Summary of a Recent
Judicial
Development in
Bankruptcy
To Claim Unoccupied Property as a Homestead, Debtor Must Show Intent to Homestead
Walt McCarterNational AgLaw Center Research Associate
Summary of Decision
In Graham v. Kleb, 2008 U.S. Dist. LEXIS 6495 (S.D. Tex. Jan. 29, 2008), the United States Bankruptcy Court for the Southern District of Texas, Houston Division, held that a Chapter 13 debtor had met his burden of showing his intent to homestead his unoccupied property and allowed him to claim the property as a homestead exemption.
Background
Tara Graham won a $125,000 judgment against the Debtor in November 2004. Id. at *2. The Debtor filed for Chapter 13 relief in December 2006 before the constable sold his real property, which he listed in his schedules as his homestead. Id. Graham objected to the homestead exemption. Id. The rural 28-acre property had been in the Debtor's family for four generations, and along with his siblings he had maintained the property and fence lines. Id. The only improvements on the property were dirt roads leading to different parts of the property, six deer blinds, and a small cabin in disrepair. Id. at *2-3. The property was used frequently by the Debtor and his family for hunting, fishing and camping (outdoors, not in the cabin). Id. at *3. He also grew vegetables there. Id. He testified that he had always intended to live on the property someday. Id. He owned and lived in the house that used to belong to his parents in Houston from 1999-2004, and he had owned no other property since the date the judgment was abstracted in February 2005. Id. He admitted that he had no specific plans to build a house yet, but that he would do so when his finances permitted, in the next four to five years. Id. at *4. His cousin had built a house and lived on the property at the time of this lawsuit. Id. The Debtor had not filed any document claiming the property as his homestead prior to the bankruptcy, because he "didn't feel a need to so because it was within the family." Id.
Arguments
Debtor argued that he intended to homestead his unoccupied property and should be allowed to claim it as a homestead exemption. Id. at *3-4.
Graham argued that the Debtor failed to show a proof of intent to occupy and use the property as his home, as opposed to "a hunting preserve." Id. at *10.
Analysis and Holdings
Under Texas law, a claimant may establish homestead rights in his land by showing both overt acts of homestead usage and the intention on the part of the owner to claim the land as a homestead. Id. at *5. The court stated the long-standing rule in Texas that "absent actual physical occupancy of the property, intent to homestead must be accompanied by an overt act that evidences that intent." Id. at *8. Neither the Texas Constitution nor the Property Code defines "homestead" with specificity. Id. at *6. However, the Fifth Circuit had previously held that "homesteads are favorites of the law, and are liberally construed by Texas courts." Id. at *11. The court pointed out that making minor improvements to the property or maintaining existing improvements may be persuasive evidence of intent to homestead. Id. at *9-10. The court found the Debtor's testimony regarding his plan to live on the property to be credible, and his numerous activities on the land seemed to be consistent with that testimony. Id. at *15. He had maintained and improved the property for years, he grew vegetables there, and he and his family had used the land for numerous gatherings. Id. The court also noted that the fact that he had never previously claimed the property as his homestead was not dispositive; rather, evidence of actual use of the property is critical. Id. at *15-16. Therefore, the court affirmed the ruling of the bankruptcy court overruling Graham's objection and allowing the homestead exemption. Id. at *17.
The case was decided on January 29, 2008.