In re Rittenhouse, 88-1487-C.
| Citation | 103 BR 250 |
| Decision Date | 28 August 1989 |
| Docket Number | No. 88-1487-C.,88-1487-C. |
| Parties | In re James Kent RITTENHOUSE d/b/a J & K Rittenhouse. |
| Court | U.S. District Court — District of Kansas |
Lynn D. Allison, Wichita, Kan., for debtor.
L.H. Goossen, Newton, Kan., for appellant.
Edward J. Nazar, Wichita, Kan., trustee.
Carol A. Park, Wichita, Kan., U.S. trustee.
The case comes before this court on appeal of the bankruptcy court's memorandum of decision and judgment of decision which were filed August 4, 1988. The bankruptcy court therein granted the motion of debtor, James Kent Rittenhouse, and avoided a lien on his homestead held by his former spouse, Nancy Carol Rittenhouse. Mrs. Rittenhouse appeals the decision arguing the bankruptcy court erred in holding that Maus v. Maus, 837 F.2d 935 (10th Cir.1988) was strictly controlling and, therefore, she had an avoidable judicial lien under 11 U.S.C. § 522(f)(1). Appellant does not object to the bankruptcy court's findings of fact and argues only that the divorce decree and the Maus decision were misinterpreted.
As husband and wife, James and Nancy Rittenhouse acquired title on January 30, 1976, to what became their homestead. They were divorced on September 9, 1981, in the District Court of Hodgeman County, Kansas, Case No. 81-DR-6. By a journal entry filed December 28, 1982, the state district court divided the parties' property, stating in relevant part:
The debtor, James Kent Rittenhouse, filed his voluntary petition under Chapter 12 of the Bankruptcy Code on June 22, 1987. Debtor exempted as his homestead the property at issue and listed as a secured creditor his former spouse.
The debtor filed an application to avoid the interest of Mrs. Rittenhouse as a judicial lien. She timely objected to the application claiming she retained a one-half interest in the equity of the property which was not a judicial lien. The bankruptcy court interpreted the divorce decree as clearly creating only a lien upon the residence in favor of Nancy Rittenhouse. The bankruptcy court also construed Maus to hold "that under Kansas law any lien created by a divorce decree was a `judicial lien' and that one spouse could avoid the other spouse's judicial lien on a claimed homestead property." (citations omitted). From these premises, the bankruptcy court concluded that Mrs. Rittenhouse's interest in the debtor's homestead was a judicial lien avoidable under § 522(f)(1).
The court's standard of review is de novo as the only issues on appeal involve the bankruptcy court's legal determinations. In re Branding Iron Motel, Inc., 798 F.2d 396, 399-400 (10th Cir.1986).
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 exception to which the debtor would have been entitled under subsection (b) of this section homestead, if such lien is — (1) a judicial lien. . . ." 11 U.S.C. § 522(f)(1). This relief is available if the debtor proves three elements: 1) the lien was fixed on an interest of the debtor in property; 2) the lien impairs an exemption to which the debtor is otherwise entitled; and 3) the lien is a judicial lien. In re Conway, 93 B.R. 731, 733 (Bankr.N.D.Okl.1988); In re Hart, 50 B.R. 956, 960 (Bankr.D.Nev.1985). The Bankruptcy Code defines a judicial lien as a "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding. . . ." 11 U.S.C.A. § 101(32) (West Supp.1989).
With some trepidation, the court wades into waters muddied before it with little hope of settling anything but the instant dispute. Courts have had "some difficulty in defining precisely the interest of an exspouse arising out of a property settlement during a divorce proceeding." In re Donahue, 862 F.2d 259, 262 (10th Cir.1988) (citation omitted). "Many courts have struggled to find theories under which a lien to enforce a property settlement survives bankruptcy." Maus v. Maus, 837 F.2d at 939. Three of the "survival" theories identified and employed by the courts are equitable lien, consensual lien, and a lien which does not attach to debtor's existing property interest. After briefly summarizing the status of these theories in light of Tenth Circuit precedent, the court will determine which of the theories the appellant advances. Finally, the court will discern what interests were created by the journal entry of divorce and whether they fit the theory asserted by plaintiff.
In Maus, the Tenth Circuit addressed each of the three theories and found them inapplicable to the facts of the case. Because the property settlement agreement granted the property to the wife "free and clear of all claims" of the husband, there was no agreement to create any type of consensual lien on the property to enforce the property settlement. 837 F.2d at 938-37. Also observing that the divorce decree did not expressly grant a lien, the Tenth Circuit reasoned that "if the decree imposes a lien at all, it is a judgment lien under Kan.Stat.Ann. § 60-2202(a)." 837 F.2d at 939. Again in reliance upon the fact that the decree awarded one spouse title outright, "free and clear" of the other spouse's claims, the Tenth Circuit concluded the judicial lien necessarily attached to the debtor/spouse's interest. 837 F.2d at 939. The court was critical of the theory espoused by the Eighth Circuit in Boyd v. Robinson, 741 F.2d 1112 (8th Cir.1984), that the lien attaches to the preexisting interest of the creditor/spouse rather than to the debtor/spouse's interest. 837 F.2d at 939. The court remarked: "The problem with this convoluted theory is that, as the dissent in Boyd points out, (citation omitted), the decree gives one party title outright and that is the interest to which the lien attaches." Id. The Tenth Circuit likewise rejected the equitable mortgage theory since there were no findings of fact to sustain such relief. 837 F.2d at 939. The Maus decision is undoubtedly susceptible, as shown by the bankruptcy court's decision in the present case, to a broad and possibly expansive construction which would support the avoidance of any lien, not consensual, created by the divorce decree.
In their next brush with the "survival" theories, the Tenth Circuit stepped back from the definitive statements in Maus and circumscribed it as precedent limited for the most part to its unique facts. In re Donahue, 862 F.2d 259 (10th Cir.1988). The terms of this divorce decree, entered by another Kansas district court, awarded a money judgment against the husband (Donahue) and conveyed certain real property to him "subject to any indebtedness thereon and to the judgment to plaintiff wife, Parker. . . ." 862 F.2d at 260. Both the bankruptcy court and the district court found the former wife to be an unsecured creditor of the debtor/former husband. While not deciding the issue of avoidability of a lien, the Tenth Circuit employed the same analysis in discerning the nature of the interest created by the divorce decree. 862 F.2d at 262.
After summarizing Maus's holdings on each of the three theories, the court then narrowly construed them. As to whether a lien created by the divorce decree attaches to the debtor/spouse's interest, the Tenth Circuit noted the conclusion in Maus that "`any lien in this case attached to an interest of the debtor within the meaning of section 522(f)(1).'" 862 F.2d at 264 (quoting Maus, 837 F.2d at 939)). In a footnote following this quotation, the court resuscitated this theory thought dead after Maus:
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