       United States Bankruptcy Appellate Panel
                         For the Eighth Circuit
                     ___________________________

                             No. 12-6061
                     ___________________________

                         In re: Patricia Anne Moore

                            lllllllllllllllllllllDebtor

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

                            J&M Securities, LLC

                    lllllllllllllllllllllCreditor - Appellant

                                        v.

                            Patricia Anne Moore

                      lllllllllllllllllllllDebtor - Appellee
                                   ____________

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

                          Submitted: May 14, 2013
                             Filed: July 8, 2013
                              ____________

Before KRESSEL, SALADINO and SHODEEN, Bankruptcy Judges.
                          ____________

KRESSEL, Bankruptcy Judge
       J&M Securities, LLC, appeals from an order of the bankruptcy court1 granting
Patricia Anne Moore’s motion to avoid a judicial lien on her homestead. Plainly
stated, the ultimate question in this case is whether a state law exception to an
exemption for a single creditor can prevent the debtor from exempting her homestead
from property of the estate. 11 U.S.C. § 522(b). We hold that it does not and affirm.


Background
       The facts are undisputed. On August 16, 2000, Patricia Ann Moore, the debtor,
a/k/a Patricia Wallingsford, in conjunction with her then husband, John Wallingsford
signed a guaranty of lease agreement with Caplaco Ten Inc., and Dierbergs Lemay,
Inc.


       The deed to Moore’s home was recorded in the St. Louis County Recorder of
Deeds office on April 11, 2003. Moore holds a one half ownership interest in the
home. She owns the property with her brother and sister-in-law, who together hold
the other one half interest. Of the three owners, Moore is the only one occupying the
house and resides in it as her homestead. Her brother and sister-in-law do not claim
Moore’s home as their homestead.


       On March 9, 2005, a judgment was entered against Moore in the Circuit Court
of St. Louis County in favor of Caplaco and Dierbergs; Caplaco and Dierbergs
transcribed the judgment on June 7, 2006, thereby creating a lien against Moore’s
home. J&M Securities obtained the judgment and lien by assignment on July 10,
2006. In January 2011, Moore granted the Anheuser-Busch Employees’ Credit Union
a mortgage against her home.


      1
       The Honorable Barry S. Schermer, United States Bankruptcy Judge for the
Eastern District of Missouri.

                                         2
      Moore filed her chapter 7 petition on September 6, 2011. She soon converted
her case to one under chapter 13. On the petition date, the judgment lien was
$72,770.73, the consensual lien (the mortgage) with ABECU was $108,603.00 and
Moore’s home had a fair market value of $143,000.00. In her schedules, Moore
claimed a homestead exemption of $15,000.00 pursuant to MO. ANN. STAT. §
513.475. J&M objected to Moore’s homestead exemption in her chapter 7 case, but
did not similarly object after she converted to chapter 13.2 The bankruptcy court
entered the order confirming Moore’s chapter 13 plan on February 22, 2012.


       Moore filed a motion to avoid J&M’s judicial lien. The credit union supported
the motion and J&M objected. The bankruptcy court ruled that 11 U.S.C. § 522(f)
allowed avoidance of all but $2,198.50 of the lien and granted the motion except to
that extent. We have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 158(b).


Standard of Review
       We review factual findings for clear error and legal conclusions de novo.
Temperato Revocable Trust v. Unterreiner (In re Unterreiner), 699 F.3d 1022 (8th
Cir. 2012).


Analysis
      On appeal, J&M challenges the propriety of the Eighth Circuit’s ruling in
Kolich v. Antioch Laurel Veterinary Hospital (In re Kolich), 328 F.3d 406 (8th Cir.
2003), and the bankruptcy court’s reliance on Kolich. We recognize that Kolich is




      2
        We agree with J&M that by granting the debtor’s lien avoidance motion,
the bankruptcy court implicitly decided and overruled J&M’s objection to the
debtor’s exemption claim.

                                         3
controlling precedent in the Eighth Circuit and decline J&M’s invitation to revisit that
court’s decision.


        J&M also argues that the bankruptcy court erred by summarily dismissing two
of its arguments, via footnote, as unpersuasive. J&M’s first argument is that Moore’s
homestead exemption is self-executing which renders § 522(f) unnecessary. J&M
anchors this theory in Judge Becker’s dissent from Simonson v. First Bank of Greater
Pittston (In re Simonson), 758 F.2d 103 (3rd. Cir. 1985), explicitly adopted by
Congress3 in the Bankruptcy Reform Act of 1994. Here J&M simply misses the
mark. The Simonson dissent stands only for the proposition that pursuant to § 522(i),
the debtor steps into the shoes of the judicial lien holder after avoiding that lien.
Section 522(i) helps prioritize the debtor’s exemption under state law with respect
to any remaining consensual liens. We agree with the bankruptcy court that the self-
execution argument is unpersuasive.


