In re McAtee
| Citation | 154 BR 346 |
| Decision Date | 21 April 1993 |
| Docket Number | Bankruptcy No. 92-05244. |
| Parties | In re James R. McATEE, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Northern District of Florida |
Charles Hoskin, Pensacola, FL, for creditor.
James R. McAtee, pro se.
Ronald A. Mowrey, Tallahassee, FL, trustee.
ORDER DENYING OBJECTION TO EXEMPTION
THIS CAUSE was heard by the Court on the objection of a creditor, Don Lanier, to the debtor's claim that a leasehold interest in a residence on Santa Rosa Island is exempt as homestead property. Upon the consideration of written submissions and the oral argument of counsel, the Court finds that the subject leasehold interest is exempt from the estate as homestead property, and accordingly, denies the creditor's motion objecting to the claimed exemption.
The facts upon which the outcome of the present controversy turns may be simply stated. The debtor filed a Chapter 7 petition with the Court on November 16, 1992. Schedule C lists the debtor's one-third interest in a residence subject to a ground lease and located on Santa Rosa Island as property exempt from the estate pursuant to the state's constitutional homestead provision.
The ground lease in question was entered into on March 15, 1968 by the Santa Rosa Island Authority (the "Authority"), an agency of Escambia County, Florida, as lessor and Hillard and Jean Peavy as lessee. The debtor and his then wife assumed the lease by assignment on August 7, 1979. The lease has an initial term of 99 years, and calls for an annual rental of $40.00 plus a maintenance and development fee of $25.00 payable in advance. Among its many terms and conditions, the lease limits the use of the land to a single family residential dwelling, and requires the lessee to rebuild the dwelling in the event of its destruction. The lease expressly provides that it may be assigned, mortgaged, pledged, or transferred without the prior approval of the Authority.
The objecting creditor argues that a leasehold interest in real property is classified as chattel real and regarded as personal property under Florida law. As such, the debtor would be limited to a $1,000 exemption for personal property. The creditor makes no argument that the debtor's leasehold interest is defective in any manner, nor that the debtor would not be entitled to the homestead exemption if the ground interest was in fee simple rather than a leasehold. Thus the sole issue before the Court is whether an otherwise eligible debtor may claim a homestead exemption for a residence subject to a leasehold interest of this nature.
Florida has opted out of the federal exemption scheme pursuant to Section 522(b), Fla.Stat.Ann. § 222.20 (West 1989), and instead makes available to its residents a state statutory exemption scheme. The Florida Constitution provides for a homestead exemption from forced sale, and states in relevant part:
"There shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon, . . . the following property owned by a head of family . . . a homestead and personal property to the value of one thousand dollars." Fla. Const. Article 10, Section 4 (amended 1984).
The Court's analysis of the problem begins with the observation that the state has a long and well established history of liberally construing and applying its homestead exemption. See, e.g., Hill v. First National Bank of Marianna, 79 Fla. 391, 84 So. 190 (1920). This is so because the homestead law furthers important public policy considerations such as promoting the stability and welfare of the state by encouraging property ownership and the independence of its citizens by preserving a home where a family may live beyond the reaches of economic misfortune. In re Ehnle, 124 B.R. 361, 363 (Bankr.M.D.Fla. 1991).
The creditor urges the Court to adopt an interpretation of the term "owned" in the state homestead provisions which essentially equates ownership with only those having title in fee simple absolute. The creditor argues that because the debtor here has only a leasehold interest in his residence he can claim a homestead exemption of only $1,000 for personal property. Fla. Const. Article 10, Section 4(a)(1) (amended 1984).
The Court finds the Florida Supreme Court decision in Williams v. Jones, 326 So.2d 425 (Fla.1975), especially important to the resolution of the instant case. The Williams case involved a question of whether property on Santa Rosa Island under lease from the Authority could be properly taxed as real estate. In discussing the nature of the lessee's property interest, the Supreme Court noted:
Turning to the law on the subject of ownership interest by the lessee, we find that, in the law of real property, it is well established that a valid lease for a term of years is a conveyance of an interest in land. A lessee\'s interest in a leasehold estate is thus stated:
Williams, 326 So.2d at 433. (citations...
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