J&M Sec., LLC v. Moore (In re Moore)
| Citation | 495 B.R. 1 |
| Decision Date | 08 July 2013 |
| Docket Number | BAP No. 12–6061. |
| Parties | In re Patricia Anne MOORE, Debtor. J & M Securities, LLC, Creditor–Appellant v. Patricia Anne Moore, Debtor–Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, Eighth Circuit |
OPINION TEXT STARTS HERE
Limited on Preemption Grounds
Jay Robert Burns, Jr., argued, Saint Louis, MO, for appellant.
Steven C. Bain, argued, Saint Louis, MO, for appellee.
Before KRESSEL, SALADINO and SHODEEN, Bankruptcy Judges.
J & M Securities, LLC, appeals from an order of the bankruptcy court 1 granting Patricia Anne Moore's motion to avoid a judicial lien on her homestead. Plainly stated, the ultimate question in this case is whether a state law exception to an exemption for a single creditor can prevent the debtor from exempting her homestead from property of the estate. 11 U.S.C. § 522(b). We hold that it does not and affirm.
The facts are undisputed. On August 16, 2000, Patricia Ann Moore, the debtor, a/k/a Patricia Wallingsford, in conjunction with her then husband, John Wallingsford signed a guaranty of lease agreement with Caplaco Ten Inc., and Dierbergs Lemay, Inc.
The deed to Moore's home was recorded in the St. Louis County Recorder of Deeds office on April 11, 2003. Moore holds a one half ownership interest in the home. She owns the property with her brother and sister-in-law, who together hold the other one half interest. Of the three owners, Moore is the only one occupying the house and resides in it as her homestead. Her brother and sister-in-law do not claim Moore's home as their homestead.
On March 9, 2005, a judgment was entered against Moore in the Circuit Court of St. Louis County in favor of Caplaco and Dierbergs; Caplaco and Dierbergs transcribed the judgment on June 7, 2006, thereby creating a lien against Moore's home. J & M Securities obtained the judgment and lien by assignment on July 10, 2006. In January 2011, Moore granted the Anheuser–Busch Employees' Credit Union a mortgage against her home.
Moore filed her chapter 7 petition on September 6, 2011. She soon converted her case to one under chapter 13. On the petition date, the judgment lien was $72,770.73, the consensual lien (the mortgage) with ABECU was $108,603.00 and Moore's home had a fair market value of $143,000.00. In her schedules, Moore claimed a homestead exemption of $15,000.00 pursuant to Mo. Ann. Stat. § 513.475. J & M objected to Moore's homestead exemption in her chapter 7 case, but did not similarly object after she converted to chapter 13.2 The bankruptcy court entered the order confirming Moore's chapter 13 plan on February 22, 2012.
Moore filed a motion to avoid J & M's judicial lien. The credit union supported the motion and J & M objected. The bankruptcy court ruled that 11 U.S.C. § 522(f) allowed avoidance of all but $2,198.50 of the lien and granted the motion except to that extent. We have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(b).
We review factual findings for clear error and legal conclusions de novo. Temperato Revocable Trust v. Unterreiner (In re Unterreiner), 699 F.3d 1022 (8th Cir.2012).
On appeal, J & M challenges the propriety of the Eighth Circuit's ruling in Kolich v. Antioch Laurel Veterinary Hospital (In re Kolich), 328 F.3d 406 (8th Cir.2003), and the bankruptcy court's reliance on Kolich. We recognize that Kolich is controlling precedent in the Eighth Circuit and decline J & M's invitation to revisit that court's decision.
J & M also argues that the bankruptcy court erred by summarily dismissing two of its arguments, via footnote, as unpersuasive. J & M's first argument is that Moore's homestead exemption is self-executing which renders § 522(f) unnecessary. J & M anchors this theory in Judge Becker's dissent from Simonson v. First Bank of Greater Pittston (In re Simonson), 758 F.2d 103 (3rd Cir.1985), explicitly adopted by Congress 3 in the Bankruptcy Reform Act of 1994. Here J & M simply misses the mark. The Simonson dissent stands only for the proposition that pursuant to § 522(i), the debtor steps into the shoes of the judicial lien holder after avoiding that lien. Section 522(i) helps prioritize the debtor's exemption under state law with respect to any remaining consensual liens. We agree with the bankruptcy court that the self-execution argument is unpersuasive.