      The second footnote argument is grounded upon a firmer legal basis and
warrants a lengthier discussion. J&M argues that Missouri’s exception to the
homestead exemption for prior causes of action by a single creditor prevents Moore
from exempting her household from property of the estate.4




      3
        4 Collier on Bankruptcy ¶ 522.11[3] (Alan N. Resnick & Henry J. Sommer
          th
eds., 16 ed.).
      4
        In a case where this was not an issue, the Eighth Circuit assumed, but did
not decide, that this is the law. See Walters v. Bank of the West (In re Walters),
675 F.3d 1142 (8th Cir. 2012).

                                           4
State law exceptions to exemptions
       We begin our analysis with the statute: “[T]he 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.” 11 U.S.C. § 522(f)(1). Subsection (b) states, in pertinent part: “an
individual debtor may exempt from property of the estate the property listed in either
paragraph (2) or, in the alternative, paragraph (3) of this subsection ... where such
election is permitted under the law of the jurisdiction where the case is filed.” 11
U.S.C. § 522(b)(1). Paragraph (b)(2) points the debtor to the list of federal
exemptions in § 522(d). Paragraph (b)(3) provides the debtor with the exemptions
available under the debtor’s state’s law and any nonbankruptcy federal exemptions.


        The Supreme Court has made two applicable holdings. First, the Court held
that for § 522(f) to apply, the debtor must have “possessed an interest to which a lien
attached, before it attached, to avoid the fixing of the lien on that interest.” Farrey v.
Sanderfoot, 500 U.S. 291, 301 (1991). Next, the Court held that the applicability of
§ 522(f) is determined by answering the question of whether the lien impairs an
exemption to which the debtor “would have been entitled to but for the lien itself.”
Owen v. Owen , 500 U.S. 305, 310-311 (1991). This first is clearly true; the second
is the issue in this case.


        The Code allows states to opt out–meaning a state can prevent its citizen
debtors from choosing the federal bankruptcy exemptions. See 11 U.S.C. § 522(b).
Missouri is an opt-out state. MO. ANN. STAT. § 513.427. To exempt her homestead,
if at all, Moore was required to use Missouri’s homestead exemption.




                                            5
     J&M argues that under Missouri law, Moore is not entitled to the homestead
exemption and, therefore, her avoidance request fails under step two. The applicable
Missouri statutes read as follows:
      The homestead of every person, consisting of a dwelling house and
      appurtenances, and the land used in connection therewith, not exceeding
      the value of fifteen thousand dollars, which is or shall be used by such
      person as a homestead, shall, together with the rents, issues and products
      thereof, be exempt from attachment and execution. The exemption
      allowed under this section shall not be allowed for more than one owner
      of any homestead if one owner claims the entire amount allowed under
      this subsection; but, if more than one owner of any homestead claims an
      exemption under this section, the exemption allowed to each of such
      owners shall not exceed, in the aggregate, the total exemption allowed
      under this subsection as to any one homestead.

MO. ANN. STAT. § 513.475.1
      Such homestead shall be subject to attachment and levy of execution
      upon all causes of action existing at the time of the acquiring [sic] such
      homestead, except as otherwise provided in sections 513.475 to 513.530;
      and for this purpose such time shall be the date of the filing in the proper
      office for the records of deeds, the deed of such homestead, when the
      party holds title under a deed ... in case of existing estates, such
      homestead shall not be subject to attachment or levy of execution upon
      any liability hereafter created.

MO. ANN. STAT. § 513.510

      The thrust of J&M’s argument is that because the judicial lien is rooted in a
cause of action existing prior to Moore’s acquisition of her homestead, § 513.510, the
exception to the exemption, prevents Moore from exempting her homestead from




                                          6
property of the estate.5 While the judicial lien clearly attached to a property interest
she held prior to the lien attaching as required under §522 and Sanderfoot–which
J&M concedes–J&M argues that regardless of lien avoidance, Moore is not entitled
to a homestead exemption.


       J&M is adamant that the existing cause of action exception under § 513.510
is definitional to the homestead exemption. In our view, § 513.510 is a separate
statute and therefore is not part of the homestead exemption definition. Regardless
of how we view the operation of the two Missouri statutes, the Owen court answered
J&M’s question to the contrary. There, the Court framed the issue as follows: “The
question in this case is whether that elimination [of the judicial lien] can operate when
the State has defined the exempt property in such a way as specifically to exclude
property encumbered by [prior] judicial liens.”6 Owen, 500 U.S. at 306. The Court’s
use of the word ‘defined’ was extremely broad in the sense that the Florida exception
emanated from case law and was not part of the state exemption statutory scheme.


