Helmick v. Gray (In Re Helmick)

406 B.R. 739, 2009 Bankr. LEXIS 1774, 2009 WL 1965047

• Court: United States Bankruptcy Court, W.D. Virginia
• Decided: July 9, 2009
• Docket: 19-70166
• Status: Published

Opinion

ORDER

ROSS W. KRUMM, Bankruptcy Judge.

At Harrisonburg in said District this 9th day of July, 2009:

Before the Court is the Plaintiffs Motion to Reconsider, Vacate and Set Aside Order Entered June 22, 2009. The Plaintiff argues that the Court is bound by Warthen v. Smith (In re Smith), 247 B.R. 191 (W.D.Va.2000), aff'd, 1 Fed.Appx. 178 (4th Cir.2001) (unpublished table decision), cert. denied, 532 U.S. 1052, 121 S.Ct. 2194, 149 L.Ed.2d 1025 (2001), to avoid the Defendant’s wholly unsecured judgment lien pursuant to 11 U.S.C. § 506(d). This Court disagrees.

The rationale in the Supreme Court’s decision in Dewsnup v. Timm, 502 U.S. 410, 112 S.Ct. 773, 116 L.Ed.2d 903 (1992), as extended by the Fourth Circuit in Ryan v. Homecomings Financial Network, 253 F.3d 778, 782 (4th Cir.2001), and In re Hamlett, 322 F.3d 342, 348 (4th Cir.2003), controls in this case. The Supreme Court in Dewsnup denied “strip down” of an undersecured consensual lien, emphasizing that “liens pass through bankruptcy unaffected.” Dewsnup, 502 U.S. at 417-18, 112 S.Ct. at 778. The Fourth Circuit applied the Dewsnup rationale to deny a debtor’s attempt to “strip off’ a wholly unsecured lien in Ryan. 253 F.3d at 782. 1 In Hamlett, the Fourth Circuit adopted the Seventh Circuit’s reasoning in In re Tarnow, 749 F.2d 464 (7th Cir.1984), agreeing that “ § 506(d) only empowers the bankruptcy court to void liens supporting disallowed claims if it judges those liens to be invalid in substance.” Hamlett, 322 F.3d at 348 (emphasis added). In this case, the Plaintiff advocates that the Defendant’s judgment lien is disallowed under § 506(a) because it is wholly unsecured and is therefore voidable under § 506(d). The Defendant’s lien, however, is properly perfected and valid in substance. Pursuant to the Fourth Circuit’s holdings in Ryan and Hamlett, the Plaintiff may not “strip off’ the Defendant’s valid unsecured lien under § 506(d).

This Court acknowledges that the Fourth Circuit in Ryan denied “strip off’ in the limited context of a wholly unsecured, consensual lien. The Ryan decision does not explicitly prohibit “strip off’ of an unsecured judgment lien, however, the Fourth Circuit expressly noted that the Western District’s decision in Warthen is at odds with Dewsnup, despite the fact that Dewsnup “remains the law of the land.” Ryan, 253 F.3d at 783 (citation and internal quotation marks omitted). Reading Ryan together with Hamlett, this Court finds that later Fourth Circuit precedent repudiates the Western District’s holding in Warthen that would permit a bankruptcy court to “strip off’ an unsecured judgment lien. This Court is therefore not bound to follow Warthen. Accordingly, it is:

ORDERED:

That the Plaintiffs Motion to Reconsider is hereby DENIED.

Copies of this Order are directed to be sent to counsel for the Plaintiff, Roland S. Carlton, Jr., Esq.; and to the Defendant, Gary Gray, 1024 15th Street, Roanoke, VA 24013.

1 . "The term 'strip down’ is used when a [lien] is partially secured and partially unsecured, while the term 'strip off is used when a junior [lien] is totally unsecured.” Ryan v. Homecomings Financial Network, 253 F.3d 778 (4th Cir.2001) (internal quotation marks and citation omitted).