In re Snellings

• Decision Date: 08 May 1981
• Docket Number: Adv. Proceeding No. 7-80-0197.,Bankruptcy No. 7-80-00669
• Parties: In re Leonard W. SNELLINGS, Helen G. Snellings, Debtors. E.C. DICKENS, Jr. and William F. Miller, Plaintiffs, v. Leonard W. SNELLINGS, Helen G. Snellings, Defendants.
• Court: United States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Virginia

10 B.R. 949 (1981)

In re Leonard W. SNELLINGS, Helen G. Snellings, Debtors.

E.C. DICKENS, Jr. and William F. Miller, Plaintiffs, v. Leonard W. SNELLINGS, Helen G. Snellings, Defendants.

Bankruptcy No. 7-80-00669, Adv. Proceeding No. 7-80-0197.

United States Bankruptcy Court, W.D. Virginia, Roanoke Division.

May 8, 1981.

Richard W. Davis, p.q., Davis & Stone, Attys., Inc., Radford, Va., for plaintiffs.

Robert W. Goodlatte, p.d., Roanoke, Va., for defendant.

MEMORANDUM OPINION AND ORDER

H. CLYDE PEARSON, Bankruptcy Judge.

In this case there are three issues for decision:

1. Are the Debtors, Leonard W. and Helen G. Snellings, husband and wife (Debtors) each entitled to claim a $5,000.00 homestead exemption pursuant to Virginia Code § 34-1 et seq.?

2. Are the Debtors entitled pursuant to 11 U.S.C. § 522(f) of the Bankruptcy Reform Act of 1978, to have the Plaintiff's judgment lien avoided as to the claimed exemptions sought to be allowed in Paragraph 1?

3. When the above questions are resolved, what is the status of Plaintiff's claim herein?

The Debtors filed their petition in this Court pursuant to Chapter 13 of the Bankruptcy Reform Act of 1978, 11 U.S.C. § 1301 et seq. on June 16, 1980. Their plan came on for hearing before the Court on confirmation October 6, 1980. On October 8, 1980 an Order Confirming the Plan was entered subject, however, to a determination of the merits of the Plaintiff's Complaint filed in this Court on August 28, 1980.

The Debtors are joint owners of real estate, their residence, in the community of Shawsville in Montgomery County, Virginia. On May 27, 1977, the Debtors became indebted to the Plaintiffs, E.C. Dickens, Jr. and William F. Miller in the sum of $10,000.00 upon a demand note without interest with a provision for 25% attorneys' fees and a waiver of homestead exemption; that on December 21, 1979 the Plaintiffs obtained a judgment against the Debtors upon the said instrument in the Circuit Court of the City of Radford in the sum of $10,000.00 with interest from August 5, 1977 and Attorneys' fees in the amount of 25% plus $37.00 costs. This judgment was duly docketed in the Circuit Court of the City of Radford. On January 17, 1980 it was also docketed in the Clerk's Office of the Circuit Court of Montgomery County, wherein the real estate in question is situated.¹

Plaintiffs, Dickens and Miller, in their Complaint in this Court seek to have subjected to their judgment lien the real estate of the Debtors to the satisfaction thereof, and further seek leave to proceed with a chancery suit previously instituted in the Circuit Court of Montgomery County, Virginia for that purpose.

The Debtors contend that the Plaintiff's Complaint should be dismissed for the reasons that the Debtors filed separate homestead exemption deeds pursuant to Virginia Code § 34-1 et seq. claiming $5,000.00 exemption each for a total of $10,000.00; that the lien is subject to being avoided pursuant to 11 U.S.C. § 522(f) as to their exemptions and as such, Plaintiffs are entitled to participate only as a secured or unsecured creditor to the extent that the equity value of the property of the Debtors exceed the exemption claimed in Debtors' equity over and above the deed of trust liens.

It appeared from the evidence upon trial of the Complaint that the first and second deed of trust notes total approximately $32,000.00; that the real estate had been listed on the real estate market for a period of time at a price of $45,500.00 and did not sell. An appraisal which was introduced reflects a "cost approach" value of $35,238.00. Another value of $48,963.00 was placed upon the property which was based upon the result of speculative subdivision activity which might be undertaken in connection with a sale of the property which did not take into consideration attendant cost involved and which would of necessity, have to be considered in such a venture. The appraisal further reflects a "capitalization approach" based on rental factors, of $39,000.00.

The evidence further appears from the Debtors' schedules and testimony that the property should bring $45,000.00 as a fair market value with a forced sale value of $36,000.00 diminished by the costs of sale customarily 5-6% plus advertising. (This also is generally the same expense in deeds of trusts as trustees' commissions in foreclosure.)

