HOMESTEAD AFTER HOME EQUITY

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					        HOMESTEAD AFTER HOME EQUITY


                       Presented by



                     STEVEN C. HALEY

                MOORMAN, TATE, MOORMAN,
                 URQUHART & HALEY, L.L.P.
                    207 East Main Street
                   Brenham, Texas 77833
                       (409) 836-5664




                       CHAPTER 5

Revised July, 2000
                                     STEVEN C. HALEY
                     Moorman, Tate, Moorman, Urquhart & Haley, L.L.P.
                                       207 E. Main
                                 Brenham, Texas 77833
                                      409-836-5664
                                   FAX: 409-830-0913

                               BIOGRAPHICAL INFORMATION
EDUCATION
     B.S., Agricultural Economics, cum laude, Texas A&M University, 1978
     J.D., cum laude, Bates College of Law, University of Houston, 1981
     Articles Research Editor, Houston Law Review
PROFESSIONAL ACTIVITIES
     Partner, Moorman, Tate, Moorman, Urquhart & Haley, L.L.P.
     Admitted to the State Bar of Texas, 1981
     Admitted to practice in Texas in the U. S. District Courts for the Northern, Eastern, Southern,
             and Western Districts of Texas
     General Counsel, Texas Department of Agriculture (1981-82)
     Senior Staff Attorney, Texas A&M University System (1982-85)
     Member:         State Bar of Texas' Real Estate, Probate and Trust Law Council (1998-)
                     State Bar of Texas' Real Estate Forms Committee (1997-)
                     State Bar of Texas' Agricultural Law Committee (Chairman 1997-98)
                     College of the State Bar of Texas
                     American Agricultural Law Ass'n
                     Washington County Bar Ass'n (President 1986-87)
LAW RELATED PUBLICATIONS AND HONORS
     Course Director for the University of Texas School of Law and Texas Mortgage Bankers'
             Association; Texas Mortgage Lending Institute 2001
     Course Director for the State Bar of Texas; Advanced Real Estate Law Course, 2000
     Author/speaker for the Southern Methodist University; Real Estate Transactions in Depth,
             2000; Texas Abstracts of Judgment and Judgment Liens
     Author/speaker for the South Texas College of Law; Real Estate Law Conference, 1999;
             Texas Law of Acknowledgments
     Author/speaker for the University of Texas School of Law and Texas Mortgage Bankers
             Association; Texas Mortgage Lending Institute, 1998, Sale or Disposition of Personal
             Property Collateral
     Author/speaker for the State Bar of Texas; Advanced Real Estate Law Course, 1998;
             Drafting Hunting and Agricultural Leases
     Author/speaker for the State Bar of Texas; Advanced Real Estate Law Course, 1997;
             Homestead Update
     Author/speaker for the University of Texas School of Law and Texas Mortgage Bankers
             Association; Texas Mortgage Lending Institute, 1997, Creative Ways To Get To The
             Homestead: Resulting And Constructive Trusts
     Author/speaker for the University of Texas at Austin; Texas Mortgage Lending Institute,
             1996, Texas Law of Acknowledgments
     Author/speaker for the University of Houston Law Foundation; Collecting Debts and
             Judgments, 1996, Sale or Disposition of Personal Property Collateral
     Author/speaker for the University of Texas at Austin; Texas Mortgage Lending Institute,
             1995, Material Alteration of Documents
     Author/speaker for the State Bar of Texas; Advanced Real Estate Law Course, 1995, Sale
             or Disposition of Personal Property Collateral
     Author/speaker for the University of Texas at Austin; Texas Mortgage Lending Institute,
             1994, Homestead Update
     Author/speaker for the State Bar of Texas; Agricultural Law Seminar, 1994, Texas Farm
             Products as Collateral
     Author/speaker for the State Bar of Texas; Agricultural Law Seminar, 1993, Distinguishing
             the Rural and Urban Homestead
Homestead After Home Equity                                                                                                       Chapter 5

                                      HOMESTEAD AFTER HOME EQUITY

                                                          Table of Contents


I.     INTRODUCTION ................................................................................................................... 1
       A. Scope of the Article ...................................................................................................... 1
       B. Construction of Homestead Provisions - Generally ................................................. 1

II.    GENERAL CHARACTERISTICS OF THE HOMESTEAD ...................................................                                            1
       A. Distinguishing the Rural and Urban Homestead ......................................................                                  1
          1. Traditional Analysis .................................................................................................            2
          2. 1989 Property Code Definition ................................................................................                    2
          3. 1999 Property Code Definition ................................................................................                    3
       B. Distinguishing the Family and Single Adult Homestead .........................................                                       3
          1. Definition of "Family" ...............................................................................................            3
          2. Social Status of Family ............................................................................................              3
          3. Duty of Support/Necessity of Dependency .............................................................                             3
          4. "Family" Status Affected by Death/Divorce/Marriage ..............................................                                 4
       C. Residential Homestead Must Include the Home .......................................................                                  4
       D. Multi-Tract Homesteads ...............................................................................................               4

III.   PROPERTY THAT MAY BE SUBJECTED TO HOMESTEAD ............................................                                                5
       A. Generally........................................................................................................................    5
       B. Tenancy in Common ....................................................................................................               5
       C. Tenancy at Will ..............................................................................................................       5
       D. Equitable Estate ............................................................................................................        5
       E. Life Estate ......................................................................................................................   5
       F. Leasehold ......................................................................................................................     5
       G. Future Interests.............................................................................................................        6
       H. Other Non-Possessory Interests ................................................................................                      6
       I. Partnership Property ....................................................................................................            7
       J. Corporate Property .......................................................................................................           7
       K. Cooperative Housing ...................................................................................................              7
       L. Mineral Property ...........................................................................................................         7
          1. Severed Minerals.....................................................................................................             8
          2. Open Mine Doctrine ................................................................................................               8
       M. Out-of-State Property ...................................................................................................            8
       N. Proceeds From the Sale of Homestead .....................................................................                            8
          1. Computing the Expiration of 6-Month Exemption Period ........................................                                     8
       O. Improvements ...............................................................................................................         8

IV. CLAIMS ENFORCEABLE AGAINST THE HOMESTEAD ................................................... 8
    A. Generally........................................................................................................................ 8
    B. Applicable Law.............................................................................................................. 9
    C. What Constitutes an "Encumbrance" Against the Homestead ............................... 9
    D. Purchase Money Liens ................................................................................................. 9
       1. Extent of Purchase Money Lien .............................................................................. 9
       2. Owelty Liens ............................................................................................................ 9
       3. Joinder of Husband and Wife Not Required .......................................................... 10
    E. Liens for Improvements .............................................................................................. 10


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Chapter 5                                                                                     Homestead After Home Equity

       1. Generally ................................................................................................................   10
       2. Time of Execution of Mechanics Lien Contract .....................................................                           10
       3. Place of Execution of Mechanic's Lien Contract ....................................................                          11
       4. Right of Rescission of Mechanic's Lien Contract ...................................................                          11
       5. Loan Closings On Liens for Improvements ............................................................                         11
       6. Disbursement of Funds to Contractor ....................................................................                     11
       7. Final Bills-Paid Affidavit Required ..........................................................................               12
       8. Required Conveyance to Contractor Prohibited ....................................................                            12
       9. Joinder of Husband and Wife in Execution of Mechanics Lien Contract ..............                                           12
       10. Filing and Recordation of Mechanics Lien Contract ..............................................                            12
       11. Elements of a Valid Written Contract for Improvements........................................                               12
       12. Sham Contracts for Improvements ........................................................................                    13
       13. Extent of Lien for Improvements ............................................................................                13
       14. Involuntary Mechanic's Liens Against the Homestead ..........................................                               13
    F. Liens for Taxes ............................................................................................................    14
       1. Taxes Which Support a Lien on Homestead .........................................................                            14
       2. Extent of Ad Valorem Tax Lien Against the Homestead .......................................                                  14
    G. Home Equity Liens ......................................................................................................        14
       1. Eligible Homestead Property ..................................................................................               15
       2. Authorized Lenders ................................................................................................          15
       3. Restriction on Loan-to-Value Ratio ........................................................................                  16
       4. Restriction Against Open-Ended Credit .................................................................                      17
       5. Restriction on Fees ................................................................................................         17
       6. Restriction Against Recourse Debt ........................................................................                   19
       7. Restriction Against Prepayment Penalties .............................................................                       19
       8. Restriction Against Additional Collateral ................................................................                   19
       9. Restriction on Number of Home Equity Loans .......................................................                           20
       10. Restriction on Frequency of Home Equity Loans...................................................                            21
       11. Restriction on Amortization of Home Equity Loans................................................                            21
       12. Restriction on Interest ............................................................................................        21
       13. Restriction on Basis for Acceleration .....................................................................                 21
       14. Restriction Against Confession of Judgment/Waiver of Citation ...........................                                   22
       15. Restriction Against Assignment of Wages .............................................................                       22
       16. Restriction Against Same Creditor Payoffs ............................................................                      22
       17. Required Pre-Loan Disclosure ...............................................................................                22
       18. Borrower's Right of Recission ................................................................................              23
       19. Requirements for Loan Documents .......................................................................                     23
       20. Restriction on Place of Closing ..............................................................................              24
       21. Restriction on Foreclosure .....................................................................................            25
       22. Restriction on Release/Transfer of Note ................................................................                    25
       23. Forfeiture Provision ................................................................................................       25
       24. Non-Severability Provision .....................................................................................            25
    H. Reverse Mortgages .....................................................................................................         25
       1. Written Contract Required ......................................................................................             25
       2. Joinder of Spouse Required ...................................................................................               25
       3. Limitation on Age of Borrower ................................................................................               25
       4. Loan Must be Non-Recourse .................................................................................                  25
       5. Restriction on Advances to Borrower .....................................................................                    25
       6. Restriction on Loan Repayment Requirements .....................................................                             26
       7. Required Borrower Counseling ..............................................................................                  26
       8. Priority of Reverse Mortgages ................................................................................               26
       9. Restriction on Interest ............................................................................................         26
       10. Assignment of Reverse Mortgages ........................................................................                    27


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Homestead After Home Equity                                                                                                      Chapter 5

             11. Forfeiture Provision ................................................................................................       27
             12. Required Disclosures .............................................................................................          27
             13. Restriction on Foreclosure .....................................................................................            27
       I.    Liens Predating Homestead .......................................................................................               27
       J.    Refinancing, Renewing and Extending a Lien on Homestead ...............................                                         28
             1. Risks of "Rolling In" Refinance Costs ....................................................................                   28
             2. Refinancing, Renewing, and Extending Purchase Money Liens ...........................                                        28
             3. Refinancing, Renewing, and Extending Liens for Improvements ..........................                                       28
             4. Refinancing, Renewing, and Extending a Lien for Taxes ......................................                                 28
             5. Refinancing, Renewing, and Extending a Home Equity Loan ...............................                                      29
       K.    Effect of Liens Not Permitted by the Constitution ...................................................                           29
       L.    Lien Spreading .............................................................................................................    29
       M.    Lien Overburdening ....................................................................................................         29
       N.    Judgment Liens ...........................................................................................................      30
       O.    Application of Loan Payments When Lien Partially Invalid ....................................                                   31

V.     ESTABLISHMENT OF THE HOMESTEAD .........................................................................                              31
       A. Generally.......................................................................................................................   31
       B. Use Sufficient to Establish a Homestead (Generally) .............................................                                  31
       C. Use Must Be By Debtor or Constituent Family Member..........................................                                       31
       D. Sufficient Use to Establish a Rural Homestead .......................................................                              32
       E. Sufficient Use to Establish a Business Homestead ................................................                                  33
       F. When Use Short of Actual Occupancy Establishes a Homestead .........................                                               34
       G. Intent Sufficient to Establish a Homestead ..............................................................                          35
          1. Vicarious Intention Via Personal Representative of Homestead Claimant ...........                                               35
       H. Written Designation of Homestead Required? ........................................................                                35
       I. Involuntary Designation of Homestead ....................................................................                          36
       J. Duration of the Homestead Designation ...................................................................                          36
       K. Who May Designate the Homestead? .......................................................................                           36
       L. Gerrymandered Designation of Homestead .............................................................                               37

VI. DEFENSIVE STRATEGIES AGAINST THE HOMESTEAD CLAIM ...................................                                                     37
    A. Abandonment ...............................................................................................................           37
       1. Generally ................................................................................................................         37
       2. Elements of Abandonment .....................................................................................                      37
       3. Temporary Absence From the Homestead ............................................................                                  38
       4. Renting of the Homestead .....................................................................................                     38
       5. Acquisition of a New Homestead as Abandonment of the Old ..............................                                            39
       6. Abandonment of Family Homestead Requires Joinder of Both Spouses .............                                                     39
       7. Abandonment of Homestead by Guardian of the Debtor ......................................                                          39
    B. Alienation ......................................................................................................................     39
       1. Sale Without Abandonment May Extinguish Homestead ......................................                                           39
       2. Sale Requires Joinder of Husband and Wife .........................................................                                40
       3. Sale Must Be Completed ........................................................................................                    40
       4. Pretended Sales .....................................................................................................              40
       5. Effect of Sale on Subsequent Purchasers .............................................................                              41
       6. Sale of Homestead as Fraudulent Conveyance? ..................................................                                     41
    C. Estoppel ........................................................................................................................     41
       1. Elements of Estoppel .............................................................................................                 42
       2. Effect of Homestead Disclaimer .............................................................................                       42
       3. Effect of Homestead Disclaimer When the Debtor is in Actual Use and
           Possession of the Property ....................................................................................                   42
       4. Effect of Homestead Disclaimer When There is Ambiguous Possession by the

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Chapter 5                                                                                            Homestead After Home Equity

              Debtor .....................................................................................................................     43
          5. Requirements of a Valid Homestead Disclaimer ...................................................                                  43
          6. Debtor Misrepresentations Regarding Validity of Mechanic's Line .......................                                           43
          7. Debtor Misrepresentations Must Be Clear, Deliberate, and Unequivocal .............                                                43
          8. Lender Reliance on Debtor Misrepresentations Must Be Reasonable .................                                                 44
          9. Husband and Wife Must Join in the Misrepresentations .......................................                                      44
          10. Estoppel Will Not Create a Lien .............................................................................                    44
          11. When the Debtor Claims Excessive Homestead ...................................................                                   44
       D. Death of the Homestead Claimant .............................................................................                        44
          1. The Right of the Property to Descend Free of Debt is Fixed at Death ..................                                            45
          2. The Right of the Property to Descend Free of Debt is Not Dependent on
              Occupancy..............................................................................................................          45
       E. D'Oench Duhme ...........................................................................................................            45
          1. When the Debtor Executes a Homestead Disclaimer ...........................................                                       45
          2. When the Debtor Executes an Antedated Mechanic's Lien Contract ...................                                                46
          3. When the Debtor Participates in a Pretended Sale ...............................................                                  46
       F. Federal Preemption .....................................................................................................             46
          1. Home Owner's Loan Act and Home Equity Lending..............................................                                       46
          2. Federal Tax Liens ...................................................................................................             47
          3. Federal Criminal Restitution Act .............................................................................                    47
          4. Bankruptcy Code and Family Support Obligations ................................................                                   48
          5. Commerce Clause - U.S. Constitution ...................................................................                           48
          6. Truth In Lending Act ...............................................................................................              48
          7. Equal Credit Opportunity Act ..................................................................................                   48
          8. Anti-Preemption Amendments to the Property Code .............................................                                     48
       G. Equitable Liens/Constructive Trusts .........................................................................                        49
       H. Fraudulent Conveyance ..............................................................................................                 49
       I. Holder in Due Course ..................................................................................................              49
       J. Waiver ...........................................................................................................................   49

VII. FORECLOSURE AGAINST THE HOMESTEAD .................................................................                                       49
      A. What Constitutes a "Forced Sale" of the Homestead? ...........................................                                        49
      B. What Liens May Be Foreclosed Against the Homestead? ......................................                                            49
      C. Notice to Cure Required .............................................................................................                 49
      D. When the Lien Attaches Only to Surplus Non-Exempt Acreage ............................                                                50
      E. When the Lien Covers Both Exempt and Non-Exempt Lands ...............................                                                 50
      F. Wrongful Execution of the Homestead .....................................................................                             50
      G. Foreclosure of a Home Equity Loan/ Reverse Mortgage ........................................                                          50
         1. Notice to Cure .........................................................................................................           51
         2. Application for Expedited Foreclosure Proceeding ................................................                                  51
         3. Notice of Expedited Foreclosure Proceeding ........................................................                                51
         4. Response to Application for Expedited Foreclosure ..............................................                                   52
         5. Default ....................................................................................................................       52
         6. Determination When Response Filed ....................................................................                             52
         7. Order to Proceed with Expedited Foreclosure .......................................................                                52
         8. Abatement and Dismissal ......................................................................................                     53
VIII. DIVORCE AND HOMESTEAD .............................................................................................                      53
      A. Decree May Award a Lien Against the Homestead ..................................................                                      53
         1. Permitted Purposes of the Lien ..............................................................................                      53
         2. Extent of the Lien Claim .........................................................................................                 53
      B. Decree May Set Aside Homestead to One Spouse For Period of Years ...............                                                      53
      C. Decree May Direct the Sale of the Homestead .........................................................                                 54


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Homestead After Home Equity                                                                                                      Chapter 5

IX. PLEADING AND PROOF .....................................................................................................                 54
    A. Pleading ........................................................................................................................     54
       1. The Homestead Defense Must Be Affirmatively Pleaded ......................................                                         54
    B. Proof..............................................................................................................................   54
       1. Homestead a Fact Issue ........................................................................................                    54
       2. Burden of Proof ......................................................................................................             54
       3. Proof of Homestead Facts by Request for Admission ...........................................                                      54
       4. Issue Submission ...................................................................................................               54

X.     TEXAS PROBATE HOMESTEAD .......................................................................................                       54
       A. Generally.......................................................................................................................   54
       B. Extent of the Probate Homestead ..............................................................................                     54
       C. Duration of the Probate Homestead ..........................................................................                       55
       D. Who is a "Survivor" for the Purposes of a Probate Homestead? ..........................                                            55
       E. Rights and Responsibilities of Survivor During the Survivorship .........................                                          55
       F. Survivor's Right to the Probate Homestead May Be Waived .................................                                          55

XI. TAXATION OF THE HOMESTEAD .....................................................................................                          55
    A. The Homestead Tax Exemptions ...............................................................................                          55
    B. Who is Entitled to Claim the Standard Residence Homestead Tax Exemption? .                                                            56
       1. Individual Ownership ..............................................................................................                56
       2. Corporate Ownership .............................................................................................                  56
       3. Condominium Ownership .......................................................................................                      56
       4. Cooperative Housing Ownership ...........................................................................                          56
       5. Trust Ownership .....................................................................................................              56
    C. Application for Residence Homestead Tax Exemption...........................................                                          56
    D. Who is Entitled to Claim the Over 65/Disabled Homestead Exemption? ..............                                                     56
    E. Amount of Homestead Tax Exemption for Elderly/Disabled ..................................                                             57
    F. Limitations on Increase of School Tax on Homesteads of Elderly ........................                                               57
    G. Installment Payment of Homestead Taxes By the Elderly ......................................                                          58
    H. Manufactured Homes as Homestead ........................................................................                              58
    I. Redemption of Residence Homestead Sold at Tax Sale .........................................                                          58




                                                                       v
Homestead After Home Equity                                                                Chapter 5


                    HOMESTEAD AFTER HOME EQUITY
I.    INTRODUCTION                                    homestead exemption traces back to
A.    Scope of the Article                            Stephen F. Austin's Code of Civil Regulations
      This Article will cover the important           regulating the affairs of his first Texas colony
developments in homestead law over the last           in 1824.
fifteen years (1985-2000).        A complete               While sometimes characterized as overly
discussion of all subtleties and nuances of the       paternalistic, the homestead exemption is
Texas homestead is well beyond the scope of           nevertheless founded on the public policy of
a CLE Article and 30 minute talk and has not          protecting citizens from destitution such that
been attempted. The focus has been on                 they "cherish in their bosoms the sublime
recent developments shaping and revising the          independence        so    essential     to   the
venerable Texas homestead.                            maintenance of free institutions."          The
                                                      universal rule of construction is that
B. Construction of Homestead Provisions               homestead protections are liberally construed
- Generally                                           in accomplishment of their objective. The
     The Texas Constitution allows a person           liberality of the Texas homestead exemption
to establish a "Homestead" thereby exempting          is not lightly disturbed. Homesteads are
certain real property from forced sale by             considered favorites of the law.
general creditors. This is a special protection
not extended to other types of property. In           II. GENERAL CHARACTERISTICS OF
addition, the exemption provides prophylactic         THE HOMESTEAD
protection of the homestead from all liens                The current rural and urban homestead
except those which are constitutionally               exemptions are as follows:
permitted.
     Texas laws protecting the homestead are
expansive and deeply rooted. The Texas


               Urban                                                        Rural

               One or more contiguous lots amounting       200 acres not in a city, town, or
               to not more that 10 acres in a city,        village used for the purposes of a
 Family        town, or village and used for the           home together with improvements
               purposes of a home or both as an
               urban home and a place to exercise a
               business or calling of the claimant
               together with improvements

               One or more contiguous lots amounting       100 acres not in a city, town, or
 Single        to not more that 10 acres in a city,        village used for the purposes of a
 Adult         town, or village and used for the           home together with improvements
               purposes of a home or both as an
               urban home and a place to exercise a
               business or calling of the claimant
               together with improvements14

A. Distinguishing the Rural and Urban                 which is part rural and part urban. This
Homestead                                             inelastic rule makes the characterization of
    A debtor cannot have both a rural and             the homestead as rural or urban of critical
urban homestead. It must be one or the                importance. The property's characterization
other. Nor can a debtor blend a homestead             will determine the amount of acreage subject


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Chapter 5                                                               Homestead After Home Equity

to homestead protection from creditors, the             municipal utilities and fire and police
acceptable bases of a lien or encumbrance               protection. This statutory definition was
against the property, the necessity of joinder          subjected to inconsiderable legislative debate.
of the spouse in any sale, conveyance, or                It largely failed in its intent to draw a bright
encumbrance        of    the     property,   the        line distinction between rural and urban
susceptibility of the property to partition after       homesteads.
death, the necessity of a written contract to                  Some post-1989 decisions questioned
support a lien for improvements, the eligibility        whether strict adherence to the definition
of the property for classification as a business        constricted the meaning of urban and rural
homestead, and many other issues of                     homesteads beyond that intended by the
importance to those who deal with the                   Constitution. A tract clearly within a city, town,
homestead claimant and his property.                    or village might not be served with the
     While the homestead exemption is                   requisite city services to qualify as an urban
generally liberally construed, Texas law does           homestead. A tract clearly outside a city,
not liberally presume one form of homestead             town, or village could have sufficient
over another.                                           municipal services to lose its rural character.
                                                        There was a split of authority in federal
1.   Traditional Analysis                               decisions considering the constitutionality of
     The Texas Constitution provides no                 the 1989 definition.
certain guide by which the rural and urban                     Other decisions questioned whether the
homestead may be plainly and readily                    1989 definition should be universally applied
distinguished. Before 1989, the question of             to all cases distinguishing between a rural and
whether a tract was or was not in a city, town,         urban homestead.           In United States v.
or village was left to common law                       Blakeman and Matter of Bradley the Fifth
interpretation, ordinarily as a question of fact        Circuit relied on sketchy legislative history to
largely dependent on the history of each                conclude that the statutory definition was the
individual case. Cases were decided on a                exclusive test only in cases involving the
broad range of evidentiary factors considered           threatened foreclosure of a homestead. In all
probative over the years. These evidentiary             other cases the traditional analysis was
factors have included consideration of the              appropriate. This construction compounded
location of municipal boundaries, the location          confusion with the untenable possibility that a
of the actual settled limits of town, whether the       tract could be an urban homestead for some
property was platted in lots and blocks, the            purposes and a rural homestead for others.
use made of the property and surrounding                       The 1989 definition was also indefinite on
properties, the occupation of the homestead             what municipal services were determinative.
claimant, whether the property was served               The conjunctive phrasing of the definition
with municipal utilities, services, and streets,        suggested that all required municipal services
any consensual acts of the homestead                    were required to serve the property to avoid
claimant indicating an intention to treat the           its characterization as rural. The definition did
tract as urban property, the size and value of          not specify what or how many "municipal
the property, the existence of restrictive              utilities" were determinative. There was also
covenants on the property, and the existence            uncertainty whether "municipal utilities"
of zoning or other municipal ordinances                 referred to public utility corporations providing
affecting the use of the property. The impact           contract services within municipal limits.
of the character of the homestead on creditors                 The 1989 Property Code definition
was not a consideration.                                reversed the common law rule regarding the
                                                        time at which the character of a homestead
2.   1989 Property Code Definition                      was determined. Traditionally, the character
     In 1989, the Texas Legislature adopted a           of the homestead was determined at the time
statutory definition for a rural homestead.             that the adverse right was asserted against it.
Under the 1989 legislation, a homestead was              The 1989 amendment reversed this rule to
considered to be rural if, at the time                  provide that the character of the homestead
designated, the property was not served by              as rural or urban was determined at the time


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Homestead After Home Equity                            Chapter 5

the homestead is "designated". The practical
effect of this change was to prevent rural
property from being transformed into an urban
homestead by the growth and expansion of a
neighboring town.

3.  1999 Property Code Definition
    Effective September 1, 1999, the
Property Code was amended to provide a
new definition for an urban homestead. A
homestead is considered to be urban if:

     (1) located within the limits of a
         municipality or its extraterritorial
         jurisdiction or a platted subdivision;
         and
     (2) served by police protection, paid or
         volunteer fire protection, and at least
         three of the following services
         provided by a municipality or under a
         contract to a municipality:

          (A)   electric
          (B)   natural gas
          (C)   sewer
          (D)   storm sewer; or
          (E)   water

     Presumedly, by negative implication, all
homesteads not meeting this statutory test are
considered rural. It remains to be seen if this
1999 remedial legislation will be held a
reasonable statutory interpretation of the
Texas Constitution and whether the legislative
history issues which bedeviled application of
the 1989 definition have been resolved.

B. Distinguishing the Family and Single
Adult Homestead
1. Definition of "Family"
     "Family" is a term of art in Texas
homestead jurisprudence. No definition for
the term is supplied by the Constitution or by
statute. Case authorities provide that a family
consists of:

     a)   a group of people having the social
          status of a family living subject to
          one domestic government;
     b)   the head of the family must be
          legally or morally obligated to
          support at least one other family
          member; and


                                                   3
Chapter 5                       Homestead After Home Equity

                         i
                         n
                         g

                         d
                         e
                         p
                         e
                2. Social Status of Family
                         n
                     A showing of the stereotypical "Leave it to
                         d
                Beaver" family is not required to establish a
                         e
                family homestead. The following social
                         n
                relationships were mentioned with approval
                         c
                during the reporting period as constituting a
                "family" e(if the requisite obligation of
                support/dependency is shown):
                         b
                         y

                         t
                         h
                         e

                         o
                         t
                         h
                         e
                         r

                         f
                         a
                         m
                         i
                         l
                         y

                         m
                         e
                         m
                         b
                         e
                         r

                         f
                         o
                         r

                         t
                         h
                         i
                         s

                         s
                         u


            4
Homestead After Home Equity           Chapter 5

                                  i
                                  e
                                  d

                                  d
                                  a
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                              5
Chapter 5           Homestead After Home Equity



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Homestead After Home Equity           Chapter 5

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                              7
Chapter 5                                                               Homestead After Home Equity

3.   Duty of Support/Necessity of Dependency             homestead before divorce could claim
     The duty of support by the head of the              separate homesteads after the divorce.
family may be either legal or moral. For a                    If a marriage is ended by the death of one
dependent minor or infirm elderly person the             spouse the "family" status of the surviving
type of support may be either emotional or               spouse is not affected. The surviving spouse
financial. However, for a dependent adult, the           has the same homestead rights that both
support must be financial. The test to                   spouses had prior to the death of one. In
determine financial dependency is whether,               Border v. McDaniel, a wife died leaving the
but for the head of the family's support, the            husband residing on 165 acres with no
dependent's financial position would be                  dependent children. Held the husband could
altered. Financial dependence need not be                claim the entire tract as homestead. Likewise,
absolute.                                                in Riley v. Riley, a husband and wife
     In Matter of Hill, a grandmother, her adult         established a rural homestead before the
daughter, and minor grandchild were                      death of the husband. After the husband's
determined to be a family when the adult                 death, the wife could continue to claim a
daughter, though employed, did not make                  homestead of up to 200 acres.
sufficient income to allow her to leave her
mother's home.          The daughter's partial           C. Residential Homestead Must Include
dependency for some of her support entitled              the Home
the grandmother to claim a family homestead.                  A residential homestead must be made
     In NCNB Texas Nat'l Bank v. Carpenter,              up of the dwelling house constituting the
evidence failed to show that a father, mother,           family residence together with the land on
and their two married adult sons comprised a             which it is situated and the appurtenances
single family unit. No showing was made that             connected therewith. The idea necessarily
there was any moral or legal duty on the                 carries with it the dwelling house or family
father to support the two able-bodied adult              residence and all property used in connection
sons or that there was any necessity for such            with the residence.
support.
     In In re Finkel, a mother and her adult             D. Multi-Tract Homesteads
son held not to constitute a family when the                  Formerly, either a rural or urban
son was not financially or legally dependent             homestead could be made up of one or more
on the mother. Likewise, the son, though                 parcels. However, one of the designated
looking after the financial affairs of his mother,       parcels must include the debtor's dwelling and
did not support his mother in any way. The               appurtenances. The tracts did not need to be
relationship did not constitute a family.                contiguous.
                                                              Effective January 1, 2000, the Texas
4. "Family"         Status      Affected   by            Constitution and Texas Property Code have
Death/Divorce/Marriage                                   been amended to require that an urban
     A family can have but one homestead.                homestead now be comprised only of
Constituent family members cannot have a                 "contiguous" lots.
separate homestead apart from the family                      Formerly, it was permissible for a debtor
homestead.                                               to claim both an urban residential homestead
     In Matter of Claflin, a single woman and            and an urban business homestead so long as
man, each with their own separate                        both in aggregate did not exceed the
homesteads, married and resided in the                   maximum permissible acreage and were
husband's home. When the new family was                  located in the same urban area. It was not
created by the marriage, the wife could no               necessary to have both. A debtor could claim
longer claim a separate homestead                        an urban business homestead without
exemption in her former home.                            claiming an urban residential homestead.
     The converse is also true. If a couple is                Effective January 1, 2000, an urban
divorced there are two heads of a family each            homestead must be used for the purposes of
with the right to claim a separate homestead.            an urban home or as both as an urban home
In re Julian held a couple entitled to one               and a place to exercise a calling or business.


                                                     8
Homestead After Home Equity                                                                 Chapter 5

This change prevents a debtor from claiming             own only one property and still not be able to
a separate business homestead on property               claim it as homestead.
not also used as a home. If the debtor's                     The homestead exemption will only
home and business are on non-contiguous                 extend to and protect that estate which the
urban tracts, no business homestead may be              debtor owns in the property. The homestead
claimed. Because the urban homestead must               right in property cannot rise any higher than
now occupy one contiguous parcel, this has              the right, title, or interest acquired by the
rendered former language in TEX. PROP.                  claimant. Therefore, the homestead interest
CODE ANN. ' 41.002(a) requiring the urban               is subject to the same limitations as the
homestead to be "in the same urban area"                claimant's interest in the property.
surplusage.      This language has been
removed effective January 1, 2000.                      B. Tenancy in Common
     A business homestead may be claimed                     A debtor's undivided interest in a tenancy
only as part of an urban homestead. In In re            in common will sustain a homestead claim,
McCain, the development of part of a rural              but the debtor's homestead claim is subject to
homestead into a rural subdivision was                  a right of partition by the other cotenants.
business activity inconsistent with the claim                In In re McCain, a debtor claimed a rural
that the developed property was homestead.              homestead in 71 acres in which the debtor
     A debtor may not combine a rural and               originally acquired an undivided 2/3 interest.
urban homestead. A debtor cannot have both              The debtor later acquired a 100% interest in a
a rural residential homestead and an urban              5.056 acre tract and built a home thereupon.
business homestead. In In re Julian and In re           The remainder of the tract remained in
Nelson,     debtors     claiming     business           undivided ownership and was developed as a
homesteads in an urban area also claimed                rural subdivision. While a homestead can be
rural residential homesteads.       Held the            established on an undivided interest, this
debtors could not claim both an urban                   debtor's acquisition of full fee title in a
business homestead and a rural residential              5.056 acre tract with no alteration in
homestead.                                              ownership of the remainder indicated an
                                                        intent to use only the 5.056 acre tract as
III. PROPERTY            THAT       MAY       BE        homestead.
SUBJECTED TO HOMESTEAD
A. Generally                                            C. Tenancy at Will
     A claim of homestead is not dependent                   A tenancy upon property at the will of the
on an unqualified fee ownership of the land             record owner will sustain a homestead claim.
involved. A property may be claimed as                  However, the continuance of such a
homestead although fee title is in a third party.       homestead claim is dependent upon the
 Generally, any present possessory estate in            continued permission of the fee owner or the
real property will support a homestead claim.           owner's successor.
     However, a debtor must have some title                  In Resolution Trust Corp. v. Olivarez, the
or interest in the property to claim the                claimants conveyed their home to their adult
exemption and the homestead extends only to             son but continued to reside in the home with
the title or interest that the debtor owns in the       the son's permission. This permissive use
property.        A homestead cannot exist               amounted to a tenancy at will. However,
independent of such title or interest in the            when the son encumbered the property with a
property. An exception to this rule exists as to        lien later foreclosed by the RTC, the
married couples. A spouse may claim a                   claimants' continued permissive right to
homestead in property though the property is            occupy the property was properly terminated
the separate property of the other spouse.              by the RTC as the successor to the fee
     But ownership of property will not                 interest in the property.
necessarily entitle the claimant to a
homestead. Ownership alone is insufficient to
make a premises a homestead. A debtor may



                                                    9
Chapter 5                                                              Homestead After Home Equity

D. Equitable Estate                                    reversionary interest later matures into fee
     A claimant may establish a homestead              title, the homestead protection will extend to
interest when only an equitable estate has             and protect that fee title.         Homestead
been acquired in the tract. For example, a             protection will relate back to the date that the
debtor acquiring equitable title in a tract by         claimant began occupying the property as his
contract for deed may claim the tract as               homestead. Thus in In re Eskew, the Eskews
homestead notwithstanding that legal title will        exclusive present occupancy of the property
not be delivered until the purchase price is           (Dean Eskew's parents having relinquished
completely paid.                                       their possessory rights in the tract arising
                                                       under the elder Eskews' life estate) allowed
E.   Life Estate                                       the homestead exemption to attach to the
     A life estate will support a homestead            Eskew's leasehold estate and reversionary
claim.                                                 interest.
                                                             The result in Eskew was dependent upon
F.   Leasehold                                         the remainderman having the exclusive
     A debtor may claim a homestead in a               present occupancy of the tract as homestead.
leasehold. The leasehold may be for a                   If the land is already occupied by a life tenant
specific term or at will. The exemption                who asserts a homestead in the property, the
extends to any security deposits and prepaid           remainderman has no right sufficient to allow
rent of the debtor.                                    the remainderman to claim a homestead. A
     In In re Eskew, tenants were allowed a            remainderman cannot pile a homestead on a
homestead in a leasehold established under             homestead in the same property.
an unwritten gratuitous lease with one of the
tenant's parents.                                      H. Other Non-Possessory Interests
G. Future Interests                                         To sustain a homestead claim, the debtor
     If a debtor has only a future interest in         must have a present possessory right in the
property without any present possessory                homestead tract. In Laster v. First Huntsville
rights therein, the tract may not be claimed as        Properties, a divorce decree awarded
homestead.                                             undivided interests in the marital homestead
     This does not mean that a holder of a             to both husband and wife (wife 78.83%,
reversionary interest in a property may never          husband 26.17%). The wife was further given
claim it as homestead. An exception to the             the exclusive right to occupy the homestead
general rule applies if (1) the remainderman           from the date of entry of the decree until the
has a present right of possession in the               couple's youngest child reached eighteen or
property sufficient to impress it with the             was no longer in school. The effect of this
homestead right and (2) the property has not           decree was to award to the husband a non-
been subjected to the homestead of another.            possessory future interest in the property
In In re Eskew, the Eskews conveyed a life             which could not be claimed as homestead so
estate in their homestead tract to Dean                long as the children were minors. When the
Eskew's parents retaining a remainder                  husband mortgaged his future interest in the
interest. The Eskews continued to occupy the           tract while the children were minors, the lien
property after this conveyance under an                was     a    valid    encumbrance     against
unwritten gratuitous lease with Eskew's                non-homestead property.
parents. Eskew's parents did not occupy or                  In Lawrence v. Lawrence, a divorce
claim the property as their homestead. Held            decree awarded the wife the exclusive use of
the Eskews' possessory interest in the                 the couple's 10 acre homestead for her life
property under the unwritten lease coupled             though the property constituted the separate
with the non-occupancy of the tract by the life        property of the husband. The decree further
tenant was sufficient to impress the property          awarded the wife a $50,000.00 judgment
as homestead.                                          against the husband in enforcement of which
     When the owner of a reversionary                  the wife filed an abstract of judgment
interest establishes a present homestead right         contemporaneously with the entry of the
in a property under the above test, and that           decree.     Held the decree deprived the


                                                  10
Homestead After Home Equity                                                                 Chapter 5

husband of his present possessory interest in           filed on the building for the debtor and the
the property. Under Laster neither the                  other owner. Held a partnership had been
husband nor his successor in title could avoid          formed to purchase and operate the land and
the wife's judgment lien by raising the                 building. The individual debtor could not
homestead defense.                                      claim the property as a business homestead.
     In Patterson v. First Nat'l Bank of Lake                In In re Brooks, restaurant property
Jackson, a 1981 divorce decree awarded the              purchased in the name of a partnership could
wife the exclusive use of the couple's                  not qualify as the business homestead of an
community property homestead for five years             individual partner.
or until she remarried. After the first to occur             In In re Cole, a debtor conveyed 3 tracts
of these triggering events, the house was to            of his rural homestead to a Family Limited
be sold and the couple's equity therein                 Partnership. Thereafter the debtor could no
distributed to the parties in accordance with           longer claim the tracts as homestead.
the decree. In 1982, the wife remarried but
the husband did not seek a partition and sale           J.   Corporate Property
of the homestead. First National Bank of                     The separate and distinct legal existence
Lake Jackson later obtained a judgment                  of a corporation generally will prevent
against the husband which it abstracted and             corporate property from being claimed as
sought to foreclose by writ of execution in             homestead by an individual shareholder.
1989.                                                        In In re Brokmeyer and In re Yamin
     Held that the husband's homestead                  individual debtors were denied homestead
interest in the property was interrupted by the         claims on property owned by a closely-held
decree which deprived him of a present                  corporation, notwithstanding the debtor's
possessory interest in the property. However,           claimed occupancy and use of the corporate
when the wife remarried, the wife forfeited her         tract. However, in In re Moody the debtor was
exclusive right to occupy the property. At that         allowed to claim a homestead interest in
point, the husband and wife became                      property conveyed to the debtor's closely-held
cotenants each with a right to demand a                 corporation when it appeared the sale was not
partition and sale of the property.                     bona fide or marked by an intent to relinquish
     While the husband did not reoccupy the             or abandon the homestead.
property after the wife's remarriage or demand               In In re Cooper an individual debtor
a partition, held his interest therein was              leased an individually-owned business
sufficient for him to reinstate a homestead             property to a closely-held corporate entity.
exemption in his 2 interest in the property.            The lease had the effect of conveying to the
                                                        corporation all present possessory rights in
I.    Partnership Property                              the property. Any continued occupation of the
      Texas ascribes to the entity theory of            property by the individual debtor was only with
partnerships. The partnership is a separate             the permission of the corporation which held
entity from the individual partners. The                the exclusive right to occupy the property.
partnership, not the partners, owns the                 This permissive use was not sufficient to
partnership property. This same rule applies            establish in the individual a homestead claim
to property of a limited partnership.                   in the property.
      In In re Cooper, the debtor and another                An opposite result was reached on similar
individual jointly purchased raw land taking            facts in McKee v. Smith, In re John Taylor
title in both their names. Both borrowed                Co., In re Finkel, and In re Hughes, A lease
money to construct thereupon an office                  of a business homestead to a wholly owned
building.     The debtor and the debtor's               corporation did not keep the individual
professional association (the "PA") leased the          shareholders from claiming the property as
building for the debtor's medical practice.             homestead. The mere fact that the debtors
Rent from the debtor and the PA were paid               chose to do business in the corporate form
into a joint account for payment of expenses            would not deprive the individual debtors from
with any profit distributed to the debtor and           exempting as homestead property used in
other owner. Partnership tax returns were               their business or calling.


                                                   11
Chapter 5                                                                 Homestead After Home Equity

                                                          N. Proceeds From the Sale of Homestead
K. Cooperative Housing                                         The proceeds from a sale of a prior
      At least for ad valorem tax purposes, an            homestead tract are exempt from seizure for a
ownership interest in cooperative housing                 period of six months after the date of sale of
may be exempted as homestead subject to                   the homestead. This allows a debtor to sell
the limitations set out in the Texas Tax Code.            his home and reinvest in another without
                                                          losing the exempt status of the property.
L.   Mineral Property
     When a homestead claimant owns the                   1. Computing the Expiration of 6-Month
surface of land, the homestead exemption                  Exemption Period
may extend to the unsevered minerals under                     The 6-month exemption period has been
that land.                                                held to begin on the day after the sale of the
     This result is not changed if the                    debtor's homestead closes and extend until
homestead claimant executes an oil and gas                midnight of the same day of the sixth month
lease of the mineral estate. Although under               following. A straight 180 day computation is
the mineral lease, the lessor holds only a                not used. Thus in In re Malone, when the
reversionary interest in the mineral estate, the          debtor closed the sale of her house on
owner's occupation and sole possession of                 November 21, 1995, the proceeds from such
the surface of the property is sufficient to              sale were exempt through May 22, 1996. The
continue to impress the leased mineral estate             debtors May 21, 1996 bankruptcy filing was
with the homestead exemption.               Refer         sufficient to protect the exempt status of the
generally to the discussion of homestead                  proceeds.
rights in future interests at (III)(G) supra.                  In Walston v. Walston, a divorce
                                                          judgment directed the sale of the marital
1.   Severed Minerals                                     homestead via receiver with all proceeds
     A debtor may not claim a homestead                   placed in the registry of the court pending
exemption in a severed mineral interest                   further action by the parties. Held the
underlying land he does not own. This result              homestead proceeds would retain their
is not changed though the income from the                 exempt status for 6 months after their release
severed mineral estate may be used to                     from the registry of the court. There was no
support the claimant's family.                            discussion why the exemption period did not
                                                          begin on the homestead sale date.
2.   Open Mine Doctrine                                        In some cases the exempt period expires
     The open mine doctrine is an exception               prior to six months. Homestead proceeds do
to the general rule that a life tenant is entitled        not constitute a second exemption entirely
to nothing but interest on mineral royalties and          separate from the homestead itself. The
bonuses. Under the open mine doctrine, a                  provision is only a means to the end of
homestead claimant is entitled to receive and             allowing the debtor to obtain a new
expend all oil and gas royalties from the                 homestead. Therefore, at the moment the
homestead, where the homestead property                   debtor acquires a new homestead, the
was producing oil or gas when the right on the            exempt status of proceeds terminates.
property came into existence. In Riley v.                      In Matter of England and In re Evans,
Riley, a widow claimed a homestead in her                 homestead claimants sold former homesteads
deceased husband's separate property.                     resulting in proceeds to the debtors. The
Because the tract was producing oil and gas               debtors then established new homesteads
at the time of her husband's death, the widow             within six months without reinvesting all of the
had a homestead in all royalties and bonuses              sales proceeds in the new homesteads. Held
from the property.                                        the remaining proceeds were not exempt,
                                                          notwithstanding that six months had not
M. Out-of-State Property                                  expired since the sale of the original
    A debtor may not claim a homestead in                 homesteads.
property located outside the State of Texas.



                                                     12
Homestead After Home Equity                                                             Chapter 5

O. Improvements
     The homestead exemption extends to
any improvements which are permanently
annexed to the homestead tract. It does not
attach to buildings apart from the soil.

