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Subject: 90-350 -- OPINION, FARREY v. SANDERFOOT




NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.
SUPREME COURT OF THE UNITED STATES


No. 90-350



JEANNE FARREY, fka JEANNE SANDERFOOT,
PETITIONER v. GERALD J. SANDERFOOT


on writ of certiorari to the united states court of appeals for the seventh
circuit

[May 23, 1991]



    Justice White delivered the opinion of the Court.

    In this case we consider whether MDRV 522(f) of the Bankruptcy Code
allows a debtor to avoid the fixing of a lien on a homestead, where the
lien is granted to the debtor's former spouse under a divorce decree that
extinguishes all previous interests the parties had in the property, and in
no event secures more than the value of the non-debtor spouse's former
interest.  We hold that it does not.
I
    Petitioner Jeanne Farrey and respondent Gerald Sander foot were married
on August 12, 1966.  The couple eventually built a home on 27 acres of land
in Hortonville, Wisconsin, where they raised their three children.  On
September 12, 1986, the Wisconsin Court for Outagamie County entered a
bench decision granting a judgment of divorce and property division that
resolved all contested issues and terminated the marriage.  See Wis. Stat.
767.37(3) (1989-1990).  A written decree followed on February 5, 1987.
    The decision awarded each party one-half of their $60,600.68 marital
estate.  This division reflected Wisconsin's statutory presumption that the
marital estate "be divided equally between the parties."  MDRV 767.255.
The decree granted Sanderfoot sole title to all the real estate and the
family house, which was subject to a mortgage and which was valued at
$104,000.00, and most of the personal property.  For her share, Farrey
received the remaining items of personal property and the proceeds from a
court-ordered auction of the furniture from the home.  The judgment also
allocated the couple's liabilities.  Under this preliminary calculation of
assets and debts, Sanderfoot stood to receive a net award of $59,508.79,
while Farrey's award would otherwise have been $1,091.90.  To insure that
the division of the estate was equal, the court ordered Sanderfoot to pay
Farrey $29,208.44, half the difference in the value of their net assets.
Sanderfoot was to pay this amount in two installments: half by January 10,
1987, and the remaining half by April 10, 1987.  To secure this award, the
decree provided that Farrey "shall have a lien against the real estate
property of [Sanderfoot] for the total amount of money due her pursuant to
this Order of the Court, i. e. $29,208.44, and the lien shall remain
attached to the real estate property . . . until the total amount of money
is paid in full."  (App. to Pet. for Cert. 57a).
    Sanderfoot never made the required payments nor complied with any other
order of the state court.  Instead, on May 4, 1987, he voluntarily filed
for Chapter 7 bankruptcy.  Sanderfoot listed the marital home and real
estate on the schedule of assets with his bankruptcy petition and listed it
as exempt homestead property.  Exercising his option to invoke the state
rather than the federal homestead exemption, 11 U. S. C. MDRV 522(b)(2)(A),
Sanderfoot claimed the property as exempt "to the amount of $40,000" under
Wis. Stat. MDRV 815.20 (1989-1990). {1}  He also filed a motion to avoid
Farrey's lien under the provision in dispute, 11 U. S. C. MDRV 522(f)(1),
claiming that Farrey possessed a judicial lien that impaired his homestead
exemption.  Farrey objected to the motion, claiming that MDRV 522(f)(1)
could not divest her of her interest in the marital home. {2}  The
Bankruptcy Court denied Sanderfoot's motion, holding that the lien could
not be avoided because it protected Farrey's pre-existing interest in the
marital property.  In re Sanderfoot, 83 B. R. 564 (ED Wis. 1988).  The
District Court reversed, concluding that the lien was avoidable because it
"is fixed on an interest of the debtor in the property."  In re Sanderfoot,
92 B. R. 802 (ED Wis. 1988).
    A divided panel of the Court of Appeals affirmed.  In re Sanderfoot,
899 F. 2d 598 (CA7 1990).  The court reasoned that the divorce proceeding
dissolved any pre-existing interest Farrey had in the homestead and that
her new interest, "created in the dissolution order and evidenced by her
lien, attached to Mr. Sanderfoot's interest in the property."  Id., at 602.
Noting that the issue had caused a split among the Courts of Appeals, the
court expressly relied on those decisions that it termed more "faithful to
the plain language of section 522(f)."  Ibid. (citing In re Pederson, 875
F. 2d 781 (CA9 1989); Maus v. Maus, 837 F. 2d 935 (CA10 1988); Boyd v.
Robinson, 741 F. 2d 1112, 1115 (CA8 1984) (Ross, J., dissenting)).
    Judge Posner, in dissent, argued that to avoid a lien under MDRV
522(f), a debtor must have an interest in the property at the time the
court places the lien on that interest.  Judge Posner concluded that
because the same decree that gave the entire property to Sanderfoot
simultaneously created the lien in favor of Farrey, the lien did not attach
to a pre-existing interest of the husband.  The dissent's conclusion
followed the result, though not the rationale, of Boyd, supra, In re
Borman, 886 F. 2d 273 (CA10 1989), and In re Donahue, 862 F. 2d 259 (CA10
1988).
    We granted certiorari to resolve the conflict of authority.  495 U. S.
--- (1990).  We now reverse the Court of Appeals' judgment and remand.
II
    Section 522(f)(1) provides in relevant part:

