In re Moore, Bankruptcy No. 187-10247-11
| Decision Date | 06 December 1988 |
| Docket Number | Bankruptcy No. 187-10247-11,Adv. No. 188-1016. |
| Citation | 93 BR 480 |
| Parties | In re Joseph L. MOORE, d/b/a Radford Hills Laundry, Debtor. Joseph L. MOORE, d/b/a Radford Hills Laundry, Plaintiff, v. BANK OF COMMERCE, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
Billy W. Boone, Abilene, Tex., for debtor.
Rebecca Conrad and Dean Shuman Conrad & Shuman, Dallas, Tex., for the Bank.
Joseph L. Moore, d/b/a Radford Hills Laundry (Debtor), seeks to set aside a lien held by Bank of Commerce of Abilene, Texas (Bank) asserting that it constitutes an invalid lien on his business homestead.
In 1978, the Debtor and his wife, Alma Faye Moore, moved from Kentucky to Abilene, Texas. They purchased a residence on a 17,000 square foot lot located at 918 Green Valley Drive. In June, 1978, the Debtor acquired the Radford Hills Laundromat (original laundromat). The original laundromat contained approximately 3,600 square feet and operated in leased space in a shopping center. The laundromat was open seven days a week and an attendant was on duty at all times. Mr. Moore regularly worked as an attendant in the laundromat and performed other necessary services such as repair and cleaning. He did not run any other business except in 1983 when he built and sold two houses. The lease on the shopping center space was to expire in January, 1985. Mr. Moore understood that the landlord was raising the rent as leases expired so, in the summer of 1984, he determined to acquire a parcel of land and construct a building in which to operate his laundromat. The Bank agreed to finance the purchase and construction. Prior to purchasing the property, he had plans drawn and secured estimates of construction costs from various parties. He submitted these plans and estimates to the Bank. He operated as his own general contractor and hired different parties to do different portions of the construction work. On August 17, 1984 he entered into an earnest money contract to purchase the land at $5.00 per square foot with a total purchase price of $90,000.00. The contract was subject to obtaining variances on the west and north sides of the property. On September 28, 1984 the Abilene Site Plan Committee granted the variances. On October 3, 1984, he purchased the land from University Hills Joint Venture for the contract price plus closing costs of $353.17. The $5,000.00 earnest money he had placed in escrow in connection with the contract of sale was applied toward this amount and the Bank supplied the balance—$85,353.17. The Warranty Deed from University Hills Joint Venture to the Debtor recited a vendor's lien note for $260,190.81. The deed transferred the vendor's lien to the Bank. On the same date he executed a note payable to the Bank for $260,190.81 and a Deed of Trust on the property. The note represented the purchase price of the land, $29,826.81 owed by the Debtor to the Bank on a pre-existing debt, and $145,010.83 subsequently advanced by the Bank for the construction of the building on the subject property. The Debtor acknowledged that he would not have purchased this property if the Bank had not agreed to finance the construction of the improvements on it. The October 3, 1984, note was renewed several times, including a note of March 1, 1985 which provided for payment of the obligation in monthly installments over a ten year period. The Debtor signed each extension as well as the note and Deed of Trust dated March 1, 1985.
In mid-October, 1984, construction began on the new laundromat. It ended in early January, 1985. The Debtor continued to operate the original laundromat until he moved into the new laundromat on January 9 and 10, 1985. He moved his laundry machines in stages and, consequently, operated in both locations on both days. The Debtor testified that he completed construction of the new laundromat on January 10, 1985 and did not operate the original laundromat after that date.
Is the new laundromat the Debtor's business homestead?
The Debtor's pleadings asserted that in the summer of 1984 he made preparations for this property to become his business homestead and, therefore, it became his business homestead at the instant it was acquired. The Debtor's position is that the vendor's lien is valid only to the extent of the funds used for the acquisition of the land. Therefore, he claims, the portions of the note which represent the prior obligation and the construction costs (advanced on a periodic basis as needed during construction) do not constitute valid liens on the property because he executed no builder's and mechanic's lien contract and Mrs. Moore did not sign any documents.
On October 2, 1984 (one day before the Debtor acquired the subject property) an amendment to § 41.001 of the Texas Property Code (Vernon, 1988) became effective which changed the definition of a Texas urban homestead to "one or more lots amounting to not more than one acre of land, together with the improvements thereon." In the instant case, the Debtor's residence homestead contained 17,000 square feet and the subject property contained 18,000 square feet; thus, the total land fits within the 43,560 square feet allowed as exempt under the Texas statute.
