In re Michelena

620 B.R. 570

IN RE: Robert Marcus MICHELENA; dba Manlorsons Estates, Debtor(s).

Case No: 19-70068

United States Bankruptcy Court, S.D. Texas, McAllen Division.

Signed August 24, 2020

Antonio Martinez Jr., McAllen, TX, for Debtor(s).

MEMORANDUM OPINION

Eduardo V. Rodriguez, United States Bankruptcy Judge

I. INTRODUCTION

It is commonly understood that "Texas Homesteads are favorites of the law, and are liberally construed by Texas courts."¹ Monica Michelena, debtor's former spouse, objected to Robert Marcus Michelena's declaration of his Texas homestead exemption.² The Court conducted multiple hearings commencing August 23, 2019, and concluding on December 19, 2019. On March 3, 2020, the Court held a status conference and ordered briefing on a variety of topics related to Debtor's declaration of his homestead exemption. Briefing has now closed, and the matter is ripe for determination. For the reasons set forth below, Robert Marcus Michelena's Texas homestead exemption pursuant to Tex. Const. art. 16 §§ 50, 51 ; Texas Prop. Code. Sec. 41.001 -.002 shall encompass only his 66.6% undivided interest in the 7.07-acre tract and his 100% interest in the 0.24-acre tract that together comprise Manlorson's Estates All of Lot 1 Block 1, 7.31AC more commonly known as 5121 W. Business Highway 83, McAllen, Texas 78501.

II. FINDINGS OF FACT

This Court makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, which is made applicable to adversary proceedings pursuant to Federal Rule of Bankruptcy Procedure 7052. To the extent any finding of fact constitutes a conclusion of law, it is adopted as such. To the extent any conclusion of law constitutes a finding of fact, it is adopted as such. This Court made certain oral findings and conclusions on the record. This Memorandum Opinion supplements those findings and conclusions. If there is an inconsistency, this Memorandum Opinion controls.

A. Procedural History

At issue here is a 7.31-acre tract known as "Manlorson's Estates All of Lot 1 Block 1 7.31AC," and known locally as 5121 W. Business Highway 83, McAllen, Texas 78501 (the "Property "). On March 4, 2019, Robert Marcus Michelena, ("Debtor ") filed his initial petition and schedules under chapter 11 of title 11 of the United States Code.³ On Debtor's Official Form 106 A/B, ("Schedule A ") Debtor listed the Property as his homestead, valued it at $700,000.00, and claimed a 100% interest.⁴ On Debtor's Official Form 106C, ("Schedule C "), Debtor claimed he alone had a 100% interest in the Property's full value, pursuant to Tex. Const. art. 16 §§ 50, 51 ; Texas Prop. Code. Sec. 41.001 -.002.⁵

On April 4, 2019, Monica Michelena ("Ms. Michelena "), Debtor's former spouse, filed an objection to Debtor's claimed homestead exemption, ("Objection ").⁶ Subsequently, on April 23, 2020, Ms. Michelena filed a pleading self-styled as "Monica Michelena's Amended Objection To Property Claimed As Exempt" ("Amended Objection ").⁷ On April 26, 2019, Debtor filed an amended Schedule A and now lists only a 2/3 fee simple interest in the Property but increased its value to $823,061.00.⁸ An amended Schedule C, however, was not filed. On April 28, 2019, Debtor filed his response to Ms. Michelena's Objection.⁹ On May 13, 2019, Debtor filed, inter alia, an amended Schedule A still claiming a 2/3 interest in the Property but decreasing its value to $820,195.00 and asserting that the value of his claimed 2/3 interest is $546,741.99.¹⁰ Curiously, Debtor only asserted a claimed exemption in the amount of $459,303.38 on Schedule C.¹¹ Nevertheless, on June 6, 2019, Debtor once more filed, inter alia, an amended Schedule A, in which the value of the Property remained the same as the May 13, 2019 amendment; however, on amended Schedule C, Debtor now claims up to 100% of fair market value up to any applicable statutory limit which Debtor asserts is $546,741.99.¹²

On August 23, 2019, the Court held an initial hearing, inter alia, on the Objection and continued the matter to September 20, 2019.¹³ On September 16, 2019, Debtor filed, inter alia, an amended Schedule A still claiming a 2/3 interest in the Property but now increasing its value to $2,272,552.00. On amended Schedule C, Debtor continues to assert up to 100% of fair market value up to any applicable statutory limit which Debtor asserts is now $1,514,883.16.¹⁴

On September 20, 2019 the Court held a further hearing, inter alia, on the Objection and continued the matter to November 22, 2019.¹⁵ On November 22, 2019, the Court held a further hearing, inter alia, on the Objection and continued the matter to December 3, 2019.¹⁶ On December 3, 2019, the Court held a further hearing, inter alia, on the Objection and continued the matter to a final hearing on December 19, 2019.¹⁷ Lastly, on December 19, 2019, the Court held a final hearing, inter alia, on the Objection.¹⁸ At the conclusion of the hearing, evidence was closed and the Court ordered the appointment of a chapter 11 trustee and abated all proceedings related to the Objection pending such appointment.¹⁹ On December 23, 2019, Catherine Stone Curtis was appointed chapter 11 trustee.²⁰

