In re Osborn
| Decision Date | 29 December 1994 |
| Docket Number | Bankruptcy No. 87-71480. |
| Citation | 176 BR 941 |
| Parties | In re O.J. OSBORN, SSN XXX-XX-XXXX, Roma Lou Osborn, SSN XXX-XX-XXXX, Debtors. |
| Court | U.S. Bankruptcy Court — Eastern District of Oklahoma |
COPYRIGHT MATERIAL OMITTED
Kenneth G.M. Mather, Trustee, Tulsa, OK.
Keith J. Hocker, Norman, OK, for debtors.
Mark Craige, Tulsa, OK, for Durant Bank & Trust.
On the 12th day of October, 1994, the above-referenced matter came on for trial after the case was remanded to this Court by the Tenth Circuit, In re Osborn, 24 F.3d 1199 (10th Cir.1994) and the United States District Court for the Eastern District of Oklahoma. Counsel appearing were Mark Craige and Jim Hicks for Durant Bank & Trust and Keith Hocker and Greg Tontz for the Debtors. Both parties have filed proposed findings of fact and conclusions of law. After hearing testimony, arguments of counsel, and reviewing the file, this Court does hereby enter the following findings and conclusions in conformity with Rule 7052, Fed.R.Bankr. P., in this core proceeding:
PROCEDURAL HISTORY
In 1956, the Osborns purchased and claimed as their homestead property located 10818 Lake June Road, Dallas, Texas ("the Texas property"). The Osborns continued to reside there until they were required to leave by the U.S. Marshal after the sale of the property in January, 1991. The Osborns purchased property in southeast Oklahoma beginning in 1959 ("the Oklahoma property"), with the intent to reside there and enter into the farming business once Mr. and Mrs. Osborn retired. The Oklahoma property was mortgaged to Durant Bank & Trust ("DB & T" or "Bank").
The Osborns filed a Chapter 12 proceeding on July 9, 1987. After the Bank objected, the action was subsequently dismissed. The Bank filed an involuntary Chapter 7 proceeding against the Osborns on December 30, 1987 which was converted to Chapter 11 and thereafter reconverted back to Chapter 7. During the Chapter 11 case, the Osborns filed their original Schedule B-1 listing their real property. The Texas property was valued at $70,000 and a piece of rural property in Oklahoma was valued at $238,950. The Tenth Circuit noted in its opinion that many of the documents relating to the loans on the Oklahoma property listed an Oklahoma address for the Osborns. The original schedules in the Chapter 12 and this Chapter 7 proceeding listed the Oklahoma property as the Osborns' mailing address. The original bankruptcy petitions listed the Osborns' mailing address as Route 2, Box 118, Bokchito, Oklahoma. Mrs. Osborn later testified that she thought that she was to give the Oklahoma address because they were filing a business bankruptcy, which was connected to the Oklahoma property.
In the appellate record before the Tenth Circuit, Mrs. Osborn had testified that she had made no express representation that the Oklahoma property was her homestead. She further testified that she had no understanding of the legal meaning of the word "homestead." On the other hand, Mr. Osborn had testified on several occasions that the Oklahoma property was his homestead. He even testified at the first meeting of creditors that he and his wife lived on the property in Oklahoma.
The Tenth Circuit also had before it the circumstances regarding the adequate protection lien on the Texas property. On July 6, 1988, the Bankruptcy Court granted the Bank an adequate protection lien on the Texas property, and allowed the Debtors to use cash proceeds from the sale of some of their cattle in order to maintain the herd, which was subject to the security interest of the Bank. The Osborns used over $11,000 of these proceeds. Notably, the Osborns did not object to that lien being put on the Texas property nor did they argue that the property was their homestead.
The Bank filed an adversary proceeding seeking to deny the Osborns a discharge of their debt to the Bank. On January 9, 1990, an agreed journal entry of judgment was entered which provided that a debt of $225,000 to the Bank was nondischargeable and the parties asked Farmers Home Administration to reguarantee the loan. The judgment provided that if Farm Home did not reguarantee the loan, then the Bank had the right to execute upon the judgment and take other legal action as it deemed reasonable. Farm Home refused to reguarantee the loan.
The Osborns then filed an amendment to their Schedule B-4 which claimed the Texas property as exempt. The Bankruptcy Court denied the amendment and the Debtors appealed. The District Court affirmed the Bankruptcy Court's decision and the Debtors appealed to the Tenth Circuit. The Tenth Circuit found:
(1) The Osborns' appeal was not moot in light of the sale of the Texas property to a third party. The Tenth Circuit noted that where state law or the Bankruptcy Code provides some remedy that does not affect the validity of the sale, § 363(m) of the Bankruptcy Code does not moot the appeal.