IV. CLAIMS ENFORCEABLE AGAINST
THE HOMESTEAD
A. Generally
     The homestead many not be subjected to
forced sale except for:

                                                            S
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                                                            1
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                                                            A
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                                                        2. 1 liens for improvements;
                                                        3. . liens for taxes;
                                                        4. home equity liens;
                                                        5. reverse mortgages; and
                                                             l
                                                        6. liens predating the establishment of
                                                             i
                                                             the homestead.
                                                             e
                                                             n
                                                        Any s other lien claims against the
                                                   homestead are considered void.
                                                             f
                                                   B. Applicable Law
                                                             o
                                                        In determining the validity of an
                                                             r
                                                   encumbrance against the homestead the law
                                                   is applied which was in force at the time that
                                                             p
                                                   the lienu attaches.          Any subsequent
                                                   constitutional or statutory change will not give
                                                             r
                                                   effect to a previously invalid lien.
                                                             c
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                                                             a
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                                                             e


                                              13
Chapter 5                                                              Homestead After Home Equity

C. What Constitutes an "Encumbrance"                        For example, if A and B own Blackacre
Against the Homestead                                  as cotenants and A has established his
     An "encumbrance" may be fixed against             homestead thereupon, an unequal partition of
the homestead only for a constitutionally              the tract among them may result in A owing B
permissible purpose. An encumbrance is a               an owelty payment. This owelty amount may
right to or interest in the homestead that             be financed by A executing a note to B and
diminishes its value or constitutes a burden           securing it with a lien on his newly-partitioned
on its transfer.                                       tract. Because this is in the nature of a
     In Nationwide of Bryan, Inc. v. Dyer, the         purchase money lien, B's lien will be a valid
Dyers purchased a mobile home under a retail           encumbrance on the entirety of A's
installment contract containing an arbitration         homestead.
provision. The contract was signed only by                  What Owelty is Not. True owelty requires
the husband. To escape the effect of the               an unequal partition in kind of real property
arbitration provision the couple claimed it was        among cotenants. Owelty does not result in a
an unlawful encumbrance against their                  transaction where one cotenant simply buys
homestead. Held the arbitration clause was             out the interest of his fellow cotenant. For
not an encumbrance against the homestead.              example, in In re Shults and In re White
It gave the creditor no right to the mobile            debtors owning partial undivided interests in
home nor did it burden the transfer of title.          property claimed as homestead borrowed
The clause was merely a procedural remedy              money to buy out the remaining cotenants.
to resolve disputes.                                   The liens securing both loans purported to
                                                       encumber all interest of the debtors in the
D. Purchase Money Liens                                homestead tract (both the undivided interest
1. Extent of Purchase Money Lien                       previously owned and the undivided interest
     A purchase money lien against                     being acquired in the transaction). These
homestead is valid only to the extent that the         were not owelty transactions as no partition
loan proceeds are actually used for the                had occurred. Held the liens securing such
purchase. If some loan proceeds are used to            loans extended only to the undivided interest
purchase the tract and some are not, the lien          purchased, not the entire ownership of the
is valid but only as to the amount of loan             tract.
proceeds used to purchase the property.                     Similar reasoning has been applied when
     In Guerra v. Raymondville Bank of                 the marital homestead is awarded solely to
Texas, the debtor raised the novel theory that         one spouse in a divorce. McGoodwin v.
if the lender advanced only a part of the              McGoodwin, Magallanez v. Magallanez, and
homestead purchase money, then the                     In re Buffington, all considered community
lender's lien was invalid. Held for the bank. A        property homesteads awarded solely to one
purchase money lien is valid even if the lender        spouse in a divorce. In exchange for the
doesn't finance 100% of the purchase price.            divested spouse conveying that spouse's 2
                                                       undivided community interest in the
2.   Owelty Liens                                      homestead to the other, the divested spouse
     Owelty is a specialized form of purchase          was awarded a judgment. Without specifically
money lien. Owelty results when there is an            discussing owelty principles, each of these
unequal partition among cotenants of real              cases held that the divested spouse had a
property in kind, whether by court decree or           lien on the homestead tract to secure the
contract. Because the tract partitioned does           repayment of the judgment, but that such lien
not lend itself to an equal division, the              attached only to 2 interest bought out by the
difference in value between the partitioned            other - not to the entirety of the homestead.
tracts is adjusted by payment from one                      Owelty Liens After November 7, 1995.
cotenant to the other. This difference is              On November 7, 1995, Texas voters adopted
known as owelty. Owelty payments, being in             an amendment to Art. 16 ' 50 of the Texas
the nature of purchase money, a lien to                Constitution providing that the homestead is
secure such a payment is a valid purchase              not protected from forced sale for payment of
money lien against homestead.                          a debt constituting "an owelty of partition


                                                  14
Homestead After Home Equity                                   Chapter 5

imposed against the entirety of the property
by a court order or by a written agreement of
the parties to the partition, including a debt of
one spouse in favor of the other spouse
resulting from a division or an award of a
family homestead in a divorce proceeding."
     The first part of this amendment simply
restates prior law on the validity of owelty liens
against homestead. The second half of the
amendment involving the "debt of one spouse
in favor of the other spouse resulting from a
division or award of a family homestead in a
divorce proceeding" is more problematic. The
division of the marital property homestead at
divorce most often does not involve an
unequal partition of the tract in kind creating a
true owelty obligation. Rather the decree is
more likely to involve one spouse simply
buying out and/or being awarded the equity
position of the other spouse in the
homestead. Such an award or division
creates no owelty of partition upon which a
lien on the entirety of the homestead may be
based.
     The extent to which the 1995
constitutional amendment changed this will
require subsequent interpretation.          It is
unclear whether the amendment allows for
the entirety of the marital homestead to be
burdened with any lien pertaining to the
division of the homestead at divorce or
whether continued adherence to a strict
owelty of partition was intended.

3. Joinder of Husband and Wife Not
Required
    A purchase money lien on homestead
does not require the signature of both
husband and wife to be valid.

E.   Liens for Improvements
1.   Generally
     To fix a lien on homestead for
improvements, the person who is to furnish
materials or perform labor must execute a
written contract setting forth the terms of the
agreement. The contract for improvements
must be:

                                                          1
                                                          )

                                                          e


                                                     15
Chapter 5            Homestead After Home Equity

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            16
Homestead After Home Equity                                            Chapter 5

                                             e
                                   2. Time of Execution of Mechanics Lien
                                   Contract r
                                             k
                                        Generally.     To attach a lien on a
                                   homestead, the mechanic's lien contract must
                                             o
                                   be executed before the contractor furnishes
                                   materialsf or performs any labor.
                                        Hruska v. First State Bank of Deanville
                                             t
                                   and Buchanan v. Federal Sav. & Loan Ins.
                                             h
                                   Corp. considered the validity of antedated
                                             e
                                   mechanics lien contracts executed after
                                   construction had been commenced but dated
                                             c
                                   to indicate the contrary. Held these contracts
                                             satisfy the formalities necessary to
                                   failed to o
                                             u
                                   create a valid lien against the homestead.
                                             n
                                        In Hruska v. First State Bank of Deanville
                                             t
                                   and Matter of Daves, homestead claimants
                                             y
                                   made unfulfilled promises to the lender that
                                   they would prepare and execute the prior
                                             i
                                   mechanic's lien contract necessary to place a
                                   valid lienn on their homestead. When the
                                   debtors later challenged the validity of the
                                             w
                                   liens because of the absence of such a
                                             h
                                   written contract, the lenders sought to impose
                                             i
                                   an equitable lien.          Held the Texas
                                             c
                                   Constitution, by setting out the requirements
                                             h
                                   for a valid lien against the homestead,
                                   precludes      any such        equitable   lien
                                             t
                                   notwithstanding the conduct of the debtor.
                                             h
                                   The creditor's arguments to impose a judicial
                                             e
                                   lien by means of a constructive trust on these
                                   facts likewise failed.
                                             h
                                        When Improvements are Financed. If the
                                             o
                                   homeowner secures any extension of credit to
                                             m
                                   finance the improvements, whether with the
                                             e
                                   contractor or a third-party lender, the Texas
                                             s
                                   Constitution requires a 12 day waiting period
                                             the
                                   between t date that the homeowner makes
                                             e
                                   application for the extension of credit and the
                                             the
                                   date that a lien instrument is executed. Any
                                             d
                                   lien for improvements executed before the
                                   expiration of the 12 day waiting period is
                                             i
                                   invalid unless the work and materials are
                                             s
                                   necessary to complete immediate repairs to
                                   conditions of the homestead property that
                                             l
                                   materially affect the health and safety of the
                                   owner oro   persons residing in the homestead
                                             c
                                   and the owner acknowledges such in writing.
                                             a
                                             t
                                             e
                                             d




                              17
Chapter 5                                                                Homestead After Home Equity

3. Place of Execution of Mechanic's Lien                 6.    Disbursement of Funds to Contractor
Contract                                                       Effective September 1, 1997, a contractor
     To prevent a homeowner from                         under a residential construction contract
encumbering the homestead with a                         requesting payment by the owner must
mechanic's lien under duress or under the                provide the owner with a periodic statement
influence of an unscrupulous salesman                    listing all bills and expenses paid or to be paid
without a full understanding of the implications         by the requested draw. The list need not
of such a lien, the constitution requires that a         include       (1) bills  and    expenses       of
mechanic's lien be contracted for away from              subcontractors or suppliers who have
the home. Effective January 1, 1998, a                   executed a lien release or waiver; or
contract for work or materials to a homestead            (2) overhead or profit of the contractor if the
must be executed at the office of a third-party          contractor represents in writing that funds not
lender making an extension of credit for the             itemized will be used for these purposes.
work and material, an attorney at law, or a title              If third-party financing is used for the
company. For a discussion of the definition of           construction of residential improvements and
a      "title     company",        refer       to        the lender is making advances of loan
Paragraph (IV)(G)(20) infra.                             proceeds directly to the contractor, the lender,
                                                         prior to making any disbursement to the
4. Right of Rescission of Mechanic's Lien                contractor, must (1) obtain from the contractor
Contract                                                 the required disbursement statement detailing
     Effective January 1, 1998, a contract for           claims paid or to be paid by the draw; and
work or materials to the homestead may be                (2) provide its own disbursement statement of
rescinded without penalty within 3 days after            all funds disbursed by the lender since the
execution of the contract.                               last disbursement statement was provided to
     Truth in Lending Act. The federal Truth             the owner. These statements may be in any
in Lending Act (TILA) provides that in a                 form agreed to between the lender and
consumer credit transaction involving a                  owner.
security interest in the obligor's homestead,                  The third-party lender obtaining a
that the obligor has three days after                    disbursement statement from the contractor is
completing the transaction to rescind without            not responsible to the owner for the accuracy
penalty. In Rooms With a View, Inc. v. Private           of the statement. A failure by the lender to
Nat'l Mortgage Ass'n, held the TILA recission            comply with these requirements will not
period and the 3-day recission period for                invalidate the lender's lien.
home improvement contracts were not in                         Criminal penalties apply to any contractor
conflict and but ran concurrently.                       or lender intentionally, knowingly, or recklessly
                                                         providing a required disbursement statement
5. Loan        Closings    On     Liens    for           containing false or misleading information.
Improvements                                             The offence is a misdemeanor bearing a fine
      Homesteads are also affected by 1997               up to $4,000 and jail time up to one year, or
amendments to the Texas Property Code                    both.
governing third-party financed residential
construction contracts. A third-party lender             7.   Final Bills-Paid Affidavit Required
financing such a contract must now deliver to                 Effective September 1, 1997, as a
the owner all documentation regarding such a             condition of final payment on a residential
loan not later than one business day before              construction contract, the original contractor
the date of the closing. This requirement can            must provide to the owner when final payment
be waived by written consent signed by the               is made a final bills-paid affidavit stating that
owner in case of emergency or good cause.                the contractor has paid all subcontractors and
If such a consent is executed the lender may             suppliers in full. If any subcontractors or
initially deliver and/or modify the loan                 suppliers have not been paid, these parties
documents at closing.                                    must be identified by name, address,
                                                         telephone number, and amount owed.



                                                    18
Homestead After Home Equity                                                                    Chapter 5

     A Bills-Paid Affidavit is also now required         10. Filing and Recordation of Mechanics Lien
to be provided at closing by any seller of               Contract
residential property (of 4 units or less) to any              In Perma Stone - Surfa Shield Co. v.
buyer acquiring the property as a principal              Merideth, summary judgment evidence was
residence. In such a case, the affidavit must            sufficient to show the mechanics lien contract
represent the seller has paid all contractors            was duly recorded when the contract with
and suppliers and that the seller is not                 recording information was attached as an
indebted to any person by reason of any                  exhibit to the motion for summary judgment.
construction. If any person remains unpaid
for any construction on the property, the                11. Elements of a Valid Written Contract for
unpaid party must be identified by name,                 Improvements
address, telephone number, and amount                         To be a valid, a written contract for
owed.                                                    improvements to the homestead must recite:
     Criminal penalties apply to any contractor          (1) the principal amount of the loan; (2) the
or owner intentionally, knowingly, or recklessly         interest rate; (3) the date that the final
providing any required Bills-Paid Affidavit              payment is due; (4) a description of the
containing false or misleading information.              property; (5) a description of the materials to
The offense is a misdemeanor bearing a fine              be supplied or labor to be performed; and (6)
up to $4,000, jail time up to one year, or both.         that a lien is granted to secure payment.
     In addition, any person signing a required               In In re Burnett, the debtors and the
Bills-Paid Affidavit is personally liable for any        FmHA entered into a "development plan"
loss resulting from any false or incorrect               providing for the construction of certain
information contained in the affidavit.                  improvements on the debtors' farm. The
                                                         debtors then executed a note and deed of
8. Required Conveyance to Contractor                     trust to the FmHA but no mechanic's lien
Prohibited                                               contract. The debtors defended against the
    Effective September 1, 1997, an original             deed of trust lien claiming it was invalid in the
contractor may not require an owner of real              absence of a valid contract for improvements.
property to convey the property to the                    The deed of trust was not signed by FmHA,
contractor (or an entity controlled by the               did not set out the time and manner of
contractor) as a condition of a residential              payment, and did not contain a description of
construction contract on that property.                  the material supplied or labor performed.
                                                         Held that a deed of trust can constitute a valid
9. Joinder of Husband and Wife in                        contract for improvements where the deed of
Execution of Mechanics Lien Contract                     trust contains the essential elements
     In the case of the family homestead the             contemplated by the Constitution. Here, the
contract for improvements must be in writing             deed of trust did contain all required elements
and signed by both spouses to create a valid             of a valid mechanic's lien contract by adopting
lien on homestead. Joinder of both spouses               by reference the "development plan" which
is also required for any renewal or extension            was signed by FmHA and recited the manner
of any lien for improvements.                            of payment and nature of the intended
     In In re Moore, a husband executed                  improvements.
deeds of trust and extension agreements for                   In 1987, the Legislature added to the
improvements to his business homestead                   required essentials of a mechanic's lien
without joinder of his wife. Held the lien was           contract by requiring that each such contract
invalid to the extent that it secured money              contain the following conspicuous disclosure
loaned for improvements.                                 next to the owner's signature line:

                                                             IMPORTANT NOTICE: You and your
                                                             contractor are responsible for meeting
                                                             the terms and conditions of this contract.
                                                              If you sign this contract and you fail to
                                                             meet the terms and conditions of this


                                                    19
Chapter 5                                                               Homestead After Home Equity

    contract, you may lose your legal                   12. Sham Contracts for Improvements
    ownership rights in your home. KNOW                       A sham mechanic's and materialman's
    YOUR RIGHTS AND DUTIES UNDER                        lien contract under which the contractor
    THE LAW.                                            receives no consideration and performs no
                                                        services will not create a valid lien against the
Any failure to include this disclosure                  homestead. In In re Jeter, a mechanic's lien
constitutes an actionable violation of the              contract was drawn up by a bank after the
Deceptive Trade Practices Act.                          improvements had been completed and
     In 1997, the Texas Constitution was                signed by a contractor who neither worked on
amended to require that a contract for work or          the project nor received any compensation.
materials on a homestead further provide that           Evidence showed the contractor participated
the owner may rescind the contract without              in the transaction because "the bank needed
penalty or charge within 3 days after                   it". Held no valid lien against homestead was
execution of the contract by the parties. An            created by this sham contract later assigned
exception will apply where the work or                  to the bank.
materials are necessary to complete
immediate repairs to conditions on the                  13. Extent of Lien for Improvements
homestead property that materially affect the                A lien for improvements will be strictly
health or safety of the owner or person                 limited to that amount of money actually used
residing in the homestead and the owner                 to improve the homestead. For example, a
acknowledges such in writing.                           mechanic's lien against homestead cannot
     1997 amendments to the Property Code               extend to secure an award for attorney's fees
also now require extensive statutory                    even if the written contract so provides.
disclosure regarding the rights and
responsibilities of a homeowner be delivered            14. Involuntary Mechanic's Liens Against the
to the owner by the contractor before any               Homestead
residential construction contract is executed.               Subcontractors and derivative claimants
For     third-party     financed     residential        may claim a statutory mechanic's lien against
construction contracts, this same disclosure            the homestead if the prime contract satisfies
must be delivered by the lender to the owner            the requirements of the Constitution and
before the date of closing. The disclosure              Property Code. The mechanic's lien contract
can be delivered to the owner on the date of            of the original contractor inures to the benefit
closing if the owner signs a written consent            of all subcontractors and materialmen.
and a bona fide emergency or other good                      Prior to filing a lien affidavit or making a
cause exists. A third-party lender must retain          claim for retainage, the derivative claimant is
a signed and dated copy of the disclosure               required to give notice of the claim to the
with the loan documents.                                owner of the property. For homestead
     In addition to this general disclosure, the        property, these notices from derivative
1997 amendments to the Texas Property                   claimants must now contain a statutory
Code also now require that an original                  disclosure regarding required retainages and
contractor     furnish,    before    residential        the possibility of lien claims by a derivative
construction commences, a list disclosing by            claimant. In addition, lien affidavits against a
name, address, and telephone number each                homestead must now disclose in bold face
subcontractor and supplier the contractor               type that they are an affidavit claiming a lien,
intends to use on the project. If the list              not a lien.
changes, the contractor must update the list
within 15 days of any addition or deletion.
The list must be accompanied by an
additional bold-face disclosure regarding the
obligations of the contractor regarding the
disclosure of subcontractors and suppliers.




                                                   20
Homestead After Home Equity                                                                  Chapter 5

F. Liens for Taxes                                       compliance with the requirements of the
1. Taxes Which Support a Lien on                         Constitution is likely required.
Homestead                                                     IMPORTANT REMINDER. Many of the
     Ad valorem property taxes will support a            details inherent to the implementation of
lien against homestead.            Under the             home equity lending are not fully
Supremacy Clause of the U.S. Constitution, a             addressed by the Constitution and have
Texas Homestead may likewise be                          not been settled by decisional authorities.
encumbered by an IRS tax lien.                           There are differing opinions among
     State inheritance taxes will not support a          practitioners on the proper construction of
lien on homestead. This is because such                  many home equity provisions. To provide
taxes are not taxes specifically against the             the     best      available     guidance     to
homestead property itself.                               practitioners in the current environment of
                                                         uncertainty, resort is sometimes made in
2. Extent of Ad Valorem Tax Lien Against                 this article to opinion and commentary
the Homestead                                            available from several regulatory and
     Effective September 1, 1999, the Texas              secondary sources. However, attorneys
Tax Code was amended to provide that when                are cautioned not to place undue reliance
an owner's real property is described with               on this opinion and commentary. Op. Tex.
certainty by metes and bounds in one or more
                                                         Att'y Gen. No. DM-495 (1998) provided that
instruments of conveyance and part of the
                                                         neither the legislature nor any state
property is the residence homestead of the
                                                         agency has authority to interpret or
owner taxed separately from the remainder of
                                                         construe TEX. CONST. art. XVI ' 50 as
the property, any ad valorem tax liens on the
homestead and remainder will extend                      presently constituted. This authority is
in solido to the entire property described in the        exclusively vested in the judiciary under
conveyance or conveyances, unless the                    the separation of powers clause of TEX.
homestead         is     identified     as      a        CONST. art. II ' 1. Any reference to
separately-described        parcel     in     the        regulatory opinion and commentary herein
conveyance or other recorded instrument.                 is illustrative only. No matter how well
This new Tax Code provision raises questions             reasoned or intentioned, this opinion and
regarding the constitutionality of allowing              commentary does not have the force of
homestead property to be burdened with                   law. Courts construing the provisions of
taxes due on non-homestead property.                     the Constitution are not obligated to defer
                                                         to or consider this commentary.
G. Home Equity Liens                                          OCCC Commentary. The Office of
     Effective January 1, 1998, TEX. CONST.              Consumer Credit Commissioner (OCCC),
art. XVI ' 50 was amended to allow a                     Department of Banking, Savings and Loan
homestead to be encumbered with a lien                   Department, and Credit Union Department
securing a "Home Equity Loan."            In a           have     issued     their    joint  Regulatory
departure from prior Texas practice, the                 Commentary on Equity Lending Procedures
validity of such a lien is generally not                 (October 7, 1998) to provide guidance to
dependent upon the use to which the loan                 lenders and consumers concerning the
proceeds are applied. However, Section 50 as             regulatory views of the participating agencies.
amended does reflect continued strong public              This regulatory Commentary is referred to
policy concerns solicitous of the homestead              herein as the "OCCC Commentary." While
as the last shield against destitution. Home             the OCCC Commentary is advisory not
Equity Loans are authorized only upon                    authoritative, it does at lease represent four
satisfaction of a number of significant                  Texas administrative agencies' interpretation
safeguards and restrictions aimed at                     of the home equity provisions of the Texas
protecting homestead owners.                             Constitution. Early decisions indicate some
     All of the Home Equity Loan restrictions            deference being shown to the OCCC
are non-severable and non-waivable. Each                 Commentary. The most current version of
must be satisfied to create a valid lien. Strict


                                                    21
Chapter 5                                                                  Homestead After Home Equity

OCCC Commentary is accessible on the                      subject to agricultural use assessment. It is
OCCC web site at www.occc.state.tx.us/.                   not settled whether the borrower in such a
     Department of Insurance Procedural                   case may render the homestead portion
Rules. The Texas Department of Insurance                  eligible to secure a home equity loan by
has adopted new title insurance coverages                 written       designation      recognizing     the
specifically for Home Equity Loans along with             homestead portion as distinct from the land
accompanying procedural rules: (1) Equity                 subject to the agricultural use designation.
Loan Mortgage Endorsement (the "T-42                              A tract designated for agricultural use
Endorsement") and accompanying Procedural                 may nevertheless secure a home equity loan
Rule P-44; and (2) Supplemental Coverage                  if it is used primarily for the production of milk.
Equity Loan Mortgage Endorsement (the "T-                  If a rural tract is used for a dairy and other
42.1 Endorsement") and accompanying                       pursuits, no bright line test is provided to
Procedural Rule P-47. These endorsements                  determine the primacy of the dairy use.
and procedural rules provide underwriting
guidelines which interpret the constitutional             2.   Authorized Lenders
requirements for a valid home equity lien.                     Home Equity Loans may only be made by
     Fannie Mae Policy. Fannie Mae has                    six types of lenders:
issued several policy directives (Lender Letter
11-97 (November 24, 1997); Announcement
Letter 97-17 (December 9, 1997); and Lender
Letter 02-98 (May 28, 1998)) governing the
conditions under which Fannie Mae will
purchase home equity mortgages in the
secondary market. These purchasing policies
contain significant commentary on Fannie
Mae's interpretation of the constitutional
requirements for a valid home equity lien.

1.   Eligible Homestead Property
     Not every homestead may secure a
Home Equity Loan. A homestead designated
for agricultural use for ad valorem tax
purposes cannot secure such a loan (unless
the tract is used primarily for the production of
milk). A tract is "designated" for agricultural
use by the chief appraiser of the appraisal
district in which the tract is located upon
annual sworn application made by the
homestead claimant. The requirements for
agricultural use designation are set out at
TEX. TAX CODE ANN. ' 23.41 (Vernon 1992).
The Constitution is silent regarding the effect
of a change to agricultural use designation
after the inception of the lien. It is not settled
whether a property may be qualified to secure
a home equity lien by the expediency of
allowing the annual agricultural use
designation to lapse for tax purposes during
the year that the mortgage is executed without
any substantive change in the use of the tract.
     It is not uncommon for a rural property to
have a small portion of the tract subject to a
homestead tax exemption with the remainder


                                                     22
Homestead After Home Equity            Chapter 5

                                   t
                                   i
                                   o
                                   n
                                   ,

                                   s
                                   a
                                   v
                                   i
                                   n
                                   g
                                   s

                                   b
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                                   r

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                                   u
                                   s
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                                   n
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                                   s
                                   s

                                   u
                                   n


                              23
Chapter 5            Homestead After Home Equity

                 d
                 i
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                 g

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            24
Homestead After Home Equity            Chapter 5


                                   i
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                              25
Chapter 5            Homestead After Home Equity

                 a
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            26
Homestead After Home Equity                                                                   Chapter 5

                                                        qualify, c the mortgagee must obtain a
                                                                  o
                                                        regulated loan license under TEX. FIN. CODE
                                                                  n
                                                        ANN. Chapter 342.
                                                                  s
                                                             Mortgage Brokers. Mortgage brokers
                                                                  a
                                                        "arranging" first lien Home Equity Loans but
                                                                  n
                                                        neither making the determination to extend
                                                                  g
                                                        the credit, funding the loan (inclusive of "table
                                                                  u
                                                        funding"), nor being named as a payee on the
                                                                  i
                                                        note, need not obtain a regulated loan
                                                                  n
                                                        license. Otherwise, the mortgage broker must
                                                                  i
                                                        be licensed. A mortgage broker either making
                                                                  t
                                                        or arranging a secondary mortgage equity
                                                                  y
                                                        loan at an interest rate greater than 10% must
                                                                  .
                                                        be a regulated loan licensee. Irrespective of
                                                        the necessity of licensure as a regulated loan
      Financial Institutions. Some question             licensee, all mortgage bankers for first lien
remains regarding the eligibility of a financial        mortgages must be licensed under the
institution chartered in a foreign state to make        Mortgage Broker License Act.
a Home Equity Loan. Such institutions are                    Loans by Relatives. A person related to
generally considered to be exempt from local            the borrower within the second degree of
procedural control.        OCCC Commentary              affinity or consanguinity may make a Home
recognizes that institutions chartered in a             Equity Loan. For the computation of degrees
foreign state are not subject to licensure as a         of affinity and consanguinity refer to TEX.
Texas regulated lender but offers no direct             GOV'T CODE ANN. ' 573.002, et seq. (Vernon
opinion on whether such an institution would            1999).
be recognized under the Constitution as an                   Redlining Restrictions.          A lender
authorized home equity lender.                          otherwise authorized to make a Home Equity
      HUD-Approved Mortgagees. A person                 Loan is ineligible to make such a loan if found
approved as a mortgagee by the United                   by a federal regulatory agency to have
States to make federally insured loans is an            engaged in the practice of refusing to make
authorized home equity lender.               The        loans because the debtor resides or the
Department of Housing and Urban                         homestead is located in a certain area. No
Development (HUD) approves lenders to                   provision is made in the Constitution to
make federally insured loans. VA and HUD                rehabilitate or requalify lenders once "written
direct endorsement or non-supervised                    up" for redlining by a federal agency.
mortgagees are eligible to make Home Equity
Loans.       The authority of mortgagees
approved by HUD as a correspondent lender
to a non-supervised mortgagee is less clear.
Originally, this class of lenders was excluded
from making Home Equity Loans by OCCC
Commentary. The latest revision of the
OCCC Commentary drops this distinction.
      VA-Guaranteed Loans. VA-Guaranteed
Loans are backed by a partial guaranty by the
Veterans Administration, Department of
Veterans Affairs (VA). Though guaranteed,
these loans are not technically "federally
insured". The eligibility of VA lenders to make
Home Equity Loans remains unclear.
      State Regulated Lenders. A person
licensed to make regulated loans under Texas
law may make a Home Equity Loan. To


                                                   27
Chapter 5                                                              Homestead After Home Equity

3.   Restriction on Loan-to-Value Ratio                 should consider that the partitioned
     The principal amount of a Home Equity              unsecured tract may have critical value to
Loan when added to the aggregate total of all           providing the homestead with access to a
other indebtedness secured by a lien against            public street or, conversely, may have no
the homestead may not exceed 80% of the                 value save in conjunction with the disposition
fair market value of the homestead on the               of the entire property.
date that the extension of credit is made.
OCCC Commentary provides that this                      4.   Restriction Against Open-Ended Credit
limitation applies to cash advances and                      A Home Equity Loan must be for a
charges made at the inception of the loan to            definite original principal sum. The credit may
the extent that the charges are financed in the         not be in the form of an open-ended account
principal amount of the note. The 80% limit             that may be debited from time to time or from
applies to the principal balance outstanding            which credit may be extended from time to
on the date that the extension of credit is             time.
made but does not include (1) interest                       OCCC Commentary provides that
accrued after that date (other than any                 prohibited open-end credits are those defined
interest capitalized and added to the principal         by TEX. REV. CIV. STAT. ANN. art. 5069-
balance on the date that the extension of               1B.002(14) (since codified as TEX. FIN. CODE
credit is made), or (2) amounts advanced by             ANN. ' 301.002(a)(14)):
the lender after closing as the result of
default, including, for example, ad valorem                  (1) the creditor reasonably contemplates
taxes, hazard insurance premiums, and                            repeated transactions and the
authorized collection costs, including                           obligor is authorized to make
attorney's fees. With a closed-end multiple                      purchases or borrow money;
advance loan, the principal balance includes                 (2) interest may be charged from time to
contractually obligated future advances not                      time on an outstanding unpaid
yet disbursed.                                                   balance; and
     Valuation. To establish the fair market                 (3) the amount of the credit that may be
value of the homestead, the lender and owner                     extended during the term of the
must execute a written acknowledgment                            account is generally made available
establishing its value on the date that the loan                 to the extent that any outstanding
is made. A lender or assignee for value may                      balance is repaid.
conclusively rely on the fair market value
established by this written acknowledgment if                The OCCC takes the position that any
(1) that value is established by appraisal or           account not an open-end account by definition
evaluation prepared in accordance with any              is a closed account. Thus, a Home Equity
applicable state or federal requirement; and            Loan may be a multiple advance loan if
(2) the lender or assignee has no actual                (1) credit is not made available to the extent
knowledge at the time that the loan is made             that outstanding balances have been repaid;
that the fair market value established by the           (2) the loan is payable in substantially equal
written acknowledgment is incorrect. The                successive monthly installments until the next
appraisal or evaluation should be attached to           advance or adjustment period; and (3) each
the written acknowledgement of value                    installment extinguishes the accrued interest
executed by the borrower at closing.                    and contributes to amortizing part of the
     In some cases, constitutional restrictions         principal balance.
against additional collateral for Home Equity                OCCC Commentary provides that
Loans may require the partition, subdivision,           amounts advanced by the lender after closing
and replatting of a tract into separate                 as a result of default for ad valorem taxes,
homestead and non-homestead parcels. The                hazard insurance premiums, and authorized
proper apportioning of value between the                collection costs, including reasonable
homestead tract and the nonhomestead tract              attorneys fees, are not contemplated repeated
is essential to proper compliance with loan-to-         transactions such as render the loan an open
value limits. This apportionment of value               end account.


                                                   28
Homestead After Home Equity                                                                    Chapter 5

                                                         subject to the 3% limit. If the discount points
5.    Restriction on Fees                                charged by the lender are in the nature of
      Home Equity Loan closing expenses,                 prepaid interest to reduce or buy down the
other than interest may not exceed 3% of the             stated rate of interest of the note or if the
original principal amount of the loan. Loan              points hold no other purpose than as
closing expenses subject to this restriction             additional consideration for making the loan,
include any fees paid to anyone to originate,            then the points are interest. However, if the
evaluate, maintain, record, insure, or service           points are charged for loan origination,
the extension of credit. The 3% limit applies            underwriting, processing, funding services, or
only to charges (1) not constituting interest            other services entitling the borrower to some
and (2) required to be paid by the lender.               other consideration in addition to the simple
There is no restriction on the lender absorbing          loan of money with no correlating effect on the
costs that might otherwise be fees covered by            contract note rate, the points may be
the fee limitation.                                      determined to be a fee subject to the 3% limit.
      Interest. Interest is specifically excluded              Fees to Evaluate. Fees to evaluate the
from the fee limitation. OCCC Commentary                 credit decision for a Home Equity Loan that
provides that "interest" means interest as               are not interest are subject to the 3% limit.
defined by TEX. REV. CIV. STAT. ANN.                     According to OCCC Commentary, this
art. 5069 - 1.01 et. seq. (since codified as             includes fees collected to cover the expenses
TEX. FIN. CODE ANN. ' 301.002(a) (4)) and as             of a credit report, survey, flood zone
interpreted by the courts of the State of                determination, tax certificate, title report, or
Texas. Any charges constituting interest                 appraisal.
under law are not subject to the 3% limit. A                   Fees to Maintain. Fees to maintain a
statutory definition of interest is now found at         Home Equity Loan that are not interest are
TEX. FIN. CODE ANN. ' 301.002(a)(4) (Vernon              subject to the 3% limit. According to OCCC
Supp. 2000).                                             Commentary, these include fees charged at
      Late charges imposed by the lender for             the inception of the loan as compensation for
the late payment of scheduled installments               performing a service for the life of the loan
generally constitute interest and are excluded           (e.g. flood zone determination fee or tax
from the fee limitation.                                 service fee).
      Voluntary Optional Fees.             OCCC                Fees to Record. Fees paid to public
Commentary provides that optional charges                officials and others for the purposes of
not required by the lender are not fees subject          recording public documents evidencing the
to the 3% limit. If the borrower chooses to              lien are fees subject to the 3% limit.
pay premiums for certain insurance                             Fees to Insure. Premiums to insure a
coverages (e.g. credit life, credit accident, and        Home Equity Loan are fees subject to the 3%
health insurance coverages), the premiums                limit (e.g. title insurance and mortgage
are not included within the 3% limit. If the             insurance).
lender required these same coverages, the                      OCCC Commentary does specifically
premiums would be fees subject to the 3%                 address the question of whether premiums for
limit.                                                   lender required casualty insurance on the
      Fees to Originate. Fees to originate a             secured homestead are fees subject to the
Home Equity Loan that are not interest are               3% limit. It may be argued that casualty
subject to the 3% limit. OCCC Commentary                 insurance premiums, unlike mortgage
provides that fees to third parties for separate         insurance, are not a fee for the "extension of
and additional consideration relating to                 credit" but a cost of maintaining the collateral.
originating the loan fall within this                     Casualty insurance is typically maintained by
characterization.         Attorney's fees for            homeowners for their own protection whether
document preparation and a broker's fees are             or not the property is encumbered by a
considered fees to originate a loan.                     mortgage. This approach may be impliedly
      OCCC Commentary does not expressly                 adopted by OCCC Commentary providing a
address whether mortgage discount points                 lender may collect or include in the principal
charged as a "loan origination fee" are fees             sum premiums or fees for the sale of


                                                    29
Chapter 5                                                               Homestead After Home Equity

insurance on the collateral for a Home Equity
Loan if complying with the rest of TEX. CONST.          6.   Restriction Against Recourse Debt
art. XVI ' 50 and applicable law concerning                  A Home Equity Loan must be a
the sale of insurance in connection with a              nonrecourse loan with no personal liability
mortgage loan.                                          against the owner or the owner's spouse. The
     Fees to Service. OCCC Commentary                   lender may look to recover only against the
provides that any fee charged to or paid by an          homestead property and not pursue a
owner at the inception of the loan transaction          deficiency against any owner or any owner's
to service a Home Equity Loan that is not               spouse. The lender may have recourse
interest is a fee subject to the 3% limit.              against the owner or owner's spouse if the
Servicing fees paid by mortgagees to third-             owner or spouse obtained the extension of
party service providers for loan administration,        credit by actual fraud.
record keeping, collection, etc. are not subject
to the 3% limit.                                        7.   Restriction Against Prepayment Penalties
     Escrow Funds. A lender may provide                      Home Equity Loans must be capable of
escrow services in a Home Equity Loan                   being paid in advance without penalty or other
transaction. Under OCCC Commentary, funds               charge. According to OCCC Commentary, a
tendered by the borrower into the escrow                lockout provision in a loan contract prohibiting
account for the payment of taxes, insurance             a buyer from paying early is considered a
premiums, maintenance on homeowner's                    prepayment penalty.
association assessments, or similar purposes                 There is no express constitutional
remain the property of the borrower and are             prohibition against note provisions applying
not considered fees subject to the 3% limit.            principal prepayment to the last of the
     Fees to Subdivide or Replat. In some               principal payments becoming due or providing
situations constitutional restrictions against          that any partial prepayment would not alter the
additional collateral for a Home Equity Loan            amount or timing of scheduled monthly
may require the subdivision or replatting of a          payments.
tract into separate homestead and non-
homestead parcels. Fannie Mae policy for the            8.   Restriction Against Additional Collateral
purchase of Home Equity Loans suggests that                  The homestead is the only collateral that
all lender-required costs incurred by the               may secure a Home Equity Loan. The
borrower to resurvey, subdivide, or replat the          Constitution expressly prohibits the credit from
property are fees subject to the 3% limit.              being secured by any other real or personal
     Subsequent Events. The OCCC has                    property.
taken the position that the 3% fee limit applies             Incidental Collateral. OCCC Commentary
only to fees charged to the owner at the                provides that a lender and owner may enter
inception of the loan. If the owner fails to            into an agreement whereby a lender may
perform covenants in the credit documents               acquire a security interest in items "incidental"
resulting in the lender's later assessment of           to the homestead collateral. According to
costs to the owner, the 3% limit is not                 OCCC Commentary, the following items are
implicated. Examples of these costs include             not considered additional real or personal
lender acquired homeowner's insurance, late             property collateral:
charges, returned check fees, collection
costs, and foreclosure costs.
     Secondary Mortgage Loans.                 A
secondary mortgage loan as defined at TEX.
FIN. CODE ANN. ' 342.001(3) is subject to
certain statutory fee limitations found at TEX.
FIN. CODE ANN. ' 342.307 and 342.308. A
Home Equity Loan also constituting a
secondary mortgage loan must comply with
both the constitutional and statutory fee
limitations.


                                                   30
Homestead After Home Equity            Chapter 5

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                              31
Chapter 5            Homestead After Home Equity

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            32
Homestead After Home Equity                                             Chapter 5

                                            s

                                             r
                                             e
                                        Guaranty. A guaranty or obligation of a
                                   cosigner l or surety is considered additional
                                               not
                                   collaterala permissible in connection with a
                                             t
                                   Home Equity Loan.
                                             e
                                        Cross-Collateral Provisions.        If the
                                   borrowerdhas other credits with the home
                                   equity lender secured by non-homestead
                                   property t(e.g., a loan to purchase a car or
                                             o
                                   boat), the security documents on these other
                                   credits may sometimes provide that this other
                                   collateraltsecures all debt of the borrower with
                                             h
                                   that lender. Such a cross-collateral provision
                                             e
                                   violates the constitutional prohibition against
                                   other collateral for a Home Equity Loan.
                                   Fannie h   Mae policy suggests that the
                                             o
                                   unwanted effect of such a cross-collateral
                                   provisionm  may be cured by written waiver of
                                             e
                                   the provision executed by the lender.
                                             s
                                        Right of Offset. A contractual right of
                                             prohibited additional collateral to a
                                   offset is t
                                             e
                                   Home Equity Loan.
                                             a
                                        Undivided Interest in Tenancy in
                                             d
                                   Common. A debtor's undivided interest in a
                                             ;
                                   tenancy in common will sustain a homestead
                                   claim. If this undivided interest secures a
                                             o
                                   Home Equity Loan, any required joinder of the
                                             r
                                   other co-tenant(s) in order to encumber the
                                              of
                                   entirety 4 the property may constitute
                                             )
                                   prohibited additional collateral.
                                        Homestead Exceeding Maximum. An
                                             c
                                   urban homestead consists of not more than
                                             o
                                   ten contiguous acres of land located in a city,
                                             n
                                   town, or village, together with improvements
                                   thereon. d Rural homesteads may be up to
                                             e
                                   100 acres for single adults and 200 acres for
                                               For
                                   a family. m a homestead established on a
                                   tract thatn exceeds the maximum allowable
                                             a
                                   land area, the excess is considered additional
                                             t
                                   real property which may not secure a Home
                                             i
                                   Equity Loan.
                                        The oinclusion of nonhomestead acreage
                                             n
                                   may invalidate a home equity lien. Procedural
                                   Rule P-47 requires as a condition to insuring
                                   a home pequity lien against invalidity for
                                   inclusion r of additional collateral that each
                                             o
                                   owner be required to execute an affidavit
                                             c
                                   stating that (1) all the subject property is the
                                             e
                                   homestead of the owner and owner's spouse;
                                             e
                                   (2) no portion of the subject property is
                                             d
                                   nonhomestead; and (3) the owner and spouse


                              33
Chapter 5                                                     Homestead After Home Equity

claim no other property as homestead save as
described in the affidavit.
     There is no provision in TEX. CONST.
art. XVI ' 50 upholding the validity of a home
equity lien if the collateral includes only de
minimus acreage in excess of the maximum
allowable homestead acreage. Procedural
Rule P-47 requires, as a condition to insuring
against invalidity for inclusion of excess
acreage, that the insured obtain a surveyor's
certificate or letter stating the exact acreage
or square footage of the collateral or that a
computation of the acreage be made by a
software program designed to compute
acreage and generate drawings of land from
the entry of boundary description calls.
     Easements and Options to Purchase. In
cases where the home equity lien extends to
the maximum permitted homestead acreage,
lenders may risk invalidating the lien by taking
an easement or option to purchase an
adjacent property deemed necessary to
realize full value for the collateral. Fannie
Mae policy for the purchase of home equity
loans prohibits the lender taking such an
easement or option on adjacent acreage
under circumstances where such an interest
could be construed as additional collateral.
     Distinguishing the Rural and Urban
Homestead. A Home Equity Loan secured by
property exceeding ten acres must be
secured by a rural homestead. The proper
classification of the homestead as rural or
urban in certain cases is critical to the validity
of the home equity lien.
     A homestead is considered to be urban if,
at the time the designation is made, the
property is:

    (1) located within the limits of a
        municipality or its extraterritorial
        jurisdiction or a platted subdivision;
        and
                                                          2
                                                          )

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                                                     34
Homestead After Home Equity            Chapter 5

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                              35
Chapter 5                          Homestead After Home Equity

                          a
                          l
                          i
                          t
                          y
                          .

                               a
                               )

                               e
                               l
                               e
                               c
                               t
                               r
                               i
                               c
                               ;
                      For a more complete discussion of
                 authorities onbdistinguishing between a rural
                               )
                 and urban homestead refer to Part II(A)
                 supra.
                               n
                      Distinguishing the Family and Single
                               a
                 Adult Homestead.        A rural single adult
                               t
                 homestead is limited to 100 acres. A rural
                               u
                 family homestead may include up to 200
                               r
                 acres. Thus, a Home Equity Loan secured by
                               a
                 property exceeding 100 acres may be
                               l
                 secured by a family rural homestead only.
                 The proper classification of the property in
                 such cases g    as a family or single adult
                               a
                 homestead is critical to the validity of the
                 home equitys lien.       For authorities on
                 distinguishing; between a family and single
                               c
                 adult homestead refer to Part II(B) hereof,
                 supra.        )

                                s
                 9. Restriction on Number of Home Equity
                 Loans          e
                                w
                      There may be only one Home Equity
                                e
                 Loan on the owner's homestead at any given
                                r
                 time. This "anti-stacking" provision creates no
                                ;
                 restriction on the number of purchase money,
                 improvement,d    tax, or owelty liens on the same
                 homestead. )           According      to   OCCC
                 Commentary, if the property ceases to be the
                 homestead ofsthe owner, the lender may treat
                 a previous t home equity lien as a
                                o
                 nonhomestead lien for the purposes of this
                 restriction. r
                                m
                      Procedural Rule P-47 requires, as a
                 condition to insuring a home equity lien
                                s
                 against invalidity as an impermissible


            36
Homestead After Home Equity                                                                    Chapter 5

"additional" Home Equity Loan, that an                   repayable in substantially equal monthly
affidavit be obtained from the owner and                 installments until the next advance or
spouse designating all land claimed as                   adjustment period.
homestead and representing that no part of                     Prepaid Interest. Scheduled monthly
that homestead is encumbered by another                  payments must begin no later than two
Home Equity Loan.                                        months from the date that the extension of
                                                         credit is made. This effectively limits prepaid
10. Restriction on Frequency of Home Equity              interest to a maximum of one month's interest
Loans                                                    (first scheduled monthly payment would
     Home Equity Loans cannot be closed                  include interest in arrears for the preceding
more frequently than one year after the                  month). Nothing in this provision would
closing date of the last such loan made on the           appear to limit or otherwise affect a lender's
same property.        Procedural Rule P-47               ability to charge or collect mortgage discount
requires, as a condition to securing a Home              points with a corresponding interest rate
Equity Loan against invalidity as an                     reduction.
impermissible Home Equity Loan closed
within one year of the last Home Equity Loan             12. Restriction on Interest
on the property, that an affidavit be obtained                 Interest on a Home Equity Loan may be
from the owner designating all land claimed              for any fixed or variable rate authorized by
as homestead and representing that no part               statute.
of that business or residential homestead is                   Variable Rate Notes. If a variable interest
encumbered by a Home Equity Loan closed                  rate is used, payment adjustments must be
within one year prior to the date of the                 regularly made in amounts sufficient to fully
transaction.                                             amortize the outstanding loan balance in
                                                         substantially equal successive monthly
11. Restriction on Amortization of Home                  payments over the remaining term of the loan.
Equity Loans                                              The amount of the payment should not
     No balloon payments are allowed with                change more frequently than the interest rate
Home Equity Loans. The loan must be repaid               adjustment. The scheduled payment amount
in substantially equal monthly installments              between each payment change date should
beginning no later than two months from                  be substantially equal and the amount of the
closing. Each installment payment must                   payment should equal or exceed the amount
exceed the amount of accrued interest on the             of interest scheduled to accrue between each
note as of the date of that installment and              payment date.
contribute to the repayment of some amount                     Interest Rate. TEX. CONST. art. XVI ' 11
of principal. A Home Equity Loan may not                 permits interest rates of 10% or less on credit
contain a "negative amortization" feature in             transactions unless alternative interest rates
which scheduled payments in the early years              are specified by the legislature by statute.
of the loan are in an amount less than the               Interest rates of first lien mortgages are
accruing interest and the resulting interest             nominally controlled by TEX. FIN. CODE ANN.
deficits are capitalized into the loan principal.        Title 4, Subtitle A. However, Congress by the
     Subsequent Events. According to OCCC                enactment of the Depository Institutions
Commentary, the constitutional restriction on            Deregulation and Monetary Control Act of
amortization does not preclude a lender's                1980 preempted state interest rate limitations
recovery of amounts made necessary by the                on first lien residential mortgage loans.
borrower's failure to perform loan covenants             Secondary mortgage loans that exceed the
such as taxes, adverse liens, insurance                  constitutional rate of 10% are controlled by
premiums, collections costs, and similar                 TEX. FIN. CODE ANN. Chapter 342, Subchapter
items.                                                   G.
     Multiple Advance Loans. The OCCC's
regulatory position is that Home Equity Loans
may be multiple advance credits. However,
the loan must be structured so that the loan is


                                                    37
Chapter 5                                                              Homestead After Home Equity

13. Restriction on Basis for Acceleration              loan). However, if loan proceeds are to be
     The maturity of a Home Equity Loan may            disbursed directly to existing creditors, the
not be accelerated because of (1) a decrease           lender      should      obtain      a    signed
in the market value of the homestead; or (2)           acknowledgement from the owner evidencing
the owner's default under some other                   the owner's voluntary payment of the existing
indebtedness not secured by a prior valid              debt.
encumbrance against the homestead.                          In Stringer v. Cendant Mortgage
     Decrease in Value. According to OCCC              Corporation, a lender required the borrowers
Commentary, the Constitution does not                  to use proceeds of a home equity loan to pay
prohibit the acceleration of a Home Equity             off debt to other creditors not secured by the
Loan because of a default by the owner of              homestead.         TEX. CONST. art. XVI
covenants contained in the loan, including             ' 50(a)(6)(Q)(i) allows a creditor to require the
covenants not to commit waste or remove                application of home equity loan proceeds to
property which indirectly bear on the market           "debts secured by the homestead or debt to
value of the homestead.                                another lender". However, the required
     Cross Default. A Home Equity Loan                 pre-loan disclosure of TEX. CONST. art. XVI
cannot contain cross-default provisions.               ' 50(g)(Q)(1) requires lenders to notify
                                                       borrowers that the lender cannot require
14. Restriction Against Confession of                  home equity loan proceeds to be applied "to
Judgment/Waiver of Citation                            another debt to the same lender". Noting that
     A home equity borrower may not be                 these two provisions are in conflict, the
required to sign any confession of judgment            Supreme Court nevertheless concluded that
or power of attorney allowing a confession of          the substantive provisions ' 50(a)(6)(Q)(i)
judgment or appearance for the debtor by a             controlled over the text of the required
third-party in a judicial proceeding.                  pre-loan disclosure found at ' 50(g)(Q)(1).
                                                       The notice itself did not prohibit lenders from
15. Restriction Against Assignment of Wages            requiring the debtors to pay debts to other
    A borrower may not be required to make             lenders not secured by the homestead. To
an assignment of wages as security for a               avoid borrower confusion, the Supreme Court
Home Equity Loan.                                      recommended the text of an addition to the
                                                       pre-loan disclosure which explained that the
16. Restriction Against Same Creditor                  substantive provisions of the constitution
Payoffs                                                controlled over the text of required disclosure.
      A lender may not require a borrower to            While the additional notice is recommended,
apply the loan proceeds of a Home Equity               its absence does not make a home equity lien
Loan to pay off any other extension of credit          unenforceable or give rise to liability for the
by that same lender except one already validly         lender.
secured by the homestead. This provision                    Voluntary Payoffs to Same Creditor. The
precludes a creditor from demanding a                  Constitution only prohibits the home equity
security interest in the debtor's homestead as         lender from requiring the debtor to pay off
a condition for granting a forbearance,                existing non-homestead debt to that same
rearrangement,        or recasting of        an        lender. An owner is not precluded from
indebtedness not already secured by the                voluntarily paying off existing non-homestead
homestead.                                             debt to the home equity lender. The OCCC's
      Payoffs of Other Creditors. An owner is          regulatory position is that a same creditor
generally entitled to use the loan proceeds of         payoff is not rendered involuntary by the home
a Home Equity Loan for any lawful purpose at           equity lender's direct payment to itself from
the owner's discretion. The lender may                 the loan proceeds. However, the home equity
require that the loan proceeds be used to pay          lender should in such cases obtain a signed
off, prepay, or reduce existing debt to another        acknowledgement from the borrower
lender (e.g., when underwriting guidelines             evidencing      the     borrower's     voluntary
based on earnings require that the debtor's            repayment of the existing debt from the Home
monthly obligations be reduced to qualify for a        Equity Loan proceeds.

