No. 82-260 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1982 

DAVID REICHERT and IRENE REICHERT, 

individually and d/b/a THE ECHO INN, 

Plaintiff and Appellant., 

RAWLEY C. KOCH, d/b/a SPEAR MEAT CO., 

Defendant and Respondent. 

Appeal from: District Court of the Thirteenth Judicial District, 

In and for the County of Yellowstone 

Honorable William J. Speare, Judge presiding. 

Counsel of Record: 

For Appellant: 

Elmer J. Dolve argued, Billings, Montana 

For Respondent: 

Harold F. Hanser, County Attorney, Billings, Montana 

Paul M. Warren argued, Billings, Montana 

Frank D. Meglen, Assistant U.S. Attorney, Billings, 

Montana 

Laura A. Mitchell, Billings, Montana 

Bawd-F, Hanse~BunLy Ilttomey~+14-i-gs7 -Montana 

Sidney R. Thomas, Billings, Montana 

Submitted: November 10, 1982 

Decided: January 6, 1983 

J G IS','] Filed: 
Mr. Justice Fred J. Weber delivered the Opinion of the Court. 

Appeal is taken from an order of the District Court of 

the Thirteenth Judicial District, Yellowstone County, allowing execution against homestead property of bankrupt parties. 

We affirm the order of the District Court. 

On September 16, 1980, respondent Rawley Koch obtained 

and docketed in Yellows tone County a final judgment against 

the appellants, David and Irene Reichert, husband and wife. 

The judgment was in the amount of $26,163.54. On May 13, 

1981, appellants filed in Yellowstone County a joint declaration of homestead covering their residence at 532 Milton 

Lane, Billings. On August 6, 1981, appellants filed a joint 

Chapter 7 bankruptcy petition in the Billings Division of 

the United States Bankruptcy Court. On December 14, 1981, 

appellants obtained a personal discharge from the Bankruptcy 

Court. On January 7, 1982, respondent Koch sought and had 

issued a writ of execution and notice of sale and levy upon 

the appellants1 residence at 532 Milton Lane. A sheriff's 

sale was set for February 3, 1982. On January 11, 1982, 

appellants filed suit against respondent in the Thirteenth 

Judicial District. The suit alleged that respondent1 s 

judgment had been voided by the discharge in bankruptcy, and 

sought damages for "wrongful and malicious execution." Also 

on January 11, 1982, appellants filed an action seeking an 

injunction against the sheriff to prevent the sale of their 

residence. The sheriff's sale was cancelled and the suits 

were consolidated. 

On January 28, 1982, respondent moved to dismiss and 

sought a declaratory judgment establishing the validity of 

his lien and the priority and status of the interests of 

himself, the Reicherts, the I.R.S., Yellowstone County, 

Security Bank, and the bankruptcy trustee. Numerous motions 
to dismiss were filed and a hearing on them had on March 29, 

1982. On May 19, 1982, the District Court issued an order 

which: (1) dismissed appellants' suit for malicious execution, (2) dismissed appellants' suit against the sheriff and 

dissolved the preliminary injunction, (3) dismissed respondent's complaint for declaratory judgment, (4) acknowledged 

the existence of appellants' Montana homestead exemption, 

and (5) ordered respondent to proceed with enforcement of 

his lien after he had complied with section 70-32-203, MCA. 

Reicherts appealed, and raise the following issues: 

1. Does a discharge in bankruptcy void a pre-existing 

judgment lien against the debtors? 

2. If a judgment lien survives the debtors' discharge 

in bankruptcy, is section 70-32-203, MCA, the proper 

procedure for enforcement? 

3. Was it error for the District Court to dismiss 

appellants' complaint which alleged "wrongful and malicious 

execution?" 

Appellants rely in large part upon the language of 11 

U.S.C. 5524 to support their position that the judgment lien 

is void. That section provides in part that a discharge in 

bankruptcy: 

" (1) voids any judgment at any time obtained, 

to the extent that such judgment is a determination of the personal liability of the debtor 

with respect to any debt discharged under section 

727, 944, 1141, or 1328 of this title, whether 

or not discharge of such debt is waived; 

" (2) operates as an injunction against the 

commencement or continuation of an action, 

the employment of process, or any act, to 

collect, recover or offset any such debt as a 

personal liability of the debtor, or from 

property of the debtor, whether or not discharge of such debt is waived . . ." 

It appears that, on its face, S524 would preclude a postdischarge execution on a judgment lien. However, examination 

of other sections of the Bankruptcy Reform Act of 1978 leads 
us to a contrary conclusion. 

