Matter of Hill

• Court: Court of Appeals for the Fifth Circuit
• Decided: September 10, 1992
• Docket: 92-4126
• Status: Published

Opinion

United States Court of Appeals,

Fifth Circuit.

No. 92–4126

Summary Calendar.

In The Matter of: Jeani MALOY HILL, Debtor.

Edmond J. ZIELINSKI, Interim Trustee for the Bankruptcy Estate of Jeani Maloy Hill, Appellant,

v.

Jeani MALOY HILL, Appellee.

Sept. 14, 1992.

Appeal from the United States District Court For the Eastern District of Texas.

Before JONES, DUHÉ and WIENER, Circuit Judges.

PER CURIAM:

The bankruptcy trustee, substitute Appellant on behalf of the FDIC as receiver for

Metropolitan National Bank, formerly Sherry Lane National Bank (Sherry Lane), appeals the

judgment of the district court affirming the bankruptcy court's allowance of a 200 acre rural

homestead to Debtor, Jeani Maloy Hill, a single grandmother in whose rural Texas home resides her

divorced and remarried daughter and minor granddaughter. The principal thrust of Appellant's

allegations of error is that Hill, as an unmarried adult, is not entitled to a rural homestead in excess

of 100 acres. In particular, Sherry Lane complains that (1) the bankrupt cy and district courts

misconstrued Texas homestead law, and (2) Hill's pleadings were deficient in failing to indicate the

number of acres comprising her claimed homestead, and the court erred in permitting Hill to amend

her pleading to reflect the acreage claimed. As we find neither error of law nor clearly erroneous

factual determinations by either of those courts, we affirm.

I

FACTS AND PROCEEDINGS

In February 1988, Hill filed a voluntary petition for bankruptcy. Electing the state exemption scheme authorized in the Bankruptcy Code,1 Hill claimed a family rural homestead containing 200

acres. As Hill's primary creditor, Sherry Lane objected, insisting that Hill was limited to the 100 acre

homestead exemption applicable to single adults. The bankruptcy court conducted a hearing at which

Hill and her adult daughter testified regarding Hill's status as head of the household. The testimony

reflects that in 1984, Hill removed and protected her daughter and infant granddaughter from a

household of domestic violence, and that they have ever since resided with and depended upon Hill

for financial and emotional support. The daughter's first husband has never supported his child. In

1987, Hill's daughter remarried, but her second husband did not live with her until 1988, and then

only to reduce his expenses. He was unemployed at the time of the hearing and has never financially

supported either Hill's daughter or granddaughter. According to the testimony, Hill's daughter

returned to work in 1988, but her income is insufficient to support her and her child. Hill testified

that she pays the household expenses with funds received from a former business partner.

The bankruptcy court found that Hill is a head of household and that her daughter and

granddaughter are dependent upon her for financial, moral and emotional support, as well as for their

physical safety. The bankruptcy court accordingly held that Hill was entitled to the 200 acre family

rural homestead exemption. The district court affirmed. Sherry Lane timely appealed; this court

granted its motion to substitute the bankruptcy trustee as appellant.

II

ANALYSIS

The bankruptcy court's factual findings regarding Hill's homestead interest are subject to the

clearly erroneous standard of review.2 Pursuant to this standard, we must defer to that court's

1 A Texas debtor in bankruptcy proceedings must elect between the federal and the state exemption scheme. In re Dyke, 943 F.2d 1435, 1438 (5th Cir.1991). Because Hill elected the Texas scheme, Texas state law delineates her available exemptions. 2 In re Bradley, 960 F.2d 502, 507 (5th Cir.1992) (citing In re Niland, 825 F.2d 801, 806 (5th Cir.1987)); see also United States v. Blakeman, ––– F.2d ––––, No. 91–1027 (5th Cir.1992) (citing Bradley) (district court determination of a rural homestead is reviewed for clear error). findings unless, after review of all the evidence, we are left with a firm and definite conviction that

the bankruptcy court erred.3 We review the court's legal conclusions de novo.4

The constitutional and statutory provisions protecting Texas homestead exemptions are

accorded liberal construction.5 The Texas Constitution provides:

Section 50. The homestead of a family, or of a single adult person, shall be, and is hereby protected....

