GUY R. HUMPHREY, Bankruptcy Judge.
This matter was heard on the Objection to Claim of Exemption in 770 Birchwood Drive, Greenville, Ohio filed by the Chapter 7 Trustee, Roger Luring and the response of the debtor, Jerry Delk. The issue tried was whether Jerry abandoned his residence so as to lose any entitlement to a homestead exemption in that property under Ohio law. For the reasons to be discussed, the court finds that while Jerry moved out of his residence upon the filing of a divorce action by his wife, Vicki Delk, he did not abandon that residence and attempted to re-establish his residence at the property, only to be precluded from doing so by a temporary restraining order obtained by Vicki from the domestic relations court, resulting in Jerry's constructive occupancy of the residence under the doctrine of stress of circumstances, thereby entitling Jerry to a homestead exemption in the residence.
Jerry filed this Chapter 7 bankruptcy case on May 8, 2015. Roger Luring was appointed as the Chapter 7 Trustee.
Jerry listed 770 Birchwood Drive, Greenville, Ohio (the "Property") as his street address on the petition, but provided a P.O. Box 97, Greenville, Ohio as his mailing address. Jerry initially scheduled the Property on his Schedule A as his "marital residence," but did not assert an exemption in that real estate on Schedule C. doc. 1. However, Jerry did file a statement of intention on the petition date, claiming the property as exempt and that he was reaffirming the first and second mortgage loans on the property, both held by Greenville National Bank. doc. 4.
On August 18, 2015 Jerry filed an Amended Schedule C, asserting an exemption in the amount of $27,456.65 in the Property pursuant to Ohio Revised Code § 2329.66(A)(1) — the Ohio homestead exemption provision. doc. 20. On August 20, 2015 the Trustee filed a timely objection to that amended claim of an exemption in the residence. doc. 21. Jerry filed a response to that objection on September 9, 2015. doc. 24. The court held the hearing on this contested matter on November 18, 2015. This court has jurisdiction pursuant to 28 U.S.C. § 1334 and is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B).
The evidence established that the Property was purchased by and is titled jointly to Jerry and Vicki, through a joint deed with right of survivorship. On July 9, 2014 Vicki filed a divorce complaint against Jerry in the Darke County Common Pleas Court (the "Divorce Court"), Case No. 14-DIV-00331 (the "Divorce Action"). The Property was listed as the address of both Jerry and Vicki on the Domestic Relations Questionnaire filed with the Divorce Court on July 9, 2014. Debtor Ex. 1. The Divorce Action remains pending. Other than the temporary restraining order discussed below, no temporary or final orders ordering support and allocating or distributing property interests have been entered by the Divorce Court. Jerry and Vicki have no minor children or other dependents.
On July 11, 2014, approximately ten months prior to filing bankruptcy and two days after Vicki filed the divorce complaint, Jerry signed a lease along with his friend, Michelle Mendenhall, for an apartment located at 423 W. 4th Street, Greenville, Ohio (the "Apartment"). Trustee Ex. A.
Jerry showed up at the Property on an evening in March 2015. Vicki's testimony concerning that event is as follows:
Tr. at 21. In her affidavit, Vicki stated that "[o]n March 16, 2015, JERRY DELK advised me that he was planning on moving back into the marital residence." Trustee Ex. B, ¶ 5. Consistent with Vicki's testimony at the hearing and her sworn affidavit, on March 18, 2015 Vicki filed a motion with the Divorce Court seeking a restraining order to keep Jerry from returning to the residence and seeking exclusive occupancy of the residence. The Divorce Court granted that motion on an uncontested basis, and on March 25, 2015 entered an order ordering that: Jerry "be, and he hereby is, restrained and enjoined from re-entering the marital premises located at 770 Birchwood Dr., Greenville, Ohio." (the "TRO"). See Trustee Ex. C. The court further ordered that Vicki "be, and she hereby is, granted the exclusive use and occupancy of the marital residence to the exclusion of [Jerry] during the pendency of this action." Id.
