           United States Bankruptcy Appellate Panel
                       For the Eighth Circuit
                         ___________________________


                             No. 19-6016
                     ___________________________

                         In re: Ruby Jeane Sawyers

                                            Debtor

                          ------------------------------

                          David G. Waltrip, LLC

                                    Creditor - Appellant

                                       v.

                            Ruby Jeane Sawyers

                                   Debtor - Appellee
                               ____________

               Appeal from United States Bankruptcy Court
               for the Eastern District of Missouri - St. Louis
                               ____________

                      Submitted: November 5, 2019
                         Filed: December 19, 2019
                             ____________


Before SALADINO, Chief Judge, NAIL and DOW, Bankruptcy Judges.
                                ____________
DOW, Bankruptcy Judge


       David Waltrip (“Waltrip”) appeals the order of the Bankruptcy Court 1

granting a motion by Ruby Sawyers (“Debtor”) to avoid a judicial lien. We have

jurisdiction over this appeal. See 28 U.S.C. §158(b). For the reasons that follow,

we affirm.

       This is a dispute between the Debtor and Waltrip, who held a judicial lien

(“Judicial Lien”) against the Debtor’s primary place of residence (the “Property”).

The Property suffered significant fire damage prior to the bankruptcy filing, and the

insurance proceeds were paid to the Debtor. The Property was not restored during

the bankruptcy proceeding. The Trustee made no distributions and abandoned all

assets, and the case was closed. After receiving notice of a sheriff’s sale of the

Property, the Debtor reopened the case and instituted a lien avoidance action. The

bankruptcy court granted the Debtor’s motion for summary judgment and avoided

the Judicial Lien, valuing the Property as of the date of the filing of the petition and

rejecting Waltrip’s position that the value of the Property should be enhanced by the

amount of the insurance proceeds. Waltrip appealed.




1The Honorable Charles E. Rendlen, III, United States Bankruptcy Judge for the Eastern District
of Missouri.
                                               2
                           STANDARD OF REVIEW

      We review a bankruptcy court’s grant of summary judgment de novo.

Mwesigwa v. DAP, Inc., 637 F.3d 884, 887 (8th Cir. 2011)(citing Anderson v.

Durham D & M, L.L.C., 606 F.3d 513, 518 (8th Cir. 2010). We will affirm if “there

is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” Fed. R. Civ. P. 56(a). “We may affirm on any basis supported

by the record.” Seaver v. New Buffalo Auto Sales, LLC (In re Hecker), 459 B.R. 6,

10-11 (8th Cir. BAP 2011). Here we review de novo whether the bankruptcy court’s

conclusions interpreting the relevant statutes and applying them to the undisputed

facts are correct. Fisette v. Keller (In re Fisette), 455 B.R. 177, 180 (8th Cir. BAP

2011).

      We review a bankruptcy court’s findings of fact for clear error. In re Potts,

421 B.R. 518, 521 (8th Cir. BAP 2010). “A finding is ‘clearly erroneous' when

although there is evidence to support it, the reviewing court on the entire evidence

is left with the definite and firm conviction that a mistake has been

committed.” United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948).

                          FACTUAL BACKGROUND

      The Debtor filed her Chapter 7 petition in February, 2017. Waltrip was a

creditor by virtue of a prepetition consent judgment in the amount of $256,739.31

entered in a civil action. The judgment constituted a judicial lien. The Debtor
                                         3
claimed her homestead exemption of $15,000 pursuant to RSMo §513.475. There

were no objections to the exemption.

        Prior to the bankruptcy filing, a fire caused significant damage to the

Property. The Debtor was the named insured under a homeowner’s policy and was

paid $132,392.99 for the purpose of repairing and restoring the Property. Waltrip

was not a loss payee under the policy, and his Judicial Lien did not extend to the

insurance proceeds.

       The Trustee filed a Report of No Distribution abandoning all assets; no

objection was filed. The Debtor received her discharge, and the case was closed.

The Property was later repaired and restored using the insurance proceeds. An

appraisal valued it between $95,000 and $103,640 in fully-restored condition, as

opposed to between $3,000 and $6,000 on the petition date.

