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Date: 07-04-2022
Case Style:
J & L LANDS, LP v. JERRY W. NEZAT
Case Number: 2022 MT 111
Judge:
Ingrid Gustafson
Court:
Plaintiff's Attorney: Donald R. Murray, Hash, O’Brien
Defendant's Attorney:
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Description:
Helena, Montana - Real Estate lawyer represented Defendant and Appellant with appeals from the orders awarding a portion of the proceeds from the sale of his homestead property.
Nezat and his late wife Dixie Nezat were married for 45 years. Dixie died in
October 2008. The couple owned a 20-acre tract of land (the “Property”) in Flathead
County as tenants-in-common. In 1996, they built a home on the Property and filed a
Homestead Declaration. Upon Dixie’s death her half interest in the property passed to her
estate. Shortly after Dixie’s death, Nezat began a relationship with Mary C. Meadows,
whom he had met online. On May 26, 2009, Nezat recorded a quitclaim deed transferring
half of his interest in the property to Meadows as joint tenants. On May 5, 2010, J&L
obtained a judgment against Meadows for $21,615.62 with accruing interest.
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¶3 In August 2010, Nezat filed an action against Meadows to recover the interest he
had granted her in the Property. He alleged the quitclaim deed and purported conveyance
to Meadows had been procured by fraud and undue influence and the quitclaim deed was
invalid and void ab initio. Meadows signed a deed conveying her interest in the property
back to Nezat on February 20, 2015, and the case was dismissed with prejudice by
stipulation of the parties. Nezat filed a new homestead declaration on the Property on
September 21, 2017. On January 19, 2018, Nezat recorded a deed of distribution from
Dixie’s estate to Nezat. After this transfer, Nezat was the sole owner of the Property.
¶4 On February 2, 2018, J&L filed this action against Nezat to foreclose a judgment
lien on the Property, along with a lis pendens against the Property in an attempt to recover
on its outstanding judgment against Meadows. On February 16, 2018, J&L agreed to lift
its judgment lien against the property and allow Nezat to sell the property. In exchange,
Nezat agreed to place into trust proceeds from the sale in the total amount of J&L’s
judgment lien plus accrued interest, pending the outcome of this litigation. As of
February 16, 2018, the total amount of J&L’s judgment lien with interest against Meadows
was $39,430.19. On February 21, 2018, Nezat sold the Property and received net traceable
proceeds of approximately $220,000 from the sale. He placed $39,430.19 into trust. On
November 12, 2020, J&L moved for summary judgment. Nezat filed a cross-motion for
summary judgment on March 8, 2021.
¶5 On July 7, 2021, the District Court granted summary judgment to J&L and denied
Nezat’s cross-motion for summary judgment. The District Court determined J&L’s
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judgment against Meadows became a lien on all of Meadows’s property, including her
25 percent interest in the Property, from the time the judgment against her was docketed
on May 5, 2010, pursuant to § 25-9-301, MCA. The court concluded this judgment lien
survived her conveyance of the property back to Nezat. As 25 percent of the property
remained encumbered by the lien, the court concluded J&L was entitled to recover up to
25 percent of the proceeds from the sale of the home despite Nezat’s homestead declaration
on the Property. Further, the District Court concluded that as the total amount of the
judgment plus interest was less than 25 percent of the proceeds of the sale, J&L was entitled
to recover the full value of the judgment plus interest or $39,430.19 from the proceeds of
the sale. The court determined collateral estoppel barred Nezat from alleging Meadows
procured the quitclaim deed from Nezat by fraud, undue influence, or lack of consideration.
Nezat moved to alter or amend the judgment pursuant to Rule 59, which the District Court
denied on September 7, 2021. Nezat appeals.
STANDARD OF REVIEW
¶6 We review a district court’s ruling on a motion for summary judgment de novo,
applying the criteria of M. R. Civ. P. 56. Bailey v. State Farm Mut. Auto. Ins. Co., 2013
MT 119, ¶ 18, 370 Mont. 73, 300 P.3d 1149.
DISCUSSION
¶7 The homestead exemption serves to protect the homes of debtors from their
creditors. See Wall v. Duggan, 76 Mont. 239, 246, 245 P. 953, 955 (1926) (“The law
authorizes a debtor to erect a barrier around the home, over which the sheriff although
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armed with final process under such a judgment, cannot pass.” (quoting Fitzell v. Leaky,
14 P. 198, 201 (Cal. 1887)). This exemption has existed in Montana law in some form
since territorial times. See Lindley v. Davis, 7 Mont. 206, 14 P. 717 (1887). Since
statehood, the Constitution of Montana has required the Legislature to “enact liberal
homestead and exemption laws.” 1972 Mont. Const. art. XIII, § 5; 1889 Mont. Const.
art. XIX, § 4. Due to their humanitarian purpose, as enshrined in our State Constitution,
homestead exemption statutes are liberally construed. See Lindley, 7 Mont. at 217, 14 P.
at 722 (“The homestead laws have an object perfectly well understood, and in the
promotion of which courts may well employ the most liberal and humane rules of
interpretation. This object is to assure to the unfortunate debtor, and his equally
unfortunate but more helpless family, the shelter and influence of home.” (quoting
Abraham Clark Freeman, Cotenancy and Partition 110 (1874)); see also Neel v. First Fed.
Sav. & Loan Ass’n of Great Falls, 207 Mont. 376, 387, 675 P.2d 96, 102 (1984); Ferguson
v. Spieth, 13 Mont. 487, 491, 34 P. 1020, 1020-21 (1893).