Although S524 provides that discharge voids judgments 

to the extent that they are determinations of the personal 

liability of debtors, it is silent on the question of the 

effect of discharge upon liens which arose out of those 

judgments. The question of the survivability of a judgment 

lien was discussed in -- In re Sillani (S.D.Fla. 1981), 9 Bankr. 

188,189: 

"It is the debtor's position that because the judgment lien secured a personal 

liability . . . the enforcement of that 

lien is discharged by the provisions of 

§524(a) (1) . . . 

"This is a common source of confusion. 

The quoted provision merely voids judgments to the extent they are unsecured. 

The judgment creditor cannot seek any 

recovery on his judgment other than that 

obtainable against his security. Liens 

pass through the bankruptcy case unaffected unless a party in interest requests the 

court to determine and allow or disallow 

the claims secured by the lien under 5502 

and the claim is not allowed. §506(d); 

Collier on Bankruptcy (15th ed.) 11506.03 

at pages506-6 and 12." 

If Koch had not docketed his judgment in Yellowstone 

County in accordance with section 25-9-301, MCA, appellants' 

position would be persuasive. However, the docketing of the 

judgment created a judicial lien against the Reicherts' 

real property in Yellowstone County. That real property was 

also the property which the Reicherts subsequently claimed 

as their homestead. A homestead is exempt property. Bankruptcy disposition of judicial liens upon exempt property is 

governed by 11 U.S.C. 5522. 

Section 522(f) provides in part that "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 . . . if such 

lien is -1) a judicial lien." That avoidance is not 

automatic. In order to avoid a lien, the debtor must affirmatively seek the Bankruptcy Court's review. -- In re Burkholder 
(E.D.Pa. 1981) 11 Bankr. 346, 348, -- In re Adkins (s.~.Cal. 1980), 

7 Bankr. 325, 326. This conclusion is in keeping with the 

treatment of non-judicial liens provided for in 11 U.S.C. 

§506(d): "To the extent that a lien secures a claim against 

the debtor that is not an allowed secured claim, such lien 

is void, unless --(I) a party in interest has not requested 

that the court determine and allow or disallow such claim 

under section 502 of this title." 

"Subsection (d) permits liens to pass 

through the bankruptcy case unaffected. 

However, if a party in interest requests 

the court to determine and allow or disallow 

the claim secured by the lien under section 

502 and the claim is not allowed, then the 

lien is void to the extent that the claim 

is not allowed." H.R. Rep. No. 595, 95th 

Cong., 1st Sess. 357 (1977). 

Only personal liability is discharged; liens not avoided 

by the bankruptcy code may be enforced notwithstanding discharge of the debtor. 3 Collier - on Bankruptcy li524.01 (15th 

ed. 1979). 

"A discharge order does not discharge 

valid liens. It accomplishes three things. 

First, it releases a debtor from all debts 

that arose before the date of the order for 

relief (the same date as the filing date of 

a voluntary Chapter 7 petition) except 

those debts which are nondischargeable by 

virtue of 8523, 11 U.S.C. 8727(b). Second, 

it voids any judgment obtained at any time 

with respect to any debt discharged to the 

extent that the judgment is a determination 

of the personal liability of the debtor and, 

third, it operates as an injunction against 

any act to collect any discharged debt as a 

personal liability of the debtor or from 

property acquired by the debtor after the 

commencement of his bankruptcy case. 11 

U.S.C. 8524 (emphasis supplied). A creditor 

is not prevented by this injunction from 

enforcing a valid lien on property of the 

debtor existing at the time of the entry of 

the order for relief. Property exempted 

from the estate is not considered as property acquired after the entry of the order 

for relief. Section 522 (c) (2) of Title 

11 adopted the long-standing rule of 

Long v. Bullard, 117 U.S. 617 (1886) that 

the security of a creditor is preserved 

des~ite debtor's claim of exemptions." 

-- 1; ;e Andrews (D.De1. 1982), 9 Bankr. Ct. 

Dee. (CRR) 589,590. 
The Reicherts did not seek avoidance of Koch's judicial 

lien in Bankruptcy Court. We hold that the lien survived 

the Reicherts' discharge in bankruptcy. 

Appellants next contend that there is no procedure for 

enforcement of a judgment lien against homestead property. 

This contention is without merit. The procedure for execution 

on a judgment lien upon homestead property is clearly set 

forth at section 70-32-203, et seq., MCA. 

Finally, we hold that respondent's attempted execution 

was soundly based upon the applicable law and was not an 

abuse of process. 

The order of the District Court is affirmed. 

We concur: 

7% ".* $.@ 

Chief >ustice 

&A- 

/* /--\ 

Hon. J61b n S. Henson 

Judge, sitting in place 

ustice John C. Sheehy