       Waltrip later instituted a sheriff’s execution sale on the Property. On the day

before the sale, the Debtor filed an emergency motion to reopen her case and a

motion to avoid Waltrip’s judicial lien pursuant to §522(f). The case was reopened,

and the parties filed competing motions for summary judgment. 2 The parties


2
 We note that the Debtor filed her original motions to reopen the case and to avoid the lien on
April 18, 2018, and the sheriff’s sale occurred on the following day. The Debtor filed her amended
motions on April 26, 2018. On May 1, 2018, the bankruptcy court entered an order granting the
motion to reopen the case. Accordingly, the Debtor did not own the Property when she proceeded
with the avoidance action. However, no party raised any issue as to the effect of the sale on the
Debtor’s ability to avoid the lien. So, we decline to address it in this appeal.
                                                4
stipulated that the Judicial Lien met the criteria for avoidance and that the Debtor

could avoid it to the extent it impaired her exemptions.

      The bankruptcy court denied Waltrip’s motion, and granted the Debtor’s

summary judgment motion and motion to avoid judicial lien. In its Order, the

bankruptcy court determined that 1) laches did not apply because the Debtor’s delay

was not unreasonable and Waltrip did not demonstrate prejudice, 2) the value of real

estate is fixed on the date the petition is filed, and thus the pre-restoration value of

the Property was the appropriate value to use in the avoidance analysis, 3) there is

no case law supporting the theory that insurance proceeds can be added to the value

of damaged real estate for the purposes of determining value for judicial lien

avoidance, and 4) there is no case law that indicates that appreciation in an

abandoned asset constitutes a windfall to the debtor. The court did, however, give

Waltrip a timeframe within which to file a pleading to request reimbursement of fees

and costs associated with the sheriff’s sale, but Waltrip did not do so.

      Waltrip makes four main arguments in this appeal. First, he contends that the

value of the Property on the petition date should be comprised of the insurance

proceeds together with the damaged home. Put another way, the bankruptcy court

should have used the post-restoration value of the Property in its avoidance analysis

rather than the pre-restoration value. Secondly, he argues that depriving him of his

right to his Judicial Lien after the Debtor converted the insurance proceeds to equity
                                           5
resulted in an impermissible windfall in contravention of Missouri’s equitable

principles and those embedded in the Bankruptcy Code. Next, Waltrip asserts that

the Debtor’s delay in exercising her remedies was deliberate, and she was therefore

unjustly enriched at the expense of her creditors. Finally, Waltrip argues that, as a

condition precedent to reopening the case or avoiding the Judicial Lien, he should

have been paid the costs and expenses he incurred in connection with the sheriff’s

sale.

        The Debtor contends that the bankruptcy court was correct in finding that the

appropriate date for purposes of determining the value of the Property was the

petition date, and the pre-restoration value was appropriate because it represents

what a willing buyer would pay a willing seller for the Property on that date. She

also argues that no legal authority exists under Missouri law or bankruptcy law

which supports the substitution of insurance proceeds for damaged or destroyed

property in the context of judicial lien avoidance. The Debtor also argues that there

is no authority that supports the view that post-petition appreciation of real property

results in a windfall for a debtor. Next, the Debtor asserts that laches does not apply

in this case because the Debtor did not unreasonably delay in moving to avoid the

Judicial Lien, and Waltrip was not unduly prejudiced. Finally, the Debtor points out

that even though there is no binding legal authority that requires the payment of

Waltrip’s expenses related to the execution sale, the bankruptcy court afforded

                                          6
Waltrip the opportunity to seek reimbursement, and he failed to avail himself of that

opportunity within the court-imposed deadline.

                                   DISCUSSION

      In general, the cases on which Waltrip relies involve the determination of the

respective rights of parties in two situations: when the transaction in question is

based on a contract (e.g., mortgage, lease), or when the property in question is

converted from one form to another (e.g., foreclosure sale). As explained below,

the cases are distinguishable and inapplicable.

      Waltrip asserted that Missouri’s view is that the injured property and the sum

received for the injury “stand together,” citing Graves v. Stanton, 621 S.W. 2d 524,

528 (Mo. App. 1981).       While the Graves court did make such a statement, the

context in which it was made was not the valuation of property for judicial lien

purposes. The issue there was the entitlement to proceeds of an insurance policy

between a lessor and lessee of a mobile home when the contract did not provide the

answer. The property was destroyed by fire, and only a part of the insurance

proceeds was used for repairs. Given that the lessee had exercised his option to buy,

the question arose as to who would be entitled to the unexpended insurance money.

