costs, including the utility charges incurred in connection with the debtors' residence. The parties also stipulated that the debtors have transferred no interest in the property to Arkansas Bus, other than a leasehold interest, and that the property is assessed in the name of the debtors.
The land on which the debtors' residence and the metal buildings are located has an appraised value of $86,000.00. The property claimed as exempt is not used for any agricultural purposes by the debtors. Aerial photographs attached as exhibits to the stipulations reflect that a substantial amount of the land immediately adjacent to the debtors' property is still devoted to agricultural uses. However, several other business enterprises are located within one mile of the debtors' property, including American Freightways, Cook Crane, Key Company, Central Tin Shop, and Bayou Metal Buildings. Most of the residences located near the debtors' property are occupied by people who also operate businesses on their property.
The debtors' property is located six to eight feet from the Pine Bluff, Arkansas, city limits. Grider Field Ladd Road is a paved county road maintained by Jefferson County, Arkansas. The area is served by a fully developed system of roads and highways. The property is located two-tenths of a mile from U.S. Highway 65 and approximately one mile from Pines Mall in Pine Bluff, Arkansas, which is the largest shopping mall in southeast Arkansas. Retail services such as gas stations, convenience stores, and a grocery store, are located on U.S. Highway 65 in the vicinity of Pines Mall. Banking services are available on U.S. Highway 65B in the vicinity of the Pines Mall. The property is also located approximately one mile from Grider Field, the municipal airport for Pine Bluff, Arkansas, which is the largest airport in southeast Arkansas.
Fire protection is provided by the Southeast Fire Department, a volunteer fire department. Police protection is provided by the Jefferson County Sheriffs office. The property has a septic tank. Water is supplied to the property by the Ladd Water Association, a small community located south of Pine Bluff that maintains a municipal waterworks that expanded to include the debtors' property. City water is available at the road adjoining the property, if the debtor so elects. Electricity is supplied by Arkansas Power and Light Company, which supplies electricity to the residents of Pine Bluff, Arkansas. Telephone service is provided by Southwestern Bell Telephone Company, which provides service to the residents of Pine Bluff, Arkansas. The debtors have curbside garbage pickup provided by Waste Management, Inc., the company serving the residents of Pine Bluff, Arkansas. Emergency services, including fire, police, and ambulance services, are provided to the property through the 911 Emergency Services System in Pine Bluff, Arkansas.
Ark.Code Ann. § 16-66-218(b) (Michie Supp.1993) provides that the following property shall be exempt from execution:
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