In re Christie

• Decision Date: 03 February 1998
• Docket Number: Bankruptcy No. 97-33162.
• Citation: 218 BR 27
• Parties: In re Richard G. CHRISTIE and Claudia Christie, Debtors.
• Court: U.S. Bankruptcy Court — District of New Jersey

218 B.R. 27 (1998)

In re Richard G. CHRISTIE and Claudia Christie, Debtors.

Bankruptcy No. 97-33162.

United States Bankruptcy Court, D. New Jersey.

February 3, 1998.

COPYRIGHT MATERIAL OMITTED

Paul N. Mirabelli, Law Office of Paul N. Mirabelli, Hazlet, NJ, for Debtors.

Thomas H. Klein, Monmouth County Division of Social Services, Freehold, NJ, for Monmouth County Division of Social Services.

OPINION

WILLIAM H. GINDIN, Chief Judge.

PROCEDURAL HISTORY

This matter comes before the court as a motion to avoid judicial liens against the real property of Richard G. Christie and Claudia Christie (sometimes cumulatively, the "debtors") pursuant to 11 U.S.C. § 522(f)(1). The debtors seek to avoid three (3) liens; the only one in dispute, however, arises from a judgment entered by the Superior Court of New Jersey, Chancery Division, Family Part, Monmouth County ("Superior Court") on June 19, 1991, held by the Monmouth County Division of Social Services ("MCDSS"). The issue before the court is whether or not the judgment for child support, may be avoided as an impairment to a debtor's § 522(b) exemption.

This court conducted a hearing on this matter on August 4, 1997 and reserved decision. Counsel for both parties were invited to submit supplemental memoranda but each declined, deciding to rest on their initial submissions.

This court finds, for the reasons set forth below, that the Debtors' Motion to Avoid MCDSS' judicial lien, which secures a child support debt, can be granted pursuant to § 522(f)(1) because the lien impairs their homestead exemption under § 522(d)(1).

This court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b) and the Standing Order of Reference by the United States District Court for the District of New Jersey, dated July 23, 1984. This matter is a core proceeding under 28 U.S.C. §§ 157(b)(2)(B), and (O).

FACTS

Prior to the debtors' marriage, Mrs. Christie, formerly Claudia Howe, had two (2) children fathered by Mr. Christie: Dana, born on June 19, 1983 and Shannon, born on September 1, 1989. Mr. Christie's paternity was established for each child by court orders entered by the Superior Court on February 13, 1986 and March 25, 1993, respectively.

During this period, Mrs. Christie obtained public assistance from MCDSS on behalf of the children, commencing on June 19, 1983. In an action to determine the amount of Mr. Christie's child support payments for Dana, styled as MCDSS v. Richard Christie, FD-001142-86, the Superior Court of New Jersey entered an order on February 13, 1986, establishing a $40.00 per week obligation. A judgment was entered by the Superior Court on June 6, 1991, #J-68848-9.¹ Thereafter, a lien was placed on the debtors' residence located at 120 Forest Avenue, Keansburg, New Jersey ("residence") in favor of MCDSS. By order dated March 25, 1993, the February, 1986 order was modified to $165.00 per week, to include support for both children.

In the later part of 1993, Mrs. Christie declined public assistance. In an order entered on July 22, 1993, Mr. Christie's child support obligation was reduced to $35.00 per week by the Superior Court, reflecting arrears in past payments. On April 1, 1997, the debtors filed their voluntary petition under chapter 7 of Title 11. As of the filing date, MCDSS reported its claim as $13,424.39, plus $4,076.37 in interest ("MCDSS claim"). As of July 7, 1997, the MCDSS claim had been reduced to $12,619.39 through subsequent payments.

The debtors assert that the MCDSS lien may be avoided under 11 U.S.C. § 522(f)(1) because it impairs the $30,000.00 exemption the debtors are claiming in the residence pursuant to § 522(d)(1). As support, the debtors offered a real estate "market analysis," dated May 5, 1997, which values the residence at $69,000.00, and an attorney's certification that the residence is encumbered by a $50,442.61 first mortgage held by Ford Consumer Finance Co., Inc. Debtors argue that the statutory prohibition of avoidance of liens found in 11 U.S.C. § 522(f)(1)(A)(i), concerning child support obligations, is inapposite in this case because the lien was assigned to MCDSS in accordance with § 522(f)(1)(A)(ii)(I).

Conversely, MCDSS contends that its lien may not be avoided because it is statutory in nature, rather than judicial. Secondly, MCDSS argues that its lien falls within the statutory prohibition found in § 522(f)(1)(A)(i) because its assignment under N.J.S.A. 44:10-2, merely assigns the rights to pursue an obligation of a non-custodial parent, not the entitlement rights of a child to child support.

