United States Court of Appeals

For the First Circuit

No. 02-9005

IN RE: LYNN A. HART AND DAVID J. HART, 

Debtors.

BANKNORTH, N.A., f/k/a PEOPLES HERITAGE BANK, N.A.,

Appellant,

v.

LYNN A. HART AND DAVID J. HART, DEBTORS,

Appellees.

ON APPEAL FROM THE UNITED STATES BANKRUPTCY APPELLATE PANEL

FOR THE FIRST CIRCUIT

Before

Torruella, Circuit Judge,

Stahl, Senior Circuit Judge,

and Lipez, Circuit Judge.

Fred W. Bopp III, with whom Randy J. Creswell and Perkins,

Thompson, Hinckley & Keddy, P.A. were on brief, for appellant.

Jeffrey M. Frankel, for appellees.

May 8, 2003
1 Effective January 1, 2002, People's Heritage Bank, N.A. changed

its name to Banknorth, N.A.

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TORRUELLA, Circuit Judge. Banknorth, N.A. (the "Bank")

appeals a judgment from the Bankruptcy Appellate Panel (the

"Appellate Panel") affirming an order of the United States

Bankruptcy Court of the District of Massachusetts ("Bankruptcy

Court"), which granted the Debtors-Appellees' Motion To Avoid

Judicial Liens Pursuant to 11 U.S.C. § 522(f). The Appellate Panel

concluded that § 522(f)(2)(C) clarifies that judgments authorizing

the sale of mortgaged premises are not judicial liens subject to

avoidance under § 522(f)(1). We concur in the Appellate Panel's

interpretation and, thus, affirm the judgment below.

I. Background

The facts of this case are undisputed. On May 23, 1996,

a Maine superior court granted People's Heritage Bank1 a

foreclosure and sale judgment on the Bridgton, Maine property of

David and Lynn Hart (collectively, the "Debtors"). After sale of

the property, the Bank obtained a deficiency judgment in the amount

of $11,718.54 plus interest and costs.

Though the underlying suit involved a default on a home

in Maine, the Debtors were property owners in, and residents of,

Woburn, Massachusetts. Accordingly, the Bank brought an action to

enforce its deficiency judgment against debtors and their property

in a Woburn district court, and on July 3, 1997, judgment was
2 The Debtors defaulted in the district court proceedings.

3 In December of 2000, the Bankruptcy Court granted the Debtors'

motion for joint administration, and the cases were consolidated.

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entered against the Debtors in the amount of $12,921.48 plus

interest.2 On July 29, 1997, the Bank recorded the Massachusetts

Writ of Execution with the Registry of Deeds for the Southern

District of Middlesex County, thereby creating, in accordance with

Massachusetts law, a lien on the Woburn property (the "Lien"). See

Mass. Gen. Laws ch. 236, § 4.

On January 5, 1997, while these state court proceedings

were progressing, David J. Hart filed for Chapter 7 relief; then,

on January 5, 1998, his spouse, Lynn A. Hart, filed for Chapter 7

relief.3 On March 23, 2001, the Debtors filed a Lien Avoidance

Motion in the Bankruptcy Court (the "Motion"), claiming that the

Bank's judicial Lien impaired an exemption that they were entitled

to under 11 U.S.C. § 522(d)(1) and (5). The Bank argued that

because the Lien arose from a deficiency judgment after foreclosure

of a mortgage in Maine, the nature of the Lien made it unavoidable

under § 522(f)(2)(C), which does not allow a debtor to avoid a

"judgment arising out of a mortgage foreclosure."

On August 14, 2001, the Bankruptcy Court granted the

Debtors' Motion, concluding that the Lien did not derive from a

"judgment arising out of a mortgage foreclosure" within the meaning
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of § 522(f)(2)(C). The Appellate Panel affirmed the determination,

and this appeal followed.

II. Statutory Interpretation

This appeal forces us to determine whether mortgage

deficiency judgments are excluded from avoidance under § 522(f) by

virtue of § 522(f)(2)(C). To resolve this issue, we must construe

the statute. "A question of the interpretation of the Bankruptcy

Code, like any other question of statutory interpretation, is a

question of law that we review de novo." In re Weinstein, 272 F.

3d 39, 42 (1st Cir. 2001).

A debtor's ability to avoid the fixing of a judicial lien

derives from § 522(f) of the Bankruptcy Code, which provides, in

relevant part, that:

(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--

(i) to a spouse, former spouse, or child of

the debtor, for alimony to, maintenance for,

or support of such spouse or child, in

connection with a separation agreement,

divorce decree or other order of a court of

record, determination made in accordance with

State or territorial law by a governmental

unit, or property settlement agreement; and

. . .

(2)(A) For the purposes of this subsection, a

lien shall be considered to impair an

exemption to the extent that the sum of--
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(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.

. . . .

(C) This paragraph shall not apply with

respect to a judgment arising out of a

mortgage foreclosure.

11 U.S.C. § 522(f).

Courts that have considered whether § 522(f)(2)(C) allows

debtors to avoid mortgage deficiency liens have come to conflicting

conclusions because most have assumed that the provision is

ambiguous and have put state foreclosure law into the calculus.

See, e.g., In re Smith, 270 B.R. 557, 561 (Bankr. W.D.N.Y. 2001)

(using New York law distinctions between equitable and legal forms

of relief to find that "a deficiency judgment is not subject to the

exclusion of 11 U.S.C. § 522(f)(2)(C)"); In re Vincent, 260 B.R.

