Larry L. Morinia and Brenda Joyce Morinia

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
LARRY L. MORINIA
dba LBM Trucking
aka Larry Lloyd Morinia and
BRENDA JOYCE MORINIA
fdba More Than Digital,
Debtors. 	No. 11-07-12803 SA
MEMORANDUM OPINION ON DEBTORS’
MOTION TO AVOID HARRIS LIEN
This matter is before the Court on the Debtors’ Motion to
Avoid the lien of Toni and Glynn Harris (“Motion”)(doc 85), the
Harrises’ Response (doc 89), Debtors’ Brief in Support (doc 94),
the Harrises’ Opposition Brief (doc 96), the Harrises’ Response
Brief (doc 104) and the Debtors’ Response Brief (doc 105).
Debtors appear through their attorney Moore, Berkson &
Gandarilla, P.C. (George M. Moore and Arin E. Berkson). 	The
Harrises appear through their attorney Miller Stratvert P.A.
(Ruth Fuess and Brian J. Haverly). 	This is a core proceeding.
28 U.S.C. § 157(b)(2)(K). 	The Court has considered the parties’
arguments, has taken judicial notice of the bankruptcy file, has
considered the applicable authorities, and is ready to rule. 	For
the reasons set forth below, the Motion to Avoid Lien will be
denied without prejudice.
Section 522(f)
Debtors seek to avoid a judicial lien on their homestead.
This procedure is governed by 11 U.S.C. § 522(f), which provides
in part:
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(f)(1) Notwithstanding any waiver of exemptions but
subject to paragraph (3), the debtor may avoid the
fixing of a lien on an interest of the debtor in
property to the extent that such lien impairs an
exemption to which the debtor would have been entitled
under subsection (b) of this section, if such lien is--
(A) a judicial lien, other than a judicial lien that
secures a debt of a kind that is specified in section
523(a)(5);
...
(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.
This simple mathematical formula is to be applied literally. 	In
re Bowshier, 389 B.R. 542, 546 (Bankr. S.D. Ohio 2008). 	See also
Kolich v. Antioch Laurel Veterinary Hospital (In re Kolich), 328
F.3d 406, 410 (8 th Cir. 2003)(“[O]ur task is simply to apply §
522(f)(2)(A) as Congress wrote it.”); Trahan v. Day Kimball
Hospital (In re Trahan), 337 B.R. 448, 451 (Bankr. D. Ct. 2006)
(literal application is appropriate). 	A Court should not adjust
the lien avoidance formula as a matter of equity to provide for
hypothetical events. 	Milgard Tempering, Inc. v. Darosa (In re
Darosa), 318 B.R. 871, 879 (9 th Cir. B.A.P. 2004). 	Nor should a
bankruptcy court order marshaling of assets at the request of a
judicial lien holder in order to preserve a lien. 	In re Pray,
242 B.R. 205, 211 (Bankr. D. Mass. 1999)(“Equity does not allow
this Court to alter application of the statutory formula to
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preserve a judicial lien and impair the debtor’s exemption simply
by issuing a marshaling order based on a hypothetical, future
sale of assets.”) See also Bowshier, 389 B.R. at 548-49 (Court
recognizes “unfairness” of refusing to marshal assets, but found
that “it is inappropriate to resort to equity in the face of
clear statutory language.”) 	And see In re TNT Farms, 226 B.R.
436, 446 (Bankr. D. Id. 1998):
[T]he Court in disinclined to intervene on an equitable
basis where there is a comprehensive statutory system
in place dictating priority of the parties' interests.
Where the legislature has considered the relative
rights of the parties and declared as a matter of
policy what the outcome of a priority contest should
be, the Court should be, and here is, reluctant to
adjust the results solely in the name of equity.
The values to use in the lien avoidance formula are those as
of the petition date. 	In re Salanoa, 263 B.R. 120, 122-23
(Bankr. S.D. Cal. 2001)(“Subsection 522(a) specifies that the
term ‘value’ in § 522 means the fair market value as of the date
of filing of the petition. ... The Court holds the petition date
is the operative date to make all § 522(f) determinations.”)
(Emphasis in original). 	See also In re Bradley, 369 B.R. 147,
152 (Bankr. S.D. N.Y. 2007)(must determine market value at the
time that the petition was filed.)
The Debtor has the burden of proof to establish that a
judicial lien impairs his or her exemption. 	In re Bozzelli, 227
B.R. 770, 772 (Bankr. E.D. Pa. 1998); Bradley, 369 B.R. at 152.
Discussion
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1Even the Debtors acknowledge that the IRS proof of claim,
in the amount of $695,841.51 is inaccurate and contains duplicate
(continued...)
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Debtors’ Motion states that Debtors own four parcels of real
estate in Bernalillo County, New Mexico including their
residence. The Court earlier ruled that Debtors were entitled to
an exemption of $120,000.00 in their residence (Bankruptcy case,
doc 78). 	The Harrises hold a claim against the Debtors of more
than $1,800,000, evidenced by a transcript of judgment filed in
the County and therefore creating a lien against all of Debtors’
real property in Bernalillo County. 	In the Motion Debtors claim
the residence is worth $500,000.00. 	On Schedule A Debtors
scheduled the residence as worth $1,000,000.00. 	The Debtors
claim that the residence is also subject to these other liens: 1)
Bernalillo County Treasurer, statutory lien, $25,670.05; 2) Bank
of America, consensual mortgage, $160,910.32; and 3) Internal
Revenue Service, statutory lien, $195,779.85. 	Therefore, Debtors
claim that the Harris lien impairs their exemption and they seek
its avoidance.
In their objection, the Harrises dispute the value of the
residence, dispute the amount of the IRS claim, and claim that
the Bank of America mortgage is less now than when the case was
filed. 	The Court agrees that it cannot determine the value of
the residence without a trial. 	The Court also agrees that the
amount of the IRS tax lien is probably inaccurate 1. 	But, the
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1(...continued)
entries.
2However, if the Harrises wish to continue this argument
they should establish that the requirements to marshal are met.
Specifically, there is no proof that IRS has a lien on a South
Carolina property. 	(See Schedule A in bankruptcy case). 	The
fact that IRS may have a lien does not mean it is perfected
without filing. 	See 26 U.S.C. 6321 (establishing lien for taxes)
and 6323(a) and (f) (establishing filing requirements). 	If IRS
has no such lien then the Harrises and IRS would have identical
real estate collateral, preventing marshaling.
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Court finds that the decrease in mortgage principal is irrelevant
to the motion.
In their Opposition Brief the Harrises also, essentially,
argue that assets should be marshaled: e.g., that the other real
estate be sold so IRS can be paid, reducing the IRS claim against
the residence. 	But, as noted above, marshaling 2 is not
appropriate in lien avoidance matters.
In summary, the Court cannot apply the “simple mathematical
formula” at this point because it lacks accurate values and
amounts. 	The Court will set a preliminary hearing to permit
discovery as necessary and then set an evidentiary hearing on the
various debts and values, as requested by the Harrisses.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	October 8, 2009
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Copies to:
Arin Elizabeth Berkson
Moore, Berkson & Gandarilla, P.C.
PO Box 216
Albuquerque, NM 87103-0216
George M Moore
Moore, Berkson & Gandarilla
PO Box 216
Albuquerque, NM 87103-0216
Ruth Fuess
Miller Stratvert PA
PO Box 25687
Albuquerque, NM 87125
Brian John Haverly
Miller Stratvert PA
PO Box 25687
Albuquerque, NM 87125
Dylan O'Reilly
Miller Stratvert P.A.
PO Box 869
Farmington, NM 87499-0869
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
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