In re Hunt
| Decision Date | 29 May 1986 |
| Docket Number | Bankruptcy No. 85-02273-H1-4,Adv. No. 85-0803-H3. |
| Citation | 61 BR 224 |
| Parties | In re John Wilmont HUNT and Ann Fisher Hunt, Debtors. John Wilmont HUNT and Ann Fisher Hunt, Plaintiffs, v. FEDERAL DEPOSIT INSURANCE CORPORATION, Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Texas |
Peter Johnson, Ziegler & Johnson, P.C., Houston, Tex., for debtors/plaintiffs John Wilmont Hunt and Ann Fisher Hunt.
Jeffrey Herzberg, Federal Deposit Ins. Corp., Midland, Tex., Ronald J. Restrepo, Hutcheson & Grundy, Houston, Tex., for defendant, Federal Deposit Ins. Corp.; Roland M. Chamberlain, Hutcheson & Grundy, Houston, Tex., of counsel.
In December, 1981, John Wilmont Hunt ("plaintiff") accepted a position of employment with STM Corporation. He was to begin work on March 1, 1982. Mr. Hunt's new job required the relocation of his wife, Ann Fisher Hunt ("plaintiff"), and his two children, from their residence in Midland, Texas, to Houston, Texas.
Plaintiffs immediately placed their Midland home on the market and started searching for a home in Houston. In early February, 1982, plaintiffs found a suitable house for the family. The purchase price of the Houston home was $228,750 and plaintiffs required financing to purchase it. Plaintiffs applied for a loan through First National Bank of Midland ("Midland Bank").1
On February 17, 1982, one day before plaintiffs were to purchase the Houston home ("Houston property"), plaintiffs executed a deed of trust note in favor of Midland Bank in the principal amount of $400,000.2 At that time, Midland Bank advanced to plaintiffs the sum of $250,000 for the purchase of the Houston property.3 The deed of trust note cited the not yet acquired Houston property as security for the payment thereof.
On February 18, 1982, plaintiffs used $180,000 of the $250,000 previously advanced to them by Midland Bank to purchase the Houston property.
At the title company closing held on February 18, 1982, plaintiffs accepted a general warranty deed from the sellers, which deed retained a vendor's lien for the benefit of the sellers in the amount of $185,004.91. That vendor's lien was thereafter assigned to Midland Bank, the present holder and beneficiary of that lien.
While at the title closing, plaintiffs executed a deed of trust4 in favor of Midland Bank, which in effect cast the Houston property as security for the payment of the deed of trust note.5 That deed of trust was filed in the real property records of Harris County, Texas, on February 19, 1982.
Although plaintiffs purchased the Houston property on February 18, 1982, they did not move to or occupy the property until either late March, 1982, or early April, 1982, when plaintiffs moved from and abandoned their Midland home. The Midland residence eventually was sold on October 3, 1982.
It is undisputed that after making several payments on the $400,000 note and its renewals,6 plaintiffs ceased to make any further payments on the notes after March 23, 1983.
On October 14, 1983, Midland Bank was declared insolvent by the Comptroller of the Currency, and the FDIC was appointed as its receiver. The FDIC is the current holder of the $400,000 note and all renewal notes thereafter executed by plaintiffs.
On April 12, 1985, plaintiffs sought relief under Chapter 7 of the Bankruptcy Code.
At the filing of plaintiffs' voluntary petition, plaintiffs remained obligated to the FDIC in the principal amount of $377,000 plus accrued interest. While plaintiffs do not contest the amount of the debt owed, they do contest the validity and extent of the FDIC's secured status.
Defendant's position is that the entire $377,000 owed by plaintiffs is a secured debt, Plaintiffs, on the other hand, contend that only $180,000 of the $377,000 debt is secured, as only $180,000 of the $400,000 advanced by Midland Bank was used by them to purchase their Houston home. Plaintiffs argue that the defendant, FDIC, is attempting to impress what they claim is their homestead with a nonpurchase debt.
Before this court is plaintiffs' complaint against Federal Deposit Insurance Corporation ("FDIC") requesting rulings on the following:
(i) whether the Houston property was plaintiffs' homestead on February 18, 1982;
(ii) the extent to which the deed of trust encumbers plaintiffs' alleged homestead property;
(iii) whether the debt owed FDIC is wholly or only partially secured;
(iv) whether the FDIC correctly applied payments made by plaintiffs in reducing the balance owed on the $400,000 deed of trust note and its renewals;
(v) whether the payments made by plaintiffs should have been applied first to the $185,004.91 vendor's lien retained in the general warranty deed, or applied first to the remaining balance of $214,995.09 owing on the deed of trust note; and
(vi) whether a release of the vendor's lien releases the deed of trust.
