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#2269 signed 9-13-96 motion to alter or amend denied 9-26-96 (appended)

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

LARRY EUGENE DAVENPORT,

FREDA GAIL DAVENPORT,

DEBTOR(S).

NO. 96-40590-13

CHAPTER 13

MEMORANDUM OF DECISION

This matter is before the Court on the debtors' "Motion to Avoid Judicial Lien on Residential Real Estate" and an objection filed on behalf of the Kansas State Department of Social and Rehabilitation Services (SRS). The debtors appear by counsel Frank Taff. SRS appears by counsel Ward D. Rowe, Deputy District Court Trustee for the Third Judicial District of Kansas. The Court has reviewed the relevant pleadings and is now ready to rule.

When the debtors filed this chapter 13 bankruptcy case in March, Mr. Davenport owed the District Court Trustee, on behalf of SRS, child support installments that were past due under a 1979 divorce decree, as modified by a 1984 journal entry. In their schedules, the debtors claimed their home in Topeka as an exempt homestead under K.S.A. 60-2301. In June, they filed a motion for permission to sell their homestead "so as to obtain proceeds to be converted to other exempt property"; they expected to receive about $2,000 after paying the mortgage on the house and the costs of the sale. SRS objected, claiming to have a judicial lien on the house to the extent of Mr. Davenport's unpaid child support of $1,501.83. SRS cited K.S.A. 60-2202 and Brieger v. Brieger, 197 Kan. 756 (1966), as authority for this claim.

In July, the debtors filed a motion pursuant to 11 U.S.C.A. §522(f)(1) to avoid SRS's lien. The debtors also asked for attorney's fees for "the filing by SRS of a frivolous objection to the sale of this real estate." The parties agreed the home could be sold and the proceeds distributed as proposed except that the portion representing the debtors' equity should be placed in escrow until the Court could resolve the motion to avoid lien. SRS objected to the motion to avoid its lien, noting that 11 U.S.C.A. §522(c)(1) provides that "exempt property remains liable for support obligations."

The Court believes both sides have misunderstood the law that governs their dispute. In Brieger, the Kansas Supreme Court declared that a judgment providing for periodic payments of child support does not create a lien for installments not yet due, but that such installments do become judgments when they are due and unpaid and may be enforced like other judgments. 197 Kan. at 759-60. K.S.A. 60-2202(a) provides that a judgment becomes a lien on the judgment debtor's real property located in the county in which the judgment was entered and any other county in which a copy of the judgment is properly filed. However, a Kansas homestead is totally exempt from a judgment lien imposed by K.S.A. 60-2202(a), even one for past-due child support. Anderson v. Anderson, 155 Kan. 69, 73 (1942); In re Marriage of Johnson, 19 Kan. App.2d 487 (1994). A personal judgment does not become a lien against the judgment debtor's homestead. Jones v. St. Francis Hospital & School of Nursing, 225 Kan. 649, 653-54 (1979). The owner of a homestead may dispose of it and pass title to the purchaser free of the claims of his or her judgment creditors. In re Estate of Carey, 156 Kan. 590, 598 (1943). See generally Theis & Swartz, "Kansas Homestead Law," 65 J. Kan. Bar Ass'n 20-49 (April 1996) (providing extensive discussion of Kansas homestead law). SRS simply has no lien on the debtors' homestead.

SRS suggests 11 U.S.C.A. §522(c)(1) supports its claim to have a lien. It reads: "Unless the case is dismissed, property exempted under this section is not liable during or after the case for any debt of the debtor that arose . . . before the commencement of the case, except--(1) a debt of the kind specified in section 523(a)(1) or 523(a)(5) of this title." SRS argues, in effect, that this provision renders irrelevant any question that its lien impairs the debtors' homestead exemption since the property remains liable for the support obligation. This is an interesting argument that appears to have been accepted by at least one court which has considered §522(c)(1). In re Sullivan, 83 B.R. 623, 624 (Bankr.S.D.Iowa 1988). Nevertheless, the Court believes it misconstrues the provision. SRS suggests a new right to attack property exempted under §522 is created for taxing authorities, 523(a)(1), and support creditors, 523(a)(5). However, §522 establishes a rather complicated exemption scheme. Unless the debtor's state has declared its debtors are limited to the exemptions provided by state law, debtors may choose either the state exemptions or the exemptions specified in §522(d), generally referred to as the "federal exemptions." Debtors allowed such a choice would, of course, choose the federal exemptions because they protected property not protected by the applicable state exemptions. Outside of bankruptcy, state exemptions continue to protect the same property they protected in bankruptcy, but without this provision, the federal exemptions would no longer be available to debtors who had used them in bankruptcy to protect their property from any claims that had not been discharged in the bankruptcy (and even "during" the case, in the event the automatic stay has terminated). Section 522(c) extends the protection of the federal exemptions after debtors have left the protection of the bankruptcy court, with the two exceptions. Thus, the exceptions limit the post-bankruptcy protection offered by the federal exemptions, rather than affirmatively granting to the creditors whose claims are excepted from the provision rights they would not otherwise have under state law. See 2 Norton Bankruptcy Law and Practice 2d, §46.19 (1994). Since Kansas has declared Kansas debtors may not claim the federal exemptions, the provision is not applicable to Kansas debtors.