      The Court went on to explain that “[p]re-existing liens, then, are in effect an
exception to the Florida homestead exemption.”7 Id. at 307. Finally, the Owen court
concluded that “Florida’s exclusion of certain liens from the scope of its homestead
protection does not achieve a similar exclusion from the Bankruptcy Code’s lien



      5
        Presumably, J&M’s point is that since the statute makes the homestead
subject to prior causes of action, and since J&M’s judgment arose out of a prior
cause of action, debtor does not have any value to which the homestead exemption
could attach since the judgment lien exceeds the value of debtor’s interest in the
property.
      6
          Emphasis added.
      7
          Emphasis added.

                                           7
avoidance provision.” Id. at 313-314. We think this holding by the Supreme Court
is fatal to J&M’s argument.


       Missouri statutes do not single out prior liens as exempt from its homestead
provision, but rather, except prior causes of action–a point J&M emphasizes. The
First Circuit is the only court of appeals to address this issue directly and apply the
Supreme Court’s decision in Owen. See Patriot Portfolio v. Weinstein (In re
Weinstein), 164 F.3d 677 (1st Cir. 1999). Currently, Massachusetts’ statutes provide
an exception to its homestead exemption for liens that attach prior to homestead
creation. See MASS. GEN. LAWS ANN. ch. 188, § 3(b)(2). However, when Weinstein
was decided, the state statutes also provided an exception from the homestead
exemption for debts contracted prior to the homestead’s acquisition, Weinstein 164
F.3d at 681-682, similar to the exception in Missouri for prior causes of action. The
court analyzed both state law exceptions.


       Weinstein had owned his property for 20 years before the judicial lien was
recorded. Some four years later, Weinstein recorded his declaration of homestead.
Four months after establishing his homestead, Weinstein filed a chapter 7 petition,
elected the state law exemption scheme under § 522 and sought to have the judicial
lien avoided. The creditor objected to avoidance on the grounds that Massachusetts’
prior lien and debt exceptions prevented Weinstein from exempting his homestead.
Both the bankruptcy court and the district court ruled that federal law preempted the
state law exceptions to the homestead exemption and allowed avoidance of the
judicial lien; the First Circuit subsequently affirmed and the Supreme Court denied
certiorari. See Patriot Portfolio v. Weinstein, 527 U.S. 1036 (1999).


      In a bankruptcy case, exemption is an issue between the debtor and the creditor
body as a whole, represented by the trustee, not between the debtor and a single


                                          8
creditor.8 As stated by the Bankruptcy Appellate Panel for the Ninth Circuit, “[u]nder
§ 522, debtors may exempt certain property from their bankruptcy estate and the
reach of their general creditors. ‘These exemptions prevent certain property from
becoming part of the bankruptcy estate, and thus place the exempted property beyond
the reach of the bankruptcy trustee.’” Hastings v. Holmes (In re Hastings), 185 B.R.
811, 813 (B.A.P. 9th Cir. 1995) quoting Kendall v. Pladson (In re Pladson), 35 F.3d
462, 464 (9th Cir. 1994). It makes no sense to argue that because an asset would be
available to one creditor outside of bankruptcy, that it is available to all creditors in
a bankruptcy case.


      Section 522(c) states that “property exempted under this section is not liable
during the case for any debt of the debtor that arose ... before the commencement of
the case except–” 1) a tax or a customs duty, 2) domestic obligations, 3) liens that
cannot be avoided, 4) liens that are not void, 5) tax liens, and 6) certain
nondischargeable debts owed to federal depository institutions. See 11 U.S.C. §
522(c); Weinstein 164 F.3d at 679. Missouri statute § 513.510 serves a similar
function–excepting a certain type of debt from exemption protection. But can the
Missouri exception provide additional debt protection beyond the Code’s enumerated
provisions?


       “States may not pass or enforce laws to interfere with or complement the
Bankruptcy Act or to provide additional or auxiliary regulations.” International Shoe
Co. v. Pinkus, 278 U.S. 261, 265 (1929). Of course, as we noted previously, the Code
allows states to opt out of the bankruptcy exemption scheme. However, the opt out
clause does not naturally lead to “the conclusion that the ‘property exempted’ in
section 522(c) must be defined by first applying all the built-in exceptions to the state


      8
        Which is not to say that the issue of an exemption cannot be raised by a
creditor. Clearly, a single creditor has the right to object.

