In re Weaver
| Decision Date | 17 January 1991 |
| Docket Number | Bankruptcy No. 89-12493M. |
| Parties | In re Billie P. WEAVER, Debtor. |
| Court | U.S. Bankruptcy Court — Western District of Arkansas |
Fines F. Batchelor, Jr., Van Buren, Ark., for debtor.
Thomas E. Robertson, Jr., Fort Smith, Ark., trustee.
Phillip Jack Taylor, Fort Smith, Ark., for Wiseman.
On October 4, 1989, Billie P. Weaver (debtor) filed a voluntary petition for relief under the provisions of chapter 7 of the United States Bankruptcy Code. Thomas E. Robertson, Jr., Esq., was appointed trustee. The debtor claimed the following real property as exempt pursuant to 11 U.S.C. § 522(b)(2), Ark.Code Ann. § 16-66-218 (Supp.1989) and Ark.Const. art. 9, § 4:
The debtor and his wife live in a house located on Lot 21, which contains approximately five acres. The south one-half of Lot 23 (Lot 23a), which is described in paragraph (2) above, also contains approximately five acres. The northwest corner of Lot 21 and southeast corner of Lot 23a meet in the center of the road which runs through Wofford Estates in Crawford County, Arkansas.
On December 15, 1989, Michael Wiseman, a judgment creditor, filed an objection to the debtor's claim of homestead exemption alleging, generally,2 (1) that the property does not qualify as rural property; (2) that the property claimed as exempt is not contiguous; and (3) that the debtor should be estopped from claiming any homestead exemption because of an alleged fraudulent conveyance of Lot 23a.3 On January 26, 1990, the trustee filed an objection to the debtor's claim of homestead exemption alleging that the claimed exemption exceeds the amount allowed by state law and adopting Wiseman's objections.
On May 21, 1990, a trial was held on the objections and the Court took the matter under advisement. The proceeding before the Court is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B), and the Court has jurisdiction to enter a final judgment in the case.
The debtor has claimed a rural homestead exemption of approximately ten acres. Wiseman and the trustee argue that the property claimed as exempt by the debtor is within a village or town and is, therefore, urban property.
Ark.Code Ann. § 16-66-218(b) (Supp. 1989) provides that the following property shall be exempt from execution under bankruptcy proceedings:
Ark. Const. art. 9, § 4 provides:
The homestead outside any city, town or village, owned and occupied as a residence, shall consist of not exceeding one hundred and sixty acres of land, with the improvements thereon, to be selected by the owner, provided the same shall not exceed in value the sum of twenty-five hundred dollars, and in no event shall the homestead be reduced to less than eighty acres, without regard to value.
Ark. Const. art. 9, § 5 provides:
The homestead in any city, town or village, owned and occupied as a residence, shall consist of not exceeding one acre of land, with the improvements thereon, to be selected by the owner, provided the same shall not exceed in value the sum of two thousand five hundred dollars, and in no event shall such homestead be reduced to less than one-quarter of an acre of land, without regard to value.
The Arkansas Supreme Court has stated that "it is the settled policy of this court that our homestead laws are remedial and should be liberally construed to effectuate the beneficent purposes for which they are intended." Smith v. Flash T.V. Sales & Serv., Inc., 17 Ark.App. 185, 190, 706 S.W.2d 184, 187 (1986); Franklin Fire Ins. Co. v. Butts, 184 Ark. 263, 270, 42 S.W.2d 559, 562-63 (1931).
The question of whether property claimed as exempt constitutes a rural or urban homestead is to be determined based on the facts of each case, and must be considered in light of the constitutional or statutory purpose or intent of the exemptions allowed. See King v. Sweatt, 115 F.Supp. 215, 220 (W.D.Ark.1953); Farmers Coop. Ass'n v. Stevens, 260 Ark. 735, 736-37, 543 S.W.2d 920, 921 (1976).
No precise legal definition is provided for the terms "city, town or village," as used in the Arkansas Constitution to describe the homestead exemption. In cases concerning the definition of these terms, the Arkansas Supreme Court has determined that the "words were used in the Constitution in their popular sense." King v. Sweatt, 115 F.Supp. at 220. See Farmers Coop. Ass'n v. Stevens, 260 Ark. at 738-39, 543 S.W.2d at 921. One court has defined a village as a small urban community or town. King v. Sweatt, 115 F.Supp. at 221.