The second footnote argument is grounded upon a firmer legal basis and warrants a lengthier discussion. J & M argues that Missouri's exception to the homestead exemption for prior causes of action by a single creditor prevents Moore from exempting her household from property of the estate.4
State law exceptions to exemptions
We begin our analysis with the statute: “[T]he debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under subsection (b) of this section.” 11 U.S.C. § 522(f)(1). Subsection (b) states, in pertinent part: “an individual debtor may exempt from property of the estate the property listed in either paragraph (2) or, in the alternative, paragraph (3) of this subsection ... where such election is permitted under the law of the jurisdiction where the case is filed.” 11 U.S.C. § 522(b)(1). Paragraph (b)(2) points the debtor to the list of federal exemptions in § 522(d). Paragraph (b)(3) provides the debtor with the exemptions available under the debtor's state's law and any nonbankruptcy federal exemptions.
The Supreme Court has made two applicable holdings. First, the Court held that for § 522(f) to apply, the debtor must have “possessed an interest to which a lien attached, before it attached, to avoid the fixing of the lien on that interest.” Farrey v. Sanderfoot, 500 U.S. 291, 301, 111 S.Ct. 1825, 114 L.Ed.2d 337 (1991). Next, the Court held that the applicability of § 522(f) is determined by answering the question of whether the lien impairs an exemption to which the debtor “would have been entitled to but for the lien itself.” Owen v. Owen, 500 U.S. 305, 310–311, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991). This first is clearly true; the second is the issue in this case.
The Code allows states to opt out—meaning a state can prevent its citizen debtors from choosing the federal bankruptcy exemptions. See11 U.S.C. § 522(b). Missouri is an opt-out state. Mo. Ann. Stat. § 513.427. To exempt her homestead, if at all, Moore was required to use Missouri's homestead exemption.
J & M argues that under Missouri law, Moore is not entitled to the homestead exemption and, therefore, her avoidance request fails under step two. The applicable Missouri statutes read as follows:
The homestead of every person, consisting of a dwelling house and appurtenances, and the land used in connection therewith, not exceeding the value of fifteen thousand dollars, which is or shall be used by such person as a homestead, shall, together with the rents, issues and products thereof, be exempt from attachment and execution. The exemption allowed under this section shall not be allowed for more than one owner of any homestead if one owner claims the entire amount allowed under this subsection; but, if more than one owner of any homestead claims an exemption under this section, the exemption allowed to each of such owners shall not exceed, in the aggregate, the total exemption allowed under this subsection as to any one homestead.
Such homestead shall be subject to attachment and levy of execution upon all causes of action existing at the time of the acquiring [sic] such homestead, except as otherwise provided in sections 513.475 to 513.530; and for this purpose such time shall be the date of the filing in the proper office for the records of deeds, the deed of such homestead, when the party holds title under a deed ... in case of existing estates, such homestead shall not be subject to attachment or levy of execution upon any liability hereafter created.
The thrust of J & M's argument is that because the judicial lien is rooted in a cause of action existing prior to Moore's acquisition of her homestead, § 513.510, the exception to the exemption, prevents Moore from exempting her homestead from property of the estate.5 While the judicial lien clearly attached to a property interest she held prior to the lien attaching as required under § 522 and Sanderfoot—which J & M concedes—J & M argues that regardless of lien avoidance, Moore is not entitled to a homestead exemption.
J & M is adamant that the existing cause of action exception under § 513.510 is definitional to the homestead exemption. In our view, § 513.510 is a separate statute and therefore is not part of the homestead exemption definition. Regardless of how we view the operation of the two Missouri statutes, the Owen court answered J & M's question to the contrary. There, the Court framed the issue as follows: “The question in this case is whether that elimination [of the judicial lien] can operate when the State has defined the exempt property in such a way as specifically to exclude property encumbered by [prior] judicial liens.” 6Owen, 500 U.S. at 306, 111 S.Ct. 1833. The Court's use of the word ‘defined’ was extremely broad in the sense that the Florida exception emanated from case law and was not part of the state exemption statutory scheme.
The Court went on to explain that “[p]re-existing liens, then, are in effect an exception to the Florida homestead exemption.” 7Id. at 307, 111 S.Ct. 1833. Finally, the Owen court concluded that “Florida's exclusion of certain liens from the scope of its homestead protection does not achieve a similar exclusion from the Bankruptcy Code's lien avoidance provision.” Id. at 313–314, 111 S.Ct. 1833. We think this holding by the Supreme Court is fatal to J & M's argument.
Missouri statutes do not single out prior liens as exempt from...
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