PaineWebber, Inc. v. Murray
| Decision Date | 30 March 2001 |
| Docket Number | 3:98-CV-0047.,No. 3:98-CV-0046,3:98-CV-0046 |
| Citation | 260 BR 815 |
| Parties | PAINEWEBBER, INC. and Admiral Insurance Co., Appellants, v. Michael F. MURRAY, Appellee. |
| Court | U.S. District Court — Eastern District of Texas |
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Peter Clifton Lewis, Walker, Bright & Whittendon PC, Dallas, TX, for Paine-Webber.
Steven Charles Malin, Malin & Malin PC, McKinney, TX, for Admiral Insurance.
Christopher James Moser, Quilling, Selander Cummiskey & Lownds PC, Dallas, TX, for defendant.
Creditor-Appellants Painewebber, Inc. and Admiral Insurance Co. (the "Creditors") both appeal from an order of the bankruptcy court overruling their objections to Debtor-Appellee Michael F. Murray's ("Murray") claimed homestead exemption. Furthermore, they seek review of Murray's Schedule C, specifically his claimed exemptions of a tractor, a riding lawn mower, and a 1992 pickup truck. Under 28 U.S.C. § 158, this district court has jurisdiction over this appeal. For the reasons discussed below, the order of the bankruptcy court is AFFIRMED.
Murray owns three tracts of land located approximately five miles outside of Telephone, Texas, in Fannin County, which are zoned for agricultural use. Two of the tracts, a 33 acre plot and one 15 acre plot, are contiguous, but a third tract of 147 acres is about a half mile from the other two tracts. A mobile home sits on the 33 acre tract, and such services as utilities and fire and police protection are provided to the site by Fannin County.
Initially, Murray used the 33 acre tract and the mobile home as a hunting lodge. When he retired in 1992 from his job as a stockbroker in Dallas, he began to reside on the 33 acre tract on a permanent basis. Since 1992, Murray has claimed this and the other two tracts as his homestead.
While living on the properties, Murray has, individually or through the help of another, fanned wheat, soybeans, or hay on the properties. On certain occasions, he has leased some of the tracts to a neighbor and entered into a sharecropping arrangement. After accounting for depreciation, however, Murray has made no money on his farming operations. Presently, Murray continues to grow hay on the 33 and 15 acre tracts to supplement his income and to barter for other goods. In addition, he often cuts wood from all three properties, particularly the 147 acre tract. Besides farming related activities, Murray and his wife, the former Gwendolyn Atkinson ("Atkinson") (collectively "the Murrays"), have used the three tracts for various other purposes, including gardening on the 33 acre tract, fishing on the 15 acre tract, and using all three properties for recreational and aesthetic activities such as bird watching and picnicking.
The Murrays were married in 1996. Prior to the marriage, the two signed a prenuptial agreement delineating the lack of obligation on the part of each spouse to support the other. Moreover, each spouse waived and released any homestead rights to the other's separate property. Furthermore, Atkinson apparently claimed a residence in Highland Park, Texas, as her homestead for ad valorem tax purposes in 1996 and 1997.
On December 2, 1997, Murray filed a voluntary petition under Chapter 7 of the Bankruptcy Code. Atkinson, however, did not join in the petition. Among the items that Murray included in his Second Amended Schedule C of exemptions were the three separate tracts of real property. Murray also claimed a tractor, a riding lawn mower, and a 1992 pickup truck as exempt farming equipment. In late January and early February of 1998, the Creditors objected to these claimed exemptions, and a hearing was held before the bankruptcy judge on May 6, 1998. After hearing testimony from Murray and Atkinson, the bankruptcy judge overruled most of the Creditors' objections and entered on the record his findings of fact and conclusions of law. Subsequently, the bankruptcy judge filed an order memorializing those rulings.
The Creditors timely appeal and raise the following issues for review:
Because issues "c" and "d" are necessarily subsumed under issue "a," the court will address those issues together before discussing issue "b."