For these reasons, the Court concludes SRS does not have any lien against the debtors' homestead or its proceeds. Although SRS and its counsel would be well-advised to become more familiar with Kansas homestead law since their lien claim here at least approaches the frivolous to the extent it is based solely on Kansas law, their reliance on 11 U.S.C.A. §522(c)(1) arose from a plausible, albeit mistaken, reading of that provision. The debtors' request for sanctions will therefore be denied.

The foregoing constitutes Findings of Fact and Conclusions of Law under Rule 7052 of the Federal Rules of Bankruptcy Procedure and Rule 52(a) of the Federal Rules of Civil Procedure. A judgment based on this ruling will be entered on a separate document as required by FRBP 9021 and FRCP 58.

Dated at Topeka, Kansas, this ____ day of September, 1996.













_________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS



In Re: )

)

LARRY EUGENE DAVENPORT, ) NO. 96-40590-13

FREDA GAIL DAVENPORT, ) CHAPTER 13

)

DEBTOR(S). )

JUDGMENT ON DECISION

This matter was before the Court on the debtors' "Motion to Avoid Judicial Lien on Residential Real Estate" and an objection filed on behalf of the Kansas State Department of Social and Rehabilitation Services (SRS). The debtors appeared by counsel Frank Taff. SRS appeared by counsel Ward D. Rowe, Deputy District Court Trustee for the Third Judicial District of Kansas. The Court reviewed the relevant pleadings and issued its Memorandum of Decision resolving the dispute.

For the reasons stated in that Memorandum, judgment is hereby entered declaring that SRS has no lien on the debtors' homestead or its proceeds, and denying the debtors' request for sanctions.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of September, 1996.











__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS









In Re: )

)

LARRY EUGENE DAVENPORT, ) NO. 96-40590-13

FREDA GAIL DAVENPORT, ) CHAPTER 13

)

DEBTOR(S). )

ORDER DENYING MOTION FOR RELIEF UNDER FRCP 59 OR 60

This matter is before the Court on a motion filed on behalf of the Kansas State Department of Social and Rehabilitation Services (SRS). SRS appears by counsel Ward D. Rowe, Deputy District Court Trustee for the Third Judicial District of Kansas. The debtors have not yet responded, but the Court has reviewed the relevant pleadings and sees no need to delay its ruling.

On September 13, the Court issued a Memorandum of Decision concluding Kansas law gave SRS no lien on the debtors' homestead, and 11 U.S.C.A. §522(c) did not give SRS any rights it did not otherwise have under state law. SRS asks the Court to alter its decision under Federal Rule of Civil Procedure 59 or to grant relief from the judgment under FRCP 60,(1) contending the Court's decision is based on a misreading of Brieger v. Brieger, 197 Kan. 756 (1966), and In re Marriage of Johnson, 19 Kan. App.2d 487 (1994). It is true that Brieger held past due installments for child support become judgments which can become liens on real estate under K.S.A. 60-2202 and Johnson only said the homestead exemption protects a homestead from forced sale, apparently leaving open the possibility a judgment lien could attach to a homestead but be enforceable only in the event the judgment debtors voluntarily transferred it. However, two other Kansas cases the Court cited foreclosed even this possibility. In Jones v. St. Francis Hospital & School of Nursing, 225 Kan. 649, 653-54 (1979), the supreme court said not only that the homestead was exempt from forced sale but that, "The personal judgment did not become a lien on the homestead," id. at 653, and that when the judgment was obtained, "[n]o lien attached to [the judgment debtor's] homestead," id. at 654. In In re Estate of Casey, 156 Kan. 590 (1943), the supreme court said that it had considered "those decisions wherein it has been held that a judgment for debt is not a lien upon the homestead," and that the creditor "cannot deny [the debtor] was the owner of the land in question during his lifetime and occupied it as a homestead. He could dispose of it in his lifetime as he pleased, when he pleased, and to whom he pleased, and pass title to the purchaser free and clear of [the creditor's] claim, even though at that time it had been reduced to judgment." Id. at 598. These cases led the authors of a recent article in the Kansas Bar Journal to declare, "The general judgment lien of K.S.A. 60-2202 does not attach to the homestead of the judgment debtor." Theis & Swartz, "Kansas Homestead Law," 65 J. Kan. Bar Ass'n 20, 38 (April 1996). Clearly, as the Court stated in its September 13 Memorandum, SRS has no lien on the debtors' homestead.

When they filed for bankruptcy, the debtors declared the home they were living in to be exempt as their homestead. No objections were filed and the time for doing so has passed, so the home is exempt. Taylor v. Freeland & Kronz, 503 U.S. 638 (1992); Fed.R.Bankr.P. 4003(b). SRS has not shown or even asserted that the home became nonexempt either before or when the debtors sold it. Furthermore, when they sold it, the debtors received money, not real estate, so no lien under K.S.A. 60-2202 could attach to those proceeds.

The Court also wants to educate counsel on a procedural point. In noticing the motion to alter or for relief from judgment for objection, counsel indicated that if no objections were filed by a specified date, "said motion will be granted by entry of an order to be prepared and submitted by counsel for movant." Counsel, of course, cannot know whether the Court will alter or grant relief from a judgment it has entered whether or not any objections are filed. Such a notice should instead indicate that the Court will consider the motion to be unopposed if objections are not filed by the specified date, and may grant the requested relief without further notice. The notice used here might lead opposing parties to believe, mistakenly, that a response to the motion is mandatory.

For these reasons, SRS's motion must be denied.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of September, 1996.











__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

1. With certain alterations not relevant here, these rules are made applicable in bankruptcy by Fed. R. Bankr. P. 9023 and 9024.

 

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