Holloway, In re
| Decision Date | 25 April 1996 |
| Docket Number | No. 95-8215,95-8215 |
| Citation | 81 F.3d 1062 |
| Parties | In re Linda Sue HOLLOWAY & Eldridge Hampton Holloway, Jr., Debtors. Linda Sue HOLLOWAY, Eldridge Hampton Holloway, Jr., Plaintiffs-Appellants, v. JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellee, Robert E. Brizendine, Trustee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Marilyn Sue Bright, Atlanta, GA, for appellants.
Fred Hanna, Elizabeth C. Whealler, L. Lynn Hanna & Assocs., Marietta, GA, for appellee.
Appeal from the United States District Court for the Northern District of Georgia.
Before TJOFLAT, Chief Judge, and RONEY and CAMPBELL *, Senior Circuit Judges.
Debtors-appellants Eldridge and Linda Holloway appeal from a judgment of the United States District Court for the Northern District of Georgia affirming a decision of the Bankruptcy Court for the Northern District of Georgia.
In October of 1991, appellee John Hancock Mutual Insurance Company obtained a judgment against Eldridge Holloway in the State Court of Cobb County. The judgment became a lien on the Holloways' residence, located in Georgia, in the amount of $26,792.97. The Holloways filed a joint petition for bankruptcy in December of 1991.
In the bankruptcy proceeding, the Holloways sought to avoid John Hancock's judgment lien on their real property. Unless a lien is avoidable and the debtor has taken timely steps to avoid it, the lien survives the discharge in bankruptcy. 1 Title 11 U.S.C. § 522(f) allows debtors to avoid the fixing of certain liens if the liens impair exemptions. An exemption is an interest of the debtor carved out of the bankruptcy estate for the benefit of the debtor and thereby shielded from creditors' claims. Section 522(f) provides: Notwithstanding any waiver of exemptions, the 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, if such lien is--
(1) a judicial lien.
11 U.S.C. § 522(f)(1) (1993). 2 The referenced subsection (b) exemptions include the federal bankruptcy exemptions enumerated in 11 U.S.C. § 522(d). Alternatively, however, § 522(b) allows states to opt out of these federal exemptions listed in § 522(d). States may write their own exemptions, in which case the only exemptions available to the debtor become those legislated by the opt-out state. Georgia has opted out of the § 522(d) exemptions and, pursuant to the invitation extended to the states in § 522(b), its legislature has enacted a list of exemptions available to Georgia domiciled debtors. See O.C.G.A. §§ 44-13-100(a) and (b). Georgia law allows a debtor to exempt from the bankruptcy estate his aggregate interest, not exceeding $5000 in value, in real or personal property used as a residence, and his aggregate interest, not exceeding $400 plus the unused amount of the homestead exemption, in other property. 3
In order to exempt property under §§ 522(b) and (f), the debtor must file, in the bankruptcy proceeding, a list of the property that the debtor claims as exempt. 11 U.S.C. § 522(l ). On January 22, 1992, the Holloways filed with the bankruptcy court an exemption schedule which provided, in part:
Property Exemption Provision Value of Exemption
1984 Honda § 44"13"100(a)(1), (3), and (6) $3000.00
Checking Account § 44"13"100(a)(1) and (6) $1758.46
Cash and savings § 44"13"100(a)(1) and (6) $1324.00
Residence § 44"13"100(a)(1) $ 0.00
Assets from Business § 44"13"100(a)(1) and (6) $5217.54
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The Holloways thus listed their home as exempt under the Georgia law but gave $0.00 as the value of the exemption. The exemption for their residence was not assigned any value because, as both parties concede, the Holloways personally retained no quantifiable equity in their home, their ownership being subject to a first security deed and note, a second security deed and note, and a tax lien from the Internal Revenue Service. These security interests exceeded, in total, the market value of the residence. The Holloways, listing the value of their homestead exemption as $0.00, proceeded to allocate their combined unused $10,000 homestead exemption to their personal property--their automobile, their cash and savings, their checking account, and their business assets--pursuant to O.C.G.A. § 44-13-100(a)(6). 4
The Holloways filed a motion with the bankruptcy court to avoid John Hancock's judgment lien on their residence pursuant to 11 U.S.C. § 522(f)(1) (1993). John Hancock filed a response alleging that its lien in no way impaired "an exemption to which the debtor[s] would have been entitled" because the Holloways had no equity in their property and had listed no value in their homestead exemption.
