The Nevada Supreme Court ruled Friday the homestead law can't be used to protect property aquired by fraud.
The case involves a woman who cashed checks belonging to her imprisoned brother, used the money to buy a house, then argued he couldn't sell the home to reclaim his money because it was protected by the Homestead Act.
That act is designed to protect legitimate owners from losing their house in a lawsuit.
"Although public policy favors homestead exemptions in all but a few situations, we cannot allow a debtor to be shielded by the homestead exemption to further a fraud or similar tortious conduct," stated the opinion by justices Bob Rose, Bill Maupin and Mark Gibbons.
Charles Maki, a state prison inmate, signed a limited power of attorney to his sister Esther Chong so she could cash his industrial insurance settlement check. She was supposed to use the money to hire an attorney who could assist Maki in his appeal.
Instead, the opinion says, she used the disability benefit award of $37,974 to buy a house in Washoe County. Then, each month, she cashed his $100 benefit check to help make the house payment.
"Chong told Maki she would not be returning any of his funds," the opinion states.
He filed to claim the property and a sheriff's sale was scheduled, but she countered by claiming the property couldn't be foreclosed on because it was protected by the Homestead Act.
A district court in Reno agreed, forcing Maki to take the issue to the Supreme Court.
The high court Friday agreed with Maki.
"We conclude that, as in the case of a debtor owing child support obligations, debtors who fraudulently acquire funds are not the type of debtor whom the Legislature sought to protect," the opinion says.