                                                  38
Homestead After Home Equity                                                                   Chapter 5

                                                        identical to the corresponding substantive
17. Required Pre-Loan Disclosure                        requirements for equity loans found
     The Constitution requires a pre-loan               elsewhere in the section.           In case of
disclosure specifying certain restrictions on           discrepancy, the substantive provisions
home equity lending. For the complete text of           control the lender's responsibilities in a Home
the required pre-loan disclosure, refer to TEX.         Equity Loan transaction. A lender may
CONST. art. XVI ' 50(g). A home equity loan             supplement the notice to clarify any
may not be closed before the twelfth calendar           discrepancies or inconsistencies.
day after the later of the date that the                     Loan Application. An application is
borrower submits a loan application to the              sufficient if submitted to an agent acting on
lender or the date that the lender provides the         behalf of a lender. An application may be
borrower with a pre-loan disclosure in a                taken orally or electronically. It does not have
separate instrument. If the discussions with            to be in writing.
the borrower are conducted primarily in a
language other than English, the lender must            18. Borrower's Right of Recission
provide the borrower with an additional copy                 The homestead owner or the owner's
of the notice translated in the written language        spouse may rescind a Home Equity Loan
in which the discussions were conducted.                transaction within three days after the date
The OCCC has provided a Spanish language                that the extension of credit is made without
translation of the notice at the OCCC web site          penalty or charge. Funding on a Home Equity
at www.occc.state.tx.us/.                               Loan should be delayed until after the
     In Stringer v. Cendant Mortgage Corp.,             expiration of the Rescission Period.
the Supreme Court grafted onto the                           Calculation of Rescission Period. The
Constitutional     pre-loan      disclosure    a        rescission period begins at closing (the
suggested addendum clearing up apparently               signing of the loan documents) and continues
conflicting language relating to required               for three calendar days. If the third calendar
payoffs to other lenders. For the complete              day falls on a Sunday or a legal holiday, the
text of addendum, refer to Note _____ infra.            right of rescission is extended to the next
     Computation of Time. In computing the              business day.       Loan proceeds may be
expiration of the 12-day "cooling off" period           disbursed on the day following the expiration
the date that the disclosure is made is not             of the rescission period.
counted. The loan may be closed on the 12th                  Truth-in-Lending Act. In a Home Equity
day of the notice period. The lender should             Loan transaction the lender must still comply
establish verifiable procedures to ensure that          with the provisions of the Truth-in-Lending Act
the owner receives the required notice within           and Regulation Z permitting the borrower
the required time frame.                                three business days to rescind a mortgage
     The Constitution does not prohibit the             loan in applicable transactions.
required notice being delivered by mail.
OCCC Commentary has adopted a "mailbox                  19. Requirements for Loan Documents
rule." If a lender mails the notice to the                  Written Contract Required. A home
borrower a reasonable period of time should             equity lien must be a voluntary lien created
be allowed for delivery. A three-day period             under a written agreement.
not including Sundays and legal holidays                    Required       Loan       Restrictions. The
constitutes a rebuttable presumption for                Constitution states that a Home Equity Loan is
sufficient mailing and delivery.                        an extension of credit made on specified
     The required notice should be delivered            conditions. Some of the conditions are self
to each owner and each owner's spouse. If               actuating. The Constitution requires that the
delivery is on different dates, the 12-day              security instrument securing the extension of
cooling off period should be calculated from            credit contain a disclosure that the extension
the last delivered notice.                              of credit contain a disclosure that the
     Content of Notice. Certain provisions of           extension of credit is the type of credit defined
the notice specified by TEX. CONST. art. XVI            by TEX. CONST. art. XVI ' 50(a)(6).
' 50(g) do not contain language exactly                 Practitioners differ on whether the remaining


                                                   39
Chapter 5                                                              Homestead After Home Equity

conditions listed at TEX. CONST. art. XVI '            reasonable time for providing these
50(a)(6)(Q) must be included in the Home               documents to the borrower.
Equity Loan documents. If the conditions are                 Required      Signatories. A       written
included in the loan documents, the                    instrument creating a home equity lien must
conditions may affect the negotiability of the         be signed by each owner and each owner's
extension of credit under TEX. BUS. & COM.             spouse (regardless of whether the spouse
CODE ANN. Chapter 3. However, there is                 claims ownership in the property or is liable on
some dated authority that a nonrecourse loan           the debt). This required joinder may apply to
is by its very nature nonnegotiable.                   all instruments executed to create the home
     Required      Disclosure. The     security        equity lien rather than a narrow construction
documents for a Home Equity Loan must                  applying only to the deed of trust. A spouse
disclose that the credit is an equity loan             or owner who is not a maker of the note may
subject to TEX. CONST. art. XVI, ' 50(a)(6).           acknowledge his or her consent by executing
This disclosure should appear in the                   a written consent to the mortgage instrument.
mortgage instrument boldfaced, capitalized,                  OCCC Commentary provides that a
underlined, or otherwise conspicuously set out         properly executed power of attorney is
from the surrounding material.                         acceptable for designating an individual to
     Restriction Against Blanks Left in                execute the loan documents on behalf of the
Instruments. The borrower in a Home Equity             owner.
Loan transaction may not sign any instrument
in which blanks are left to be filled in.              20. Restriction on Place of Closing
According to OCCC Commentary, the                            To prevent a homeowner from
prohibited blanks refer to loan contract terms         encumbering the homestead under duress or
and not signature blocks that must be signed           under the undue influence of an unscrupulous
to execute the document. No guidance is                salesman without a full understanding of the
provided regarding blanks for recording                implications, the constitution requires that a
information unknown at the time of closing.            home equity loan be contracted for away from
     The Constitution does not specify the             the home. Such a loan may be closed only at
instruments to which this restriction applies.         the offices of (1) the lender, (2) an attorney at
Procedural Rule P-47 requires, as a condition          law, or (3) a title company.
to insuring a home equity lien against                       Offices of Lender. A Home Equity Loan
invalidity for impermissible blanks, that no           may not be closed in the offices of a mere
such blanks appear in (1) the written                  loan broker. To qualify as a lender, the party
acknowledgement of the fair market value,              must advance funds directly to the borrower
(2) the insured mortgage, (3) the promissory           or be identified as the payee of the note.
note, or (4) any affidavits of compliance with               Offices of Title Company. According to
TEX. CONST. art. XVI ' 50(a)(6).                       Procedural Rule P-44, the offices of a title
     Required Copies. A home equity lender             company include the leased or owned Texas
must provide the borrower at closing with a            office location of a title insurance company or
copy of all documents signed by the borrower           (1) direct operation, (2) title insurance agent,
and related to the extension of credit.                or (3) an attorney conducting the attorney's
According to OCCC Commentary, the                      business in the name of the title insurance
Constitution does not require the lender to            company, direct operation, or title insurance
provide copies of documents signed by the              agent (if the attorney or the attorney's bona
borrower before closing but related to the             fide employees are escrow officers under TEX.
extension of credit (e.g., documents signed in         INS. CODE ANN. art. 9.41C. The term "title
the loan application process). For documents           company" means a title insurer or an agent of
signed after closing (e.g., borrower's                 a title insurer. The term does not include a
confirmation that the recission period has             mere abstract company which does not serve
expired), the lender must provide the borrower         as an agent for a title insurance company.
copies within a reasonable time after                        Personal       Appearance       by     the
execution.      Three business days is a               Borrower. OCCC Commentary provides that
                                                       a Home Equity Loan may be closed for a


                                                  40
Homestead After Home Equity                                                                    Chapter 5

borrower by the borrower's attorney-in-fact              24. Non-Severability Provision
acting under a valid power of attorney. If a                  Home equity lending is authorized only on
transaction is closed in the proper office but           condition that none of the constitutional
lacks the consent of a spouse or other party, it         restrictions ever be preempted by federal law.
is permissible to obtain that individual's               To this end, TEX. CONST. art. XVI ' 50(j)
consent by mail.                                         contains a "Don't Mess With Texas" provision
                                                         providing that all home equity provisions are
21. Restriction on Foreclosure                           non-severable, that none would have been
     Home equity liens may be foreclosed only            enacted without the other. If any home equity
by court order. Pursuant to TEX. CONST.                  provision is held to be preempted by federal
art. XVI ' 50(r), the Supreme Court has                  law, all home equity lending provisions are
developed rules for expedited foreclosure                rendered invalid. In such a case, a savings
proceedings found at TEX. R. CIV. P.                     provision upholds the validity of Home Equity
Rules 735, 736. For a more complete                      Loans made before the decision holding any
discussion of foreclosures on Home Equity                aspect of home equity lending preempted by
Loans refer to Part VII(G) of this paper infra.          federal law.

22. Restriction on Release/Transfer of Note              H. Reverse Mortgages
     Within a reasonable time after repayment                 Effective January 1, 1998, a certain
of a Home Equity Loan, the lender must                   debtors may encumber their homestead with
cancel and return the promissory note to the             a reverse mortgage. A reverse mortgage is
borrower and deliver in a recordable form a              an instrument that allows a debtor to borrow
release of lien. If the loan is being refinanced,        against the debtor's home equity to create an
a lender may deliver an endorsement and                  annuity-like debt providing for periodic
assignment of the lien. Thirty days is a                 payments to the debtor by the lender or
reasonable time for the lender to perform the            providing a line of credit on demand. Like
duties required by this section. An affidavit of         home equity loans, reverse mortgages are
lost note may be returned to the owner in lieu           subject to a host of constitutional restrictions.
of the original note if the original note has
been lost.                                               1.   Written Contract Required
                                                              A reverse mortgage must be a voluntary
23. Forfeiture Provision                                 lien created by written contract.
      Constitutional provisions for home equity
lending contain a "death penalty" provision for          2.  Joinder of Spouse Required
non-conforming loans. If a lender or holder                  The joinder of each owner and each
fails to comply with its obligations under the           owner's spouse is required to encumber the
extension of credit within a reasonable time             marital homestead with a reverse mortgage.
after notice to cure by the borrower, the lender
or holder forfeits all principal and interest on         3.   Limitation on Age of Borrower
the note.                                                     A reverse mortgage loan cannot be made
                                                         unless the borrower or the borrower's spouse
                                                         is 62 years of age or older.

                                                         4.  Loan Must be Non-Recourse
                                                             A reverse mortgage must be without
                                                         recourse for personal liability against the
                                                         owner or the owner's spouse.




                                                    41
Chapter 5                                                              Homestead After Home Equity

5.   Restriction on Advances to Borrower                the borrower are not taxable as income and
     A reverse mortgage loan must provide for           do not affect eligibility for social security,
advances to the borrower based on the                   medicare, medicaid, low-income energy
borrower's equity in the homestead.                     assistance, property tax relief, and other
Presumedly the reverse mortgage can be set              means-tested allowances, benefits, or
up with either an annuity-like string of regular        services.
payments or a single advance arrangement.                   If advances are set up on a periodic
If more than one advance is contemplated,               basis, the lender may not reduce the amount
the advances must be made at regular                    or number of advances because of an
intervals according to a plan established by            adjustment in the interest rate.
the loan documents. However, the borrower,
upon request, may reduce the amount of the              6. Restriction   on   Loan   Repayment
regular advances made on the loan.                      Requirements
Additionally, the lender may make advances                   Reverse mortgages have no monthly
on the reverse mortgage note on behalf of the           repayment requirements. The note may not
borrower at any time if the borrower fails to           require repayment of either principal or
pay any of the following that the borrower is           interest unless:
obligated to pay:
                                                            (1) all borrowers have died;
                                                                the
                                                            (2) 1 homestead property securing the
                                                                loan is sold or otherwise transferred;
                                                                )
                                                            (3) all borrowers cease occupying the
                                                                t
                                                                homestead property for period of
                                                                longer than 12 consecutive months
                                                                a
                                                                without prior written approval from
                                                                x
                                                                e lender;
                                                                the
                                                                the borrower defaults on an
                                                            (4) s
                                                                obligation specified in the loan
                                                                ;
                                                                2
                                                                documents to repair and maintain,
                                                                pay taxes and assessments on, or
                                                                )
                                                                insure the homestead property;
                                                                the
                                                            (5) i borrower commits actual fraud in
                                                                n
                                                                connection with the loan; or
                                                                the
                                                            (6) s borrower fails to maintain the
                                                                priority of the lender's lien on the
                                                                u
                                                                homestead property, after the lender
                                                                r
                                                                a
                                                                gives notice to the borrower, by
                                                                promptly discharging any lien that
                                                                n
                                                                has priority or may obtain priority
                                                                c
                                                                e
                                                                over the lender's lien within 10 days
                                                                after the date that the borrower
                                                                ;
     (3) costs of repair or maintenance (if                     receives the notice unless the
         performed by a party not an                            borrower (a) agrees in writing to the
         employee or directly or indirectly                     payment of the obligation secured by
         controlled by the lender);                             the lien in a manner acceptable to
     (4) assessments; or                                        the lender; (b) contests in good-faith
     (5) any lien that has or may obtain                        by, or defends the enforcement of
         priority over the reverse mortgage.                    the lien in, legal proceedings so as
                                                                to prevent the enforcement of the
    There is no restriction on the purpose                      lien or the forfeiture of any part of the
and use of the future advances by the                           homestead property; or (c) secures
borrower. Nor is there any restriction on the                   from the holder of the lien an
term of future advances. Advances made to                       agreement satisfactory to the lender


                                                   42
Homestead After Home Equity                                                                   Chapter 5

         subordinating the lien to all amounts
         secured by the lender's lien on the              11. Forfeiture Provision
         homestead property.                                   If the lender fails to make loan advances
                                                          as required in the loan documents after notice
     When the note becomes due, the lender                from the borrower, the reverse mortgage
must satisfy the note from the sale of the                death penalty will apply. In such a case, the
mortgaged homestead. Neither the note nor                 lender forfeits all principal and accrued
any deficiency will be an obligation of the               interest on the reverse mortgage note. The
borrower's estate.                                        death penalty will not apply when a
     Reverse mortgages contemplate that no                government agency or instrumentality takes
principal or interest are payable until the entire        an assignment of the loan in order to cure the
note becomes due upon the occurrence of                   default.
one of several triggering events. Unlike home
equity loans there is no restriction against a            12. Required Disclosures
balloon payment.                                               The reverse mortgage must require the
                                                          lender, at the time the loan is made, to
7.   Required Borrower Counseling                         disclose by written notice the specific
     A reverse mortgage may not be made                   repayment restrictions for reverse mortgages
unless the owner receives counseling                      found at TEX. CONST. art. XVI ' 50 (k)(6).
regarding the advisability and availability of
reverse mortgages and other financial                     13. Restriction on Foreclosure
alternatives. The owner must attest in writing                 For a discussion of foreclosures on
that the owner received the required                      Reverse Mortgages refer to Part VII (G) on
counseling.                                               this paper infra.

8.   Priority of Reverse Mortgages                        I.   Liens Predating Homestead
     All lien advances made or to be made                      Generally an encumbrance will prevail
under a reverse mortgage and for interest on              over homestead if the right existed before the
those advances has priority over a lien filed             property became homestead.                 The
for record after the recordation of the reverse           establishment of a homestead on a tract will
mortgage. There is no limitation on the term              not destroy or avoid a preexisting right.
that future advances take priority over                        Inwood North Homeowners' Ass'n v.
intervening liens.                                        Harris and Johnson v. First Southern
                                                          Properties, considered the enforceability
9.   Restriction on Interest                              against homestead of liens created by
     A reverse mortgage may accrue interest               subdivision and condominium declarations
at either a fixed or variable rate. The interest          respectively. The declarations in each such
rate may also be made contingent on an                    case were filed of record by the developer
appreciation of the fair market value of the              prior to the purchase of the homestead by the
homestead securing the note.                              claimant.Each declaration provided for annual
     While no interim interest or principal               assessments to be paid by all resident owners
payments may be required until the entire                 and each reserved a lien to enforce payment
note is due, interest may accrue and be                   of the assessments. When the owners
compounded during the term of the note as                 purchased their respective homesteads, the
provided by the reverse mortgage loan                     deeds were made subject to the recorded
agreement. There is no prohibition on                     declarations.
compound interest or interest on interest.                     Both cases, noting that the assessment
                                                          liens predated the establishment of the
10. Assignment of Reverse Mortgages                       homestead, held in favor of the enforceability
     Reverse mortgages are freely assignable.             of the liens. Additionally the declarations
 There is no requirement that a percentage of             were in the nature of a mutual and reciprocal
the reverse mortgage proceeds be advanced                 property interest against the tract in favor of
before assignment of the reverse mortgage.                the other owners. Because the homestead


                                                     43
Chapter 5                                                                Homestead After Home Equity

right could not rise any higher than the title           J. Refinancing, Renewing and Extending
acquired by the homestead claimant, the                  a Lien on Homestead
assessment lien was superior to the                      1. Risks of "Rolling In" Refinance Costs
homestead claim.                                               A valid lien against a homestead may be
     In Boudreaux Civic Ass'n v. Cox, a                  renewed, refinanced, and perpetuated without
homeowner bought a residential tract subject             losing its validity. This renewal and extension
to and with notice of subdivision restrictions           may change the form of the obligation so long
containing property use restrictions, providing          as there is no increased burden on the
for maintenance fees secured by a lien on the            homestead except as necessary for
property, and allowing for the restrictions to be        readjustment of the outstanding obligation.
amended. The property owners association                 Traditionally, this has meant that closing costs
later sued the homeowner to enjoin him from              for the refinance transaction may be rolled
leaving inoperable cars on his property. After           into the new loan and secured with a valid lien
the suit was filed but before judgment, the              against the homestead so long as necessary
subdivision restrictions were amended to                 to the readjustment of the debt. In the event
impose a lien for attorney's fees and costs              that the closing costs were deemed
against     recalcitrant     property    owners          excessive, the mortgagee ran the risk that the
successfully sued by the association for                 refinanced lien would be held to be partially
restrictions violations. The association then            invalid to the extent of the excessive charges.
prevailed in its injunctive action against the            This risk was hedged by the use of a "partial
homeowner and was awarded a $25,000.00                   invalidity" clause in the deed of trust providing
judgment for attorney's fees. The property               that any amounts not properly secured by a
owners association then tried to foreclose its           lien on the homestead were discharged by the
lien for attorney's fees on the homeowner's              first payments made on the note.
property via a turnover order. The question                    Effective January 1, 1998 TEX. CONST.
was presented whether any lien acquired by               art. XVI ' 50 was amended to provide that a
the association pursuant to the restrictions             refinance of a debt secured by homestead
amended after the homeowner's purchase of                that includes the advance of additional funds
the lot and designation of it as his homestead           may not be secured by a valid lien against the
could be paramount the homeowner's                       homestead unless the advance of additional
homestead rights in the property. This issue             funds is for a Home Equity Loan or for
was sidestepped by the court which found that            "reasonable costs necessary to refinance
the judgment for attorney's fees recited that it         such debt". While this amendment expressly
was based on TEX. PROP. CODE ANN.                        authorizes a lien on homestead for funds
' 5.006(a) (providing for attorney's fees for a          advanced for reasonable costs necessary to
prevailing party in a suit to enforce restrictive        refinance, it also appears to invalidate the
covenants) and not the subdivision                       refinance lien in its entirety if the additional
restrictions. Because the attorney's fees                funds advanced are not "costs" or are
award was not imposed based on the                       determined to be neither "reasonable" nor
subdivision restrictions, the association had            "necessary" to refinancing the homestead
no lien to foreclose.                                    debt. Adding to the uncertainty, the terms
                                                         "costs", "reasonable", and "necessary" are not
                                                         defined by the Constitution. There are no
                                                         cases interpreting this provision.            An
                                                         interpretive bulletin by the Texas Department
                                                         of Insurance provides that refinance closing
                                                         costs not exceeding 3% of the loan may be a
                                                         safe harbor for refinance lenders until more
                                                         definitive guidance is provided. However, the
                                                         efficacy of interpretive commentary on TEX.
                                                         CONST. art. XVI ' 50 made by state agencies
                                                         has been questioned by Texas Attorney
                                                         General's Opinion.


                                                    44
Homestead After Home Equity                                                                  Chapter 5

                                                        4. Refinancing, Renewing, and Extending a
2. Refinancing, Renewing, and Extending                 Lien for Taxes
Purchase Money Liens                                          A taxpayer with a federal tax lien against
     A valid purchase money lien against                his homestead may refinance the tax
homestead many renewed, refinanced, and                 obligation through a third-party lender and that
perpetuated without losing its validity so long         lender will become subrogated to the tax lien
as the renewal does not change the form of              against the homestead. In Benchmark Bank
the obligation or increase the burden on the            v. Crowder, a husband who was the sole
homestead except as necessary for the                   officer, director, and shareholder of a closely
readjustment of the outstanding obligation. In          held corporation became vicariously and
In re Freytag, the debtors refinanced their             personally liable for unpaid federal payroll
home mortgage to provide for interest only              taxes of the corporation. As a result, federal
payments for a 14-month period. Held the                tax liens attached to the marital homestead of
interest only payments did not involve an               husband and wife. The couple paid off the tax
unlawful alteration of the basic debt obligation        lien by executing a note to Benchmark Bank
or increase burden on the homestead. The                and securing it with a deed of trust on their
new deed of trust was a valid purchase                  homestead. After defaulting on the note, the
money lien against the homestead.                       debtor contended that the bank could not
     A lender, who as part of the new loan,             become subrogated to the IRS' right to
pays off a prior purchase money lien with the           proceed against their homestead. Held that
express or implied consent of the homestead             refinancing the federal tax lien was no
owner is subrogated to the rights of the                different than refinancing any other
original lienholder. In In re Julian, a lender          permissible lien against homestead. The
made a loan in part to pay off an existing              bank was subrogated to the federal tax lien
indebtedness predating the establishment of             and could foreclose same against the
the debtor's used car lot as homestead and in           homestead.
part to supply working capital. Held the lender               Notwithstanding, the IRS tax obligation
was subrogated to the rights of the original            was owed by the husband only with the tax
lienholder notwithstanding that the prior lien          lien to which the lender was subrogated filed
was not mentioned in the new note or deed of            only against the husband. The wife, who did
trust, the new deed of trust contained no               not owe the taxes, had a separate homestead
express subrogation clause, and the prior lien          interest in the tract apart from her husband.
was released not transferred at the time that           As a result, the bank could not foreclose on
the new loan was closed. The debtor was                 the homestead without compensating the wife
aware that the new loan was intended to be              for the loss of her homestead estate.
secured by a lien on the used car lot. This                   On November 7, 1997, Texas voters
was enough to show the debtor's implied                 approved an amendment to TEX. CONST.
consent to the subrogation.                             art. XVI ' 50 specifically providing for the
                                                        validity of liens against the homestead
3. Refinancing, Renewing, and Extending                 refinancing a federal tax lien resulting from
Liens for Improvements                                  the tax debt of both spouses, if the
    A lender who refinances a debt secured              homestead is a family homestead or from the
by a valid mechanic's lien against a                    tax debt of the owner.
homestead is subrogated to that lien.




                                                   45
Chapter 5                                                                 Homestead After Home Equity

5. Refinancing, Renewing, and Extending a                L.    Lien Spreading
Home Equity Loan                                               Texas common law prohibited an existing
    The refinancing of a debt, any portion of            lien upon part of a homestead from being
which is secured by a home equity lien, may              spread or extended over another part of a
be made only by an extension of credit                   homestead not originally charged with the
meeting all of the constitutional requirements           debt secured. For example, in Baxter v.
of a Home Equity Loan. The effect of this                Crow, Crow encumbered his 22 acre urban
provision is to make any transaction involving           homestead with a purchase money lien. The
the     refinance,    renewal,       extension,          note was later renewed with Crow's separate
modification, or consolidation of a Home                 business homestead being added as
Equity Loan subject to all of the restrictions of        additional security. Held the lien could not be
home equity lending both at closing and                  spread to attach to the business homestead.
throughout the term of the note.                         Effective September 1, 1999, the common law
                                                         rule against spreading was repealed. TEX.
K. Effect of Liens Not Permitted by the                  PROP. CODE ANN. ' 5.042(a) was amended to
Constitution                                             repeal "[t]he common law...doctrine or rule
     No attempt to mortgage or impose a lien             prohibiting an existing lien upon part of a
on homestead for a purpose or in a manner                homestead from extending to another part of
not permitted by the Constitution is ever valid.         the homestead not charged by the debts
 Such a void lien is an utter nullity which never        secured by the existing lien upon part of the
becomes effective to any extent even after the           homestead..." However, because the rule
property is no longer impressed with the                 against lien spreading has a constitutional
homestead character.                                     basis in the TEX. CONST. art. XVI ' 50, it is not
     In In re Nelson, a debtor executed a void           clear whether this amendment to the Property
non-purchase money deed of trust on his                  Code will be effective to reverse the former
business homestead.              The debtor's            rule.
subsequent abandonment of this business
homestead in favor of a rural residential                M. Lien Overburdening
homestead held not to resuscitate the void                    Decisional authorities under TEX. CONST.
deed of trust.                                           art. XVI ' 51 formerly prohibited the
                                                         homestead from being subjected to an
                                                         increased burden of debt beyond that
                                                         constituting a permissible encumbrance
                                                         against the particular tract encumbered. Debt
                                                         on one part of the homestead cannot be
                                                         shifted to another part of the homestead. For
                                                         example in John Hancock Mut. Life Ins. Co. v.
                                                         Glasgow, Glasgow bought Lots 6 and 7 and
                                                         established his homestead thereon. To
                                                         purchase the lots, Glasgow executed notes to
                                                         the seller and assumed existing indebtedness
                                                         against the property.             Glasgow later
                                                         refinanced with John Hancock and secured
                                                         the refinanced obligation with Lot 7 and
                                                         10 feet of Lot 6 only. The remainder of Lot 6
                                                         was released. Held John Hancock's lien was
                                                         partially invalid to the extent that it secured the
                                                         unpaid purchase price of the released portion
                                                         of Lot 6.
                                                              On November 2, 1999, Texas voters
                                                         approved an amendment to TEX. CONST.
                                                         art. XVI ' 50 reversing the rule against lien
                                                         overburdening.         The Constitution now

                                                    46
Homestead After Home Equity                                                                    Chapter 5

provides that "a release or refinance of an               (2) the debtor attempts to sell the homestead
existing lien against a homestead as to a part            and the sale is thwarted by the abstract. A
of the homestead does not create an                       creditor is under no general obligation to
additional burden on the part of the                      partially release the abstract "on demand" and
homestead property that is unreleased or                  give up forever a valuable potential lien that
subject to the refinance, and a new lien is not           could later attach to the homestead tract if its
invalid only for that reason".                            homestead status later terminated. However,
                                                          a different situation is presented when the
N. Judgment Liens                                         debtor shows the property is under contract
      A judgment lien will not attach to an               for sale, the title company will not issue a
existing homestead. However, unlike a void                policy on the property without a partial release
contractual lien, a judgment lien may attach to           of the judgment lien, and the property has
property later abandoned as homestead by                  remained       the     debtor's      homestead
the debtor or to the proceeds from the sale of            continuously since the abstract was filed.
the homestead (subject to the proceeds                    Faced with a definite sale of the homestead
exemption period).                                        tract held up by an abstracted judgment, the
      In Tarrant Bank v. Miller, homeowners               creditor should partially release the abstract
sued Tarrant Bank for slander of title when               conditioned upon the sale closing.
the bank refused to partially release its                       The 1995 opinion also considered and
judgment lien as to their homestead. Tarrant              rejected the idea that the filing of an abstract
Bank defended that the bank's abstracted                  constitutes a slander of title. Slander of title
judgment created no lien against the                      requires the publication of false and malicious
homestead therefore could not as a matter of              words in disparagement of title causing the
law cloud the homeowners' title. Held for the             plaintiff damages. A duly recorded abstract
homeowners in the amount of $21,000.00.                   makes no false statement and does not of
The lien did not need to be valid to create a             itself assert any claim of lien on the
cloud on title.                                           homestead. Likewise, a refusal to partially
      Using the same reasoning, the Fifth                 release an abstract "on demand" is not a false
Circuit in Matter of Henderson allowed a                  claim of a lien against the homestead. If the
debtor to avoid an abstract of judgment                   creditor has any duty to mitigate the effect of
affecting his rural homestead. Under Section              the abstract, it would be at most a duty to
522(f)(1) of the Bankruptcy Code, a debtor is             disclaim any present lien but not to waive a
entitled to avoid a judgment lien if it "impairs"         potential future lien.
the debtor's exempt property. The Fifth
Circuit determined that while the judgment lien
was unenforceable against the homestead, its
practical effect was to create a cloud on title
making it difficult for the debtor to obtain title
insurance.
      A 1995 Attorney General's Opinion
considered the effect of recording an abstract
of a valid, non-dormant, and undischarged
judgment in light of the Tarrant Bank decision.
 The opinion, like Tarrant Bank, concluded
that an abstracted judgment does create a
cloud on the debtor's title to his homestead.
Notwithstanding, the existence of a cloud on
title does not give the debtor a cause of action
to have the cloud removed without a
reasonable apprehension of injury caused by
the cloud. As a result, no suit to remove the
abstract of judgment will lie unless (1) the
creditor attempts a seizure of the property or


                                                     47
Chapter 5                                                               Homestead After Home Equity

O. Application of Loan Payments When                    B. Use Sufficient to Establish a
Lien Partially Invalid                                  Homestead (Generally)
      Occasionally a lien will be declared to be             While actual occupancy and use of a
only partially valid against the homestead. In          tract will not alone make it homestead, such
such cases, the question arises how to apply            use and occupancy is the most satisfactory
payments made thus far on the loan by the               and convincing evidence of an intention to
debtor. The debtor will want prior payments             establish a permanent residence. Possession
to be applied to the valid portion of the lien.         or use of a property by a debtor who resides
The lender will want all payments applied to            thereupon with his family raises a rebuttable
the invalid part of the lien. Generally, to             presumption of homestead which in some
resolve such a dispute, the courts will look            cases makes investigation of intention
first to the terms of the note. If the note             unnecessary.
contains a provision providing that all                      However, use without intention to
payments will be applied first to paying                establish a homestead is not sufficient to
accrued interest then to the reduction of               impress a property with the homestead
principal, this provision will be applied to            character. Mere residence on a property,
determine the amount of principal reduction.            even over a length of time, does not convert it
After the amount of the principal reduction is          to homestead. The word "home" is not
determined on a lien partially valid and                necessarily synonymous with "homestead".
partially invalid against the homestead, the                 In Sanchez v. Telles, the debtor's
courts will look to see if the note and deed of         residence on a property for eight years was
trust direct how payments are to be applied. If         not sufficient to establish the property as
the loan documents provide that in case of              homestead contrary to debtor's (1) affidavit
any partial invalidity of the lien, all payments        disclaiming the tract as homestead, (2) failure
will be directed first to the payment of the            to file a homestead designation, and
unsecured part of the indebtedness, this                (3) failure to claim the property as exempt for
provision will be applied against the debtor.           ad valorem tax purposes.
When the loan documents do not address the
possibility of a partial invalidity of the lien,        C. Use Must Be By Debtor or Constituent
there is a variance of the authorities on how           Family Member
principal reduction ought to be applied. In In               To claim a homestead the use of the
re Hughes, In re Napier, and In re Howard, it           property must be by the homestead claimant,
was determined that when the note and deed              or, in the case of a family homestead, by a
of trust were silent on this issue and the              constituent member of the family. Use by a
debtors had not directed the lender to make             third party will not impress a property with the
application of the principal reduction in any           homestead character.
certain way, that the lender was free to                     In NCNB Texas Nat'l Bank v. Carpenter,
allocate principal reduction first to the               a debtor claimed a family homestead on
unsecured part of the debt. In In re Julian,            property used by his two married adult sons.
the court determined that when the note was             Held the debtor could not claim a homestead
silent and the debtors had not designated how           in the tract used by his sons unless the two
payments were to be applied, the lender was             adult married sons and the debtor were part
nevertheless obligated to apply all principal           of a single family unit.
reduction first against the valid portion of a               In Patterson v. First Nat'l Bank of Lake
lien against homestead.                                 Jackson, a divorced husband owned as
                                                        cotenant with his ex-wife a house occupied by
V. ESTABLISHMENT             OF         THE             the ex-wife and minor children. Held the
HOMESTEAD                                               occupancy of the house by the constituent
A. Generally                                            family members of the claimant was sufficient
    To establish a homestead, the claimant              to impress the property with the homestead
must show a combination of both overt acts of           character. However, in In re Brown, an
usage and an intent to claim the land as a              apparently childless couple divorced with
permanent residence.                                    each remaining tenants in common in the


                                                   48
Homestead After Home Equity                                                                   Chapter 5

former marital homestead. The ex-husband                     The cases are at variance on the degree
lived on the property, the ex-wife did not.             and kind of support that the rural homestead
Held the ex-wife, without occupying the                 must provide to the claimant in order to
property could not claim it as homestead.               qualify. In In re Brokmeyer, a claim of a rural
                                                        homestead failed when the tract provided no
D. Sufficient Use to Establish a Rural                  meaningful and substantial source of income
Homestead                                               and support to the debtor. In In re Moody, a
      To establish a homestead claim on rural           rural homestead claim was sustained
property, the claimant must (1) reside on part          although the cattle raised thereupon did not
of the property and (2) use all the remaining           provide the debtor with his sole financial
tract for the support of the family. The home           support. In In re Spencer, a debtor's "country
need not occupy the entire property but the             estate" used only for hobby farming did not
home must be an integral part of the property           qualify as a rural homestead when it provided
claimed.                                                no pronounced economic benefit to the
      If the rural homestead consists of more           homestead claimant.
than one parcel, the claimant need not reside                However, In re Mitchell, held the
on all tracts. In In re Bohac and In re                 protections of the rural homestead were not
Brokmeyer, a rural homestead was denied                 limited to working farms and ranches. The
when debtors, although making some                      tract need only be used as a home. The
agricultural use of the property, failed to             shelter, protection, comfort, convenience, and
reside thereon. In In re Brooks, a debtor               enjoyment of the home were the only required
resided on the same ranch in close proximity            rural homestead uses. In accord is In re
to but not on the actual parcels claimed as             McCain holding the homestead claimant need
homestead. He used the claimed homestead                not show any economic support derived from
parcels for income-producing ranching                   the property to claim a rural homestead. It is
purposes. Held the property could not be                sufficient to show that the property is rural and
debtor's rural homestead unless actually                used as a home.
occupied by the debtor as his home.                          It is the use of the property made by the
      Occasional use of the property is not             debtor at the time that the adverse right is
enough. The debtor must use the property as             asserted that will determine whether the tract
a permanent home. Weekend or holiday use                qualifies as homestead. If a debtor is
of the tract will not make it a rural homestead.        presently using a rural tract for the support of
 In In re Mitchell, a claim of a rural homestead        the family, unfulfilled plans for future
failed when debtor lived in town but used his           development will not deprive the tract of its
farm on weekends and in the summer. Such                homestead status. In Matter of Bradley, the
use of the farm made it a retreat for leisure           debtor made repeated attempts to develop
time not a home. Held no rural homestead.               ranch property with no success. Some of the
In Van Brunt v. BancTexas Quorum, N.A. use              tract had been sold to investors but
of a rural tract for family recreation and              reacquired by the debtors when the
enjoyment which included family picnics,                development failed. The debtor, who resided
family recreational games, and use by the               on a part of the tract, reconverted it to
family dog failed to qualify it as a rural              ranching pursuits but hoped to develop the
homestead. In In re McCain, a debtor claimed            tract in the future. Held the property qualified
a 23.32 acre tract adjacent to the debtor's             as a rural homestead.
home as part of a rural homestead. While                     A different result was reached in In re
some qualifying use was made of the tract it            McCain, where the debtor claimed as
was "very minimal". Held the tract was not              homestead the unsold portion of a rural
part of the debtor's homestead.                         residential subdivision known as "Briarwood
      The remaining balance of the rural                Acres" being developed in part by the debtor.
homestead must be used to support the                   In this case the development of the property
family. This may include cultivation, raising of        as a subdivision was ongoing with 14 lots
livestock, growing of forage, raising of timber,        sold, 11 homes built, and surfaced subdivision
and/or the production of family supplies.               roads in place and maintained by the county.


                                                   49
Chapter 5                                                               Homestead After Home Equity

The court found the development plan so                 The welfare of the family, it was reasoned,
complete as to extend not only to all platted           was best served by letting the debtor elect
lots in the subdivision but also to a 23.32 acre        which place he chose to use to earn his
tract adjacent thereto labeled on the plat as           livelihood.
"Briarwood Acres - Phase II".                                 Effective January 1, 2000, TEX. CONST.
      While a maximum of 200 acres is                   art. XVI ' 51 was amended to require that an
available for a family rural homestead, the             urban business homestead be used both as
exemption will only extend to so much of the            an urban home and a place to exercise a
tract that is actually used as a rural home.            calling or business of the homestead
Nevertheless, if a debtor uses part of a rural          claimant. This amendment would seem to
tract for an appropriate homestead use, the             eliminate the requirement that the urban
law will imply that same constructive use to            homestead be used to exercise the principal
the entire tract unless an inconsistent use is          occupation of the debtor.
shown.                                                        In In re Finkel, a widow claimed a
      One use inconsistent with a rural                 business homestead in property leased to the
homestead is the use of the tract for the               family restaurant corporation. The widow was
operation of a business. The operation of any           a minority stockholder in the corporation, did
business on part of a rural homestead forfeits          not serve as a corporate officer, and did not
the homestead protection on that part of the            actively participate in the running of the
property. In In re McCain, the debtor's                 corporation save for some occasional filing
development of part of his rural homestead              and helpful hints to her son. Held the widow,
into a rural subdivision was a business use             as a passive investor in the corporation, did
inconsistent with use as a home.                        not have a business or occupation that would
                                                        support a business homestead. Mere renting
E. Sufficient Use to Establish a Business               of property to others is not a business or
Homestead                                               calling but an investment activity.
      To establish a business homestead, it                   The business homestead will extend only
must be shown that (1) the head of the family           to property reasonably necessary to the
has a business or calling; (2) the tract is             debtor's business and on which the debtor's
reasonably adapted and necessary to that                business is actually conducted. If a property
business; and (3) the property is actually used         is only incidentally used in connection with or
as both a place to exercise that business and           is convenient to the business, it cannot qualify
an urban home.                                          as part of the business homestead. The
      It is axiomatic that a debtor must have           property need not be physically adapted to the
some business or calling before a business              principal business of the debtor. The test is
homestead may be claimed. A business or                 not whether the business would perish without
calling is construed broadly to encompass any           the lot at issue, but whether the business
legitimate avocation in life by which the               would keep its character if deprived of the lot.
honest support of a family may be obtained.              In In re Starns, a debtor sought to include
      Some decisional authorities required that         within his business homestead a tract used
the business must be the principal business of          for storing boxes. Held this use was not
the homestead claimant. The activity had to             necessary to debtor's primary business. The
be one that busied or occupied one's time,              debtor could not claim the property as
attention, and labor as his chief concern; that         homestead. In In re Krug, the debtor sought
which the homestead claimant did for a                  to exempt property used to store old records
livelihood, occupation, and employment.                 and pipe inventory and to house the debtor's
      In In re Hughes, the court examined the           son. Held the property, while beneficial, was
income and asset value of the debtor's                  not necessary to the debtor's business. The
various businesses to determine his principal           property could not qualify as a business
business. However other authorities have                homestead.
indicated that a debtor with several                          The tracts sought to be included in a
businesses could choose which would be                  business homestead must be operated as
considered his principal place of business.             part of one integrated business. In Matter of


                                                   50
Homestead After Home Equity                                                              Chapter 5

Webb, the debtor, sought to exempt both the                The acts by the debtor to prepare the
lot on which he operated his wholesale auto           property for occupation must have proceeded
parts business and his retail location. The           to the extent as to manifest beyond a
businesses were operated separately with              reasonable doubt an intention to complete the
separate books. Held the two tracts were not          improvements and reside upon the property
operated as a single integrated business.             as a home. During the reporting period, the
The business homestead did not attach to the          following preparatory acts were cited with
retail location.                                      approval as establishing a homestead prior to
     This is dispute among the authorities on         actual occupancy:
the extent to which a commercial premises
may be exempted as a business homestead
when only partially occupied by a business of
the homestead claimant. In In re Hughes, the
debtor claimed a multi-tenant office building
as his homestead.          Held the debtor's
occupation of part of the office space while
renting out the remainder of the building was
sufficient to make the whole building
homestead. However in In re Kang, the
debtors occupation of a portion of a strip
center with a family-operated convenience
store failed to qualify the entire center as a
business homestead. The debtor could only
claim a homestead exemption on the lease
space actually occupied by the convenience
store together with necessary space for
parking, ingress, and egress. The remainder
of the center was not homestead. The Kang
Court determined that a contrary rule would
lead to debtor abuse by allowing exemptions
in large multistory commercial buildings or
hotels if the debtor operated a small retail
operation within such a building leading to a
windfall for the debtor.

F. When Use Short of Actual Occupancy
Establishes a Homestead
     Generally residence on the homestead
tract is required. However, the homestead
character may be impressed on property prior
to actual occupancy when the owner intends
to improve and occupy the premises as
homestead within a reasonable and definite
time and the owner has made actual
preparations toward occupancy.
     The policy behind this rule is to allow a
debtor to buy an unimproved property and
protect that property as homestead while he
prepares the tract for occupation. The
rationale for the rule does not readily apply
when the second homestead is ready for
occupation, but the debtor continues to
occupy the prior homestead.