On January 4, 1993, the bankruptcy court issued the following order granting the Holloways' motion for lien avoidance:
After consideration of the argument of counsel for Movants and Respondents, this Court finds the judgment lien of Respondent John Hancock Mutual Insurance Company ... avoidable. The judgment lien of Respondent is therefore avoided upon the exempted personal property of the Debtors. The real property of the Debtors appears to have no equity over and above the preexisting first and second security deeds and tax lien to which the judgment of Respondent could attach; because the judgment did not attach to any real property pre-petition, there is no lien avoidance which must be had as to Debtors' real property and Respondent's judgment.
Holloway v. John Hancock Mutual Ins. Co. (In re Holloway), No. A91-82491-HR (Bankr.N.D.Ga. Dec. 31, 1992). Then on August 12, 1993, the bankruptcy court issued another order, partially vacating its earlier order:
[T]he Judgment lien against the exempted personal property of the Debtors shall remain void. However, any reference in the January 4, 1993 Order of this Court regarding the avoidance of Respondent's Judgment against Debtors' real property or the validity of the Judgment itself is hereby rescinded, vacated, and set aside.
Holloway v. John Hancock Mutual Ins. Co. (In re Holloway), No. A91-82491-HR (Bankr.N.D.Ga. Aug. 12, 1993). On March 14, 1994, the bankruptcy court denied the Holloways' motion to alter or amend the August 12, 1993 order. The Holloways appealed to the district court.
The district court found that the bankruptcy court had denied lien avoidance as a matter of federal law, but affirmed the bankruptcy court's judgment on what the district court described as independent state law grounds. The district court ruled that, by listing their residence as an exemption but giving $0.00 as the value of the exemption, the Holloways had acted in a contradictory manner that was insufficient to plead the exemption under Georgia law. Because § 522(f) only allows avoidance of liens that impair "an exemption to which the debtor would have been entitled," the district court found that John Hancock's lien could not be avoided. The Holloways now appeal from the judgment of the district court.
This court reviews de novo the district court's determination of law in a bankruptcy case. See Wrenn v. American Cast Iron Pipe Co. (In re Wrenn), 40 F.3d 1162, 1164 (11th Cir.1994). In deciding whether Georgia debtors may avoid a judicial lien pursuant to § 522(f), courts commonly determine, first, whether under Georgia state law the debtors are entitled to the exemption they claim and, second, whether the judicial lien would in fact impair the exemption as a matter of federal bankruptcy law. Cravey v. L'Eggs Prods., Inc. (In re Cravey), 100 B.R. 119, 121 (Bankr.S.D.Ga.1989); Register v. Reese (In re Register), 37 B.R. 708, 709 (Bankr.N.D.Ga.1983). Before reaching these questions, we first address the Holloways' claim that the case should be remanded because the bankruptcy court failed to state its findings of fact and conclusions of law.
The bankruptcy court's order denying avoidance of John Hancock's judicial lien on the Holloways' residence contained no express findings of fact and conclusions of law. In the district court, and now on appeal, the Holloways argue that the case should be remanded to the bankruptcy court because of its purported disregard of Fed.R.Civ.P. 52, which requires courts to state their findings of fact specially and conclusions of law separately in certain circumstances. 5 The district court found that the bankruptcy court's orders contained implicit factual findings concerning the Holloways' interest in their real property, and John Hancock's judgment lien on that real property, as well as "the implicit legal conclusion that Debtors could not prevail under § 522(f)." Holloway v. John Hancock Mutual Ins. Co. (In re Holloway), No. 1:94-cv-1220-ODE (N.D.Ga. Jan. 20, 1995). The relevant characteristics of the secured interests in the residential real estate are not in dispute. The district court thus ruled that there was a sufficient basis for it to review the legal conclusions of the bankruptcy court.
We agree. Even assuming for purposes of argument, although we need not decide, that Rule 52 applies, there are sufficient undisputed facts in the record for us to resolve the issues on appeal, which, being legal in nature, are subject to our de novo review. See Holtkamp v. Littlefield (In re Holtkamp), 669 F.2d 505, 510 (7th Cir.1982) () (internal citations omitted). Cf. Federal Land Bank v. Cornelison (In re Cornelison), 901 F.2d 1073, 1075 (11th Cir.1990) (...
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