Jerry testified that he did not move out of the marital residence until late March 2015, when he was served with the TRO. He testified that prior to that time he stayed at the Property approximately four days each week and at the Apartment with Ms. Mendenhall a couple days each week. Tr. at 13 & 43. He testified that when he started staying with Ms. Mendenhall in the apartment, he "left with what he had on [his] back." Tr. at 10-11. Jerry also testified that he maintained the swimming pool, mowed outside the fenced area of the yard, and performed other maintenance and work around the Property until he was served with the TRO. Tr. at 47-48. Vicki testified that he had clothing and other personal property at the Birchwood Drive property and moved out "on a piecemeal basis." Tr. at 20-21 & 26. The testimony was consistent that Jerry did go to the Property during the day when Vicki was not home on some occasions. Tr. at 37, 47-48. However, Vicki insisted that he did not spend the night there from July 2014 until the evening in March 2015 when he returned. Tr. at 19, 21, 26 & 27. Jerry testified that he came home to the Property late at night after cleaning up and shutting down his ice cream parlor for the evening and sometimes parked in the garage, inferring that people outside the home would not know he was at the Property because of his late hours and his parking in the garage. Tr. at 15-16.
As to the issue of Jerry moving out of the Property, the court finds the testimony of Vicki and Ms. Rex to be more credible. Their testimony is also supported by Jerry signing the lease with Ms. Mendenhall for the Apartment on July 11, 2014. While the court finds that Jerry sometimes did return to the Property during the day prior to being served with the TRO, including for performing work and maintenance around the residence, he moved out of the Property in July 2014.
It is undisputed that Jerry has resided in the Apartment at least since he was served with the TRO. However, Jerry testified that it is was and remained his intention since the divorce action was filed to return to the Property, but for the TRO. He testified that he is hoping that the Divorce Court awards him possession of the property. Tr. at 42-43, 46, and 48.
Both Jerry and Vicki testified that the mortgage payments for the Property and housing expenses such as the real estate taxes and utilities are paid through checks issued by Vicki from a business account for the Back in Time Café, which is owned jointly by Jerry and Vicki. However, following the issuance of the TRO, Jerry has not worked at the Café, but has received paychecks from the business. Jerry asserted that half of the income from the Café belongs to him. Vicki continues to work at the Café and testified that that the income from the Café which is used to make the mortgage payments and to pay the housing-related expenses is attributable to her labor. Tr. at 29-34.
The Trustee asserts that Jerry's claim of the homestead exemption in the Property should be denied because Jerry vacated and abandoned it in July 2014, only attempting to return to the premises in March 2015 to be able to claim the Property as his primary residence for bankruptcy exemption planning purposes. Jerry asserts that he is entitled to the homestead exemption in the Property because the only reason he left the premises was because of the TRO granted by the Divorce Court and that it is his intention to return to property, hoping the Divorce Court awards the property to him.
The Trustee had the burden by a preponderance of the evidence to show that the exemption was not properly claimed. Fed. R. Bankr. P. 4003(c); Baumgart v. Alam (In re Alam), 359 B.R. 142, 147 (B.A.P. 6th Cir. 2006); In re Wengerd, 453 B.R. 243, 246 (B.A.P. 6th Cir. 2011). Further, Ohio exemption provisions are to be construed liberally in favor of the debtor and a debtor's dependents and any doubt in interpretation should be resolved in favor of granting the exemption. Daugherty v. Central Trust Co. of Ne. Ohio, N.A., 504 N.E.2d 1100, 1104 (Ohio 1986); Alam, 359 B.R. at 148; In re Jackson, 348 B.R. 771, 772 (Bankr. S.D. Ohio 2006) and Wengerd, 453 B.R. at 246.