                                                 51
Chapter 5            Homestead After Home Equity

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            52
Homestead After Home Equity            Chapter 5

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                              53
Chapter 5            Homestead After Home Equity


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            54
Homestead After Home Equity                                              Chapter 5

                                              r
                                              e
                                              m
                                              o
                                              d
                                              e
                                              l
                                              i
                                              n
                                              g
                                        Farrington v. First Nat'l Bank of Bellville,
                                              1
                                   may represent the absolute minimum to which
                                              1
                                   preparatory acts must proceed to establish a
                                              )
                                   homestead. Here a fact issue was declared
                                   to exist on whether the debtor could exempt
                                   rural      o
                                             property     as       her homestead
                                              b
                                   notwithstanding that the debtor purchased
                                              t
                                   and resided in a house in town. The urban
                                              a
                                   home was remodeled to accommodate the
                                              i
                                   family, listed as debtor's home in telephone
                                              n
                                   and church directories, and claimed as
                                              i
                                   homestead for ad valorem tax purposes. Use
                                              n
                                   of the rural tract had only included building
                                   fences, g  pasturing livestock, growing hay,
                                   picking out a homesite, talking informally to
                                   builders, fand camping out.
                                              i
                                        Preparatory acts deemed not sufficient to
                                              n
                                   designate a homestead prior to occupancy
                                              a
                                   have included:
                                        (1) n digging postholes
                                        (2) c repairing fences
                                        (3) i depositing fill dirt
                                        (4) n securing zoning variance and
                                              g
                                              informal arrangement with contractor
                                        (5) indefinite plans to build a house on
                                              the
                                              a property
                                              n
                                              d
                                   G. Intent Sufficient to Establish a
                                   Homestead
                                        Like c  hell, homestead claims are paved
                                              o
                                   with good intentions. Intention is the prime
                                              m
                                   factor in securing the benefits of homestead.
                                              m
                                   However, it is sufficient only in conjunction
                                              e
                                   with a proper use of the property.
                                              n
                                        When a debtor's homestead is at stake,
                                              c
                                   their statements about intention are almost
                                   uniformlyi self-serving. Nevertheless, the
                                   debtor's n  statements are not binding. The
                                              g
                                   courts will look behind these statements at
                                   objective indicators of intention. Some of
                                              c
                                   these most recently cited include:
                                              o
                                        (1) n intention of the debtor expressed
                                              the
                                              s a homestead affidavit
                                              in


                              55
Chapter 5                                                Homestead After Home Equity

    (2) the percentage of time the debtor
         spends at the property
    (3) claiming the property as homestead
         for ad valorem tax purposes
    (4) the timing of the homestead
         designation
    (5) whether the debtor owns other
         property
    (6) whether the loan was made upon
         typically investment or typically
         residential terms
    (7) whether the tract has the amenities
         of a home
    (8) whether the tract was improved by
         the debtor to accommodate his
         residence there
    (9) whether the tract was listed as the
         debtor's residence in phone and
         other directories
    (10) whether the debtor receives mail at
         the property
    (11) whether the debtor's phone calls are
         forwarded from the property
    (12) where the debtor votes
    (13) the residence address shown on the
         debtor's driver's license
                                                     1
                                                     4
                                                     )

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                                                56
Homestead After Home Equity            Chapter 5

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                              57
Chapter 5            Homestead After Home Equity

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            58
Homestead After Home Equity            Chapter 5

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                              59
Chapter 5                                                             Homestead After Home Equity

                                                                b
                                                      H. Written Designation of Homestead
                                                      Required? t
                                                                o
                                                           The longstanding rule in Texas has been
                                                      that no r specific writing is required to
                                                                '
                                                      designate a homestead. The mere act of
                                                                s
                                                      using and enjoying the property as a home
                                                      impresses the property with the homestead
                                                                f
                                                      character. However, in 1987, the Texas
                                                      Legislature added ' 41.005 to the Property
                                                                i
                                                                n
                                                      Code relating to voluntary designation of the
                                                      homestead.a       This section requires the
                                                                n
                                                      homestead claimant (or if a married couple,
                                                                c
                                                      both spouses) to designate the homestead in
                                                                i
                                                      a writing signed and acknowledged or proved
                                                                a
                                                      in the manner required for the recording of
                                                                l
                                                      instruments. The designation must then be
                                                      filed and recorded by the county clerk of a
                                                      county ins  which part or all of the homestead is
                                                      located. tThe designation must contain:
                                                                a
                                                           (1) t description sufficient to identify the
                                                                a
                                                                e
                                                                property designated;
                                                           (2) m statement by the person or
                                                                a
                                                                e
                                                                persons       who       executed    the
                                                                n
                                                                instrument that the property is
                                                                t
                                                                designated as the homestead of the
                                                                .
                                                                person's family or as the homestead
                                                                of a single adult person not
1. Vicarious Intention Via Personal                             otherwise entitled to a homestead;
Representative of Homestead Claimant                       (3) the name of the current record title
      It is apparently possible to establish                    holder of the property; and
sufficient intention to establish a homestead              (4) for a rural homestead, the number of
claim even when the claimant is                                 acres designated and, if there is
incapacitated. In State of Texas By and                         more than one survey, the number of
Through Texas Dept. of Mental Health and                        acres in each.
Mental Retardation v. Ellison, the homestead
claimant was a long-time resident of a state               Effective September 1, 1997, the
hospital with the mental capacity of an               designation of a tract as homestead for ad
11 month old child. For 21 years the claimant         valorem tax purposes under TEX. TAX CODE
never left the school overnight. The claimant         ANN. ' 11.43 is considered a voluntary
was unaware that he owned the property.               homestead designation of equal effectiveness
Notwithstanding, the claimant's Guardian,             as the standard written designation prescribed
fearing that state care might at some future          by TEX. PROP. CODE ANN. ' 41.005(c) if the
date be terminated, moved a fully-equipped            property is listed as the person's homestead
trailer house on the homestead tract with the         on the most recent appraisal roll for the
intention to install the Ward at this location        appraisal district for the county where the
should state residential care ever be denied.         homestead is located.
Held that while the claimant had insufficient              If there is a conflict between (1) the
mental capacity to form homestead intent, his         property designation as homestead in an ad
Guardian had taken sufficient preparatory             valorem tax exemption application and (2) a
steps to show such intent on behalf of the            voluntary homestead designation of the
Ward.                                                 homestead under TEX. PROP. CODE ANN. '
                                                      41.005 or an involuntary designation of

                                                 60
Homestead After Home Equity                                                                  Chapter 5

homestead under TEX. PROP. CODE ANN. '                  be disrupted by marriage, death, divorce, or
41.021 et seq., the latter will prevail.                other family altering situations.
     TEX. PROP. CODE ANN. ' 41.005
seemingly reverses the old rule by requiring a          K. Who May Designate the Homestead?
written designation of homestead. No cases                   The traditional rule in Texas is that the
have been decided under the new section.                husband, as head of the household, absent
Can a debtor raise the homestead defense                fraud, determines the family homestead. This
against an otherwise invalid lien against               presumption may have been invalidated by
homestead without a prior recorded                      the Equal Rights Amendment to the Texas
homestead designation? We will have to wait             Constitution. However, political correctness is
for the answer.                                         not without its cost. No decisions coming
     TEX. PROP. CODE ANN. ' 41.005 does                 after the Equal Rights Amendment have
provide an out for debtors whose homestead              determined what happens when the husband
is not designated in writing and which is being         and wife can't agree on what property should
levied upon by a judgment creditor. Under               be designated as their homestead.
this set of facts, the debtor will be allowed to             It may be that the new rule requires
designate the homestead after the fact by               unanimity of intention among the husband
using the involuntary designation procedures            and wife in order to establish a family
set up in TEX. PROP. CODE ANN. ''                       homestead. In In re Brown, a married couple
41.021-41.024.                                          had insufficient intent to establish a family
     Once designated in writing, the                    homestead in the wife's home before
boundaries of a homestead designation may               marriage when the husband continued to
be amended by a writing meeting all of the              reside in his home before marriage and there
requirements of an original voluntary                   was no evidence that he considered the wife's
homestead designation. Such an amendment                property his home.
will not impair the rights acquired by a party               For a written and recorded designation of
before the change.                                      homestead, 1987 amendments to the
                                                        Property Code make it clear that both the
I.   Involuntary Designation of Homestead               husband and wife must join in the
     If the homestead claimant has not                  designation.
voluntarily designated his homestead and
segregated the homestead portion of the                 L. Gerrymandered             Designation      of
property from the excess, a creditor may                Homestead
compel the segregation of the excess by a                    When the debtor must designate the
statutory procedure set out in detail in the            homestead tract from a larger inclusive tract,
Texas Property Code.                                    issues of gerrymandering may arise when the
     In Matter of Crowell, the bankruptcy court         debtor cuts out an irregularly shaped parcel to
forced the debtor to designate an urban                 the detriment of creditors. In In re Tinsley, a
homestead out of a 42 acre urban tract. The             debtor owned a 3.61 acre tract in Dallas of
debtor objected that the bankruptcy court               which 1 acre was homestead. Originally the
failed to follow the Texas Property Code                debtor designated his house a one foot
procedures for the involuntary designation of           parameter around the entire tract. Later the
a homestead. Held the bankruptcy court                  debtor modified his designation to include the
under choice of law principles was not bound            house a access drive in a manner violative of
to follow the procedural standards of the               City of Dallas ordinances regarding platting.
Texas Property Code in requiring an                     Held the debtor could claim the designated
involuntary designation of homestead.                   homestead irrespective of Dallas ordinances.
                                                         The bankruptcy court declined to consider
J. Duration       of    the     Homestead               the permitted use question.
Designation                                                  In Riley v. Riley, a surviving widow was
    Generally, once the homestead is shown              entitled to continue a rural homestead totalling
to be properly designated, the homestead is             200 acres consisting of a 160 acre parcel
presumed to continue. This presumption may              containing her home and a 59.7 acre tract


                                                   61
Chapter 5                                                              Homestead After Home Equity

non-adjacent mineral producing property.               When the water business did not develop as
The widow chose to designate her 200 acre              successfully as expected, the debtor
homestead to include all of the mineral                remodeled an apartment for himself in France
producing tract and only 140 acres of the              and established his family there. Held the
home place. Held this designation was lawful           debtor formed a post-removal intention never
as long as all of the designated property was          to return to his Texas homestead.
used for homestead purposes.              The               Along these same lines, a debtor can
homestead claimant was allowed to exclude              also remove from his homestead with no
part of a tract on which she resided to obtain         intention to return but later reverse himself by
homestead coverage in the other tract.                 forming an intention to resume possession.
                                                       This shift in intention will have the effect of
VI. DEFENSIVE STRATEGIES AGAINST                       reinvesting the property with a homestead
THE HOMESTEAD CLAIM                                    character. However, the result is to create a
A. Abandonment                                         new homestead at the time that the debtor's
1. Generally                                           intention changed with no affect on the rights
     Homestead rights may be lost by                   of intervening third parties.
abandonment. Abandonment is in the nature                   In Taylor v. Mosty Bros. Nursery,
of an affirmative defense. Therefore, a party          evidence supported an abandonment of the
relying on abandonment must both plead and             homestead when a husband executed an
prove that the debtor has given up his                 unconditional deed to his wife, left the state,
homestead.      The matter is generally a              and did not appear at trial to testify regarding
question of fact. The burden to prove                  his intentions.     In Womack v. Redden,
abandonment is said to be a heavy one. That            evidence supported abandonment when the
evidence must be so convincing as to make              wife moved out all furniture, used community
the abandonment "undeniably clear" and                 funds to purchase a new house, and failed to
beyond almost the shadow of reasonable                 return to care for her husband in the last year
ground of dispute.                                     of his life. Held further that the husband
     Cases involving abandonment are fact              likewise abandoned the same homestead
intensive. Abandonment is to be determined             when, during his last illness, he moved in with
from all pertinent facts and circumstances of          his sister, built a room onto her house to
each particular case as it arises.                     accommodate himself, and had furnishings
                                                       removed to allow a caretaker to move into the
2.   Elements of Abandonment                           former residence. In Power v. Chapman,
     Like the establishment of a homestead,            there was some evidence that a surviving
abandonment has two basic elements. The                spouse had abandoned his probate
debtor must (1) discontinue his use of the             homestead when he remarried and moved out
tract by overt acts and (2) intend to                  of his former homestead at the request of his
permanently abandon the tract as homestead.            deceased wife's son.
 Both elements are necessary to prove                       With         business         homesteads,
abandonment.                                           abandonment may be proved without a
     In cases where physical absence from              showing that the debtor has left the property
the property is shown, the matter devolves to          or obtained a new homestead. Abandonment
a question of intention. In such cases,                of the business homestead may be
abandonment requires a definitive intention            demonstrated by a voluntary discontinuance
never to return, use, or occupy the property as        of the business under facts demonstrating no
homestead. Any countervailing intention to             further intent to continue that business. To
return must be unqualified, fixed, and abiding.        this end, financial inability to engage in
     The intention not to return may be formed         business supports the abandonment of a
at the time of removal from the homestead or           business homestead. In Shearer v. Allied
afterwards. In Coury v. Prot, the debtor               Live Oak Bank, the abandonment of an RV
moved from Texas to France with the                    dealership was shown when the property was
intention to develop a bottled water business          vacant and locked, had no RVs thereupon,
there and return to Texas within 18 months.            and accommodated no business activity. The


                                                  62
Homestead After Home Equity                                                               Chapter 5

debtor further represented that they had              constituted a continuous lease abandoning
moved their business to another location and          the property as homestead. In In re Julian, a
put the property up for sale.                         22 year lease of commercial property likewise
                                                      disqualified the tract as homestead. In In re
3. Temporary         Absence       From   the         Brown, the debtor's long-standing rental of a
Homestead                                             farm tract prevented the establishment of a
     A homestead claimant is not required to          rural homestead on the property.
remain on the homestead at all times.                      In re Niland involved a sham lease of the
Therefore temporary absence from the                  debtor's home to inflate his income figures on
homestead or temporary loss of the right to           a loan application. Held such a sham lease
occupy the homestead is not abandonment.              did not show any abandonment of the
This is especially true if no new homestead is        residence when debtor continued to live there.
acquired. In Exocet, Inc. v. Cordes, no
abandonment found by the debtor's temporary           5. Acquisition of a New Homestead as
absence to serve a prison sentence. In In re          Abandonment of the Old
Niland, a pro football player's post-trade                 No one can have two homesteads at the
absences for 3-4 months and 4-5 weeks were            same time. If a debtor acquires and occupies
not sufficient to show abandonment. In In re          a new homestead, he thereby abandons and
Moody, the debtor's temporary absences to             loses his former homestead. It has been held
North Carolina for health reasons showed no           that the best evidence of abandonment is the
abandonment. In In re Leonard, the debtors'           fact that a new home has been acquired and
3 year absence to educate their daughter in a         appropriated as such. Removal from one
different school district was not evidence of         property to another unaccompanied by any
abandonment. In Estate of Casida, the                 act evidencing an intention to return to the
debtors ten years in Arizona was not                  former home silently but effectively proclaims
abandonment when the evidence showed the              the latter property as homestead. Indeed the
debtor traveled a great deal, returned to his         acquisition of a new homestead abandons the
Texas home two to four times a year, bought           old as a matter of law.
no new home, and left his furnishings in                   However, acquiring a new home is not
place.                                                always the equivalent of acquiring a new
     Nevertheless, the lapse of time that the         homestead. Nor does a debtor necessarily
debtor has remained away from home is a               move his homestead by merely moving his
matter to be considered. If a homestead               home. In In re Leonard, the debtors owned
claimant has remained away from home for a            and lived in a house in Midland. Later they
prolonged period of time, an intention not to         moved to a lake house (owned under a long
return may be inferred.                               term "lake lease") some 125 miles away to
                                                      allow their daughter to attend a smaller
4.   Renting of the Homestead                         school. The mere fact that the debtors moved
     Temporary rental of the homestead does           into another home which they owned did not
not constitute abandonment if the claimant            constitute an abandonment of the Midland
does not acquire another homestead. Again,            house.
the matter is one of intention. The ultimate
question is whether the claimant intends to           6. Abandonment of Family Homestead
reassume possession after the rental term.            Requires Joinder of Both Spouses
     However, continuous rental of a property             A homestead may not be abandoned
will constitute an abandonment. Merely                without the consent of each owner and the
collecting rents on a tract will not establish        spouse of each owner.
homestead even where the rents are used to
support the family. Indeed, evidence that
rentals are used to allow the claimant to live
elsewhere shows that the lease was not
intended to be temporary. In In re Cooper a
ten year lease of a business property


                                                 63
Chapter 5                                                                Homestead After Home Equity

7. Abandonment of Homestead by Guardian                  the Eskews continued possession, use, and
of the Debtor                                            occupation of the property.
     Nothing in the Probate Code clearly                      In In re Cole, the debtors conveyed
prohibits a Guardian from abandoning or                  certain parcels of their rural homestead to a
selling the homestead of the Ward. Therefore             Family Limited Partnership.          Held this
the guardian may vicariously form the                    alienation of these tracts terminated the
necessary intent to abandon or relinquish the            debtor's homestead interest therein.
homestead status of a tract on behalf of the                  A property owner always has the option
ward. In Hardeman v. Judge, an elderly                   to voluntarily sell the homestead to pay debts,
woman lived upon her homestead until                     even though those same debts could not have
forcibly removed. An appointed guardian                  been enforced against the homestead
desired to sell the property to maintain the             property.
ward over the objections of the beneficiaries
named in the ward's will. Held the guardian              2. Sale Requires Joinder of Husband and
was empowered either to sell or abandon the              Wife
Ward's homestead.                                             Generally, whether the homestead is the
                                                         separate property of either spouse or
B. Alienation                                            community property, neither spouse may sell,
      Homestead protection for a tract will end          convey, or encumber it without the joinder of
if the debtor sells the property. There is no            the other spouse.
more convincing proof of a debtor's intention                 In In re McCain, a wife sold 14 lots out of
to give up the homestead than its sale.                  a rural subdivision owned in part as her
                                                         separate property without joinder by her
1. Sale Without Abandonment May                          husband. When the debtor later claimed the
Extinguish Homestead                                     remainder of the property as homestead this
      Alienation is a method of extinguishing a          non-joinder was some evidence of the
homestead claim distinct from abandonment.               non-homestead character of the property.
A sale of the property by the claimant may               The wife could not have intended to make so
terminate the homestead even if no                       many void sales of lots by this non-joinder.
abandonment is shown by discontinuance of
use. In Resolution Trust Corp. v. Olivarez, the          3.   Sale Must Be Completed
debtors sold their residential homestead to                   In order to terminate the homestead
their son but continued to reside there. The             interest of the debtor, the sale must be
Fifth Circuit reasoned that even without                 completed. An unsuccessful or incomplete
physical abandonment the homestead might                 attempt to sell the tract is not inconsistent with
be lost by the sale. In In re Robinson, a                an intention to presently occupy the property
debtor made an estate planning transfer of his           as homestead. At best, the attempt to sell the
homestead to a trustee for the benefit of                tract only evidences a future intent to abandon
another though he continued to reside on the             the homestead. In Exocet, Inc. v. Cordes, the
property. Held this alienation of the property           debtors unsuccessfully attempted to give the
caused the property to lose its homestead                homestead tract to their daughter. Held the
character. The court noted that had the                  homestead was not abandoned. In Matter of
debtor retained a life estate in the property the        Bradley, the debtor unsuccessfully attempted
result might have been different.                        to develop ranch property. While this effort
      In In re Eskew, the Eskews conveyed a              failed, the debtor continued his intentions for
life estate in their homestead to Dean Eskew's           future development. Held there was no
parents but retained a reversionary interest.            present relinquishment of the homestead.
The Eskews continued to occupy the property
after the conveyance based on an unwritten
gratuitous lease from the parents. Held this
alienation of the property was not an
"abandonment" of the homestead based on



                                                    64
Homestead After Home Equity                                                                Chapter 5

4.   Pretended Sales                                   there was no pretended sale. The estate
     There is no constitutional prohibition            planning nature of the transfer was a
against a debtor selling his homestead so              legitimate purpose.            Therefore the
long as the sale is voluntary, made with the           conveyance was not a sham.
appropriate legal formalities, and is intended               More difficult to distinguish are cases
to pass title. When the sale is not bona fide          involving the sale of the debtor's homestead
and not marked with the intent to relinquish           to a closely held corporation made in order to
and pass title, a "Pretended Sale" occurs. A           use the property as collateral for an otherwise
pretended sale is void. If such a sale is              prohibited loan transaction. In In re Girard
attempted, equitable title will remain in the          and In re Loter, homestead sales, made to
debtor allowing the debtor to continue to claim        family corporations in order to collateralize
a homestead exemption in the property. A               homestead, upheld as bona fide sales. This
pretended sale usually occurs as part of a             result was reached in In re Girard
loan transaction that would be otherwise               notwithstanding that the sale was always
invalid under the Texas Constitution.                  intended to secure a loan, resulted in no
     If a bank advances funds secured by a             interruption of the debtor's occupancy of the
lien on homestead with knowledge or notice             home, and came at the suggestion of the
that the sale was a pretense, the lien is void.        lender. The debtor's decision to convey the
If, however, a lender advances money in                homestead to the corporation was conscious
reliance on the apparent genuineness of the            and advised.       The incorporation of the
sale, without knowledge of any subterfuge or           business was also supported by other
of facts to put a reasonable lender on notice,         legitimate business purposes.
the lien can be enforced.                                    On similar facts a different result was
     A classic pretended sale is shown in              reached in Matter of Rubarts and First Bank v.
Orozco v. Sander. Here the lender was in the           Pope. In each of these cases the debtors
business of arranging (then constitutionally           likewise sold their homestead to a corporation
prohibited) home equity lending through                in a transaction involving no interruption of
pretended sales and openly advertised this.            debtor's occupancy, an agreement to
The transaction, arranged by the lender,               reconvey without necessity of repayment, and
provided for a sale of the homestead to the            lender involvement in the transaction.
lender's agent with a lease back to the debtor.        Concentrating on the absence of an intention
 The lease payments amortized the credit               for an unconditional sale evidenced by an
extended to the homeowner. An agreement                agreement for reconveyance without
existed to reconvey the property to the                repayment of the debt, the transactions were
homeowner if all lease payments were made              void as pretended sales.
over the term of the lease.          Held the                In 1987, the Texas Legislature acted to
transaction constituted a pretended sale.              prohibit pretended sales by amendment to the
     In Ketcham v. First Nat'l Bank of New             Texas Property Code. Section 41.006 has
Boston, a fact issue regarding a pretended             been added to the Code defining a pretended
sale was raised when parents sold their                sale as a transaction where:
homestead to their son who financed the sale
with a bank loan. The loan proceeds were                   (1) the homestead is sold for a fixed
paid to the parents who in turn endorsed the                   purchase price less than the
check and directed that the proceeds be                        appraised fair market value;
made available to the son.           The son               (2) with a lease back at rentals
presented evidence that the bank required the                  exceeding the fair market rental
transaction be so structured in order to make                  value of the property.
him a loan and that he considered the sale a
sham.                                                  Any qualifying transaction, except a family
     In In re Robinson, a debtor conveyed his          transaction, is a violation of the Deceptive
homestead to a trustee for the benefit of              Trade Practices Act with any rental payments
another for estate planning purposes yet               exceeding fair market rent being interest for
continued to reside upon the property. Held            the purposes of usury.


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Chapter 5                                                                Homestead After Home Equity

                                                          C. Estoppel
5.   Effect of Sale on Subsequent Purchasers                   A debtor may execute a homestead
     Generally, a subsequent purchaser of                 disclaimer on property to secure a loan for a
homestead will be entitled to assert their                non-homestead purpose using the disclaimed
predecessor's homestead protection against                property as collateral. In some cases the
prior lienholders. This enables the purchaser             debtor later reverses himself to assert a
to take free of such prior liens. There is a              homestead claim in that same tract in defense
dispute among authorities over whether a                  of the lien created based on his original
prior lienholder's interest may attach if there is        representations. Public policy considerations
a gap in time between the sale of the                     abhor the perpetuation of such a fraud on
homestead and the recordation of the buyer's              creditors. These misrepresentations, under
interest. In Intertex, Inc. v. Kneisley, a debtor         certain circumstances, will estop the debtor
sold homestead subject to an abstracted                   from reversing himself to claim the homestead
judgment. The buyer failed to record the                  defense.
deed for 52 months. Held this gap in
recording the buyer's interest allowed the prior          1.   Elements of Estoppel
judgment lien to attach to the property.                       Estoppel will apply when:
However, in U.S. v. Johnson, the Fifth Circuit
refused to follow Intertex on similar facts.                   (1) physical facts open to observation
Finding that the Intertex runs counter to the                      lead to the conclusion that the
overwhelming weight of Texas authority, the                        property is not homestead;
Court noted that alienation is complete on                     (2) the use of the property is not
conveyance not recordation. The strong                             inconsistent with the claimant's
policy of protecting homesteads from                               representations that the property is
judgment liens would be gutted by strict                           not homestead; and
adherence to Intertex. There is inevitably                     (3) the representations were intended to
some gap between the execution of a deed                           be relied upon by the lender and
and its recordation.                                               were so relied upon.

6. Sale of Homestead as Fraudulent                        2.   Effect of Homestead Disclaimer
Conveyance?                                                    In applying estoppel, lenders were
     Because the homestead is exempt from                 formerly charged not only with the physical
the claims of the owner's creditors, its                  facts and conditions of use actually known to
conveyance by the debtor may not be                       the lender but also with those facts that might
attacked as a fraudulent conveyance. In                   have been known upon reasonable inquiry.
Fitzgerald v. Antoine Nat'l Bank, the debtors             The duty of reasonable inquiry had to be
sold their homestead to the Fitzgeralds                   prosecuted to the extent that a reasonable
ostensively for $650,000. However, the                    lender would act to protect its own rights.
debtors gave a "discount" to the Fitzgeralds of           This rule applied notwithstanding that the
$162,500 of this sales price. The Fitzgeralds             debtor acted with fraud and deceit. The
in turn leased the homestead back to the                  practical effect of the rule was to invite all
debtors who continued to occupy it. Antoine               manner of abuse by debtors, this being one
National Bank, a judgment creditor of the                 those queer areas of the law where lying,
debtors, claimed that this sale for inadequate            cheating, and stealing by debtors was
consideration was a fraudulent conveyance.                tolerated and therefore encouraged. Texas
Held the sale of exempt homestead, whether                constitutional provisions regarding homestead
for adequate consideration or not, is not a               are accorded a deference not unlike scripture.
fraudulent conveyance. The sale deprived                   The homestead exemption must be upheld
the creditor of no right it had against the               even under circumstances which might
exempt property.                                          unwittingly assist a dishonest debtor in
                                                          wrongfully defeating his creditors.        The
                                                          rationale behind the rule was that it was
                                                          necessary to avoid lender abuse. The greater


                                                     66
Homestead After Home Equity                                                                  Chapter 5

evil, it was feared, would be that of lenders         terms. In Shearer v. Allied Live Oak Bank,
routinely requiring execution of homestead            estoppel was applied against a debtor
disclaimers by financially strapped debtors to        disclaiming an RV dealership as homestead
the extent that the homestead exemption               when an examination by a bank officer
would become meaningless.                             revealed that the property was vacant and
      On November 7, 1995, Texas voters               deserted, no RVs were present, and all
adopted an amendment to Art. XVI ' 50 of the          appearances were consistent with the
Texas Constitution. After this date lenders           debtors' representations that the business
and subsequent purchasers for value without           had relocated.
actual knowledge may conclusively rely on a                In Sanchez v. Telles, the debtor executed
debtor's affidavit designating homestead or           a deed of trust disclaiming the subject parcel
disclaiming a homestead interest in the               as homestead. Evidence showed that the
property conveyed or encumbered. Whether              debtor "resided" at the property at the time
this amendment effects any substantive                that the deed of trust was executed.
change to the effectiveness of homestead              However, these facts did not necessarily give
disclaimers and a lender's ability to rely on         notice to the creditor of any intention by the
them remains to be seen. Some authorities             debtor to claim the property as homestead.
interpret the term "actual knowledge" to              The debtor had not filed a written designation
embrace not only the things of which the one          of homestead pursuant to TEX. PROP. CODE
sought to be charged has express information          ANN. ' 41.005 nor had the debtor claimed the
but also those things which a reasonably              tract as homestead for ad valorem tax
diligent inquiry and exercise of the means of         purposes. On these facts, the best evidence
information at hand would have disclosed.             of the debtor's intention was the affidavit
Until the new constitutional language is              incorporated in the deed of trust stating the
interpreted, prudent lenders should make              property was not homestead. The creditor
reasonable inquiry of the verity of any facts         was entitled to summary judgment on his
recited in any homestead disclaimer.                  estoppel defense.

3. Effect of Homestead Disclaimer When                4. Effect of Homestead Disclaimer When
the Debtor is in Actual Use and Possession of         There is Ambiguous Possession by the
the Property                                          Debtor
     Prior to the 1995 amendments, if a                     The area where estoppel is best applied
homestead claimant was in actual use and              is in cases where the debtor uses two tracts in
possession of the property, a lender could not        an ambiguous fashion such that either could
raise the estoppel defense no matter what the         be his homestead. In such a case the
debtor represented in a homestead                     physical facts alone cannot be relied upon as
disclaimer. The lender in such cases was              giving notice that one of the tracts is
presumed to have acted with knowledge that            homestead and one is not. The debtor's
the claimant could invoke the homestead               intention will control allowing the lender to rely
defense.                                              on an expression of that intention as set out in
     In Border v. McDaniel, the debtor                a homestead disclaimer.           The debtor's
executed a homestead disclaimer on property           intention will be honored and a homestead
where he built a home, lived, raised crops,           disclaimer will give rise to estoppel in favor of
and upon which he buried his deceased wife.           the lender.
 Held the disclaimer under these facts did not              In In re Lane, the debtors rented, lived
estop the debtor from invoking the homestead          upon, and farmed a tract of 200 acres. They
defense. In Gregory v. Sunbelt Sav., F.S.B.,          owned and farmed a separate 158 acre tract
estoppel was applied when the debtors                 which they disclaimed as homestead. Held
executed a homestead disclaimer on property           the debtors' use of both tracts was sufficiently
which, at the time that the debt was created,         ambiguous to invoke estoppel in favor of the
was not occupied. Evidence also showed that           lender. In In re Nelson, a debtor was in
the debtors were in the construction business         possession and use of both a rural residential
and purchased the lot on commercial loan              property and an urban business property.


                                                 67
Chapter 5                                                              Homestead After Home Equity

Only one could comprise his homestead. The             7. Debtor Misrepresentations Must Be
debtor disclaimed the business property.               Clear, Deliberate, and Unequivocal
Held the debtor was estopped to later claim a               The debtor's misrepresentations contrary
homestead exemption in the business                    to an essential fact and relied upon to claim
property.                                              estoppel must be clear, deliberate, and
     In In re Skinner, estoppel was not applied        unequivocal. No estoppel will arise unless the
when the debtors designated only 10 acres of           hypothesis of mere mistake has been
their 91.93 acre farm as homestead.                    eliminated. In In re Osborn, a debtor's
Because the debtors were always in actual,             erroneous reference in her bankruptcy
open, and exclusive possession of the whole            schedule to an Oklahoma exemption statute
tract, no ambiguous use supported estoppel.            when a Texas homestead was claimed did
5. Requirements of a Valid Homestead                   not amount to estoppel. The hypothesis of
Disclaimer                                             mere mistake had not been eliminated.
     Most homestead disclaimers either
expressly or by implication include a                  8. Lender          Reliance      on     Debtor
countervailing designation of the homestead.           Misrepresentations Must Be Reasonable
Because of this, practitioners should take care             Estoppel will not apply if the lender's
that any such disclaimer includes all of the           claimed      reliance     on    the    debtor's
elements of a valid homestead designation as           misrepresentations was not reasonable. In
set out in the Property Code.                          Fajkus v. First Nat'l Bank of Giddings,
                                                       estoppel did not apply when the lender relied
6. Debtor Misrepresentations Regarding                 on a stale homestead disclaimer from a
Validity of Mechanic's Line                            previous loan transaction. By the time the
     If a debtor misrepresents that an existing        lender extended the credit, the debtors had
debt against homestead is validly secured by           sold the tract designated as homestead and
a mechanic's lien contract properly executed           begun using the disclaimed tract for their
and by that misrepresentation induces a third          support.
party to invest funds in the obligation, the                In In re Julian, a lender was not justified
debtor will be estopped to deny the validity of        in relying on a financial statement made two
the lien. In Matter of Smith, the debtors, a           years before the loan in the face of a bank
contractor, and a bank entered into a sham             officer's actual knowledge that the debtor was
mechanic's lien contract to defraud federal            then using other property as his homestead.
banking authorities. When the lien was later           Likewise, the lender could not base estoppel
transferred to an innocent purchaser, held the         on a homestead affidavit made three years
debtors were estopped to deny the validity of          after the loan was made. The lender could
the lien.                                              not possibly have relied on this affidavit in
     In Brown v. Bank of Galveston Nat'l               making the loan.
Ass'n, a mechanic's lien contract signed by                 In In re Napier, the Court looked at the
the debtor stated that it was executed before          length of the relationship between the debtor
any labor was performed or materials                   and lender and the small size of the town to
furnished. When the bank relied upon this              determine that the lender probably did not rely
statement to accept the lien as security for           on false representations contained in the
interim construction financing, the debtor was         homestead disclaimer in extending credit to
estopped to deny the validity of lien based on         the debtor.
a claim that the contract was executed after                Reliance will not be reasonable if the
construction began.                                    false representations are not made directly by
                                                       the debtor to the lender. In First Interstate
                                                       Bank v. Bland, estoppel was not applied when
                                                       the principal false representations upon which
                                                       estoppel was claimed were made by the
                                                       claimant's son, not by the claimant himself. In
                                                       In re Niland, the false representations were
                                                       made by the debtor to a third party and not


                                                  68
Homestead After Home Equity                                                                  Chapter 5

relied upon by the party seeking estoppel.              11. When the Debtor Claims Excessive
Held no estoppel applied.                               Homestead
                                                             If a debtor claims more property as
9. Husband and Wife Must Join in the                    homestead than that to which he is entitled,
Misrepresentations                                      there is no basis for applying estoppel so long
     In order to constitute estoppel against the        as the actual homestead is included within the
family homestead, the misrepresentations                excessive claim. In In re Julian, the debtor
must be chargeable against both the husband             claimed both rural and urban property as his
and wife. In Matter of Daves, Mr. Daves                 homestead in a bankruptcy proceeding.
made misrepresentations to the bank that he             While both tracts were not homestead,
would place a valid mechanic's lien on                  claiming both did not evidence any lack of
homestead properties to secure a loan. Mrs.             intention to claim the urban property as
Daves did not join in the misrepresentations.           exempt.
Held estoppel did not apply unless the acts or
omissions alleged to constitute estoppel were           D. Death of the Homestead Claimant
joined in by both husband and wife. If the wife              The death of the homestead claimant will
is not estopped to claim the homestead, the             not terminate the family homestead when
husband cannot be.                                      (1) the estate is insolvent and (2) the claimant
     In In re Osborn, a husband made                    is survived by a spouse, minor child, or
numerous sworn misrepresentations to the                unmarried adult child remaining with the
bankruptcy court and creditors on which basis           family. On satisfaction of these conditions,
estoppel was asserted. Held no estoppel                 the homestead descends to those entitled to
when no such misrepresentations were                    inherit it unburdened by the claims of creditors
chargeable to his wife.                                 (save for constitutionally permissible claims).
                                                        This is true whether the homestead claimant
10. Estoppel Will Not Create a Lien                     dies testate or intestate. In contrast, when the
     Estoppel is purely defensive in nature             decedent leaves no surviving spouse, minor
preventing a homestead claimant from                    child, or unmarried adult child residing with
denying the validity of an existing lien.               the family, the homestead property descends
Estoppel cannot be used by the lender to                charged with the debts of the decedent.
create a lien where none otherwise exists. In
Hruska v. First State Bank of Deanville, the            1. The Right of the Property to Descend
formality of having a prior written contract in         Free of Debt is Fixed at Death
writing was not observed in creating a                       This right to have the homestead
mechanic's lien against the debtor's                    descend free of debt is triggered immediately
homestead. The bank sought to impose a                  and is fixed at the death of the decedent.
equitable lien based on the debtors'                    Post mortem events have no effect on the
misrepresentations that they would have such            property descending free of debt. Once the
a mechanics lien contract prepared. Held                homestead passes free of a debt, it never
estoppel did not apply. The debtors' false              became subject to that debt.
statements could not be used to create a valid               For example if an insolvent homestead
mechanic's lien where none existed.                     claimant dies leaving constituent family
                                                        members, the family's subsequent sale or
                                                        abandonment of the homestead has no effect
                                                        on the property descending free of debt.
                                                        Likewise, the proceeds from the sale of that
                                                        homestead are free from the claims of the
                                                        decedent's creditors.




                                                   69
Chapter 5                                                             Homestead After Home Equity

2. The Right of the Property to Descend                requested or executed in the loan transaction.
Free of Debt is Not Dependent on Occupancy              When the FDIC later became the holder of
      The right to have the homestead property         the note, held D'Oench Duhme did not
descend free of the debts of the deceased              preclude the debtors from asserting the
homestead claimant is a completely different           invalidity of the lien as to the homestead
concept from the Texas probate homestead.              portion of the tract. Without any secret
It is not dependent on any right to occupy the         agreement, D'Oench Duhme is inapplicable.
homestead. Thus, one who inherits the
decedent's homestead receives the property             1. When the Debtor Executes a Homestead
free from debt even though the beneficiary             Disclaimer
benefitting from the rule may have no                        Patterson v. Federal Deposit Ins. Corp.,
immediate right to occupy the property.                In re Hughes, In re Stephens, and In re
      In National Union Fire Ins. Co. v. Olson,        Napier, all considered whether D'Oench
an insolvent debtor died survived by an adult          Duhme would estop a debtor from asserting
son and a minor daughter neither of whom               the homestead defense against the FDIC
lived with the debtor. Before and after the            contrary to a written homestead disclaimer
decedent's death, the minor daughter lived             contained in the files of the failed financial
with a guardian who did not assert any right to        institution. Held that the debtors execution of
occupy the homestead. The decedent's will              a homestead disclaimer on property actually
left the property to his adult son. Held the           used and occupied by the debtor was facially
property passed to the adult son at death free         invalid. Because the disclaimer and the
of an abstracted judgment against the                  bank's efforts to encumber the property were
decedent. The mere existence of a minor                illegal under Texas homestead law, the
child at death caused the property to pass to          debtor's homestead defense was based on
the son free of debt.          There was no            the Texas Constitution and not on the
requirement that the minor child have resided          enforcement of a secret agreement.
with the decedent before death or that the
child intend to occupy the property after the          2. When the Debtor Executes an Antedated
decedent's death. The exempt nature of the             Mechanic's Lien Contract
homestead was not dependent on the                          In Buchanan v. Federal Sav. & Loan Ins.
surviving constituent family members actual            Corp., the debtor executed a mechanic's lien
use of the property.                                   contract which represented that it was
                                                       executed before any labor was performed or
E.   D'Oench Duhme                                     material furnished. The debtor later sought
     The D'Oench Duhme doctrine is a form of           removal of the lien on the basis of homestead
a specialized federal estoppel protecting the          claiming that the mechanic's lien contract had
FDIC and others from secret schemes to                 actually been executed after work started.
deceive or mislead federal banking                     Held that by executing a mechanic's lien
authorities. The doctrine will prevent the             contract known by the debtor to misrepresent
enforcement of any oral side agreement in              the facts, the debtor lent herself to a scheme
derogation of an indebtedness to a federally           or arrangement likely to mislead the FSLIC.
insured institution.                                   The D'Oench Duhme doctrine precluded the
     As a general rule, D'Oench Duhme does             debtor from raising homestead.
not preclude a borrower from attempting to
prove up the homestead defense.
Homestead, as a creature of the Texas
Constitution and the Texas Property Code,
exists independent of any secret agreement.
In In re Howard, the debtor secured a debt not
for purchase money, improvements, or taxes
with a lien on a 460.61 acre tract inclusive of
their 194.71 acre rural homestead. No
homestead designation or disclaimer was


                                                  70
Homestead After Home Equity                                 Chapter 5

3. When the Debtor Participates in a
Pretended Sale
     In Templin v. Weisgram, the debtor
engaged in a pretended sale of homestead to
mortgage the tract for an impermissible
purpose. The pretended sale transaction,
though known to the bank, was not disclosed
by its records. Held D'Oench Duhme would
estop the homestead claim of the debtor. The
pretended sale was a secret side agreement
quintessentially the type of conduct against
which D'Oench Duhme was designed to
protect.

F.   Federal Preemption
     A growing inroad into constitutional
limitations on permissible claims against the
homestead is the Federal Preemption
Doctrine. Under this doctrine the homestead
claim can be avoided if the restrictions of
Texas Constitution have been preempted by
some provision of federal law.

1. Home Owner's Loan Act and Home
Equity Lending
     First Gibraltar Bank, F.S.B. v. Morales #1.
 In 1994 in First Gibraltar Bank, F.S.B. v.
Morales, the Fifth Circuit briefly reversed 150
years of homestead precedent restricting
contractual liens against homestead to those
given for purchase money, improvements,
and taxes. According to the opinion, this
traditional Texas homestead concept had
been preempted by federal regulations which
authorized home equity lending.
     In First Gibraltar, a federally chartered
savings bank and nonfederally chartered
financial services corporation sued Texas
Attorney General, Dan Morales, seeking a
declaratory judgment that Texas homestead
law had been preempted by federal
regulations authorizing home equity lending
through reverse annuity (RAM) and line of
credit conversion mortgages.
     In accepting the preemption argument the
Fifth Circuit relied on:

                                                        1
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                                                   71
Chapter 5            Homestead After Home Equity

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Homestead After Home Equity            Chapter 5

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Homestead After Home Equity            Chapter 5

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Homestead After Home Equity                                               Chapter 5


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                                   Concluding that it was bound to show
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                                             i
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                                   delegated authority, the Fifth Circuit accepted
                                             g
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                                   FHLBB.
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                                             u
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                                             t
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                                             h
                                   of credit conversion mortgages based on the
                                   AlternateoMortgage Transaction Parity Act.
                                   The FifthrCircuit opinion purported to limit the
                                             i
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                                             t
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                                             y
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                                   the effect of federal preemption to any specific
                                   type of g mortgage authorized by the
                                             r
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                                   laws of the state where the property is
                                   located. b
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                                        Congressional Reversal of Federal
                                   Preemption. At the instance of Henry B.
                                             H
                                   Gonzales, Chairman of the Banking, Finance
                                             O
                                   and Urban Affairs Committee of the House of
                                             L
                                   Representatives, Congress amended the
                                   InterstateA      Banking       Bill      effective
                                   September 29, 1994 to provide:
                                             a
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                                        No provisions of this Act or any other
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                                        provision of law administered by the
                                        Director [of the Office of Thrift
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                                        Supervision] shall be construed as
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                                        superseding any homestead provision of
                                             S
                                        any State constitution, including any state
                                        implementing statute...or any subsequent
                                             r
                                        amendment to such a State constitutional


                              77
Chapter 5                                                               Homestead After Home Equity

     or statutory provision...that exempts the          3.    Federal Criminal Restitution Act
     homestead of any person from                             Under the Federal Criminal Restitution
     foreclosure or forced sale, for the                Act an order of restitution may be enforced
     payment of all debts, other than a                 under two separate provisions. The federal
     purchase money obligation relating to the          government may enforce an order of
     homestead, taxes due on the homestead,             restitution (1) in the manner provided for the
     or an obligation arising from work and             collection of fines or (2) in the same manner
     material     used      in     constructing         as a judgment in a civil action. A private
     improvements on the homestead.                     crime victim may enforce a restitution order
                                                        only by the latter method. The broader
     First Gibraltar Bank, F.S.B. v. Morales #2.        enforcement provisions in favor of the United
 In 1995, after the effective date of this              States allow it to enforce restitution by placing
amendment to the Interstate Banking Bill, the           a lien upon and seizing all property of the
Fifth Circuit issued a second opinion in First          criminal defendant inclusive of the
Gibraltar Bank, F.S.B. v. Morales. Turning              homestead. However, a private crime victim
aside constitutional challenges, the Court              cannot avoid a homestead claim in the
determined the Interstate Banking Bill                  enforcement of a restitution order.
amendment was effective to reverse any                        In Auclair v. Sher, a criminal defendant
federal preemption of Texas homestead by                sought a declaratory action to remove a
HOLA or by OTS regulations.                             judgment lien against her homestead filed by
     Irrespective, the Federal Preemption               private crime victims in enforcement of a
Doctrine remains a possible basis for                   federal restitution order. Held the private
imposing a valid lien on homestead outside of           crime victims could enforce the restitution
the context the Interstate Banking Bill or the          order only in the manner available to collect a
Alternative Mortgage Transaction Parity Act.            civil judgment. Notwithstanding, this case left
                                                        open the possibility that the restitution order
2.    Federal Tax Liens                                 creates a self-executing lien in favor of the
      Under the Federal Preemption Doctrine,            government against the criminal defendants
a federal tax lien is a valid encumbrance               exempt and non-exempt property which
against the homestead. The tax lien is valid            possibly inures to and may be enforced in
from the time the notice of lien is filed.              favor of the crime victim. The crime victims
      In Frappier v. Texas Commerce Bank,               argued that in the absence of government
N.A., Texas Commerce Bank abstracted a                  action to enforce the lien, the victim may
judgment against the debtors in 1986. The               properly abstract the lien without creating a
IRS filed a tax lien against the debtors in             cloud on the criminal's homestead. The case
1989. A third lender foreclosed on the                  was remanded on this question.
homestead in 1993 creating excess proceeds.
 Held the IRS had the prior lien on the
proceeds. The IRS lien attached immediately
on filing in 1989. The Texas Commerce Bank
lien never attached to the homestead and only
to the proceeds 6 months after the 1993
foreclosure sale.




                                                   78
Homestead After Home Equity                                                                 Chapter 5

4. Bankruptcy Code and Family Support                        Rooms With a View, Inc. also examined
Obligations                                             the 12-day waiting period required by the
     Bankruptcy Code ' 522(c)(1) provides               constitution between application for extension
property of the debtor is "liable" for certain          of credit and the execution of a contract for
non-dischargeable debts including, under                work or materials to improve the homestead.
' 523(a)(5), "family support obligations".              Noting the TILA has its own preemption
Matter of Davis considered whether these                clause eschewing the annulment or alteration
Bankruptcy Code provisions preempt the                  of state law except when inconsistent with the
Texas Constitution subjecting the Texas                 TILA and then only as far as the
homestead to family support claims in the               inconsistency, held the prescribed waiting
event the debtor files bankruptcy. Held the             period was not preempted by any precisely
Texas Constitution does not permit the                  inconsistent provision of the TILA.
seizure of a homestead for a family support
obligation. The Bankruptcy Code does not                7.   Equal Credit Opportunity Act
preempt applicable Texas law.           In a                 The federal Equal Credit Opportunity Act
bankruptcy, the homestead exemption is                  (ECOA) makes it unlawful for a creditor to
proof against a non-dischargeable claim for             discriminate against an applicant for credit on
alimony, maintenance, or child support.                 the basis of race, color, religion, national
                                                        origin, sex, age, or marital status. Rooms
5.   Commerce Clause - U.S. Constitution                With a View, Inc. v. Private Nat'l Mortgage
     Under the Commerce Clause of the U.S.              Ass'n, a lender argued that the ECOA
Constitution, Congress has the power to                 preempted TEX. CONST. art. XVI ' 50(a)(5)(A)
regulate interstate commerce. States are                requiring both spouses to sign a home
precluded from enacting legislation which               improvement contract on homestead. Held
imposes an excessive burden on interstate               there was no federal preemption. The ECOA
commerce. In Rooms With a View, Inc. v.                 specifically provides that requiring both
Private Nat'l Mortgage Ass'n, the plaintiff             spouses to sign to create a valid lien does not
contended that the required 12-day waiting              constitute discrimination.
period before the execution of a mechanic's
lien on homestead violated the Commerce                 8. Anti-Preemption Amendments to the
Clause by imposing an excessive burden on               Property Code
interstate commerce. Held any slight or                       Effective January 1, 2000, Section 41.008
incidental effect of the waiting period on              was added to the Property Code to provide
interstate commerce was far from excessive.             "[t]o the extent of any conflict between this
                                                        subchapter [homestead exemption] and any
6.   Truth In Lending Act                               federal law that imposes an upper limit on the
     The federal Truth in Lending Act (TILA)            amount, including the monetary amount or
provides that in consumer credit transactions           acreage amount, of homestead property a
involving a security interest in an obligor's           person may exempt from seizure, this
homestead, the obligor has three days after             subchapter prevails to the extent allowed
completing the transaction to rescind it without        under federal law."        This section likely
penalty. The Texas Constitution requires that           anticipates proposed sweeping amendments
a contract for work or materials to the                 to the Bankruptcy Code which may restrict
homestead expressly provide that the owner              homestead claims in bankruptcy.            The
may rescind the contract without penalty or             efficacy of this provision will need to abide
charge within three days after the execution of         further events.
the contract of all parties. In Rooms With a
View, Inc. v. Private Nat'l Mortgage Ass'n,
held the TILA and constitutional three day
recission periods were not in conflict but ran
concurrently.      There was no federal
preemption.