Section 51. The homestead, not in a town or city, shall consist of not more than two hundred acres of land, which may be in one or more parcels, with the improvements thereon; the homestead in a city, town or village, shall consist of lot or lots amounting to not more than one acre of land, together with any improvements on the land; provided, that the same shall be used for the purposes of a home, or as a place to exercise the calling or business of the homestead claimant, whether a single adult person, or the head of a family; provided also, that any temporary renting of the homestead shall not change the character of the same, when no other homestead has been acquired.6

The "homestead" is also defined statutorily:

If used for the purposes of a rural home, the homestead shall consist of:

(1) for a family, not more than 200 acres, which may be in one or more parcels, with the improvements thereon; or

(2) for a single, adult person, not otherwise entitled to a homestead, not more than 100 acres, which may be in one or more parcels, with the improvements thereon.7

Prior to 1973, a homestead only inured to the benefit of a "family." The framers of the Texas

3 Bradley, 960 F.2d at 507 (citing United States v. Gypsum Co., 333 U.S. 364, 68 S.Ct. 525, 92 L.Ed. 746 (1948)). 4 Bradley, 960 F.2d at 507 (citation omitted). 5 Bradley, 960 F.2d at 507; In re Moody, 862 F.2d 1194, 1197 (5th Cir.1989), cert. denied, ––– U.S. ––––, 112 S.Ct. 1562, 118 L.Ed.2d 209 (1992) ("Texas constitutional and statutory protection of the homestead is absolute." (citing In re Reed, 700 F.2d 986, 990 (5th Cir.1983))); Inwood North Homeowners' Assoc. v. Harris, 736 S.W.2d 632 (Tex.1987); In re Harrison, 1990 WL 338989, No. 390–34092 (Bankr.N.D.Tex. November 14, 1990) (describing the broad homestead protection as well established). 6 TEX.CONST. art. 16, §§ 50, 51. 7 TEX.PROP.CODE ANN. § 41.002(b) (Vernon Supp.1992) (emphasis added). constitution intended that the legislature or the judiciary would define or apply this term.8 The

legislature has not given "family" a statutory definition. For over a century, however, the courts of

Texas have held that (1) the family relation is one of status, (2) the head of the family must be legally

or morally obligated to support at least one other family member, and (3) there must be a

corresponding dependence on the other member for this support.9 There has never been a

requirement that the head of the family be married.10 The requisite familial relationship may be

between siblings,11 adult children and their parents,12 or grandparents and grandchildren.13

In 1973, the Texas legislature amended the definition of homestead to provide for single

adults.14 Sherry Lane argues that this augmentation of the homestead right changed the definition of

8 Reconstruction Finance Corp. v. Burgess, 155 S.W.2d 977 (Tex.Civ.App.1941); 43 TEXAS JUR § 54, p. 467 (3d ed. 1985). 9 Roco v. Green, 50 Tex. 483 (1878); Henry S. Miller Company v. Shoaf, 434 S.W.2d 243, 244 (Tex.Civ.App.1968); Stout v. Anthony, 254 S.W.2d 879, 880 (Tex.Civ.App.1952); Garrard v. Henderson, 209 S.W.2d 225, 228 (Tex.Civ.App.1948); Seley v. Howell, 115 Tex. 583, 285 S.W. 815, 817 (Tex.Comm.App.1926); see also 43 TEXAS JUR § 54. 10 Renaldo v. Bank of San Antonio, 630 S.W.2d 638 (Tex.1982) (interpreting the pre–1973 revision law and holding that divorced husband was entitled to a homestead as head of family); Woods v. Alvarado State Bank, 118 Tex. 586, 19 S.W.2d 35 (1929); Henry S. Miller Co. v. Shoaf, 434 S.W.2d 243 (single woman was head of household where her mother was dependent upon her); Lynda Beck Fenwick, Note, 26 BAYLOR L.REV. 658, 658–59 (1974). 11 See Henry S. Miller Co. v. Shoaf, 434 S.W.2d at 244; Garrard v. Henderson, 209 S.W.2d at 229 (citing Central Life Assurance Society v. Gray, 32 S.W.2d 259 (Tex.Civ.App.1930)). 12 Henry S. Miller Co. v. Shoaf, 434 S.W.2d 243 (single woman was head of household where her mother was dependent upon her); Hutchenrider v. Smith, 242 S.W. 204 (Tex.Com.App.1922). 13 Elliott v. Texas Pacific Coal & Oil Co., 29 S.W.2d 982 (Tex.Com.App.1930) (applying the family homestead test to a grandmother's claim that granddaughter was dependent upon her but concluding that evidence was insufficient to support the grandmother's claim); Tunnell v. Johnson, 209 S.W. 451 (Tex.Civ.App.1919) (debtor grandmother and two granddaughters qualified for family status). 14 TEX.REV.CIV.STAT. art. 3833, amended by Acts 1973, 63rd Leg., p. 1627, ch. 588, § 1, repealed by Acts 1983, 68th Leg., p. 3729, ch. 576, § 6 (current version at Tex.Prop.Code § 41.002). Since 1973, the Property Code definition of homestead has undergone stylistic changes, initially being codified at section 41.001 of the Code. See discussion, In re Mitchell, 132 B.R. 553 (Bankr.W.D.Tex.1991). the word "family" to exclude any family unit in which an unmarried person is the head of the

household. We disagree.

