In re Leva

• Decision Date: 19 February 1989
• Docket Number: Bankruptcy No. 88-52430C.
• Citation: 96 BR 723
• Parties: In re Lee E. LEVA, Debtor.
• Court: U.S. Bankruptcy Court — Western District of Texas

96 B.R. 723 (1989)

In re Lee E. LEVA, Debtor.

Bankruptcy No. 88-52430C.

United States Bankruptcy Court, W.D. Texas, San Antonio Division.

February 19, 1989.

Lawrence A. Beck, Beck & Beck, P.C., San Antonio, Tex., for debtor.

John Patrick Lowe, Uvalde, Tex., trustee.

DECISION SUSTAINING TRUSTEE'S OBJECTIONS TO DEBTOR'S EXEMPTIONS

LEIF M. CLARK, Bankruptcy Judge.

The Trustee, John Patrick Lowe, objects on three grounds to the debtor's claim of exemption in certain items of personal property under the Texas Property Code. He contends that:

(1) the debtor\'s claim of exemption of certain jewelry pieces does not satisfy the requirements of Texas law for jewelry to be exempt;

(2) the debtor\'s relationship with his girlfriend and her son does not entitle him to the $30,000 ceiling for personal property given to a "family unit" instead of the $15,000 for a single adult; and

(3) the debtor\'s exemption claim to the insurance proceeds for a lost portable phone and lost hand-held recorder does not fall within the exemption category for tools and equipment used in a trade or profession.

After presentation and conclusion by both sides of legal argument, I took this matter under advisement. A few weeks before, the Fifth Circuit had remanded an unrelated, but legally dispositive, case concerning the jewelry issue, originally decided by this court. Matter of Fernandez, 855 F.2d 218 (5th Cir.1988). The District Court in turn remanded the case back to this court, with instructions to follow the directives of the circuit.¹ The Fifth Circuit has directed that I initiate the development of a test to use in future cases concerning the jewelry exemption. To some extent, I am aided in this task by the groundwork laid by my brethren, Judge Larry E. Kelly, of the Austin division of this district, and Judge Harold C. Abramson, of the Northern District of Texas. In re Peters, 91 B.R. 401 (Bankr.W.D.Tex.1988), In re Reed, 89 B.R. 603 (Bankr.N.D.Tex.1988).

I. JEWELRY EXEMPT AS CLOTHING

The debtor seeks to exempt a diamond ring, a gold bracelet, and a Rolex watch under the Texas personal property exemption for clothing. Tex.Prop.Code § 42.002(3)(C).

The alchemistic task of transforming jewelry into clothing is imposed on this court by the Fifth Circuit's conclusion that jewelry may be "clothing" under Texas law for exemption purposes. Fernandez clearly mandates that: (1) not all jewelry qualifies under the clothing exemption; (2) to qualify as clothing, the jewelry must be "worn by the owner"; (3) "it would be inappropriate to claim an exemption for jewelry held by the debtor for investment or resale purposes"; and (4) the jewelry must be "reasonably necessary for the family or single adult." Id. at 221-22.

Fernandez emphasized the importance of fleshing out the standard, especially the "reasonably necessary" prong. The Fifth Circuit cited a bankruptcy court's ruling as an example of the kinds of issues a court might look at. In re Tyler, 2 B.C.D. 1537 (Bankr.N.D.Tex.1976). That decision opined that:

Factors which are important in determining whether the claimed exemption is reasonably necessary are the station in life of the person claiming the exemption; the feasibility of wearing it in day to day activity; its value; and the circumstances under which it was acquired including the financial condition of the debtor at the time. There are others, the list does not purport to be exhaustive.

Id. at 1538. The Fifth Circuit warned however that it did not necessarily approve of these factors, but "merely used them to illustrate the types of questions a court might address in deciding whether jewelry claimed by a debtor meets the reasonable necessity test." Fernandez, 855 F.2d at 222, n. 24.

I am also assisted by the panoply of canons of statutory construction. In construing a statute, I may legitimately consider, among other things, the following:

(1) the object sought to be attained;

(2) the circumstances under which the statute was enacted;

(3) legislative history;

(4) common law or former statutory provisions, including laws on the same or similar subjects;

(5) the consequences of a particular construction;

(6) administrative construction of the statute; and

(7) title (caption), preamble, and emergency provisions.

Texas Code Construction Act, Tex. Gov't Code. Ann. § 311.023 (Vernon 1988).