    "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 lien impairs an exemption to which the debtor would have been
entitled under subsection (b) of this section, if such lien is  --

    "(1) a judicial lien . . . ."


    The provision establishes several conditions for a lien to be avoided,
only one of which is at issue.  See In re Hart, 50 B. R. 956, 960 (Bkrtcy
Ct. Nev. 1985).  Farrey does not challenge the Court of Appeals'
determination that her lien was a judicial lien, 899 F. 2d, at 603-605, nor
do we address that question here.  The Court of Appeals also determined
that Farrey had waived any challenge as to whether Sander foot was
otherwise entitled to a homestead exemption under state law, id., at 603,
and we agree.  See Owen v. Owen, --- U. S. --- (1991).  The sole question
presented in this case is whether MDRV 522(f)(1) permits Sanderfoot to
avoid the fixing of Farrey's lien on the property interest that he obtained
in the divorce decree.
    The key portion of MDRV 522(f) states that "the debtor may avoid the
fixing of a lien on an interest in . . . property."  Sanderfoot, following
several Courts of Appeals, suggests that this phrase means that a lien may
be avoided so long as it is currently fixed on a debtor's interest.
Farrey, following Judge Posner's lead, reads the text as permitting the
avoidance of a lien only where the lien attached to the debtor's interest
at some point after the debtor obtained the interest.
    We agree with Farrey.  No one asserts that the two verbs underlying the
provision possess anything other than their standard legal meaning: "avoid"
meaning "annul" or "undo," see Black's Law Dictionary 136 (6th ed. 1990);
H. R. Rep. No. 95-595, pp. 126-127 (1977), and "fix" meaning to "fasten a
liability upon," see Black's Law Dictionary, supra, at 637.  The statute
does not say that the debtor may undo a lien on an interest in property.
Rather, the statute expressly states that the debtor may avoid "the fixing"
of a lien on the debtor's interest in property.  The gerund "fixing" refers
to a temporal event.  That event -- the fastening of a liability --
presupposes an object onto which the liability can fasten.  The statute
defines this pre-existing object as "an interest of the debtor in
property."  Therefore, unless the debtor had the property interest to which
the lien attached at some point before the lien attached to that interest,
he or she cannot avoid the fixing of the lien under the terms of MDRV
522(f)(1). {3}
    This reading fully comports with the provision's purpose and history.
See United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 242 (1989).
Congress enacted MDRV 522(f) with the broad purpose of protecting the
debtor's exempt property.  See S. Rep. No. 95-989, p. 77 (1978); H. R. Rep.
No. 95-595, supra, at 126-127.  Ordinarily, liens and other secured
interests survive bankruptcy.  In particular, it was well settled when MDRV
522(f) was enacted that valid liens obtained before bankruptcy could be
enforced on exempt property, see Louisville Joint Stock Land Bank v.
Radford, 295 U. S. 555, 582-583 (1935), including otherwise exempt
homestead property, Long v. Bullard, 117 U. S. 617, 620-621 (1886).
Congress generally preserved this principle when it comprehensively revised
bankruptcy law with the Bankruptcy Reform Act of 1978, Pub. L. 95-598, 92
Stat. 2587, 11 U. S. C. MDRV 522(c)(2)(A)(i).  But Congress also revised
the law to permit the debtor to avoid the fixing of some liens.  See, e.
g., 11 U. S. C. MDRV 545 (statutory liens).
    Section 522(f)(1), by its terms, extends this protection to cases
involving the fixing of judicial liens onto exempt property.  What specific
legislative history exists suggests that a principal reason Congress
singled out judicial liens was because they are a device commonly used by
creditors to defeat the protection bankruptcy law accords exempt property
against debts.  As the House Report stated:

