Lehman v. VisionSpan Inc.
| Decision Date | 18 February 2000 |
| Docket Number | No. 99-12545,99-12545 |
| Citation | 205 F.3d 1255 |
| Parties | (11th Cir. 2000) In re Lowell W. LEHMAN, Jr., Debtor. Lowell W. Lehman, Jr., Plaintiff-Appellant, v. VisionSpan, Inc., Defendant-Appellee. Non-Argument Calendar. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
Appeal from the United States District Court for the Northern District of Georgia.
Before COX and WILSON, Circuit Judges, and RONEY, Senior Circuit Judge.
In this bankruptcy case, appellant debtor Lowell Lehman sought complete avoidance of a judicial lien on his home in the amount of $53,878.19 held by appellee VisionSpan, Inc. The bankruptcy judge, affirmed by the district court, held that only part of the lien could be avoided and that $24,6881 of that lien could not be avoided. We affirm.
This case involves interpretation of the Bankruptcy Code. Although the precise terms of the applicable provision would call for avoidance of the entire lien, the bankruptcy court reasoned that such a reading would produce an absurd result and departed from those precise terms. See In re Lehman, 223 B.R. 32, 34-35 (Bankr.N.D.Ga.1998). We have held this to be a legitimate approach to statutory interpretation. Although statutory interpretation begins with the language of the statute itself, see In re Southeast Banking Corp., 156 F.3d 1114, 1120 (11th Cir.1998) a court may look beyond the plain language of a statute if applying the plain language would produce an absurd result, see Hughey v. JMS Dev. Corp., 78 F.3d 1523, 1529 (11th Cir.1996). There was no error in the decision that a literal application of the language of the statute would violate Congressional intent and would produce an absurd result.
Briefly, these are the undisputed facts. On November 13, 1997, Lowell Lehman filed a case under Chapter 7 of the Bankruptcy Code. At the time of the filing, VisionSpan had a judgment lien against Lehman's property in the amount of $53,878.19. Lehman and his wife, as tenants in common, owned a home in Atlanta, Georgia valued at $225,000. Lehman's wife is not in bankruptcy and is not a debtor of VisionSpan. Lehman had only an undivided fifty-percent interest in the home. NationsBank held a first-priority mortgage on the entire interest in the home in the amount of $165,000.
Section 522 of the Bankruptcy Code, 11 U.S.C. 522, sets out a statutory scheme permitting a debtor in bankruptcy to exempt certain property from his or her bankruptcy estate. For property to qualify for an exemption, it must first be part of the bankruptcy estate. If the debtor has mortgaged his or her property, the debtor has retained only an equitable interest in the property. Absent a provision providing otherwise, only that equitable interest would be property of the estate and eligible for an exemption.
Section 522(f), however, provides a special mechanism for the debtor to "avoid" certain liens on property, thereby bringing the whole property within the bankruptcy estate and potentially qualifying it for an exemption. See generally Owen v. Owen, 500 U.S. 305, 308-09, 111 S.Ct. 1833, 114 L.Ed.2d 350 (1991). To accomplish this purpose, 522(f) provides, in basic part, that a debtor may "avoid" a lien to the extent it "impairs" an exemption. This amount is calculated as follows:
(2)(A) For the purposes of this subsection, a lien shall be considered to impair an exemption to the extent that the sum of-
(i) the lien;
(ii) all other liens on the property; and
(iii) the amount of the exemption that the debtor could claim if there were no liens on the property;
exceeds the value that the debtor's interest in the property would have in the absence of any liens.
In this case, under the express language of the statute, the following calculation would be made:
*Add (i) $53,878.19 (the amount of the VisionSpan judgment lien); (ii) $165,000 (the amount of the mortgage held by NationsBank); and (iii) $5,312 (the amount of the exemption claimed by Lehman). The total of these figures is $224,190.19.
*The value of Lehman's "interest in the property ... in the absence of any liens" is $112,500.
*$224,190.19 "exceeds" $112,500 by $111,690.
Therefore, VisionSpan's lien would be "considered to impair" Lehman's exemption by $111,690 and Lehman could avoid it to that extent, which would permit Lehman to avoid all of VisionSpan's lien of $53,878.19.
This would be the consequence of applying the precise terms of the statute: Lehman, as shown above, would avoid all of VisionSpan's lien. Lehman, however, would still have equity in the property of $30,000 (derived by subtracting the $165,000 amount of the NationsBank mortgage from the $225,000 property value and dividing by two, to account for Lehman's one-half ownership of the property). In effect, Lehman would shield his entire equity of $30,000 from VisionSpan's lien of $53,878.19, even though Lehman was entitled to a debtor's exemption of only $5,312.00.
Concluding this result would provide Lehman a windfall and would be "absurd," the bankruptcy court took the following common sense approach:
The value of the entire property is $225,000.00. Deducting the mortgage, $165,000.00, leaves $60,000.00 equity in the property, not accounting for VisionSpan's lien. The Debtor's half-interest in the property is therefore worth $30,000.00. After deducting the debtor's exemption, $5,312.00, there is remaining in the property $24,688.00. [VisionSpan's] lien is in the amount of $53,879.00, which clearly impairs the Debtor's exemption. [VisionSpan] is, however, entitled to retain its lien on the unencumbered, nonexempt portion of the Debtor's property, in the amount of $24,688.00.
In effect, the court was simply substituting, in the statutory formula, the total value of the home ($225,000) in place of Lehman's interest in the home in the absence of any liens ($112,500). The same outcome would also be produced by substituting the value of the NationsBank mortgage attributable to Lehman's share of the property ($82,500), in place of the value of the mortgage on the whole property ($165,000).
Although a literal reading of...
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