DISCUSSION

I. Jurisdictional Issues:

Before this court addresses any substantive merits of this case, it must first determine whether it has subject matter jurisdiction over the claims. Congress has vested bankruptcy courts with jurisdiction over four kinds of Title 11 matters: (1) cases under Title 11; (2) proceedings arising under Title 11; (3) proceedings arising in Title 11; and (4) proceedings related to Title 11. See 28 U.S.C.A. § 1334(b); See Donaldson v. Bernstein, 104 F.3d 547 (3d Cir.1997); In re Lands End Leasing, Inc., 193 B.R. 426 (Bankr.D.N.J.1996). The matter before this court, a motion to avoid a lien under 11 U.S.C. § 522(f)(1), clearly involves a matter arising under Title 11. Accordingly, this court has general jurisdiction over the Debtors' claim.

Recently, however, the Supreme Court in Seminole Tribe of Florida v. Florida, 517 U.S. 44, 116 S.Ct. 1114, 134 L.Ed.2d 252 (1996) has placed limits on federal jurisdiction. The Court held that states or "arms of the state" may not be sued in federal courts because of the state's sovereign immunity under the Eleventh Amendment of the United States Constitution. Eleventh Amendment sovereign immunity claims must be raised at anytime, even on appeal. See Patsy v. Board of Regents, 457 U.S. 496, 515 n. 19, 102 S.Ct. 2557, 2567 n. 19, 73 L.Ed.2d 172 (1982) (Supreme Court in dicta stated "that Eleventh Amendment is jurisdictional in the sense that it must be raised and decided by the Court on its own motion."). See also, In re Kish, 212 B.R. 808, 813 (D.N.J.1997) (a court is required to determine sua sponte whether Congress has effectively abrogated the states' Eleventh Amendment immunity); In re Fennelly, 212 B.R. 61 (D.N.J.1997) (same); In re Midland, 200 B.R. 453, 456 (Bankr.N.D.Ga.1996) ("new theory of Eleventh Amendment immunity strikes to the heart of bankruptcy court's jurisdiction" and could be presented at any stage of the proceedings.); In re Rose, 214 B.R. 372, 376-77 (Bankr.W.D.Mo.1997) (same).

The Eleventh Amendment of the Constitution provides: "the judicial power of the United States shall not be construed to extend to any suit in law or equity commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." U.S. Const.Amend. XI. The policy behind Eleventh Amendment sovereign immunity has two presuppositions. First, each State is a sovereign entity in our federal system. Seminole, 517 U.S. 44, 51-53, 116 S.Ct. 1114, 1121, 134 L.Ed.2d 252 quoting Hans v. Louisiana, 134 U.S. 1, 11-14, 10 S.Ct. 504, 506, 33 L.Ed. 842, (1890). Second, "it is inherent in the nature of sovereignty not to be amenable to the suit of an individual without its the states consent." Hans, 134 U.S. at 12, 10 S.Ct. at 506 (quoting The Federalist No. 81, p. 487 (C. Rossiter ed. 1961) (A. Hamilton) (parentheses added)). See Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 U.S. 139, 146, 113 S.Ct. 684, 688-89, 121 L.Ed.2d 605 (1993) ("the very object and purpose of the Eleventh Amendment was to prevent the indignity of subjecting a State to the coercive process of judicial tribunals at the instance of private parties."); Fennelly, 212 B.R. at 63 (same); In re Martinez, 196 B.R. 225, 228 (Bankr.D. Puerto Rico 1996) (same). See also, Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 101, n. 11, 104 S.Ct. 900, 908, n. 11, 79 L.Ed.2d 67 (1984) (The Eleventh Amendment's general purpose is to foster states autonomy); Fitchik v. New Jersey Transit Rail Operations, Inc. 873 F.2d 655, 664 (3d Cir.1989) (same).

A. Scope of Eleventh Amendment:

The Eleventh Amendment immunity extends only to states, arms of the state or state officials or agents and does not extend to counties and similar municipal corporations. Mt. Healthy City School District Board of Ed. v. Doyle, 429 U.S. 274, 97 S.Ct. 568, 50 L.Ed.2d 471 (1977); In re Decalcomania Mfg. Corp., 142 B.R. 670 (Bankr. D.N.J.1990). The Supreme Court in Mt. Healthy City School District held that the determination of the nature of a political entity will, in part, depend on state law. 429 U.S. at 280, 97 S.Ct. at 572. See generally, Franceschi v. Schwartz, 57 F.3d 828, 830 (9th Cir.1995) (state constitution and statutes give the State, not counties, discretion and control over municipal court judges).

Generally, under state law, a political entity will be considered an arm of the state if that entity receives a significant amount of money from the state. Franceschi, 57 F.3d at 830. The Third Circuit in Christy v. Pennsylvania Turnpike Comm'n, 54 F.3d 1140 (3d Cir.1995), cert. denied 516 U.S. 932, 116 S.Ct. 340, 133 L.Ed.2d 238 (1995), held that a court, in determining whether Eleventh Amendment immunity extends to an entity as arm of the state, must consider whether money that would pay any judgment would come from the state treasury. Id. at 1145. Other relevant factors include: (1) the status of that agency under state law (e.g. whether the agency has been separately incorporated; whether the agency has the power to sue or be sued and to enter into contracts; whether its property is immune from state taxation; and whether the sovereign has immunized itself from responsibility for the agency's operations); and (2) the degree of autonomy the agency has over its operations. Id. at 1144. See Urbano v. Board of Managers of N.J....