Court Opinion

ID: 9711495
Source: CourtListenerOpinion
Date Created: 2023-08-26 04:33:06.433937+00
Date Added: 2024-06-11T18:23:05.520456
License: Public Domain

CANE, P.J.
(dissenting). The majority holds that a postpetition bankruptcy debtor may, as a matter of Wisconsin law, redeem his mortgaged property by paying its fair value, rather than the amount of the judgment. I concur with that part of the decision that states that Richard Hobl has standing to bring this appeal. However, because the majority erroneously perceives a conflict between Wisconsin and federal bankruptcy law, and because they misconstrue In re Lindsey, 823 F.2d 189 (7th Cir. 1987), I dissent from the remainder of the opinion.
I agree with the analysis set forth in In re Hagberg, 92 B.R. 809, 811 (Bankr. W.D. Wis. 1988), where the court stated:
It is now well settled that a chapter 7 discharge eliminates the debtor's in personam liability on a secured debt while the in rem liability of the property held as security is unaffected and may be enforced by the mortgagee postdischarge. See In re Lindsey, 823 *23F.2d 189, 191 (7th Cir. 1987). . . The discharge only protects the debtor from the entry of a deficiency judgment should the collateral be insufficient to satisfy the debt.
This general rule, that discharge from bankruptcy only affects personal liability, has long been the rule in Wisconsin's state courts; see Charnesky v. Urban, 245 Wis. 268, 273, 14 N.W.2d 161, 163 (1944), and federal courts, see United States v. Midwest Livestock Prods. Coop., 493 F. Supp. 1001, 1002 (E.D. Wis. 1980); Hagberg, 92 B.R. at 811; In re Geiger, 12 B.R. 410, 411 (Bankr. E.D. Wis. 1981), as well as a recognized black letter law principle, see 9A Am. Jur. 2d Bankruptcy sec. 779, at 513 (1980).
The majority reads sec. 506(d) of the bankruptcy code, as interpreted in Lindsey, to require allowing Lord to redeem his property at fair value, that is, the stripped-down value of the lien.1 I disagree. As stated in Lindsey:
Section 506 gives [the mortgage holder] a secured interest that he can foreclose on equal to the market value of his interest, and makes him an unsecured creditor for the rest, which is all that a judgment creditor is anyway. . . .
What the statute does for the debtor ... is enable him to precipitate the foreclosure proceedings ... in order to minimize the secured claims and thus *24increase the amount available for the unsecured creditors.
Id. at 191. The court's conclusion in Lindsey is that sec. 506(d) is a device to allow debtors to bring mortgage holders into the bankruptcy proceeding, not to erase the traditional distinction between personal and in rem liability.2 Lindsey explicitly states that redemption rights, if available, are subject to state law. Id. As an end result of the majority's decision, Lord's judgment is reduced from approximately $128,000 to $50,000, an outcome specifically decried in Lindsey. Id. As Hagberg states, Lindsey is consistent with the proposition that ch. 7 discharges only personal liability.
Once we reach the conclusion that sec. 506 discharges only personal liability, and therefore does not affect state redemption law, it would be absurd to construe sec. 846.13, Stats., in the manner urged by the majority. That statute provides: "The mortgagor . . . may redeem the mortgaged premises ... by paying to the clerk of the court in which the judgment was rendered . . . the amount of such judgment. . .."
The statute clearly provides for payment of the amount of the judgment rendered in circuit court. This interpretation in no way discriminates against those discharged from bankruptcy. They have exactly the same rights at the foreclosure sale and upon redemption as any other individual, and no obligation to participate in either. The majority's conclusion rewrites Wisconsin's redemption statutes, a matter properly left to the legislature.
*25Lord was not entitled under sec. 846.13, Stats., to redeem his property at its. fair value. Consequently, I would reverse and remand either for the payment by Lord of the full amount of the judgment, or confirmation of the sale to Hobl.

 The majority purports to follow the seventh circuit's interpretation of sec. 506(d), while acknowledging other federal courts have explicitly rejected the conclusion they derive from Lindsey. See In re Shrum, 98 B.R. 995, 1002 (Bankr. W.D. Okla. 1989); In re Dewsnup, 87 B.R. 676, 682-83 (Bankr. D. Utah 1988). I do not believe Lindsey, if followed, compels the result the majority reaches. However, if Lindsey did compel that result, I would choose to follow federal court decisions concluding that ch. 7 releases only the debtor's personal liability.

In this case, the bankruptcy court merely found $48,000 to be the fair value of the property. Had Lord explicitly requested that the bankruptcy court disallow the lien and allow redemption at fair value, a different analysis would have to be followed.