CLIVE W. BARE, Bankruptcy Judge.
In this adversary proceeding the debtors seek to avoid a judicial lien held by Southeastern Energy, Inc., on real property claimed as exempt. 11 U.S.C. § 522(f)(1). The facts are as follows.
On September 12, 1975, the debtors purchased lots 14 and 15 in Swifton Village Subdivision, in Scott County, Tennessee, and on June 10, 1976, purchased two adjoining lots, Nos. 13 and 16. At all times pertinent, these lots were subject to a deed of trust held by First Trust & Savings Bank of Oneida, Tennessee.
On September 12, 1979, defendant, Southeastern Energy, Inc., obtained a judgment in the Chancery Court of Blount County, Tennessee, against the debtors (and Linda Coal Company, Inc.) in the amount of $4,403.39. Execution on this judgment was issued October 22, 1979, but the execution was never returned to the office of the Clerk and Master. On April 28, 1980, a certified copy of the judgment was recorded in the office of the Register of Deeds for Scott County, Tennessee, where the subject property is located. An alias execution was issued on August 21, 1980, and returned unsatisfied. On May 20, 1981, the debtors filed a petition in bankruptcy in this court. On May 28, 1981, in the Chancery Court for Scott County, Southeastern filed an action to subject the Scott County property to its judgment lien, specifically describing the subject property. On the same date a Notice of Lis Pendens was recorded with the Register of Deeds of Scott County.
On October 13, 1981, the debtors filed the present adversary proceeding and on October 19, 1981, moved to amend their schedule of exempt property to assert real property
The real property involved in this litigation is and has been at all pertinent times the residence of the debtors.
The debtors first challenge the validity of Southeastern's "judicial lien" but insist that, even if the lien is valid, it may be avoided under 11 U.S.C. § 522(f)(1).
A "judicial lien" is defined in the Bankruptcy Code as any "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." 11 U.S.C. § 101(27).
Tenn.Code Annotated § 25-5-101 sets forth the requirements to perfect a judgment lien in Tennessee upon land:
T.C.A. § 25-5-102 states that a judgment or decree shall not bind the equitable interests of a debtor in real estate or other property until a memorandum or abstract of the judgment or decree is certified by the clerk and registered in the register's office where the real estate is situated.
T.C.A. § 25-5-104 states the lien shall cease unless a bill in equity to subject the debtor's interest is filed within thirty (30) days from the return of the execution unsatisfied.
T.C.A. § 25-5-105 states that the lien will be lost unless an execution is taken out and the land sold within twelve (12) months after the rendition of the judgment or decree. T.C.A. § 25-5-106 extends this period if the sale is prevented by an injunction or an appeal.
In challenging the validity of the defendant's lien, the debtors assert that Southeastern failed to file a bill in equity "within thirty (30) days from the return of the execution unsatisfied," T.C.A. § 25-5-104. Thus, the debtors insist that the lien has been lost by the express provisions of that section. Southeastern responds that T.C.A. § 25-5-104 and 105 have no application to the factual situation presented by this cause, since the limitations upon liens of judgment apply only to priorities among judgment creditors and/or bona fide purchasers and were never intended and have never been construed to provide protection for the property of a judgment debtor. Southeastern's brief, December 15, 1981.
It does not appear necessary to determine whether Southeastern's argument is correct. Under 11 U.S.C. § 544 the trustee is both a judgment lien creditor, sub. a(1), and a bona fide purchaser of real property, sub.
The intended purpose of § 522(g) is expressly stated in the legislative history:
Based on the undisputed facts of this case, Southeastern's lien as against the trustee has been lost. Southeastern did not proceed as required by T.C.A. § 25-5-104 and 105. The trustee, standing in the shoes of a judgment lien creditor and a bona fide purchaser for value, 11 U.S.C. § 544(a)(1), (3), could have avoided the lien. Furthermore, since the trustee took no action, the debtor may do so under the specific provisions of the Bankruptcy Code:
Thus, Southeastern's judicial lien may be avoided by the debtors if such lien impairs an exemption to which they are entitled.
The debtors initially claimed homestead exemptions allowed under the State statute,
It appears the debtors' interest in the real property is $9,000.00 over and above the Bank's first lien. Thus, if T.C.A. § 26-2-301 applies, the debtors' exemptions would total $7,500. If application of § 522(d)(1) and (m) of the Bankruptcy Code is permissible, the debtors could claim their full interest in the property, $9,000.
Defendants insist that while the bankruptcy law permits liberal amendments of claims and interests, it is contrary to the principles of law and equity "to permit a person to lull his adversaries into silence and, having obtained their consent, increase his demands at a time when this increase is unlikely to be known to the vast majority of his creditors."
In McLemore v. Crawford, Adv.Proc.No. 2-81-0228 (Bkrtcy.M.D.Tenn., 1982), Judge Jennings denied a debtor's application to change his exemptions, both as to property claimed as exempt and as to the election of the exemption statute, after the 15-day period expired.
Although as a general proposition this court agrees with the decisions of the district and bankruptcy judges in the Middle District of Tennessee, those decisions will not be applied in the instant case due to the uncertainty that has prevailed since the enactment of the Code. As plaintiff correctly points out, bankruptcy laws and other laws relating to exemptions have always been liberally construed. Pending a decision by the Sixth Circuit Court of Appeals, the debtors' homestead exemption will be limited to $7,500.00. If the Rhodes decision is affirmed on appeal, the debtors may avail themselves of the Federal exemptions of their equity in the property, to wit, the sum of $9,000.00. In order to implement this decision, the debtors forthwith will deposit into the registry of this court the sum of $1,500.00. This sum, depending upon the decision of the Sixth Circuit, either will be paid hereafter to Southeastern or refunded to the debtors.
Southeastern avers that the debtors' property consists of "three distinct residential tracts," each one capable of containing a residence, and that the central tract (composed of two lots) is, in and of itself, of sufficient value to exhaust the debtor's homestead exemption without reference to the adjoining lots. Southeastern submits that it would be contrary both to the letter and spirit of the law to permit the debtors an exemption covering all four lots. The proof is clear, however, that the four lots comprise the "homestead" — the residence is on two lots, a driveway runs across another lot, and a water line crosses the other. Southeastern's suggestion that its lien be avoided only as to lots 14 and 15 is rejected.
Southeastern also refers to the procedure in Tennessee to set apart the homestead exemption.
Southeastern's judicial lien will be avoided to the extent that such lien impairs an
This Memorandum constitutes findings of fact and conclusions of law, Bankruptcy Rule 752.