In re Cooper
| Citation | 202 BR 319 |
| Decision Date | 12 October 1995 |
| Docket Number | Bankruptcy No. 94-8312-8G7. |
| Parties | In re Miller COOPER, Debtor. |
| Court | United States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Middle District of Florida |
Buddy D. Ford, Tampa, FL, for Debtor.
Eugene V. Allen, Trustee, Largo, FL.
Lee Wm. Atkinson, Clearwater, FL, for Gibson Group, Ltd.
George L. Hayes, III, St. Petersburg, FL.
ORDER ON MOTIONS FOR SUMMARY JUDGMENT, MOTION TO AVOID LIEN, AND MOTION FOR RELIEF FROM STAY
THIS CASE came before the Court to consider the Motion for Summary Judgment filed by Miller Cooper (Debtor), and the Answer in Opposition to Motion for Summary Judgment, Cross Motion for Summary Judgment, and Incorporated Memorandum of Law filed by Gibson Group, Ltd. of Pinellas County, Inc. (Gibson). The Debtor's motion for summary judgment requests the Court to enter summary judgment in his favor on his Motion to Avoid Judicial Lien. Gibson opposes the Debtor's motion for summary judgment, and requests the Court to enter summary judgment in its favor. Gibson has also filed a Motion for Relief from Stay, requesting relief from the automatic stay so that it may pursue its state court remedies against property. These motions relate to a judicial lien asserted by Gibson against certain real property owned by the Debtor in Pinellas County, Florida. The Debtor claims that the real property is his homestead and that he is entitled to avoid the lien pursuant to Section 522(f) of the Bankruptcy Code. Gibson contends that the lien cannot be avoided under Section 522(f) because it attached to the real property before the property acquired its homestead status and is therefore excepted from the protection granted under Florida's homestead exemption laws.
Although many facts are in dispute, the following facts appear from the record. On August 10, 1992, the Debtor purchased a parcel of unimproved real property in Pinellas County, Florida, located at 961 Landmark Circle, Tierre Verde, Florida, and described as follows:
Lot 5, Tierre Verde Landmark, according to the plat thereof as recorded in Plat Book # 107, Pages 85 and 86, Public Records of Pinellas County, Florida. Parcel No. 20-32-26-90825-000-0050.
At the time he purchased the property, the Debtor, a general contractor, intended to construct a single family home on the lot which would serve as his homestead. In fact, the Debtor had already engaged an engineer and draftsman to plan the construction of the home. On November 3, 1992, the Debtor obtained a building permit for the home, and construction commenced shortly thereafter. In February of 1993, the Debtor filed an Affidavit with the Pinellas County Building Department stating that he was constructing the home for his own occupancy, and not for sale to third parties.
Until April of 1993, the Debtor lived in a condominium that he leased from its owner. The lease expired in April of 1993, and the Debtor did not renew the lease in view of the construction of his home. Because construction of the home was not complete when his condominium lease expired, the Debtor temporarily stored many of his personal belongings with a friend in Lakeland. Additionally, the Debtor married in May of 1993, and he stayed in his wife's condominium in Clearwater during this period, when not travelling out of town on business.
In mid-June, 1993, the Debtor moved some of his possessions into the home. The Debtor also began occupying the home in June, although perhaps intermittently.
On July 15, 1993, Gibson obtained a Final Judgment against the Debtor in the Circuit Court of Pinellas County, Florida, in the principal amount of $485,016.49, and the Final Judgment was recorded in the public records of Pinellas County on July 15, 1993.1
Construction of the Debtor's residence was also completed in July of 1993. On September 30, 1993, the Pinellas County Department of Building Inspection issued a Certificate of Occupancy with respect to the home which certified that the residence was in compliance with the required county ordinances. While the Debtor and his family may have moved into the home earlier, they clearly resided on the property as their home after September 30, 1993.2
On August 22, 1994, Gibson obtained an Amended Final Judgment against the Debtor in the amount of $526,759.58, which was recorded in the public records of Pinellas County on August 23, 1994. Gibson also initiated proceedings to execute on the property, and scheduled a hearing on these Proceedings Supplementary in state court.
