In re Hughes

• Decision Date: 13 May 1994
• Docket Number: Bankruptcy No. 94-70054.
• Citation: 166 BR 957
• Parties: In re W.R. HUGHES, Sr., SSN XXX-XX-XXXX, Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Oklahoma

166 B.R. 957 (1994)

In re W.R. HUGHES, Sr., SSN XXX-XX-XXXX, Debtor.

Bankruptcy No. 94-70054.

United States Bankruptcy Court, E.D. Oklahoma.

May 13, 1994.

Lynn D. Nolen, Muskogee, OK, for debtor.

Matthew A.P. Schumacher, Muskogee, OK, for creditor Muskogee Farm & Ranch Supply, Inc.

ORDER

TOM R. CORNISH, Bankruptcy Judge.

On the 20th day of April, 1994, the Objection to Debtor's Claims for Exemption filed by Muskogee Farm & Ranch Supply, Inc., the Response by Debtor and Creditor's Request for Entry Upon Land for Inspection and Other Purposes by Muskogee Farm & Ranch Supply, Inc. came on for an evidentiary hearing before this Court.

Counsel appearing in person were Matthew Schumacher for Muskogee Farm & Ranch Supply, Inc. and Lynn Nolen on behalf of the Debtor.

After a review of the above-referenced pleadings and consideration of the sworn testimony presented, the Court does hereby enter the following findings and conclusions in conformity with Rule 7052, Fed.R.Bankr. P., in this core proceeding:

The principal issue before the Court is whether the Debtor's receiving bills from his self-employment at his home negates his ability to claim his home as exempt property. In the Debtor's Schedules, he listed Lots 6, 7 and 8, Block 23, Canard Addition to the City of Muskogee, Oklahoma as his homestead. In Debtor's Response to Creditor's Objection to the claim for exemption, the Debtor made it clear that the Debtor was claiming Lots 7 and 8, Block 23, Canard Addition, City of Muskogee, Oklahoma as his homestead. He was not claiming Lot 6, Block 23, Canard Addition, which has as improvements a house occupied by the Debtor's son and his family. The parties stipulated that the Debtor and his wife, not a debtor in this proceeding, own Lots 7 and 8.

Oklahoma law is determinative of the exemptions allowed for debtors who file bankruptcy in Oklahoma. Under Oklahoma law, a home that is the principal residence of the debtor is exempt. Okla.Stat. tit. 31, § 2 (West 1991) provides, in pertinent part, as follows:

. . . within any city or town, owned and occupied as a residence only, shall consist of not exceeding one (1) acre of land, to be selected by the owner: Provided, that the same shall not exceed in value the sum of Five Thousand Dollars ($5,000.00), and in no event shall the homestead be reduced to less than one-quarter (¼) of an acre, without regard to value: And provided, further, that in case said homestead is used for both residence and business purposes, the homestead interests therein shall not exceed in value the sum of Five Thousand Dollars ($5,000.00).

Lots 7 and 8 consist of .31 acre. The Debtor testified that he is self-employed doing concrete work and currently does contract work for two or three different people. The Debtor's house is located on Lot 8. Lot 7 has a shed on it in which the Debtor keeps miscellaneous items not used in his business. Lot 8 has two addresses — 4031 Oklahoma and 222 Honor Heights Drive, Muskogee, Oklahoma. Debtor and his wife, not a debtor in this bankruptcy, own Lots 7 and 8 of Block 23 as joint tenants. The Debtor testified that he takes calls for his business in his truck. However, invoices and bills are sent to his home. The Debtor testified he previously took business telephone calls at his residence, but no longer does.

The Court must look at the facts at the time of filing bankruptcy to determine how the property is used. The parties stipulated that the 1993 Muskogee telephone directory lists the address of Hughes Paving Company, owned by Debtor's wife, as 222 Honor Heights Drive. It lists the address for William R. and Phyllis Hughes as 4031 Oklahoma. The fact that the Debtor's wife uses the residence for business purposes does not, standing alone, impact the Debtor's homestead exemption.

The Debtor testified he believed the value of all three lots was approximately $60,000.00 and that a mortgage exists on the property in the amount of $50,000.00. Muskogee Farm & Ranch Supply ("MFRS") presented expert testimony showing the ownership and location of the land. However, the expert did not make an valuation of the property.

Whether or not the entire property constitutes the bankrupt's homestead must be determined by the Constitution and the statutes of the State of Oklahoma and the decisions of its Supreme Court construing them. In re Booth, 18 F.Supp. 79 (N.D.Okla. 1937). The homestead laws must be liberally construed to comport with the beneficent spirit that prompted their enactment. Id. The homestead exemption statute of the territory of Oklahoma (Section 2845, Statute of Oklahoma, 1893) provided:

The homestead in a city, town or village, consisting of a lot or lots, not to exceed one acre with the improvements thereon; provided, that the same shall be used for the purposes of the home for the family.

With this statute, the Supreme Court of the Territory of Oklahoma in DeFord v. Painter, 3 Okla. 80, 41 P. 96 (1895), found that the debtor was entitled to claim as a homestead a lot, with a building thereon, in the business part of the city. In DeFord, the first floor and part of the second floor were rented, while the debtor and his family resided in part of the second floor.

The framers of the Constitution had this case in mind at the time of the writing of the state constitution. Section 1 of Article XII of the Oklahoma Constitution provides:

The homestead of any family in this State, not within any city, town, or village, shall consist of not more than one hundred and sixty acres of land, which may be in

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