                                           9
exemption statute.” Weinstein 164 F.3d at 683. “The state’s ability to define its
exemptions is not absolute and must yield to conflicting policies in the Bankruptcy
Code.” Id. citing Owen 500 U.S. at 313.


       To the extent § 513.510 would except Moore’s homestead from exemption as
to J&M specifically, we hold that this type of exception is preempted by the specific
exceptions listed in § 522(c) of the Code. To the extent § 513.510 would except
Moore’s homestead from exemption from property of the estate, we hold that this
result is at odds with the Code’s exemption scheme–and is also preempted.


       Other circuit courts have similarly found that Owen prevents state law
exceptions to exemptions from determining exemptible property under the Code. The
Fifth Circuit has held that “although the states remain free to define the property
eligible for exemptions under § 522(b), the particular liens that may be avoided on
that property are determined by reference to Federal law; specifically, § 522(f) of the
Bankruptcy Code.” Tower Loan of Mississippi, Inc. v. Maddox (In re Maddox), 15
F.3d 1347, 1356 (5th Cir. 1994). The Fourth Circuit has held that a North Carolina
state statute must similarly yield to § 522(f). See Wachovia Bank and Trust Co. N.A.
v. Opperman (In re Opperman), 943 F.2d 441 (4th Cir. 1991). Ultimately, J&M’s
state exception to the exemption argument is unpersuasive.


Statutory calculation
      Because the debtor would be entitled to claim her homestead exempt in her
bankruptcy case, but for J&M’s lien, §522(f) is available to her. To determine
whether a lien impairs an exemption, the Code provides the following formula:
      a lien shall be considered to impair an exemption to the extent that the
      sum of–(i) the lien; (ii) all other liens on the property; and (iii) the
      amount of the exemption that the debtor could claim if there were no


                                          10
      liens on the property; exceeds the value that the debtor’s interest in the
      property would have in the absence of any liens.

11 U.S.C § 522(f)(2).
In Kolich, the Eighth Circuit acknowledged that there are a number of cases from
other circuits that allowed modifying the ‘all other liens’ aspect of the statutory
formula in the context of a debtor possessing less than 100% interest in the property.
However, the Eighth Circuit found “no sufficient basis for concluding that the
statutory formula produces ... a result ‘demonstrably at odds with the intentions of its
drafters.’” Kolich 328 F.3d at 410. The court went on to say, “our task is simply to
apply § 522(f)(2)(1) as Congress wrote it.” Id. And, of course, our task is to apply
the law as the Eighth Circuit interpreted it.


       The parties stipulated that only 50% of the credit union’s consensual lien
should be used in the Kolich calculation. J&M argues that Kolich is incorrect.
However, we are compelled to apply the Eighth Circuit’s precedent. We accept the
parties’ stipulation and apply Kolich.


       The Missouri homestead exemption statute, § 513.475, provides for a
$15,000.00 exemption. The statute allows an individual owner to claim the entire
$15,000.00 exemption if no other property owners claim part of the exemption, but
limits multiple owners to exempting, in the aggregate, only $15,000.00. In other
words, the maximum that can be exempted from one homestead property is
$15,000.00. Here, Moore’s claim of a $15,000.000 exemption is allowed under
Missouri’s scheme.




                                          11
       The bankruptcy court applied the § 522(f)(2) statutory formula as follows:

 The judicial lien - plus                                                 $72,770.73
 All other liens on the property (50% of
 credit union’s consensual lien) - plus                                   $54,301.50
 Exemption Moore could claim absent                                       $15,000.00
 any liens equals:
 Sum                                                                    $142.072.23
 Minus - Value of Moore’s interest in                                     $71,500.00
 the property absent any liens (50% of
 $143,000.00)
 Equals - Extent of the Impairment                                        $70,572.23

       The bankruptcy court found that subtracting the extent of the impairment
($70,572.23) from the judicial lien ($72,770.73) left $2,198.50 of the lien unimpaired.
The value the bankruptcy court used for all other liens on the property was 50% of
the credit union’s consensual lien in accordance with Moore’s concession that it
would be inequitable to apply the entire lien to her interest in property that secures
only 50% of the lien. The bankruptcy court held that whether Moore had equity in
her interest in the property was irrelevant because the debtor in Kolich, likewise, did
not have equity. We agree. The bankruptcy court properly calculated the extent of
the impairment in accordance with the statute, Eighth Circuit precedent, and the
parties’ stipulation.


Conclusion
      We hold that the debtor was entitled to claim her homestead exempt in her
bankruptcy case; that J&M’s judicial lien impaired her exemption; and that the
bankruptcy court properly applied Kolich in computing the extent to which the lien
impaired the debtor’s exemption. Therefore, we affirm the bankruptcy court.


                                           12