The Debtor filed his voluntary petition under Chapter 7 of the Bankruptcy Code on August 26, 1994, and claimed the residence as exempt under Florida's homestead law. No objections were filed to the claim of exemption within the time permitted for filing such objections, and it is undisputed that the property was the Debtor's homestead at the time that the Bankruptcy Petition was filed.
Gibson filed its Motion for Relief from Automatic Stay and asserted that it held a valid lien on the property, that the Debtor did not have any equity in the property, and that Gibson therefore is entitled to relief from the automatic stay to permit it to proceed with its litigation in state court.
The Debtor subsequently filed a Motion to Avoid Judgment Lien of Gibson and asserted that the property was the Debtor's homestead at the time that Gibson recorded the judgment, that the property had been properly claimed as exempt, and that the judgment did not constitute a lien on the property. The Debtor contends that he is entitled to avoid the lien claimed by Gibson, pursuant to Section 522(f) of the Bankruptcy Code.
Both parties have filed motions for summary judgment. Given the status of the law, the Court believes that it should resolve the matter at this time, although the Court makes no determination of the exact point in time that the Debtor's property acquired its homestead status.
Section 522(f) provides that a 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)." The section specifically applies to judicial liens.
Subsection (b) of Section 522 contains the provisions which determine the nature and extent of the property that an individual debtor may exempt from property of the estate. Subsection (b) states that a debtor may exempt from property of the estate the exemptions listed in subsection (d) unless applicable state law specifically does not so authorize, and in such event the debtor may exempt from property of the estate property that is exempt under applicable state law. Florida law specifically provides that residents of Florida shall not be entitled to the federal exemptions of subsection (d). § 222.20, Florida Statutes. Consequently, in bankruptcy cases involving debtors who are residents of Florida, debtors may exempt from property of the estate pursuant to § 522(b) property that is exempt under Florida law.
Article X, Section 4 of the Florida Constitution provides that a homestead "shall be exempt from forced sale under process of any court, and no judgment, decree or execution shall be a lien thereon," except for circumstances not present in this case. It is well-established in Florida, however, that homestead property is not exempt from the lien of a judgment which attached to the property prior to the property acquiring its homestead status. See Bessemer v. Gersten, 381 So.2d 1344 (Fla.1980). Pre-existing liens, therefore, are excepted from Florida's homestead exemption.
The Debtor has claimed his homestead property as exempt, and now seeks to avoid the judicial lien asserted by Gibson.
For a debtor to avoid a judicial lien under Section 522(f), two elements must be present: first, the lien at issue must have fixed on an interest of the debtor in property, and second, the lien must impair an exemption to which the debtor would have been entitled. Both elements must be present for the lien to be avoided.
Resolution of this case is controlled by the decisions of the United States Supreme Court in Owen v. Owen, 500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991), and, on remand, the Eleventh Circuit Court of Appeals in In re Owen, Owen v. Owen, 961 F.2d 170 (11th Cir.1992), cert. den. 506 U.S. 1022, 113 S.Ct. 659, 121 L.Ed.2d 584 (1992).
In the Owen case, which arose under Florida law, the debtor's former wife obtained a judgment against the debtor in 1975 and recorded the judgment in 1976. The debtor did not own any real property at the time that the judgment was recorded. In 1984, the debtor purchased a condominium in Sarasota County, Florida. At the time he purchased the condominium, Florida's homestead exemption law did not apply to condominiums, so the existing judgment immediately attached to the property. One year later, Florida's homestead exemption law was amended to extend the exemption to condominiums. The debtor subsequently filed a petition under Chapter 7 of the Bankruptcy Code, claimed the condominium as exempt, and filed a motion to avoid the lien under Section 522(f). Owen, 500 U.S. at 305-07 and 307-09, 111 S.Ct. at 1834 and 1835.
In Owen, the Supreme Court specifically "assumed without deciding" that the lien at issue fixed "on an interest of the debtor in property." Id. at 309, 111 S.Ct. at 1836. Consequently, the Supreme Court addressed only the second element set forth in Section 522(f) and considered whether the lien impaired "an exemption to which the debtor would have been entitled." With respect to this element, the Court concluded that the statute should be interpreted to apply to exemptions to which the debtor would have been entitled, hypothetically rather than actually, but for the lien at issue:
The phrase denotes a state of affairs that is conceived or hypothetical, rather than...
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