## Facts

- John R. and Elsie B. Martin filed for bankruptcy relief, initially under Chapter 13 and later converted to Chapter 12.
- The Martins owned (1) a homestead in Clinton, Oklahoma, (2) farm property used in their farming operation, and (3) an undivided mineral interest in another tract.
- Secured liens were allocated as follows:
  - SBA: first lien on the homestead and second lien on the farm.
  - Commissioner of the Land Office: first lien on the farm.
  - Oklahoma Bank & Trust: third lien on the farm and first lien on the mineral interest.
- The Martins’ reported valuations showed that total secured debt exceeded the combined value of the properties, and the bank disputed the stated values.
- The bank sought to require the SBA to satisfy its debt from the homestead first, leaving more value in the farm for the bank’s junior lien position.
- The Martins opposed compelled resort to the homestead, asserting that Oklahoma’s constitutional and statutory homestead protections prevent marshalling that would force use or sale of the homestead for other creditors’ benefit.
- The Oklahoma Supreme Court received the dispute as a certified question from the U.S. Bankruptcy Court on the meaning of Oklahoma law.

## Issues

1. Whether Oklahoma’s constitutional homestead protections and exemption statutes create an exception to marshalling that prevents creditors from compelling marshalling against a debtor’s homestead.
2. Whether Oklahoma’s marshalling statutes permit creditors to compel a senior creditor to proceed first against homestead property when doing so would affect the debtor’s homestead exemption.

## Decision

- The court answered the certified question in favor of the Martins.
- Oklahoma’s Constitution and exemption statutes recognize an exception to marshalling when homestead property is involved.
- Creditors may not compel marshalling under Oklahoma marshalling statutes in a manner that forces resort to the debtor’s homestead.
- The court confined its ruling to state-law interpretation for application by the bankruptcy court.

## Legal Principles

- Homestead protections grounded in the Oklahoma Constitution and exemption statutes limit equitable creditor remedies, including marshalling.
- Marshalling statutes are construed in harmony with homestead law and do not authorize an indirect defeat of the homestead exemption.
- Marshalling is an equitable remedy and will not be applied to impair a debtor’s constitutionally protected homestead interest for the benefit of other creditors.

## Conclusion

Oklahoma law treats the homestead exemption as a controlling limitation on marshalling: a junior creditor cannot compel a senior creditor to satisfy its claim from homestead property first when doing so would undermine homestead protections.


In re Martin, 875 P.2d 417 (Okla. 1994)