Court Opinion

ID: 3016583
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:15:48.227483+00
Date Added: 2024-06-11T12:17:30.462380
License: Public Domain

___________

                                    No. 95-3110
                                    ___________

Rene Lee Meseraull, also known           *
as Rene Lee O'Donnell,                   *
                                         *
              Appellant,                 *
                                         *   Appeal from the United States
       v.                                *   District Court for the
                                         *   Northern District of Iowa.
Rick Miller Construction, Inc.           *
                                         *
              Appellee.                  *   [UNPUBLISHED]

                                    ___________

                     Submitted:     February 23, 1996

                           Filed:   April 19, 1996
                                    ___________

Before FAGG, BOWMAN, and HANSEN, Circuit Judges.
                               ___________

PER CURIAM.

       Chapter 7 bankruptcy debtor Rene Lee Meseraull appeals from the
district court's1 order affirming the order of the bankruptcy court2
denying her motion to avoid the judicial lien of Rick Miller Construction,
Inc.   We affirm.

       In her voluntary Chapter 7 bankruptcy petition, Meseraull listed Rick
Miller Construction, Inc. (Miller), as a secured creditor holding a $43,000
claim against her; the claim had been reduced to a judgment lien against
her homestead.    The parties stipulated that Miller had restored Meseraull's
homestead after it

       1
     The Honorable Edward J. McManus, United States District Judge
for the Northern District of Iowa.
       2
     The Honorable Paul J. Kilburg, United States Bankruptcy Judge
for the Northern District of Iowa.
was damaged by fire, and that Meseraull's debt to Miller was exclusively
for   work    done,    and    materials   furnished,   to   restore   the   homestead.
Meseraull claimed her homestead as property that was exempt pursuant to 11
U.S.C. § 522 from the bankruptcy estate under Iowa Code § 561 (1993);
Miller did not object to the claimed exemption.              Meseraull then moved to
avoid Miller's judicial lien under 11 U.S.C. § 522(f), arguing the lien
encumbered exempt property.          Miller objected, arguing the lien was not
avoidable because a homestead is not exempt from the sort of debt Meseraull
owed it pursuant to Iowa Code § 561.21(3).

      After a hearing, the bankruptcy court denied Meseraull's motion and
sustained Miller's objection.        The bankruptcy court first determined that
Miller could raise exemption issues in objection to Meseraull's lien
avoidance motion, even though it failed to timely object to her claimed
exemption.     Relying on In re Streeper, 158 B.R. 783 (Bankr. N.D. Iowa
1993), the bankruptcy court noted that Iowa law defined the homestead
exemption to exclude a homestead subject to a lien for a section 561.21(3)
debt, and concluded that, as Meseraull's homestead thus would not be exempt
even if the lien were avoided, Miller's lien was not avoidable based on the
analysis in Owen v. Owen, 500 U.S. 305 (1991).           The district court affirmed
the bankruptcy court's order.

      On     appeal,    Meseraull    challenges   both      the   bankruptcy    court's
conclusions.     This court sits as a second court of review in bankruptcy
proceedings, applying the same standard of review as the district court.
In re Kjellsen, 53 F.3d 944, 946 (8th Cir. 1995) (per curiam).                 We review
de novo the bankruptcy court's conclusions of law, and for clear error its
findings of fact.       Id.

      We conclude that Miller is precluded from challenging Meseraull's
homestead's exemption from the bankruptcy estate, because Miller never
filed an objection.      See Abramowitz v. Palmer, 999 F.2d 1274, 1276-77 (8th
Cir. 1993).     Miller's failure to object

                                           -2-
to the claimed exemption, however, does not bar it from challenging
Meseraull's ability to avoid the lien.       See In re Montgomery, 80 B.R. 385,
388 (Bankr. W.D. Tex. 1987); In re Indvik, 118 B.R. 993, 1007 (Bankr. N.D.
Iowa 1990).

       States are allowed to opt out of the federal exemption scheme
contained in the Bankruptcy Code, thereby determining what property debtors
may exempt from the bankruptcy estate.          See 11 U.S.C. § 522(b); In re
Gerrald, 57 F.3d 652, 654 (8th Cir. 1995).             Iowa has opted out of the
federal exemption scheme.        See Iowa Code § 627.10 (1992).         Iowa Code
§ 561.16 provides that "the homestead of every person is exempt from
judicial sale where there is no special declaration of statute to the
contrary."    Section 561.21 contains a special declaration to the contrary,
providing that a "homestead may be sold to satisfy debts . . . incurred for
work done or materials furnished exclusively for the improvement of the
homestead."

       Federal law applies to determine whether a lien may be avoided under
section 522(f), In re Thompson, 884 F.2d 1100, 1102 (8th Cir. 1989), and
Meseraull had the burden of establishing that she was entitled to avoid
Miller's lien, see In re Catli, 999 F.2d 1405, 1406 (9th Cir. 1993).             In
Owen, the Supreme Court held that a judicial lien may impair an exemption
even though an opt-out state's statutory definition of exempt property
specifically excludes property encumbered by judicial liens.            Owen, 500
U.S. at 306, 308-11.   In determining whether such a lien is avoidable the
question is "not whether the lien impairs an exemption to which the debtor
is in fact entitled, but whether it impairs an exemption to which [she]
would have been entitled but for the lien itself."         Id. at 310-13.     Under
Iowa   law,   homesteads   are   not   exempt   from    section   561.21(3)   debt.
Accordingly, Miller's lien does not impair an exemption to which Meseraull
would be entitled but for the lien, as even if Miller's lien were avoided,
Meseraull's homestead would not be exempt from her debt to Miller.            Thus,
Meseraull has not met her

                                       -3-
burden of establishing that she is entitled to avoid Miller's lien.

     Accordingly, we affirm the order of the district court.

     A true copy.

           Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                  -4-