(2) In this case, the showing of prejudice was not sufficient to deny the amendment under Rule 1009. The Tenth Circuit noted:
The bankruptcy court\'s order here is not clear whether there was merely a procedural denial of the amendment, or whether the homestead claim was rejected on the merits. In any event we hold that, insofar as the bankruptcy court\'s order was a denial of the procedural right to amend, the ruling was in error. That is not the end of the matter, however. "Whether the claims of exemption contained in that amendment will be approved if an interested party timely objects, however, is a separate issue." Redmond v. Tuttle, 698 F.2d 414 at 417 (10th Cir.1983).
(3) The Tenth Circuit further stated:
We feel the fashioning of such a remedy should first be considered by the bankruptcy judge. Moreover, the present record is inadequate for the making of a determination about possible relief for the Osborns, and the weighing of the equities relating to impressing a trust on the proceeds from the sale of the Texas property or to the extent of monetary relief that should be given to the Osborns from those proceeds or from the party that received them. The bankruptcy court should conduct proceedings to consider the equities and the fashioning of relief, consistent with this opinion.
The denial of the amendment was reversed by the Tenth Circuit and remanded.
The Tenth Circuit noted that the Bankruptcy Court entered an order allowing the Trustee to sell the Texas property. The Bankruptcy Court stayed the sale of the Texas property on the condition that the Osborns maintain insurance on the property and pay "reasonable rent" of $450 per month to the Bank. The reasonable rate of $450 per month was agreed to by Mrs. Osborn at a bankruptcy hearing and was not appealed. The Osborns failed to comply with the conditions and the Trustee sold the Texas property at auction for $27,000. As a result of this case being remanded back to this Court, this Court held a full day trial where the following evidence was received.
Mrs. Osborn testified that in 1956, she and Mr. Osborn purchased the property known as 10818 Lake June Road, Dallas, Texas and resided there until 1991. Mr. and Mrs. Osborn had never been separated or divorced. In 1965, Mrs. Osborn began working for Proctor and Gamble in Dallas. At first, she only worked part-time and in 1962, she began working full-time. She continued her employment with Proctor and Gamble until she was laid off in 1992. She testified that her children attended schools in Texas although her youngest son moved to Oklahoma to live with her oldest son to finish high school. Mrs. Osborn testified that she and her husband first acquired property in Oklahoma in 1959 and later continued to acquire land in Oklahoma. In 1987, they owned 498 acres in Oklahoma subject to the Bank's mortgages.
In 1987, the Osborns filed for relief under Chapter 12 of the Bankruptcy Code. At that time, there was no dwelling on the Oklahoma property. The Bank presented documents filed in these bankruptcy proceedings which listed the Osborns' address as Route 2, Bokchito, Oklahoma. Mrs. Osborn testified that this was their business address and she believed that address needed to be on the documents since they were filing a business bankruptcy in Oklahoma. However, she did testify that they received correspondence from the Bank at the Dallas address. Furthermore, Mrs. Osborn testified that their financial statements and tax returns included the Dallas address.
Mrs. Osborn testified as to the expenses they were entitled to be reimbursed for as a result of the sale of the Texas property. The Osborns are claiming $600 for moving expenses; rent in Dallas after the eviction for 18 months at $600 per month for a total of $10,800; storage in Dallas of $70 per month for 18 months for a total of $1,260; storage of furniture in Oklahoma at $45 per month for 27 months for a total of $1,215; and rent in Oklahoma at $300 per month for 26 months for a total of $7,800. When they moved out of the Dallas home in 1991 for failure to pay the $450 per month rent, they moved into a $600 per month apartment. Mrs. Osborn testified that the house they were renting in Oklahoma belonged to their son and they have not paid any rent to their son as of the date of the trial even though they want reimbursed for $7,800.
Evidence was presented that the Debtors' loan documents with the Bank did not reflect that the Texas property was their homestead. Further, the promissory note lists the Debtors' address in Bokchito, Oklahoma and it does not reflect that the address is a business address.
The Debtors' original Chapter 11 Petition and Schedules listed their real property as follows:
Description Value
10818 Lake June Rd. $ 70,000
Dallas, TX
498 acres $238,950
On Schedule B-4, the Debtors listed their homestead in Texas as exempt pursuant to Okla.Stat. tit. 31, § 1 (West 1991)...
To continue reading
Request your trial