P.I.E. Employees Federal Credit Union v. Bass

• Decision Date: 02 June 1988
• Docket Number: No. 19766,19766
• Citation: 759 P.2d 1144
• Parties: P.I.E. EMPLOYEES FEDERAL CREDIT UNION, Plaintiff and Respondent, v. JoAnn BASS, an individual, Rex Paul Bass, an individual, Defendants and Appellants.
• Court: Utah Supreme Court

Page 1144

759 P.2d 1144

P.I.E. EMPLOYEES FEDERAL CREDIT UNION, Plaintiff and Respondent, v. JoAnn BASS, an individual, Rex Paul Bass, an individual Defendants and Appellants.

No. 19766.

Supreme Court of Utah.

June 2, 1988.

Rehearing Denied June 28, 1988.

Paul Franklin Farr, Bruce L. Richards, Mark A. Wolfert, Salt Lake City, for plaintiff and respondent.

Jon C. Heaton, James A. Boevers, Salt Lake City, for defendants and appellants.

STEWART, Justice:

JoAnn Bass appeals the trial court's denial of her motion for payment of her homestead exemption from amounts received by plaintiff, P.I.E. Employees Federal Credit Union (P.I.E.), from a foreclosure sale of her home. We affirm.

I. FACTS

On October 19, 1979, while still married, Bass and her ex-husband, Rex Paul Bass, signed a promissory note in favor of P.I.E. which was secured by a nonpurchase money second mortgage on their home. Subsequent to their divorce in 1980, JoAnn Bass retained possession of the mortgaged property and continued to reside there with her two children. P.I.E. filed a complaint February 10, 1982, to foreclose the second mortgage because of defaults in the payments on the note. Bass then recorded a declaration of homestead on the property on March 29, 1982, pursuant to Utah Code Ann. § 78-23-4 (1987). On January 24, 1983, P.I.E. obtained a judgment, a decree of foreclosure, and an order of sale from the district court. The property was sold pursuant to the court's order for an amount in excess of Bass's homestead exemption. Prior to bringing this action and after the sale of the property, Bass's attorney sent two letters to P.I.E.'s attorney demanding payment of the homestead exemption in the amount of $11,000. P.I.E. denied having an obligation to remit money to Bass for her homestead exemption. The issue was submitted to the district court. Bass's motion asserting that under Utah Code Ann. § 78-23-3(2)(b) (1987), ¹ her homestead exemption prevailed over P.I.E.'s mortgage lien and that no security interests, purchase money or otherwise, may be excluded from the debtor's homestead exemption provided in Article XXII, Section 1 of the Utah Constitution.

On appeal, Bass argues that to be constitutional under Article XXII, Section 1 of the Utah Constitution, § 78-23-3(2)(b) must be limited to purchase money liens. If the statute is so construed, then P.I.E.'s nonpurchase money note and mortgage do not take priority over Bass's homestead exemption, and she is entitled to receive the amount of her homestead exemption from P.I.E.

P.I.E. asserts three alternative arguments in support of the trial court's ruling. The first is that nothing in Article XXII, Section 1 precludes the enforcement of voluntary encumbrances on the homestead because that section only exempts homestead property from "sale on execution" and a mortgage foreclosure is not a "sale on execution," as that term is used in the Constitution. Second, P.I.E. asserts that § 78-23-3(2)(b) creates a constitutionally valid exception to the homestead exemption for enforcement of nonpurchase money as well as purchase money security interests in property. And third, P.I.E. argues that if appellant is found to have a valid homestead exemption, she has waived it by voluntarily signing the note and second mortgage.

II. CONSTITUTIONAL HOMESTEAD EXEMPTION

The common law recognized no homestead exemption. Zuniga v. Evans, 87 Utah 198, 218, 48 P.2d 513, 521 (1935); Cook v. Higley, 10 Utah 228, 37 P. 336 (1894). Consequently, homestead exemptions exist only by a legislative act. Higley, 10 Utah at 229, 37 P. at 336-37. The majority of states, either under constitutional provisions supplemented by statutes or solely by statutes, have some form of homestead exemption from execution or forced sale.

The general purpose of a homestead exemption is to protect citizens and their families from the miseries of destitution. See, e.g., Panagopulos v. Manning, 93 Utah 198, 203, 69 P.2d 614, 617 (1937); Gammett v. Storrs, 15 Utah 336, 340, 49 P. 642, 643 (1897); Knudsen v. Hannberg, 8 Utah 203, 208, 30 P. 749, 751 (1892). Absent constitutional or statutory restrictions, the homestead may be mortgaged and subjected to sale through foreclosure proceedings. United States Bldg. & Loan Ass'n v. Stevens, 93 Mont. 11, 17, 17 P.2d 62, 65 (1932); 40 Am.Jur.2d Homestead § 115 (1968).