"The first right [MDRV 522(f)(1)] allows the debtor to undo the actions of
creditors that bring legal action against the debtor shortly before
bankruptcy.  Bankruptcy exists to provide relief for an overburdened
debtor.  If a creditor beats the debtor into court, the debtor is
nevertheless entitled to his exemptions."  H. R. Rep. No. 595, supra, at
126-127.


One factor supporting the view that Congress intended MDRV 522 (f)(1) to
thwart a rush to the courthouse is Congress' contemporaneous elimination of
MDRV 67 of the 1898 Bankruptcy Act, 30 Stat. 564.  Prior to its repeal,
MDRV 67a invalidated any lien obtained on an exempt interest of an
insolvent debtor within four months of the bankruptcy filing.  The
Bankruptcy Reform Act eliminated the insolvency and timing requirements.
It is possible that Congress simply decided to leave exemptions exposed
despite its longstanding policy against doing so.  But given the
legislative history's express concern over protecting exemptions, it
follows instead that MDRV 522(f)(1) was intended as a new device to handle
the old provision's job by "giv[ing] the debtor certain rights not
available under current law with respect to exempt property."  H. R. Rep.
No. 95-595, supra, at 126-127.
    Conversely, the text, history, and purpose of MDRV 522(f)(1) also
indicate what the provision is not concerned with.  It cannot be concerned
with liens that fixed on an interest before the debtor acquired that
interest.  Neither party contends otherwise.  Section 522(f)(1) does not
state that any fixing of a lien may be avoided; instead, it permits
avoidance of the "fixing of a lien on an interest of the debtor."  If the
fixing took place before the debtor acquired that interest, the "fixing" by
definition was not on the debtor's interest.  Nor could the statute apply
given its purpose of preventing a creditor from beating the debtor to the
courthouse, since the debtor at no point possessed the interest without the
judicial lien.  There would be no fixing to avoid since the lien was
already there.  To permit lien avoidance in these circumstances, in fact,
would be to allow judicial lienholders to be defrauded through the
conveyance of an encumbered interest to a prospective debtor.  See In re
McCormick, 18 B. R. 911, 913-914 (Bkrtcy. Ct. WD Pa. 1982).  For these
reasons, it is settled that a debtor cannot use MDRV 522(f)(1) to avoid a
lien on an interest acquired after the lien attached.  See, e. g., In re
McCormick, supra; In re Stephens, 15 B. R. 485 (Bkrtcy. Ct. WD NC 1981); In
re Scott, 12 B. R. 613 (Bkrtcy. Ct. WD Okla. 1981).  As before, the
critical inquiry remains whether the debtor ever possessed the interest to
which the lien fixed, before it fixed.  If he or she did not, MDRV
522(f)(1) does not permit the debtor to avoid the fixing of the lien on
that interest.
III
    We turn to the application of MDRV 522(f)(1) to this case.
    Whether Sanderfoot ever possessed an interest to which the lien fixed,
before it fixed, is a question of state law.  Farrey contends that prior to
the divorce judgment, she and her husband held title to the real estate in
joint tenancy, each possessing an undivided one-half interest.  She further
asserts that the divorce decree extinguished these previous interests.  At
the same time and in the same transaction, she concludes, the decree
created new interests in place of the old: for Sanderfoot, ownership in fee
simple of the house and real estate; for Farrey, various assets and a debt
of $29,208.44 secured by a lien on the Sanderfoot's new fee simple
interest.  Both in his briefs and at oral argument, Sanderfoot agreed on
each point.  (Brief for Respondent 7-8; Tr. of Oral Arg. 39).
    On the assumption that the parties characterize Wisconsin law
correctly, Sanderfoot must lose.  Under their view, the lien could not have
fixed on Sanderfoot's pre-existing undivided half interest because the
divorce decree extinguished it.  Instead, the only interest that the lien
encumbers is debtor's wholly new fee simple interest.  The same decree that
awarded Sanderfoot his fee simple interest simultaneously granted the lien
to Farrey.  As the judgment stated, he acquired the property "free and
clear" of any claim "except as expressly provided in this [decree]."  (App.
to Pet. for Cert. 58a).  Sanderfoot took the interest and the lien
together, as if he had purchased an already encumbered estate from a third
party.  Since Sanderfoot never possessed his new fee simple interest before
the lien "fixed", MDRV 522(f)(1) is not available to void the lien.
    The same result follows even if the divorce decree did not extinguish
the couple's pre-existing interests but instead merely reordered them.  The
parties' current position notwithstanding, it may be that under Wisconsin
law the divorce decree augmented Sanderfoot's previous interest by adding
to it Farrey's prior interest.  If the court in exchange sought to protect
Farrey's previous interest with a lien, MDRV 522(f)(1) could be used to
undo the encumbrance to the extent the lien fastened to any portion of
Sanderfoot's previous surviving interest.  This follows because Sanderfoot
would have possessed the interest to which that part of the lien fixed,
before it fixed.  But in this case, the divorce court did not purport to
encumber any part of Sanderfoot's previous interest even on the assumption
that state law would deem that interest to have survived.  The decree
instead transferred Farrey's previous interest to Sanderfoot and, again
simultaneously, granted a lien equal to that interest minus the small of
amount of personal property she retained.  Sanderfoot thus would still be
unable to avoid the lien in this case since it fastened only to what had
been Farrey's pre-existing interest, and this interest Sanderfoot would
never have possessed without the lien already having fixed.  {4}
    The result, on either theory, accords with the provision's main
purpose.  As noted, the legislative history suggests that Congress
primarily intended MDRV 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.  That is not what occurs in a divorce
proceeding such as this.  Farrey obtained the lien not to defeat
Sanderfoot's pre-existing interest in the homestead but to protect her own
pre-existing interest in the homestead that was fully equal to that of her
spouse.  The divorce court awarded the lien to secure an obligation the
court imposed on the husband in exchange for the court's simultaneous award
of the wife's homestead interest to the husband.  We agree with Judge
Posner that to permit a debtor in these circumstances to use the Code to
deprive a spouse of this protection would neither follow the language of
the statute nor serve the main goal it was designed to address.
IV
    We hold that MDRV 522(f)(1) of the Bankruptcy Code requires a debtor to
have possessed an interest to which a lien attached, before it attached, to
avoid the fixing of the lien on that interest.  Accordingly, the judgment
of the Court of Appeals is reversed, and the case is remanded for further
proceedings consistent with this opinion.

