In re Scott
Decision Date | 27 July 1981 |
Docket Number | Bankruptcy No. BK-81-00653,Adv. No. 81-087. |
Parties | In re Vella Ernestine SCOTT, aka Vella Ernestine Cowan, Debtor. Otis B. COWAN, Plaintiff, v. Vella Ernestine COWAN, Defendant. |
Court | United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Western District of Oklahoma |
Harley E. Venters, Oklahoma City, Okl., for plaintiff, Otis B. Cowan.
Michael Ray Dayton, Del City, Okl., for defendant-debtor, Vella Ernestine Cowan.
This adversary proceeding was commenced by Plaintiff's Complaint alleging a security interest in the defendant-debtor's homestead and requesting an order from this Court lifting the automatic stay regarding Plaintiff's pending foreclosure action thereon in state court. In response to Plaintiff's Complaint Defendant filed a Cross-Complaint seeking to avoid Plaintiff's lien under the provisions of 11 U.S.C. § 522(f).
Plaintiff Otis B. Cowan and Defendant-Debtor Vella E. Cowan were married on March 25, 1966. During their marriage they acquired a home in joint tenancy and resided therein.
On October 11, 1979, the parties obtained a divorce. At the time of the divorce, the parties' equity in the home was approximately $30,000.00. The divorce decree provided in part:
According to the testimony of the various witnesses the aforementioned terms of the Divorce Decree were the result of an agreement between the parties. This agreement was negotiated in an effort to arrive at a fair and equitable division of jointly acquired property without necessitating protracted litigation and its accompanying expense.
After the divorce, Defendant continued to reside in the home but made only one payment to Plaintiff on the $8,500.00 debt. On October 17, 1980, Plaintiff commenced a foreclosure action in state court.
On April 6, 1981, before Plaintiff's foreclosure action was tried, Defendant filed her voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code. Defendant now seeks to avoid Plaintiff's lien on the home under the provisions of 11 U.S.C. § 522(f).
Defendant relies on 11 U.S.C. § 522(f) which provides in pertinent part:
Thus, in order for the defendant to prevail under § 522(f), three conditions must be met. First, the lien sought to be avoided must have fixed "on an interest of the debtor in property." Second, the lien must impair "an exemption to which the debtor would have been entitled." And third, the lien must be a "judicial lien."
In House Report 95-595, 95th Cong., 1st Sess., 1977, p. 126, U.S.Code Cong. & Admin.News 1978, pp. 5787, 6087, we find an indication of the congressional reasoning behind § 522(f):
It is clear from the House Report that the intent behind the judicial lien avoidance provisions of § 522(f) is to allow the removal of judicial liens obtained by creditors on a debtor's exempt property. The implication of the House Report, as well as the language of § 522(f) itself which permits the avoidance of "the fixing of a lien on an interest of the debtor in property," is that Congress intended the avoidance of liens that become fixed after the debtor acquired the interest upon which they became fixed.
Such is not the case here. The document which gave rise to Plaintiff's lien was the Divorce Decree. It was this same document which operated to convey Plaintiff's interest in the homestead to Defendant. Thus, it may be said that the property was conveyed to Defendant subject to Plaintiff's lien to secure the payment of Plaintiff's share of the property settlement.
This situation is somewhat analogous to the situation where property is conveyed subject to a lien to secure the purchase price thereof. According to 31 Okl.Stat. Ann. § 5:
Defendant claims that Plaintiff's lien impairs an exemption to which she would have been entitled. 12 Okl.Stat.Ann. § 1278 provides for property divisions between the parties to divorce actions as follows in applicable part:
"... As to such property, whether real or personal, which has been acquired by the parties jointly during their marriage, whether the title thereto be in either or both of said parties, the court shall make such division between the parties as may appear just and reasonable, by a division of the property in kind, or by setting the same apart to one of the parties, and requiring the other thereof to pay such sum as may be just and proper to effect a fair and just division thereof...."
The above quoted language has been interpreted in connection with real property division by the Oklahoma Supreme Court in Lawson v. Lawson, 295 P.2d 769 (Okl.1956):
(Emphasis added)
Thus, the Oklahoma Supreme Court has specifically approved the establishment of a lien on property awarded to one party in a divorce action to secure payment by that party of a sum of money awarded to the opposing party.
As to homestead considerations, in Oklahoma it is recognized that the homestead may be treated as other property when a division of property is made in a divorce proceeding. Williams v. Williams, 428 P.2d 218 (Okl.1967). In Haven v. Trammell, 79 Okl. 309, 193 P. 631 (1920), a divorce decree awarded alimony, attorney's fees and costs to the wife and imposed a lien therefor on all real estate owned by the husband within Oklahoma. Execution was subsequently issued, pursuant to which the husband's lands were levied upon. The husband then attempted to prevent the sale thereof claiming that the land seized under the execution was his homestead and therefore not subject to sale to satisfy any execution or judgment. The Oklahoma Supreme Court, however, allowed the sale to proceed saying:
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