In Re Hebert
ORDER RE OBJECTION TO EXEMPTION аnd ORDER RE MOTION TO AVOID LIEN
On May 12, 2003, debtor filed a motion to avoid two judgment liens pursuant to
Findings of Fact
Duane Hebert filed a Chapter 7 bankruptcy petition on February 13, 2003. He listed in his schedule of real property an interest in property legally described as:
The S 40' of Quarter Block 1, in Block 9, Higman’s Addition to Sioux City, in the County of Woodbury and State of Iowa, and the S 68' of the N 118' of Quarter Block 1, in Block 9, Higman’s Addition to Sioux City, in the County of Wood-bury and State of Iowa.
The property is locally known as 1615-1617 Pierce Street, Sioux City (the “Pierce Street property”). The court tаkes judicial notice that the property is not agricultural land. Hebert claimed the property exempt as his homestead.
Hebert purchased the Pierce Street property under a real estate contract executed Octobеr 26, 2001. Exhibit A. Beginning on or about that date, he has continuously occupied the property as his homestead.
In 2001, Hebert was involved with an entity known as Paladin Development, Ltd. (“Paladin”). Paladin was formed by Charles Lieber, owner of the Palmer House on Gordon Drive in Sioux City. Paladin operated a restaurant, called “Chuck and Ed’s,” and a convenience store on that property. Hebert could not say precisely what his interest was in Paladin, but he said that he managed the restaurant.
At some point, Hebert decided to part ways with Lieber because of disagreement about running the business. Hebert stopped working at the restaurant about September 2001.
On October 16, 2001, Hebert entered into a purchase agreement to buy the Pierce Street property. Exhibit C. Emil D. Lieber and Mary E. Liеber executed the agreement as sellers. The agreement stated “down payment is credit for corp transfer Paladine Development Inc.” Id., Hl.E.
A contract for deed on the property was subsequently executed by Hebert, as buyer, and C & E Investment Group, a partnership, a/k/a C & E Investments, as seller. Emil and Mary Lieber signed as partners of the seller. Exhibit A. Hebert said C & E Investments was a business of Charles Lieber and his father.
The contract purchase price was $115,000; the contract acknowledged that $35,000 of that price had been paid. An attachment to the contract set out additional provisions as follows:
A) Down Payment. Buyer shall receive a credit in the amount of $35,000.00 representing the entire down payment required under this Contract in exchange for which Buyer shall transfer to David Rusley (on behalf of Seller) all of Buyer’s right, title and interest in the shares of stock of the Iowa corporation known as Paladine Development, Inc. Buyer represents and warrants to Seller and to David Rusley that Buyer is the sole owner of all of the issued and outstanding shares of stoсk of said corporation; that said shares are free and clear of all liens and encumbrances; that Buyer is the sole director and officer of the corporation and is possessed of the lawful authority to transfer said shares without restriction; that said corporation is in good standing with the State of Iowa and has filed all required corporate reports to date; that David Rusley shall become the sole shareholder, director and officer of the corporation upon cоmpletion of the closing of this transaction and that Buyer shall transfer to David Rusley all corporate records with regard to said corporation at the time of closing hereunder.
E) Assignment of Contract. Buyer acknowledges that Seller will assign its interest in this Contract to Raymond W. Hall. Buyer shall make all payments of principal, interest and taxes requiredunder this Contract to Raymond W. Hall at the following address: P.O. Box 20457, Bloomington, MN 55420.
Exhibit A. On October 26, 2001, C & E Investment Group executed a warranty deed transferring its interest in the Pierce Street proрerty, subject to the contract with Hebert, to Raymond W. Hall. Exhibit D. The real estate contract and warranty deed were filed with the Woodbury County Recorder October 31, 2001.
Midwest Fuels, Inc. is a wholesaler of fuel oil, gasoline and diesel fuel. Dan Stei-chen owns the business. Charles Lieber approached Steichen about purchasing fuel for the Palmer House convenience store. Steichen quoted Lieber a price that was agreed upon.