617, 621-22 (Bankr. D. Conn. 2000) ("[A]lthough they are ambiguous

in the present context, the words, 'judgment arising out of . . .

a mortgage foreclosure,' more naturally suggest the mechanics of a

Connecticut deficiency judgment rather than that of a mortgage

transmutation . . . . [A]ccordingly, that lien is not avoidable

under Section 522(f) of the Bankruptcy Code."). But see In re

Pascucci, 225 B.R. 25, 28 (Bankr. D. Mass. 1998) ("While

Massachusetts has articulated protection of the family as the goal

of its homestead statute, that statement does not override the
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plain provisions of § 522(f). Federal law determines whether

property is exempted and immunized against seizure and sale of

prebankruptcy debts.") (quotation marks and citation omitted).

However, we find that application of state law is

inappropriate because the statute is not ambiguous. In re

Weinstein, 272 F.3d 39, 43 (1st Cir. 2001) (stating that when we

interpret the Bankruptcy Code, we first consider the text of the

statute, and "[i]f sufficiently clear, that text assumes overriding

importance"). When we closely examine the structure of § 522(f),

the meaning of the terms used in § 522(f)(2)(C) become

"sufficiently clear" for us to conclude that Congress did not

intend § 522(f)(2)(C) as an exception to otherwise avoidable liens.

We begin our inquiry with the language of the statute.

United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989).

Crucial to our interpretation is our need to determine to what

Congress was referring when it used the phrase "this paragraph" in

§ 522(f)(2)(C) ("This paragraph shall not apply with respect to a

judgment arising out of a mortgage foreclosure"). Because Congress

failed to designate the meaning of "this paragraph," we determine

its meaning by "examin[ing] the statute as a whole, giving due

weight to design, structure, and purpose as well as to aggregate

language." Cablevision of Boston, Inc. v. Pub. Improvement Comm'n,

184 F.3d 88, 101 (1st Cir. 1999).
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Like the Appellate Panel, when we examine the structure

of § 522 and analyze the placement of § 522(f)(2)(C) within this

structure, we find that the meaning of "this paragraph" is not

ambiguous and that 522(f)(2)(C) does not create any exception to

otherwise avoidable judicial liens. Congress uses "paragraph" to

refer to the numbered sections of the statute, and specifically,

uses "this paragraph" to refer to § 522(f)(2). This structural

analysis also makes it clear that Congress uses "this subsection"

in § 522(f)(2)(A) to refer to all of § 522(f). Consequently, we

are to utilize § 522(f)(2)(A)'s impairment formula for all judicial

liens.

Section 522(f)(2)(C) does not create different treatment

for "a judgment arising out of a mortgage foreclosure." Instead,

Congress used § 522(f)(2)(C) to contrast mortgage foreclosure

judgments from liens which are avoidable under § 522(f), clarifying

that the entry of a foreclosure judgment does not convert the

underlying consensual mortgage into a judicial lien which may be

avoided. Mortgage foreclosure judgments do not become judicial

liens subject to avoidance under § 522. "Rather, a deficiency

judgment -- whether it arises in a foreclosure action as in Maine

or in a separate action as in Massachusetts -- is a non-consensual

judicial lien like any other which is subject to avoidance under

§ 522(f)." In re Linane, No. 02 B 42557, 2003 Bankr. LEXIS 230, at

*9 (N.D. Ill. Mar. 17, 2003).
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Our interpretation provides a logical and coherent

reading of Congress' organization of § 522. If Congress intended

to except mortgage foreclosure judgments, then § 522(f)(1) was the

natural, and trouble-free, place to insert such an exception.

Congress' chosen language supports our interpretation. Congress

uses the word "lien" throughout § 522(f) and only uses "judgment"

in § 522(f)(2)(C). As the Appellate Panel pointed out, Congress

would have used the word "lien" if it intended to exclude

deficiency judgment liens. "[I]t is a general principle of

statutory construction that when Congress includes particular

language in one section of a statute but omits it in another

section of the same Act, it is generally presumed that Congress

acts intentionally and purposely in the disparate inclusion or

exclusion." Barnhart v. Sigmon Coal Co., 534 U.S. 438, 452 (2002)

(quotation marks and citation omitted).

Subsection 522(f)(2)(C) lacks legislative history, and as

we discussed in In re Silveira, 141 F.3d 34, 33-39 (1st Cir. 1998),

the legislative history of the amendments to § 522(f) is

unreliable, making the intention of the drafters tenebrous. See In

re Pascucci, 225 B.R. 25, 28 (Bankr. D. Mass. 1998) (stating that

"the First Circuit has demonstrated that the legislative history of

the amendments to § 522(f) is unreliable and therefore the exact

purpose cannot be deciphered"). Consequently, our inquiry is

complete because "[t]he plain meaning of legislation should be
4 The Bank does not challenge on appeal the Appellate Panel's

determination that, insofar as the Bank placed the lien upon the

Massachusetts property after David Hart had filed his bankruptcy

petition, the lien was a violation of the automatic stay and,

therefore, void as to David Hart's interest in the property. We

agree that the violation of the stay only voided the Bank's lien on

the Debtor David Hart's interest in the Massachusetts property.

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conclusive, except in the rare cases in which the literal

application of a statute will produce a result demonstrably at odds

with the intentions of its drafters."4 Ron Pair Enters., Inc., 489

U.S. at 242 (quotation marks and citation omitted). And as the

Supreme Court has directed us, "courts must presume that a

legislature says in a statute what it means and means in a statute

what it says there. When the words of a statute are unambiguous,

then, this first canon is also the last: judicial inquiry is

complete." Barnhart, 534 U.S. at 461-62 (quotation marks and

citation omitted).

III. Conclusion

For the reasons stated above, we affirm the determination

of the Appellate Panel.

Affirmed.