In re Spore

Decision Date30 June 1989
Docket NumberNo. EU11-83-00002.,EU11-83-00002.
Citation105 BR 476
PartiesIn re Richard A. SPORE, Sandi Spore, Debtors.
CourtU.S. Bankruptcy Court — Western District of Wisconsin

Lawrence J. Kaiser, Eau Claire, Wis., for debtors.

Daniel M. Byrnes, Amery, Wis., for James and Lola Woodley.

MEMORANDUM OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW

THOMAS S. UTSCHIG, Bankruptcy Judge.

PROCEDURAL POSTURE

The debtors by their attorney Lawrence Kaiser have brought a motion for contempt against James and Lola Woodley for intentionally violating 11 U.S.C. § 362(a)(3) by filing an Application for Order of Satisfaction of Judgment Due to Discharge in Bankruptcy (Application) with the Polk County Circuit Court. The Woodleys are represented by their attorney Daniel M. Byrnes. A hearing was held on the debtors' motion for contempt on September 19, 1988, at which time the debtors agreed to dismiss the motion for contempt and, pursuant to the parties' request, the Court agreed to determine the validity and the extent of the debtors' judgment lien on the Woodleys' non-exempt real estate. The Court has jurisdiction because this is a core proceeding under 28 U.S.C. § 157(b)(2)(K).

ISSUE

The question presented by this case is whether the Order of Satisfaction signed by the Honorable James R. Erickson on August 24, 1988, pursuant to WIS. STAT. 806.19(4), voids the debtors' judgment lien on the Woodleys' non-exempt real estate pursuant to WIS. STAT. 806.21. Because of recent amendments to the statutes in question, this is a case of first impression. See infra p. 483. For the reasons stated below, the Court holds that this Court's Order of Discharge voids the debtors' judgment against the Woodleys pursuant to 11 U.S.C. § 524; and the Circuit Court's Order of Satisfaction, granted pursuant to WIS. STAT. 806.19(4), voids the debtors' lien on the Woodleys' non-exempt real estate pursuant to WIS. STAT. 806.21.

FACTS

On January 3, 1983, the debtors, Richard and Sandi Spore, filed a petition under Chapter 11 of the Bankruptcy Code. At this time, the debtors had a contract to purchase the Country Dam Supper Club, located in Polk County, Wisconsin, from James E. Woodley and Lola Woodley. On May 9, 1983, the Woodleys obtained relief from the automatic stay to foreclose on the land contract. On April 4, 1983, the debtors sued to rescind the land contract; judgment was entered in their favor against the Woodleys in the amount of $477,969.22 on April 4, 1985. The Woodleys filed a petition under Chapter 11 of the Bankruptcy Code on June 11, 1986, which was converted to a Chapter 7 proceeding on September 14, 1987. The debtors filed a motion to determine the dischargeability of their judgment against the Woodleys and the Court dismissed the action. The Woodleys received a discharge from the Bankruptcy Court on January 21, 1988. On August 23, 1988, the Woodleys filed an Application for Order of Satisfaction of Judgment Due to Discharge in Bankruptcy with the Polk County Circuit Court pursuant to WIS. STAT. 806.19(4). The next day the Honorable James R. Erickson signed an Order of Satisfaction directing the Clerk of the Circuit Court to indicate on the judgment docket that the judgment described in the attached application had been satisfied by discharge in bankruptcy.

STATUTES

The question before the Court involves two sections of the Wisconsin Statutes:

806.21. Judgment satisfied not a lien; partial satisfaction.
If a judgment is satisfied in whole or in part or as to any judgment debtor and such satisfaction docketed, such judgment shall, to the extent of such satisfaction, cease to be a lien; and any execution thereafter issued shall contain a direction to collect only the residue thereof, or to collect only from the judgment debtors remaining liable thereon. 806.19. Satisfaction of judgments.
* * * * * *
4(a) Any person who has secured a discharge in bankruptcy that renders void one or more judgments and any person interested in the real property affected by any such judgments may submit an application for an order of satisfaction of the judgments and an attached order of satisfaction to the clerk of the court in which the judgments rendered void by discharge were entered.
(b) The application and attached order shall be in substantially the following form:
APPLICATION FOR ORDER OF SATISFACTION OF JUDGMENTS DUE TO DISCHARGE IN BANKRUPTCY
----------
To: Clerk of Circuit Court ______ County 1. ______ (Name of judgment debtor) has received an order of discharge of debts under the bankruptcy laws of the United States, a copy of which is attached, and ______ (Name of judgment debtor or person interested in real property) applies for satisfaction of the following judgments:
______ (List of judgments by case name, case number, date and, if applicable, docket volume and page number.)
2.a. Copies of the schedules of debts as filed with the bankruptcy court showing each judgment creditor for each of the judgments described above are attached; or
b. Each judgment creditor for each of the judgments described above has been duly notified of the bankruptcy case in the following manner: ______ (statement of form of notice).
3. The undersigned believes that each judgment listed above has been completely voided by the discharge in bankruptcy, and no inconsistent ruling has been made by, or is being requested by any party from, the bankruptcy court.
Dated this ______ day of ______, 19__