Of particular assistance is the case law construing other Texas exemptions. As a general proposition, Texas law mandates that provisions of the Texas Constitution and Texas statutes which relate to the same subject matter should be construed together, consistently, harmoniously, uniformly, and in light of each other. Purcell v. Linsey, 158 Tex. 541, 314 S.W.2d 283 (1958); Kaufman County Levee Imp. Dist. v. National Life Ins. Co., 171 S.W.2d 188, 189 (Tex.Civ.App.—Dallas 1943, writ ref'd); Duncan v. Gabler, 147 Tex. 229, 215 S.W. 2d 155 (1948); Railroad Commission v. St. Louis Southwestern Ry. Co., 443 S.W.2d 71, 74 (Tex.Civ.App.—Austin 1969, writ ref'd n.r.e.); Yeary v. Bond, 384 S.W.2d 376, 379 (Tex.Civ.App.—Amarillo 1964, writ ref'd n.r.e.); Howard v. State, 704 S.W.2d 575, 578 (Tex.App.—Beaumont 1986, no writ); Willaby v. State, 698 S.W.2d 473, 477 (Tex.App.—Fort Worth 1985, no writ); Flax v. Potts, 204 F.Supp 458 (N.D.Tex. 1962), aff'd, 313 F.2d 284 (5th Cir.1963); Carr v. Hunt, 651 S.W.2d 875 (Tex.App.— Dallas 1983, writ ref'd n.r.e.). Additionally, although not controlling, other states' case law construing similar exemptions also illuminates the inquiry. Sportatorium, Inc. v. State, 115 S.W.2d 483, 489 (Tex.Civ.App.—Dallas 1938, writ dism'd); In re Estates of Carrigan, 517 S.W.2d 817, 818-819 (Tex.Civ.App.—Tyler 1974, no writ).

Guided by these authorities, I now explore factors a court ought to use in applying the clothing exemption to particular jewelry items. In deference to the principle of judicial restraint and acknowledging the continuing vital character judicial precedent, this list does not purport to be exhaustive.

DEBTOR'S USE AND INTENT TO USE JEWELRY AS CLOTHING

("A Rolling Gem Stone Gathers No Debt")

Writing on a nearly clean slate, as it were, I begin by examining case law which relates to the same basic subject matter, exemptions. Texas has a well-developed body of case law on homestead exemptions and an equally well-developed test that proves to be instructive. To establish a homestead exemption, a debtor must prove (1) actual use as homestead, and (2) intent to use the property as a homestead. Ellisor v. Ellisor, 630 S.W.2d 746 (Tex.App.— Houston 1 Dist. 1982, no writ); Braden Steel Corp. v. McClure, 603 S.W.2d 288 (Tex.Civ.App.-Amarillo 1980, no writ); Prince v. North State Bank of Amarillo, 484 S.W.2d 405 (Tex.Civ.App.—Amarillo 1972, writ ref'd n.r.e.). These elements focus on the debtor's relationship with the property. They are useful aids in the jewelry area as well. It is not a particular jewelry item itself which suggests its exempt character but rather something in the relationship of the debtor to the jewelry item in question. Fernandez suggests an approach reminiscent of that used in homestead exemption analysis, requiring a showing that the jewelry item is actually used as clothing and disqualifying jewelry "held by the debtor for investment or resale purposes," i.e., held for a purpose other than as clothing. Matter of Fernandez, 855 F.2d at 222. As a general proposition, then, this court holds that, as in homestead analysis, in jewelry as well the debtor must establish that (1) the jewelry item in question is in fact used as clothing and (2) the debtor's intent with respect to the jewelry is an intent to use it in an "exempt manner" as clothing, as opposed to, for example, an investment intent. Now my task is to hang flesh on these bare bones.

It is safe to say that the first major element, that of use as clothing, is the sine qua non. If the jewelry is never worn, it cannot be exempt. This follows from its classification (by case law) as "clothing." If it is not worn, it cannot be clothing and so should not enjoy exemption. See Matter of Fernandez, 855 F.2d at 220-21. In a sense, all jewelry by its very nature is intended to be worn. See e.g., Levey & Greenhall, Concise Columbia Encyclopedia (Columbia University Press 1983) ("personal adornments worn for ornament, to show rank or wealth, or to follow custom"). Texans must do more than rely on dictionarial "sleight of word," however. Only jewelry which is in fact worn is exempt:

If worn by the owner, it was a constituent part of his attire, and in our judgment is within what the Legislature meant to include by the term `wearing apparel.\' Otherwise a sheriff with an execution could remove the pendants from a lady\'s ears, or a badge from the veteran\'s coat.

First Nat. Bank v. Robinson, 124 S.W. 177, 179 (Tex.Civ.App.1909).

But for how long or when must the debtor wear the jewelry? The court in Reed concluded that it "would find exempt from execution by creditors only that jewelry which is worn by the debtor on a continuing basis." In re Reed, 89 B.R. at 607. A "continuing basis" is not synonymous with "continually." The court in Reed was merely seeking to avoid exempting jewelry which is "never worn or perhaps worn only on rare occasions." Id. at 607. The court easily found jewelry that was worn on a daily basis to be exempt. A Texas court allowed a debtor (albeit a deceased one) to exempt rings, even though the debtor (presumably in his lifetime),

did not wear the rings continuously but `at times\' pledged them as security for loans and `at other times\' had them in a file at home or in his bank box . . . To hold otherwise would allow a debtor to exempt a shirt as clothing only while on his back but not while reposing in a dresser drawer.

Hickman v. Hickman, 149 Tex. 439, 234 S.W.2d 410, 414. Hickman recognizes that most debtors regularly consign their jewelry to a jewelry box, safety deposit box, the top of a dresser or night stand, or...