In re Nelson
| Decision Date | 04 December 1991 |
| Docket Number | Adv. No. 390-3771.,Bankruptcy No. 390-34532 RCM-11 |
| Citation | 134 BR 838 |
| Parties | In re Michael Lane NELSON, Debtor. FIRST NATIONAL BANK MANSFIELD, Plaintiff, v. Michael Lane NELSON, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
COPYRIGHT MATERIAL OMITTED
Following are the Court's findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052, with respect to the trial of the above adversary proceeding on May 14-16, 1991.
The claims and defenses of the parties are as follows.
The debtor in the above-styled adversary proceeding, Michael Lane Nelson ("Defendant"), alleges that First National Bank Mansfield ("Plaintiff") does not have a valid and enforceable deed of trust lien on the real property located at 8224 Grapevine Highway, North Richland Hills, Texas, for the reason that, at the time Plaintiff allegedly acquired its lien, such property was the business homestead of Defendant.
Defendant is seeking to have a trustee's foreclosure sale of the property, held on October 6, 1987, set aside on the grounds that Plaintiff did not have a valid, enforceable deed of trust lien on the property, or alternatively, that Plaintiff did not comply with the Texas Property Code in conducting the trustee's sale.
Defendant also asserts that the $669,000 loan (the "Note") was usurious since (a) the Note provides for a floating rate of interest, but does not provide a maximum interest rate ceiling, and (b) the interest rate which was actually charged and received by Plaintiff exceeded six percent per annum, which was the highest rate which it could have lawfully charged.
Defendant further seeks relief from Plaintiff's purported Trustee's sale of two tracts of property located in Mansfield, Tarrant County, Texas, on the basis that Plaintiff failed to comply with the Texas Property Code in conducting such foreclosure sale.
Plaintiff is seeking a determination that it had a valid and enforceable lien at all times on the subject property, and that its trustee's sale of said property was valid in all respects. Plaintiff is further requesting that the Court fix the amount of its deficiency claim now existing under the Note.
Plaintiff additionally requests that, should the Court find the North Richland Hills property to be Defendant's homestead, the Court find that Defendant defrauded Plaintiff through his fraudulent misrepresentations and that the Court grant Plaintiff judgment against Defendant for the amounts due and owing under the Note, for fraud, and that such judgment be non-dischargeable under 11 U.S.C. § 523.
Defendant has been a chiropractic doctor at all pertinent times herein. The first issue in this case is whether Defendant's clinic (the "Clinic"), owned by him, at 8224 Grapevine Highway, North Richland Hills, Texas, was his business homestead at the time of his allegedly giving Plaintiff liens thereon. The Clinic was built by Defendant in 1976 and he has been using the Clinic as his place of practicing his business as a chiropractic doctor since such date. When Defendant built the Clinic, he lived in a house in North Richland Hills, Tarrant County, Texas with his then wife. He lived with her in such house from approximately 1974-1976. They were divorced in 1976. For approximately three years after the divorce, he lived at 1212 Irwin, Hurst, Tarrant County, Texas. While he still owns such property at 1212 Irwin, he has not lived there since approximately 1979. Since 1979, that property has been continuously rented out to tenants.
In approximately December 1979 or January 1980, Defendant moved to a three-bedroom mobile home in Wise County, Texas. He left some chairs and bar stools in the attic at 1212 Irwin and moved a couple of items to the Clinic, but the majority of his furniture he moved to Wise County at such time. He commuted to work each day and was living in the Wise County mobile home when the $644,000 interim development loan and $669,000 final loan documents in question were executed. The total of all these loans was in the principal amount of $669,000. It is thirty-five miles from the Clinic to the Wise County property.
The Wise County mobile home is located on approximately thirteen acres of land. Defendant's elderly grandfather lived with him in the mobile home in Wise County, Texas from the inception in December 1979 or January 1980, until his grandfather died in May 1984. Defendant moved to Wise County primarily for two purposes. First, his grandfather's wife had died, his grandfather, although having a house in Tarrant County, Texas, was at loose ends and wanted to live in open spaces, and Defendant's parents traveled frequently, making it difficult for them to keep an eye on his grandfather. Second, Defendant had some horses that he had boarded elsewhere and he wanted a place to keep his horses. Prior to moving to Wise County, Texas, Defendant had lived all his life in Tarrant County, Texas, except when he had been away at college prior to 1974.
The Wise County property is rural acreage. Defendant used the ranch or farm in Wise County, Texas as a tax business write-off. Defendant's financial statement to Plaintiff listed the Wise County property as his residence.
The 1212 Irwin property is a 3-2-2 brick house, with a small backyard.
Defendant presently has five horses at the Wise County property, and in late 1984 he had five or six horses there. He does not ride the horses, but tries to use some of them for racing. On his tax returns, Defendant took business tax deductions on the 1212 Irwin property, categorizing it as rental property.
Defendant put in a well, a covered patio on the mobile home, and built a barn, a chicken coop and fences on the Wise County property. According to Defendant's testimony, the Wise County property never generated income.
None of the properties, i.e., the 1212 Irwin, the Clinic, or the Wise County were ever designated as homestead with the taxing authorities by Defendant.
Defendant testified that he has not moved back into the 1212 Irwin property because he needs the rent money to live on.
Defendant testified that he always intended to move back to Tarrant County from Wise County. He is claiming 1212 Irwin as his residential homestead and the Clinic as his business homestead.
Since 1976, Defendant has continuously received all his mail at the Clinic address and his voter registration was out of such address since such date.
Defendant lived in the mobile home in Wise County continuously from 1979 until August 1989, when he moved back to Tarrant County, Texas into a rent house he owned on Victoria Street. He lived there for three or four months and then, from that point forward through trial date, he has lived with his parents on Lola Drive in North Richland Hills, Tarrant County, Texas. Defendant testified that when he bought the 1212 Irwin property, he intended to move back there and live there, and that the reason he had not lived there since 1979 was because the property was easy to rent and he needed to keep it rented because of his constant financial difficulties. In November 1984, prior to the bank loans in question, he gave Bedford Bank a deed of trust mortgage on the 1212 Irwin property.
In or around November 1984, Defendant approached Plaintiff and requested a loan to remodel and renovate a strip shopping center located in Mansfield, Texas (the "Mansfield Center").
On or about December 13, 1984, Defendant executed a promissory note to Plaintiff in the original principal amount of $644,000 (the "Development Note"). The Development Note matured in six months.
On or about December 13, 1984, Defendant executed a deed of trust, for the benefit of Plaintiff, covering the Mansfield Center. This Deed of Trust is recorded at Volume 8037, Page 2034, Real Property Records of Tarrant County, Texas.
On January 14, 1985, Defendant executed the Non-Homestead Affidavit and Designation of Homestead (the "Affidavit") (Plaintiff's Exhibit ("PX") 4). The Affidavit renounces and disclaims any homestead right in Exhibit A, which exhibit legally describes the Clinic. In the Affidavit, he represents as follows:
The two deeds of trust executed by Defendant for the benefit of Plaintiff also contained provisions that Defendant did not claim the property as any part of his homestead.
On January 14, 1985, Defendant executed a deed of trust, which states that it grants Plaintiff a lien against the Clinic. This Deed of Trust is dated January 3, 1985, and is recorded at Volume 8065, Page 557, Real Property Records of Tarrant County, Texas.
In or around February, 1985, construction was completed on the renovation of the Mansfield Center.
On or about July 10, 1985, Defendant executed the Note to Plaintiff in the original principal amount of $669,000.
On or about July 10, 1985, Defendant executed a deed of trust which states that it grants Plaintiff liens against the Mansfield Center and the...
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