On January 22, 2020, the Court held a status conference in which all parties requested additional time to attend a mediation in an attempt to settle the Objection.²¹ The Court granted the parties' request and continued the status conference to March 3, 2020. On March 3, 2020, the Court held its second status conference in which the parties announced that a settlement could not be reached. At the conclusion of the hearing, the Court ordered briefing on the following discrete issues:

a. Whether Debtor can claim a valid Texas homestead exemption on the entirety of 7.31-acre tract known as "Manlorson's Estates All of Lot 1 Block 1, 5121 W. Business Highway 83, McAllen Texas 78501."

b. What impact, if any, do the following have on Debtor's claimed homestead exemption:

i. The April 30, 1992 gift deed of a 0.24-acre tract of land to Debtor;

ii. The Last Will and Testament of Debtor's mother, Loretta Michelena;

iii. The Last Will and Testament of Debtor's father, Manuel Michelena;

iv. Debtor's claim of 100% ownership of Hidalgo County of "Manlorson's Estates All of Lot 1 Block 1, 5121 W. Business Highway 83, McAllen Texas 78501";

v. 11 U.S.C. § 522(p)(1).

Ms. Michelena's Amended Objection is currently the live pleading before the Court.²²

III. CONCLUSIONS OF LAW

A. Jurisdiction, Venue, and This Court's Constitutional Authority to Enter a Final Order

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334 and now exercises its jurisdiction in accordance with In re: Order of Reference to Bankruptcy Judges, Gen. Order 2012-6 (S.D. Tex. May 24, 2012). Furthermore, a determination of Debtor's claimed exemptions is a proceeding that affects the liquidation of assets of the estate or the adjustment of the creditor and debtor relationship, it is a core matter under 28 U.S.C. § 157(b)(2)(O). Because this is a core matter expressly brought under the Code, the Supreme Court's holding in Stern v. Marshall is not applicable and this Court holds constitutional authority to enter a final order and judgment with respect to the core matter at bar.²³ Finally, venue is governed by 28 U.S.C. §§ 1408, 1409. Here, venue is proper because the Court presided over the underlying Bankruptcy Case.²⁴

B. Debtor's Legal Interest In The Property

On May 15, 1980, Debtor's parents, Manuel G. Michelena and Loretta Michelena, along with Debtor and his two siblings, Ricardo M. Michelena and Ronald M. Michelena (collectively "Michelena Family "), were conveyed 28.355 acres out of Lot 207, John H. Shary Subdivision in McAllen, Texas.²⁵ Two homes, the main home ("Large House ") and a smaller, guest home ("Cottage "), exist on the Property.²⁶ Debtor's uncontroverted testimony was that he has resided on the Property for 30 years and, with the exception of the time he cared for his mother in the Large House until shortly after her death, he has lived in the Cottage.²⁷

On June 3, 1983, the Michelena Family conveyed by deed the most northwestern 4.267 acres of the Property to Manuel G. Michelena and Loretta Michelena.²⁸ The Large House and the Cottage, where Debtor resides, exist on that piece of land. Therefore, at that time, Debtor became a tenant-at-will and retained his 20% interest in the remainder of the property owned jointly by the Michelena Family.

On December 29, 1985, Manuel G. Michelena died and through his probated will devised his undivided interest in all of his real property, inter alia, subject to Loretta Michelena's homestead interest, to his three sons Ricardo, Roberto and Ronald Michelena.²⁹ As a result, Debtor received an undivided 16.6% interest in the Property.

On April 30, 1992, Loretta Michelena, Rick M. Michelena, and Ronald M. Michelena, via Gift Deed, deeded to Debtor the following parcel of real property which is located within the 4.267-acre tract previously deeded to Manuel G. Michelena and Loretta Michelena, to wit:

"A 0.24-acre tract out of Lot 207 John H. Shary Subdivision, Hidalgo County Texas as shown by map or plat thereof ... said 0.24 acre tract being a portion of the property described in a deed from Loretta Michelena, Independent Executrix of the Estate of Manuel G. Michelena to Rick M. Michelena, Roberto M. Michelena and Ronald M. Michelena. ..."³⁰

Debtor alleges that in 1999, Debtor, along with his mother, Loretta Michelena, and his two siblings developed a mobile home park on the southernmost 12 acres of the Property and sold that portion.³¹ Debtor did not provide any evidence for this alleged fact that would allow the Court to verify the truth of the matter. However, an appraisal conducted by the Hidalgo County Appraisal District dated December 9, 2015 for the 2014 appraisal year, reflects that the remaining Property consists of 7.31 acres.³²

On April 8, 2013, Loretta Michelena died and her will, which was probated on December 18, 2013,...