The court found that the subject of the contract between the parties was the mobile

home, or in case of its destruction, the insurance proceeds. It therefore ruled in favor


                                           7
of the lessee, reasoning that “[t]his is a suit in equity, and the only object we have is

to compel the doing of such equity as grows out of the contract.” Id. (citations

omitted). There is no contract between the parties in this case.

      Waltrip also cited Skelly Oil Co. v. Ashmore, 365 S.W.2d 582 (Mo. 1963) to

support his position that “Missouri’s Supreme Court has determined that insurance

proceeds are a substitute for the property destroyed.”       Skelly Oil makes no such

blanket statement as to the definition of a property interest under Missouri law. The

case discusses the apportionment of risk of loss in the absence of a contractual

determination, and the enforceability of a contract when the subject property has

been damaged. The court’s position that the vendee was entitled to enforce the

contract of sale with the insurance proceeds substituted for the destroyed building

was tangential to the holding, and certainly not a mandate: “We see no inequity to

defendants in such enforcement since they will receive the full amount ($20,000) for

which they contracted to sell the property.” Id. at 589.

      Waltrip cited several other cases to boost his argument that Missouri

recognizes money as a substitute for property. None has to do with the valuation of

property in the context of a judicial lien. See, e.g., Grand Teton Mountain Invs.,

LLC v. Beach Props., LLC, 385 S.W.3d 499 (Mo. App. 2012)(a foreclosure sale

surplus stands in place of the foreclosed property). In fact, in two of the cases, the

mention of a monetary equivalent representing lost property is only remotely related
                                           8
to the issue before the court, and tenuous at best. See State ex rel. Phoenix Mut. Life

Ins. v. Harris, 121 S.W.2d 141, 146 (Mo. 1938)(involving the issue of service of

process on licensed foreign insurance companies); Ross v. Kendall, 81 S.W. 1107

(Mo. 1904)(involving a judgment of condemnation).

      Waltrip then argued that this concept is recognized in bankruptcy law. Again,

the cases on which Waltrip relied do not make a determination as to the valuation of

a property interest in an insurance policy or proceeds that would logically apply to

the analysis of lien avoidance under §522(f). See, e.g., In re Burns, 482 B.R. 164

(Bankr. E.D.La. 2012)(relying on Louisiana law to hold that proceeds representing

prepetition wages lost as a result of debtor’s medical condition constituted exempt

earnings); In re Dezonia, 347 B.R. 920 (Bankr. M.D.Fla. 2006)(applying Florida

exemption law to hold that debtor was entitled to homestead exemption in surplus

proceeds from foreclosure sale); In re Swift, 129 F. 3d 792 (5th Cir. 1997)(applying

Texas exemption provision to hold that a cause of action to replace a lost retirement

account is exempt). One example cited by Waltrip, In re Crystian, 197 B.R. 803

(Bankr. W.D. Pa. 1996), relates to a debtor’s ability to cram down a mortgage, and

is centered on the language of the covenants in the mortgage documents. Waltrip

suggested that its holding can be extended to a lien avoidance action. The court in

Crystian examined the issue of whether a covenant in a mortgage requiring the

debtor to maintain hazard insurance on the residence created additional security for

                                          9
purposes of cram down, and held that it did not – the insurance was merely an

element of adequate protection, and therefore, the mortgage could not be modified

through the plan. There was no indication that the bankruptcy court’s recognition

of the hazard insurance as the money equivalent of the improvements in the context

of §§1123(b)(5) or 1322(b)(2) applies in the context of lien avoidance. Furthermore,

the resolution of the issues here does not hinge on a contract. Waltrip also cited In

re Mateer, 525 B.R. 559 (Bankr. D. Mass. 2015). The issue in Mateer, however, was

whether the debtor was entitled to claim a homestead exemption in his home (which

had been damaged by a storm) and insurance proceeds under Massachusetts law.

