In re Mannlein

Chapter 7

Hyrum M. Zeyer, PETERSON ZEYER LAW, Boise, Idaho, Attorney for Debtor.

Merrily K. Munther, MERRILY MUNTHER, PLLC, McCall, Idaho, Attorney for Pamela Obenauer.

MEMORANDUM OF DECISION

HON. BENJAMIN P. HURSH U.S. BANKRUPTCY JUDGE

I. Introduction

In this reopened chapter 7^[1] case, the Court must review and construe various pleadings filed more than 10 years ago in Philip Mannlein's ("Debtor") divorce case^[2] to determine whether judgment liens may be avoided pursuant to § 522(f)(1)(A) as requested by Debtor. Pamela Obenauer ("Obenauer") objects to the relief requested arguing, inter alia, the judgments correspond to domestic support obligations. Finding Debtor failed to establish that the judgments do not represent domestic support obligations, the Court holds the liens underlying the judgments are not subject to avoidance.

II. Procedural Background

In 2023, Debtor moved to re-open his case to file the lien avoidance motions, explaining that after the case closed he discovered "judgment liens were recorded against his domicile[.]"^[3]The Court re-opened the case and shortly after Debtor filed motions to avoid the liens under § 522(f)(1)(A).^[4] Obenauer objected to the motions.^[5]

The parties submitted briefs in support of their positions.^[6] The Court held an evidentiary hearing where Debtor and Obenauer testified.^[7] Having considered the evidence, written submissions, and arguments made by the parties, this decision sets forth the Court's findings, conclusions, and reasons for its disposition of the motions. Rules 7052 and 9014.

III. Factual Background

A. Prepetition events

Debtor and Obenauer were married in 1998 and had two children together. Obenauer filed for divorce in April 2002 and the divorce decree was entered in March 2003 in the Domestic Relations Case. Obenauer was awarded primary physical custody of the children and Debtor was obligated to pay child support.

In connection with one of Debtor and Obenauer's ongoing post-divorce disputes in the Domestic Relations Case, Debtor filed a "Motion for Civil and or Criminal Contempt Charges" (the "Contempt Motion") against Obenauer.^[8] The subject matter of the Contempt Motion involved a Supplemental Custody Order. The Contempt Motion included 50 separate enumerated counts each of which alleged Obenauer had violated the Supplemental Custody Order, or other order.^[9]

The allegations in the Contempt Motion focused on claims that Obenauer: (i) was restricting access to the children, (ii) was alienating the affection of the children, (iii) was not providing appropriate care and supervision to the children, (iv) was not communicating health and education information to the other parent, (v) was scheduling activities during the other parent's parenting time, and (vi) was not allowing reasonable telephone contact between the children and other parent.^[10] Debtor requested a judgment finding Obenauer in contempt, to pay any fines the court may impose, and requiring her to pay his attorney's fees and costs for bringing the motion "pursuant to Idaho Code §§ 7-610, 12-120, 12-121[.]"^[11]

Following the filing of the Contempt Motion, Debtor filed a "Motion to Compel Discovery Response[.]" After a hearing, the motion was denied and Obenauer sought her attorney's fees and costs of $677.22 as the prevailing party.^[12] The state court granted Obenauer's motion for attorney's fees and costs and judgment was entered against Debtor and in favor of Obenauer on May 8, 2014 in the amount of $677.22 ("Judgment 1").^[13] The order stated

the award was requested and made "pursuant to Idaho Rules of Civil Procedure ["I.R.C.P."] 37(d), 54(d) and 54(e), Idaho Code § 12-120, specifically 12-120(3), and § 12-121[.]"^[14]

Shortly after Judgment 1 was entered, Obenauer moved for summary judgment on the Contempt Motion.^[15] The motion asserted two bases for relief: first, that three of the counts were barred by the relevant statute of limitations, and more importantly, that Debtor admitted in his deposition that he had no evidence to support his allegations.^[16] After a hearing, the state court granted summary judgment on 43 of the 50 counts.^[17] A trial was held on June 20, 2014, on the remaining counts at which the state court entered a directed verdict in Obenauer's favor.^[18] The state court dismissed the Contempt Motion and determined that Obenauer was "entitled to her attorney fees and costs[.]"^[19]

