IN RE MEYERS, (Bankr.D.Or. 1999)

ALBERT RADCLIFFE, Chief Judge, Bankruptcy

This matter comes before the court upon the trustee's objection to the debtor's claim of a homestead exemption in certain real property located at 1655 Fircrest Drive, Eugene, Oregon. The trustee maintains that the debtor's exemption claim should be limited to the sum of $8,000 since her husband, Benjamin R. Meyers, has already been allowed a full $25,000 homestead exemption in the same property, in a separate bankruptcy proceeding, and that the combined exemptions should not exceed the statutory maximum of $33,000. The debtor maintains that she is not bound by the $33,000 limitation contained in O.R.S. 23.240 because she and her husband were not members of the same household when she filed her bankruptcy petition, herein, on June 12, 1998.

FACTS

The facts are largely undisputed. Based upon the memoranda submitted by the parties, a review of the court's file in this case and in the case of Benjamin R. Meyers, 697-63375-aer7, the court finds the following to be the pertinent facts.

The debtor and her husband, Benjamin R. Meyers (Meyers) own the property located at 1655 Fircrest Drive, Eugene, Oregon (the Fircrest property) as tenants by the entirety. Meyers filed his Chapter 7 petition on June 10, 1997. In the Meyers case, he scheduled his ownership interest in the Fircrest property and claimed a $25,000 homestead exemption therein. Apparently, he was living at the Fircrest property at the time. The trustee in the Meyers case (Meyers trustee) did not object to the claim of exemption, accordingly, it has been allowed. The Meyers case remains open.

Debtor filed her Chapter 7 petition, herein, on June 12, 1998. She has likewise scheduled her ownership interest in the Fircrest property and claimed a $25,000 homestead exemption therein. At all times material herein, the debtor and Meyers were not living together. In other words, debtor was not living at the Fircrest property when she filed her petition or at any time thereafter. At all times material herein, debtor and Meyers were married. The debtor has indicated that she is either contemplating or in the process of obtaining a dissolution of marriage from Meyers. She was forced from the family home by Meyers.

No evidence has been presented that either a parent or child of the debtor resides at the Fircrest property. Indeed, the debtor's sole claim to the homestead exemption in the Fircrest property rests upon the fact that it is the actual abode of and occupied by her spouse, Meyers.

ISSUE

The issue to be decided by this court is whether or not a husband and wife may each claim a $25,000 homestead exemption in the same property (an aggregate of $50,000) when they are not living together at the homestead when their respective bankruptcies are filed.

DISCUSSION

The Oregon homestead exemption statute provides in pertinent part as follows:

O.R.S. 23.240(1) A homestead shall be exempt from sale on execution, from the lien of every judgment and from liability in any form for the debts of the owner to the amount in value of $25,000, . . . When two or more members of a household are debtors . . . their combined exemptions under this section shall not exceed $33,000. The homestead must be the actual abode of and occupied by the owner, or the owner's spouse, parent or child. . . . (Emphasis added)

The trustee maintains that even though the family or household relationship between debtor and her husband may be dysfunctional or lack harmony, the combined entitlement to a homestead exemption is still as a household. He maintains that there is no language in the statute that suggests a possible exemption of $50,000 in the same property for a husband and wife, whether living together or apart.

Debtor maintains that she is entitled to claim her own $25,000 homestead exemption in the Fircrest property in addition to that claimed by her husband, since they are not members of the same household. She notes that she has not engaged in any fraudulent conduct or otherwise attempted to manipulate the amount of the exemption in bad faith.

Debtor relies upon an unpublished decision, In re Keown, Case #380-02418-H7 (Bankr. D. Or. 2/24/81) (unpublished) (Hess, J.) and a number of Oregon cases which have held that the phrase "members of a household" refers to people who dwell together under one roof. See Grange Insurance Association v. Stumpf, 140 Or. App. 577, 915 P.2d 1033 (1996) and Farmers Insurance Company of Oregon v. Stout, 82 Or. App. 589, 728 P.2d 937 (1987).

The facts in the Keown case are distinguishable from the case at bar. There, the Keowns had completed a dissolution of marriage proceeding prior to the filing of their bankruptcy proceedings. A decree had been entered by the state court providing that they were to be the owners of a mobile home and the real property on which it was situated as tenants in common, each with an undivided ½ interest therein. In the bankruptcy proceeding involving Mrs. Keown, she claimed the homestead exemption in the subject property on the basis that, while she did not occupy the premises as her home on the date of her filing, her absence was only temporary and she intended to reoccupy it as her homestead. Subsequently, in the bankruptcy of Mr. Keown, he likewise attempted to claim the amount of the available homestead exemption.

At the time of the Keown bankruptcies, O.R.S. 23.240 provided in relevant part that:

A homestead shall be exempt from sale on execution, from the lien of every judgment and from liability in any form for the debts of the owner to the amount in value of $12,000, except as otherwise provided by law. When two or more members of a household are debtors whose interest in the homestead are subject to sale on execution, the lien of a judgment or liability in any form, their combined exemptions under this section shall not exceed $12,000. The homestead must be the actual abode of and occupied by the owner, his spouse, parent or child, but such exemption shall not be impaired by:

(a) Temporary removal or temporary absence with the intention to reoccupy the same as a homestead;

Although it is not clear, it appears that Mr. Keown claimed the exemption on the basis that it was his actual abode.