It is so ordered.
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1
    Section 815.20 provides in relevant part:

"Homestead exemption definition.
    "(1) An exempt homstead as defined in s. 900.01(14) selected by a
resident owner and occupied by him or her shall be exempt from execution,
from the lien of every judgment and from liability for the debts of the
owner to the amount of $40,000, except mortgages, laborers', mechanics' and
purchase money liens and taxes and except as otherwise provided. . . .  The
exemption extends to the interest therein of the tenants in common, having
a homestead thereon with the consent of the cotenants, and to any estate
less than a fee."

2
    Farrey also objected to her former husband's valuation of the home at
$82,750 in his bankruptcy filings.  Neither the Bankruptcy Court, the
District Court, or the Court of Appeals resolved this dispute on the
merits.

3
    Other provisions of the Code likewise indicate that Congress used the
term "fixing" to refer to the timing of an event.  Section 545(1), for
example, provides:
    "The trustee may avoid the fixing of a statutory lien on the property
of the debtor to the extent that such lien  --
    "(1) first becomes effective against the debtor --
    "(A) when a case under this title concerning the debtor is commenced;
    "(B) when an insolvency proceeding other than under this title
concerning the debtor is commenced;
    "(C) when a custodian is appointed or authorized to take or takes
possession;
    "(D) when the debtor become insolvent;
    "(E) when the debtor's financial condition fails to meet a specified
standard; or
    "(F) at the time of an execution against property of the debtor levied
at the instance of an entity other than the holder of such statutory
lien."

11 U. S. C. MDRV 545(1) (emphasis added).

4
    Justice Scalia does not join in this paragraph.