Trial was commenced on plaintiffs' complaint on February 6, 1986. Briefs were submitted by both sides and final arguments were heard on March 13, 1986.
The initial issue is procedural.
Defendant, by its answer dated November 12, 1985, admitted that the Houston property was plaintiffs' homestead on February 18, 1982. However, defendant subsequently argued at trial that the Houston property was not plaintiffs' homestead when the Hunts purchased it.
Plaintiffs argue defendant is estopped from asserting that the Houston property was not plaintiffs' homestead on February 18, 1982. Plaintiffs emphasize that not only did defendant admit that the Houston property was plaintiffs' homestead in its original answer, but on December 5, 1985, when the pretrial conference was held, defendant did not raise the issue of homestead. It was not until December 18, 1985, that defendant requested leave of court to amend FDIC's answer to plaintiffs' complaint to determine validity and extent of FDIC's secured status.
Although defendant's application for leave of court was never scheduled for oral argument nor was leave of court ever granted, defendant filed its second amended answer on January 29, 1986, wherein defendant denied that the Houston property was plaintiffs' homestead on February 18, 1982.
At trial, defendant again requested a ruling upon its December 18, 1985, motion for leave of court to amend its answer.
The Bankruptcy Rules govern the procedure in the Bankruptcy Courts in cases under Title 11 of the United States Code. Those rules were adopted to secure the just, speedy, and inexpensive determination of every action therein. B.R. 1001. Defendant's application to amend its answer is granted. Fair notice was given. No continuance was sought or needed by plaintiffs. No prejudice to plaintiffs was demonstrated.
There is no contention that the property in Midland, Texas, owned by plaintiffs and actually occupied by them and their children from September, 1980 until February 18, 1982, did not constitute their homestead under the Texas Constitution and laws, prior to the acquisition by plaintiffs of the Houston property.
Plaintiffs do not contend that they are entitled to two different homesteads at the same time. Plaintiffs do urge that their sole homestead on February 18, 1982, was the Houston property. They argue their purchase of the Houston property on February 18, 1982, was with the sole intent to dedicate the property to homestead usage. Plaintiffs claim that their intent to vacate the Midland property together with their intent to improve and occupy the Houston property as a home, coupled with steps toward carrying such purpose into effect, divested the Midland property at once of its homestead character on February 18, 1982, notwithstanding that they continued to own and occupy the home in Midland until late March, 1982, or early April, 1982.
Defendant, however, argues that the Houston property was not plaintiffs' homestead on February 18, 1982, and did not become their homestead until, at the earliest, late March 1982, when plaintiffs moved from and abandoned their Midland homestead.
Texas cases have continually held that a homestead is the dwelling house constituting the family residence, together with the land on which it is situated and the appurtenances connected therewith. Lifemark Corp. v. Merritt, 655 S.W.2d 310 (Tex.Civ.App. — Houston 14th Dist. 1983, writ ref'd n.r.e.); Gann v. Montgomery, 210 S.W.2d 255, 258 (Tex.Civ.App. — Fort Worth 1948, writ ref'd n.r.e.). The possession and use of real estate by one who owns it, and who, with his family, resides upon it, makes it the homestead of the family in law and in fact. Tolman v. Overstreet, 590 S.W.2d 635, 637 (Tex.Civ.App. — Tyler 1979, no writ); Garrard v. Henderson, 209 S.W.2d 225, 230 (Tex.Civ.App. — Dallas 1948, no writ).
The State of Texas has extended its protection of homesteads to residences of both single and married persons, protecting these homesteads against mortgages, except for purchase money to buy the property, money to pay for work and materials improving the property, or money to pay taxes upon the property. Tex. Const. Art. XVI § 50. No specific writing is needed to claim a homestead. By the mere act of using and enjoying a property as a home, a person qualifies for the protections mandated by the Texas Constitution. Dodd v. Harper, 670 S.W.2d 646 (Tex.Civ.App. — Houston 1st Dist. 1983, no writ); Hoffman v. Love, 494 S.W.2d 591 ().
The initial burden of establishing that property is homestead property is on the claimant of the protection. Burk Royalty Co. v. Riley, 475 S.W.2d 566, 568 (Tex. 1972); Lifemark Corp. v. Merritt, supra at 314; Prince v. North State Bank of Amarillo, 484 S.W.2d 405, 409 (Tex.Civ. App. — Amarillo 1972, writ ref'd n.r.e.); Pace v. McEwen, 617 S.W.2d 816, 818 (Tex. Civ.App. — Houston 14th Dist. 1981, no writ).
In Texas it is well settled that in order to establish homestead rights, a combination...
To continue reading
Request your trial