The debtor had failed to disclose the storm damage or the insurance proceeds in his

schedules or at his §341 meeting, so the opinion focuses on the effect, if any, that

concealment has on an exemption claim. Like the other cases on which Waltrip

relied, this one has nothing to do with the valuation of property in a lien avoidance

context.

      The case of In re Thigpen, 374 B.R. 374 (Bankr. S.D. Ga. 2007), was in fact

decided in the context of avoiding a judicial lien. The debtors in Thigpen owned

real estate that was secured by a mortgage and encumbered by a prepetition judicial

lien. During the bankruptcy proceeding, the debtors did not claim an exemption or

seek to avoid the judicial lien. The debtors received a discharge and the case was

closed. When the judicial lienholder instituted a foreclosure action, the debtors

                                         10
obtained an order reopening the case and moved to avoid the judicial lien. The

lienholder urged the court to use the current value of the property rather than the

value on the date of filing because the property had appreciated in excess of the

maximum exemption amount and the debtors had paid off the first mortgage. The

court refused, concluding that the petition date was the proper date for assessing the

property’s value for the avoidance action, adopting the position of numerous courts

around the country, and recognizing the intent behind §522(f): to freeze the relative

rights of the parties as of the date of the petition.   This is also consistent with

§522(a)(2) which defines “value” as the “fair market value as of the date of the filing

of the petition….”

       The use of the pre-restoration date to determine value rather than the post-

restoration date is not only grounded in law, but simply makes sense. Suppose, for

example, that before a debtor files for bankruptcy, her property is destroyed by a

fire. The debtor collects the insurance proceeds. If she were to sell the property at

this point, she would only receive the fair market value of the property, i.e., the value

of the “bricks and sticks.” It stands to reason that a willing buyer would only pay

for the property as it existed on that date, without taking the insurance proceeds into

account. Similarly, if Waltrip had foreclosed on the Judicial Lien before the Debtor

filed for bankruptcy, but after the fire, Waltrip would have received the value of the



                                            11
Property as it existed on the sale date, in its pre-restoration condition without taking

the insurance proceeds into account.

      Waltrip’s argument that the avoidance of the Judicial Lien constituted a

windfall to the Debtor is made by analogy. Waltrip begins by citing RSMo §525.010

and Rule 90.01(d), both of which deal with garnishment of insurance proceeds. The

analogy is not persuasive. Waltrip does not have a lien on the insurance proceeds in

this case. Why it is relevant that he might have the right as a judgment creditor to

garnish the proceeds is not clear.

      Next, Waltrip relies on Petrie v. LeVan, 799 S.W. 2d 632 (Mo. App. 1990), to

support his argument that depriving him of his Judicial Lien after the Debtor

converted the insurance proceeds to equity would contravene Missouri’s equitable

principle against double recovery. Petrie is a case of unjust enrichment. It involved

a breach of contract and conversion action against a vendor of property after the

vendor retained insurance proceeds for damage to the property that occurred the

night before the closing. The right to restitution for unjust enrichment presupposes

that the defendant was enriched by the receipt of a benefit, that the enrichment was

at the expense of the plaintiff, and that it would be unjust to allow the defendant to

retain the benefit. Id. at 635.      The court in Petrie found that each element was

satisfied, and concluded: “If [the defendant] may keep the proceeds of the insurance

and also the full purchase price, he has a windfall. [The defendant] is compensated
                                           12
for that which he did not lose and the [plaintiffs] pay for that which they did not

receive.” Id. at 636. That is not the case here. The elements of unjust enrichment

were not satisfied because Waltrip did not confer a benefit on the Debtor to which

she was not entitled. The Debtor was the rightful owner of the insurance proceeds

as loss payee under the policy. Furthermore, Missouri law on that question is not

relevant to lien avoidance under the Bankruptcy Code.