The 1973 amendments were intended to grant additional homestead rights to single adults,

not to decrease the pre-revision homestead acreage afforded families with a single adult head of

household.15 The word "family" is a term of art in Texas jurisprudence.16 A well settled rule of

statutory construction holds that an enacting legislature is presumed to have been aware of the

judicial construction of existing law.17 Indeed, the homestead statute applies the 100 acre limitation

to "a single, adult person, not otherwise entitled to a homestead." The legislature thereby

accommodated the jurisprudential definition of family that has been consistently applied in Texas since

the nineteenth century.18 The legislature thereby accommodated the jurisprudential definition of

family that has been consistently applied in Texas since the nineteenth century.19

Sherry Lane also argues that Hill has not proved the elements of a family. Again, we

disagree. Texas jurisprudence has recognized in the context of the homestead, regarding the requisite

element of status, that "[a] social status greatly exists between parents and their children[.]"20 In this

case the testimony reflects that Hill, her daughter and granddaughter function and appear as a unit

in the community.

15 Cf. L. Fenwick, supra note 8 at 658–59 (explaining that the change in law extends new rights to single adults). 16 See In re Barnett, 33 B.R. 70, 71 (Bankr.N.D.Tex.1983) ("The term "family' contained in the old Article 3833, construed to include a single divorced parent by the Texas Supreme Court in a continuing line of cases for over 50 years, is a term of art, and was left undisturbed by the legislature when it enacted the 1973 amendments."). 17 See Shapiro v. United States, 335 U.S. 1, 16, 68 S.Ct. 1375, 1383, 92 L.Ed. 1787 (1948). 18 TEX.PROP.CODE ANN. § 41.002(b)(2) (emphasis added). 19 In re Barnett, 33 B.R. at 71. 20 Garrard v. Henderson, 209 S.W.2d at 228. Sherry Lane next contends that because her daughter is married, Hill does not have a financial

or moral obligation to support her. Sherry Lane cites no Texas authority for such a per se rule, and

we find none. In the absence of such a rule, we conclude that the bankruptcy court in this case was

entitled to credit and to rely on the testimony that the daughter and granddaughter were in physical

danger in 1984, had no other avenue of assistance but Hill, and have depended on her for emotional

and financial support continually since that time. That they have never received assistance from either

of the daughter's husbands underscores the propriety of the bankruptcy court's conclusion.

We recognize that married children are not expressly included in the Texas Probate Code's

homestead estate exemption.21 We also note, however, that neither siblings nor parents are

mentioned in the restrictive probate estate definition, yet both siblings and parents have been held to

qualify as family members for homestead purposes generally. Even assuming that the Probate Code

restriction applies to the homestead exemption in a bankruptcy case, Hill could have attained head

of household status prior to the daughter's marriage.22 In addition, a grandchild may qualify as the

dependent family member even if the parents are still living.23

Sherry Lane's next argument, that the daughter's employment disproves her dependence on

her mother, overlooks the testimony that the daughter's income is insufficient to enable her to leave

her mother's household. This argument overlooks the fact that absolute dependence is not necessary

to fulfill the third prong of the Texas test. Central Life Assure Society v. Gray, 32 S.W.2d 259

(Ct.Civ.App.—Waco, 1930, writ ref.). The findings of the bankruptcy judge prove the level of

support necessary for dependence under Texas law. Although the term has not been directly defined

21 TEX.PROB.CODE § 271 (Vernon 1980) (Exemption benefits "surviving spouse and minor children and unmarried children remaining with the family of the deceased."); see In re Nunnally, 506 F.2d 1024 (5th Cir.1975) (citing Givens v. Hudson, 64 Tex. 471 (1885) and explaining the probate rule). 22 See Woods v. Alvarado State Bank, 118 Tex. 586, 19 S.W.2d 35 (1929) (homestead rights of head of family were not destroyed when children lost family member status by moving away). 23 Tunnell v. Johnson, 209 S.W. 451 (Tex.Civ.App.1919). in Texas Ho mestead law, other areas of law have defined the term "dependence" in analogous

situations.

Under Texas Workman's Compensation law a dependent is one who is sustained in whole

or part by another for reasonable necessaries in subst antial amounts allowing the recipient to live

consistent with his or her position in society. Turner v. Travelers Insurance Co., 401 S.W.2d 618,

622 (Tex.Civ.App.1966, writ ref. n.r.e.) (defining dependence in general); Stanaland v. Traders &

General Insurance Co., 195 S.W.2d 118 (Tex.1946) (substantial part); Industrial Accident Bd. v.