                                                   79
Chapter 5                                                               Homestead After Home Equity

G. Equitable Liens/Constructive Trusts                  H. Fraudulent Conveyance
     Another defensive strategy employed                     It is not a fraudulent conveyance for a
against a homestead claim is the imposition of          debtor to invest nonexempt assets into a
an equitable lien or constructive trust. There          homestead with the intent to shelter those
is a split of authorities over whether the              assets from creditors. This is true even when
homestead may be burdened with a judicial               the debtor is in failing or insolvent condition.
lien or constructive trust when the homestead           In In re Coates, Mr. and Mrs. Coates used
is purchased or improved by the fruits of the           cash assets to pay off the lien on their
homestead claimant's fraud.                             homestead just 18 days before they file
     In Curtis Sharp Custom Homes v. Glover,            bankruptcy. Held the Coates' investment in
the homestead claimants used embezzled                  their homestead was not a fraudulent
funds to improve their homestead. When the              conveyance although made with a motivation
aggrieved party sought to foreclose an                  to defeat their creditors.
equitable lien against the property by judicial
decree, the Court held in favor of the                  I.  Holder in Due Course
embezzlers. When the homestead had been                     The fact that the debt obligation has been
established before the embezzled funds were             acquired by a subsequent transferee for value
used to improve it, a constructive trust could          qualifying as a holder in due course will not
not attach to the homestead.                            preclude the debtor from raising homestead.
     In Matter of Moody, the court refused to           Homestead is in the nature of a real defense
impose an equitable lien or constructive trust          sustainable even against a holder in due
on a homestead improved by fraudulently                 course.
obtained money. The court distinguished
homesteads purchased with wrongfully                    J.  Waiver
obtained funds from homesteads improved                     A voluntary waiver of homestead rights
with wrongfully obtained funds. Only the                contained in a deed of trust or other security
former may be subjected to an equitable lien.           agreement in void, illegal, and unenforceable.
     In Bransom v. Standard Hardware, Inc.,
the court imposed a constructive trust on the           VII. FORECLOSURE           AGAINST         THE
proceeds from the sale of an alleged                    HOMESTEAD
embezzler's homestead. Held a constructive              A. What Constitutes a "Forced Sale" of
trust may be imposed on a homestead                     the Homestead?
irrespective of whether the wrongfully                       The Texas Constitution protects the
obtained funds are used for improvements or             homestead from "forced sale". Newman v.
purchase money. The stolen funds never                  State, considered a novel claim by a criminal
acquired homestead rights because they were             defendant that the trial court's failure to find
considered held in trust for the rightful owner.        him an indigent entitled to a free record
 The framers of the Texas Constitution never            amounted to a forced sale of his homestead
intended to distort homestead protection to             property. Held the court's sole finding was
protect thievery.                                       that the defendant was not indigent. This did
                                                        not order the defendant to sell anything.

                                                        B. What Liens May Be Foreclosed
                                                        Against the Homestead?
                                                            The only debts that may be foreclosed
                                                        against the homestead are those specifically
                                                        authorized in the Texas Constitution.

                                                        C. Notice to Cure Required
                                                             1987 and 1993 amendments to the
                                                        Property Code now require that a lender
                                                        provide a defaulting debtor under a deed of
                                                        trust or other contract lien on real property

                                                   80
Homestead After Home Equity                                                                       Chapter 5

used as the debtor's residence with written                    In In re Howard, the FDIC held a deed of
notice by certified mail (1) stating that the             trust on a 460.61 acre tract of which 194.71
debtor is in default; and (2) giving the debtor           acres was homestead. Held the FDIC must
at least 20 days to cure the default before               foreclose on the excess acreage before
notice of a foreclosure sale is given to the              foreclosing on the homestead portion.
debtor. In computing the twenty day notice                     In In re Shults, the lender held a valid lien
period, you count the day notice to cure is               on a 2/3 undivided interest in the debtor's
given but do not count the day that the notice            homestead. The debtors sought an order
of the foreclosure sale is given.                         allowing them to designate 1/3 of the acres as
     The notice to cure provision has been                their homestead preventing any foreclosure
held to apply to deeds of trust executed prior            on this partitioned portion. Held the lender
to the effective date of the Property Code                was entitled to foreclose its lien against a 2/3
amendments.                                               undivided interest in the whole tract. The
     Along with giving notice to cure, the                purchaser at the foreclosure would own a 2/3
lender must allow the debtor to cure the                  undivided interest in the whole tract which
debtor's default. A creditor's refusal of the             could then be partitioned.
debtor's lawful attempt to cure violates this
provision.                                                F.   Wrongful Execution of the Homestead
     If the creditor gives notice of a                         A homestead is exempt from forced sale
foreclosure sale on the debtor's residence                by execution. Any such attempted sale is void
without the required notice to cure, this                 and subject to collateral attack. While the
violates both the Texas Deceptive Trade                   sheriff's deed is a nullity, this will not preclude
Practices Act and the Texas Debt Collection               the aggrieved party from suing the
Practices Act. A foreclosure without the                  overzealous creditor and its agents.
20 day notice to cure also entitles a debtor to                In Vackar v. Patterson, Boyd, Lowery, a
an action for wrongful foreclosure. The debtor            debtor sued the creditor and the law firm
may recover damages or rescind the                        representing the creditor for wrongful
foreclosure, but not both.                                execution on a condominium constituting his
                                                          homestead. The creditor's counsel defended
D. When the Lien Attaches Only to                         that the sheriff's deed misdescribed the
Surplus Non-Exempt Acreage                                condominium        thereby       rendering       the
    When a lienholder has a valid lien only               conveyance a nullity. Held even if the sheriff's
against the non-exempt surplus acreage                    deed was a nullity, the debtor still had a cause
adjacent to the homestead, the lender must                of action for wrongful execution. The debtor's
segregate the excess from the homestead                   cause of action was not dependent on an
before foreclosure. This segregation may be               effective conveyance.
compelled of the debtor. If the lienholder
forecloses on the unsegregated estate the                 G. Foreclosure of a Home Equity Loan/
foreclosure is a nullity.                                 Reverse Mortgage
                                                               The Texas Supreme Court promulgated
E. When the Lien Covers Both Exempt                       rules for the foreclosure of home equity loans
and Non-Exempt Lands                                      and reverse mortgages. Under these rules,
     When a lender is foreclosing a lien on               foreclosures of home equity loans and certain
property part of which is homestead and part              reverse mortgages may be effected by use of
of which is not, the debtor has the equitable             one of three different procedures: (1) suit for
right to require the lender to resort first to the        judicial foreclosure; (2) suit or counterclaim
non-exempt portion of the property before any             seeking final judgment which includes an
attempt is made to foreclose on the                       order allowing foreclosure under the deed of
homestead. A contrary rule results in injustice           trust; or (3) application for an expedited
and a sacrifice of both the homestead and the             foreclosure proceeding allowing foreclosure
excess. This rule will apply even when it                 under the deed of trust.
prejudices junior lienholders or unsecured
creditors in a bankruptcy.


                                                     81
Chapter 5                                                      Homestead After Home Equity

1.   Notice to Cure                                      identifying recording information
     A foreclosure of a home equity loan or              found in the official real property
reverse mortgage must be preceded by notice              records of the county where all or
to cure given by the lender.                             any part of the property is located or
     For a reverse mortgage, the notice to               attach a legible copy of the security
cure must specify that a ground for                      instrument;
foreclosure exists. The notice to cure must
also give notice that the borrower may cure
the default by (1) remedying the condition
creating the ground for foreclosure, (2) paying
the debt from the proceeds of the sale of the
homestead or other sources, or (3) conveying
the property to the lender by deed in lieu of
foreclosure. This special reverse mortgage
notice to cure may be combined with any
notice to cure required by TEX. PROP. CODE
ANN. ' 51.002.
     For a reverse mortgage, the notice to
cure must be given at least 30 days before the
foreclosure is "commenced". However, if the
default is the failure of the debtor to maintain
the priority of the lender's lien under TEX.
CONST. art. XVI ' 50(k)(6)(D)(iii), the notice to
cure need be given only 20 days before the
foreclosure is commenced.

2. Application for Expedited Foreclosure
Proceeding
      An expedited foreclosure is instituted by
filing a verified application for an in rem
proceeding under TEX. R. CIV. P. Rule 736
seeking a court order allowing the foreclosure
of the home equity lien or reverse mortgage.
The application may be filed in the district
court in any county where all or any part of the
real property encumbered by the lien is
located. The verified application must:

     (1) be styled:      "In re:    Order for
         Foreclosure Concerning (Name of
         person to receive notice of
         foreclosure) and (Property Mailing
         Address)";
     (2) identify the party who, according to
         the records of the holder of the debt,
         is obligated to pay the debt secured
         by the property;
     (3) identify the property by mailing
         address and legal description;
     (4) identify the security instrument
         encumbering the property by
         reference to volume and page,
         clerk's file number, or other


                                                    82
Homestead After Home Equity            Chapter 5

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Chapter 5            Homestead After Home Equity


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Chapter 5            Homestead After Home Equity

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Homestead After Home Equity            Chapter 5

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Chapter 5            Homestead After Home Equity

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                 b
                 y

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                 E
                 X
                 .



            88
Homestead After Home Equity                                             Chapter 5

                                            d
                                            e
                                            r

                                            t
                                            h
                                            e

                                             s
                                             e
                                        The verified application of any supporting
                                             c
                                   affidavit u must be made on personal
                                   knowledge and set forth facts admissible in
                                             r
                                   evidence. The facts may be stated on
                                             i
                                   information and belief if the grounds for that
                                             t
                                   belief areyspecifically stated.

                                   3. Notice of Expedited Foreclosure
                                             i
                                   Proceedingn
                                        In an expedited foreclosure proceeding,
                                             s
                                   no citation is issued by the clerk and
                                             t
                                   personally served on the debtor. Rather the
                                             r
                                               is
                                   applicantu responsible for serving the debtor
                                   with a copy of the application and a notice of
                                             m
                                   the proceeding.
                                             e
                                        The n notice which accompanies the
                                   application must substantially comply with the
                                             t
                                   statutory form for notice specified at TEX. R.
                                   CIV. P. Rule 736(2)(C) and be at least ten
                                             a
                                   point type. The notice must be sent to the
                                             n
                                   party to be served by first class and certified
                                             d
                                   mail addressed to each party who, according
                                   to the records of the holder of the debt, is
                                             T
                                               to
                                   obligatedE pay the debt. Service is complete
                                   upon deposit of the application and notice in a
                                             X
                                   postage . prepaid and properly addressed
                                   wrapper at a post office or official depository
                                   of the U.S. Postal Service. If the party to
                                             P
                                   receive the notice is represented by an
                                             R
                                   attorney whose name and address are known
                                             O
                                   to the applicant's attorney, an additional copy
                                             P
                                   of the notice must be sent to the respondent's
                                             .
                                   attorney.
                                        The applicant or applicant's attorney must
                                             C
                                   certify toO the satisfaction of these notice
                                   requirements by certificate of service
                                             D
                                   accompanying the application. A copy of the
                                             E
                                   notice must accompany the application. The
                                   certificate of service is considered prima facie
                                             A
                                               of
                                   evidenceN the fact of service.
                                            N
                                            .



                              89
Chapter 5                                                                 Homestead After Home Equity

4. Response to Application for Expedited                  51.002.     The applicant must prove all
Foreclosure                                               elements of entitlement to the foreclosure set
     A respondent desiring to contest a                   out in the application.
foreclosure application may do so by filing a                  An order determining an application for
response setting out as many matters,                     expedited foreclosure does not constitute res
whether of law or of fact, as the respondent              judicata, collateral estoppel, or estoppel by
deems necessary or pertinent to contest the               judgment.      The grant or denial of the
application.     The response and any                     application is without prejudice to the right of a
accompanying affidavit must be made on                    party seeking other relief in any court of
personal knowledge setting forth facts                    competent jurisdiction. The grant or denial of
admissible in evidence. An accompanying                   the application is not an appealable order.
affidavit may be made on information and
belief if the grounds for that belief are                 7. Order to Proceed with Expedited
specifically stated.    The response must                 Foreclosure
contain the respondent's mailing address.                       If the application for expedited
     The response is filed with the clerk of the          foreclosure is granted, the order will direct that
court where the application was filed. A copy             the applicant is authorized to proceed with the
must be sent to the applicant or applicant's              foreclosure under the security document and
attorney at the address set out in the notice.            TEX. PROP. CODE ANN. ' 51.002. The order
     The response is due on or before                     must provide (1) the mailing address and
10:00 a.m. on the first Monday after the                  legal description of the property, (2) that a
expiration of 38 days after the date of filing of         copy of the order will be sent to the
the application and notice, exclusive of the              respondent with the notice of sale, (3) that the
date of mailing set out in the certificate of             applicant may communicate with the
service.                                                  respondent and all third parties reasonably
                                                          necessary to the conduct of the sale, and
5.   Default                                              (4) direct that the notice of sale be sent to
     If no response is timely filed, the court            respondent's counsel (if represented) by
may grant the application without further                 certified mail.
notice or hearing if (1) the application                        A certified copy of the order must also be
complies with TEX. R. CIV. P. Rule 736(1);                filed in the real property records of the county
(2) no response is on file; and (3) the notice            where the property is located within ten days
and certificate of service have been on file              of the entry of the order. However, failure to
with the clerk at least ten days exclusive of             file the order will not affect the validity of the
the date of filing.                                       sale or defeat the presumption, under TEX.
                                                          CONST. art. XVI ' 50(i), that the foreclosed
6.   Determination When Response Filed                    home equity lien was a valid encumbrance
     If a response is filed, the application is to        against the homestead.
be finally determined by the Court not later
than 10 business days after a request for                 8.  Abatement and Dismissal
hearing by either party unless the parties                    The respondent may secure the
agree on an extension. The matter shall be                automatic abatement and subsequent
promptly heard after reasonable notice to the             dismissal of an expedited foreclosure
parties. No discovery is allowed in an                    proceeding by filing a petition contesting the
expedited foreclosure proceeding.                         applicant's right to foreclosure in a district
     At the hearing, the applicant bears the              court in the county where the application is
burden of proof to prove by affidavits on file or         pending and providing notice of that filing to
other evidence the grounds for granting the               the clerk where the expedited foreclosure
application. The only issue to be determined              proceeding is pending before the entry of the
in an expedited foreclosure proceeding is the             foreclosure order.
right of the applicant to obtain an order to
proceed with foreclosure under the security
instrument and TEX. PROP. CODE ANN. '


                                                     90
Homestead After Home Equity                                                                   Chapter 5

                                                        divorce decree awarding the wife and children
VIII. DIVORCE AND HOMESTEAD                             possession of the husband's separate
A. Decree May Award a Lien Against the                  property homestead "for her lifetime" held an
Homestead                                               abuse of discretion. The homestead interest
      As part of the property division in a             of the wife could be lost by abandonment.
divorce decree, a court may award a lien                The decree as written allowed her exclusive
against the other spouse's homestead.                   use of the husband's separate property
                                                        homestead for her lifetime even if the wife
1.    Permitted Purposes of the Lien                    abandoned the property. This was an abuse
      To be valid, any such lien must be for a          of discretion.
permissible homestead purpose. Permissible                   The effect of a decree awarding exclusive
purposes include a lien given to secure the             use of the marital homestead to the wife for a
amount of the lienholder's homestead interest           period of years is to deprive the husband of
awarded to the other spouse or to secure a              his homestead claim in the property. In Laster
right of reimbursement for community funds              v. First Huntsville Properties, a decree
expended on purchase money, taxes, or                   awarded the marital homestead to husband
improvements made to the other spouse's                 and wife as cotenants but gave the wife the
homestead during marriage. Lien claims are              exclusive right to occupy the property until the
not permissible when securing delinquent                youngest of the couple's children reached
child support or a debt created by the just and         eighteen. The effect of the decree was to
right division of the marital estate.                   award the husband a future non-possessory
      These lien claims operate on a                    interest in the tract which could not be claimed
subrogation theory. The spouse awarded the              as homestead.
lien is subrogated to the rights of the original             In Lawrence v. Lawrence, a divorce
lienholder. Therefore, the spouse's right of            decree awarded the wife the exclusive use of
subrogation can rise no higher than the rights          the couple's 10 acre homestead to the wife for
of the original lienholder. If the spouse is            life though the property constituted the
relying on a reimbursement claim for                    separate property of the husband. The
improvements made to the homestead, the                 decree further awarded the wife a $50,000.00
lien must be supported by an original                   judgment       against    the    husband,      in
mechanic's lien contract in writing, predating          enforcement of which, the wife filed a
the improvements, and signed by both                    judgment lien contemporaneously with the
spouses.                                                decree.      Held the decree deprived the
                                                        husband of a present possessory interest in
2.   Extent of the Lien Claim                           the property. Under Laster neither the
     For a discussion of owelty considerations          husband nor his successor in interest could
affecting liens on homestead awarded as part            avoid the wife's judgment lien by raising the
of the property division in a divorce, refer to         homestead defense.
Owelty Liens at Part IV(D)(2).                               It is apparently unimportant in applying
                                                        Laster whether the divorce decree is a
B. Decree May Set Aside Homestead to                    consent decree or one imposed involuntarily
One Spouse For Period of Years                          on the homestead claimant. Either way, if the
     A divorce decree may set aside the                 homestead claimant is deprived of a right to
homestead for the use of the wife and                   occupy the homestead property, he loses his
children for a period of years even though the          homestead interest in the tract.
tract is the separate property of the husband.
The homestead aspect of such a tract is
considered to be community property which
the court may award to either party.
     The decree may not however expand the
community homestead interest of the wife in
the tract beyond those rights that existed
during marriage. In LeBlanc v. LeBlanc, a


                                                   91
Chapter 5                                                                Homestead After Home Equity

C. Decree May Direct the Sale of the                     4.  Issue Submission
Homestead                                                    The party seeking a determination of
    As Part of the just and right division of the        homestead must submit a jury question on the
marital estate, the court may order the sale of          issue or the homestead defense may be
a community homestead and the partition of               waived.
resulting proceeds. However such a sale
cannot be required in order to extinguish                X.   TEXAS PROBATE HOMESTEAD
marital liabilities due to unsecured creditors.          A.   Generally
    In Matter of Marriage of Banks, a divorce                 Upon the death of the husband or wife, or
decree awarded attorney's fees to the                    both, the surviving spouse or the guardian of
husband to be recovered from the sale of the             a minor child may continue to occupy the
community homestead. Held the attorney's                 homestead during the lifetime of the survivor.
fee claim was a liability to a general creditor          This right is to the exclusion of all other
which could not be ordered paid from the                 owners of the property. The property will pass
proceeds of the wife's homestead.                        according to the testamentary directions of the
                                                         deceased spouse's will subject to the
IX. PLEADING AND PROOF                                   survivor's constitutional probate homestead.
A. Pleading                                              The property may not be partitioned among
1. The Homestead Defense Must Be                         the beneficiaries of the decedent's will so long
Affirmatively Pleaded                                    as the survivor continues to occupy the
     A plea of homestead is an affirmative               homestead. The probate homestead may not
defense. For failure to plead homestead, the             be defeated by any testamentary disposition
defense is waived.                                       made of the property by the deceased
                                                         spouse.
B. Proof                                                      The probate homestead of the surviving
1. Homestead a Fact Issue                                spouse is in the nature of a legal life estate
     Whether property is homestead presents              created by operation of law.
a fact issue for the trier of fact.
                                                         B. Extent of the Probate Homestead
2.   Burden of Proof                                          The surviving spouse has the same
     The party claiming the homestead                    homestead rights that both spouses had prior
exemption has the burden of establishing the             to the death of one spouse. The probate
homestead character of the property. The                 homestead will attach whether the homestead
court may not assume facts to support a claim            tract is the separate property of the deceased
of homestead against the validity of an                  or the community property of the surviving
existing debt or lien.                                   spouse and the deceased. It doesn't matter
                                                         whether the survivor is the husband or the
3. Proof of Homestead Facts by Request for               wife.
Admission                                                     During the existence of the probate
     Facts establishing or defeating a                   homestead the surviving spouse has the
homestead are as susceptible to proof by                 rights to all fruits, rents, and revenues derived
requests for admission as any other fact. In             from the property.
McDaniel v. Camp, the debtor failed to
respond to a request for admission that the              C. Duration of the Probate Homestead
debtor had abandoned his homestead. This                       The   probate       homestead       vests
failure resulted in a deemed admission of                immediately upon the death of the spouse.
abandonment though the debtor had resided                Like any homestead, it is presumed to
on the property for 23 years. Held this                  continue until proof to the contrary is shown.
admission was conclusive of abandonment                  The probate homestead will extend for the
notwithstanding the true facts.                          lifetime of the surviving spouse unless
                                                         abandoned.




                                                    92
Homestead After Home Equity                                                                 Chapter 5

D. Who is a "Survivor" for the Purposes                 XI. TAXATION OF THE HOMESTEAD
of a Probate Homestead?                                 A. The Homestead Tax Exemptions
     In Hunter v. NCNB Texas Nat'l Bank, a                   The residential homestead of a taxpayer
daughter attempted to establish a probate               is partially exempt from taxation from county
homestead in the property of her incompetent            ad valorem taxes for $3,000.00 of the
mother. Held the benefits of the probate                assessed value of the homestead. A 1997
homestead only attach when there is a death             constitutional amendment raised the
of the person owning the homestead property.            corresponding mandatory exemption from
     In Estate of Casida, an adult unmarried            school district taxes to $15,000.00 of the
son of the decedent living in the family home           appraised value of the homestead.            In
claimed a probate homestead. Held that                  addition to these standard homestead
while an unmarried adult child allows the               exemptions, there is also a mandatory partial
homestead to descend free of the claims of              exemption for the residential homestead of an
creditors under TEX. PROB. CODE ANN. ' 271,             adult who is disabled or who is 65 years or
that adult child is not entitled to claim               older in the amount of $10,000.00 of
possession of the tract or prevent its partition        assessed value.
among the heirs and devisees of the estate.                  Augmenting these mandatory exemptions
An adult surviving child living at home is not          is a local option exemption which may be
among the class of persons who may claim a              adopted by the governing body of a local
probate homestead.                                      taxing unit for not less than $5,000.00 nor
                                                        more than 20% of the appraised value of the
E. Rights and Responsibilities of                       property. An additional local option exemption
Survivor During the Survivorship                        of not less than $3,000.00 of the appraised
     During the survivorship, the surviving             value is available for taxpayers over 65 or
spouse is not liable for rent to the heirs. The         disabled. This local option exemption may
survivor will be chargeable with the expenses           apply to those over 65, those disabled, or
of upkeep of the property including the                 both. If both exemptions are adopted, a
payment of ad valorem taxes.             If any         person over 65 and disabled may choose
improvements are made, the survivor is not              either exemption for any tax year but not both.
entitled to reimbursement.
                                                        B. Who is Entitled to Claim the Standard
F. Survivor's Right to the Probate                      Residence Homestead Tax Exemption?
Homestead May Be Waived                                 1. Individual Ownership
     The right to a probate homestead is a                   Generally the homestead tax exemption
personal right which may be waived by                   is available only to natural persons. Further,
agreement. Any such agreement must strictly             the property must be designed or adopted for
satisfy the requirements of TEX. FAM. CODE              human residence, used as a residence, and
ANN. ' 5.46 or ' 5.55, as applicable.                   occupied by an "owner" who qualifies for the
     In Hunter v. Clark, the devisee of a               exemption. Only one residence homestead
homestead sought a declaratory judgment                 can be claimed per tax year.
that the surviving spouse had waived her                     Copeland v. Tarrant Appraisal Dist.
probate homestead rights by a premarital                considered whether the surviving spouse
agreement providing only that the separate              occupying a probate homestead constituting
property of each spouse would remain their              the separate property of the deceased spouse
separate property with the exclusive right to           could claim a homestead tax exemption on
control, manage, and dispose of such                    the property during the survivorship. Held that
property. Held the provisions of the premarital         the homestead tax exemption was not limited
agreement presented no clear and convincing             to persons holding legal title to property but
evidence of an informed consensual waiver of            would extend to a taxpayer holding a legal life
the probate homestead.                                  estate created by operation of TEX. CONST.
                                                        art. XVI ' 52. The surviving spouse with the
                                                        absolute right to occupy the homestead and
                                                        with the obligation to pay taxes thereupon


                                                   93
Chapter 5                                                   Homestead After Home Equity

could not be denied the homestead tax
exemption.

2.  Corporate Ownership
    Corporations are not entitled to claim the
homestead tax exemption on corporate
property.

3.    Condominium Ownership
      Condominium owners are entitled to
claim the homestead tax exemption.
Condominium ownership involves individual
ownership of a specific condo combined with
joint ownership of the common elements thus
qualifying for the exemption.

4.    Cooperative Housing Ownership
      In 1987, the Texas Tax Code was
amended to allow the homestead tax
exemption to attach to the interest of a
stockholder in a cooperative housing
corporation. To qualify, that cooperative
interest must be a separately secured and
occupied structure or portion of a structure
which is occupied by the owner as his
principal residence. The homestead tax
exemption extends to the dwelling place
occupied as a residence homestead and to a
portion of the total common area used in the
residential occupancy equal to the percentage
of stock in the project owned by the claimant
all of which may not exceed 20 acres.

5.   Trust Ownership
     In 1993, the Texas Legislature amended
the Tax Code to make the homestead tax
exemption available to properties held in a
"qualifying trust". A qualifying trust must have
as its trustor the individual residing on the
property or that person's spouse. The trust
instrument must:

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                                                   94
Homestead After Home Equity            Chapter 5


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                              95
Chapter 5            Homestead After Home Equity

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            96
Homestead After Home Equity            Chapter 5

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                              97
Chapter 5                       Homestead After Home Equity

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                 C. Application for Residence Homestead
                           s
                 Tax Exemption
                      To t qualify for a homestead tax
                           o
                 exemption, a person must file an application
                 for such r exemption. Effective January 1,
                 1998, each such application is required to
                           o
                 (1) include the applicants name; (2) include
                           r
                 the applicants driver's license number and
                 personal identification certificate number, or
                           t
                 social security number.
                           h
                      If the taxpayer acquires the homestead
                           e
                 property during the tax year, the taxpayer may
                 get an exemption for a portion of a tax year.
                           p
                 However, application for the exemption must
                 be madee within one year of acquiring the
                 property. r
                           s
                           o
                 D. Who is Entitled to Claim the Over
                           n
                 65/Disabled Homestead Exemption?
                           a
                      In Ripley v. Stephens, a couple lived
                           l
                 upon a homestead constituting the separate
                 property of the husband. The couple claimed
                           r
                 the over-65 tax exemption on the tract. The
                 husband e  was under 65 but the wife was over
                 65. The p   Texas Tax Code required that the
                           r
                 tract sought to be exempted be the principal
                           e
                 residence of "an owner who qualifies" for the
                 exemption.s     Held the property was not
                 "owned" eby a taxpayer qualified for the
                           n
                 over-65 exemption.
                           t
                      In 1995, the Texas Tax Code was
                           a
                 amended to provide relief for the surviving
                           t
                 spouse of an over-65 taxpayer. Under the
                           i
                 amendment, if an over-65 taxpayer dies
                           v
                 survived by a spouse between 55 and 65, the
                 over-65 e tax        exemption       continues
                 notwithstanding.     This surviving spouse
                           o
                 exemption cannot be stacked with the over-65
                           f
                 or disabled tax exemption.


            98
Homestead After Home Equity                                                                        Chapter 5

    Effective January 1, 1998, a surviving                    1997 Amendments to the Tax Code
spouse between 55 and 65 can claim the                   provide protection for the over-65 taxpayer
over-65 exemption even if the deceased                   acquiring a new homestead. Such a taxpayer
spouse didn't claim the exemption before                 does not necessarily acquire a new tax base
death. It is only necessary that the deceased            by acquiring a new home. The tax limitation
spouse was qualified to claim the exemption              on the new home is determined by the
before death.                                            following formula:

E. Amount of Homestead Tax Exemption                     1st year               last year taxes on former home
for Elderly/Disabled                                     taxes on      X        with over-65 limitation
                                                         new home               last year taxes on former home
     The amount of the local option                                                    without over-65 limitation
over-65/disabled exemption on homestead is
$3,000.00 of the appraised value of the                       A taxpayer applying for this limitation on
homestead unless a higher value is set by the            taxes on his new home is entitled to receive
taxing authority or by local option election.            from the appraisal district for his former home
The authority of the taxpayers to adopt a                a certificate providing the information
higher amount for this exemption is not                  necessary to calculate taxes due on the new
untrammelled.      The taxing authority is               home.
empowered to disregard a taxpayer-adopted                     As part of the 1993 revisions to the Tax
exemption where taxes have been pledged to               Code, this limitation on tax increases against
pay a debt of that body and granting the full            the property of the elderly was extended to
amount of the exemption would impair the                 property held by a qualified trust.
contractual obligation to repay that debt. A                  In 1987, the Texas Constitution was
1991 Attorney General's Opinion authorized               amended to extend the limitation on
the City of Camp Wood to ignore a                        increasing the taxes of the elderly to the
$50,000.00 exemption adopted by local                    homesteads of surviving spouses of the
election where the City determined that                  elderly. If a person 65 or over dies (after
granting the exemption would impair its ability          November 3, 1987) while taking the over 65
to pay its bonds with pledged tax dollars.               exemption, the taxes on the property may not
     If a taxpayer qualifies for the                     be increased while it remains the residence
over-65/disabled tax exemption during a tax              homestead of that person's spouse and the
year, the exemption will apply retroactively for         spouse is 55 or over at the time of that death.
the entire tax year in which the taxpayer                 In 1997, the Constitution was further
qualified and thereafter.                                amended to allow the surviving spouse to
                                                         transfer all or a proportionate amount of this
F. Limitations on Increase of School Tax                 limitation to a different residence homestead.
on Homesteads of Elderly                                      The 1997 revisions to the tax code also
     The Texas Tax Code prohibits school                 extended the limitation on school tax
districts from increasing the total amount of ad         increases to the elderly to the surviving
valorem taxes imposed against the                        spouse of a taxpayer qualified to claim the
homestead of an individual 65 years or older             over-65 exemption if: (1) the surviving spouse
above the amount of tax imposed when the                 is 55 years or older when the qualified
property first qualified for the over 65                 taxpayer dies; (2) the property is the
exemption.                                               residence homestead at the time the qualified
     If the homestead is qualified for the               taxpayer dies; and (3) the property remains
over-65 exemption during a tax year, the base            the residence homestead of the surviving
year for determining future tax is that first tax        spouse. If the qualifying taxpayer dies in first
year or the following full tax year, if taxes are        year that taxpayer is qualified for the over-65
less in the following year. For homesteads               exemption, the surviving spouse's taxes are
qualified for the over-65 tax exemption before           limited to those assessed in that first tax year
the 1997 tax year, a statutory formula is                or those assessed in the following tax year, if
provided to calculate the base tax year.                 less determined as if the deceased spouse
                                                         had lived for the entire year.

                                                    99
Chapter 5                                                                      Homestead After Home Equity

     School districts in counties with a                authority buys the homestead property at the
population less than 75,000 may by local                tax sale, the two-year redemption period
option elect to apply the surviving spouse tax          begins to run from the date that the deed to
limitation to spouses widowed on or after               the taxing authority is recorded even if the
January 1, 1993 for taxes assessed in a tax             property is later resold to a third party.
year after the local option is adopted. This                  If the homestead property is sold to a
local option had to be exercised prior to               third party at a tax sale, the redemption
January 1, 1999.                                        consideration is determined by the formula set
                                                        out at TEX. TAX CODE ANN. ' 34.21(a). If the
G. Installment Payment of Homestead                     homestead is sold to a taxing authority at the
Taxes By the Elderly                                    tax sale, the redemption consideration is the
     In 1989, the Legislature amended the               lesser of the amount of the tax judgment
Tax Code to allow persons claiming the                  against the property or the market value of the
over-65 tax exemption to pay their taxes in             property specified in the judgment (plus the
installments.    To qualify for installment             filing fee for the taxing unit's deed and costs
payments, the taxpayer must claim the over              expended by the taxing unit). If the property is
65 exemption, give notice of an intention to            sold to a taxing authority at the tax sale but
pay in installments, and pay one-fourth of the          later resold to a third party,the redemption
taxes due all before the delinquency date for           consideration is determined by the formula set
the taxes.      Thereafter three equal tax              out at TEX. TAX CODE ANN. ' 34.21(c);
installments would be paid on April 1, June 1,          provided that if this redemption consideration
and August 1.                                           is less than the tax judgment, the owner must
                                                        also pay this difference to the taxing authority
H. Manufactured Homes as Homestead                      before redeeming the property.
      In 1985, the Legislature allowed
                                                        wpnet\sch\papers\hmstdheq.700/akl
manufactured homes to be included in the
residential homestead tax exemption. To
qualify, the manufactured home must be
owned by the person claiming the exemption.
 Proof of this ownership may be made by the
title document for the mobile home or by
verified copy of the purchase contract. This
special manufactured home tax provision will
not apply if the manufactured home has been
attached to the real estate and the title
document cancelled.
I. Redemption of Residence Homestead
Sold at Tax Sale
      Formerly, all property sold at a tax sale
could be redeemed by the taxpayer within two
years of the recordation of the tax sale
purchaser's deed.       In 1993, the Texas
Legislature amended the Tax Code to reduce
the redemption period from two years to six
months.       Excepted from this shortened
redemption period are residence homesteads
and land designated for agricultural use. For
these types of properties the redemption
period remains two years.
      If a third party buys the homestead
property at the tax sale, the two-year
redemption period begins to run when the
purchaser's tax deed is recorded. If a taxing


                                                  100
Homestead After Home Equity         Chapter 5




                              101
Chapter 5                                                                  Homestead After Home Equity

                                               ENDNOTES



    * This decision was rendered by the infamous "Semi-Colon Court" following the War of
Northern Aggression. The holding, being the product of a Supreme Court of Carpetbaggers and
Scalawags, is instructive but not particularly authoritative. See Taylor v. Murphy, 50 Tex. 291, 295
(1878).

S.W.3d 2
B.R. 247
F.3d 210
F.Supp.2d 94

    Homestead rights have their origin in constitutional and statutory provisions and not in common law.
Sanchez v. Telles, 960 S.W.2d 762, 769 (Tex. App. - El Paso 1997, writ denied).

    Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000); State of Texas By
and Through Texas Dept. of Mental Health and Mental Retardation v. Ellison, 914 S.W.2d 679, 684 (Tex.
App. - Austin 1996, no writ).

    Nationwide of Bryan, Inc. v. Dyer, 969 S.W.2d 518, 521 (Tex. App. - Austin 1998, no writ).

    Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000); Sanchez v. Telles,
960 S.W.2d 762, 769 (Tex. App. - El Paso 1997, writ denied).

    In re Davis, 188 B.R. 544, 549 (Bankr. N.D. Tex. 1995).

    Barker, The Life of Stephen F. Austin, p. 195 (1925).

     Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 847, 849 (Tex. App. - Austin
1999, no writ); In re Davis, 188 B.R. 544, 549 (Bankr. N.D. Tex. 1995) citing Franklin v. Coffee, 18 Tex.
413, 417 (1857).

     Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 847, 849 (Tex. App. - Austin
1999, no writ); McKee v. Smith, 965 S.W.2d 52, 53 (Tex. App. - Fort Worth 1998, writ denied); Sanchez v.
Telles, 960 S.W.2d 762, 769 (Tex. App. - El Paso 1997, writ denied); In re Kang, 243 B.R. 666, 669
(Bankr. N.D. Tex. 1999); In re Brooks, 233 B.R. 696, 699 (Bankr. N.D. Tex. 1999).

    Id.

    In re Brooks, 233 B.R. 696, 699 (Bankr. N.D. Tex. 1999).

      TEX. CONST. art. XVI, '' 50, 51; TEX. PROP. CODE ANN. '' 41.002(a), 41.005(b) (Vernon Supp.
2000). See also Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 n.4 (Tex. 1991); Falor v. Falor,
840 S.W.2d 683, 686 (Tex. App. - San Antonio 1992, no writ); Fajkus v. First Nat'l Bank of Giddings, 735
S.W.2d 882, 884 (Tex App. - Austin 1987, writ denied); Matter of England, 975 F.2d 1168, 1172 n.7 (5th
Cir. 1992).

     TEX. CONST. art. XVI, '' 50, 51; TEX. PROP. CODE ANN. '' 41.002(b)(1), 41.005(a) (Vernon Supp.
2000). See also NCNB Texas Nat'l Bank v. Carpenter, 849 S.W.2d 875, 879 (Tex. App. - Fort Worth
1993, no writ); Fajkus v. First Nat'l Bank of Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ
denied); Matter of Henderson, 18 F.3d 1305, 1307 n.1 (5th Cir. 1994); Matter of England, 975 F.2d 1168,
1172 (5th Cir. 1992); Matter of Bradley, 960 F.2d 502, 506 (5th Cir. 1992).

    TEX. CONST. art. XVI, '' 50, 51; TEX. PROP. CODE ANN. '' 41.002(b)(2), 41.005(b) (Vernon Supp.


                                                    102
Homestead After Home Equity                                                                        Chapter 5


2000). See also Riley v. Riley, 972 S.W.2d 149, 153 (Tex. App. - Texarkana 1998, no writ); Matter of
Henderson, 18 F.3d 1305, 1307 n.1 (5th Cir. 1994); Matter of Bradley, 960 F.2d 502, 506 n.6 (5th Cir.
1992); In re Moody, 77 B.R. 580, 593 (S.D. Tex. 1987); In re Poer, 76 B.R. 98, 99 n.2 (Bankr. N.D. Tex.
1987).

      State of Texas By and Through Texas Department of Mental Health and Mental Retardation v.
Ellison, 914 S.W.2d 679, 684 (Tex. App. - Austin 1996, no writ); Farrington v. First Nat'l Bank of Bellville,
753 S.W.2d 248, 251 (Tex. App. - Houston [1st Dist.] 1988, writ denied); Fajkus v. First Nat'l Bank of
Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied); In re Grisham, 230 B.R. 529, 531
(Bankr. N.D. Tex. 1998); In re Julian, 163 B.R. 478, 482 (Bankr. N.D. Tex. 1994); In re England, 141 B.R.
495, 497 (N.D. Tex. 1991).

     First Nat'l Bank of McAllen v. Jones, 244 S.W. 1057, 1058 (Tex. Civ. App. - San Antonio 1922), rev'd
on other grounds, 259 S.W. 157 (Tex. Comm'n App. 1924, judgm't adopted).

     In re Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex. 1998).

     Id.

    Iken & Co. v. Olenik, 42 Tex. 195, 198 (1875); In re Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex.
1998).

    Fajkus v. First Nat'l Bank of Giddings, 735 S.W.2d 882, 885 (Tex. App. - Austin 1987, writ denied);
Connelly v. Johnson, 259 S.W. 634, 637 (Tex. Civ. App. - San Antonio 1924, no writ).

      See Allen v. Whitaker, 18 S.W. 160, 161 (Tex. 1892); Commerce Farm Credit Co. v. Sales, 288 S.W.
802, 804 (Tex. Comm'n App. 1926, judgm't adopted); Jones v. First Nat'l Bank of McAllen, 259 S.W. 157,
159 (Tex. Comm'n App. 1924, judgm't adopted); Vistron Corp. v. Winstead, 521 S.W.2d 754, 755 (Tex.
Civ. App. - Eastland 1975, no writ); Aetna Ins. Co. v. Ford, 417 S.W.2d 448, 451 (Tex. Civ. App. -
Eastland 1967), rev'd on other grounds, 424 S.W.2d 612 (Tex. 1968); Purdy v. Grove, 35 S.W.2d 1078,
1081 (Tex. Civ. App. - Eastland 1931, writ ref'd); Boerner v. Cicero Smith Lumber Co., 293 S.W. 632, 636
(Tex. Civ. App. - Amarillo 1927), rev'd on other grounds 298 S.W. 545 (Tex. Comm'n App. 1927, judgm't
adopted); Connelly v. Johnson, 259 S.W. 634, 635 (Tex. Civ. App. - San Antonio 1924, no writ); First Nat'l
Bank of McAllen v. Jones, 244 S.W. 1057, 1058 (Tex. Civ. App. - San Antonio 1922), rev'd on other
grounds, 259 S.W. 157 (Tex. Comm'n App. 1924, judgm't adopted); Ewing v. Riley, 246 S.W. 94, 95 (Tex.
Civ. App. - San Antonio 1923, no writ); Harris v. Matthews, 81 S. W. 1198, 1204 (Tex. Civ. App. 1904, writ
ref'd); Batts v. Middlesex Banking, 63 S.W. 1046, 1047 (Tex. Civ. App. 1901, no writ); Matter of Crowell,
138 F.3d 1031, 1034 (5th Cir. 1998); Canady v. Wilson, 653 F.2d 210, 215 (5th Cir. 1981); Rutherford v.
Hughes, 103 F.Supp. 161, 165 (E.D. Tex. 1952); In re Buie, 287 F. 896, 901 (N.D. Tex. 1928); In re
Grisham, 230 B.R. 529, 531-33 (Bankr. N.D. Tex. 1998); In re Mitchell, 132 B.R. 553, 558 (Bankr. W.D.
Tex. 1991).

      For tracts bisected by the city limits, the location of the house generally determined the homestead's
rural or urban character. See Ewing v. Riley, 246 S.W. 94, 95 (Tex. Civ. App. - San Antonio 1923, no
writ). In In re Grisham, 230 B.R. 529 (Bankr. N.D. Tex. 1998), the Grishams established their homestead
on an 80 acre tract on the edge of Mabank, Texas. At the time of designation, 11.74 acres of the tract
was within the city limits of Mabank. Id. at 531. The Grishams built their house on the 11.74 acre city
portion of the property. Id. Held the Grishams had an urban homestead. Id. at 533.

      See M.H. Lauchheimer & Sons v. Saunders, 97 Tex. 137, 141, 76 S.W. 750, 751-52 (1903); Vistron
Corp. v. Winstead, 521 S.W.2d 754,755 (Tex. Civ. App. - Eastland 1975, no writ); Schultz v. Schultz, 45
S.W.2d 312, 313 (Tex. Civ. App. - Austin 1931, no writ); Cotten v. Friedman, 158 S.W. 780, 781 (Tex. Civ.
App. - Galveston 1913, no writ); Ayres v. Patton, 111 S.W. 1079, 1081 (Tex. Civ. App. 1908, writ ref'd);
Jolly v. Diehl, 86 S.W. 965, 966 (Tex. Civ. App. 1905, no writ); Harris v. Matthews, 81 S.W. 1198, 1205
(Tex. Civ. App. 1904, writ ref'd); J.B. Watkins Land - Mortgage Co. v. Abbott, 37 S.W. 252, 253 (Tex. Civ.
App. 1896, writ ref'd); Neeley v. Case, 32 S.W. 785, 786 (Tex. Civ. App. 1895, no writ); First Nat'l Bank of
Aransas Pass v. Walsh, 26 S.W. 1113, 1113 (Tex. Civ. App. 1894, no writ); Matter of Crowell, 138 F.3d

                                                     103
Chapter 5                                                                 Homestead After Home Equity


1031, 1034 (5th Cir. 1998); Canady v. Wilson, 653 F.2d 210, 214 (5th Cir. 1981); Buttram v. Harris, 23
F.2d 679, 680 (5th Cir. 1934); In re Grisham, 230 B.R. 529, 532 (Bankr. N.D. Tex. 1998); In re McCain,
160 B.R. 933, 939 n.5 (Bankr. E.D. Tex. 1993).