Where raw land is held by a party intending to occupy it in the future, a homestead right is created when the intent is manifest by overt acts toward the utilization of the property for homestead purposes. Harkrider-Keith-Cooke Co. v. Smith, 284 S.W. 612 (Tex.Civ.App.—Austin 1926). The Texas Supreme Court expressed the basic policy underlying the rule as follows:
... If a homestead cannot be acquired until it is occupied, then no one can acquire a homestead exempted from forced sale unless he buys an improved place; and then he must have a race with the sheriff for possession. The unimproved lands of the country and the vacant lots of our cities cannot be acquired for the purpose of making a home by the man who is indebted except at the risk of turning it over to a creditor. If a man owes nothing, or is able to pay all that he owes, he does not need the exemption. If he has other property, he can protect his home by pointing out that other property for sale; but if he has nothing but the homestead, he comes within the necessity of the constitutional provision, and to him is the chief value of exemption.
Cameron v. Gebhard, 85 Tex. 610, 22 S.W. 1033, 1035 (1893).
The same rule applies to impressing homestead character on business property. Hufstedler v. Glenn, 82 S.W.2d 733 (Tex. Civ.App. — Austin 1935, no writ). It is well-settled that a homestead estate is dependent upon some title or interest in the property, and does not exist as a separate estate in property, independently of such title or interest. Rutledge v. Mitchell, 91 S.W. 2d 1135 (Tex.Civ.App. — Austin 1936, writ dism'd). A homestead right does not depend on unqualified fee ownership of the land involved, but may exist in any possessory interest in land. Gann v. Montgomery, 210 S.W.2d 255 (Tex.Civ.App. — Fort Worth 1948, writ ref'd n.r.e.). The right will attach to an estate for life. White v. Blackman, 168 S.W.2d 531 (Tex.Civ.App. — Texarkana 1943, writ ref'd). It also attaches to a leasehold interest for a fixed term or at will. Evans v. Galbraith-Foxworth Lumber Co., 51 S.W.2d 831 (Tex.Civ. App.—Amarillo 1932, writ dism'd). It may attach to other interests as well. See, e.g., Cheswick v. Freeman, 282 S.W.2d 315, rev'd on other grounds, 287 S.W.2d 171 (Tex.Civ.App. — Waco 1955) (); Moorhouse v. Crew, 273 S.W.2d 654 (Tex.Civ.App. — San Antonio 1954, writ ref'd) (); Haynes v. Vermillion, 242 S.W.2d 444 (Tex.Civ.App. — Fort Worth 1951, writ ref'd n.r.e.) (); Hughes v. Groshart, 150 S.W.2d 827 (Tex.Civ.App. — Amarillo 1941, no writ) (an equitable estate); Weiser v. Travis Cotton Seed Products Co., 63 S.W.2d 246 (Tex.Civ.App.—Amarillo 1933, writ ref'd) (a joint tenancy).
Texas courts defined which overt acts are sufficient preparation to raw land to evidence the existence of homestead character. In Lilly v. Lewis, 249 S.W. 1095 (Tex.Civ.App. — San Antonio 1923, writ dism'd w.o.j.), the Court held the fact that claimant cultivated the land was sufficient to show the existence of the homestead. Other cases in which Texas courts found acts sufficient to impress unimproved property with homestead character include: Tiblier v. Perez, 277 S.W. 189 (Tex.Civ.App. — San Antonio 1925), overruled on other grounds, 153 Tex. 12, 263 S.W.2d 154 (1953) (); Atkinson v. Jackson Bros., 259 S.W. 280 (Tex.Civ.App. — Eastland, 1923), modified on other grounds, 270 S.W. 848 (Tex. Comm'n App.1925, approved), (digging a well); Burton v. Schwartz, 36 S.W. 2d 1066 (Tex.Civ.App. — Fort Worth 1931, writ dism'd) (excavating); Dobkins v. Kuykendall, 81 Tex. 180, 16 S.W. 743 (1891) (constructing a foundation); Bell v. Greathouse, 20 Tex.Civ.App. 478, 49 S.W. 258 (Tex.Civ.App. — Waco 1899, no writ) (constructing a sidewalk); and Clark v. Salinas, 626 S.W.2d 118 (Tex.Civ.App. — Corpus Christi 1981), writ ref'd n.r.e. per curiam, 628 S.W.2d 51 (Tex.1982) ().
Cases in which Texas courts found acts of preparation insufficient to uphold a claim of homestead exemption include Garcia v. Uveda, 198 S.W. 167 (Tex.Civ.App. — San Antonio 1917, no writ) (digging postholes), Farmers' National Bank v. Coffman, 79 S.W.2d 905 (Tex.Civ.App. — Eastland 1935, writ ref'd) (repairing fences), and Churchwell v. Sweeney, 29 Tex.Civ. App. 166, 68 S.W. 185 (Tex.Civ.App. — Waco 1902, no writ) (depositing dirt on a...
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