Lance, 556 S.W.2d 101, 102 (Tex.Civ.App.—Amarillo, 1977, no writ) (noting at 103 "the test is:

Was the alleged beneficiary relying in whole or in part upon the labors of the deceased for support?");

Federal Underwriters Exchange v. Hall, 179 S.W.2d 519, 523 (Tex.Civ.App.—Dallas, 1944),

modified on other grounds, 143 Tex. 36, 182 S.W.2d 703 (noting "dependence may be proven as a

fact without arithmetical demonstration.") (citing Consolidated Underwriters v. Free, 253 S.W. 941

(Tex.Civ.App.—Fort Worth, 1923, writ ref.)). If that test is applied to the instant case the debtor

had to prove that her daughter relied on her for some part of her support; that is, "but for" such

support the recipient's position would be altered. Although the lower court erroneously used a much

lighter "any dependency" standard, this error is harmless. The lower court's factual findings fulfill the

correct Texas test.

Appellee asserts alternatively that the moral support given to her daughter alone fulfills the

third prong of the Texas test. This is an incorrect reading of Texas law. Texas cases have held that

in the case of minor children, to satisfy the third prong of the Roco test, financial dependence is not

necessary. See, e.g., American National Bank of Austin v. Cruger, 31 Tex.Civ.App. 17, 71 S.W.

784, 788 (1902, no writ) (noting that even though supposed dependents were owners of a valuable

farm they still depended upon appellant for moral training); Garrard v. Henderson, 209 S.W.2d 225,

227 (Tex.Civ.App.—Dallas, 1948, no writ) (minor child); Wolf v. Buckley, 52 Tex. 641 (1890)

(minor children although having an estate still dependent for moral training). Texas courts have taken one further step and said that a dependent and infirm elderly parent may be dependent in terms of

moral support. Hutchenrider v. Smith, 242 S.W. 204, 209 (Tex.Comm.App.—Section B 1922, no

writ). However, in that case it was stated that absent the help of the children the "father would be

in poverty." Id. at 207.

In this case there are neither minor children nor infirm parents who may be morally dependent

upon the debtor. The cases cited by the debtor for moral support alone are inapposite as they deal

with the definition of the family in terms of the first prong of the Roco test. Because that prong is

satisfied by a legal or moral obligation, cases mentioning moral obligation in that context have no

bearing on the dependency issue that constitutes the third prong. However, as mentioned above, even

though the bankruptcy court accepted appellee's incorrect argument to some degree, its factual

findings demonstrate the degree of financial dependence that is the true measure of Roco's third

prong.

Sherry Lane also contends that the admission of Hill's homestead evidence was reversible

error because Sherry Lane's counsel was surprised by it and had no opportunity to respond. The

trustee makes the related argument that Hill neglected to plead entitlement to a 200 acre homestead

properly. Sherry Lane objected to this evidence at the time of the bankruptcy hearing and in a Motion

to Strike. We conclude that the bankruptcy court did not abuse it s discretion in denying these

motions.24

Schedule B–1 of Hill's bankruptcy petition lists the homestead and recites its value, but not

its acreage. In its objection to the homestead exemption, Sherry Lane asserted that the homestead

claimed by Hill comprises 200 acres but that by law Hill is limited to a 100 acre exemption. In

response, Hill admitted that the acreage claimed is 200 but denied that the law limits her to 100 acres.

24 See In Matter of Beaubouef, 966 F.2d 174 (5th Cir.1992) (abuse of discretion review of challenge to admitted evidence based on allegation of surprise and failure to plead). In denying Sherry Lane's objection to the homestead claim, the bankruptcy court took "judicial notice

of the fact that [Hill] claims and has claimed in her schedules 200 acres as exempt property." Even

assuming that Hill's pleadings were deficient on this issue, the court was empowered to allow

amendment of the pleadings instanter as long as Sherry Lane was not prejudiced by the amendment.25

As the record reflects that Sherry Lane had ample notice of the homestead issue, we find no basis for

the claim of reversible error.

We also reject Sherry Lane's contention that the district court erred in accepting the

bankruptcy court's findings of fact. Pursuant to Bankruptcy rule 8013, the district court was required

to accept the findings unless they were clearly erroneous. As all of the findings are directly based on

reasonable testimonial evidence, we find no clear error.

III

CONCLUSION

The bankruptcy court did not abuse its discretion in allowing Hill to amend her pleadings

instanter to include the acreage figure for the clearly identifiable homestead for which she had already

claimed an exemption. As such, her evidence of head of household status was admissible, and the

bankruptcy court was not clearly erroneous in finding that Hill was in fact the head of a family

household within the contemplation of the applicable homestead laws of Texas. Concluding that

neither the bankruptcy court nor the district court committed reversible error, the judgment appealed

from is

AFFIRMED.

25 Id. (citing Fed.R.Civ.P. Rule 15(b) and Hardin v. Manitowoc–Forsythe Corp., 691 F.2d 449, 457 (10th Cir.1982)).