The question of whether a homestead is urban property is not "altogether controlled by the corporate limits," thus property located within the corporate limits of a town may still be determined rural and property outside the corporate limits may be determined urban. First Nat'l Bank of Owatonna v. Wilson, 62 Ark. 140, 143, 34 S.W. 544, 544 (1896). See King v. Sweatt, 115 F.Supp. at 219-20; Farmers Coop. Ass'n v. Stevens, 260 Ark. at 738-39, 543 S.W.2d at 922-23. Even platting land into blocks and filing a plat with the county clerk does not make the land urban property unless it is, in fact, situated within a town or village. Spalding v. Haley, 101 Ark. 296, 300, 142 S.W. 172, 173 (1911); Clements v. Crawford County Bank, 64 Ark. 7, 11, 40 S.W. 132, 133 (1897).
The use made of the property is "very much pertinent" to the determination of the rural or urban character of a debtor's homestead. Farmers Coop. Ass'n v. Stevens, 260 Ark. at 738, 543 S.W.2d at 921. Use of the property for exclusively agricultural purposes generally indicates a rural homestead; however, property used for another purpose may still be determined rural. See Bank of Sun Prairie v. Hovig, 218 F.Supp. 769, 783-84 (W.D.Ark. 1963) (); King v. Sweatt, 115 F.Supp. at 218-19 (tourist court); George v. George, 267 Ark. 823, 826, 591 S.W.2d 655, 657 (Ct.App.1979) (rental property).
Since neither the location within corporate limits nor the use of the property is controlling, courts have focused on the characteristics of the community itself in determining whether it should be considered rural or urban. If the community does not contain the common attributes and conveniences of a city, then the property will be determined to be rural. Bank of Sun Prairie v. Hovig, 218 F.Supp. at 785; King v. Sweatt, 115 F.Supp. at 221; Farmers Coop. Ass'n v. Stevens, 260 Ark. at 739, 543 S.W.2d at 923. See also Southeast Arkansas Levee Dist. v. Turner, 184 Ark. 1147, 1152, 45 S.W.2d 512, 514 (1932).
The following evidence was offered in connection with the proper characterization of the debtor's homestead. On October 2, 1981, the debtor and his wife entered into a contract of sale with K & C Properties to purchase Lot 21 in Wofford Estates, Crawford County, Arkansas. On October 14, 1982, Kemal E. Kutait, Virginia Kutait, and George Z. Catsavis executed a warranty deed conveying Lot 21 to the debtor and his wife. The deed was recorded with the Crawford County Circuit Clerk and Ex-Officio Recorder on October 25, 1982. The debtor and his wife have resided in a house located on Lot 21 since 1982.
On April 17, 1985, Kemal E. Kutait, Virginia Kutait, George Z. Catsavis, and Denise Catsavis executed a warranty deed conveying Lot 23a of Wofford Estates, Crawford County, Arkansas, to the debtor. The deed was recorded with the Crawford County Circuit Clerk and Ex-Officio Recorder on May 7, 1985. After purchasing Lot 23a, the debtor cleared the land and moved a house trailer to the lot. The debtor's wife testified that they had intended to repair the trailer for rental purposes; however, the trailer was never repaired. The debtor's wife testified that when Lot 23a was purchased, she and her husband believed their children might want to live on the lot some day. Testimony was presented that the debtor used wood from Lot 23a to heat his home and to make cedar fence posts.
Lots 21 and 23a are located in a subdivision known as Wofford Estates, which consists of twenty-seven lots. Wofford Estates is located three or four miles north of Rudy, Arkansas. The nearest grocery store is located in Rudy, Arkansas, and the nearest banks are located in Alma and Van Buren, Arkansas, fifteen and twenty miles from the subdivision, respectively. The gravel road in Wofford Estates is designated on the assessor's county road atlases as County Road 370; however, the road has not officially been accepted as a county road by Crawford County for purposes of maintenance. The county occasionally blades the road to assist the residents. No city tax is assessed against the residents in Wofford Estates. Electric service is...
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