In re Zoernack

Decision Date24 January 2003
Docket NumberNo. 00-07560-8W7.,00-07560-8W7.
Citation289 B.R. 220
PartiesIn re Kirsten ZOERNACK, a/k/a Kirsten Becker, Debtor.
CourtU.S. Bankruptcy Court — Middle District of Florida

Stanley M. Krawetz, P.A., Wallace, Browning, Clayton & Krawetz, Sarasota, FL, pro se.

David L. Schrader, Tampa, FL, for Debtor.

Douglas N. Menchise, Clearwater, FL, trustee.

MEMORANDUM DECISION DENYING DEBTOR'S MOTION TO AVOID CHARGING LIEN OF STANLEY M. KRAWETZ, P.A.

MICHAEL G. WILLIAMSON, Bankruptcy Judge.

This case came on for hearing on November 14, 2002 ("Hearing"), on the Debtor's Motion to Avoid Charging Lien ("Motion")(Doc. No.78) of Stanley M. Krawetz, P.A. ("Krawetz, P.A."). For the following reasons, and as announced in open court at the Hearing, the Motion is denied.

Findings of Fact

Krawetz, P.A. is the law firm that formerly represented the Debtor in this bankruptcy case and served as her counsel in a state court action for dissolution of her marriage with Steven Zoernack, who is also a debtor before this court with his own pending chapter 7 case (Case No. 99-19684-7). These two cases have a long and contentious history, but, fortunately, the facts relevant to the Motion can be briefly summarized.

Prior to the entry of the final judgment of dissolution of marriage on May 7, 2002, the Zoernacks' primary marital asset was a single-family home located in Casey Key Florida ("Home"). The title to the Home was in the name of the Debtor. However, the parties separated prior to the commencement of the Debtor's bankruptcy case, and the Debtor no longer occupied the Home when her bankruptcy case was filed. Nevertheless, the Debtor claimed the Home as exempt in her bankruptcy schedules. Thereafter, Douglas Menchise, the Chapter 7 Trustee in this case ("Trustee"), filed an objection to the Debtor's claim of exemption with respect to the Home ("Homestead Objection"), arguing in essence that the Debtor had abandoned her homestead when she ceased to reside there. The Debtor responded that she had been forcibly removed from the Home and had never voluntarily abandoned it.

Subject to a future resolution of the Homestead Objection and with the consent of all parties, the Home was sold during the pendency of this case for approximately $3.3 million. The net proceeds from the sale after payment of the various mortgages, certain liens, and real estate taxes — approximately $371,000 ("Funds") — were paid to the Trustee. Soon after the sale of the Home, the Trustee and the Debtor reached a compromise with respect to the Homestead Objection under which the Home was allowed as exempt. However, the allocation of the proceeds among various claimants remained in dispute as of the date of the Hearing.

Krawetz, P.A. was one of those seeking payment from the Funds. It filed an amended application for payment of fees (Doc. No. 72) ("Application") in which it asserted that it was entitled to a charging lien against the Funds in the amount of $52,374.79 ("Charging Lien"). The Charging Lien had been granted to Krawetz, P.A. by the state court judge ("State Court") presiding over the marital dissolution proceedings through the entry of a Final Judgment Granting Charging Lien ("State Court Judgment"). The State Court Judgment provides, in relevant part, that:

B. The law office of STANLEY M. KRAWETZ, P.A. is granted a Charging Lien against KIRSTEN ZOERNACK in the amount of $52,374.79.

C. Judgment is hereby entered in the amount of $52,374.79. This judgment shall attach to, encumber, and be a lien upon any and all proceeds and other entitlements and/or recoveries that the Wife receives or retains in or as a result of the instant litigation, or any proceeds received by KIRSTEN ZOERNACK against which let execution issue.

State Court Judgment at 2.

Although the Debtor had "consented to the entry of a Final Judgment" imposing the Charging Lien in the state court proceedings, State Court Judgment at 1, the Debtor responded to Krawetz, P.A.'s Application by filing the Motion, challenging the validity of and, consequently, seeking to avoid the Charging Lien.

Conclusions of Law

In the Motion, the Debtor acknowledges that a valid charging lien is not a judicial lien subject to avoidance under section 522(f)(1). Motion, ¶ 9. However, the Debtor contends that the lien created by the State Court Judgment is nevertheless avoidable under that section because it was "wrongfully entered" by the State Court. Motion ¶¶ 9-13. The relief sought by the Debtor in the Motion is premised on the proposition that this Court is not bound by the State Court Judgment granting the Charging Lien to Krawetz, P.A. In support of this argument, the Debtor relies on Weed v. Washington (In re Washington), 242 F.3d 1320 (11th Cir.2001) ("Washington"). At first blush, this case appears to support the Debtor's position that this Court may review the underlying merits of the Charging Lien, and if this Court determines that the Charging Lien is not valid under Florida law, then the lien created by the State Court Judgment would be subject to avoidance under section 522(f)(1).

