Source: http://openjurist.org/674/f2d/796
Timestamp: 2015-08-29 14:57:41
Document Index: 572099474

Matched Legal Cases: ['§ 522', '§ 522', '§ 522', '§ 522', '§ 522', '§ 2403', '§ 522', '§ 1293', '§ 522', '§ 522', '§ 522', '§ 522', '§ 522']

674 F2d 796 Webber Webber v. Credithrift of America Inc Yoder Yoder | OpenJurist
674 F. 2d 796 - Webber Webber v. Credithrift of America Inc Yoder Yoder Home
674 F2d 796 Webber Webber v. Credithrift of America Inc Yoder Yoder 674 F.2d 796
6 Collier Bankr.Cas.2d 1149, 8 Bankr.Ct.Dec. 1416,Bankr. L. Rep. P 68,657
In re Harry George WEBBER, Susan Marie Webber, Debtors.Harry George WEBBER, Susan Marie Webber, Plaintiffs-Appellees,andThe United States of America, Intervenorv.CREDITHRIFT OF AMERICA, INC., Defendant-Appellant.andIn re Everett YODER, Jr., and Elizabeth Yoder, Debtors.Everett YODER, Jr. and Elizabeth Yoder, Plaintiffs-Appellees,andThe United States of America, Intervenorv.CREDITHRIFT OF AMERICA, INC., Defendant-Appellant.
Nos. 81-3055, 81-3128.
Argued and Submitted Sept. 11, 1981.Decided April 14, 1982.
Daniel J. Gatti, Gatti & Gatti, Salem, Or., for defendant-appellant.
Frank Wilson, Portland, Or., argued, for plaintiffs-appellees; John H. Durkheimer, Sussman, Shank, Wapnick, Caplan & Stiles, Portland, Or., on brief.
Appeal from the United States Bankruptcy Court For the District of Oregon.
Before KILKENNY and SCHROEDER, Circuit Judges and JAMESON,* District Judge.
Credithrift of America, Inc. (Credithrift) perfected liens on personal property of the debtors between the enactment date (November 6, 1978) and the effective date (October 1, 1979) of the Bankruptcy Reform Act of 1978. Credithrift has appealed from two decisions of the Bankruptcy Court for the District of Oregon which applied 11 U.S.C. § 522(f) of the Reform Act to those liens, thereby allowing their avoidance by the debtors. The sole question on appeal is whether § 522(f) may constitutionally be applied to liens perfected after the enactment date but before the effective date of the Act.
The Reform Act was passed by Congress on October 6, 1978 and signed into law by the President on November 6, 1978. The effective date of the Act was October 1, 1979.
A primary goal of the Reform Act, the first major revision of the Bankruptcy Act since 1938, was to provide an effective modern bankruptcy mechanism for consumer debtors. Congress recognized that consumer credit had become a fundamental element of the post-war economy and that the laws needed reform to make "bankruptcy a more effective remedy for the unfortunate consumer debtor." H.R.Rep.No.95-595, 95th Cong., 2nd Sess. 4 (1978), reprinted in 5 U.S.Code Cong. & Ad.News 5787, 5966 (1978).
Congress found that most state bankruptcy laws were as outmoded as the federal laws and that there was a federal interest in seeing that a debtor survives bankruptcy with adequate possessions to avoid becoming a public charge and to make a fresh start. Id. at 126, reprinted in 5 U.S.Code Cong. & Ad.News 6087. Accordingly, Congress established a set of federal exemptions which serve as an alternative to state bankruptcy law exemptions. Section 522(d) of the Reform Act provides for the exemption of specified personal property from the portion of the debtor's estate subject to sale in bankruptcy for the satisfaction of debts, including
As the bankruptcy court noted, "Any excess value will usually be exempt through the use of subsection (d)(5) which gives the debtor another $400.00 general exemption and the right to apply the 'spill over' from the unused portion of the homestead exemption under subsection (d)(1)."