The facts further reflect that Mrs. Snellings contributed a substantial amount of the down payment upon the purchase price of the real estate from proceeds obtained from the sale of a home previously owned by Mrs. Snellings in Richmond and the monthly payments on the first and second deeds of trust are made by Mr. Snellings resulting in the balance presently due at the time the petition was filed of $32,000.00. Mr. Snellings maintains two jobs, the income from which funds the plan herein.

The threshold issue is the eligibility of the Debtors each to claim $5,000.00 homestead exemption pursuant to Virginia Code § 34-1 et seq. The resolution of this issue requires a construction of the Virginia homestead statutes and their recent amendments.

Historically, the word "homestead" as used in popular parlance described real estate used as the home or residence of a family. The term signified a dwelling house with customary appurtenances, including outbuildings that were necessary for use where the family resides. See 13 R.C.L. Homestead § 8; 40 Am.Jur.2d Homestead § 1. The historical purpose of homestead statutes is the preservation of the home for the benefit of the family and the protection of beneficiaries and those dependent upon the head of the household which in olden days was the father and husband who was the bread winner.

As stated in 40 Am.Jur.2d Homestead § 4

"The statutes are intended to secure to the householder a home for himself and his family, . . . "

The construction placed upon homestead statutes and exemptions claimed thereunder by the Courts has been one of a liberal construction. See Wilkinson v. Merrill (1891) 87 Va. 513, 12 S.E. 1015. It is a shield to protect the helpless. Linkenhoker v. Detrick (1885) 81 Va. 44.

A remedial statute must be construed liberally so as to afford all the relief within the power of the Court which the language of the statute indicates that the legislature intended. See Virginia Development Company v. Crozer Iron Company, 90 Va. 126, 17 S.E. 806. In this case, the Supreme Court of Virginia in construing a statute granting superior lien rights to persons furnishing supplies and fuel in the operation of manufacturing company, included the furnishing of pig iron for a rolling mill. The development company claimed that wording of the statute, to-wit: "all persons furnishing . . . fuel, and all other supplies . . ." did not include pig iron but only included supplies necessary to the operation of a plant and not items such as pig iron that was furnished and converted into finished products by the manufacturing process. By application of a liberal construction of the statute in the determination of the legislative intent, the Court rejected that contention and held that the creditor who furnished the pig iron was entitled to the superior lien.

In Jennings v. Commonwealth 109 Va. 821, 63 S.E. 1080, the Supreme Court of Virginia was construing then criminal statute Virginia Code § 36-77 strictly against the Commonwealth and liberally in favor of the accused. That Section provided:

"if any person, under promise of marriage, seduce and have illicit connection with any unmarried female of previous chaste character, . . . shall be guilty of a felony, etc."

The Defendant was convicted and sentenced for the seduction of a divorced woman. The question was whether the word "unmarried female" was intended to describe a female who had not previously been married or whether it included a female who was presently unmarried but may have previously been married and divorced. The Court in construing the intent of the legislature held that the word "unmarried" correctly meant "never having been married". The Court stated at Page 1081 that its construction was based on the Court's process of time experience and an enlightened public sentiment sought by the legislature to be corrected. Thus, the Virginia courts in the construction of statutes have construed statutes in light of the mischief to be correctly viewed in the present-day enlightened society and the prevailing facts relating thereto.

With reference to homestead exemptions, courts employ the most liberal and humane rules of interpretation to insure the unfortunate debtor and his equally unfortunate but more helpless family, the shelter and influence of the object which the exemption provides. See Calhoun v. Williams, 32 Grat. (73 Va.) 18.

With the foregoing general principles of statutory constructions expressed by the Supreme Court of Virginia as a backdrop, we review the statute under consideration, Virginia Code § 34-4.²

The legislature from time to time, has increased the allotted amount in keeping with the needs of poor debtors. The amount of $2,000.00 prevailed for many decades and was increased to $3,500.00 in 1975 and to the present $5,000.00 by the amendment of 1977. The statute provides that every householder or head of a family shall be entitled to the exemption (emphasis added). In 73 Am.Jur.2d statutes § 241 it is stated

"in elementary sense the word `or\', as used in a statute, is a disjunctive particle indicating that the various members of the sentence are to be taken separately. If `and\' is used, such portions of the sentence are to be considered jointly."

Hence, it would appear that the language "householder or head of a family" would be all inclusive. The legislature has sought to define the word householder for the purposes of this Chapter covering exemptions. In so doing, it did not define head of a family which is the alternative portion of the qualifying criteria relating to a beneficiary of the homestead...