In Washington, at issue was the avoidability of an attorney charging lien under section 522(f). The Eleventh Circuit affirmed District Court Judge Susan Bucklew's ("District Court") conclusion that charging liens arise by operation of law, without judicial action, and are thus not obtained through the judicial process — that is, they are not "judicial liens" for purposes of section 522(f)(1). However, the Eleventh Circuit went further; it vacated the District Court's order and remanded the case to the District Court to "address Washington's arguments that the lien failed to meet the requirements of a valid attorney's charging lien and that charging liens are insufficient to create an interest in real property under Florida law." Id. at 1325. The Eleventh Circuit remanded the case for this purpose notwithstanding the fact that the Charging Lien in Washington had been recognized and approved in a final judgment by a state court of competent jurisdiction.

The Debtor argues in this case that in essence Washington stands for the proposition that — notwithstanding the entry of a final judgment by a state court — a federal court may review the conclusions of the state court and, if it determines that the state court erred in entering the judgment, disregard the conclusions and findings of the state court contained in a final judgment.1 As discussed below, this interpretation of the holding in Washington would mean that principles of collateral estoppel, res judicata, and the Rooker-Feldman doctrine2 were overruled by the Eleventh Circuit when it entered its decision in Washington. This Court does not read Washington to have such far-reaching consequences for reasons discussed below.

First, the preclusive effect of the State Court Judgment under the doctrines of collateral estoppel or res judicata and the applicability of the Rooker-Feldman doctrine were not raised by the parties or dealt with in any way by the Washington court in its decision. It is noteworthy that the Eleventh Circuit made a point in the decision that, "[t]he inadequacy of the briefing to assist the Court in resolving the state law issues presented by this appeal further warrants our remand to the district court...." Id. at fn. 3. Indeed, both of the parties in the appeal were pro se. The Eleventh Circuit also noted that the debtor appellant filed the same brief as was used in the District Court below, and the appellee failed to file any brief at all. Id.

It also appears that the only "justiciable issue" initially on appeal to the District Court was the narrow legal issue of whether an attorney's charging lien constituted an avoidable "judicial lien." Order of District Court on remand of June 28, 2001, Doc. No. 67 at 4, District Court Case No. 8:98-Civ-2142-T-24E ("District Court Decision on Remand"). The District Court did not consider the issue of the validity of the attorney appellant's charging lien to be in dispute, and, accordingly, did not decide the issue in the initial appeal of the bankruptcy court's decision. Ordinarily, the general appellate rule is that an issue raised for the first time before an appellate court is not considered by that appellate court. Etienne v. Inter-County Security Corp., 173 F.3d 1372, 1375 (11th Cir.1999); Roberts v. Commissioner of Internal Revenue, 175 F.3d 889, 898, fn. 11 (11th Cir.1999).

It would appear, therefore, that the Eleventh Circuit's decision to remand the case for further consideration of the validity of the charging lien was not a holding in its decision. Clearly, it was in no way pivotal or necessary to its determination that a charging lien is not avoidable under section 522(f). As such, it is at best "dictum" and has no precedential effect. Denno v. School Board of Volusia County, 218 F.3d 1267, 1283 (11th Cir.2000); see also New Port Largo, Inc. v. Monroe County, 985 F.2d 1488, 1500 n. 7 (11th Cir.1993)(Edmondson, J., concurring)(suggesting that dictum is a statement not squarely presented by the facts and one not absolutely necessary to the decision of the concrete case before the court).

A second reason that this Court does not read Washington so broadly arises from what occurred when the case was remanded to the District Court. On remand, the District Court, citing to Community Bank of Homestead v. Torcise, 162 F.3d 1084, 1086 (11th Cir.1998), held that the doctrine of collateral estoppel prevented the debtor in Washington from asserting the charging lien was invalid because the state court had already ruled on this very issue. District Court Decision on Remand at 5.

Indeed, the Full Faith and Credit Act, 28 U.S.C. § 1738, compels a federal court to accord a state court judgment the same preclusive effect that it would be accorded by the rendering state court. In re Keene, 135 B.R. 162 (Bankr.S.D.Fla.1991) (citing Marrese v....

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