John R. Biesterveld

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
JOHN R. BIESTERVELD,
aka John R. Biesterveld, Jr.,
Debtor. 	No. 7-07-12962 SA
MEMORANDUM OPINION
This matter comes before the Court for hearing on Debtor’s
Motion to Avoid Judicial Lien held by Ashok K. Kaushal. 	This
motion seeks to avoid the judicial lien held against the
residence of Debtor, John Biesterveld, for impairing Debtor’s
homestead exemption to which he is entitled under 11 U.S.C.
§522(b) and N.M. Stat. Ann. §42-10-9. 	This is a core proceeding
under 28 U.S.C. §157(b)(2)(B), which gives the Court the
authority to enter final judgment. 	This memorandum opinion
constitutes the Court’s findings of fact and conclusions of law
pursuant to Bankruptcy Rule 7052. 	The Court finds that the
judicial lien held by Ashok K. Kaushal impairs Debtor’s homestead
exemption and shall be avoided in its entirety pursuant to
§522(f) of the Bankruptcy Code.
The parties have agreed to the underlying facts and the
evidence contained in the three exhibits admitted without
objection. 	On November 21, 2007 Debtor filed a voluntary chapter
7 petition. 	At the time of filing, Debtor’s residence had a
value of $170,000. 	Debtor holds a one-half interest in the
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1Ex. 3, Quitclaim Deed to real property at 1519 Hermosa
Drive Southeast, Albuquerque, New Mexico 87108.
2Ex. 1, Transcript of Judgment No. CV-2006-05388 State of
New Mexico Second Judicial District, filed in the records of
Bernalillo County, New Mexico on September 29, 2006 as document
2006148588 in Book A124 at page 8191.
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property subject to a transfer by quitclaim deed. 1 	On the date
of the petition there was a mortgage on the residence in the
amount of $85,000. 	There was also a judicial lien on the
residence in the amount of $14,725 at the time of filing. 2 	At
this time Debtor claims a homestead exemption in the amount of
$30,000 pursuant to N.M. Stat. Ann. §42-10-9.
Discussion
Debtor alleges that the judicial lien should be avoided
under §522(f) as an impairment on his homestead exemption.
Section 522(f) permits a judicial lien to be avoided if it
impairs an exemption to which the debtor is entitled. 	To
determine if an exemption is impaired the Code provides the
following formula:
For purposes of this section [§522(f)(2)(A)], 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.
Debtor reads §522(f) to say that the proper method of calculation
is to add together the value of the lien sought to be avoided
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(judicial lien), the non-avoidable liens (mortgage on the
residence), and Debtor's exemption; from this subtotal, subtract
Debtor's interest in the property to find the extent to which the
judicial lien may be avoided. 	Following this interpretation the
calculation would be as follows:
Debtor’s Interest 	$85,000
Exemption 	$30,000
Mortgage 	$85,000
Judgment Lien 	+ $14,725
subtotal 	$129,725
Subtract Subtotal 	-$129,725
from Debtor’s interest
Amount that liens 	-$44,725
and exemption exceed
Debtor’s interest
(Total impairment)
Under this interpretation of the Code the judgment lien would be
avoided in its entirety, as the the amount of the impairment
exceeds the amount of the judgment lien.
Creditor, Ashok Kaushal, reads §522(f) differently. 	Under
Creditor’s interpretation, all non-avoidable liens should be
subtracted from the total value of the residence; the remaining
equity should then be divided in half to account for Debtor's
one-half interest (Debtor’s equity); from Debtor’s equity
subtract Debtor's homestead exemption to find net equity; the net
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equity is then subtracted from the judicial lien to find the
extent to which the lien is avoided. 	Following this
interpretation the calculation would be as follows:
Value of Residence 	$170,000
Non-avoidable liens 	- $85,000
(mortgage)
Total Equity 	$85,000
Total Equity 	$85,000
Equity of joint tenant 	- $42,500
Debtor’s equity 	$42,500
Debtor’s equity 	$42,500
Homestead exemption 	- $30,000
Net Debtor equity 	$12,500
Judgment lien 	$14,725
Net Debtor equity 	- $12,500
Extent to which lien 	$2,225
is avoided
Under Creditor’s interpretation, the judgment lien is partially
avoided in the amount of $2,225, but the remaining $12,500
remains attached to the residence.
The issue before the Court is thus the appropriate means by
which to interpret §522(f) in determining if or the extent to
which the judicial lien may be avoided. 	The United States
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3Zeigler Eng’g Sales, Inc. v. Cozad (In re Cozad), 208 B.R.
495 (10th Cir. B.A.P. 1997).
4Id. at 497.
5Id. at 498.
6All Points Capital Corp. v. Meyer (In re Meyer), 373 B.R.
84, 90 (9th Cir. B.A.P. 2007) (rejecting a strict or mechanical
approach to applying the statutory formula used in In re Cozad);
Nelson v. Scala, 192 F.3d 32, 35 (1st Cir. 1999); Miller v. Sul
(In re Miller), 299 F.3d 183, 186 (3d Cir. 2002); Lehman v.
VisionSpan, Inc.(In re Lehman), 205 F.3d 1255, 1257 (11th Cir.
2000).
7In re Cozad, 208 B.R. at 495; In re Griffith, No. 96-12874,
slip op. (Bankr. N.M. 1999).
8 Lamie v. United States Trustee, 540 U.S. 526, 534 (2004)
(“When the statute’s language is plain, the sole function of the
(continued...)
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Bankruptcy Appellate Panel for the Tenth Circuit has already
ruled on this issue in In re Cozad.3 	In that case the Court
approved the interpretation used by the Debtor in this case. 4
The Court affirmed the methodology of adding the full amount of
all liens and exemptions together before comparing that value to
the debtor's one-half interest in the property, rather than
calculating Debtor equity after subtracting liens. 5 	Although the
position Creditor takes is supported in other jurisdictions, 6
this Court and the Bankruptcy Appellate Panel for the Tenth
Circuit have consistently used a strict application of the
statutory formula in calculating §522(f). 7 	Statutes are to be
interpreted according to the existing statutory text, absent
ambiguity or absurdity. 8 	The Court finds no such ambiguity in
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8(...continued)
courts – at least where the disposition required by the text is
not absurd – is to enforce it according to its terms.”).
(Citations and internal punctuation omitted.)
9The court in In re Meyer found that a strict or mechanical
application of §522(f) would lead to an absurd result, but, with
some understatement, “conceded that [the Ninth Circuit B.A.P.’s
methodology] requires a generous interpretation of §522(f)(2)
because the precise language of the statute does not ineluctably
yield that conclusion.” 	In re Meyer, 373 B.R. at 90.
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522(f), and finds that there is no absurdity in the outcome that
would require looking beyond the text of the statute to the
intent of Congress. 9
Conclusion
Based on a strict statutory construction of §522(f), and in
accordance with precedent in this district, the Court determines
that the calculation used by Debtor is the proper construction of
§522(f). 	As such the judicial lien held against Debtor’s
residence is avoided in its entirety as an impairment of Debtor’s
homestead exemption. 	A separate order consistent with this
memorandum opinion is entered concurrently herewith.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	August 15, 2008
copies to:
Jason Neal
320 Gold Avenue SW, Suite 900
Post Office Box 8
Albuquerque, NM 87103-0008
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Kevin D Hammar
1212 Pennsylvania St NE
Albuquerque, NM 87110-7410
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