A district court reviews a bankruptcy court's legal conclusions de novo.2 But a bankruptcy court's findings of fact are subject to the clearly erroneous standard.3 "According to this deferential standard, a court should overturn the factual findings of a bankruptcy court only when, after review of all the evidence, the court is left with a `firm and definite conviction' that the bankruptcy court committed a mistake."4 Nevertheless, where a finding of fact is premised on an improper legal standard, it "loses the insulation of the clearly erroneous rule."5
The Creditors' first issue on appeal is whether Murray may exempt the three tracts and the mobile home as a rural homestead under Texas Property Code §§ 41.001 and 41.002. Implicit to this issue are two other issues raised by the Creditors: 1) whether Murray is the head of his family for purposes of the rural homestead exemption and 2) whether all of Murray's properties support his family.
Homestead exemptions in Texas have their origins in both constitutional6 and statutory provisions.7 When interpreting these provisions, a court must liberally construe them to protect the homestead.8 Indeed, a court "must uphold and enforce the Texas homestead laws even though in so doing the court might unwittingly `assist a dishonest debtor in wrongfully defeating his creditor.'"9
Under Texas law, a family or single adult may claim either a rural or urban homestead.10 Section 41.002(a) of the Texas Property Code states that an urban homestead claimant may exempt up to one acre of property if it is used for the purposes of a home or for a business.11 Accordingly, an urban homestead may be comprised of a residential and/or business homestead. On the other hand, the rural homestead exemption does not include a business homestead component.12 Instead, § 41.002(b) allows a family or single adult to claim up to 200 or 100 acres of property, respectively, for the purposes of a rural home.13
Whether a homestead is rural or urban is a question of fact.14 Section 41.002(c) provides that "a homestead is considered to be rural if, at the time the designation is made, the property is not served by municipal utilities and fire and police protection." The Fifth Circuit, however, has interpreted this provision as clarifying the test to determine homestead status rather than as a definitive measure of whether some property is rural or urban. Accordingly, § 41.002(c) is but one of many factors that a court may consider to determine whether a homestead is rural or urban.15 Other factors include: "(1) the location of the land with respect to the limits of the municipality; (2) the situs of the lot in question; (3) the existence of municipal utilities and services; (4) the use of the lot and adjacent property; and (5) the presence of platted streets, blocks, and the like."16
In addition to claiming rural or urban property, a homestead claimant has the burden of establishing that his property qualifies as a homestead.17 "Mere ownership or possessory interest is not of itself sufficient to establish a homestead."18 A claimant must show "both (i) overt acts of homestead usage and (ii) the intention on his part . . . to claim the land as a homestead."19 Although some courts have required that the claimant reside on part of the property,20 others have held otherwise so long as there is a "bona fide intention to dedicate the property as a homestead, accompanied with such acts of preparation sufficient to amount to notice of a dedication."21 And a court generally need not investigate intent when the land is actually put to homestead use because that is "the most satisfactory and convincing evidence of intention."22
Thus, for Murray to show that the three tracts of land qualify for the homestead exemption, four things are required. First, the tracts must be rural in nature.23 Second, Murray must qualify as the head of a family given that he claims more than 100 acres as exempt homestead. Third, Murray must demonstrate overt acts of homestead usage consistent with a rural home. Finally, Murray must have the intent to claim the three tracts as his homestead. Because the Creditors either concede or do not question the first and last requirements,24 the court need only address whether the second and third requirements have been met.
Notwithstanding the bankruptcy court's conclusion to the contrary, the Creditors contend that Murray cannot claim the 200 acre family exemption for rural homesteads because Murray and his wife are not a family for purposes of the rural homestead. Although a husband and wife form a traditional type of family, Texas courts since Roco v. Green25 have held 1) that the family relation is one of status, not of mere contract, 2) that the head of the family must have a...
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