      See Martin Clothing Co. v. Henly, 83 Tex. 592, 593, 19 S.W. 167, 168 (1892); Allen v. Whitaker, 18
S.W. 160, 161-62 (Tex. 1892); Rogers v. Ragland, 42 Tex. 422, 441 (1875); Clark v. Nolan & Campbell,
38 Tex. 416, 422 (1873)*; Boerner v. Cicero Smith Lumber Company, 293 S.W. 632, 636 (Tex. Civ. App. -
Amarillo 1927), rev'd on other grounds 298 S.W. 545 (Tex. Comm'n App. 1927, judgm't adopted);
Connelly v. Johnson, 259 S.W. 634, 635 (Tex. Civ. App. - San Antonio 1924, no writ); O'Fiel v. Janes, 220
S.W. 371, 373 (Tex. Civ. App. - Beaumont 1920, writ ref'd); Cotten v. Friedman, 158 S.W. 780, 781 (Tex.
Civ. App. - Galveston 1913, no writ); Ayres v. Patton, 111 S.W. 1079, 1081-82 (Tex. Civ. App. 1908, writ
ref'd); Jolly v. Diehl, 86 S.W. 965, 966 (Tex. Civ. App. 1905, no writ); Harris v. Matthews, 81 S.W. 1198,
1204 (Tex. Civ. App. 1904, writ ref'd); Roberts v. Cawthon, 63 S.W. 332, 334 (Tex. Civ. App. 1901, no
writ); Atkinson v. Phares, 49 S.W. 653, 653 (Tex. Civ. App. 1898, writ ref'd); Ayres v. Lamb, 40 S.W. 1024,
1024 (Tex. Civ. App. 1897, no writ); Waggener v. Haskell, 35 S.W. 711, 711-12 (Tex. Civ. App. 1896, no
writ); J.B. Watkins Land - Mortgage Co. v. Abbott, 37 S.W. 252, 252-53 (Tex. Civ. App. 1896, writ ref'd);
Foust v. Sanger, 35 S.W. 404, 404 (Tex. Civ. App. 1896, writ ref'd); First Nat'l Bank of Aransas Pass v.
Walsh, 26 S.W. 1113, 1113 (Tex. Civ. App. 1894, no writ); Matter of Crowell, 138 F.3d 1031, 1034 (5th
Cir. 1998); In re Buie, 287 F. 896, 899 (N.D. Tex. 1928); In re Grisham, 230 B.R. 529, 532 (Bankr. N.D.
Tex. 1998).

     See Williams v. P.J. Willis & Bros., 84 Tex. 398, 399, 19 S.W. 683, 684 (1892); Allen v. Whitaker, 18
S.W. 160, 161 (Tex. 1892); Pridgen v. Warn, 79 Tex. 588, 592, 15 S.W. 559,560 (1891); Posey v. Bass,
77 Tex. 512, 513, 14 S.W. 156, 156 (1890); Rogers. v. Ragland, 42 Tex. 422, 442 (1875); Iken & Co. v.
Olenik, 42 Tex. 195, 197 (1875); Commerce Farm Credit Co. v. Sales, 288 S.W. 802, 804 (Tex. Comm'n
App. 1926, judgm't adopted); Jones v. First Nat'l Bank of McAllen, 259 S.W. 157, 159 (Tex. Comm'n App.
1924, judgm't adopted); Fajkus v. First Nat'l Bank of Giddings, 735 S.W.2d 882, 885 (Tex. App. - Austin
1987, writ denied); Aetna Ins. Co. v. Ford, 417 S.W.2d 448, 450 (Tex. Civ. App. - Eastland 1967), rev'd on
other grounds, 424 S.W.2d 612 (Tex. 1968); Collier v. Perry, 149 S.W.2d 292, 296 (Tex. Civ. App. - El
Paso 1941, writ dism'd judgm't. cor.); Farmers' and Mechanics' Trust Co. v. Perry, 56 S.W.2d 501, 502
(Tex. Civ. App. - Amarillo 1933, writ ref'd); Ewing v. Riley, 246 S.W. 94, 95 (Tex. Civ. App. - San Antonio
1923, no writ); Ayres v. Patton, 111 S.W. 1079, 1082 (Tex. Civ. App. 1908, writ ref'd); Mansur & Tibbett
Implement Co. v. Graham, 85 S.W. 308, 309 (Tex. Civ. App. 1905, no writ); J.B. Watkins Land - Mortgage
Co. v. Abbott, 37 S.W. 252, 253 (Tex. Civ. App. 1896, writ ref'd); Matter of Crowell, 138 F.3d 1031, 1034
(5th Cir. 1998); In re Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex. 1998); In re Cole, 205 B.R. 382, 385
(Bankr. E.D. Tex. 1997); In re McCain, 160 B.R. 933, 938 (Bankr. E.D. Tex. 1993); In re Mitchell, 132 B.R.
553, 556-57 (Bankr. W.D. Tex 1991).

      See M.H. Lauchheimer & Sons v. Saunders, 97 Tex. 137, 141, 76 S.W. 750, 752 (1903); Posey v.
Bass, 77 Tex. 512, 513, 14 S.W. 156, 157 (1890); Rogers v. Ragland, 42 Tex. 422, 443 (1875); Iken &
Co. v. Olenik, 42 Tex. 195, 200 (1875); Ayres v. Patton, 111 S.W. 1079, 1082 (Tex. Civ. App. 1908, writ
ref'd); Parker v. W.L. Moody & Co., 96 S.W. 650, 650 (Tex. Civ. App. 1906, no writ); Atkinson v. Phares,
49 S.W. 653, 654 (Tex. Civ. App. 1898, writ ref'd); Ayres v. Lamb, 40 S.W. 1024, 1024 (Tex. Civ. App.
1897, no writ); In re Buie, 287 F. 896, 901 (W.D. Tex. 1928); In re Grisham, 230 B.R. 529, 532 (Bankr.
N.D. Tex. 1998). But see, Posey v. Bass 77 Tex. 512, 514, 14 S.W. 156, 157 (1890); Jones v. First Nat'l
Bank of McAllen, 259 S.W. 157, 159 (Tex. Comm'n App. 1924, judgm't adopted); Woolf v. Smith, 86
S.W.2d 67, 70 (Tex. Civ. App. - Beaumont 1935, writ dism'd); Rutherford v. Hughes, 103 F. Supp. 161,
165 (E.D. Tex. 1952); In re Mitchell, 132 B.R. 553, 561 (Bankr. W.D. Tex. 1991).

     See Allen v. Whitaker, 18 S.W. 160, 161 (Tex. 1892); Taylor v. Boulware, 17 Tex. 74, 80 (1856);
Commerce Farm Credit Co. v. Sales, 288 S.W. 802, 804 (Tex. Comm'n App. 1926, judgm't adopted);
Fajkus v. First Nat'l Bank of Giddings, 735 S.W.2d 882, 885 (Tex. App. - Austin 1987, writ denied); First
State Bank of Grapeland v. Brown, 490 S.W.2d 248, 250 (Tex. Civ. App. - Tyler 1973, no writ); Aetna Ins.
Co. v. Ford, 417 S.W.2d 448, 451 (Tex. Civ. App. - Eastland 1967), rev'd on other grounds, 424 S.W.2d
612 (Tex. 1968); Woolf v. Smith, 86 S.W.2d 67, 69 (Tex. Civ. App. - Beaumont 1935, writ dism'd); Boerner
v. Cicero Smith Lumber Co., 293 S.W. 632, 636 (Tex. Civ. App. - Amarillo 1927), rev'd on other grounds
298 S.W. 545 (Tex. Comm'n App. 1927, judgm't adopted); Ayres v. Patton, 111 S.W. 1079, 1082 (Tex.

                                                   104
Homestead After Home Equity                                                                      Chapter 5


Civ. App. 1908, writ ref'd); Mansur & Tibbett Implement Co. v. Graham, 85 S.W. 308, 309 (Tex. Civ. App.
1905, no writ); Harris v. Matthews, 81 S.W. 1198, 1205 (Tex. Civ. App. 1894, writ ref'd); Waggener v.
Haskell, 35 S.W. 711, 712 (Tex. Civ. App. 1896, no writ); Matter of Crowell, 138 F.3d 1031, 1034 (5th Cir.
1998); In re Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex. 1998); In re McCain, 160 B.R. 933, 938 (Bankr.
E.D. Tex. 1993).

      See Allen v. Whitaker, 18 S.W. 160, 161 (Tex. 1892); First Nat'l Bank of McAllen v. Jones, 244 S.W.
1057, 1058 (Tex. Civ. App. - San Antonio 1922), rev'd on other grounds, 259 S.W. 157 (Tex. Comm'n
App. 1924, judgm't adopted); Rutherford v. Hughes, 103 F. Supp. 161, 165 (E.D. Tex. 1952); In re
Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex. 1998) (homestead claimants knowingly purchased property
within existing municipal boundaries). Clark v. Nolan & Campbell, 38 Tex. 416, 421 (1873)*; Cotten v.
Friedman, 158 S.W. 780, 781 (Tex. Civ. App. - Galveston 1913, no writ); Ayres v. Patton, 111 S.W. 1079,
1080-81 (Tex. Civ. App. 1908, writ ref'd); Waggener v. Haskell, 35 S.W. 711, 712 (Tex. Civ. App. 1896, no
writ) (homestead claimants developed rural property for urban purposes). M.H. Lauchheimer & Sons v.
Saunders, 97 Tex. 137, 141, 76 S.W. 750, 752 (1903); Woolf v. Smith, 86 S.W.2d 67, 68 (Tex. Civ. App. -
Beaumont 1935, writ dism'd); First Nat'l Bank of McAllen v. Jones, 244 S.W. 1057, 1058 (Tex. Civ. App. -
San Antonio 1922), rev'd on other grounds, 259 S.W. 157 (Tex. Comm'n App. 1924, judgm't adopted);
Harris v. Matthews, 81 S.W. 1198, 1205 (Tex. Civ. App. 1904, writ ref'd); In re Grisham, 230 B.R. 529,
532-33 (Bankr. N.D. Tex. 1998) (homestead claimants voted in municipal elections, stood for municipal
office, rendered property for municipal taxes, and/or sent kids to school in town). In re McCain, 160 B.R.
933, 938 (Bankr. E.D. Tex. 1993) (claimant developed rural property for a rural subdivision).

      See Posey v. Bass, 77 Tex. 512, 514, 14 S.W. 156, 157 (1890); Iken & Co. v. Olenik, 42 Tex. 195,
197 (1875); Fajkus v. First Nat'l Bank of Giddings, 735 S.W.2d 882, 885 (Tex. App. - Austin 1987, writ
denied); First State Bank of Grapeland v. Brown, 490 S.W.2d 248, 250 (Tex. Civ. App. - Tyler 1973, no
writ); Boerner v. Cicero Smith Lumber Co., 293 S.W. 632, 636 (Tex. Civ. App. - Amarillo 1927), rev'd on
other grounds, 298 S.W. 545 (Tex. Comm'n App. - 1927, judgm't adopted); In re McCain, 160 B.R. 933,
938 (Bankr. E.D. Tex. 1993).

    In re McCain, 160 B.R. 933, 939 n.5 (Bankr. E.D. Tex. 1993).

     Matter of Crowell, 138 F.3d 1031, 1034 (5th Cir. 1998); In re Grisham, 230 B.R. 529, 532 (Bankr.
N.D. Tex. 1998).

    In re Grisham, 230 B.R. 529, 533 (Bankr. N.D. Tex. 1998).

    TEX. PROP. CODE ANN. ' 41.002(c) (now amended). See also In re Grisham, 230 B.R. 529, 531
(Bankr. N.D. Tex. 1998).

      The definition was added to unrelated legislation concerning bonds for temporary restraining orders
restraining a foreclosure on the residential homestead of an indigent. Tex. Laws 1989, Ch. 391 ' 2, at
1519. In an unusual move, the definition was added from the house floor on the third reading of the bond
legislation. H.J. of Tex., 71st Leg., Reg. Sess. 2505 (1989).

     The change wrought on urban homesteads was most marked in unincorporated towns. The Texas
Constitution did not require a town to be incorporated to support an urban homestead. M.H. Lauchheimer
& Sons v. Saunders, 97 Tex. 137, 141, 76 S.W.750, 751-52 (1903). However, the municipal utilities,
police and fire protection required to support an urban homestead were only authorized for incorporated
municipalities. See TEX. LOCAL GOV'T. CODE ANN. ' 1.005 (Vernon 1999), '' 341.001-341.003, 342.004,
402.001 (Vernon 1999).

     It was possible for rural tracts to be served by the extra jurisdictional city services that would
characterize the tract as an urban homestead. See TEX. LOCAL GOV'T. CODE ANN. '' 42.001, 42.021
(Vernon 1999) (extra jurisdictional extensions of municipal utilities), '' 341.001, 341.021 (Vernon 1999)
(extra jurisdictional police protection), ' 352.003 (Vernon 1999) (extra jurisdictional fire protection).



                                                   105
Chapter 5                                                                    Homestead After Home Equity


     See In re Mitchell, 132 B.R. 553, 568 (Bankr. W.D. Tex. 1991) (concluding the Texas Legislature
might not have the authority to restrict the broad constitutional terms which inquire only whether tract is or
is not in a city, town, or village); Matter of Bradley, 960 F.2d 502, 511-12 n.18 (5th Cir. 1992) (concluding
the amendment was a reasonable statutory interpretation of the Texas Constitution).

     997 F.2d 1084 (5th Cir. 1992).

     960 F.2d 502 (5th Cir. 1992).

     See United States v. Blakeman, 997 F.2d 1084, 1091 (5th Cir. 1992); Matter of Bradley, 960 F.2d
502, 511-12 n.18 (5th Cir. 1992). See also In re Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex. 1998); In
re McCain, 160 B.R. 933, 938-39 (Bankr. E.D. Tex. 1993); In re Davis, 152 B.R. 133, 135 (Bankr. S.D.
Tex. 1992).

    See Matter of Crowell, 138 F.3d 1031, 1034 (5th Cir. 1998) (a property served by city sewer and
water and private gas and electrical utilities determined to be an urban homestead).

     M.H. Lauchheimer & Sons v. Saunders, 97 Tex. 137, 140, 76 S.W. 750, 751 (1903).

     TEX. PROP. CODE ANN. ' 41.002(c) (now amended). But see Matter of Crowell, 138 F.3d 1031, 1034
(5th Cir. 1998) (A debtor's property was on the edge of development of the City of Keller at the time
designated. By the time the debtor filed bankruptcy, city expansion had surrounded the property leaving a
small farm in the middle of a residential neighborhood. Without mentioning the 1989 legislation, held the
property was an urban homestead at the time that the adverse right was asserted against it).

     TEX. PROP. CODE ANN. ' 41.002(c) (Vernon Supp. 2000).

     Id.

     But see In re Grisham, 230 B.R. 529, 531 (Bankr. N.D. Tex. 1998) (Holding a homestead not meeting
the 1989 statutory test for a rural homestead was not necessarily an urban homestead).

    Border v. McDaniel, 70 F.3d 841, 844 (5th Cir. 1995); Matter of Hill, 972 F.2d 116, 120 (5th Cir.
1992).

     Id. at 119.

      NCNB Texas Nat'l Bank v. Carpenter, 849 S.W.2d 875, 879 (Tex. App. - Fort Worth 1993, no writ);
Matter of Hill, 972 F.2d 116, 119 (5th Cir. 1992); In re Preston, 233 B.R. 375, 377 (Bankr. E.D. Tex. 1999);
In re Finkel, 151 B.R. 779, 785 (Bankr. W.D. Tex. 1993).

      Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 n.4 (Tex. 1991); Patterson v. First Nat'l
Bank of Lake Jackson, 921 S.W.2d 240, 246 (Tex. App. - Houston [1st Dist.] 1995, no writ); NCNB Texas
Nat'l Bank v. Carpenter, 849 S.W.2d 875, 879-80 (Tex. App. - Fort Worth 1993, no writ); Matter of Hill, 972
F.2d 116, 119-20 (5th Cir. 1992); In re Cate, 170 B.R. 582, 584 (Bankr. N.D. Tex. 1994); In re Finkel, 151
B.R. 779, 785 (Bankr. W.D. Tex. 1993).

     Border v. McDaniel, 70 F.3d 841, 844 (5th Cir. 1995).

     NCNB Texas Nat'l Bank v. Carpenter, 849 S.W.2d 875, 879 (Tex. App. - Fort Worth 1993, no writ).

     Matter of Hill, 972 F.2d 116, 121 (5th Cir. 1992).

     Id. at 121-22.

     Id. at 121.


                                                     106
Homestead After Home Equity                                                                     Chapter 5


      NCNB Texas Nat'l Bank v. Carpenter, 849 S.W.2d 875, 879-80 (Tex. App. - Fort Worth 1993, no
writ); Matter of Hill, 972 F.2d 116, 121 (5th Cir. 1992).

    972 F.2d 116 (5th Cir. 1992).

    Id. at 121.

    Id.

    849 S.W.2d 875 (Tex. App. - Fort Worth 1993, no writ).

    Id. at 880.

    Id.

    151 B.R. 779 (Bankr. W.D. Tex. 1993).

    Id. at 785.

    Id.

    Id.

     Matter of Claflin, 761 F.2d 1088, 1090 (5th Cir. 1985); In re Brown, 191 B.R. 99, 101 (Bankr. N.D.
Tex. 1995).

    Id.

    761 F.2d 1088 (5th Cir. 1985).

    Id. at 1090-91.

    Id. See also In re Brown, 191 B.R. 99, 101-02 (Bankr. N.D. Tex. 1995).

    Patterson v. First Nat'l Bank of Lake Jackson, 921 S.W.2d 240, 246 (Tex. App. - Houston [1st Dist.]
1995, no writ).

    163 B.R. 478 (Bankr. N.D. Tex. 1994).

    Id. at 482.

    See Border v. McDaniel, 70 F.3d 841, 844 (5th Cir. 1995).

     Riley v. Riley, 972 S.W.2d 149, 154 (Tex. App. - Texarkana 1998, no writ); Border v. McDaniel, 70
F.3d 841, 844 (5th Cir. 1995).

    70 F.3d 841 (5th Cir. 1995).

    Id. at 844.

    Id.

    972 S.W.2d 149 (Tex. App. - Texarkana 1998, no writ).

    Id. at 154.



                                                   107
Chapter 5                                                                 Homestead After Home Equity


    Id.

     Sanchez v. Telles, 960 S.W.2d 762, 769 n.1 (Tex. App. - El Paso 1997, writ denied); Matter of
Crowell, 138 F.3d 1031, 1034 n.3 (5th Cir. 1998); Resolution Trust Corp. v. Olivarez, 29 F.3d 201, 204
(5th Cir. 1994); In re Nerios, 171 B.R. 224, 226 (Bankr. N.D. Tex. 1994); In re Cate, 170 B.R. 582, 584
(Bankr. N.D. Tex. 1994).

      Sanchez v. Telles, 960 S.W.2d 762, 769 n.1 (Tex. App. - El Paso 1997, writ denied); Matter of
Crowell, 138 F.3d 1031, 1034 n.3 (5th Cir. 1998);In re Nerios, 171 B.R. 224, 226 (Bankr. N.D. Tex. 1994);
In re Cate, 170 B.R. 582, 584 (Bankr. N.D. Tex. 1994).

      TEX. CONST. art. XVI, ' 51; TEX. PROP. CODE ANN. ' 41.002(a), (b), ' 41.005(a), (b) (Vernon Supp.
2000). See also Riley v. Riley, 972 S.W.2d 149, 154 (Tex. App. - Texarkana 1998, no writ); Fajkus v. First
Nat'l Bank of Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied); In re Cole, 205 B.R.
382, 384 (Bankr. E.D. Tex. 1997); In re Hughes, 172 B.R. 205, 212 n.11 (Bankr. N.D. Tex. 1993); In re
Spencer, 109 B.R. 715, 716 (Bankr. W.D. Tex. 1989).

     Riley v. Riley, 972 S.W.2d 149, 154 (Tex. App. - Texarkana 1998, no writ); Matter of Crowell, 138
F.3d 1031, 1034 n.3 (5th Cir. 1998).

    In re Hughes, 172 B.R. 205, 209-10 (Bankr. N.D. Tex. 1993); In re Howard, 65 B.R. 498, 501 (Bankr.
W.D. Tex. 1986).

     TEX. CONST. art. XVI ' 51 (Vernon Supp. 2000). Presumedly each urban homestead parcel need not
touch every other homestead parcel. Contiguous probably means only that each tract must touch some
other parcel included in the homestead. See Railroad Comm'n of Texas v. Lone Star Gas Co., 587
S.W.2d 110, 114 (Tex. 1979). There is also authority that tracts may be contiguous even if separated by
an intervening public road. See International & G.N.R. Co. v. Boles, 161 S.W. 914, 915 (Tex. Civ. App. -
Austin 1913, writ ref'd.); Gardner v. Amerada Petroleum Corp., 91 F.Supp. 134, 137 (S.D. Tex. 1950).

     In re Hughes, 172 B.R. 205, 209-10 (Bankr. N.D. Tex. 1993); In re Nelson, 134 B.R. 838, 844 (Bankr.
N.D. Tex. 1991).

    In re Nelson, 134 B.R. 838, 845 (Bankr. N.D. Tex. 1991).

    TEX. CONST. art. XVI ' 51 (Vernon Supp. 2000); TEX. PROP. CODE ANN. ' 41.002(a) (Vernon Supp.
2000).

    TEX. PROP. CODE ANN. ' 41.002(a) (Vernon Supp. 2000).

     Matter of Bradley, 960 F.2d 502, 506 n.4 (5th Cir. 1992); In re McCain, 160 B.R. 933, 938 (Bankr.
E.D. Tex. 1993).

    160 B.R. 933 (Bankr. E.D. Tex. 1993).

    Id. at 939.

     In re Julian, 163 B.R. 478, 480-81 (Bankr. N.D. Tex. 1994); In re Nelson, 134 B.R. 838, 844 (Bankr.
N.D. Tex. 1991).

    169 B.R. 478 (Bankr. N.D. Tex. 1994).

    134 B.R. 838 (Bankr. N.D. Tex. 1991).

     In re Julian, 169 B.R. 478, 481 (Bankr. N.D. Tex. 1994); In re Nelson, 134 B.R. 838, 844 (Bankr. N.D.
Tex. 1991).


                                                   108
Homestead After Home Equity                                                                      Chapter 5


    Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 636 (Tex. 1987); Resolution Trust
Corp. v. Olivarez, 29 F.3d 201, 205 (5th Cir. 1994); In re Eskew, 238 B.R. 708, 711 (Bankr. W.D. Tex.
1998); In re Moody, 77 B.R. 580, 596 (S.D. Tex. 1987); In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex.
1988).

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 849 (Tex. App. - Austin
1999, no writ).

    Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 636 (Tex. 1987); Resolution Trust
Corp. v. Olivarez, 29 F.3d 201, 205 (5th Cir. 1994); In re Eskew, 238 B.R. 708, 711 (Bankr. W.D. Tex.
1998); In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex. 1988).

     In re Robinson, 180 B.R. 174, 175 (Bankr. E.D. Tex. 1995); In re Moore, 93 B.R. 480, 482 (Bankr.
N.D. Tex. 1988).

    Id.

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 849 (Tex. App. - Austin
1999, no writ); Matter of Claflin, 761 F.2d 1088, 1092 (5th Cir. 1985).

    Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied).

     Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); In re Mitchell, 80
B.R. 372, 384 (Bankr. W.D. Tex. 1987); In re Brown, 191 B.R. 99, 102 (Bankr. N.D. Tex. 1995).

    Laster v. First Huntsville Properties, 826 S.W.2d 125, 131-32 (Tex. 1991).

    Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 636 (Tex. 1987); Resolution Trust
Corp. v. Olivarez, 29 F.3d 201, 205 (5th Cir. 1994).

    Id.

     Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 (Tex. 1991); Patterson v. First Nat'l Bank
of Lake Jackson, 921 S.W.2d 240, 245-46 (Tex. App. - Houston [1st Dist.] 1995, no writ); Smith v. Smith,
715 S.W.2d 154, 159 (Tex. App. - Texarkana 1986, no writ); In re McCain, 160 B.R. 933, 941 (Bankr. E.D.
Tex. 1993); In re Leonard, 194 B.R. 807, 811 (Bankr. N.D. Tex. 1986).

     Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 n.3 (Tex. 1991); In re Shults, 97 B.R. 874,
877 (Bankr. N.D. Tex. 1989).

    160 B.R. 933 (Bankr. E.D. Tex. 1993).

    Id. at 934-35.

    Id. at 935.

    Id. at 941.

    Id.

    Resolution Trust Corp. v. Olivarez, 29 F.3d 201, 205 (5th Cir. 1994).

    Id.

    29 F.3d 201, 205 (5th Cir. 1994).



                                                    109
Chapter 5                                                                    Homestead After Home Equity


     Id. at 202-03.

     Id. at 205.

     Id.

     In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex. 1988).

     In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex. 1988) citing Hughes v. Groshart, 150 S.W.2d 827,
830 (Tex. Civ. App. - Amarillo 1941, no writ).

     In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex. 1988).

     In re Eskew, 238 B.R. 708, 711 (Bankr. W.D. Tex. 1998); In re Leonard, 194 B.R. 807, 811 (Bankr.
N.D. Tex. 1996); In re Shults, 97 B.R. 874, 875 (Bankr. N.D. Tex. 1989); In re Moore, 93 B.R. 480, 482
(Bankr. N.D. Tex. 1989); In re Brown, 78 B.R. 486, 489 (Bankr. N.D. Tex. 1987).

     In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex. 1989).

     In re Nagel, 216 B.R. 397, 399 (Bankr. W.D. Tex. 1997).

     233 B.R. 708 (Bankr. W.D. Tex. 1998).

     Id. at 711-12.

     Laster v. First Huntsville Properties, 826 S.W.2d 125, 130 (Tex. 1991); Patterson v. First Nat'l Bank
of Lake Jackson, 921 S.W.2d 240, 245 (Tex. App. - Houston [1st Dist.] 1995, no writ); Lawrence v.
Lawrence, 911 S.W.2d 450, 452 (Tex. App. - Texarkana 1995, no writ); In re Eskew, 238 B.R. 708, 710
(Bankr. W.D. Tex. 1998); In re Moody, 77 B.R. 580, 596 (S.D. Tex. 1987).

     Laster v. First Huntsville Properties, 826 S.W.2d 129, 130 n.8 (Tex. 1991); In re Eskew, 233 B.R.
708, 710 (Bankr. W.D. Tex. 1998).

     233 B.R. 708 (Bankr. W.D. Tex. 1998).

     Id. at 710.

     Id.

     Id.

     Id. at 711.

     Laster v. First Huntsville Properties, 826 S.W.2d 129, 130 n.8 (Tex. 1991); In re Eskew, 233 B.R.
708, 710 (Bankr. W.D. Tex. 1998).

     Laster v. First Huntsville Properties, 826 S.W.2d 129, 130 n.8 (Tex. 1991); In re Eskew, 233 B.R.
708, 710 (Bankr. W.D. Tex. 1998).

     233 B.R. 708 (Bankr. W.D. Tex. 1998).

     Id. at 712 citing Evans v. Mills, 67 F.2d 840 (5th Cir. 1933).

     Id. at 711 citing Turner v. Miller, 255 S.W. 237 (Tex. Civ. App. - Amarillo 1923, no writ).

     Id. at 711 citing Turner v. Miller, 255 S.W. 237 (Tex. Civ. App. - Amarillo 1923, no writ).

                                                     110
Homestead After Home Equity                                                                      Chapter 5


     Laster v. First Huntsville Properties, 826 S.W.2d 125, 130 (Tex. 1991); Patterson v. First Nat'l Bank
of Lake Jackson, 921 S.W.2d 240, 245 (Tex. App. - Houston [1st Dist.] 1995, no writ); Lawrence v.
Lawrence, 911 S.W.2d 450, 452 (Tex. App. - Texarkana 1995, writ denied); In re Eskew, 238 B.R. 708,
710 (Bankr. W.D. Tex. 1998); In re Julian, 163 B.R. 478, 483 (Bankr. N.D. Tex. 1994).

     826 S.W.2d 125 (Tex. 1991).

     Id. at 127.

     Id. at 127-28.

     Id. at 129-30.

     Id. at 130.

     911 S.W.2d 450 (Tex. App. - Texarkana 1995, writ denied).

     Id. at 451.

     Id.

     Id. at 454.

     Id.

     921 S.W.2d 240 (Tex. App. - Houston [14th Dist.] 1996, no writ).

     Id. at 243.

     Id.

     Id.

     Id.

     Id. at 245.

     Id.

     Id.

     Id. at 246.

     In re Cooper, 128 B.R. 632, 636 (Bankr. E.D. Tex. 1991), In re Brooks, 103 B.R. 123, 124 (Bankr.
S.D. Tex. 1988).

     In re Cooper, 128 B.R. 632, 636 (Bankr. E.D. Tex. 1991); In re Brooks, 103 B.R. 123, 124-25 (Bankr.
S.D. Tex. 1988).

     TEX. REV. CIV. STAT. ANN., art. 6132b-2.04 (Vernon Supp. 2000). See also In re Cooper, 128 B.R.
632, 636 (Bankr. E.D. Tex. 1991).

     In re Cole, 205 B.R. 382, 385 (Bankr. E.D. Tex. 1997).

     128 B.R. 632 (Bankr. E.D. Tex. 1991).



                                                    111
Chapter 5                                                                Homestead After Home Equity


    Id. at 635.

    Id.

    Id.

    Id.

    Id.

    Id. at 636.

    Id.

    103 B.R. 123 (Bankr. S.D. Tex. 1988).

    Id. at 125-26.

    In re Cole, 205 B.R. 382 (Bankr. E.D. Tex. 1997).

    Id. at 385.

    Id.

    See McKee v. Smith, 965 S.W.2d 52, 53 (Tex. App. - Fort Worth 1998, writ denied); In re Cooper,
128 B.R. 632, 636 (Bankr. E.D. Tex. 1991); In re Yamin, 65 B.R. 938, 942 (Bankr. S.D. Tex 1986); In re
Brokmeyer, 51 B.R. 704, 705-6 (Bankr. S.D. Tex. 1985).

    51 B.R. 704 (Bankr. S.D. Tex. 1985).

    65 B.R. 938 (Bankr. S.D. Tex. 1986).

    In re Yamin, 65 B.R. 938, 941-43 (Bankr. S.D. Tex. 1986); In re Brokmeyer, 51 B.R. 704, 705-6
(Bankr. S.D. Tex. 1985).

    77 B.R. 580 (S.D. Tex. 1987).

    Id. at 595.

    128 B.R. 632 (Bankr. E.D. Tex. 1991).

    Id. at 634.

    Id. at 636. See also In re Julian, 163 B.R. 478, 483 (Bankr. N.D. Tex. 1994).

    Id.

    Id. at 636-37.

    965 S.W.2d 52 (Tex. App. - Fort Worth 1998, no writ).

    935 F.2d 75 (5th Cir. 1991).

    151 B.R. 779 (Bankr. W.D. Tex. 1993).

    172 B.R. 205 (Bankr. N.D. Tex. 1993).

                                                  112
Homestead After Home Equity                                                                     Chapter 5


     McKee v. Smith, 965 S.W.2d 52, 53 (Tex. App. - Fort Worth 1998, writ denied); In re John Taylor Co.,
935 F.2d 75, 76-77 (5th Cir. 1991); In re Hughes, 172 B.R. 205, 211 n.6 (Bankr. N.D. Tex. 1993); In re
Finkel, 151 B.R. 779, 786-87 (Bankr. W.D. Tex. 1993).

     McKee v. Smith, 965 S.W.2d 52, 53 (Tex. App. - Fort Worth 1998, writ denied); In re John Taylor Co.,
935 F.2d 75, 76-77 (5th Cir. 1991); In re Hughes, 172 B.R. 205, 211 n.6 (Bankr. N.D. Tex. 1993); In re
Finkel, 151 B.R. 779, 787 (Bankr. W.D. Tex. 1993).

    TEX. TAX CODE ANN. ' 11.13(o), (p) (Vernon Supp. 2000).

    In re Poer, 76 B.R. 98, 99 (Bankr. N.D. Tex. 1987).

      In re Eskew, 233 B.R. 708, 710-11 (Bankr. W.D. Tex. 1998) citing Evans v. Miller, 67 F.2d 840 (5th
Cir. 1933).

      In re Eskew, 233 B.R. 708, 710-11 (Bankr. W.D. Tex. 1998) citing Evans v. Miller, 67 F.2d 840 (5th
Cir. 1933).

    Id. at 100.

    Id.

    Riley v. Riley, 972 S.W.2d 149, 155 (Tex. App. - Texarkana 1998, no writ).

    Id.

    972 S.W.2d 149 (Tex. App. - Texarkana 1998, no writ).

    Id.

    Id.

     Rider v. Rider, 887 S.W.2d 255, 260 (Tex. App. - Beaumont 1994, no writ) (denying homestead in
Mississippi property); In re Peters, 91 B.R. 401, 404 (Bankr. W.D. Tex. 1989) (denying homestead in
residential tract located in Sao Paulo, Brazil).

    TEX. PROP. CODE ANN. ' 41.001(c) (Vernon Supp. 2000). See also Laster v. First Huntsville
Properties, 826 S.W.2d 125, 132 (Tex. 1991); Fitzgerald v. Antoine Nat'l Bank, 980 S.W.2d 228 (Tex.
App. - Houston [14th Dist.] 1998, no writ); Sharman v. Schuble, 846 S.W.2d 574, 576 (Tex. App. -
Houston [14th Dist.] 1993, no writ); Taylor v. Mosty Bros. Nursery, Inc., 777 S.W.2d 568, 569-70 (Tex.
App. - San Antonio 1989, no writ); McIntyre v. McIntyre, 722 S.W.2d 533, 537 (Tex. App. - San Antonio
1986, no writ).

     See Taylor v. Mosty Bros. Nursery, 777 S.W.2d 568, 570 (Tex. App. - San Antonio 1989, no writ); In
re England, 141 B.R. 495, 498 (Bankr. N.D. Tex. 1991). See also Op. Tex. Att'y Gen. DM-366 (1995).

    In re Malone, 201 B.R. 175, 176 (Bankr. W.D. Tex. 1996).

    Id.

    201 B.R. 175 (Bankr. W.D. Tex. 1996).

    Id. at 176.

    Id.



                                                   113
Chapter 5                                                                Homestead After Home Equity


    971 S.W.2d 687 (Tex. App. - Waco 1998, no writ).

    Id. at 695. n.5.

    In re England, 141 B.R. 495, 499 (Bankr. N.D. Tex. 1991). See also Op. Tex. Att'y Gen. DM-366
(1995).

    Id.

    Matter of England, 975 F.2d 1168, 1173 (5th Cir. 1992). See also Op. Tex. Att'y Gen. DM-366
(1995).

    975 F.2d 1168 (5th Cir. 1992).

    135 B.R. 261 (Bankr. S.D. Tex 1991).

     Matter of England, 975 F.2d 1168, 1170 (5th Cir. 1992); In re Evans, 135 B.R. 261, 262 (Bankr. S.D.
Tex. 1991).

     Matter of England, 975 F.2d 1168, 1170 (5th Cir. 1992); In re Evans, 135 B.R. 261, 262 (Bankr. S.D.
Tex. 1991).

     Matter of England, 975 F.2d 1168, 1170 (5th Cir. 1992); In re Evans, 135 B.R. 261, 262 (Bankr. S.D.
Tex. 1991).

    TEX. CONST. art. XVI ' 51; TEX. PROP. CODE ANN. ' 41.002(a) (Vernon Supp. 2000). See also
Sanchez v. Telles, 960 S.W.2d 762, 770 n.1 (Tex. App. - El Paso 1997, writ denied).

    Sanchez v. Telles, 960 S.W.2d 762, 770 n.1 (Tex. App. - El Paso 1997, writ denied).

   Laster v. First Huntsville Properties, 826 S.W.2d 125, 129 (Tex. 1991). See also Op. Tex. Att'y Gen.
DM-366 (1995).

    See Benchmark Bank v. Crowder, 919 S.W.2d 657, 660 (Tex. 1996).

    See Id.

    See TEX. PROP. CODE ANN. ' 41.001(b) (Vernon Supp. 2000).

    Nationwide of Bryan, Inc. v. Dyer, 969 S.W.2d 518, 521 (Tex. App. - Austin 1998, no writ).

    969 S.W.2d 518 (Tex. App. - Austin 1998, no writ).

    Id. at 519.

    Id. at 520.

    Id.

    Id. at 521.

    Id.

     Gregory v. Sunbelt Sav., F.S.B., 835 S.W.2d 155, 160 (Tex. App. - Dallas 1992, writ denied). See
also In re Napier, 144 B.R. 719, 721 (Bankr. W.D. Tex. 1992).



                                                  114
Homestead After Home Equity                                                                      Chapter 5


    Gregory v. Sunbelt Sav., F.S.B., 835 S.W.2d 155, 160 (Tex. App. - Dallas 1992, writ denied).

    791 S.W.2d 212 (Tex. App. - Corpus Christi 1990, no writ).

    Id. at 214.

    Id.

    See Sayers v. Pyland, 161 S.W.2d 769, 772 (Tex. 1942).

    Id.

    In re Shults, 97 B.R. 874, 878 (Bankr. N.D. Tex. 1989).

    Id. at 877-78.

    Id. at 878.

    97 B.R. 874 (Bankr. N.D. Tex. 1989).

    47 B.R. 98 (Bankr. S.D. Tex. 1985).

     In re Shults, 97 B.R. 875, 875-76 (Bankr. N.D. Tex. 1989); In re White, 47 B.R. 98, 99-100 (Bankr.
S.D. Tex 1985).

     In re Shults, 97 B.R. 874, 876-77 (Bankr. N.D. Tex. 1989); In re White, 47 B.R. 98, 101 (Bankr. S.D.
Tex. 1985).

    In re Shults, 97 B.R. 874, 878 (Bankr. N.D. Tex. 1989).

    In re Shults, 97 B.R. 874, 878 (Bankr. N.D. Tex. 1989); In re White, 47 B.R. 98, 101 (Bankr. S.D. Tex.
1985).

    671 S.W.2d 880 (Tex. 1984).

    911 S.W.2d 91 (Tex. App. - El Paso 1995, no writ).

    167 B.R. 833 (Bankr. E.D. Tex. 1994).

    Id.

    McGoodwin v. McGoodwin, 671 S.W.2d 880, 881 (Tex. 1984); In re Buffington, 167 B.R. 833, 834
(Bankr. E.D. Tex. 1994).

    McGoodwin v. McGoodwin, 671 S.W.2d 880, 882-83 (Tex. 1984); In re Buffington, 167 B.R. 833, 836
(Bankr. E.D. Tex. 1994). See also In re Norton, 180 B.R. 168, 170 (Bankr. E.D. Tex. 1995).

     TEX. CONST. art. XVI ' 50(a)(3) (Vernon Supp. 2000). See also TEX. PROP. CODE ANN. ' 41.001(b)(4)
(Vernon Supp. 2000); TEX. PROB. CODE ANN. ' 270(4) (Vernon Supp. 2000).

     See McGoodwin v. McGoodwin, 671 S.W.2d 880, 882-83 (Tex. 1984); In re Buffington, 167 B.R. 833,
836 (Bankr. E.D. Tex. 1994).

    Nationwide of Bryan, Inc. v. Dyer, 969 S.W.2d 518, 521 (Tex. App. - Austin 1998, no writ).

    TEX. CONST. art. XVI ' 50(a)(5) (Vernon Supp. 2000); TEX. PROP. CODE ANN. ' 53.254(a) (Vernon

                                                   115
Chapter 5                                                               Homestead After Home Equity


Supp. 2000).

     TEX. CONST. art. XVI ' 50(a)(5) (Vernon Supp. 2000); TEX. PROP. CODE ANN. ' 53.254(b), (c), (e)
(Vernon Supp. 2000).

     TEX. PROP. CODE ANN. ' 53.254(b) (Vernon Supp. 2000). See also Brown v. Bank of Galveston Nat'l
Ass'n, 963 S.W.2d 511, 515 (Tex. 1998).

    747 S.W.2d 783 (Tex. 1988).

    935 F.2d 83 (5th Cir. 1991).

    Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 784 (Tex. 1988); Buchanan v. Fed. Sav. &
Loan Ins. Corp., 935 F.2d 83, 84 (5th Cir. 1991).

     Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 785 (Tex. 1988); Buchanan v. Fed. Sav. &
Loan Ins. Corp., 935 F.2d 83, 84 (5th Cir. 1991). See also In re Stephens, 149 B.R. 414, 416-17 (Bankr.
E.D. Tex. 1992).

    747 S.W.2d 783 (Tex. 1988).

    770 F.2d 1363 (5th Cir. 1985).

    Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 784 (Tex. 1988); Matter of Daves, 770 F.2d
1363, 1369 (5th Cir. 1985).

    Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 784 (Tex. 1988); Matter of Daves, 770 F.2d
1363, 1368 (5th Cir. 1985).

     Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 784-85 (Tex. 1988); Matter of Daves, 770
F.2d 1363, 1368 (5th Cir. 1985).

    Matter of Daves, 770 F.2d 1363, 1367 (5th Cir. 1985).

     TEX. CONST. art. XVI ' 50(a)(5)(B) (Vernon Supp. 2000). See also Rooms With a View, Inc. v.
Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 848 n.10 (Tex. App. - Austin 1999, no writ).

    TEX. CONST. art. XVI ' 50(a)(5)(B) (Vernon Supp. 2000).

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 848 (Tex. App. - Austin
1999, no writ).

    TEX. CONST. art. XVI ' 50(a)(5)(D) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(a)(5)(C).

    15 U.S.C. ' 1635(a), (b).

    7 S.W.3d 840 (Tex. App. - Austin 1999, no writ).

    Id. at 849.

    TEX. PROP. CODE ANN. ' 53.257(a) (Vernon Supp. 2000).

    Id.


                                                  116
Homestead After Home Equity                                                                    Chapter 5


    Id.

    Id.

    Id. at ' 53.258(a).

    Id.

    Id. at ' 53.258(b), (c).

    Id. at ' 53.258(c).

    Id. at ' 53.258(d).

    Id. at ' 53.258(e).

    Id. at ' 53.258(f).

    Id.

    Id. at ' 53.259(a).

    Id.

    Id. at ' 53.259(b).

    Id.

    Id.

    Id. at ' 53.259(c).

    Id.

    Id. at ' 53.259(d).

    Id. at ' 53.260.

      TEX. CONST. art. XVI ' 50(a)(5)(A) (Vernon Supp. 2000); TEX. PROP. CODE ANN. ' 53.254(c) (Vernon
Supp. 2000). See also Heggen v. Pemelton, 836 S.W.2d 145, 147-48 (Tex. 1992); Nationwide of Bryan,
Inc. v. Dyer, 969 S.W.2d 518, 521 (Tex. App. - Austin 1998, no writ); Faires v. Billman, 849 S.W.2d 455,
458 (Tex. App. - Austin 1993, no writ); Smith v. Smith, 715 S.W.2d 154, 158 (Tex. App. - Texarkana 1986,
no writ); Matter of Daves, 770 F.2d 1363, 1368 (5th Cir. 1985).

     In re Moore, 110 B.R. 255, 258 (Bankr. N.D. Tex. 1990); In re Jeter, 48 B.R. 404, 408 (Bankr. N.D.
Tex. 1985).

    110 B.R. 255 (Bankr. N.D. Tex. 1990).

    Id. at 258.

    Id.

    722 S.W.2d 224 (Tex. App. - San Antonio 1988, no writ).



                                                   117
Chapter 5                                                              Homestead After Home Equity


    Id. at 228-30.

    In re Burnett, 120 B.R. 839, 841-42 (Bankr. N.D. Tex. 1990).

    120 B.R. 839 (Bankr. N.D. Tex. 1990).

    Id. at 840.

    Id. at 840-41.

    Id. at 841.

    Id.

    Id.

    Id. at 842.

    TEX. PROP. CODE ANN. ' 41.007(a) (Vernon Supp. 2000).

    Id. at ' 41.007(b).

    TEX. CONST. art. XVI ' 50(a)(5)(c) (Vernon Supp. 2000).

    Id.

    For the complete text of the required disclosure, See TEX. PROP. CODE ANN. ' 53.255 (Vernon Supp.
2000).

    TEX. PROP. CODE ANN. ' 53.257(b) (Vernon Supp. 2000).

    Id.

    Id.

    Id. at 53.256 (Vernon Supp. 2000).

    Id.

    For the complete text of the required disclosure, See TEX. PROP. CODE ANN. ' 53.256 (Vernon Supp.
2000).

     See In re Jeter, 48 B.R. 404, 408 (Bankr. N.D. Tex. 1985). See also TEX. PROP. CODE ANN. ' 53.026
(Vernon 1984).

    48 B.R. 404 (Bankr. N.D. Tex. 1985).

    Id. at 408.

    Id.

    Dossman v. National Loan Investors, L.P., 845 S.W.2d 384, 386 (Tex. App. - Houston [1st Dist.]
1992, writ denied).

    TEX. PROP. CODE ANN. ' 53.254(d) (Vernon Supp. 2000).


                                                  118
Homestead After Home Equity                                                                    Chapter 5


    Id. at '' 53.056, 53.057, 53.058 (Vernon Supp. 2000).

    For a complete text of the required statutory disclosure refer to TEX. PROP. CODE ANN. '' 53.252(a),
53.254(i) (Vernon Supp. 2000).

    Id. at ' 53.254(h).

    TEX. CONST. art. XVI ' 50(a)(2) (Vernon Supp. 2000); TEX. PROP. CODE ANN. ' 41.001(b)(2) (Vernon
Supp. 2000).

    Crowder v. Benchmark Bank, 919 S.W.2d 657, 660 (Tex. 1996).

    Cornerstone Bank v. Randle, 869 S.W.2d 580, 587 (Tex. App. - Dallas 1993, no writ).

    Id.

    TEX. TAX CODE ANN. ' 32.01(c) (Vernon Supp. 2000).

   Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000); See also TEX. PROB.
CODE ANN. ' 270(6) (Vernon Supp. 2000).

    See Tollen v. Fertille, 67 S.W.2d 229, 230 (Tex. Comm'n App. 1932, holding approved).

    Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000).

   The most current version of the OCCC Commentary may be accessed on the OCCC Web Page at
www.occc.state.tx.us/.

    Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000).

    Id. at _____.

    TEX. CONST. art. XVI ' 50(a)(6)(I) (Vernon Supp. 2000).

    TEX. TAX CODE ANN. '' 23.43, 23.44 (Vernon 1992).

    TEX. CONST. art. XVI ' 50(a)(6)(I) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(a)(6)(P).

    12 U.S.C. ' 1831d.

    Regulatory Commentary on Equity Lending Procedures (October 7, 1999), Office of the Consumer
Credit Commissioner, Department of Banking, Savings and Loan Department, and Credit Union
Department (hereinafter the "OCCC Commentary") at 9.

    TEX. CONST. art. XVI ' 50(a)(6)(P) (Vernon Supp. 2000).

    OCCC Commentary at 9.

    TEX. CONST. art. XVI ' 50(a)(6)(P) (Vernon Supp. 2000).

    OCCC Commentary at 8-9.

    Id. at 9.


