In re Pederson, BAP No. NC-97-1935-PMeR

• Decision Date: 29 January 1999
• Docket Number: Bankruptcy No. 97-43754 TG.,BAP No. NC-97-1935-PMeR
• Citation: 230 BR 158
• Parties: In re Sheila Ann PEDERSON, Debtor. Randall Lawrence Weeks, Appellant, v. Sheila Ann Pederson, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

230 B.R. 158 (1999)

In re Sheila Ann PEDERSON, Debtor.

Randall Lawrence Weeks, Appellant, v. Sheila Ann Pederson, Appellee.

BAP No. NC-97-1935-PMeR, Bankruptcy No. 97-43754 TG.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted September 24, 1998.

Decided January 29, 1999.

As Amended February 25, 1999.

Randall Lawrence Weeks, Walnut Creek, CA, appellant pro se.

David Ashley Smyth, Walnut Creek, CA, for Sheila Ann Pederson.

Before: PERRIS, MEYERS and RUSSELL, Bankruptcy Judges.

OPINION

PERRIS, Bankruptcy Judge.

This appeal concerns whether 11 U.S.C. § 522(f)(1)¹ permits a debtor to avoid a judgment lien that attaches by virtue of a preexisting judgment when a debtor acquires homestead property. Judgment creditor Randall Weeks ("Weeks") appeals from the bankruptcy court's order granting debtor's motion to avoid such a judicial lien. In re Pederson, 215 B.R. 768 (Bankr.N.D.Cal. 1997). We REVERSE.

FACTS

In 1993, Weeks obtained a state court judgment against debtor. When he recorded an abstract of that judgment in Contra Costa County in 1993, debtor did not own any real property in that county. In 1994, debtor acquired title to real property in the county. Pursuant to California law, the judgment lien created by the recording of the abstract of judgment attached to her interest in the property.

Debtor filed a petition for relief under chapter 13 of the Bankruptcy Code in 1997. She moved to avoid Weeks's judicial lien. The bankruptcy court granted the motion, and Weeks appeals.

ISSUE

Whether a debtor may avoid under § 522(f)(1)(A) a judicial lien that attaches upon acquisition to debtor's interest in real property.

STANDARD OF REVIEW

The panel reviews matters of statutory construction de novo. In re Morgan, 149 B.R. 147, 150 (9th Cir. BAP 1993). Where there are no disputed material facts, whether a judicial lien is avoidable under § 522(f)(1) is a question of law that is reviewed de novo. In re Yerrington, 144 B.R. 96, 98 (9th Cir. BAP 1992), aff'd without opinion, 19 F.3d 32 (9th Cir.1994); In re Barnes, 198 B.R. 779, 781 (9th Cir. BAP 1996).

DISCUSSION

Bankruptcy Code § 522(f)(1)(A) provides that

the debtor may avoid the fixing of a judicial 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. . . .

A debtor may avoid a lien under that section if

(1) there was a fixing of a lien on an interest of the debtor in property; (2) such lien impairs an exemption to which the debtor would have been entitled; and (3) such lien is a judicial lien.

Estate of Catli v. Catli (In re Catli), 999 F.2d 1405, 1406 (9th Cir.1993). Debtor has the burden of showing that she is entitled to avoid the lien. Id.

Weeks does not dispute that the second and third requirements are met; the only issue is whether there was a fixing of a lien on a property interest of the debtor.

1. Fixing of liens on property of the debtor

Under California law, Weeks's recording of the abstract of the money judgment in Contra Costa County created a judgment lien on real property, which attached to certain of debtor's interests in real property in Contra Costa County. Cal.Code Civ.Pro. §§ 697.310(a); 697.340(a).² At the time the abstract of judgment was recorded and the lien created, debtor did not own any real property in Contra Costa County. When debtor later acquired an interest in real property in that county, which she now claims as her homestead, "the judgment lien attached to such interest at the time it was acquired." Cal.Code Civ.Pro. § 697.340(b).

In Farrey v. Sanderfoot, 500 U.S. 291, 111 S.Ct. 1825, 114 L.Ed.2d 337 (1991), the Supreme Court held that a judicial lien obtained simultaneously with an interest in property, such as under a dissolution judgment, is not avoidable, because the lien does not fix on an interest of the debtor in property. The Court noted that "fix" as used in § 522(f)(1) means to "fasten a liability upon." Id. at 296, 111 S.Ct. 1825.

