Jackman v. Nance

• Decision Date: 29 July 1993
• Docket Number: No. 23526,23526
• Citation: 109 Nev. 716,857 P.2d 7
• Parties: Ione JACKMAN, Trustee in Bankruptcy for the Estate of Fuz Nance, d/b/a Winnemucca Rent-All, Appellant, v. Fuz NANCE, d/b/a Winnemucca Rent-All, Debtor, Respondent.
• Court: Nevada Supreme Court

Page 7

857 P.2d 7

109 Nev. 716

Ione JACKMAN, Trustee in Bankruptcy for the Estate of Fuz Nance, d/b/a Winnemucca Rent-All, Appellant, v. Fuz NANCE, d/b/a Winnemucca Rent-All, Debtor, Respondent.

No. 23526.

Supreme Court of Nevada.

July 29, 1993.

Bible, Hoy, Trachok, Wadhams & Zive and Terrill R. Dory, Reno, for appellant.

Malikowski & McCoy, Reno, for respondent.

OPINION

PER CURIAM:

Respondent and debtor Fuz Nance, D/B/A Winnemucca Rent-all, conducted an equipment rental business from a 6,380 square foot building. Over several years, Nance constructed a modest residence inside the building while continuously residing in the building. Nance homesteaded the entire building in which he resided and later filed bankruptcy. Ione Jackman, the appellant and trustee in bankruptcy for the estate of Fuz Nance, D/B/A Winnemucca Rent-All, objected to Nance's homestead claim. After a hearing, the bankruptcy court certified the pertinent question regarding the status of Nevada homestead law to this court.

FACTS

In 1985, Nance, a disabled electrician, leased a 6,380-square foot building at 201 East Second Street in Winnemucca for $625.00 per month. Throughout 1985, Nance lived in a trailer located inside the building where he was also constructing a 500-square-foot apartment intended for his place of abode. Between 1985 and early 1988, Nance developed and operated an equipment rental business in the building while continuing to expand his living area to approximately 1,200 square feet, including another bedroom, exercise room, laundry room and pantry. After receiving notice of a rent increase, Nance decided to purchase the building and did so in February of 1988 for $82,500.00, $75,000.00 of which was financed. The property was appraised in October 1987 as having a fair market value of $115,000.00.

In May of 1990, while struggling with both personal and business problems, Nance filed a homestead on the property. The following month, Nance sought relief under Chapter 13 of the Bankruptcy Code, which was converted to Chapter 11 in December 1990, and to Chapter 7 a year later. Jackman was appointed as Trustee following the conversion to a liquidation case under Chapter 7.

Jackman objected to Nance's claim of homestead and after a hearing, the court determined that there was merit to the position posited by each party. Specifically, Nance relied on Clark v. Shannon, 1 Nev. 568 (1865), and Smith v. Stewart, 13 Nev. 65 (1878), as examples of homestead protection accorded to "commercial buildings." Jackman relied upon cases arising in jurisdictions outside of Nevada and suggested that the Nevada cases are too antiquated to have significant meaning.

DISCUSSION

The U.S. Bankruptcy court certified the following question for our review:

May a Nevada judgment debtor properly claim as exempt, under NRS 21.090(1)(l ) and NRS Chapter 115, premises upon which he resides and conducts an equipment rental business?

The purpose of the homestead exemption is to preserve the family home despite financial distress, insolvency or calamitous circumstances, and to strengthen family security and stability for the benefit of the family, its individual members, and the community and state in which the family resides. These values are of greater importance to the polity than the just demands of those who may be financially disadvantaged as a result of the homestead exemption. See Matter of Estate of Dodge, 685 P.2d 260, 263 (Colo.Ct.App.1984).

The homestead exemption, unknown to the common law, was given birth as a constitutional and statutory response to public policy and sentiment. See Smith v. Stewart, 13 Nev. 65, 68 (1878). Accordingly, the homestead exemption is extended or limited by the statute or constitutional provision which created it. Id. The wealth of case law concerning homesteads reflects a judicial tendency to construe homestead laws liberally in favor of the persons for whose benefit they were enacted. See, e.g., Roberts v. Greer, 22 Nev. 318, 328, 40 P. 6, 7 (1895); Macumber v. Shafer, 96 Wash.2d 568, 637 P.2d 645, 646 (1981) (homestead law to be liberally construed in favor of homestead claimant).

The relevant homestead statute, NRS 115.005(2), which was effective until January 1, 1992, provided in pertinent part that: " 'Homestead' means the property consisting of either a quantity of land, together with the dwelling house thereon and its appurtenances, ... to be selected by the husband and wife, or either of them, or a single person claiming the homestead." In addition, the homestead exemption extends to the claimant's equity in the homesteaded property up to a maximum of $95,000.00. NRS 115.010(2). A number of Nevada cases have addressed the homestead exemption in some form. However, the cases of greatest insight and significance on the subject continue to be Clark v. Shannon, 1 Nev. 568 (1865), and Smith v. Stewart, 13 Nev. 65 (1878).

The facts in Clark reveal a debtor who owned two adjacent lots, upon which was situated a dwelling and a livery stable, respectively. The sole issue on appeal was whether the stable and the lot upon which it was situated constituted a part of the homestead. ¹ The Clark court concluded that the debtor could select "any land included in the homestead tract, provided it does not exceed five thousand dollars in value. There is no qualification as to the uses to which it may be applied." Clark, 1 Nev. at 570 (emphasis added). The creditor objected to the inclusion of the stable and lot in the homestead because it was used for a business purpose. The court in Clark was unpersuaded, responding that the fact that the property was devoted to a business purpose was of little significance. Specifically, the court declared that "[t]he only limitation of the right to select the homestead land is that they shall not exceed five thousand dollars in value." Id. at 571 (emphasis added). Moreover, the court stated that since farm land can be included in the "quantity of land," a shop, stable, storehouse or hotel could also be claimed as part of the homestead. Id. Finally, the Clark court observed that it "would be a wise and humane policy" to protect an insolvent debtor in the "enjoyment of a cheap and modest house ... together with adjacent lands or business houses as will enable him to decently support his family." Id.

Later, in Smith v. Stewart, 13 Nev. 65 (1878), the debtor claimed as a homestead, a dwelling-house, two buildings used as stores, and a stone house used for storing goods. The creditor argued that the primary objective of the legislature in enacting the homestead statute was to exempt a homestead consisting of the dwelling place of the family and not simply property having a value of up to five thousand dollars. The Smith court replied:

The statute requires [the debtor] to use it as a homestead, but allows him to select any quantity of land upon which his dwelling-house stands, if the whole does not exceed five thousand dollars in value. If a man with his family owns and resides upon a ranch of five hundred acres, and uses it in the ordinary way for the purposes of profit, he can hold the whole, with the house and barns thereon; if the whole property is within the maximum limit as to value.... The legislature did not intend to exempt five thousand dollars, as so much money, but the intention was, in our opinion, to protect that amount of realty if it is in one body, and altogether makes up what is home.

Id. at 74-75. Furthermore, the court by way of illustration indicated:

Shall it be...