Redmond v. Kester

Decision Date08 June 2007
Docket NumberNo. 97,627.,97,627.
Citation159 P.3d 1004
PartiesChristopher J. REDMOND, Trustee, Appellant, v. Donald Kenton KESTER and Charlotte Yvonne Kester, Appellees.
CourtKansas Supreme Court

Christopher J. Redmond, Husch & Eppenberger, LLC, Kansas City, Missouri, argued the cause and was on the brief for the appellant bankruptcy trustee.

No appearance by appellees.

The opinion of the court was delivered by ROSEN, J.:

This case involves a certified question from the Tenth Circuit Court of Appeals regarding the application of the Kansas homestead exemption in a bankruptcy proceeding.

Donald and Charlotte Kester purchased a house by warranty deed in 1994 and immediately began occupying it. In 1996, the Kesters transferred the ownership of the house via a quit claim deed to the Charlotte Kester Trust, a revocable trust with Charlotte Kester as the trustee. Both of the Kesters were named as beneficiaries of the Trust.

In 2002, the Kesters filed a joint petition for a Chapter 7 bankruptcy, claiming the house as exempt property under K.S.A. 60-2301, the homestead exemption. The Bankruptcy Trustee objected to the exemption and filed an adversary proceeding to compel the Kesters to turn over the house to the bankruptcy estate. The Federal bankruptcy court denied the Bankruptcy Trustee's motion, holding that the Kesters were entitled to the homestead exemption. The Bankruptcy Trustee appealed, and the bankruptcy court appellate Panel affirmed. The Bankruptcy Trustee then appealed to the Tenth Circuit. Before resolving the Bankruptcy Trustee's appeal, the Tenth Circuit submitted the following certified question for us to decide:

"May a Chapter 7 bankruptcy debtor claim the homestead exemption allowed by Kan. Stat. Ann. § 60-2301 for real property that was placed in a self-settled living revocable trust prior to the bankruptcy, where the settlor and the beneficiary, as well as the bankruptcy debtor, are the same person?"

We review certified questions as questions of law using an unlimited standard of review. Farmers Ins. Co. v. Southwestern Bell Tel. Co., 279 Kan. 976, 977, 113 P.3d 258 (2005).

K.S.A. 60-2301 provides:

"A homestead to the extent of 160 acres of farming land, or of one acre within the limits of an incorporated town or city, or a manufactured home or mobile home, occupied as a residence by the owner or by the family of the owner, or by both the owner and family thereof, together with all the improvements on the same, shall be exempted 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. The provisions of this section shall not apply to any process of law obtained by virtue of a lien given by the consent of both husband and wife, when that relation exists."

The Bankruptcy Trustee asserts that the debtors cannot claim the homestead exemption in their Chapter 7 bankruptcy action because the real estate is owned by a trust rather than the debtors. According to the Bankruptcy Trustee, the debtors did not have an interest in the real estate after they executed a quit claim deed transferring their interest in the real estate to the trust. The Bankruptcy Trustee argues that the debtors voluntarily alienated their homestead rights in the real estate when they executed the quit claim deed.

The homestead exemption codified in K.S.A. 60-2301 originates in the Kansas Constitution, which provides in relevant part:

"A homestead to the extent of one hundred and sixty acres of farming land, or one acre within the limits of an incorporated town or city, occupied as a residence by the family of the owner, together with all the improvements on the same, shall be exempted 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: Provided, That provisions of this section shall not apply to any process of law obtained by virtue of a lien given by the consent of both husband and wife . . . ." Kan. Const. Art. 15, § 9.

