Farrey v. Sanderfoot, 500 U.S. 291 (1990)

Farrey v. Sanderfoot

No. 90-350

Argued March 25, 1991
Decided May 23, 1991
500 U.S. 291

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

When petitioner Farrey and respondent Sanderfoot divorced, a Wisconsin court awarded each one-half of their marital estate. Among other things, the decree awarded Farrey’s interest in the family home and real estate to Sanderfoot and ordered him to make payments to Farrey to equalize their net marital assets. To secure the award, the court granted Farrey a lien against Sanderfoot’s real property. Sanderfoot did not pay Farrey, and subsequently filed for bankruptcy, listing the marital home and real estate as exempt homestead property. The Bankruptcy Court denied his motion to avoid Farrey’s lien under 11 U.S.C. § 522(f)(1) -- which provides, inter alia, that a debtor "may avoid the fixing of a [judicial] lien on an interest of the debtor in property" -- finding that the lien could not be avoided because it protected Farrey’s preexisting interest in the marital property. The District Court reversed, and the Court of Appeals affirmed.

Held:

1. Section 522(f)(1) requires a debtor to have possessed an interest to which a lien attached, before it attached, to avoid the fixing of a lien on that interest. The statute does not permit avoidance of any lien on a property, but instead expressly permits avoidance of "the fixing of a lien on an interest of the debtor." A fixing that takes place before the debtor acquires an interest, by definition, is not on the debtor’s interest. This reading fully comports with § 522(f)’s purpose, which is to protect the debtor’s exempt property, and its legislative history, which suggests that Congress primarily intended § 522(f)(1) as a device to thwart creditors who, sensing an impending bankruptcy, rush to court to obtain a judgment to defeat the debtor’s exemptions. To permit lien avoidance where the debtor at no point possessed the interest without the judicial lien would allow judicial lienholders to be defrauded through the conveyance of an encumbered interest to a prospective debtor. Pp. 295-299.

2. Farrey’s lien cannot be avoided under § 522(f)(1). The parties agree that, under state law, the divorce decree extinguished their joint tenancy, in which each had an undivided one-half interest, and created new interests in place of the old. Thus, her lien fixed not on Sanderfoot’s preexisting interest, but rather on the fee simple interest that he was awarded in the decree that simultaneously granted Farrey her lien. The result is the same even if the decree merely reordered the couple’s preexisting interests, since the lien would have fastened only to what had been Farrey’s preexisting interest, an interest that Sanderfoot would never have possessed without the lien already having fixed. To permit Sanderfoot to use the Bankruptcy Code to deprive Farrey of protection for her own preexisting homestead interest would neither follow the statute’s language nor serve its main goal. Pp. 299-301.

899 F.2d 598 (CA7 1990), reversed and remanded.

WHITE, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and MARSHALL, BLACKMUN, STEVENS, O’CONNOR, KENNEDY, and SOUTER, JJ., joined, and in all but the penultimate paragraph of Part III of which SCALIA, J., joined. KENNEDY, J., filed a concurring opinion, in which SOUTER, J., joined, post, p. 301.