The statute does not say that the debtor may undo a lien on an interest in property. Rather, the statute expressly states that the debtor may avoid "the fixing" of a lien on the debtor\'s interest in property. The gerund "fixing" refers to a temporal event. That event — the fastening of a liability — presupposes an object onto which the liability can fasten. The statute defines this pre-existing object as "an interest of the debtor in property." Therefore, unless the debtor had the property interest to which the lien attached at some point before the lien attached to that interest, he or she cannot avoid the fixing of the lien under the terms of § 522(f)(1).

Id. (footnote omitted; emphasis supplied). The critical inquiry is

whether the debtor ever possessed the interest to which the lien fixed, before it fixed. If he or she did not, § 522(f)(1) does not permit the debtor to avoid the fixing of the lien on that interest.

500 U.S. at 299, 111 S.Ct. 1825.

Weeks argues that, in this case, the judicial lien attached at the same time debtor acquired her interest in the property. Therefore, debtor's interest did not exist before the lien attached, and § 522(f)(1) does not allow avoidance of the lien. Debtor argues, and the bankruptcy court held, that a lien cannot attach until the debtor has an interest in property, and therefore debtor's interest existed before the lien attached.

2. Approaches to determining whether the lien fixed on an interest of the debtor

A. Temporal approach

The Supreme Court in Farrey adopted a purely temporal approach to determining whether a judicial lien fixed on an interest of the debtor for purposes of avoiding that lien under § 522(f)(1). According to the Court, the dispositive question is: Did the debtor possess an interest in the property at any time before the lien attached? If the answer is no, for example because the lien attached simultaneously with the debtor's acquisition of the interest in the property, § 522(f)(1) does not allow avoidance of the lien.

The Court repeated that view in Owen v. Owen, 500 U.S. 305, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991), which it decided the same day as Farrey. In Owen, the creditor obtained a judgment against the debtor at a time when the debtor did not own any real property in the county where the judgment was recorded. When the debtor later acquired property in that county, the judgment lien attached to the property. The debtor sought to avoid the lien under § 522(f)(1). The lower courts denied the motion to avoid. The Court remanded, saying that, under Florida law,

the lien may have attached simultaneously with the acquisition of the property interest. If so, it could be argued that the lien did not fix "on an interest of the debtor."

500 U.S. at 314, 111 S.Ct. 1833.

The only two circuit courts to have considered the issue have also focused on the temporal aspect of the statute, holding that, where the lien attached at the same time the debtor acquired an interest in the property, § 522(f)(1) could not be used to avoid the lien. In Owen v. Owen (In re Owen), 961 F.2d 170 (11th Cir.1992), the circuit court on remand from the Supreme Court held that,

Under Florida law, the creditor\'s recorded judgment became a lien upon the real property thereafter acquired by the judgment debtor at the same time that title was acquired in 1984. "A judgment lien . . . springs to life the minute the debtor acquires property to which it attaches." . . . The property was acquired and the lien fixed simultaneously in 1984. Therefore, there was never a fixing of a lien on an interest of the debtor, as the debtor had no property interest prior to the fixing of the lien. The Supreme Court has held that "unless the debtor had the property interest to which the lien attached at some point before the lien attached to the interest, he or she cannot avoid the fixing of the lien under the terms of § 522(f)(1)." . . .

Id. at 172 (citations omitted; emphasis in original).

The Second Circuit reached the same conclusion on facts nearly identical to the facts of this case. In Marine Midland Bank v. Scarpino (In re Scarpino), 113 F.3d 338 (2d Cir.1997), the creditor had obtained and recorded a judgment at a time when the debtor did not own any property in the county where the judgment was recorded. State law provided that a judicial lien would attach to any after-acquired property of the debtor. The debtor acquired an interest in property to which the lien attached. When the debtor filed bankruptcy and sought to avoid the judgment lien, the bankruptcy and district courts held that logic and common sense dictated that a debtor first had to acquire an interest in property before any lien could attach to it.

The Second Circuit reversed. The court said that, under Farrey, if the creation of the debtor's interest and the creation of the lien are simultaneous, the lien cannot be avoided. 113 F.3d at 340. The court saw the issue as whether, under New York law, "a judgment lien attaches at the moment of the debtor's postjudgment acquisition of real property or sometime thereafter." Id. at 341. The court read New York law as providing that there can be no interval between the debtor's postjudgment acquisition of an interest in property and the fixing of the lien arising from a previously docketed judgment. Were it otherwise, the debtor logically could transfer his interest during that interval, thereby defeating the lien of the judgment creditor. Because the docketed judgment became a lien on the after-acquired property at the time the debtor acquired it, the lien and the interest arose simultaneously, and the debtor could not use § 522(f)(1) to avoid the lien. Id.

B. Acquisition of property as independent from attachment of lien

Some of the leading bankruptcy treatise writers take a different approach, focusing on whether the debtor's interest in property was subject to or limited...