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#2355 signed 8-20-97

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS




In re:

AREC M. HOUSER,

DEBTOR(S).





CASE NO. 97-40436-7

CHAPTER 7





MEMORANDUM OF DECISION

This matter is before the Court on the case trustee's objection to the debtor's claimed homestead exemption. The trustee appears by counsel Susan Mauch of Cosgrove, Webb & Oman. The debtor appears by counsel William E. Metcalf of Metcalf & Justus. The Court has reviewed the relevant pleadings and considered the evidence presented, and is now ready to rule.

FACTS

The only evidence presented was the debtor's testimony. In May 1995, he bought a house in Larned, Kansas, now valued at $20,000 and encumbered by a mortgage for $11,500. The house was built as a one-family residence and is surrounded by other single-family dwellings. The debtor occupies about 1000 square feet of the house as his residence, and the rest, about 680 square feet, is divided into two apartments. The apartments each have their own external entrances and separate mailing addresses. They are not directly accessible from the debtor's part of the house. After buying the house, the debtor bought small refrigerators and stoves for the apartments. When he filed for bankruptcy and claimed the house as his exempt homestead, one apartment was rented for $175 per month and the other for $150. The trustee objected that the rented parts of the house cannot be exempted under Kansas law. By the time of the hearing on the trustee's objection, one apartment was vacant and the other was rented for $200 per month on a month-to-month tenancy.

The debtor intends to return the house to a single-family residence. He borrowed money on a five-year note to install a new air conditioning and heating system and make other improvements. The new system is located in his part of the house but supplies cooling and heating for the entire house. The utilities for the apartments are not separately metered. Once the debtor has paid off the five-year note, he intends to borrow more money to fix up one part of the house as an apartment for his grandmother and to remove the walls that were added to separate the apartments from the rest of the house. Ultimately, he intends to occupy the whole house along with members of his family.

DISCUSSION AND CONCLUSIONS

As the party objecting, the trustee has the burden to prove the debtor's homestead exemption is not properly claimed.  Fed. R. Bankr. P. 4003(c). In Kansas, "[a] homestead to the extent . . . of one acre within the limits of an incorporated town or city, . . . 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." K.S.A. 60-2301; see also Kan. Const. Art. 15, §9 (establishing somewhat narrower homestead exemption than provided by statute). Twenty years ago, this Court faced an exemption claim similar to the one the debtor has asserted in this case. In re Belcher, 13 Collier Bankr. Cas. (1st) 240 (Bankr.D.Kan. 1977), aff'd 13 Collier Bankr. Cas. (1st) 245 (D.Kan. 1977), aff'd sub nom. Belcher v. Turner, 579 F.2d 73 (10th Cir. 1978).

In Belcher, the debtors owned a duplex. They lived in one half and rented the other half to a third party who lived in it. Each unit of the duplex had its own garage, drive, entrance, and backyard patio, and the back yard was divided by a chain link fence. The units shared a common attic and sewer but all the utilities were metered and billed separately. The debtors had never expressed any intent to occupy the entire duplex. See 13 Collier Bankr. Cas. (1st) 242-43. This Court considered a number of Kansas cases involving the homestead exemption and declared that they were inconsistent and reached seemingly opposite conclusions on indistinguishable facts. Id. at 243-44. Others have since stated, "It is difficult to reconcile all the rulings in this area." Roger L. Theis & Karl R. Swartz, "Kansas Homestead Law," 65 J. Kan. Bar Ass'n 20, 25 (1996). Ultimately, the Court concluded that only the half of the duplex the debtors lived in was exempt, and that the rented half could be severed from it and sold. Id. at 244-45.

Despite its similarities, the case now before the Court is distinguishable from Belcher. The debtor's house was originally built as a single-family residence rather than to serve as a residence for two or more families. The utilities provided to the apartments are not metered separately from those for the rest of the house. The debtor has expressed his intent to return the house to its single-family origins and have it completely occupied by his family. His intent is evidenced by the fact he had a single new heating and air conditioning system installed to serve the whole house. The Court finds these differences are sufficient to dictate a different result here. The facts here are more like those before the Kansas Supreme Court in Iola Wholesale Grocery Co. v. Johnson, 114 Kan. 89 (1923) and Hoffman v. Hill, 47 Kan. 611 (1892) than the facts in Belcher and the cases this Court relied on there. Consequently, the Court concludes the trustee has failed to meet his burden of proving the debtor is not entitled to exempt his whole house, including the apartments, and so his objection to the debtor's homestead exemption will be overruled.

The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by FRBP 9021 and FRCP 58.

Dated at Topeka, Kansas, this ____ day of August, 1997.













_________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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