Ohio has opted out of the federal bankruptcy exemptions provided in § 522 of the Bankruptcy Code and, therefore, Ohio's state law exemptions are generally applicable. In re Kyle, 510 B.R. 804, 808 (Bankr. S.D. Ohio 2014); In re Gokay, 535 B.R. 758, 762 (Bankr. S.D. Ohio 2015). Ohio Revised Code § 2329.66(A)(1)(b) provides an exemption applicable in bankruptcy cases for "the person's interest, not to exceed one hundred twenty-five thousand dollars, in one parcel or item of real or personal property that the person or a dependent of the person uses as a residence." The ceiling on the amount of the exemption is adjusted every three years based upon the consumer price index for all urban consumers as published by the United States Department of Labor. On the petition date, that ceiling was $132,900. See Ohio Revised Code § 2329.66(B).
Case law breaks down the determination of whether the Ohio homestead exemption is applicable based upon the existence or nonexistence of two factors: 1) whether the debtor has an interest in the property in which the exemption is asserted; and 2) whether the debtor uses the property as his residence. See In re Street, 395 B.R. 637, 646 (Bankr. S.D. Ohio 2008); In re Breece, 2013 Bankr. LEXIS 203, at *19-21 (B.A.P. 6th Cir. Jan. 18, 2013). These determinations are to be made based upon the facts in existence on the petition date. Owen v. Owen, 500 U.S. 305, 314 n.6 (1991); Wengerd, 453 B.R. at 250 (A debtor's intent to abandon the homestead post-petition does not negate the entitlement to the homestead exemption when the debtor is residing in the residence on the petition date); In re Cope, 80 B.R. 426, 427 (Bankr. N.D. Ohio 1987) (similar).
There is no dispute that Jerry had an interest in the Property on the petition date, as the evidence established that Jerry owned the Property with his wife, Vicki, under a joint and survivorship deed. The controverted issue is whether Jerry "use[d] as a residence" the Property on the petition date.
Since Ohio has opted out of the federal bankruptcy exemptions, the court will begin its analysis of the issue of whether Jerry used the Property as his residence on the petition date by reviewing early Ohio state court cases construing the Ohio homestead exemption, followed by an examination of the application of that provision, mostly in the bankruptcy courts.
In one of its earliest pronouncements on the Ohio homestead exemption, the Ohio Supreme Court held that a debtor does not lose his homestead exemption by temporarily vacating the property if the debtor intends to return to the premises. Wetz v. Beard, 12 Ohio St. 431 (1861). In Wetz, the debtor and his family moved out of the property and leased it to somebody else and then the tenant vacated the premises at the request of the debtor and the debtor moved back into the property. The court found that the debtor did not lose his homestead exemption under those circumstances. Similarly, the Ohio Supreme Court later recognized that a debtor does not abandon his homestead for exemption purposes when he or she temporarily leaves the premises with an intention to return to the premises to exclusively and permanently reside there. However, the court held that: "If the debtor has voluntarily abandoned his homestead before claiming it as exempt, his right is gone." Jackson v. Reid, 32 Ohio St. 443, second paragraph of syllabus (1877). The Court subsequently held that the homestead right is a personal privilege which cannot be conveyed to another and is lost through the failure to claim the exemption or by abandonment of the homestead. McComb v. Thompson, 42 Ohio St. 139 (1884). In another early decision, the Ohio Supreme Court noted that the homestead right is a statutory personal privilege created solely for the benefit of the debtor and his family, noting that once the debtor ceases to occupy the homestead, it may be subjected to the claims of the debtor's creditors. Schuler v. Miller, 45 Ohio St. 325 (1887). In order to claim a homestead exemption, the Debtor must have occupied the property at some point. Mutual Bldg. & Inv. Co. v. Efros, 89 N.E. 648, 651 (1949). Future intention is not sufficient when the property has never been occupied by the party claiming the exemption. Id.
A trial court applied Jackson v. Reid but held that when a debtor is forced to leave premises, in this case due to the foreclosure of a mortgage, the debtor does not abandon her right to claim an exemption in the proceeds of the sale of the property, stating:
William H. Holmes Co. v. Book, 1 Ohio Dec. 665, 668 (Mahoning C.P. 1894). This is perhaps the earliest recognition in Ohio case law of what has been referred to as the "stress of circumstances" doctrine.