Obenauer submitted a "Memorandum of Attorney Fees and Costs Re: Petitioner's Motion for Contempt" seeking fees and costs of $16,978.45.^[20] The memorandum featured a prevailing party analysis wherein Obenauer's counsel explained, as detailed above, that Obenauer successfully defended against the Contempt Motion and thus was entitled to her fees and costs.^[21] The memorandum also addressed the reasonableness of the fees, citing the twelve factors set forth in I.R.C.P. 54(e)(3), which must be considered when the state court awards attorney's fees in a civil action.^[22] The memorandum did not cite a statute under which the fees were authorized.^[23]

A second judgment was entered against Debtor and in favor of Obenauer on July 30,

2014 in the amount of $16,978.45 ("Judgment 2") (collectively, Judgment 1 and Judgment 2 are referred to as the "Judgments" or "Judgment Liens").^[24]

B. Post petition events

Debtor filed a no-asset chapter 7 bankruptcy in January 2015.^[25] Debtor did not list Obenauer as a creditor on his schedules or amended schedules despite her having recently obtained and recorded the Judgments.^[26] Debtor claimed a $100,000 homestead exemption in his residence, located at 13524 W. Meadowdale Dr., Boise, Idaho 83713 (the "Property"), which was the statutory maximum at the time under Idaho law.^[27] Debtor scheduled the Property as being worth $114,300 and encumbered by a deed of trust held by Green Tree totaling $85,662.67 (the "Green Tree Lien"), a "second mortgage" held by Key Bank totaling $35,000 in his deceased father's name (the "Key Bank Lien"), and a service lien totaling $2,319.87.^[28]These encumbrances totaled $122,982.84. Debtor received a discharge in his bankruptcy and the case was closed in September 2015.^[29]

Debtor moved to re-open his case to file the lien avoidance motions, explaining that after the case closed he discovered "judgment liens were recorded against his domicile[.]"^[30] The Court re-opened the case and Debtor filed his motions to avoid the liens under § 522(f)(1)(A).^[31]

IV. Applicable Law and Analysis

Under § 522(f)(1)(A), a debtor may avoid a judicial lien to the extent of impairment if three elements are met: (1) there was a "fixing of the lien on an interest of the debtor in property[;]" (2) the lien "impairs an exemption to which the debtor would have been entitled[;]" and (3) the lien does not secure "a debt of a kind that is specified under section 523(a)(5)[,]" that is, a debt for a domestic support obligation. See In re Ashcraft, 415 B.R. 428, 430 (Bankr. D. Idaho 2008) (citations omitted). The debtor must prove each of these elements by a preponderance of the evidence. See Gardner v. Dykeman Constr. (In re Gardner), 2010 WL 6259995, at *2 (9th Cir. BAP 2010) (citations omitted).^[32] There is no dispute the Judgment Liens encumber Debtor's interest in the Property. ^[33] However, Obenauer challenges the second and third elements, asserting the Judgments do not impair Debtor's homestead exemption and that the Judgments represent debt for a domestic support obligation.^[34]

A. The Judgment Liens impair Debtor's homestead exemption

Obenauer's impairment challenge is without merit because it is premised on the present-day value of the Property and present-day amount of the liens.^[35] This is incorrect. It is well established that when applying § 522(f), "the property value, the lien amounts, and exemptions as they existed on the bankruptcy petition date control." Rosen v. Chiu (In re Chiu), 2017 WL 1149076, at *3 (9th Cir. BAP 2017) (citations omitted); In re Salanoa, 263 B.R. 120, 123 (Bankr. S.D. Cal. 2001). The indicia of values and amounts in the record were provided by Debtor. Obenauer did not contest either the value or amounts. Using these figures, it is clear the Judgments impair Debtor's homestead exemption and the second element is satisfied.

Section 522(f)(2) supplies a formula to assess whether an exemption is impaired by a lien. Under this statute, 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.

Id. This calculation is performed as to each target lien independently, and in order of reverse priority. Bank of Am. Nat'l Tr. & Sav. Ass'n v. Hanger (In re Hanger), 217 B.R. 592, 595 (9th Cir. BAP 1997). A lien that has been avoided is not considered in the impairment calculation. Id. Applying this formula to Obenauer's judicial liens yields the following result:^[36]