       Waltrip cited to other instances where a debtor manipulated the date of the

bankruptcy filing such that a windfall was created for the debtor at the expense of

the creditors. See, e.g., In re Burival, 406 B.R. 548 (8th Cir. BAP 2009)(discussing

a debtor’s obligations under an unexpired lease of nonresidential real property and

expressing concern that debtor could create a windfall by filing for bankruptcy the

day after rent is due); In re Crownover, 43 B.R. 22 (Bankr. E.D. Mo. 1984)(to allow

debtor to receive insurance proceeds on the theory that they represented “proceeds”

of her promissory note and deed of trust would produce an undue windfall). We

agree with the bankruptcy court that the evidence did not establish that the Debtor

engaged in any such manipulation. For example, the Debtor could have manipulated

the system by filing the avoidance action the day after the bankruptcy closed, but

she did not; she filed it instead, appropriately, immediately after she learned of the

sheriff’s sale.



                                         13
      Notably, the Trustee abandoned the Property and made no effort to administer

the insurance proceeds. As the bankruptcy court noted in its Order, Waltrip cited no

cases holding that appreciation in an abandoned asset constitutes a windfall to the

debtor. Moreover, here, the increased value of the property results not from

appreciation due to market forces, but repairs effected by the application of funds

owned by Debtor in which Waltrip had no interest. We do not disagree with the

bankruptcy court’s conclusion that the avoidance of the Judicial Lien did not create

a windfall for the Debtor. In fact, the converse could be true. Using the post-

restoration value of the Property for purposes of avoiding the Judicial Lien would

create a windfall in favor of Waltrip because it would allow him to recover the value

of the Property with enhancements that did not exist on either the date of the petition

or the date of the judgment.

      Although Waltrip did not mention laches by name in this appeal, he is

essentially making the argument that the doctrine applies. He asserts that the Debtor

made a conscious choice to delay the filing of the avoidance action so she could

retain all the equity in her home at the expense of her creditors. Laches consists of

two elements: 1) unreasonable delay in asserting one’s rights, and 2) a resulting

prejudice to the defending party. Strawn v. Missouri State Board of Education, 210

F.3d 954, 956-57 n.3 (8th Cir. 2000)(citations omitted). The bankruptcy court found

that “the doctrine of laches does not apply, because only fourteen months have

                                          14
passed from the Petition Date to the reopening of the Case, and the Creditor has

demonstrated no amount of prejudice outside of potentially a few fees.” The Debtor

moved to reopen the case and avoid Waltrip’s lien immediately upon receiving

notice of the sheriff’s execution sale.       That timing is reasonable given the

circumstances. Furthermore, from a procedural standpoint, neither the Bankruptcy

Code nor the Bankruptcy Rules places any time limit on the filing of a lien avoidance

motion. In re Hall, 327 B.R. 424, 426 (Bankr. W.D.Mo. 2005). Therefore, we find

that the bankruptcy court’s conclusion that laches does not apply is not clearly

erroneous.

      Waltrip cited several cases in support of his position that the payment of his

fees and expenses was a prerequisite to reopening the case because he incurred them

in reliance upon the belief that the Judicial Lien had survived discharge. Noble v.

Yingling, 29 B.R. 998 (D. Del. 1983); In re Oglesby, 519 B.R. 699 (Bankr. N.D.

Ohio 2014).    The Noble court acknowledges that “[s]ome courts have spoken of

conditioning relief to debtor upon payment of the judgment creditor’s costs and

expenses.” Noble, 29 B.R. at 1003. In its holding, however, the court did not rule

that those expenses must be paid. Rather, it lists a number of factors that the lower

court might consider on remand. In the Oglesby case, the court did condition

granting the debtor’s motion to reopen the case on the payment of the attorney’s fees

and costs incurred by the creditor, but that ruling was made “in light of Debtor’s

                                         15
unreasonable delay in pursuing avoidance of Sunrise’s lien and the resulting

prejudice to Sunrise….” Oglesby, 519 B.R. at 707. Here, however, as noted

previously, we find no clear error in the bankruptcy court’s determination that the

Debtor’s delay in pursuing the lien avoidance was reasonable, and that Waltrip was

not prejudiced as a result.

      These cases suggest that the payment of fees is not a condition to reopening

the case for lien avoidance, but a determination that is made on a case-by-case basis.

At any rate, here Waltrip has no cause for complaint because the Bankruptcy Court

gave him 14 days after the date of the Order to file a request for fees and costs, but

he failed to avail himself of the opportunity.

                                   CONCLUSION

      For the foregoing reasons, the bankruptcy court judgment is AFFIRMED.

                              ________________________




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