Recent decisions have applied the principles established in those Ohio cases on a number of occasions in determining whether debtors were entitled to the Ohio homestead exemption.
A bankruptcy court was presented with a homestead issue in which the debtors claimed the exemption in a property on a house that burned down two months prior to the bankruptcy filing. However, the debtors never resided at the property. In examining the issue, the court found that in order for debtors who are not occupying the premises on the petition date to be entitled to the homestead exemption in those premises, the temporarily displaced debtors must have:
In re Cottingim, 7 B.R. 56, 58 (Bankr. S.D. Ohio 1980). Further, there must be no subterfuge or intent to defraud.
Another case addressing intent involved a recently married couple who each owned a home. In re Orwig, 6 B.R. 725 (Bankr. S.D. Ohio 1980). They each placed their respective home on the market for sale and the debtor wife moved into the husband's home, leaving behind some articles of personal property. At the time of her bankruptcy filing, the debtor was residing at her husband's property and testified that they would move into the property which did not sell, i.e. they would sell the property that they could first sell and move into the property which did not sell. In determining the issue, the court noted that there must be an "intent to occupy a homestead as a necessary element to establishing an allowable homestead exemption" under Ohio law, particularly when the debtor was not occupying the property at the time of the filing of the bankruptcy case. Id. at 726. In rejecting the debtor's claim of a homestead exemption in the property, the court noted that: 1) the debtor was not occupying the property when the bankruptcy was filed; 2) the debtor designated her husband's property as her residence on her Statement of Financial Affairs filed with the bankruptcy court; 3) the debtor had not been forced to leave her property; and 4) the debtor had no specific intent to return to her property. Id. at 727; See also In re Flegner, 2011 Bankr. LEXIS 4118 (Bankr. N.D. Ohio Oct. 24, 2011) (exemption denied because debtors failed to show actual occupancy or future intention to occupy an out-of-state vacation home); In re McCormick, 2015 Bankr LEXIS 2585 (Bankr. N.D. Ohio Aug. 4, 2015) (husband and wife living in separate residences each entitled to a homestead exemption. Although husband planned to return to his wife's residence after his son helped him recover from surgery, he resided at a separate address on the petition date).
The stress of circumstances doctrine also has been applied in modern case law. In re Cycyk, 29 B.R. 722, 724 (Bankr. N.D. Ohio 1983) (court applied stress of circumstances to allow the claiming of a homestead exemption when the debtor husband had to leave the premises due to restraining orders issued by the state court and the police department and the debtor wife vacated the residence due to fear of domestic violence against her by the debtor husband);
The evidence established that Jerry, as of the petition date, owned the Property with Vicki and used it as his residence, at least through July 9, 2014, the date of the filing of the Divorce Action. Jerry testified that he intended to return to the Property if the Divorce Court awarded him the property through the Divorce Action. The bankruptcy petition listed the Property as his street address and on the petition date he filed his Statement of Intention indicating that he intended to claim the Property as exempt and to reaffirm the mortgage debts. Finally, between July 2014 and the petition date Jerry resided at the Apartment with Ms. Mendenhall under a written lease with a stated term expiring on July 11, 2015.
The court finds that Jerry physically vacated the Property when he signed the lease and moved into the Apartment. Vicki's and Ms. Rex's testimony was credible with respect to Jerry moving out in July 2014, coupled with the extrinsic evidence of Jerry signing the apartment lease. Jerry occupied the Apartment as his residence.
However, the homestead exemption issue is to be determined as of the petition date and the Trustee needed to establish that Jerry's intent was to permanently abandon or vacate the premises. See Lusiak, 247 B.R. at 703; Meadow Wind Health Care Ctr., Inc., 2000 WL 1055938, at *12-13 and Cycyk, 29 B.R. at 724. As noted, Ohio law recognizes that the fact that the debtor is not residing in a property at the time a bankruptcy is filed does not prevent a debtor from claiming an exemption in that property premises if the debtor previously resided at in that property and intended to return. See Jackson v. Reid, 32 Ohio St. 443 (1877) and In re Cope, 80 B.R. 426. (1987). However, that intention must be corroborated with some form of extrinsic evidence beyond the unsupported testimony of the debtor. Cottingim, 7 B.R. at 58 and Lusiak, 247 B.R. at 703.
