Dec. 21 (Westlaw Journals) – Oregon’s homestead exemption, which the state Supreme Court says must be construed humanely, allows a Chapter 7 debtor to keep from creditors the rent she receives from a cell phone tower located on her residential property, a federal bankruptcy judge has ruled.
In re Nork, No. 12-63141, 2012 WL 6027765 (Bankr. D. Or. Dec. 4, 2012).
The debtor needs the exemption because she uses the rent money to make her monthly home loan payments, Chief U.S. Bankruptcy Judge Frank R. Alley III of the District of Oregon said in a memorandum opinion.
The judge reached the decision after noting that it appeared to be one of first impression in the state.
The debtor, Cynthia Lee Nork, lives on a 10-acre property in a semi-rural area near Medford, Ore. She leases a portion of the property some distance from her house to a cell phone company in return for monthly rent of $1,000, the opinion said.
Nork filed for bankruptcy protection in July and later claimed the tower is subject to Oregon’s homestead exemption, Or. Rev. Stat. § 18.395. The full amount goes toward her monthly home loan payment of nearly $2,500, the opinion said.
The bankruptcy trustee, Candace Amborn, objected in September. She claimed the tower is not part of the exempt homestead.
Judge Alley overruled the objection.
He said he could easily dispose of the case based on the fact that the lease agreement states the cell tower is the property of the tenant and not Nork.
“The tower is not property of the estate, and therefore not subject to either the trustee's control or the debtor's claim of exemption,” the judge wrote.
But he said it became clear to him at a hearing on the objection that the real issue is not the tower, but Nork’s right to retain the rent proceeds.
While the exemption plainly applies to the cash proceeds from the sale of a homestead, the judge said no court in Oregon has decided whether it extends to rent.
He then relied upon the Oregon Supreme Court’s admonition in In re Banfield’s Estate, 137 Or. 167 (1931), that the homestead exemption must be liberally and humanely interpreted in favor of the “unfortunate debtor” to find that the exemption applies to rental proceeds to the extent they are used to pay debt secured by the homestead.
Debtor: Matthew G. Fawcett, Medford, Ore.
Trustee: David B. Mills, Eugene, Ore.