In re Kudrna, Bankruptcy No. 93-01830. Adv. No. 94-6276.
| Decision Date | 04 November 1994 |
| Docket Number | Bankruptcy No. 93-01830. Adv. No. 94-6276. |
| Parties | In re Edward E. KUDRNA and Julianna E. Kudrna, Debtors. Edward E. Kudrna and Julianna E. Kudrna, Plaintiffs, The Credit Bureau, Incorporated of Georgia dba CBI Collections, Statewide Collections, Inc. and Land Title and Escrow, Inc., Defendants. |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — District of Idaho |
Kevin M. Rogers, Jerome, ID, for plaintiffs.
Michael B. Howell, Boise, ID, for defendant CBI Collections.
William A. Parsons, Parsons, Smith, Stone & Fletcher, Burley, ID, for defendant Land Title and Escrow, Inc.
Terry Lee Johnson, Twin Falls, ID, for defendant Statewide Collections, Inc.
Background.
The following undisputed facts appear in the record. In October of 1987 Plaintiffs Edward and Julianna Kudrna purchased a mobile home and the real property upon which it was located. Between January of 1990 and June 23, 1993, the date Plaintiffs filed for Chapter 7 relief, several judgments were obtained by creditors and recorded as liens against Plaintiffs' property. The judgments were entered in favor of Defendant Statewide Collections, Inc. ("Statewide") for $333.01 and Defendant CBI Collections ("CBI") for $706.50 and $1,057.29. Plaintiffs claimed a homestead exemption in the property in their bankruptcy case, to which claim no objection was filed. Plaintiffs received a discharge on September 20, 1993 and the case was closed on that same day. Plaintiffs did not attempt to avoid Defendants' judicial liens while the case was pending.
On January, 28, 1994, Plaintiffs entered into a contract to sell the mobile home and land to a third party. On February 18, 1994, a closing was held at the office of Defendant Land Title and Escrow in Jerome, Idaho ("Land Title"). The purchase price of the property was $23,900. The judicial liens of Statewide and CBI were paid by Land Title from the sale proceeds and released, to which payments Plaintiffs consented. After satisfaction of mortgages, liens, taxes and fees, Plaintiffs received only $280.16 from the sale of the property.
Thereafter, upon motion by Plaintiffs, their bankruptcy case was reopened and the present adversary proceeding was filed. Plaintiffs' Complaint seeks to avoid the judicial liens of Statewide and CBI under Section 522(f)(1) of the Bankruptcy Code, and money judgments against each for the amounts paid on the judicial liens from the sale of the home. Plaintiffs also seek a judgment against Land Title for improperly disbursing the funds to Statewide and CBI.
The action is now before the Court on cross motions for summary judgment by all parties. Disposition of the issues hinges on whether Plaintiffs may properly avoid the judicial liens at this point in time.
Disposition of the Issues.
Section 522(f)(1) of the Bankruptcy Code provides:
Statewide and CBI do not dispute that Plaintiffs could have avoided their judicial liens had Plaintiffs properly sought to do so before the case was closed, the property sold and payments made to satisfy the liens. The creditors do contest Plaintiffs' right to relief under these facts, though.
Admittedly, this Court has permitted other debtors to reopen their bankruptcy cases after closing and then have allowed the avoidance of judicial liens on the exempt property of those debtors. In re Atchley, 89 I.B.C.R. 145. Here, the Court granted Plaintiffs' motion to reopen, but the issue is whether the liens may be avoided under the Code after they have been paid.
Other courts have addressed similar issues. In Matter of Riddell, 96 B.R. 816 (Bankr.S.D.Ohio 1989), the debtor sold her homestead after she received a discharge in Chapter 7 but before attempting to avoid a judicial lien on the property. When the judgment lien creditor sought to collect on its judgment, the debtor reopened the bankruptcy case and moved to avoid the creditor's judicial lien. The court held that in order to avoid the lien three conditions must be satisfied: (1) the lien of the creditor must be against an interest of the debtor in the property; (2) the lien must impair an exemption to which the debtor would otherwise be entitled; (3) the lien must be a judicial lien. Id. at 818, citing In re Vitullo, 60 B.R. 822, 823 (D.N.J.1986). The Court did not allow avoidance of the lien holding that since the debtor no longer had an interest in the property she lacked standing to avoid the lien pursuant to the first criterion. Id., see also In re Carilli, 65 B.R. 280, 283 (Bankr.E.D.N.Y.1986); Vitullo, 60 B.R. at 824. In addition, the court held that debtor failed to meet the second criterion because the lien did not impair an exemption to which the debtor was entitled, because, again, Debtor no longer owned the property. Id.
The Court agrees with the reasoning of this line of cases and would find that Plaintiffs cannot avoid liens in property if they no longer have an interest in the property. However,...
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