In re Ross
| Decision Date | 29 May 1997 |
| Docket Number | Bankruptcy No. 97 B 02609. |
| Citation | 210 BR 320 |
| Parties | In re Barron W. ROSS, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Roy Safanda, St. Charles, IL, for debtor.
Kevin W. Wright, Elgin, IL, for respondent.
This matter comes before the Court on the objection of Roy Safanda, the Chapter 7 Trustee (the "Trustee") for the estate of Barron W. Ross (the "Debtor") to the Debtor's claim of exemption, and the Debtor's response in opposition thereto. It presents an issue of first impression about the propriety of a claim of homestead exemption under Illinois law, 735 ILCS 5/12-901, in a 1980 Chris Craft Boat (the "Boat"). Also at issue is whether the Debtor abandoned his claimed homestead in the Boat he occupied as his home thereby losing his exemption. For the reasons set forth herein, the Court finds that the Debtor established that the Boat was used as his homestead and that he did not voluntarily abandon it when he temporarily resided elsewhere during the winter season when the Boat was in drydock. Consequently, the Court overrules the Trustee's objection.
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Local General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(B).
On January 29, 1997, the Debtor filed a voluntary Chapter 7 petition. The Debtor is self-employed operating a boat chartering and snow plowing business. On his Schedule C — Property Claimed as Exempt, the Debtor claimed an exemption pursuant to 735 ILCS 5/12-1001 et seq. in the amount of $2,750.00 for the Boat. The Boat was duly scheduled on the Schedule B at such current market value. The Debtor's petition listed his street address as 32W640 Hecker, East Dunee (sic), Illinois. In response to Question 15 in the Statement of Financial Affairs concerning his prior addresses in the two years preceding the filing of the petition, the Debtor checked the box "none" indicating that he had no other addresses which he occupied during that period and vacated prior to the commencement of the case.
The meeting of creditors pursuant to 11 U.S.C. § 341 was held on March 3, 1997, during which the Trustee questioned the Debtor. On that date, the Debtor also filed amended Schedules B and C which valued the Boat at $7,500.00 and showed the Debtor as a joint owner with a 50% interest in the Boat. The Debtor also claimed a homestead exemption of $7,500.00 in the Boat under 735 ILCS 5/12-901. On March 28, 1997, the Trustee filed an objection to the homestead exemption contending that the Debtor did not use the Boat as his residence at the time of, and for not less than two months prior to, the date of the filing of the petition, and at all times within the year prior to filing maintained separate residences on land. In his supporting affidavit, the Trustee avers that at the § 341 meeting the Debtor testified that he did not use the Boat as a residence from November or December 1996 through March 3, 1997, and that the Debtor maintained a residence in East Dundee, Illinois until May 1, 1996, and has maintained other residences on land continually since that date.
In response, the Debtor alleges that he occupied the Boat as his sole residence from approximately May through November 1996; he continues to consider it as his residence; and he has not established any other residence. Further, he states that the Trustee's affidavit does not accurately reflect his testimony at the § 341 meeting. Pursuant to the Debtor's affidavit, he maintains separate mailing addresses for business purposes; he has lived at temporary addresses while the Boat was being cleaned and repaired; and he intended to return to the Boat and continues to reside there.
Because of the factual disputes raised in the affidavits, the Court set the matter for trial. The Debtor testified that he temporarily lived at several addresses in late 1996 and early 1997 while the Boat was in winter drydock. He had earlier established his residence on the Boat after marital dissolution proceedings were commenced and he left the marital homestead where he resided for over twenty years. The marital residence was still utilized as his business address and the one used for driver's registration and voting purposes. He admitted that at the time of filing the petition he was not actually living on the Boat because it was drydocked in the harbor of the Waukegan Port Authority. The Boat had been "winterized" and not occupied during the winter months although it had utility hookups, living quarters, cooking facilities and other amenities for dwelling and was designed for several people to live on. According to the Debtor, he considers the Boat his permanent address and homestead on which he resides during the fishing season to avoid the expense of renting other quarters. He receives mail at both the Boat and former marital home addresses, and thus has not changed his license registration or mailing address.
