Opinion
Bankruptcy Case No. 99-92579.
March 1, 2004
OPINION
This matter having come before the Court on a Motion to Avoid Judicial Lien/Memorandum of Judgment (Carle Clinic) filed by the Debtor and Objection to Motion to Avoid Judicial Lien/Memorandum of Judgment filed by Carle Clinic Association; the Court, having heard arguments of counsel and being otherwise fully advised in the premises, makes the following findings of fact and conclusions of law pursuant to Rule 7052 of the Federal Rules of Bankruptcy Procedure.
Findings of Fact
The material facts in this matter are not in serious dispute and are, in pertinent part, as follows:
1. The Debtor filed for relief under Chapter 7 of the Bankruptcy Code on November 1, 1999.
2. The Debtor scheduled Creditor, Carle Clinic Association, as having an unsecured, non-priority debt in the amount of $30,236.89. The Debtor further indicated, at paragraph 4 of his Statement of Financial Affairs, that there was a pending lawsuit for collection of medical bills in which Carle Clinic Association was the plaintiff in Case No. 99-LM-182 in Champaign County, Illinois. The Debtor's schedules indicate that this lawsuit was pending at the time of filing of his bankruptcy petition. Documents filed as attachments to the Objection to Motion to Avoid Judicial Lien/Memorandum of Judgment indicate that, in fact, the lawsuit had been taken to judgment prior to Debtor's Chapter 7 bankruptcy filing and a Memorandum of Judgment had been filed in the Office of the Recorder of Champaign County, Illinois, on April 8, 1999, in the amount of $29,659.27, plus costs of suit, in favor of Carle Clinic Association.
3. Following the filing of Debtor's Chapter 7 bankruptcy proceeding, nothing further occurred concerning the debt of Carle Clinic Association, and, on February 7, 2000, the Debtor received a discharge in bankruptcy. On that same date, a final decree was entered, and the Chapter 7 proceeding was closed.
4. Subsequent to the conclusion of Debtor's Chapter 7 bankruptcy proceeding, the Debtor passed away on April 24, 2003. Thereafter, the Debtor's sole heir, Christine L. Johnson, was appointed as Independent Representative of the Debtor's probate estate.
5. In administrating the affairs of the Debtor's probate estate, his daughter and sole heir proceeded to sell the Debtor's homestead real estate located at 1505 West Columbia Avenue, Champaign, Illinois. In proceeding with the sale, it was discovered that Creditor, Carle Clinic Association, was asserting a judicial lien by virtue of its Memorandum of Judgment filed on April 8, 1999.
6. On November 17, 2003, Christine L. Johnson, as the Administrator of the Estate of James H. Mobley, Debtor/Decedent, filed a Motion to Reopen Debtor's Chapter 7 bankruptcy proceeding indicating a desire to reopen Debtor's bankruptcy case for the purpose of filing an Application to Avoid Judicial Lien/Memorandum of Judgment filed by Creditor, Carle Clinic Association.
7. On November 17, 2003, the Court set the Motion to Reopen for hearing on December 8, 2003, with notice sent to Creditor, Carle Clinic Association, at 602 West University, Urbana, Illinois.
8. A hearing was held on December 8, 2003, on the Motion to Reopen. There being no appearances other than the Movant and no objections, the Court entered an Order reopening the Chapter 7 bankruptcy case of Debtor, James Hugh Mobley.
9. Thereafter, on January 9, 2004, the instant Motion to Avoid Judicial Lien/Memorandum of Judgment was filed by Christine L. Johnson, and it is this matter that is presently before the Court.
Conclusions of Law
In its Objection, Carle Clinic Association first requests that the Court revisit the issue of reopening Debtor's Chapter 7 bankruptcy proceeding. Carle Clinic Association argues that, under the Doctrine of Laches, Debtor's Chapter 7 bankruptcy case should not be reopened, citing as authority for this propositionIn re Bianucci, 4 F.3d 526 (7th Cir. 1993). As indicated above, Debtor's Chapter 7 bankruptcy case was previously reopened on December 8, 2003, and the Court finds that, contrary to the assertion of Carle Clinic Association, a notice of the hearing on the Motion to Reopen was sent to Creditor, Carle Clinic Association, and an Order was entered on December 8, 2003, reopening the instant Chapter 7 proceeding. The Court finds that the case of Bianucci cited by Carle Clinic Association is, in fact, distinguishable from the case at bar in that this Court finds that there is no prejudice to Carle Clinic Association as a result of the reopening. In fact, the Court states in Bianucci that the mere passage of time in itself does not constitute prejudice, but that delay may be prejudicial when it is combined with other factors. Unlike the case at bar, the creditor inBianucci was not only prejudiced by the passage of time, but by the fact that it had spent considerable effort and expense in litigating the judicial lien in question in that case in the State Court prior to Debtor's seeking to reopen their closed Chapter 7 proceeding. The Court also notes that, in the case ofIn re Costello, 72 B.R. 841 (Bankr. E.D.N.Y. 1987), Chief Judge Duberstein held on similar facts as in the present case that a bankruptcy case would be reopened five years after closing for the purpose of commencing a proceeding to avoid the fixing of liens absent a showing of prejudice by the lien claimant.
In addition to its argument that the Debtor's bankruptcy proceeding should not be reopened, Carle Clinic Association argues that Christine L. Johnson, as Administrator of the Debtor's probate estate has no standing to pursue the Motion to Avoid Judicial Lien/Memorandum of Judgment. Carle Clinic Association argues that, as a result of the Debtor's death, there is no homestead exemption to apply under the provisions of 11 U.S.C. § 522(f). In this regard, the Court finds that the Debtor's homestead exemption must be determined as of the date of the original filing under Chapter 7, and, as a result, the Debtor's subsequent death is not controlling. See: In re Costello, supra, at 841; In re Polis, 242 B.R. 653 (D.C.N.D. Ill. 1998); and In re Alexander, 236 F.3d 431 (8th Cir. 2001). This proposition is further supported by Rule 1016 of the Federal Rules of Bankruptcy Procedure, which states, in pertinent part, in that death or incompetency of the debtor shall not abate a liquidation case under Chapter 7 of the Code, and that, in such event, the estate shall be administered and the case concluded in the same manner, so far as possible, as though the death or incompetency had not occurred.
Having determined that the Debtor's Chapter 7 bankruptcy proceeding has been properly reopened and that Movant, Christine L. Johnson, has standing to pursue a motion to avoid lien, the Court finds that the matter must be scheduled for a final hearing to determine the value of the subject real estate and the amount of secured indebtedness having priority over the Memorandum of Judgment filed by Carle Clinic Association so that the lien avoidance formula under 11 U.S.C. § 522(f) may be applied to determine whether, in fact, the Judicial Lien/Memorandum of Judgment of Creditor, Carle Clinic Association, may be avoided in whole or in part.
ORDER
For the reasons set forth in an Opinion entered on the 1st day of March 2004;
IT IS HEREBY ORDERED that:
A. The Objection to Motion to Avoid Judicial Lien/Memorandum of Judgment filed by Creditor, Carle Clinic Association, on January 26, 2004, is DENIED as to the matters raised therein; and,
B. A final hearing on the Motion to Avoid Judicial Lien/Memorandum of Judgment shall be scheduled for April 1, 2004, at 9:00 a.m., in Courtroom 120, Federal Building, 201 North Vermilion Street, Danville, Illinois, to determine the values necessary for application of the lien avoidance formula pursuant to 11 U.S.C. § 522(f).