Congress recognized, however, that something more was needed, because the purpose of household property exemptions had often been frustrated by creditors who acquired dragnet security interests in otherwise exempt property when making consumer loans. Consequently, Congress included § 522(f)1 in the Reform Act to allow debtors to avoid certain security interests of creditors:
(f) Notwithstanding any waiver of exemptions, the debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such impairs an exemption to which the debtor would have been entitled under subsection (b) of this section, if such lien is-
On July 2, 1979, defendant/appellant Credithrift made a loan to Everett and Elizabeth Yoder. The Yoders executed a note for $2,508.90, payable to Credithrift, and signed a form pledging their household furnishings, goods and appliances as security for the loan. On July 23, 1979, Credithrift made a loan to Harry G. and Susan Marie Webber, who executed a note for $3,224.96 and signed a similar security agreement. The parties stipulated that each lien is a "nonpossessory, nonpurchase-money security interest" that arose after November 6, 1978 and before October 1, 1979.
The Webbers and Yoders subsequently filed petitions in bankruptcy on May 5, 1980 and July 1, 1980 respectively. Each couple sought to avoid the Credithrift liens in their exempt household goods pursuant to § 522(f)(2)(A). Credithrift asserted that § 522(f)(2)(A) cannot be constitutionally applied in these cases because the security interests were perfected prior to the effective date of the Reform Act. The constitutional question was certified to the Attorney General of the United States, who, through the United States Attorney, intervened, pursuant to 28 U.S.C. § 2403, in support of the constitutionality of the challenged provision.
On November 17, 1980 the bankruptcy court concluded in the Webber case that " § 522(f)(2) is constitutional in so far as it applies to liens arising between November 6, 1978 and October 1, 1979, and the plaintiffs are entitled to the voiding of the defendant's lien on their household furnishings, household goods and appliances." In re Webber, 7 B.R. 580, 586 (Bkrtcy.D.Or.1980). A stipulated judgment was subsequently entered in the Yoder case allowing similar relief based upon the Webber decision. Both cases have come to this court on direct appeal pursuant to 28 U.S.C. § 1293(b). In this court, the United States, in effect, represents the debtors/appellees.
III. Contentions of Parties
Appellant contends that (1) § 522(f)(2)(A) cannot be given retroactive effect because to do so would be manifestly unreasonable; (2) a creditor whose rights in specific property have attached prior to the effective date of the law may not be deprived of those rights by legislative enactment, and giving retroactive effect to § 522(f)(2) amounts to an unconstitutional taking of property under the holding in Louisville Joint Stock Land Bank v. Radford, 295 U.S. 555, 55 S.Ct. 854, 79 L.Ed. 1593 (1935); (3) the public cannot be considered to be "on notice" of a statute until it is made effective and both parties were on notice of the effective date; and (4) the Fifth Amendment protects all property interests, whether real or personal, regardless of monetary value.
Appellee contends that (1) the bankruptcy law comports with due process because it is not so grossly unreasonable or arbitrary as to be incompatible with fundamental law; (2) because appellant was on notice of the contents of § 522(f)(2)(A) when the liens were perfected, there is no retroactive effect of constitutional dimension; (3) even if considered to be retroactive, application of § 522(f)(2)(A) is constitutional because it effectuates sound Congressional policy; (4) Radford has been severely limited by subsequent case law and is inapplicable to this case; and (5) the Fifth Amendment does not protect ownership of these liens because they are not property interests of "substantial value."
IV. Prior Court Decisions
At the outset it may be noted that both the bankruptcy courts and the courts of appeal are divided with respect to the retroactive applicability of § 522(f) (2)(A). Bankruptcy courts in Oklahoma, Colorado, Oregon, Michigan, Washington, Kansas, and New Mexico have held that it cannot be applied to liens perfected before the Reform Act's enactment date.2 This holding was followed by the Co