A debtor who has vacated his residential premises may re-establish occupancy for homestead exemption purposes. Wetz, 12 Ohio St. at 431; Jackson, 32 Ohio St. at 443; Cameron, 25 B.R. at 120. When a debtor is precluded by a natural disaster, such as a fire, or by a court order, from re-occupying the premises and the debtor has not otherwise evinced his intent to abandon the premises by never returning to the premises, the debtor is entitled to the homestead exemption due to the "stress of the circumstances." William H. Holmes Co., 1 Ohio Dec. at 668; and Cycyk, 29 B.R. at 724.
Although Jerry physically vacated the Property in July 2014 when he moved into the Apartment, the evidence also established that Jerry maintained a presence at the premises following July 2014 through performing various tasks around the home, including yard and pool maintenance. The evidence established that he did so until the TRO was issued. He also attempted to re-establish his residence at the Property in March 2015 when he appeared at the Property, advised Vicki that he "missed his dogs", and that he planned to move back in and stayed at the Property for some period of time that evening. After Jerry appeared at the Property that evening in March, Vicki sought and obtained the TRO precluding his presence at the property and awarding her exclusive possession of the property during the pendency of the divorce proceeding. Of course the TRO precluded any further effort by Jerry to re-occupy the property and to re-establish his residency at the Property. The court does not believe that Jerry's motive in attempting to re-occupy and re-establish his residency at the Property is relevant — that is whether it was because he "missed his dogs" or whether it was for bankruptcy exemption planning purposes.
The facts and circumstances of this case are similar to those in In re Luttge, 204 B.R. 259 (Bankr. S.D. Fla. 1997). In that case, the debtor vacated the former marital property pursuant to a court order granting his former spouse the exclusive right to occupy the property until it could be sold. When the debtor filed his bankruptcy, he asserted a homestead exemption in the property he vacated pursuant to the court order. The trustee objected to the claim of exemption, arguing that the debtor abandoned the property. Noting that the debtor would have violated a domestic relations court order had he remained in the premises, the court applied the equivalent of Ohio's stress of circumstances doctrine to find that the debtor had not abandoned the homestead by vacating the property pursuant to the state court order. See also In re Harrison, 236 B.R. 788 (Bankr. M.D. Fla. 1999) (ex-wife debtor did not abandon residence when debtor moved out of home with younger minor son and rented another home while ex-husband and an older minor son resided in the homestead property, finding that she was entitled to the exemption since she moved out of the homestead due to the impact which the older son's drug activities could have on the younger son and because under Florida law it must be established that both the owner and the owner's family must have vacated the homestead for an abandonment to have occurred.).
In summation, the court determines that: a) Jerry physically vacated the Property in July 2014; b) he continued to maintain some presence at the premises, although not residing there, from July 2014 until the TRO was issued in March 2015 through visiting the property and performing tasks at the premises such as lawn and pool maintenance; c) he attempted to re-occupy and re-establish residency and use of the Property in March 2015, having both exhibited an intent to re-establish that residence and having taken physical action to re-occupy the Property; d) he was precluded from re-occupying the Property as a result of the TRO; and e) as of the petition date, as evidenced by these facts and his bankruptcy filings, Jerry's intent to return to the premises was corroborated. Thus, under these facts, and resolving any doubt as to entitlement to the exemption in favor of Jerry, the court finds that the Trustee has failed to meet his burden of establishing that Jerry is not entitled to a homestead exemption in the Property.
For these reasons, the court will contemporaneously enter an order overruling the Trustee's objection to Debtor Jerry Delk's claim of a homestead exemption in the Property.