As in this case, the trustee objected on the basis that since the full exemption had already been allowed to Mrs. Keown, it would be improper to allow any amount in the bankruptcy proceedings involving Mr. Keown. The court allowed the second exemption, citing a number of cases defining "members of a household" as being those who live together as a family and concluded that ". . . Mr. Mrs. Keown were not `members of a household' during the times in question. . . . [T]hey were unrelated and therefore were not members of a family. In addition they were not living together." In re Keown, Case #380-02418-H7 (Bankr. D. Or. 2/24/81) (unpublished) (Hess, J.)p. 4.

Here, the debtor and Meyers were still married at the time debtor filed her bankruptcy petition. Indeed, her sole claim to the homestead exemption appears to rest upon the language in the statute providing that ". . . The homestead must be the actual abode of and occupied by . . . the owner's spouse, . . ." In other words, had she divorced Meyers prior to the filing of her bankruptcy petition, she would have no claim to a homestead exemption in the Fircrest property under Oregon law. The Oregon cases relied upon by debtor are not cases interpreting O.R.S. 23.240.

The Oregon law providing for a homestead exemption has been in existence for quite some time. Prior to its amendment in 1975, the statute provided in pertinent part as follows:

O.R.S. 23.240(1) — A homestead shall be exempt from sale on execution, from the lien of every judgment and from liability in any form for the debts of the owner to the amount in value of $7,500, . . .

At that time, the language concerning "members of a household" did not appear in the statute.

The statute was amended in 1975 to provide as follows:

O.R.S. 23.240(1) — A homestead shall be exempt from sale on execution, from the lien of every judgment and from liability in any form for the debts of the owner to the amount in value of $12,000, . . . When two or more members of a household are debtors whose interest in the household are subject to sale on execution, . . . their combined exemptions under this section shall not exceed $12,000.

Thus, the 1975 amendments had the effect of raising the allowable exemption, but making it explicit that only one exemption would be allowed per household.

One of the primary proponents of the 1975 amendments to the statute was Richard Forester, a Deputy Director of Legal Aid Service. In a letter dated March 1, 1975, he wrote to John DeWenter, Administrative Assistant, Senate Committee on the Judiciary indicating:

VII. On homestead exemptions we give the Committee the optional language sections depending upon whether they choose family use or single but cumulative exemptions. It was the general consensus of those consulted that a family purpose exemption of one exemption per homestead should be applied rather than allowing combining the exemptions by the judgment debtors. I for one feel that more debtors will be protected by the family purpose doctrine if the exemption is increased than by a single exemption which would leave the exemption substantially where it is now.

Exhibits S.B. 229, Senate Judiciary Committee, 1975 Session, at p. 57.

In short, the legislative intent was to provide for "a family purpose exemption" rather than allowing cumulative exemptions by each judgment debtor. Although the statute now permits a household exemption which is larger than the individual exemption, the idea of the family purpose exemption is still clearly applicable by the terms of the present statute. Here, the debtor's sole claim to the exemption arises from the marital relationship. The legislative intent is clear that the maximum household exemption is all that should be allowed.

Over the years, both the individual and household amounts have been increased. In 1981, the amounts were increased to $15,000 and $20,000 respectively. 1981 c.903 § 4a. They were increased again in 1993 to the current $25,000 and $33,000. 1993 c.439 § 2.

Finally, as a matter of public policy, the position urged by the debtor lacks merit. She seeks to rely upon a fortuitous set of circumstances to increase the exemption beyond that envisioned by the legislature. On the one hand, she argues her entitlement to the exemption by virtue of her status as the wife of the occupant of the Fircrest property. On the other hand, she maintains she is not part of the same household with Meyers and should therefore have a complete, separate, and additional exemption.

If this view were to prevail, the opportunity for creative pre-bankruptcy planning would be obvious. Frequently, divorce proceedings and bankruptcy proceedings are closely intertwined. Debtors should not be given the opportunity to increase their homestead exemptions beyond the maximum amount envisioned by the Oregon Legislature by the timing of divorce and bankruptcy proceedings. Based upon the facts presented in this case, the debtor and Meyers must be presumed to be members of the same household for the purpose of claiming the homestead exemption.

Based upon the foregoing, this court concludes that the trustee's objection to the homestead exemption should be sustained. The exemption should be allowed in the amount of $8,000. This opinion contains the court's findings of fact and conclusions of law; they shall not be separately stated, an order consistent herewith shall be entered.

The parties have stipulated that the allowance of $25,000 for Meyers and $8,000 as to the debtor is not binding between the parties; they are free to seek an equitable division of the $33,000 aggregate exemption as part of the dissolution of marriage proceedings or otherwise.