Bernadine E. Fitzgerald

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/10/06
Bernadine E. Fitzgerald
04-18472
Order Denying [26-1] Motion For Determination of Secured Status of Lien by L.R.
Fitzgerald, Bernadine E. Fitzgerald .
Received on: 2006-03-17 15:29:16.000
2006-03-17 00:00:00.000
2006-03-20 00:00:00.000
Patti Hennessy
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: BERNADINE E. FITZGERALD, No. 7-04-18472 MF
Debtor.
ORDER DENYING DEBTOR’S MOTION TO DECLARE THE LIEN OF
VANDERBILT MORTGAGE & FINANCE INC. VOID
THIS MATTER is before the Court on the Joint Motion for Determination of Secured Status of
Lien (“Motion”), filed by Debtor, and her non-filing spouse, pro se. The Motion seeks a determination
that the lien of Vanderbilt Mortgage & Finance, Inc. (“Vanderbilt”) against the Debtor’s manufactured
home is void, and that the claim of Vanderbilt is unsecured and therefore discharged as part of
Debtor’s bankruptcy proceeding because the Debtor claimed an exemption in her home and Vanderbilt
failed to object to the Debtor’s claimed exemption. The Court held a hearing on the Motion on
March 13, 2006. Upon review of the Motion and the documents filed in the Debtor’s bankruptcy
proceeding, the Court finds that Vanderbilt’s lien is valid yet subject to the Debtor’s claimed
exemption. The Motion will, therefore, be denied. In reaching this determination the Court FINDS:
1. L. R. Fitzgerald, the Debtor’s non-filing spouse, filed a voluntary petition under Chapter 7 of
the Bankruptcy Code on November 7, 2000, as Case No. 7-00-16005 MF. Vanderbilt was listed as
a secured creditor on Schedule D - Creditors Holding Secured Claims. L.R. Fitzgerald received a
discharge on March 13, 2001 and the case was closed.
2. Debtor filed a voluntary petition under Chapter 7 of the Bankruptcy Code on November
19, 2004.
3. Debtor’s Schedule A - Real Property lists a 1999 Clayton Double Wide located at #35
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Road 6940 (“Residence”), valued at $50,000.00 with no secured claim against it.
4. Debtor claimed an exemption in her Residence in the amount of $30,000.00, pursuant to
N.M.S.A. 1978 § 42-10-9. See Schedule C - Property Claimed as Exempt.
5. Vanderbilt is listed on the Debtor’s Schedule D - Creditors Holding Secured Claims, with a
disputed, secured, claim in the amount of $43, 051.00 against the Residence.
6. Vanderbilt did not file an objection to the Debtor’s claim of exemption in her Residence.
7. Debtor asserts that because Vanderbilt failed to object to her claimed exemption in her
Residence, the Residence is exempt, and, therefore, free from any alleged lien claimed by Vanderbilt,
citing Taylor v. Freeland & Kronz, 503 U.S. 638, 112 S.Ct. 1644, 118 L.Ed.2d 280 (1992).
Debtor’s reliance on Taylor is misplaced. Taylor concerned a debtor’s claim of exemption in
proceeds from a pending employment discrimination lawsuit in which the chapter 7 trustee failed to
timely object. Id. The Supreme Court held that the trustee’s failure to file a timely objection to the
debtor’s claimed exemption under Rule 4003(b) precluded him from contesting its validity, despite the
fact that it was not disputed that the debtor claimed a greater exemption than either the federal or state
exemption statutes provided. Id. at 642. Here, no party objected to the Debtor’s claim of exemption
in her Residence, and the Debtor holds an exemption in her Residence in the amount of $30,000.00, as
claimed in her Schedule C. However, Vanderbilt’s failure to object to the Debtor’s claimed exemption
does not invalidate Vanderbilt’s consensual lien against the Residence and somehow transmute a
secured claim into an unsecured claim. The Residence remains subject to Vanderbilt’s lien, and the
Debtor is entitled to an exemption of up to $30,000.00 in any equity in the Residence above the amount
of Vanderbilt’s secured claim.
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8. The discharge entered in L. R. Fitzgerald’s previous bankruptcy proceeding and the
discharge entered in the Debtor’s bankruptcy proceeding extinguished only their personal liability; the
creditor’s right to proceed in rem against the property and foreclose on its lien passes through
bankruptcy. See 11 U.S.C. § 727(b); 11 U.S.C. § 524(a)(1); Johnson v. Home State Bank, 501
U.S. 78, 83, 111 S.Ct. 2150, 2153, 115 L.Ed.2d 66 (1991) (“Codifying the rule of Long v. Bullard,
117 U.S. 617, 6. S.Ct. 917, 29 L.Ed. 1004 (1886), the Code provides that a creditor’s right to
foreclose on the mortgage survives or passes through the bankruptcy.”) (citations omitted).
9. Debtor also appears to argue that because Vanderbilt’s lien is against a manufactured home,
which the Debtor asserts is personal property, rather than real property, the Debtor is entitled to avoid
the lien. This position is contrary to applicable law. In In re Clark, 217 B.R. 177 (Bankr.E.D.Va.
1998), the debtors attempted to avoid a consensual lien against their mobile home as impairing the
debtors’ exemption rights. The bankruptcy court found that the debtors’ mobile home was a house
which cannot, by definition, constitute “household goods” under § 522(f)(2)(A), such that § 522(f)
could not “be used to avoid a deed of trust or other consensual security in real estate.” Clark, 217
B.R. at 180. Similarly, in In re Coonse, 108 B.R. 661, 662 (Bankr.S.D.Ill. 1989), the Court held that
a lien against the debtor’s mobile home could not be avoided as a lien against a household good under
11 U.S.C. § 522(f)(2). The court in Coonse reasoned further that a debtor cannot categorize
property as one type of property for exemption purposes, and another for lien avoidance purposes, so
that a debtor may not claim a homestead exemption in property, which would presume characterization
of the property as real property, and then attempt to avoid a lien against the same property by asserting
that the property is in the nature of a household good. Id. at 662-663. Finally, as noted in In re
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Trobaugh, 330 B.R. 559, 560 (Bankr.W.D.Ky. 2005), “[t]here is no provision in 11 U.S.C. § 522(f)
that allows a debtor to avoid a consensual lien,” so that the debtors were not allowed to avoid the
consensual lien granted by the debtors to the creditor on the debtors’ mobile home. Moreover, the
Court has already ruled in this case that the lien of Vanderbilt cannot be avoided as a “judicial lien.”
See Order Denying Petitioner’s Motion to Avoid Judgment Lien of Vanderbilt Mortgage & Finance,
Inc. (Docket # 25).
WHEREFORE, IT IS HEREBY ORDERED that the Motion is DENIED.
_________________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
I certify that on the date shown on the attached document verification, a true and correct copy of
the foregoing was either electronically transmitted, faxed, delivered or mailed to the listed counsel
and/or parties.
Bernadine Fitzgerald L. R. Fitzgerald
Debtor Non-filing Spouse
PO Box 433 PO Box 433
Waterflow, NM 87421 Waterflow, NM 87421
Robert Finch Office of the United States Trustee
Chapter 7 Trustee PO Box 608
555 East Main Street Albuquerque, NM 87103
Farmington, NM 87401
Michael Craddock Vanderbilt Mortgage
Attorney for Vanderbilt Mortgage ATTN: Managing Agent
3100 Monticello Avenue, Suite 550 PO Box 9800
Dallas, TX 87205 Maryville, TN 37802
________________________________
Patti G. Hennessy
Law Clerk (505) 348-2545
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