This constitutional right has been zealously guarded and enforced by the courts of this state. See, e.g., State ex rel. Braun v. A Tract of Land, 251 Kan. 685, 840 P.2d 453 (1992) (finding statute unconstitutional because it presumed a violator's waiver of homestead exemption in forfeiture of real estate for violations of Uniform Controlled Substances Act); Celco, Inc. of America v. Davis Van Lines, Inc., 226 Kan. 366, 598 P.2d 188 (1979) (invalidating waiver of homestead exemption by executory contracts as against public policy); State, ex rel., v. Mitchell, 194 Kan. 463, 399 P.2d 556 (1965) (invalidating statutory provision allowing padlocking of homestead for illegal sale and possession of intoxicating liquor); Stowell v. Kerr, 72 Kan. 330, 332, 83 P. 827 (1905); Tarrant v. Swain, 15 Kan. 146 (1875); Moore v. Reaves, 15 Kan. 150 (1875) (holding that equitable owner of interest in real estate who occupies it as his homestead cannot transfer his equitable interest without consent of his wife and, under such circumstances, purchaser of equitable interest is only entitled to money judgment rather than deed to real estate); Pierce v. Bohannon, 25 Kan.App.2d 652, 967 P.2d 359 (1998), rev. denied 266 Kan. 1109 (1999) (holding that voluntary sale of homestead, owned by one who has neglected to pay court-ordered child support, does not subject homestead to child support judgment lien); In re Estate of Phillippe, 23 Kan. App.2d 436, 933 P.2d 151, rev. denied 262 Kan. 961 (1997) (protecting the homestead exemption for a decedent's estate even though the decedent had moved to a nursing home prior to his death); In re Marriage of Johnson, 19 Kan.App.2d 487, 872 P.2d 308 (1994); (preventing sale of homestead to satisfy judgment lien for child support); In re Estate of Fink, 4 Kan.App.2d 523, 533, 609 P.2d 211, rev. denied 228 Kan. 806 (1980) (applying the homestead exemption to widow who had moved, torn down her house, and sold part of property to her daughter because she planned to move into new house her daughter was building on homestead at some point in future).

The homestead exemption was established for the benefit of the family and society "to protect the family from destitution, and society from the danger of her citizens becoming paupers." Morris v. Ward, 5 Kan. 239, 244 (1869). Because the manner in which the homestead exemption may be alienated is specifically enumerated in the constitutional provision, courts must liberally construe the constitutional provision without restricting its application. West v. Grove, 139 Kan. 361, 366, 31 P.2d 10 (1934) (refusing to uphold a waiver of homestead rights because the waiver did not specifically mention homestead rights and the debtor did not have any homestead rights at the time the contract with the waiver was signed).

With our forebears' commitment to the protection of the homestead in mind, we turn to the question of what type of interest is necessary for claiming the homestead exemption. In Cole v. Coons, 162 Kan. 624, 633, 178 P.2d 997 (1947) (holding homestead claim does not prevent partition of real estate between cotenants), this court stated:

"We are not holding that it is always essential, in order to establish a homestead right upon real property, that the husband or wife shall have had full title to the property. A homestead right of occupancy may be established upon a cotenancy title, an equitable title, or an executory contract to purchase, a leasehold estate, or an estate for life as against almost any class of claimants except cotenants."

Although the Cole court's comments are dicta, they accurately summarize the law as it relates to claiming a homestead interest in real estate. See, e.g., Bennett v. Glazier, 145 Kan. 571, 66 P.2d 370 (1937) (refusing to enforce lease on real estate claimed as homestead because wife had not consented to lease); Walz v. Keller, 102 Kan. 124, 169 P. 196 (1917) (upholding homestead right to land held under contract for purchase); Stowell v. Kerr, 72 Kan. at 332, 83 P. 827 (protecting homestead interests of debtor even though third party held deed as security for repayment of down payment); Tarrant, 15 Kan. 146 (upholding homestead claim by debtor who held equitable interest in property); In re Estate of Fink, 4 Kan. App.2d at 533, 609 P.2d 211 (applying homestead exemption to a former owner who sold her interest to a family member).

In Stowell, a judgment creditor sought to force the sale of real estate occupied by the debtor but owned by a third party who held the deed as security for the purchase price. Even though the judgment debtor did not own a fee simple title to real estate, this court held that a preexisting judgment lien did not attach to the real estate because the debtor occupied the real estate as his homestead. 72 Kan. at 332, 83 P. 827.

In Tarrant, this court set aside a sheriff's sale of real estate because the debtor occupant, who held an equitable interest in the real estate, claimed a homestead exemption. 15 Kan. at 148. Without specifying the nature of the debtor's equitable interest, the Tarrant court rejected the judgment creditor's argument that an equitable interest was insufficient for the homestead claim. If the interest was sufficient to uphold a levy of execution, the debtor reasoned, it was also sufficient to uphold a homestead claim. The debtor argued that the term "owner" in the constitutional provision protecting a homestead includes whatever interest the party owns in a family residence. 15 Kan. at 146. The Tarrant court agreed, stating:

"It seems to us an...

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