                                                   119
Chapter 5                                                             Homestead After Home Equity


    Id.

    Id.

    TEX. FIN. CODE ANN. Chapter 156 (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 50(a)(6)(P) (Vernon Supp. 2000).

    Id.

    Id. at art. XVI ' 50(a)(6)(B).

    OCCC Commentary at 2.

    Id.

    Id.

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(ix) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(h).

    See Procedural Rule P-47, Texas Department of Insurance.

    See In re Tinsley, 217 B.R. 188, 191 (Bankr. N.D. Tex. 1997).

    TEX. CONST. art. XVI ' 50(a)(6)(F) (Vernon Supp. 2000).

    OCCC Commentary at 5.

    Id.

    Id.

    Id.

    TEX. CONST. art. XVI ' 50(a)(6)(E) (Vernon Supp. 2000).

    Id.

    Id.

    OCCC Commentary at 3.

    TEX. CONST. art. XVI ' 50(a)(6)(E) (Vernon Supp. 2000).

    OCCC Commentary at 3.

    Id.

     See e.g., TEX. FIN. CODE ANN. ' 302.103 (Vernon Supp. 2000); Parks v. Lubbock, 51 S.W. 322, 323
(Tex. 1899).

    OCCC Commentary at 3.

    Id.

                                                 120
Homestead After Home Equity                                                             Chapter 5


    Id.

    Id.

    Id.

    Id.

    See Gonzales County Sav. & Loan Ass'n v. Freeman, 534 S.W.2d 903, 906-08 (Tex. 1976).

    See Greever v. Persky, 165 S.W.2d 709, 711-12 (Tex. 1942).

    OCCC Commentary at 3.

    Id.

    Id.

    Id.

    Id. at 4.

    Id.

    Id. at 5.

    Id. at 4.

    Id.

    Id.

    Fannie Mae Lender Letter LL02-98 (May 28, 1998).

    OCCC Commentary at 4.

    Id.

    Id.

    Id. at 4-5.

    TEX. CONST. art. XVI ' 50(a)(6)(C) (Vernon Supp. 2000).

    OCCC Commentary at 3-4.

    TEX. CONST. art. XVI ' 50(a)(6)(C) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(a)(6)(G).

    OCCC Commentary at 5.

    Id.

    TEX. CONST. art. XVI ' 50(a)(6)(H) (Vernon Supp. 2000).


                                                 121
Chapter 5                                                               Homestead After Home Equity


    Id.

    OCCC Commentary at 6.

    Id.

    Id.

    See Fannie Mae Lender Letter LL-2-98 (May 28, 1998).

    Id.

    OCCC Commentary at 6.

    See Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 (Tex. 1991).

    TEX. CONST. art. XVI ' 51 (Vernon 1993); TEX. PROP. CODE ANN. ' 41.002(a) (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 50(a)(6)(H) (Vernon Supp. 2000).

    Procedural Rule P-47, Texas Department of Insurance.

    Id.

    Fannie Mae Lender Letter LL02-98 (May 28, 1998).

    TEX. PROP. CODE ANN. ' 41.002(c) (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 51 (Vernon Supp. 2000); TEX. PROP. CODE ANN. '' 41.002, 41.005 (Vernon
Supp. 2000).

    TEX. CONST. art. XVI ' 50(a)(6)(K) (Vernon Supp. 2000).

    Id.

    OCCC Commentary at 5.

    Procedural Rule P-47, Texas Department of Insurance.

    TEX. CONST. art. XVI ' 50(a)(6)(M)(ii) (Vernon Supp. 2000).

    Procedural Rule R-47, Texas Department of Insurance.

    TEX. CONST. art. XVI ' 50(a)(6)(L) (Vernon Supp. 2000).

    Id.

    Id.

    Id.

    OCCC Commentary at 7.

    Id. at 5.

    TEX. CONST. art. XVI ' 50(a)(6)(L) (Vernon Supp. 2000).

                                                  122
Homestead After Home Equity                                                                     Chapter 5


    Id.

    Id. at art. XVI ' 50(a)(6)(O).

    Id. at art. XVI ' 50(a)(6)(L).

    OCCC Commentary at 8.

    Id.

    12 U.S.C. ' 7735f-a.

    See OCCC Commentary at 1.

    TEX. CONST. art. XVI ' 50(a)(6)(J) (Vernon Supp. 2000).

    OCCC Commentary at 7.

    Id.

     TEX. CONST. art. XVI ' 50(a)(6)(Q)(iv) (Vernon Supp. 2000); TEX. CIV. PRAC. & REM. CODE ANN.
' 30.001 (Vernon 1997).

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(ii) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(a)(6)(Q)(i). See also Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____,
_____ (Tex. 2000).

    OCCC Commentary at 10.

    _____ S.W.3d _____ (Tex. 2000).

    Id. at _____.

    Id. at _____.

    Id. at _____.

    The text of the recommended additional disclosure provides:
                                           ADDITIONAL NOTICE
    The notice above states that your home-equity lender may not require you to apply the loan
    proceeds to another debt that is not secured by your home. Although the Texas Constitution
    requires that the notice include this statement, the statement conflicts with another provision of
    the Texas Constitution. That provision permits your home-equity lender to require you to apply
    the loan proceeds to a debt to another lender that is not secured by your home. This provision is
    controlling, and you should disregard the contrary statement in the notice.
    Id. at _____.

    Id. at _____.

    Id.

    Id. See also Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000).

    OCCC Commentary at 10.


                                                   123
Chapter 5                                                                 Homestead After Home Equity


    OCCC Commentary at 10; Fannie Mae Announcement Letter 97-17 (December 9, 1997).

    TEX. CONST. art. XVI ' 50(g) (Vernon Supp. 2000).

    Id. See also Stringer v. Cendant Mortgage Corp., _____ S.W.3d _____, _____ (Tex. 2000).

    Id.

    _____ S.W.3d _____ (Tex. 2000).

    Id. at _____. For more complete discussion of these conflicting provisions, see Notes _____-_____
and accompanying text.

    OCCC Commentary at 11.

    Id.

    Id.

    Id.

    Id.

    Id. at 7.

    Id.

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(viii) (Vernon Supp. 2000).

    OCCC Commentary at 2, 10-11.

    Id. at 11.

    TEX. CONST. art. XVI ' 50(a)(6)(A) (Vernon Supp. 2000).

    Id. at ' 50(a)(6)(Q)(vi).

    Hinckley v. Eggers, 587 S.W.2d 448, 450 (Tex. Civ. App. - Dallas 1979, writ ref'd n.r.e.).

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(vi) (Vernon Supp. 2000).

    OCCC Commentary at 10.

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(iii) (Vernon Supp. 2000).

    OCCC Commentary at 10.

    Procedural Rule P-47, Texas Department of Insurance.

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(v) (Vernon Supp. 2000).

    OCCC Commentary at 10.

    Id.

    Id.

                                                   124
Homestead After Home Equity                                                                  Chapter 5


    TEX. CONST. art. XVI ' 50(a)(6)(A) (Vernon Supp. 2000).

    OCCC Commentary at 2.

    Id. at 8.

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 848 (Tex. App. - Austin
1999, no writ).

    TEX. CONST. art. XVI ' 50(a)(6)(P) (Vernon Supp. 2000).

    OCCC Commentary at 7.

    Id.

    Procedural Rule P-44, Texas Department of Insurance.

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 847 (Tex. App. - Austin
1999, no writ).

    Id. at 846-47.

    OCCC Commentary at 8.

    Id. at 7-8.

    TEX. CONST. art. XVI ' 50(a)(6)(D) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(a)(6)(Q)(vii).

    Id.

    OCCC Commentary at 10.

    Id.

    TEX. CONST. art. XVI ' 50(a)(6)(Q)(x) (Vernon Supp. 2000).

    Id. at art. XVI ' 50(j).

    Id. at art. XVI ' 50(k) (Vernon Supp. 2000). See also TEX. PROB. CODE ANN. ' 270(7) (Vernon Supp.
2000).

    See First Gibraltar Bank, F.S.B. v. Morales, 19 F.3d 1032, 1037 (5th Cir. 1994).

    TEX. CONST. art. XVI ' 50(k)(1) (Vernon Supp. 2000).

    Id.

    Id. at art. XVI ' 50(k)(2).

    Id. at art. XVI ' 50(k)(3).

    Id. at art. XVI ' 50(k)(4).



                                                  125
Chapter 5                                                                   Homestead After Home Equity


     Id. at art. XVI ' 50(n)(2).

     Id. at art. XVI ' 50(p).

     Id. at art. XVI ' 50(p)(2).

     Id. at art. XVI ' 50(p)(3).

     Id. at art. XVI ' 50(n)(1).

     Id. at art. XVI ' 50(n)(2).

     Id. at art. XVI ' 50(o).

     Id. at art. XVI ' 50(k)(5).

     Id. at art. XVI ' 50(k)(6).

     Id. at art. XVI ' 50(m).

     Id. at art. XVI ' 50(n)(5).

     Id. at art. XVI ' 50(k)(8).

     Id.

     Id. at art. XVI ' 50(l).

     Id. at art. XVI ' 50(n)(3).

     Id. at art. XVI ' 50(m).

     Id.

     Id.

     Id. at art. XVI ' 50(n)(6).

     Id. at art. XVI ' 50(n)(8).

     Id. at art. XVI ' 50(k)(7).

     Id.

     Id.

     Id. at art. XVI ' 50(k)(9).

     Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 635 (Tex. 1987); Gregory v. Sunbelt
Sav., F.S.B., 835 S.W.2d 155, 159 (Tex. App. - Dallas 1992, writ denied); Johnson v. First Southern
Properties, Inc., 687 S.W.2d 399, 401 (Tex. App. - Houston [14th Dist.] 1985, writ ref'd n.r.e); In re Brown,
113 B.R. 320, 321 n.1 (Bankr. W.D. Tex. 1990). See also Caulley v. Caulley, 806 S.W.2d 795, 797 (Tex.
1991); In re Moore, 93 B.R. 483-84 (Bankr. N.D. Tex. 1988).

     Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 635 (Tex. 1987); Boudreaux Civic


                                                    126
Homestead After Home Equity                                                                       Chapter 5


Ass'n v. Cox, 882 S.W.2d 543, 547 (Tex. App. - Houston [1st Dist.] 1994, no writ). See also Resolution
Trust Corp. v. Olivarez, 29 F.3d 201, 204-05 (5th Cir. 1994); In re Julian, 163 B.R. 478, 483 (Bankr. N.D.
Tex. 1994).

     736 S.W.2d 632 (Tex. 1987).

     687 S.W.2d 399 (Tex. App. - Houston [14th Dist.] 1985, writ ref'd n.r.e.).

    Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 633 (Tex. 1987); Johnson v. First
Southern Properties, Inc., 687 S.W.2d 399, 401 (Tex. App. - Houston [14th Dist.] 1985, writ ref'd n.r.e.).

    Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 633-34 (Tex. 1987); Johnson v. First
Southern Properties, Inc., 687 S.W.2d 399, 401 (Tex. App. - Houston [14th Dist.] 1985, writ ref'd n.r.e.).

    Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 633-34 (Tex. 1987); Johnson v. First
Southern Properties, Inc., 687 S.W.2d 399, 401 (Tex. App. - Houston [14th Dist.] 1985, writ ref'd n.r.e.).

      Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 635-36 (Tex. 1987) (noting the lien
attached to the property at the time the declaration was recorded); Johnson v. First Southern Properties,
Inc., 687 S.W.2d 399, 401-2 (Tex. App. - Houston [14th Dist.] 1985, writ ref'd n.r.e.) (apparently
determining that the lien attached when the sale to the homestead claimant closed and noting an 18 day
gap between closing and actual occupation of the condominium by the owner). See also Boudreaux Civic
Ass'n v. Cox, 882 S.W.2d 543, 547 (Tex. App. - Houston [1st Dist.] 1994, no writ).

     Inwood North Homeowners' Ass'n v. Harris, 736 S.W.2d 632, 636 (Tex. 1987).

     Id.

     882 S.W.2d 543 (Tex. App. - Houston [1st Dist.] 1994, no writ).

     Id. at 546.

     Id. at 545.

     Id. at 546.

     Id. at 547.

     Id. at 545-46.

     Id. at 546.

     Id. at 549.

     Id.

     TEX. CONST. art. XVI ' 50(4)(4) (Vernon Supp. 2000). See also Gregory v. Sunbelt Sav., F.S.B., 835
S.W.2d 155, 160 (Tex. App. - Dallas 1992, writ denied); In re Freytag, 155 B.R. 150, 154 (Bankr. N.D.
Tex. 1993); In re Moore, 93 B.R. 480, 484 (Bankr. N.D. Tex. 1988).

     In re Freytag, 155 B.R. 150, 154 (Bankr. N.D. Tex. 1993).

     Id.

     TEX. CONST. art. XVI ' 50(e) (Vernon Supp. 2000).



                                                    127
Chapter 5                                                                Homestead After Home Equity


    Commissioner's Bulletin B-0008-98, Texas Department of Insurance (April 24, 1998).

    See Op. Tex. Att'y Gen. DM-495 (1998).

    In re Freytag, 155 B.R. 150, 154 (Bankr. N.D. Tex. 1993).

    155 B.R. 150 (Bankr. N.D. Tex. 1993).

    Id. at 152.

    Id. at 155.

    Id.

      Farm Credit Bank of Texas v. Ogden, 886 S.W.2d 304, 311 (Tex. App. - Houston [1st Dist.] 1994, no
writ); In re Julian, 163 B.R. 478, 485 (Bankr. N.D. Tex. 1994).

    163 B.R. 478 (Bankr. N.D. Tex. 1994.)

    Id. at 485.

    Id. at 484-85.

    Id. at 485.

    Benchmark Bank v. Crowder, 919 S.W.2d 657, 661 (Tex. 1996).

    Id. at 660-61.

    919 S.W.2d 652 (Tex. 1996).

    Id. at 659.

    Id.

    Id.

    Id. at 660.

    Id. at 661.

    Id.

    Id. at 661-62.

    Id. at 662.

    Id. citing United States v. Rodgers, 461 U.S. 677, 680, 103 S.Ct. 2132, 2135-36, 76 L.Ed. 236 (1983).

     TEX. CONST. art. XVI ' 50(a)(4) (Vernon Supp. 2000). See also TEX. PROP. CODE ANN. ' 41.001(b)(5)
(Vernon Supp. 2000); TEX. PROB. CODE ANN. ' 270(5) (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 50(f) (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 50(c) (Vernon Supp. 2000). See also Laster v. First Huntsville Properties, 826
S.W.2d 125, 129 (Tex. 1991); Paterson v. First Nat'l Bank of Lake Jackson, 921 S.W.2d 244, 245 (Tex.

                                                  128
Homestead After Home Equity                                                                     Chapter 5


App. - Houston [14th Dist.] 1994, no writ); Curtis Sharp Custom Homes v. Glover, 701 S.W.2d 24, 25
(Tex. App. - Dallas 1985, writ ref'd n.r.e.); Matter of Daves, 770 F.2d 1363, 1367 (5th Cir. 1985); In re
Stephens, 149 B.R. 414, 417 (Bankr. E.D. Tex. 1992); In re Nelson, 134 B.R. 838, 845 (Bankr. N.D. Tex.
1991).

    Patterson v. First Nat'l Bank of Lake Jackson, 921 S.W.2d 244, 245 (Tex. App. - Houston [14th Dist.]
1994, no writ); In re Nelson, 134 B.R. 838, 845 (Bankr. N.D. Tex. 1991).

    134 B.R. 838 (Bankr. N.D. Tex. 1991).

    Id. at 842.

    Id. at 845.

    133 S.W.2d 187 (Tex. Civ. App. - San Antonio 1939, writ dism'd judgm't cor.).

    Id. at 188.

    Id.

    Id.

    TEX. PROP. CODE ANN. ' 5.042(a) (Vernon Supp. 2000).

    141 S.W.2d 942 (Tex. Comm'n App. 1940, opinion adopted).

    Id. at 943.

    Id.

    Id.

    Id.

    Id. at 943-44.

    TEX. CONST. art. XVI ' 51 (Vernon Supp. 2000).

    Id.

     Tarrant Bank v. Miller, 833 S.W.2d 666, 667 (Tex. App. - Eastland 1992, writ denied); Exocet, Inc. v.
Cordes, 815 S.W.2d 350, 352 (Tex. App. - Austin 1991, no writ); U.S. v. Johnson, 160 F.3d 1061, 1063-64
(5th Cir. 1998); McDaniel v. Camp, 59 F.3d 548, 552 n.7 (5th Cir. 1994); Frappier v. Texas Commerce
Bank, N.A. 879 F. Supp. 715, 717 (S.D. Tex. 1995). But see Matter of Henderson, 18 F.3d 1305, 1309
(5th Cir. 1994); In re Davis, 188 B.R. 544, 550 (Bankr. N.D. Tex. 1995) (judgment lien attaches to the
homestead but cannot be enforced against it).

    Walton v. Stinson, 140 S.W.2d 497, 499 (Tex. Civ. App. - Dallas 1940, writ ref'd); U.S. v. Johnson,
160 F.3d 1061, 1063-64 (5th Cir. 1998). See also Op. Tex. Atty' Gen. DM-366 (1995).

    Frappier v. Texas Commerce Bank, N.A., 879 F.Supp. 715, 717 (S.D. Tex. 1995).

    833 S.W.2d 666 (Tex. App. - Eastland 1992, writ denied).

    Id. at 667.



                                                   129
Chapter 5                                                                Homestead After Home Equity


    Id.

    Id. at 668-69.

    18 F.3d 1305 (5th Cir. 1994).

    Id. at 1310-11.

    Id. at 1308.

    Id. at 1310-11.

    Op. Tex. Att'y Gen. DM-366 (1995).

    Id. at 1985.

    Id.

    Id.

    Id. at 1987-90.

    Id. at 1990.

    Id.

    Id. at 1985.

    Id. at 1989.

    Id. at 1989-90.

    Id. at 1990.

    See In re Napier, 144 B.R. 719, 725 (Bankr. W.D. Tex. 1992); In re Howard, 65 B.R. 498, 510
(Bankr. W.D. Tex. 1986).

     In re Julian, 165 B.R. 478, 486 (Bankr. N.D. Tex. 1994); In re Napier, 144 B.R. 719, 725 (Bankr. W.D.
Tex. 1992); In re Moore, 110 B.R. 255, 258 (Bankr. N.D. Tex. 1990).

    See e.g., In re Hughes, 172 B.R. 205, 213-14 (Bankr. N.D. Tex. 1993).

    172 B.R. 205 (Bankr. N.D. Tex. 1993).

    144 B.R. 719 (Bankr. W.D. Tex. 1992).

    65 B.R. 498 (Bankr. W.D. Tex. 1986).

     In re Hughes, 172 B.R. 205, 213-14 (Bankr. N.D. Tex. 1993); In re Napier, 144 B.R. 719, 725 (Bankr.
 W.D. Tex. 1992); In re Howard, 65 B.R. 498, 510-11 (Bankr. W.D. Tex. 1986) citing W.E. Grace Mfg. Co.
v. Levin, 506 S.W.2d 580 (Tex. 1974).

    163 B.R. 478 (Bankr. N.D. Tex. 1994).

    Id. at 486-87 citing Wingate v. Peoples Bldg. & Loan Sav. Ass'n., 39 S.W.2d 999 (Tex. Civ. App.
1897, no writ).

                                                   130
Homestead After Home Equity                                                                         Chapter 5


     Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); Gregory v. Sunbelt
Sav., F.S.B., 835 S.W.2d 155, 158 (Tex. App. - Dallas 1992, writ denied); Magill v. Magill, 816 S.W.2d
530, 535 (Tex. App. - Houston [1st Dist.] 1991, writ denied); First Interstate Bank v. Bland, 810 S.W.2d
277, 286 (Tex. App. - Fort Worth 1989, no writ); Smith v. Smith, 715 S.W.2d 154, 159 (Tex. App. -
Texarkana 1986, no writ).

      See Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); Farrington v.
First Nat'l Bank of Bellville, 753 S.W.2d 248, 251 (Tex. App. - Houston [1st Dist.] 1988, writ denied); In re
Nelson, 134 B.R. 838, 844-45 (Bankr. N.D. Tex. 1991); In re Yamin, 65 B. R. 938, 941 (Bankr. S.D. Tex.
1986).

     In re Niland, 825 F.2d 801, 807 (5th Cir. 1987); In re Moody, 77 B.R. 580, 591 (S.D. Tex. 1987); In re
Julian, 163 B.R. 478, 481 (Bankr. N.D. Tex. 1994); In re Hughes, 172 B.R. 205, 210 n.5 (Bankr. N.D. Tex.
1993); In re Napier, 144 B.R. 719, 724 (Bankr. W.D. Tex. 1992).

     See First Interstate Bank v. Bland, 810 S.W.2d 277, 286 (Tex. App. - Fort Worth 1991, no writ);
Matter of Bradley, 960 F.2d 502, 507 (5th Cir. 1992); In re Niland, 825 F.2d 801, 807 (5th Cir. 1987); In re
Julian, 163 B.R. 478, 481 (Bankr. N.D. Tex. 1994); In re Hughes, 172 B.R. 205, 210 n.5 (Bankr. N.D. Tex.
1993); In re Napier, 144 B.R. 719, 724 (Bankr. W.D. Tex. 1992). See also In re Osborn, 176 B.R. 941,
948 (Bankr. E.D. Okla. 1994). But see Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 251
(Tex. App. - Houston [1st Dist.] 1988, writ denied).

     Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied).

     Id.

     960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied).

     Id. at 770-71.

     In re Julian, 163 B.R. 478, 483 (Bankr. N.D. Tex. 1984).

     849 S.W.2d 875 (Tex. App. - Fort Worth 1993, no writ).

     Id. at 878-79.

     Id. at 879.

     921 S.W.2d 240 (Tex. App. - Houston [1st Dist.] 1996, no writ).

     Id. at 246.

     Id.

     112 B.R. 15 (Bankr. E.D. Tex. 1990).

     Id. at 16.

     Id.

     Id. at 17.

     Riley v. Riley, 972 S.W.2d 149, 154 (Tex. App. - Texarkana 1998, no writ); NCNB Texas Nat'l Bank
v. Carpenter, 849 S.W.2d 875, 879 (Tex. App. - Fort Worth 1993, no writ); Fajkus v. First Nat'l Bank of
Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied); In re Brooks, 233 B.R. 696, 700
(Bankr. N.D. Tex. 1999); In re Cole, 205 B.R. 382, 384 (Bankr. E.D. Tex. 1997).


                                                     131
Chapter 5                                                                 Homestead After Home Equity


    In re Brooks, 233 B.R. 696, 700 (Bankr. N.D. Tex. 1999).

     Riley v. Riley, 972 S.W.2d 149, 154 (Tex. App. - Texarkana 1998, no writ); NCNB Texas Nat'l Bank
v. Carpenter, 849 S.W.2d 875, 879 (Tex. App. - Fort Worth 1993, no writ); Fajkus v. First Nat'l Bank of
Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied); In re Moody, 77 B.R. 580, 593
(S.D. Tex. 1987); In re Bohac, 117 B.R. 256, 263 (Bankr. W.D. Tex. 1990).

    117 B. R. 256 (Bankr. W.D. Tex. 1990).

    51 B.R. 704 (Bankr. S.D. Tex 1985).

    In re Bohac, 117 B.R. 256, 263 (Bankr. W.D. Tex. 1990); In re Brokmeyer, 51 B.R. 704, 705-6
(Bankr. S.D. Tex. 1985).

    233 B.R. 696 (Bankr. N.D. Tex. 1999).

    Id. at 700.

    Id.

    Id.

    See Caulley v. Caulley, 777 S.W.2d 147, 150 (Tex. App. - Houston [14th Dist.] 1989), aff'd, 806
S.W.2d 795 (Tex. 1991); In re Mitchell, 80 B.R. 372, 383-84 (Bankr. W.D. Tex. 1987).

    80 B.R. 372 (Bankr. W.D. Tex. 1987).

    Id. at 383-84.

    Id. at 384.

    Id.

    804 S.W.2d 117 (Tex. App. - Dallas 1989, no writ).

    Id. at 122.

    160 B.R. 933 (Bankr. E.D. Tex. 1993).

    Id. at 940.

    Id.

    Id.

     Fajkus v. First Nat'l Bank of Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied);
Matter of Kennard, 970 F.2d 1455, 1458 (5th Cir. 1992); Matter of Bradley, 960 F.2d 502, 508 (5th Cir.
1992); In re Moody, 77 B.R. 580, 593 (S.D. Tex. 1987); In re Mitchell, 132 B.R. 553, 559 (Bankr. W.D.
Tex. 1991).

     Matter of Kennard, 970 F.2d 1455, 1458 (5th Cir. 1992); In re Bohac, 117 B.R. 256, 261 (Bankr. W.D.
Tex. 1990); In re Poer, 76 B.R. 98, 100 (Bankr. N.D. Tex. 1987); In re Brown, 78 B.R. 486, 487 (Bankr.
N.D. Tex. 1987).

     Riley v. Riley, 972 S.W.2d 149, 154 (Tex. App. - Texarkana 1998, no writ); Fajkus v. First Nat'l Bank
of Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied); Matter of Kennard, 970 F.2d


                                                   132
Homestead After Home Equity                                                                     Chapter 5


1455, 1458 (5th Cir. 1992); Matter of Bradley, 960 F.2d 502, 508 (5th Cir. 1992); In re Moody, 77 B.R.
580, 593 (S.D. Tex. 1987).

    Matter of Bradley, 960 F.2d 502, 508 (5th Cir. 1992). But see In re Brokmeyer, 51 B.R. 704, 705
(Bankr. S.D. Tex. 1985).

     In re McCain, 160 B.R. 933, 940 (Bankr. E.D. Tex. 1993). Although a single cutting of timber with no
plans to replant or for future cuttings may not be enough to establish a rural homestead. Id.

     In re Bohac, 117 B.R. 256, 261 (Bankr. W.D. Tex. 1990); In re Brown, 78 B.R. 486, 487 (Bankr. N.D.
Tex. 1987); In re Poer, 76 B.R. 98, 100 (Bankr. N.D. Tex. 1987).

    51 B.R. 704 (Bankr. S.D. Tex. 1985).

    Id. at 705.

    77 B.R. 580 (S.D. Tex. 1987).

    Id. at 593.

    109 B.R. 715 (Bankr. W.D. Tex. 1989).

    Id. at 716-18.

    132 B.R. 553 (Bankr. W.D. Tex. 1991).

    Id. at 566.

    Id.

    Id.

    160 B.R. 933 (Bankr. E.D. Tex. 1993).

    Id. at 938.

    Id.

    960 F.2d 502 (5th Cir. 1992).

    Id. at 505.

    Id.

    Id. at 508.

    Id. at 509.

    160 B.R. 933 (Bankr. E.D. Tex. 1993).

    Id. at 939.

    Id.

    Id. at 940-41.



                                                   133
Chapter 5                                                                 Homestead After Home Equity


    In re Poer, 76 B.R. 98, 100 (Bankr. N.D. Tex. 1987).

    Matter of Bradley, 960 F.2d 502, 509 (5th Cir. 1992).

     Matter of Bradley, 960 F.2d 502, 506 n.6 (5th Cir. 1992); In re McCain, 160 B.R. 933, 939 (Bankr.
E.D. Tex. 1993).

    Matter of Bradley, 960 F.2d 502, 506 n.6 (5th Cir. 1992).

    160 B.R. 933 (Bankr. E.D. Tex. 1993).

    Id. at 939.

    In re Kang, 243 B.R. 666, 669 (Bankr. N.D. Tex. 1999); In re Hughes, 172 B.R. 205, 209 (Bankr.
W.D. Tex. 1993); In re Finkel, 151 B.R. 779, 781 (Bankr. W.D. Tex. 1993); In re Krug, 102 B.R. 98, 99
(Bankr. W.D. Tex. 1989).

    See In re Kang, 243 B.R. 666, 669 (Bankr. N.D. Tex. 1999).

    In re Hughes, 172 B.R. 205, 212 n.9 (Bankr. N.D. Tex. 1993); In re Finkel, 151 B.R. 779, 782 (Bankr.
W.D. Tex. 1993); In re Krug, 102 B.R. 98, 99 n.2 (Bankr. W.D. Tex. 1989).

    In re Hughes, 172 B.R. 205, 209 (Bankr. N.D. Tex. 1993).

    In re Finkel, 151 B.R. 779, 789 (Bankr. W.D. Tex. 1993).

    172 B.R. 205 (Bankr. N.D. Tex. 1993).

    Id. at 211-12.

    Id. at 212 n.9 citing Gulbrasen Co. v. Couch, 61 F.2d 932 (5th Cir. 1932).

    Id.

    TEX. CONST. art. XVI ' 51 (Vernon Supp. 2000).

    151 B.R. 779 (Bankr. W.D. Tex. 1993).

    Id. at 782.

    Id. at 783.

    Id.

     In re Kang, 243 B.R. 666, 669 (Bankr. N.D. Tex. 1999); In re Finkel, 151 B.R. 779, 783 (Bankr. W.D.
Tex. 1993).

     Matter of Webb, 954 F.2d 1102, 1107 (5th Cir. 1992); In re Hughes, 177 B.R. 205, 210 (Bankr. N.D.
Tex. 1993); In re Starns, 52 B.R. 405, 415 (S.D. Tex. 1985); In re Krug, 102 B.R. 98, 99 (Bankr. W.D. Tex.
1989).

     Matter of Webb, 954 F.2d 1102, 1108 (5th Cir. 1992); In re Kang, 243 B.R. 666, 669 (Bankr. N.D.
Tex. 1999); In re Hughes, 177 B.R. 205, 210 (Bankr. N.D. Tex. 1993); In re Krug, 102 B.R. 98, 99 (Bankr.
W.D. Tex. 1989).

    In re Hughes, 172 B.R. 205, 210 n.4 (Bankr. N.D. Tex. 1993).

                                                   134
Homestead After Home Equity                                                                        Chapter 5


    Matter of Webb, 954 F.2d 1102, 1108 (5th Cir. 1992); In re Starns, 52 B.R. 405, 415 (S.D. Tex.
1985); In re Hughes, 177 B.R. 205, 210 (Bankr. N.D. Tex. 1993).

     52 B.R. 405 (S.D. Tex. 1985).

     Id. at 415.

     Id.

     102 B.R. 98 (Bankr. W.D. Tex. 1989).

     Id. at 100.

     Id.

     Matter of Webb, 954 F.2d 1102, 1108 (5th Cir. 1992).

     954 F.2d 1102 (5th Cir. 1992).

     Id. at 1102-3.

     Id. at 1108.

     Id.

     Id.

     172 B.R. 205 (Bankr. N.D. Tex. 1993).

     Id. at 207-08.

     Id. at 211 n.6.

     243 B.R. 66 (Bankr. N.D. Tex. 1999).

     Id. at 670.

     Id.

     Id.

     Id. at 671.

    See Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 250 (Tex. App. - Houston [1st Dist.]
1988, writ denied).

     State of Texas By and Through Texas Dept. of Mental Health and Mental Retardation v. Ellison, 914
S.W.2d 679, 684 (Tex. App. - Austin 1996, no writ); Gregory v. Sunbelt Sav., F.S.B., 835 S.W.2d 155, 158
(Tex. App. - Dallas 1992, writ denied); Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 250 (Tex.
App. - Houston [1st Dist.] 1988, writ denied); In re Brooks, 233 B.R. 696, 700 (Bankr. N.D. Tex. 1999); In
re Brown, 191 B.R. 99, 101-02 (Bankr. N.D. Tex. 1995).

    In re Moore, 93 B.R. 480, 482 (Bankr. N.D. Tex. 1988) citing Cameron v. Gebhard, 85 Tex. 610, 22
S.W. 1033 (1893).

     See e.g., In re Moore, 93 B.R. 482-83 (Bankr. N.D. Tex. 1988); In re Mitchell, 80 B.R. 372, 381 n.15

                                                     135
Chapter 5                                                                    Homestead After Home Equity


(Bankr. W.D. Tex. 1987); In re Hunt, 61 B.R. 224, 228-29 (Bankr. S.D. Tex. 1986).

     Gregory v. Sunbelt Sav., F.S.B., 835 S.W.2d 155, 158 (Tex. App. - Dallas 1992, writ denied);
Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 250 (Tex. App. - Houston 1988, writ denied); In
re Brooks, 233 B.R. 696, 700 (Bankr. N.D. Tex. 1999).

    State of Texas By and Through Texas Dept. of Mental Health and Mental Retardation v. Ellison, 914
S.W.2d 679, 684 (Tex. App. - Austin 1996, no writ).

    In re Moore, 110 B.R. 255, 257 (Bankr. N.D. Tex. 1990) citing Gilmore v. Dennison, 131 Tex. 398,
115 S.W.2d 902 (Tex. Comm'n App. 1938, opinion adopted).

     In re Moore, 93 B.R. 480, 483 (Bankr. N.D. Tex. 1988) citing Atkinson v. Jackson Bros., 259 S.W.
280 (Tex. Civ. App. - Eastland 1923), modified on other grounds, 270 S.W. 848 (Tex. Comm'n App. 1925,
holding approved).

     Id. at 483 citing Burton v. Schwartz, 36 S.W.2d 1066 (Tex. Civ. App. - Fort Worth 1931, writ dism'd).

     Id. at 483 citing Dobkins v. Kuykendall, 81 Tex. 180, 16 S.W. 743 (1891). But see Gregory v. Sunbelt
Sav., F.S.B., 835 S.W.2d 155, 159 (Tex. App. - Dallas 1992, writ denied).

     Id. at 483 citing Bell v. Greathouse, 49 S.W. 258 (Tex. Civ. App. - Waco 1899, no writ).

      Id. at 483 citing Clark v. Salinas, 626 S.W.2d 118 (Tex. Civ. App. - Corpus Christi 1981) writ ref'd
n.r.e. per curiam, 628 S.W.2d 51 (Tex. 1982).

     Id. at 482 citing Tiblier v. Perez, 277 S.W. 189 (Tex. Civ. App. - San Antonio 1925), overruled on
other grounds, 153 Tex. 12, 203 S.W.2d 154 (1953).

     Id. at 482 citing Lilly v. Lewis, 249 S.W. 1095 (Tex. Civ. App. - San Antonio 1923, writ dism'd w.o.j.).
But see In re Bohac, 117 B.R. 256, 262 (Bankr. W.D. Tex. 1990).

     In re Brown, 191 B.R. 99, 102 (Bankr. N.D. Tex. 1995); In re Huizar, 71 B.R. 826, 830 (Bankr. W.D.
Tex. 1987).

     In re Freytag, 155 B.R. 150, 154 (Bankr. N.D. Tex. 1993).

     753 S.W.2d 248 (Tex. App. - Houston [1st Dist.] 1988, writ denied).

     Id. at 250.

     Id.

     In re Moore, 93 B.R. 480, 483 (Bankr. N.D. Tex. 1988) citing Garcia v. Uweda, 198 S.W. 167 (Tex.
Civ. App. - San Antonio 1917, no writ).

      Id. at 483 citing Farmers' Nat'l Bank v. Coffman, 79 S.W.2d 905 (Tex. Civ. App. - Eastland 1935, writ
ref'd).

     Id. at 483 citing Churchwell v. Sweeney, 68 S.W. 185 (Tex. Civ. App. - Waco 1902, no writ).

     Id. at 483.

     In re Brooks, 233 B.R 696, 701 (Bankr. N.D. Tex. 1999).

     This being only a matter of conjecture with the author. Brenham, according to conventional bovine


                                                     136
Homestead After Home Equity                                                                        Chapter 5


wisdom, is at the other place.

      Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 251 (Tex. App. - Houston [1st Dist.] 1988,
writ denied).

    In re Bohac, 117 B.R. 256, 262 (Bankr. W.D. Tex. 1990); In re Mitchell, 80 B.R. 372, 381 (Bankr.
W.D. Tex. 1987); In re Poer, 76 B.R. 98, 99-100 (Bankr. N.D. Tex. 1987); In re Hunt, 61 B.R. 224, 228
(Bankr. S.D. Tex. 1986).

     Van Brunt v. BancTexas Quorum, N.A., 804 S.W.2d 117, 122 (Tex. App. - Dallas 1989, no writ).

    See Caulley v. Caulley, 777 S.W.2d 147, 150 (Tex. App. - Houston [14th Dist.] 1989), aff'd, 806
S.W.2d 795 (Tex. 1991); In re Mitchell, 80 B.R. 372, 383-84 (Bankr. W.D. Tex. 1987).

      See Sanchez v. Telles, 960 S.W.2d 762, 771 (Tex. App. - El Paso 1997, writ denied); Gregory v.
Sunbelt Sav., F.S.B., 835 S.W.2d 155, 159 (Tex. App. - Dallas 1992, writ denied); Caulley v. Caulley, 777
S.W.2d 147, 149 (Tex. App. - Houston [14th Dist.] 1989), aff'd, 806 S.W.2d 795 (Tex. 1991); Farrington v.
First Nat'l Bank of Bellville, 753 S.W.2d 248, 251 (Tex. App. - Houston [1st Dist.] 1988, writ denied);
Hunter v. Clark, 687 S.W.2d 811, 815-16 (Tex. App. - San Antonio 1985, no writ).

     See Caulley v. Caulley, 806 S.W.2d 795, 797 (Tex. 1991).

    Estate of Casida, 13 S.W.3d 519, 522 (Tex. App. - Beaumont 2000, no writ); Patterson v. First Nat'l
Bank of Lake Jackson, 921 S.W.2d 240, 246 (Tex. App. - Houston [1st Dist.] 1995, no writ). See also In
re Moore, 93 B.R 480, 483 (Bankr. N.D. Tex. 1988).

     Gregory v. Sunbelt Sav., F.S.B., 835 S.W.2d 155, 159 (Tex. App. - Dallas 1992, writ denied).

      Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 250 (Tex. App. - Houston [1st Dist.] 1988,
writ denied).

    See Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 250 (Tex. App. - Houston [1st Dist.]
1988, writ denied); Coury v. Prot, 85 F.3d 244, 254 (5th Cir. 1996).
.

      Farrington v. First Nat'l Bank of Bellville, 753 S.W.2d 248, 250 (Tex. App. - Houston [1st Dist.] 1988,
writ denied); In re Leonard, 194 B.R. 807, 809 (Bankr. N.D. Tex. 1996).

    Coury v. Prot, 85 F.3d 244, 254 (5th Cir. 1996); In re Leonard, 194 B.R. 807, 809 (Bankr. N.D. Tex.
1996).

     In re Leonard, 194 B.R. 807, 809 (Bankr. N.D. Tex. 1996).

     Id.

     Id.

    Id. A bankrupt debtor was not judicially estopped from claiming a different homestead than the
property listed as his "residence" in the debtor's bankruptcy petition. A residence is different than a
homestead. Residence in one place does not necessarily preclude a homestead in another.

     In re Osborn, 176 B.R. 941, 948 (Bankr. E.D. Tex. 1994).

     Sanchez v. Telles, 960 S.W.2d 762, 771 (Tex. App. - El Paso 1997, writ denied); Van Brunt v.
BancTexas Quorum, N.A., 804 S.W.2d 117, 120 (Tex. App. - Dallas 1989, no writ); Coury v. Prot, 85 F.3d
244, 254 (5th Cir. 1996); In re Osborn, 176 B.R. 941, 948 (Bankr. E.D. Okla. 1994).


                                                     137
Chapter 5                                                                 Homestead After Home Equity


     Estate of Casida, 13 S.W.3d 519, 522 (Tex. App. - Beaumont 2000, no writ); Coury v. Prot, 85 F.3d
244, 253 (5th Cir. 1996).

    Id.

    Id. at 254.

    Van Brunt v. BancTexas Quorum, N.A., 804 S.W.2d 117, 120 (Tex. App. - Houston 1989, no writ).

    914 S.W.2d 679 (Tex. App. - Austin 1996, no writ).

    Id. at 684.

    Id.

    Id.

    Id.

    In re Hunt, 61 B.R. 224, 228 (Bankr. S.D. Tex. 1986).

    Id.

     TEX. PROP. CODE ANN. ' 41.005(a), (b), (c) (Vernon Supp. 2000). See also In re Tinsley, 217 B.R.
188, 189 (Bankr. N.D. Tex. 1997).

    Id. at ' 41.005(c).

     Id. at ' 41.005(c). See also Sanchez v. Telles, 960 S.W.2d 762, 769 (Tex. App. - El Paso 1997, writ
denied).

    TEX. PROP. CODE ANN. ' 41.005(e) (Vernon Supp. 2000).

    TEX. PROP. CODE ANN. ' 41.005(e) (Vernon Supp. 2000).

    Id. at ' 41.005(e). For a review of this statutory scheme for designating homestead, see In re Niland,
825 F.2d 801, 815 (5th Cir. 1987).

    Id. at 41.005(d).

    Id.

     Id. at ' 41.001 et. seq. See also Matter of Crowell, 138 F.3d 1031, 1034-35 (5th Cir. 1998); In re
Niland, 825 F.2d 801, 815 (5th Cir. 1987).

    138 F.3d 1031 (5th Cir. 1998).

    Id. at 1035.

    Id.

    Id.

    Caulley v. Caulley, 806 S.W.2d 795, 797 (Tex. 1991); Estate of Casida, 13 S.W.3d 519, 521 (Tex.
App. - Beaumont 2000, no writ); Patterson v. First Nat'l Bank of Lake Jackson, 921 S.W.2d 240, 246 (Tex.
App. - Houston [1st Dist.] 1995, no writ); Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio

                                                    138
Homestead After Home Equity                                                                     Chapter 5


1985, no writ); Matter of Rubarts, 896 F.2d 107, 110 (5th Cir. 1990).

    See e.g., Matter of Claflin, 761 F.2d 1088, 1090-91 (5th Cir. 1985); In re Brown, 191 B.R. 99, 101
(Bankr. N.D. Tex. 1995).

     Burk Royalty Co. v. Riley, 475 S.W.2d 566, 568-69 (Tex. 1972); Lawrence v. Lawrence, 911 S.W.2d
450, 454 (Tex. App. - Texarkana 1995, writ denied).

     See Lawrence v. Lawrence, 911 S.W.2d 450, 454 (Tex. App. - Texarkana 1995, writ denied); Matter
of Claflin, 761 F.2d 1088, 1091 (5th Cir. 1985).

     191 B.R. 99 (Bankr. N.D. Tex. 1995).

     Id. at 102.

     TEX. PROP. CODE ANN. ' 41.005(a), (b) (Vernon Supp. 2000).

     217 B.R. 188 (Bankr. N.D. Tex. 1997).

     Id. at 189.

     Id.

     Id. at 190.

     Id.

     Id.

     972 S.W.2d 149 (Tex. App. - Texarkana 1998, no writ).

     Id. at 151, 154.

     Id. at 154.

     Id.

     Id.

     Laster v. First Huntsville Properties, 826 S.W.2d 125, 129 (Tex. 1991); LeBlanc v. LeBlanc, 761
S.W.2d 450, 453 (Tex. App. - Corpus Christi 1988), writ denied per curiam, 778 S.W.2d 865 (Tex. 1989);
Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ); Matter of Rubarts, 896 F.2d
107, 110 (5th Cir. 1990); In re Moody, 77 B.R. 580, 592 (S.D. Tex. 1987).

    Patterson v. First Nat'l Bank of Lake Jackson, 921 S.W.2d 240, 246 (Tex. App. - Houston [1st Dist.]
1995, no writ). See also In re Niland, 825 F.2d 801, 808 (5th Cir. 1987).

      Estate of Casida, 13 S.W.3d 519, 521 (Tex. App. - Beaumont 2000, no writ); Scott v. Estate of Scott,
973 S.W.2d 694, 696 (Tex. App. - El Paso 1998, no writ); Patterson v. First Nat'l Bank of Lake Jackson,
921 S.W.2d 240, 246 (Tex. App. - Houston [1st Dist.] 1995, no writ); In re Niland, 825 F.2d 801, 808 (5th
Cir. 1987); In re Moody, 77 B.R. 580, 592 (S.D. Tex. 1987).

     Scott v. Estate of Scott, 973 S.W.2d 694, 696 (Tex. App. - El Paso 1998, no writ).

     Estate of Casida, 13 S.W.3d 519, 521 (Tex. App. - Beaumont 2000, no writ).



                                                    139
Chapter 5                                                                 Homestead After Home Equity


     Estate of Casida, 13 S.W.3d 519, 521 (Tex. App. - Beaumont 2000, no writ); Womack v. Redden,
846 S.W.2d 5, 7 (Tex. App. - Texarkana 1992, writ denied); Taylor v. Mosty Bros. Nursery, 777 S.W.2d
568, 569 (Tex. App. - San Antonio 1989, no writ); In re Moody, 77 B.R. 580, 592 (S.D. Tex. 1987); In re
Leonard, 194 B.R. 807, 810 (Bankr. N.D. Tex. 1996).

    Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996).

     Womack v. Redden, 846 S.W.2d 5, 7 (Tex. App. - Texarkana 1992, writ denied); Taylor v. Mosty
Bros. Nursery, 777 S.W.2d 568, 569 (Tex. App. - San Antonio 1989, no writ); McDaniel v. Camp, 59 F.3d
548, 550 (5th Cir. 1995); In re Niland, 825 F.2d 801, 808 (5th Cir. 1987); In re Moody, 77 B.R. 580, 592
(S.D. Tex. 1987).

     See In re Bohac, 117 B.R. 256, 265 (Bankr. W.D. Tex. 1990); In re Hunt, 61 B.R. 224, 229 (Bankr.
S.D. Tex. 1986) (intent to abandon alone is insufficient). In re Moody, 77 B.R. 580, 592 (S.D. Tex. 1987)
(mere removal from homestead alone is insufficient).

    In re Leonard, 194 B.R. 807, 810 (Bankr. N.D. Tex. 1996).

     See Estate of Casida, 13 S.W.3d 519, 521 (Tex. App. - Beaumont 2000, no writ); Coury v. Prot, 85
F.3d 244, 253 (5th Cir. 1996); In re Leonard, 194 B.R. 807, 810 (Bankr. N.D. Tex. 1996).

    Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996).

    Id. at 254.

    85 F.3d 244 (5th Cir. 1996).

    Id. at 254.

    Id. at 454-55.

    Id. at 255.

    Id. at 253.

    Id.

    Id.

