Sprague v. Williams (In re van Winkle)

Case Type:
Case Status:
Affirmed in part and Reversed in part
BAP Nos. NM-17-031, 17-032, 17-033 (10th Circuit, Apr 03,2018) Published
BAP for 10th Circuit affirmed in part, reversed in part, and remanded bankruptcy court's (D. NM) order denying defendants' motion to dismiss and entering judgment in favor of plaintiff. BAP ruled New Mexico law allowed judgment lien to reattach upon debtor's redemption following foreclosure, reversing finding that defendants violated discharge, but affirmed finding that creditors violated court order, and remanded for further findings regarding damages. Because creditors did not seek personal liability on deficiency, enforcement of lien against property did not violate discharge.
Procedural context:
Bankruptcy court denied defendants' motion to dismiss and entered plaintiff's order granting partial summary judgment. Defendants appealed to BAP for 10th Circuit.
Debtor filed chapter 7, claiming homestead exemption in condo. Debtor moved to avoid judgment lien, then passed away. Debtor's daughter, as personal representative, entered into stipulated order capping creditors' judgment lien at amount remaining based on $100k total value, less payment of consensual first mortgage and deduction for homestead exemption. Creditors obtained relief from stay to foreclose on separate vacant real property owned by debtor. Creditors obtained title, credit bidding $67k for judgment lien. State court issued deficiency judgment of approximately $272k, limiting deficiency to lien on debtor's estate's remaining real estate, i.e., the condo. Personal representative redeemed the vacant real property by depositing $73,200 in state court registry. Creditors objected that personal representative was required to pay deficiency judgment as well to redeem. Creditors also purchased first consensual mortgage against condo, and commenced foreclosure action against condo. Personal representative commenced adversary alleging creditors had violated discharge injunction and terms of stipulated order.
Karlin, Nugent, Mosier

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