Homestead Exemptions in Bankruptcy Proceedings
In In Re Hickmott, The US Bankruptcy Court of the Eastern District of Michigan decided that the debtor could not claim a homestead exemption on a home in which she did not actually or constructively reside at the time of filing her petition for bankruptcy. In 1993, the debtor and her late spouse purchased a cabin, which they used for hunting trips or during the holidays and summer vacations. After her spouse passed, the debtor moved into the cabin and lived there for approximately 3 months in 1998. Due to space limitations, the debtor purchased a bigger home and moved into. The debtor maintained her cabin and kept it furnished to use as a guesthouse.
In 2008, debtor began to consider bankruptcy and planned to move back into her cabin because she could no longer make mortgage payments on the home. She began moving almost all of her belongings out of the home and into a rented storage unit in anticipation of moving back into the cabin. She filed her petition for bankruptcy while she was still living in the house and sought a homestead exemption for her cabin.
Pursuant to 11 U.S.C. §522(d)(1), a debtor may exempt real property that the debtor or a dependent of the debtor uses as a residence. The issue before the court was whether or not the debtor can use this homestead exemption to exempt her cabin she admittedly was not physically occupying or living in on the date of filing her petition. The trustee objected to the debtor’s exemption because she was not living in the cabin. The debtor argued that she constructively resided in the cabin because she intended on moving into it.
Courts do recognize the theory of constructive possession—which is the “physical absence from a premise, coupled with an intent to return to the premise at some point in the future. However, the court must first decide if the debtor moved out of the cabin involuntarily or under some kind of compulsion. Second, the court must decide if at the time the debtor moved out, she intended to come back.
The bankruptcy court found that under the facts of this case, the debtor did not meet the test. While she did move out of her home voluntarily, seeking more space, there was no intent that she would move back. In fact, the court noted, had she been able to keep up with the mortgage payments, she would have continued to live at the home rather than the cabin. The court found that there was no constructive possession and, therefore, the debtor could not take advantage of the homestead exemption for the cabin.
One-Year Statute of Limitation Clause Upheld in Residential Home Purchase Agreements
In Siuda v. Tobin, the buyers appealed from the trial court’s decision that granted the seller summary judgment upholding a one year limitation period in the contract between the parties. The buyers entered into an agreement with the seller to purchase a modular home. The agreement, dated November 28, 2003, contained a clause that stated that any action by the buyer of the home against the seller had to be brought within one year from the date of sale of the home. The buyers brought the action in February 2007 asserting that their home was exposed to weather and water damage during the construction and that the home was poorly built. Furthermore, they believe that the seller attempted to fraudulently conceal the defects.
The seller moved for summary disposition because of the one year limitations clause in the purchase agreement. However, the buyers argued that the seller waived enforcement of the clause and is estopped because of the fraudulent concealment or a “continuing wrong.” The buyers also argued that the clause was against public policy and was unconscionable to enforce. The trial court, however, granted the seller’s motion because it believed the clause in the agreement had clear, unambiguous language to which that both parties agreed. Furthermore, the trial court held that there was no waiver and that a continuing wrong was not applicable in this kind of case. Finally, the trial court thought that even if there were a fraudulent concealment, the buyers waited too long to bring action because they discovered or should have discover the damage in December 2004.
The Court of Appeals affirmed the trial court’s decision. Citing to Rory v Continental Ins Co, 473 Mich 457 (2005), the Court of Appeals found that the clause in the agreement was unambiguous and that the buyers have not shown that a public policy has been violated. Furthermore, the court found that the seller is not estopped from enforcing the clause because the seller did not induce the buyers to believe that the limitations clause would not be enforced. Finally, the court found that the clause was not unconscionable. To be unconscionable, the provision would have to “lead to a result that should shock the court’s conscience.” The buyers neither established that they had no realistic alternative to purchasing the modular home nor that the loss sustained was material to the inequity of the contractual term.
Homeowners Unsuccessfully Challenge Foreclosure Sale Arguing Lack of Notice
In Brown v. Fremont Investment & Loan, the homeowners defaulted on their mortgage and the mortgagee commenced foreclosure proceedings. The homeowners sued the mortgagee arguing that the mortgagee failed to give notice of sale by publication and posting by the required date because they never received such notice. At trial, the deputy sheriff responsible for posting the property testified that he did not remember the homeowners’ home, but was familiar with the home as he posted many other homes in the same neighborhood. He also testified that he had been posting properties for 34 years. The trial court found that the homeowners did not show by clear and convincing evidence that the property was not posted.
The Court of Appeals affirmed that actual notice is not necessary under Michigan law. The court found that the trial court did not err in its ruling because the homeowners only showed that they did not receive actual notice, which is not required under Michigan law. Other than statements in the affidavit that they never received notice, the homeowners provided no evidence that publication and posting did not occur.