    777 S.W.2d 568 (Tex. App. - San Antonio 1989, no writ).

    Id. at 569.

    846 S.W.2d 5 (Tex. App. - Texarkana 1992, writ denied).

    Id. at 7.

    Id. at 7-8.

    994 S.W.2d 331 (Tex. App. - Texarkana 1999, no writ).

    Id. at 335.

    In re Finkel, 151 B.R. 779, 783 (Bankr. W.D. Tex. 1993).

    Id.

                                                   140
Homestead After Home Equity                                                                     Chapter 5


    Id.

    758 S.W.2d 940 (Tex. App. - Corpus Christi 1988, writ denied).

    Id. at 945.

    Id.

    Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996).

    Patterson v. First Nat'l Bank of Lake Jackson, 921 S.W.2d 240, 246 (Tex. App. - Houston [1st Dist.]
1995, no writ); Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996); In re Moody, 77 B.R. 580, 592 (S.D. Tex.
1987); In re Nelson, 134 B.R. 838, 845 (Bankr. N.D. Tex. 1991).

     See Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996); In re Nelson, 134 B.R. 838, 845 (Bankr. N.D.
Tex. 1991).

    815 S.W.2d 350 (Tex. App. - Austin 1991, no writ).

    Id. at 355.

    825 F.2d 801 (5th Cir. 1987).

    Id. at 808.

    77 B.R. 580 (S.D. Tex. 1987).

    Id. at 592.

    194 B.R. 807 (Bankr. N.D. Tex. 1996).

    Id.

    13 S.W.3d 519 (Tex. App. - Beaumont 2000, no writ).

    Id. at 522.

    Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996).

     Coury v. Prot, 85 F.3d 244, 253 (5th Cir. 1996); In re Nelson, 134 B.R. 838, 845 n.3 (Bankr. N.D.
Tex. 1991).

     TEX. PROP. CODE ANN. ' 41.003 (Vernon Supp. 1999). See also In re Leonard, 194 B.R. 807, 809
(Bankr. N.D. Tex. 1996); In re Julian, 163 B.R. 478, 483 (Bankr. N.D. Tex. 1994); In re Nelson, 134 B.R.
838, 845 n.1 (Bankr. N.D. Tex. 1991); In re Cooper, 128 B.R. 632, 636 (Bankr. E.D. Tex. 1991).

    In re Leonard, 194 B.R. 807, 810 (Bankr. N.D. Tex. 1996).

     In re Cooper, 128 B.R. 632, 636 (Bankr. E.D. Tex. 1991); In re Brown, 78 B.R. 486, 487 (Bankr. N.D.
Tex. 1987). See also In re Julian, 163 B.R. 478, 483 (Bankr. N.D. Texas 1994).

    In re Brown, 78 B.R. 486, 487 (Bankr. N.D. Tex. 1987); In re Poer, 76 B.R. 98, 100 (Bankr. N.D. Tex.
1987).

    In re Nelson, 134 B.R. 838, 845 n.1 (Bankr. N.D. Tex. 1991).



                                                   141
Chapter 5                                                                Homestead After Home Equity


    128 B.R. 632 (Bankr. E.D. Tex. 1991).

    Id. at 635-37.

    163 B.R. 473 (Bankr. N.D. Tex. 1994).

    Id. at 483.

    78 B.R. 486 (Bankr. N.D. Tex. 1987).

    Id. at 488.

    825 F.2d 801 (5th Cir. 1987).

    Id. at 808.

    Id.

    Coury v. Prot, 85 F.3d 244, 254 (5th Cir. 1996).

    Id.

    Id.

    Id.

    Coury v. Prot, 85 F.3d 244, 254 (5th Cir. 1996); In re Evans, 135 B.R. 261, 264 (Bankr. S.D. Tex.
1991); In re Bohac, 117 B.R. 256, 262 (Bankr. W.D. Tex. 1990).

    Sanchez v. Telles, 960 S.W.2d 762, 770-71 (Tex. App. - El Paso 1997, writ denied); In re Leonard,
194 B.R. 807, 810 (Bankr. N.D. Tex. 1996).

    Sanchez v. Telles, 960 S.W.2d 762, 770-71 (Tex. App. - El Paso 1997, writ denied); In re Leonard,
194 B.R. 807, 810 (Bankr. N.D. Tex. 1996).

    194 B.R. 807 (Bankr. N.D. Tex. 1996).

    Id. at 808-09.

    Id. at 809.

    Id. at 810.

    TEX. CONST. art. XVI ' 50(b); TEX. PROP. CODE ANN. ' 41.004 (Vernon Supp. 2000).

    Hardeman v. Judge, 931 S.W.2d 716, 718 (Tex. App. - Fort Worth 1996, writ denied).

    Id. at 719.

    931 S.W.2d 716 (Tex. App. - Fort Worth 1996, writ denied).

    Id. at 717.

    Id.

    Id. at 719.

                                                   142
Homestead After Home Equity                                                                       Chapter 5


     Intertex, Inc. v. Kneisley, 837 S.W.2d 136, 138 (Tex. App. - Houston [14th Dist.] 1992, writ denied);
U.S. v. Johnson, 160 F.3d 1061, 1064 (5th Cir. 1998); In re Moody, 77 B.R. 580, 592 (S.D. Tex. 1987).

     In re Eskew, 233 B.R. 708, 712 (Bankr. W.D. Tex. 1998); In re Cole, 205 B.R. 382, 385 (Bankr. E.D.
Tex. 1997); In re Robinson, 180 B.R. 174, 175 (Bankr. E.D. Tex. 1995); In re Evans, 135 B.R. 261, 264
(Bankr. S.D. Tex. 1991).

     Resolution Trust Corp. v. Olivarez, 29 F.3d 201, 206 (5th Cir. 1994).

    Resolution Trust Corp. v. Olivarez, 29 F.3d 201, 206 (5th Cir. 1994); In re Cole, 205 B.R. 382, 385
(Bankr. E.D. Tex. 1997); In re Robinson, 180 B.R. 174, 175 (Bankr. E.D. Tex. 1995).

     29 F.3d 201 (5th Cir. 1994).

     Id. at 202-03.

     Id. at 206-07.

     180 B.R. 174, 175 (Bankr. E.D. Tex. 1995).

     Id. at 174.

     Id. at 175.

     Id.

     233 B.R. 708 (Bankr. W.D. Tex. 1998).

     Id. at 710.

     Id.

     Id. at 712.

     205 B.R. 382 (Bankr. E.D. Tex. 1997)

     Id. at 385.

     Id.

     Hardeman v. Judge, 931 S.W.2d 716, 719 (Tex. App. - Fort Worth 1996, writ denied).

     TEX. CONST. art. XVI ' 50(b) (Vernon Supp. 2000); TEX. FAM. CODE ANN. ' 5.001 (Vernon 1998). See
also In re McCain, 160 B.R. 933, 940 (Bankr. E.D. Tex. 1993).

     160 B.R. 933 (Bankr. E.D. Tex. 1993).

     Id. at 940.

     Id.

     Id.

    Exocet, Inc. v. Cordes, 815 S.W.2d 350, 355 (Tex. App. - Austin 1991, no writ); Matter of Bradley,
960 F.2d 502, 509 (5th Cir. 1992).



                                                    143
Chapter 5                                                                 Homestead After Home Equity


         Matter of Bradley, 960 F.2d 502, 509 (5th Cir. 1992).

         Id.

         815 S.W.2d 350 (Tex. App. - Austin 1991, no writ).

         Id. at 355.

         Id.

         960 F.2d 502 (5th Cir. 1992).

         Id. at 509.

         Id.

         Id.

      Ketcham v. First Nat'l Bank of New Boston, 875 S.W.2d 753, 756 (Tex. App. - Texarkana 1994, no
writ); In re Girard, 104 B.R. 817, 820 (Bankr. W.D. Tex. 1989).

    See Ketcham v. First Nat'l Bank of New Boston, 875 S.W.2d 753, 756 (Tex. App. - Texarkana 1994,
no writ); In re Moody, 77 B.R. 580, 595-96 (S.D. Tex. 1987).

         TEX. CONST. art. XVI ' 50(c) (Vernon Supp. 2000).

         In re Girard, 104 B.R. 817, 820 (Bankr. W.D. Tex. 1989).

         In re Moody, 77 B.R. 580, 595 (S.D. Tex. 1987).

         Ketcham v. First Nat'l Bank of New Boston, 875 S.W.2d 753, 756 (Tex. App. - Texarkana 1994, no
writ).

         Id.

         824 S.W.2d 555 (Tex. 1992).

         Id. at 556.

         Id.

         Id.

         Id.

         Id.

         875 S.W.2d 753 (Tex. App. - Texarkana 1994, no writ).

         Id. at 754.

         Id.

         Id. at 756.

         180 B.R. 174, 175-76 (Bankr. E.D. Tex. 1995).

                                                       144
Homestead After Home Equity                                                                      Chapter 5


    Id. at 174-76.

    Id. at 176.

    Id.

    104 B.R. 817 (Bankr. W.D. Tex. 1989).

    2 Tex. Bankr. Ct. Rptr. 362 (Bankr. N.D. Tex. 1988).

     In re Girard, 104 B.R. 817, 821-22 (Bankr. W.D. Tex. 1989); In re Loter, 2 Tex. Bankr. Ct. Rptr. 362,
363 (Bankr. N.D. Tex. 1988).

    In re Girard, 104 B.R. 816, 818 (Bankr. W.D. Tex. 1989).

    Id. at 822.

    Id.

    896 F.2d 107 (5th Cir. 1990).

    141 B.R. 115 (E.D. Tex. 1992).

     Matter of Rubarts, 896 F.2d 107, 113-14 (5th Cir. 1990); First Bank v. Pope, 141 B.R. 115, 119-20
(E.D. Tex. 1992).

     Matter of Rubarts, 896 F.2d 107, 114 (5th Cir. 1990); First Bank v. Pope, 141 B.R. 115, 119-20 (E.D.
Tex. 1992).

    TEX. PROP. CODE ANN. ' 41.006 (Vernon Supp. 2000).

    Id.

    Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); Lawrence v.
Lawrence, 911 S.W.2d 450, 452 (Tex. App. - Texarkana 1995, writ denied); Intertex, Inc. v. Kneisley, 837
S.W.2d 136, 138 (Tex. App. - Houston [14th Dist.] 1992, writ denied); U.S. v. Johnson, 160 F.3d 1061,
1064 (5th Cir. 1998). See also Op. Tex. Att'y Gen. DM-366 (1995).

    Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); Lawrence v.
Lawrence, 911 S.W.2d 450, 452 (Tex. App. - Texarkana 1995, writ denied); Intertex, Inc. v. Kneisley, 837
S.W.2d 136, 138 (Tex. App. - Houston [14th Dist.] 1992, writ denied).

    837 S.W.2d 136 (Tex. App. - Houston [14th Dist.] 1992, writ denied).

    Id. at 138.

    Id.

    160 F.3d 1061 (5th Cir. 1998).

    Id. at 1065-66.

    Id. at 1065.

    Id.



                                                   145
Chapter 5                                                                      Homestead After Home Equity


         Id.

         Fitzgerald v. Antoine Nat'l Bank, 980 S.W.2d 228, 231 (Tex. App. - Houston [14th Dist.] 1998, no
writ).

         980 S.W.2d 228 (Tex. App. - Houston [14th Dist.] 1998, no writ).

         Id. at 230.

         Id.

         Id.

         Id.

         Id. at 231.

         Id.

         First Interstate Bank v. Bland, 810 S.W.2d 277, 283 (Tex. App. - Fort Worth 1991, no writ).

     First Interstate Bank v. Bland, 810 S.W.2d 277, 283 (Tex. App. - Fort Worth 1991, no writ); In re
Julian, 163 B.R. 478, 482 Bankr N.D. Tex. 1994); In re Yamin, 65 B.R. 938, 942 (Bankr. S.D. Tex. 1986).

      NCNB Texas Nat'l Bank v. Carpenter, 849 S.W.2d 875, 881 (Tex. App. - Fort Worth 1993, no writ);
First Interstate Bank v. Bland, 810 S.W.2d 277, 284-85 (Tex. App. - Fort Worth 1991, no writ); Shearer v.
Allied Live Oak Bank, 758 S.W.2d 940, 945 (Tex. App. - Corpus Christi 1988, writ denied).

     Matter of Bradley, 960 F.2d 502, 510 (5th Cir. 1992); First Bank v. Pope, 141 B.R. 115, 119 (E.D.
Tex. 1992); In re Niland, 50 B.R. 468, 476-77 (Bankr. N.D. Tex. 1985).

         First Bank v. Pope, 141 B.R. 115, 119 (E.D. Tex. 1992).

    See In re Stephens, 149 B.R. 414, 417 (Bankr. E.D. Tex. 1992); In re Niland, 50 B.R. 468, 477
(Bankr. N.D. Tex. 1985).

     In re Brooks, 233 B.R. 696, 699 (Bankr. N.D. Tex. 1999); In re Tinsley, 217 B.R. 188, 190 (Bankr.
N.D. Tex. 1997).

         Matter of Bradley, 960 F.2d 502, 510 (5th Cir. 1992); In re Niland, 825 F.2d 801, 809 (5th Cir. 1987).

         TEX. CONST. art. XVI ' 50 (Vernon Supp. 2000).

      Id. at art. XVI ' 50(d). See also Sanchez v. Telles, 960 S.W.2d 762, 771 (Tex. App. - El Paso 1997,
writ denied).

    See e.g., Hexter v. Pratt, 10 S.W.2d 692, 693 (Tex. Comm'n App. 1928, judgm't adopted); Morris v.
Reeves, 580 S.W.2d 891, 893 (Tex. Civ. App. - Houston [1st Dist.] 1979, no writ).

     Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); NCNB Texas Nat'l
Bank v. Carpenter, 849 S.W.2d 875, 880 (Tex. App. - Fort Worth 1993, no writ); Fajkus v. First Nat'l Bank
of Giddings, 735 S.W.2d 882, 884 (Tex. App. - Austin 1987, writ denied); Border v. McDaniel, 70 F.3d 841,
843 (5th Cir. 1995); In re Osborn, 24 F.3d 1199, 1207 (10th Cir. 1994).

    Sanchez v. Telles, 960 S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); NCNB First Nat'l
Bank v. Carpenter, 849 S.W.2d 875, 880 (Tex. App. - Fort Worth 1993, no writ).

                                                        146
Homestead After Home Equity                                                                      Chapter 5


    70 F.3d 841 (5th Cir. 1995).

    Id. at 843.

    Id. at 843-44.

    835 S.W.2d 155 (Tex. App. - Dallas 1992, writ denied).

    Id. at 159-60.

    Id.

    758 S.W.2d 940 (Tex. App. - Corpus Christi 1988, writ denied).

    Id. at 945.

    960 S.W.2d 762 (Tex. App. - El Paso 1997, writ denied).

    Id. at 764-65.

    Id. at 771.

    Id. at 770-71.

    Id. at 771.

    Id.

    Id.

     First Interstate Bank v. Bland, 810 S.W.2d 277, 284 (Tex. App. - Fort Worth 1991, no writ); In re
Mitchell, 80 B.R. 372, 382 (Bankr. W.D. Tex. 1987).

     First Interstate Bank v. Bland, 810 S.W.2d 277, 284 (Tex. App. - Fort Worth 1991, no writ); In re
Hughes, 172 B.R. 205, 212 n.11 (Bankr. N.D. Tex. 1993); In re Nelson, 134 B.R. 838, 846 (Bankr. N.D.
Tex. 1991); In re Mitchell, 80 B.R. 372, 382 (Bankr. W.D. Tex. 1987).

     First Interstate Bank v. Bland, 810 S.W.2d 277, 284 (Tex. App. - Fort Worth 1991, no writ); In re
Mitchell, 80 B.R. 372, 382 (Bankr. W.D. Tex. 1987).

    103 B.R. 816 (Bankr. N.D. Tex. 1987).

    Id. at 817.

    Id.

    Id. at 818.

    134 B.R. 838 (Bankr. N.D. Tex. 1991).

    Id. at 846.

    Id.

    Id.



                                                    147
Chapter 5                                                                Homestead After Home Equity


    74 B.R. 571 (Bankr. N.D. Tex. 1987).

    Id. at 573.

    Id.

    See TEX. PROP. CODE ANN. ' 41.005(c) (Vernon Supp. 2000).

     Matter of Smith, 966 F.2d 973, 977 (5th Cir. 1992); In re Hughes, 172 B.R. 205, 213 n.12 (Bankr.
N.D. Tex. 1993).

    966 F.2d 973 (5th Cir. 1992).

    Id. at 977.

    Id.

    963 S.W.2d 511 (Tex. 1998).

    Id. at 515.

    Id.

    In re Osborn, 24 F.3d 1199, 1207 (10th Cir. 1994).

    Id.

    24 F.3d 1199 (10th Cir. 1994).

    Id. at 1208.

    Id.

    735 S.W.2d 882 (Tex. App. - Austin 1987, writ denied).

    Id. at 884.

    Id.

    163 B.R. 478 (Bankr. N. D. Tex. 1994).

    Id. at 482.

    Id.

    Id. See also In re Hughes, 172 B.R. 205, 212 (Bankr. N.D. Tex. 1993).

    144 B.R. 719 (Bankr. W.D. Tex. 1992).

    Id. at 725.

    810 S.W.2d 281 (Tex. App - Fort Worth 1991, no writ).

    Id. at 286.

    825 F.2d 801 (5th Cir. 1987).

                                                   148
Homestead After Home Equity                                                                   Chapter 5


    Id. at 810.

    Id.

    In re Osborn, 24 F.3d 1199, 1208 (10th Cir. 1994); Matter of Daves, 770 F.2d 1363, 1369 (5th Cir.
1985).

    770 F.2d 1363 (5th Cir. 1985).

    Id. at 1370.

    Id. at 1369.

    Id.

    In re Osborn, 24 F.3d 1199, 1208 (10th Cir. 1994); Matter of Daves, 770 F.2d 1363, 1369 (5th Cir.
1985).

    24 F.3d 1199 (10th Cir. 1994).

    Id. at 1207.

    Id. at 1208-09.

    Hruska v. First State Bank of Deanville, 747 S.W.2d 783, 785 (Tex. 1988).

    Id. at 785.

    747 S.W.2d 783 (Tex. 1988).

    Id. at 784.

    Id.

    Id. at 785.

    See In re Julian, 163 B.R. 478, 482 (Bankr. N.D. Tex. 1994).

    163 B.R. 478 (Bankr. N.D. Tex. 1994).

    Id. at 482.

    Id.

     TEX. PROB. CODE ANN. ' 279 (Vernon 1980). See also Estate of Casida, 13 S.W.3d 519, 522 (Tex.
App. - Beaumont 2000, no writ); National Union Fire Ins. Co. v. Olson, 920 S.W.2d 458, 461 (Tex. App. -
Austin 1996, no writ).

     Estate of Casida, 13 S.W.3d 519, 522 (Tex. App. - Beaumont 2000, no writ); National Union Fire Ins.
Co. v. Olson, 920 S.W.2d 458, 461 (Tex. App. - Austin 1996, no writ).

    Id. at 461.

    Id.

    Id. at 462.

                                                  149
Chapter 5                                                                 Homestead After Home Equity


    Id.

    Id. citing Hoefling v. Hoefling, 106 Tex. 350, 167 S.W. 210 (1914).

    Id. citing American Bonding Co. v. Logan, 106 Tex. 306, 166 S.W. 1132, 1137-38 (1914).

     Estate of Casida, 13 S.W.3d 519, 522 (Tex. App. - Beaumont 2000, no writ). The right to have the
homestead to descend free of the claims of creditors under TEX. PROB. CODE ANN. ' 271 does not defeat
the claims of the heirs, prevent the partition of the property, nor grant the surviving constituent family
member a right to continue to occupy the property. Id. To determine if a probate homestead is applicable
to the property requires reference to TEX. CONST. art. XVI ' 52 (Vernon 1993).

    Id. at 461.

    Id.

    920 S.W.2d 458 (Tex. App. - Austin 1996, no writ).

    Id. at 460.

    Id.

    Id.

    Id. at 462.

    Id.

    Id. at 461-62.

    Id. at 462.

     12 U.S.C. ' 1823(e); D'Oench Duhme & Co. v. Fed. Deposit Ins. Corp., 315 U.S. 447, 62 S.Ct. 676,
86 L.Ed. 956 (1942).

    In re Napier, 144 B.R. 719, 723 (Bankr. W.D. Tex. 1992).

    Id.

     Patterson v. Federal Deposit Ins. Corp., 918 F.2d 540, 545 (5th Cir. 1990); In re Hughes, 172 B.R.
205, 213 (Bankr. N.D. Tex. 1993).

    65 B.R. 498 (Bankr. W.D. Tex. 1986).

    Id. at 499-502.

    Id. at 501.

    Id. at 503.

    Id.

    918 F.2d 540 (5th Cir. 1990).

    172 B.R. 205 (Bankr. N.D. Tex. 1993).


                                                   150
Homestead After Home Equity                                                                     Chapter 5


    149 B.R. 414 (Bankr. E.D. Tex. 1992).

    144 B.R. 719 (Bankr. W.D. Tex. 1992).

    In re Stephens, 149 B.R. 414, 418 (Bankr. E.D. Tex. 1992).

     Patterson v. Federal Deposit Ins. Corp., 918 F.2d 540, 545 (5th Cir. 1990); In re Stephens, 149 B.R.
414, 418-19 (Bankr. E.D. Tex. 1992); In re Napier, 144 B.R. 719, 725 (Bankr. W.D. Tex. 1992).

    935 F.2d 83 (5th Cir. 1991).

    Id. at 84.

    Id.

    Id. at 86.

    Id.

    867 F.2d 240 (5th Cir. 1989).

    Id. at 240.

    Id. at 241.

    Id. at 242.

    Id.

    19 F.3d 1032 (5th Cir. 1994).

      Id. at 1035. A RAM mortgage is an instrument that allows a debtor to borrow against his home equity
to create an annuity-like debt providing for periodic payments by the lender to the debtor. Id. at 1037. A
line of credit conversion mortgage is a variant of the RAM mortgage by which the debtor is provided with a
line of credit available upon demand and secured by the debtor's equity in his home. Id. at 1037. Neither
the RAM mortgage nor the line of credit conversion mortgage would restrict the debtor from using the loan
proceeds for any specific purpose.

    12 U.S.C. '' 1461-1468c (Supp. 1994).

    First Gibraltar Bank, F.S.B. v. Morales, 19 F.3d 1032, 1041 (5th Cir. 1994).

    Id. at 1044.

    Id. at 1047.

    Id.

    Id. at 1052-53.

    Id. at 1053.

    Id. at 1039, 1046.

    12 U.S.C. ' 1462a(f) (Supp. 1998).



                                                   151
Chapter 5                                                           Homestead After Home Equity


    42 F.3d 895 (5th Cir. 1995).

    Id. at 902.

     Crowder v. Benchmark Bank, 919 S.W.2d 657, 660 (Tex. 1996); Frappier v. Texas Commerce Bank,
N.A., 879 F. Supp. 715, 717 (S.D. Tex. 1995).

    Frappier v. Texas Commerce Bank, N.A., 879 F.Supp. 715, 717-18 (S.D. Tex. 1995).

    879 F.Supp. 715 (S.D. Tex. 1995).

    Id. at 716.

    Id. at 717.

    Id. at 716.

    Id. at 718.

    Id. at 717-18.

    Id. at 718.

    18 U.S.C. ' 3663(h).

    Id.

    Id. See also Auclair v. Sher, 63 F.3d 407 (5th Cir. 1995).

    Auclair v. Sher, 866 F.Supp. 322, 324 (W.D. Tex. 1994).

    Auclair v. Sher, 63 F.3d 407, 409 (5th Cir. 1995).

    63 F.3d 407 (5th Cir. 1995).

    Id. at 408.

    Id. at 409-10.

    Id. at 410.

    Id.

    Id.

    11 U.S.C. '' 522(c)(1), 523(a)(5).

    170 F.3d 475 (5th Cir. 1999).

    Id. at 477-78.

    Id. at 482.

    Id. at 483.

    Id.

                                                   152
Homestead After Home Equity                                                                  Chapter 5


     U.S. CONST. art. I, ' 8 cl. 3.

     See Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 848-49 (Tex. App. -
Austin 1999, no writ).

    7 S.W.3d 840 (Tex. App. - Austin 1999, no writ).

    TEX. CONST. art. XVI ' 50(a)(5)(B) (Vernon Supp. 2000).

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 849 (Tex. App. - Austin
1999, no writ).

    Id.

    15 U.S.C. ' 1635(a), (b).

    TEX. CONST. art. XVI ' 50(a)(5)(C) (Vernon Supp. 2000).

    7 S.W.3d 840 (Tex. App. - Austin 1999, no writ).

    Id. at 849.

    Id.

    See TEX. CONST. art. XVI ' 50(a)(5)(B) (Vernon Supp. 2000).

    Rooms With a View, Inc. v. Private Nat'l Mortgage Ass'n, 7 S.W.3d 840, 849 (Tex. App. - Austin
1999, no writ).

    15 U.S.C. ' 1691(a)(1).

    7 S.W.3d 840 (Tex. App. - Austin 1999, no writ).

    Id. at 849.

    Id.

    15 U.S.C. ' 1691d(a).

    TEX. PROP. CODE ANN. ' 41.008 (Vernon Supp. 2000).

    701 S.W.2d 24 (Tex. App. - Dallas 1985, writ ref'd n.r.e.).

    Id. at 24.

    Id. at 26.

    Id. at 25-26.

    862 F.2d 1194 (5th Cir. 1989).

    Id. at 1200.

    Id.

    Id.

                                                    153
Chapter 5                                                                Homestead After Home Equity


    874 S.W.2d 919 (Tex. App. - Fort Worth 1994, writ denied).

    Id. at 928.

    Id.

    Id.

    Id. See also In re Coates, 242 B.R. 901, 907 (Bankr. N.D. Tex. 2000).

    In re Coates, 242 B.R. 901, 906-07 (Bankr. N.D. Tex. 2000).

    Id. at 906.

    242 B.R. 901 (Bankr. N.D. Tex. 2000).

    Id. at 904.

    Id. at 907.

     Patterson v. Federal Deposit Ins. Corp., 918 F.2d 540, 544 (5th Cir. 1990); In re Stephens, 149 B.R.
414, 416 (Bankr. E.D. Tex. 1992); In re Napier, 144 B.R. 719, 724 (Bankr. W.D. Tex. 1992); In re Howard,
65 B.R. 498, 509 (Bankr. W.D. Tex. 1986).

     Patterson v. Federal Deposit Ins. Corp., 918 F.2d 540, 544 (5th Cir. 1990); In re Stephens, 149 B.R.
414, 416 (Bankr. E.D. Tex. 1992); In re Napier, 144 B.R. 719, 724 (Bankr. W.D. Tex. 1992); In re Howard,
65 B.R. 498, 509 (Bankr. W.D. Tex. 1986).

    Panasonic Co. v. Zinn, 903 F.2d 1039, 1041 (5th Cir. 1990); In re Howard, 65 B.R. 498, 502 (Bankr.
W.D. Tex. 1986); In re White, 47 B.R. 98, 101 (Bankr. M.D. La. 1985).

    TEX. CONST. art. XVI ' 50(a) (Vernon Supp. 2000).

    937 S.W.2d 1 (Tex. Cr. App. 1996, no writ).

    Id. at 3.

    Id.

    Id.

    State of Texas By and Through Texas Dept. of Mental Health and Mental Retardation v. Ellison, 914
S.W.2d 679, 684 (Tex. App. - Austin 1996, no writ).

    TEX. PROP. CODE ANN. ' 51.002(d) (Vernon 1995).

    Id.

    Rey v. Acosta, 860 S.W.2d 654, 657 (Tex. App. - El Paso 1993, no writ).

    Id. at 658.

    Id.

    Id. at 659.


                                                  154
Homestead After Home Equity                                                                    Chapter 5


     Reyna v. State Nat'l Bank of Iowa Park, 911 S.W.2d 851, 855 (Tex. App. - Fort Worth 1995, writ
denied).

    Id.

    Mallou v. Payne & Vendig, 750 S.W.2d 251, 255 (Tex. App. - Dallas 1988, writ denied).

    TEX. PROP. CODE ANN. ' 41.021 et. seq. (Vernon Supp. 2000). See also Crowder v. Benchmark
Bank, 889 S.W.2d 525, 530 (Tex. App. - Dallas 1994), rev'd on other grounds, Benchmark Bank v.
Crowder, 919 S.W.2d 657 (Tex. 1994).

    Crowder v. Benchmark Bank, 889 S.W.2d 525, 530 (Tex. App. - Dallas 1994), rev'd on other
grounds, Benchmark Bank v. Crowder, 919 S.W.2d 657 (Tex. 1994).

    Mallou v. Payne & Vendig, 750 S.W.2d 251, 255 (Tex. App. - Dallas 1988, writ denied); In re Tinsley,
217 B.R. 188, 191 (Bankr. N.D. Tex. 1997); In re Julian, 163 B.R. 478, 487 (Bankr. N.D. Tex. 1994); In re
Howard, 65 B.R. 498, 511 (Bankr. W.D. Tex. 1986); In re Greene, 40 B.R 807, 809 (Bankr. N.D. Tex.
1984).

    Mallou v. Payne & Vendig, 750 S.W.2d 251, 255 (Tex. App. - Dallas 1988, writ denied).

     In re Julian, 163 B.R. 478, 487 (Bankr. N.D. Tex. 1994); In re Howard, 65 B.R. 498, 511 (Bankr. W.D.
Tex. 1986); In re Barnhardt, 47 B.R. 277, 283 (Bankr. N.D. Tex. 1985).

    65 B.R. 498 (Bankr. W.D. Tex. 1986).

    Id. at 500-1.

    Id. at 511.

    97 B.R. 897 (Bankr. N.D. Tex. 1989).

    Id. at 879.

    Id.

    Id.

    Id.

    Vackar v. Patterson, Boyd, Lowery, 866 S.W.2d 817, 819 (Tex. App. - Beaumont 1993, no writ).

    Id.

    Id.

    866 S.W.2d 817 (Tex. App - Beaumont 1993, no writ).

    Id. at 818.

    Id. at 819.

    Id.

    Id.



                                                   155
Chapter 5                                                                 Homestead After Home Equity


    TEX. R. CIV. P. Rules 735, 736 (Vernon Supp. 2000).

      As a general rule all reverse mortgages must be foreclosed under the procedures set out in TEX. R.
CIV. P. Rule 735, 736 (Vernon Supp. 2000). However, if the foreclosure is the result in a payment default
after (1) both borrowers have died or (2) the homestead property securing the loan is sold or otherwise
transferred, no court order is to effect the foreclosure. TEX. CONST. art. XVI ' 50(k)(11) (Vernon Supp.
2000). Presumedly, in the case of these specified defaults, the foreclosure may be effected under a
power of sale contained in the deed of trust.

    TEX. R. CIV. P. Rule 735 (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 50(k)(10) (Vernon Supp. 2000); TEX. PROP. CODE ANN. ' 51.002(d) (Vernon
1995).

    TEX. CONST. art. XVI ' 50(k)(10) (Vernon Supp. 2000).

    Id.

    TEX. R. CIV. P. Rule 736(1)(E) (Vernon Supp. 2000).

    TEX. CONST. art. XVI ' 50(k)(10) (Vernon Supp. 2000).

    Id.

    TEX. R. CIV. P. Rule 736(1) (Vernon Supp. 2000).

    Id.

    Id. at Rule 736(1).

    Id.

    Id. at Rule 736(2).

    Id. at Rule 736(2)(C).

    Id. at Rule 736(2)(A).

    Id.

    Id.

    Id. at Rule 736(2)(B).

    Id.

    Id.

    Id. at Rule 736(4)(A).

    Id.

    Id.

    Id. at Rule 736(4)(B).


                                                    156
Homestead After Home Equity                                                                       Chapter 5


     Id. at Rule 736(4)(C).

     Id.

     Id. at Rule 736(3).

     Id. at Rule 736(5).

     Id. at Rule 736(6).

     Id.

     Id.

     Id.

     Id. at Rule 736(7)(A).

     Id. at Rule 736(8)(A).

     Id. at Rule 736(9).

     Id. at Rule 736(9).

     Id. at Rule 736(8)(A).

     Id. at Rule 736(8)(B).

     Id.

     Id. at Rule 736(8)(C).

     Id.

     Id. at Rule 736(10).

     See Heggen v. Pemelton, 836 S.W.2d 145, 147 (Tex. 1992); Faires v. Billman, 849 S.W.2d 455, 458
(Tex. App. - Austin 1992, no writ); Falor v. Falor, 840 S.W.2d 683, 686-87 (Tex. App. - San Antonio 1992,
no writ); Smith v. Smith, 836 S.W.2d 688, 693 (Tex. App. - Houston [1st Dist.] 1992, no writ); Magill v.
Magill, 816 S.W.2d 530, 536 (Tex. App. - Houston [1st Dist.] 1991, writ denied).

    Magallanez v. Magallanez, 911 S.W.2d 91, 94 (Tex. App. - Tyler 1995, no writ); Cole v. Cole, 880
S.W.2d 477, 484 (Tex. App. - Fort Worth 1994, no writ); Smith v. Smith, 836 S.W.2d 688, 693 (Tex. App. -
Houston [1st Dist.] 1992, no writ); Magill v. Magill, 816 S.W.2d 530, 536 (Tex. App. - Houston [1st Dist.]
1991, writ denied); Kamel v. Kamel, 760 S.W.2d 677, 679 (Tex. App. - Tyler 1988, writ denied).

     Heggen v. Pemelton, 836 S.W.2d 145, 147-48 (Tex. 1992); Faires v. Billman, 849 S.W.2d 455, 458
(Tex. App. - Austin 1992, no writ); Falor v. Falor, 840 S.W.2d 683, 686-87 (Tex. App. - San Antonio 1992,
no writ); Magill v. Magill, 816 S.W.2d 530, 536 (Tex. App. - Houston [1st Dist.] 1991, writ denied); Kamel v.
Kamel, 760 S.W.2d 677, 679 (Tex. App. - Tyler 1988, writ denied).

    Heggen v. Pemelton, 836 S.W.2d 145, 148-49 (Tex. 1992); Cole v. Cole, 880 S.W.2d 477, 487 (Tex.
App. - Fort Worth 1994, no writ); Wren v. Wren, 702 S.W.2d 250, 253 (Tex. App. - Houston [1st Dist.]
1985, writ dism'd).

     Smith v. Smith, 715 S.W.2d 154, 158 (Tex. App. - Texarkana 1986, no writ);

                                                    157
Chapter 5                                                                 Homestead After Home Equity


    Id.

    Id. at 158-59.

     Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 (Tex. 1991); Lawrence v. Lawrence, 911
S.W.2d 450, 451 (Tex. App. - Texarkana 1995, writ denied); LeBlanc v. LeBlanc, 761 S.W.2d 450, 452
(Tex. App. - Corpus Christi 1988), writ denied per curiam, 778 S.W.2d 865 (Tex. 1989).

    LeBlanc v. LeBlanc, 761 S.W.2d 450, 452 (Tex. App. - Corpus Christi 1988), writ denied per curiam,
778 S.W.2d 865 (Tex. 1989).

    761 S.W.2d 450 (Tex. App. - Corpus Christi 1988), writ denied per curiam, 778 S.W.2d 865 (Tex.
1989).

    Id. at 453.

    Id.

    Id. But see Lawrence v. Lawrence, 911 S.W.2d 450, 451 (Tex. App. - Texarkana 1995, writ denied).

    See Laster v. First Huntsville Properties, 826 S.W.2d 125, 130 (Tex. 1991); Lawrence v. Lawrence,
911 S.W.2d 450, 454 (Tex. App. - Texarkana 1995, writ denied). See also In re Johnson, 112 B.R. 15, 17
(Bankr. E.D. Tex. 1990).

    826 S.W.2d 125 (Tex. 1991).

    Id. at 127-28.

    Id. at 130.

    911 S.W.2d 450 (Tex. App. - Texarkana 1995, writ denied).

    Id. at 451.

    Id.

    Id. at 454.

    Id.

    Id. at 453.

    Id.

     Laster v. First Huntsville Properties, 826 S.W.2d 125, 131 (Tex. 1991); Matter of Marriage of Banks,
887 S.W.2d 160, 164 (Tex. App. - Texarkana 1994, no writ); Mallou v. Payne & Vendig, 750 S.W.2d 251,
257 (Tex. App. - Dallas 1988, writ denied); McIntyre v. McIntyre, 722 S.W.2d 533, 537 (Tex. App. - San
Antonio 1986, no writ).

    Walston v. Walston, 971 S.W.2d 687, 695 (Tex. App. - Waco 1998, no writ); Mallou v. Payne &
Vendig, 750 S.W.2d 251, 257 (Tex. App. - Dallas 1988, writ denied); Matter of Marriage of Banks, 887
S.W.2d 160, 164 (Tex. App. - Texarkana 1994, no writ); McIntyre v. McIntyre, 722 S.W.2d 533, 537 (Tex.
App. - San Antonio 1986, no writ).

    887 S.W.2d 160 (Tex. App. - Texarkana 1994, no writ).



                                                   158
Homestead After Home Equity                                                                    Chapter 5


    Id. at 164.

    Id.

    Svacina v. Gardner, 905 S.W.2d 780, 782 (Tex. App. - Texarkana 1995, no writ).

    Id.

     Brown v. Bank of Galveston Nat'l Ass'n, 963 S.W.2d 511, 515 (Tex. 1998); In re Grisham, 230 B.R.
529, 531 (Bankr. N.D. Tex. 1998).

     Estate of Casida, 13 S.W.3d 519, 521 (Tex. App. - Beaumont 2000, no writ); Sanchez v. Telles, 960
S.W.2d 762, 770 (Tex. App. - El Paso 1997, writ denied); In re Grisham, 230 B.R. 529, 531 (Bankr. N.D.
Tex. 1998).

    Sanchez v. Telles, 960 S.W.2d 762, 771 (Tex. App. - El Paso 1997, writ denied).

    59 F.3d 548 (5th Cir. 1995).

    Id. at 549.

    Id.

    Id. at 555.

    See Brown v. Bank of Galveston Nat'l Ass'n, 963 S.W.2d 511, 515 (Tex. 1998).

     TEX. CONST. art. XVI, ' 52 (Vernon 1993); TEX. PROB. CODE ANN. '' 271, 283, 284 (Vernon 1980).
See also Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 151 (Tex. App. - Fort Worth 1995, writ
denied); Cornerstone Bank v. Randle, 869 S.W.2d 580, 586 (Tex. App. - Dallas 1993, no writ Hunter v.
Clark, 687 S.W.2d 811, 814 (Tex. App. - San Antonio 1985, no writ).

    Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 152 (Tex. App. - Fort Worth 1995, writ denied).

    TEX. CONST. art XVI, ' 52 (Vernon 1993).

    Id.

    Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 151 (Tex. App. - Fort Worth 1995, writ denied);
Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ).

    Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 151 (Tex. App. - Fort Worth 1995, writ denied).

    Hunter v. Clark, 687 S.W.2d 811, 814 (Tex. App. - San Antonio 1985, no writ).

    Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 151 (Tex. App. - Fort Worth 1995, writ denied);
Cornerstone Bank v. Randle, 869 S.W.2d 580, 586 (Tex. App. - Dallas 1993, no writ); Hunter v. Clark, 687
S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ).

    Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ).

      Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 152 (Tex. App. - Fort Worth 1995, writ denied)
citing Sargeant v. Sargeant, 118 Tex. 343, 351, 15 S.W.2d 589, 593 (1929).

    Id. at 815.



                                                   159
Chapter 5                                                                    Homestead After Home Equity


     Id.

     Id.

     857 S.W.2d 722 (Tex. App. - Houston 1993, writ denied).

     Id. at 726.

     Id.

     13 S.W.3d 519 (Tex. App. - Beaumont 2000, no writ).

     Id. at 521.

     Refer to VI(D) supra.

     13 S.W.3d 523 (Tex. App. - Beaumont 2000, no writ).

      Id. This case raises the ironical relationship between TEX. PROB. CODE ANN. ' 271 and TEX. CONST.
art. XVI ' 52. While an adult child living at home is sufficient to ransom the homestead from the reach of
creditors, the adult child cannot stay on the homestead if the decedent's heirs desire to partition the tract.
The legislature's intention to protect dependent adult children is in this instance frustrated by the
limitations of the Constitution. Id.

     Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ).

    Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 152 (Tex. App. - Fort Worth 1995, writ denied);
Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ).

     Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148, 152 (Tex. App. - Fort Worth 1995, writ denied).

     Hunter v. Clark, 687 S.W.2d 811, 815 (Tex. App. - San Antonio 1985, no writ).

     Id.

     See Id. at 817.

     687 S.W.2d 811 (Tex. App. - San Antonio 1985, no writ).

     Id. at 813, 816.

     Id. at 817. See also Power v. Chapman, 944 S.W.2d 331, 335 (Tex. App. - Texarkana 1999, no writ).

     TEX. TAX CODE ANN. ' 11.13(a) (Vernon Supp. 2000).

     TEX. CONST. art. VIII ' 1-b(c) (Vernon Supp. 2000). This change is effective January 1, 1997. The
amendments further provided that the legislature could by statute provide that all or part of the exemption
did not apply to a district or political subdivision that imposes ad valorem taxes for public education
purposes but is not the principal school district providing general elementary and secondary public
education throughout its territory. Id.

    TEX. CONST. art. VIII ' 1-b(c) (Vernon Supp. 2000); TEX. TAX CODE ANN. ' 11.13(c) (Vernon Supp.
2000).

     TEX. TAX CODE ANN. ' 11.13(n) (Vernon Supp. 2000).


                                                     160
Homestead After Home Equity                                                                     Chapter 5


      Id. at ' 11.13(d). The exemption may be adopted either by the governing body of the local taxing unit
or by referendum vote of the taxpayers. TEX. TAX CODE ANN. ' 11.13(h) (Vernon Supp. 2000); Op. Tex.
Att'y Gen. No. JM-829 (1987).

    Op. Tex. Att'y Gen. No. JM-829 (1987).

    TEX. CONST. art. VIII ' 1-b(b) (Vernon Supp. 2000); TEX. TAX CODE ANN. ' 11.13(h) (Vernon Supp.
2000); Op. Tex. Att'y Gen. No. JM-829 (1987).

    Op. Tex. Att'y Gen. No. JM-829 (1987).

    TEX. TAX CODE ANN. ' 11.13(j) (Vernon Supp. 2000).

    Id. at ' 11.13(h).

    906 S.W.2d 148 (Tex. App. - Fort Worth 1995, writ denied).

    Id. at 150-52.

    Id. at 152.

    Id.

    Op. Tex. Att'y Gen. No. JM-612 (1986).

    Id.

    Id.

    TEX. TAX CODE ANN. ' 11.13(o), (p) (Vernon Supp. 2000).

    Id. at ' 11.13(o).

    Id. at ' 11.13(p).

    Id. at ' 11.13(j)(1)(A) (Vernon Supp. 1999).

    Id. at ' 11.13(j)(2).

    Id. at ' 11.13(j)(3).

    Id. at ' 11.43(a).

    Id. at ' 11.43(f).

    Id. at ' 11.43(d).

     686 S.W.2d 757 (Tex. App. - Austin 1995, writ ref'd n.r.e.).

    Id. at 758.

    Id.

    Id.



                                                    161
Chapter 5                                                                  Homestead After Home Equity


     TEX. TAX CODE ANN. ' 11.13(j)(1)(D) (Vernon Supp. 2000).

    Ripley v. Stephens, 686 S.W.2d 757, 758-59 (Tex. App. - Austin 1995, writ ref'd n.r.e.). Compare
Copeland v. Tarrant Appraisal Dist., 906 S.W.2d 148 (Tex. App. - Fort Worth 1995, writ denied).

     TEX. TAX CODE ANN. ' 11.13(q) (Vernon Supp. 2000).

     Id. at ' 11.13(r).

     Id. at ' 11.13(q).

     Id.

     Id. at ' 11.13(d), (e).

     See Op. Tex. Att'y Gen. No. DM-31 (1991).

    TEX. CONST. art. VIII ' 1-b(b) (Vernon Supp. 2000); TEX. TAX CODE ANN. ' 11.13(i) (Vernon Supp.
2000). See also Op. Tex. Att'y Gen. No. DM-31 (1991).

     Op. Tex. Att'y Gen. No. DM-31 (1991).

     TEX. TAX CODE ANN. '' 11.42(c), 26.112(a) (Vernon Supp. 2000). For property qualified for the
exemption during the tax year, the assessor must recalculate the tax, correct the tax rolls, mail a corrected
tax bill, or refund overpaid tax as applicable. TEX. TAX CODE ANN. ' 26.112(c) (Vernon Supp. 2000).

    TEX. CONST. art. VIII ' 1-b(d) (Vernon Supp. 2000); TEX. TAX CODE ANN. ' 11.26 (Vernon Supp.
2000).

     TEX. TAX CODE ANN. ' 11.26(a) (Vernon Supp. 2000).

     Id.

     Id. at ' 11.26(g).

     Id. at ' 11.26(h).

     Id. at ' 11.26(f).

     TEX. CONST. art. VIII, ' 1-b(d) (Vernon Supp. 2000).

     Id. See also Op. Tex. Att'y Gen. No. JM-991 (1988).

     TEX. CONST. art. VIII ' 1-b(d) (Vernon Supp. 2000).

     Id. at ' 11.26(g).

     Id. at '' 11.26(h)-(k), 26.112 (b).

     Id. at ' 11.26(l).

     Id.

     TEX. TAX CODE ANN. ' 31.031 (Vernon Supp. 2000).



                                                    162
Homestead After Home Equity                                                                      Chapter 5


    Id. at ' 31.031(a).

    Id.

    Id. at ' 11.432.

    Id. at ' 11.432(a).

    Id.

    Id. at ' 11.432(c).

    Id. at ' 34.21(e).

     Id. at ' 34.21(a)-(c). To qualify for the extended redemption period the property must be used as a
residence homestead or designated for agricultural use when the tax suit was filed or the application for
tax warrant was made. Id.

    Id.

    Id.

    Id. at ' 34.21(b), (c).

    Id. at ' 34.21(c).

    Id. at ' 34.21(d).




                                                   163

				
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