¶8 Today, Title 70, chapter 32, MCA, governs homestead exemptions. In 2021, a
creditor could not execute on a homestead valued at $350,0001 or less to satisfy a judgment,
1
In Neel, we explained because “homestead laws are to be liberally construed in favor of the
homestead claimant,” increases in the homestead value limit “apply to all debts whenever
contracted” even after judgment has been entered against the claimant. Neel, 207 Mont. at 387,
675 P.2d at 102. In 2021, the Legislature increased the home value limit from $250,000 to
$350,000 and mandated the value limit to increase by 4 percent every calendar year after 2021.
See 2021 Mont. Laws ch. 442, § 1 (codified as § 70-32-104, MCA (2021)). The amendments
became effective on May 11, 2021, before the District Court entered judgment in this case. The
amended statute clearly states: “In 2021, the homestead value limit is $350,000.” This higher
value limit applies to these proceedings which occurred in 2021.
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except under limited statutory exceptions. See § 70-32-104, MCA (“In 2021, the
homestead value limit is $350,000.”); § 70-32-201, MCA (“The homestead is exempt from
execution or forced sale, except as in this chapter provided.”). Those exceptions include
debts secured by construction or vendors’ liens or mortgages on the property itself. Section
70-32-202, MCA. For properties valued over the homestead value limit, the statute
provides a specific process for appraisal, division, and sale of the property to satisfy other
types of judgments. See §§ 70-32-203 through -215, MCA.
¶9 As the homestead statutes declare a general rule the homestead is exempt under
§ 70-32-201, MCA, and then enumerate specific exceptions under § 70-32-202, MCA,
those enumerated exceptions are the exclusive exceptions to the homestead exemption. See
Wall, 76 Mont. at 246, 245 P. at 955. Section 70-32-202, MCA, does not include an
exception for judgment liens that are entered before a homestead declaration is made. In
fact, the 1981 Legislature specifically removed an exception for judgments obtained before
a declaration of homestead was filed to allow a homestead exemption to be claimed after
judgment was recorded. See 1981 Mont. Laws ch. 370, § 6. Thus, as we recognized in
Neel, 207 Mont. at 380, 675 P.2d at 99, a person claiming a homestead exemption may
declare a homestead after a judgment is recorded. See § 70-32-201, -202, MCA. The
provision allowing a declarant to file a homestead declaration after judgment has been
obtained exempts that homestead from execution or forced sale, except as provided for
under the homestead statutes. Additionally, the homestead statutes provide any proceeds
up to the statutory homestead value limit from the voluntary sale of a homestead property
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are exempted from judgment execution for 18 months. See § 70-32-216, MCA; In re
Snyder, 2006 MT 308, ¶ 10, 335 Mont. 11, 149 P.3d 26.
¶10 J&L maintains its judgment lien on 25 percent of the Property survived the transfer
of the Property from Meadows to Nezat. Assuming, arguendo, J&L’s judgment lien on the
property remained on the 25 percent interest of the property transferred back to Nezat in
2015, the homestead statutes would still apply to protect the property from execution from
that judgment. Under the homestead exemption statutes, Nezat was entitled to declare and
have the full protection of the homestead exemption on the Property even after judgment
had been entered against Meadows and attached to any interest she had in the Property
before it was conveyed back to him. See § 70-32-201 and -202, MCA; Neel, 207 Mont. at
380, 675 P.2d at 99. Additionally, Nezat was entitled to keep up to $350,000 of proceeds
from any voluntary sale of the Property. See §§ 70-32-201, -216, MCA. The parties
stipulated the proceeds from the sale of the property were $220,000. Thus, Nezat was
entitled to the full proceeds of the sale of the Property.
¶11 The District Court erred in satisfying J&L’s judgment lien from the proceeds of the
sale before exempting the full amount of the homestead value limit allowed under the
statute. We have previously explained:
from the fact that [the Legislature] declared a general rule that the homestead
is exempt, and then enumerated certain exceptions to that rule, but failed to
include as one of the exceptions a homestead subject to an attachment, it must
be accepted as a legislative declaration that the lien of an attachment does
not operate to defeat a homestead declaration.
8
Wall, 76 Mont. at 246, 245 P. at 955. As J&L’s judgment lien did not fall under one of the
enumerated exceptions to the exemption of the homestead from execution to satisfy a
judgment, it could not operate to defeat Nezat’s homestead declaration. Under the
homestead exemption, the full value of the exemption is satisfied first and
the creditor claiming the homestead is on the same plane as other creditors
seeking the proceeds of a judicial sale and all creditors are paid according to
their respective ranking after payment of cost. The whole theory of the
exemption of the homestead is that the obligation of the debtor to those whom
he owes the duty to support is a higher obligation than the payment of his
debts. The purpose of the framers of the law was to secure a home beyond
the reach of financial misfortune, around which gather the affections of the
family; the greatest incentive to virtue, honor and industry.
Neel, 207 Mont. at 387, 675 P.2d at 102. Nezat had the right to receive the full value of
the homestead exemption before any proceeds could be used to satisfy J&L’s judgment
lien on the Property. The District Court erred in satisfying J&L’s judgment lien before
Nezat received the full value of the homestead exemption from the proceeds of the sale.
Outcome: Reversed and remanded for the District Court to grant summary judgment to Nezat.
Plaintiff's Experts:
Defendant's Experts:
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