Article XXII, Section 1 of the Utah Constitution states:

The Legislature shall provide by law, for the selection by each head of a family, an exemption of a homestead which may consist of one or more parcels of lands, together with the appurtenances and improvements thereon of the value of at least fifteen hundred dollars, from sale on execution.

The first issue we consider is whether the phrase "sale on execution," as used in Article XXII, Section 1, was intended by the framers of the Utah Constitution to encompass the judicial enforcement of consensual liens, such as the nonpurchase money mortgage securing the promissory note involved here.

A. Framer's Intent

When interpreting constitutional language, it is appropriate to look to extrinsic evidence of the framers' intent, State v. Betensen, 14 Utah 2d 121, 378 P.2d 669 (1963); Gammon v. Federated Milk Producers Ass'n, Inc., 12 Utah 2d 189, 190, 364 P.2d 417, 418 (1961); General Electric Co. v. Thrifty Sales, 5 Utah 2d 326, 334, 301 P.2d 741, 746 (1956), including the record of debates during the constitutional convention. American Fork City v. Crosgrove, 701 P.2d 1069, 1072 (Utah 1985); General Electric Co., 301 P.2d at 746; Voker-Scrowcroft Lumber Co. v. Vance, 32 Utah 74, 84, 88 P. 896, 899 (1907). Those debates indicate that the wording of the homestead provision was given careful consideration. The framers initially considered adopting verbatim the homestead article from the Michigan constitution. It read:

Every homestead of not exceeding forty acres of land, and the dwelling house thereon, and the appurtenances to be selected by the owner thereof, and not included in any town plat, city or village; or instead thereof, at the option of the owner, any lot in any city, village or recorded town plat, or such parts of lots as shall be equal thereto, and the dwelling house thereon, and its appurtenances, owned and occupied by any resident of the State, not exceeding in value fifteen hundred dollars, shall be exempt from forced sale on execution, or any other final process from a court, for any debt contracted after the adoption of this Constitution. Such exemption shall not extend to any mortgage thereon, lawfully obtained; but such mortgage or other alienation of such land by the owner thereof, if a married man, shall not be valid without the signature of the wife to the same.

Mich. Const. of 1850, Art. 16, § 2 (emphasis added.)

Opposition to this proposal centered on three main issues. First, it was not as generous to large families as the then-existing Utah statute which allowed the head of the household $1,000, an additional $500 in value for his wife, and another $250 for every minor child. Second, Utah was considered unique in that many Utahns had small city lots with larger noncontiguous acreage outside the city, and the proposal did not take this into consideration. Third, the proposal was thought to be too specific for constitutional enactment. See 2 Proceedings and Debates of the Constitutional Convention for the State of Utah, 1769-1771 (1898) (hereinafter 2 Proceedings ).

Several amendments to the Michigan provision were proposed to correct the first two problems, none of which was acceptable to the delegates. A Mr. Creer offered an entirely new provision for consideration based on the law in Wyoming, which read:

A homestead, as provided by law, shall be exempt from forced sale, under any process of law, and shall not be alienated without the joint consent of husband and wife, when that relation exists, but no property shall be exempt from sale for taxes, or for the payment of obligations contracted for the purchase of said premises, or for the erection of improvements thereon.

2 Proceedings, at 1772 (emphasis added). The Creer proposal was criticized because it "contemplate[d] matters that might properly be left to the Legislature" and was promptly rejected by the committee. Id. at 1773-74.

The proposal eventually adopted by the Convention was suggested by Mr. Varian and later amended at Mr. Richards' prompting to provide a minimum $1,500 exemption. The Varian-Richards proposal generated much discussion and was viewed by the delegates as a vehicle to secure permanently a minimum homestead exemption, while at the same time allowing future legislatures flexibility to modify the exemption amount and other details to accommodate current conditions. At the Convention, Mr. Varian stated:

[W]hy should we undertake to fix these matters of detail for all time, or at least until the Constitution shall come to be amended? [This is a question] of public policy, depending from time to time upon the condition of the people and the necessities which exist.... That is to say, insist that there shall be the necessary exemptions for the protection of poor debtors, ... but leave that necessity to be determined from time to time by the Legislature, which is better enabled to pass upon the question ... than this Constitutional Convention.

2 Proceedings, at 1774-75. Mr. Varian also stated in response to delegate questions:

Now, this constitutional provision simply guarantees that [the homestead exemption] ... shall never be obliterated. It must be maintained in some form or other. ... The Legislature, in dealing with this question, would regulate the whole subject with reference to the exemption and necessities of the case.... [J]ust as sure as you undertake now to cover the subject, you will ascertain that you have omitted something, when it is too late, or conditions and necessities of your people may change.

Id. at 1781-82.

There was virtually no discussion at the...