The Debtor's testimony was substantially corroborated in part by the testimony of Walter T. Jones, the Executive Director of the Waukegan Port District, who also lives on his own boat during the fishing season and similarly rents an apartment during the winter months when his vessel is drydocked. Mr. Jones personally observed the Debtor at the harbor both conducting his business of charter fishing for the past eight years and living on the Boat from April through November 1996, and at the time of trial, May 1997.
Under the Bankruptcy Code, either the applicable state or the federal exemptions may be selected pursuant to 11 U.S.C. § 522 unless a state chooses to "opt out" of the federal exemption scheme. See 11 U.S.C. § 522(b)(1). The Illinois General Assembly "opted out" by enacting Ill.Rev.Stat. ch. 110, ¶ 12-1201, now recodified and cited as 735 ILCS 5/12-1201. The Illinois statute that sets forth the exemption of homestead provides in relevant part:
Every individual is entitled to an estate of homestead to the extent in value of $7,500 of his or her interest in . . . personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence. . . . That homestead and all right in and title to that homestead is exempt from attachment, judgment, levy, or judgment sale for the payment of his or her debts or other purposes. . . .
735 ILCS 5/12-901 (emphasis supplied).
Illinois exemption statutes are to be liberally interpreted in favor of the debtor. In re Barker, 768 F.2d 191, 196 (7th Cir.1985). The Illinois estate of homestead is a possessory right. In re Szekely, 936 F.2d 897, 901 (7th Cir.1991). A brief review of some of the relevant Illinois case law on homestead exemptions is in order for purposes of deciding the instant matter. All of the cases cited by the parties, and those found by the Court, are factually distinct from the matter at bar, but contain helpful dicta and presumptions applicable on the precise ultimate issue to be decided here: whether the Debtor established or abandoned his homestead exemption claim when he vacated the Boat during the winter season.
The right of homestead is created by statute, not founded in common law. Bank of Illmo v. Simmons, 142 Ill.App.3d 741, 744, 97 Ill.Dec. 4, 8, 492 N.E.2d 207, 211 (5th Dist.1986). The purpose of the estate of homestead and the exemption is to secure the debtor and his family the necessary shelter from creditors. Id. at 745, 97 Ill.Dec. 4, 492 N.E.2d 207. One way for the homestead exemption to be lost, other than by conveyance or release, is by abandonment. In re Moneer, 188 B.R. 25, 27 (Bankr.N.D.Ill.1995) (citation omitted). Generally, a removal from the homestead premises will be taken as an abandonment unless it clearly appears that there was an intention to return and occupy them. Id. (citations omitted). "Whether one entitled to a homestead may be said to have abandoned it by moving away from it is a matter largely of intention to be determined from the facts of each case." Rasmussen v. Rasmussen, 368 Ill. 137, 140, 13 N.E.2d 166, 168 (1938) (citations omitted). Accord Kawszewicz v. Kawszewicz, 385 Ill. 461, 468, 53 N.E.2d 386, 389 (1944). A person's intention on the question of returning to the homestead may be shown by acts or words, or both, and the mere statement or testimony of the claimant that he intended to return to the homestead does not constitute conclusive proof of such intention. Moneer, 188 B.R. at 27 (citations omitted). Such intention to return must be unequivocal — equivocal intention to return is not sufficient. Rasmussen, 368 Ill. at 141, 13 N.E.2d at 168. A mere temporary absence for any cause deemed sufficient with the intention of returning, however, will not forfeit the right. See Dixon v. Moller, 42 Ill.App.3d 688, 691, 1 Ill.Dec. 411, 415, 356 N.E.2d 599, 603 (5th Dist.1976). But, "when no new homestead has been acquired, absence from the old one, unless for an extended period of time, does not create a presumption of abandonment." Id. (emphasis supplied) (citations omitted). Removal from homestead with the intent of returning is not an abandonment. See Kenley v. Hudelson, 99 Ill. 493, 500-01 (1881); Wiggins v. Chance, 54 Ill. 175, 178 (1870).
Federal Rule of Bankruptcy Procedure 4003(c) governs hearings on disputed claims of exemption and objections thereto. Bankruptcy Rule 4003(c) expressly places the burden of proof on the objecting party to prove the exemption is not properly claimed. This is in contrast to Illinois case law concerning homesteads which generally places the burden of proving the existence of a homestead on the person relying on it. See Gillespie v. Fulton Oil & Gas Co., 236...
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