______ (Signature) Judgment Debtor Person Interested in Real Property or Attorney for Debtor or Person

ORDER OF SATISFACTION
The clerk of circuit court is directed to indicate on the judgment docket that each judgment described in the attached application has been satisfied.
Dated this ______ day of ______, 19__.

______ (Signature) Circuit Judge

(bm) The copy of the order of discharge that is attached to the application shall be either a certified copy or a photocopy of the order in the form in which it was served on parties in interest by the bankruptcy court.
(c) Any person submitting an application and attached proposed order shall serve a copy of the completed application and attached proposed order on each judgment creditor for each of the judgments described in the application within 5 business days after the date of submission.
(d) Upon receipt of a completed application, the clerk shall submit the attached proposed order for signature by a judge after which the clerk shall satisfy of record each judgment described in the application.
DEBTORS' ARGUMENT

The debtors argue that they still have a valid judgment lien on the non-exempt property of the Woodleys. The debtors reason as follows: "As we have already seen, the discharge alone voids the judicial lien only as to personal liability. Since the Bankruptcy Code does not by itself render void the in rem aspects of a judgment, it must be concluded that the only reasonable construction of order of satisfaction under WIS. STAT. § 806.19(4) is that such order only voids the in personam aspects of such judgment unless some action has been taken under other sections of the Bankruptcy Code to have the judgment lien voided. Debtors' Brief at 5. Therefore "the only just and equitable conclusion at this time is that the judgment lien continues . . ." Debtors' Brief at 6.

The debtors' argument appears reasonable at first but closer inspection reveals intrinsic flaws in its logic and its law. The conclusion does not follow from the argument's premises and the argument's premises do not find support in the law. Accordingly, the Court disagrees with the debtors' argument.

The debtors argue that a discharge in bankruptcy voids a judicial lien as to personal liability. This is not a correct statement of the law. A discharge under section 524 of the Bankruptcy Code does not void a judicial lien in any respect; only sections 506(d), 522(f) or (g), 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code can effectively void a judgment lien. The debtors argue that a discharge in bankruptcy does not void the "in rem aspects" of a judgment. This, too, is not a correct statement of the law. A discharge does not fail to void any aspect of a judgment; a discharge in bankruptcy voids all aspects of all judgments to the extent of the debtor's personal liability. 11 U.S.C. § 524(a)(2). The debtors argue that WIS. STAT. 806.19(4) voids a judgment. Once again, this is not a correct statement of the law. WIS. STAT. 806.19(4) does not void judgments; WIS. STAT. 806.19(4) satisfies judgments.

Even if the debtors' statements of the law were correct, their argument would still fail because their conclusion does not follow from their premises. To summarize, the debtors argue that a discharge does not void the "in rem aspects" of a judgment and WIS. STAT. 806.19(4) voids the "in personam aspects" of a judgment. Therefore, the debtors' lien continues. Supra at 478. The debtors' premises all concern judgments; the debtors' conclusion concerns liens. A "judgment of itself is not a lien upon the property . . ." French Lumbering Company v. Theriault and wife, 107 Wis. 627, 633, 83 N.W. 927 (1900).1 A conclusion concerning liens does not follow from premises concerning judgments.

Finally, the debtors argue that WIS. STAT. 806.19(4) does not apply to the debtors' judgment because the judgment has not been completely voided. Debtors' Brief at 5. The debtors reason that if the bankruptcy discharge voids the "in personam aspects" of the judgment, the "in rem aspects" of the judgment still survive. If the "in rem aspects" of a judgment still survive, the judgment is not completely voided. If the judgment is not completely voided, a satisfaction may not be granted pursuant to WIS. STAT. 806.19(4) because WIS. STAT. 806.19(4) requires the applicant to state that the judgment has been completely voided. Implicit in the debtors' argument are two premises: 1) that a judgment has both an "in rem aspect" and an "in personam aspect"; 2) that in WIS. STAT. 806.19(4)(b) the...

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