Steichen’s practice is to request a personal guаrantee when selling fuel to a corporation. Charles Lieber told Steichen that Paladin would be the purchaser and that Hebert would guarantee the debt. Hebert’s financial statement was sent to Steichen by fax. On November 30, 2001, Steichen met with Leiber and Hеbert at the convenience store to obtain Hebert’s guarantee. The three drove across the street to a bank, where Hebert executed the document in front of a notary. The document is titled “GUARANTY OF PAST AND FUTURE INDEBTEDNESS.” The final paragraph states in its entirety: “The guаrantors hereby waive the benefit of all Homestead exemption laws.” Only Hebert signed the guarantee. The document contains no reference to the Pierce Street property and no other reference to a homestead. Exhibit B.
Midwest Fuеls delivered four or five loads of fuel to the convenience store. Each load was valued at about $7,000 or $8,000. Because of an error in the first draft of the guarantee document, Midwest Fuels delivered one load of fuel to the store prior to the date the guarantee was signed.
Paladin paid for only two or three loads of fuel. It owed Midwest Fuels approximately $12,000. Midwest Fuels brought suit in state court against Paladin, C & E Investments and Hebert. On October 21, 2002, it obtained judgment by default against Hebert in the Iowa District Court for Wоodbury County, Case No. LACV 123757.
Discussion
Midwest Fuels bears the burden of showing that Hebert has not properly claimed an exemption in his homestead.
Under Iowa law, a debtor’s homestead is generаlly exempt from judicial sale, unless there is a “special declaration of statute to the contrary.”
The homestead may be sold to satisfy dеbts of each of the following classes:
1. Those contracted prior to its acquisition ...
2. Those created by written contract by persons having the power to convey, expressly stipulating that it shall be liable, but then only for a deficiency remaining after exhausting all other property pledged by the same contract for the payment of the debt.
3. Those incurred for work done or material furnished exclusively for the improvement of the homestead.
There is no evidence that any of the debt at issue predated the acquisition of
Hebert argues that a statutory waiver of the homestead must contain the legal description of the property. The case of
In re White,
The guarantee prepared by Midwest Fuels is a simple contract, not a present transfer of an interest in Hebert’s property. A contract need not be а mortgage to constitute a waiver of the homestead exemption pursuant to
Midwest Fuels contends there is no statutorily mandated form for waiver of a non-agricultural homestead. Section 521.22 specifies the minimum type size to be used and language that must be includеd in a written contract waiving a homestead “affecting agricultural land.”
Chelsea State Bank v. Wagner (In re Wagner),
Case law shows, however, that
In
Maguire v. Kennedy,
These Iowa cases indicate that, for a contract to come within
The statеment in Hebert’s guarantee, that “guarantors hereby waive the benefit of all Homestead exemption laws,” is no more specific than the waiver clause in Rutt v. Howell. The court concludes, therefore, that the waiver provision was not effective. It did not “expressly stipulate” that Hebert’s homestead would be liable for the debt owed to Midwest Fuels.
Because the waiver provision was unenforceable under Iowa law, Hebert’s homestead was exempt on the date that Midwest Fuels obtained judgment against him. Consequently, its judgment lien did not attach to Hebert’s homestead.
Lamb v. Shays,
The court has determined that the judgment lien of Midwest Fuels did not attach to Hebert’s homestead property. The motion to avoid liens should bе denied as unnecessary.
ORDER
IT IS ORDERED that the objection to debtor’s claim of exemption in his homestead is overruled.
IT IS FURTHER ORDERED that, because the judgment liens of Midwest Fuels, Inc., Case No. LACV 123757, and Jeffery L. Loax, dba Eagle Construction, Case No. SCCV 90957, both arising in the Iowa District Court for Woоdbury County, did not attach to Hebert’s property, legally described as—
The S 40' of Quarter Block 1, in Block 9, Higman’s Addition to Sioux City, in the County of Woodbury and State of Iowa, and the S 68' of the N 118' of Quarter Block 1, in Block 9, Higman’s Addition to Sioux City, in the County of Wood-bury and State of Iowa,
the motion to avoid liens is denied as unnecessary. Judgment shall enter accordingly.