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In Re v. Commercial Bank and Trust Company

November 16, 2011

IN RE:
JEFFREY LEWIS WHITE,
DEBTOR.
JEFFREY LEWIS WHITE, DEBTOR - APPELLANT,
v.
COMMERCIAL BANK AND TRUST COMPANY,
CREDITOR - APPELLEE.
IN RE:
JENNIFER GAY WHITE, DOING BUSINESS
AS THE PRAIRIE LAND CO., LLC,
DEBTOR.
JENNIFER GAY WHITE,
DEBTOR - APPELLANT,
v.
COMMERCIAL BANK AND TRUST COMPANY,
CREDITOR - APPELLEE.



Appeal from the United States Bankruptcy Court for the Eastern District of Arkansas

The opinion of the court was delivered by: Kressel, Chief Judge.

Appeal from the United States Bankruptcy Court for the Eastern District of Arkansas

Submitted: September 29, 2011

Before KRESSEL, Chief Judge, SCHERMER and SALADINO, Bankruptcy Judges.

The appellants in these consolidated appeals are debtors in their respective chapter 7 cases. Commercial Bank objected to the debtors' homestead exemption claims and moved for relief from the automatic stay. The debtors then moved to avoid Commercial Bank's judicial liens. The bankruptcy court consolidated all of the motions and all three parties moved for summary judgment. The bankruptcy court overruled Commercial Bank's objection to the debtors' exemption, denied the debtors' motions to avoid Commercial Bank's judicial liens and granted

Commercial Bank relief from the automatic stay to allow it to foreclose its judicial liens. The debtors have both appealed. We have consolidated their appeals and reverse.

Standard of Review

We review a bankruptcy court's grant of summary judgment de novo, Mwesigwa v. DAP, Inc., 637 F.3d 884, 887 (8 tCir. 2011) (citing Anderson v.h Durham D & M, L.L.C., 606 F.3d 513, 518 (8 tCir. 2010)).h

Background

The debtors acquired the property which is the subject of this appeal on April 27, 1991, while they were still married. They originally purchased approximately 220 acres of land near Wilmar, Arkansas. Later, they sold some of the property and retained approximately 160 acres, using the proceeds from the sale of the other portion to pay the original debt for acquiring the property. As a result, they owned the 160 acres near Wilmar free of any encumbrances.

Between June 2004 and August 2007, the debtors borrowed money from Commercial Bank approximately eight times and granted it security interests in personal property and mortgages on real property, other than the Wilmar property. The debtors defaulted on those notes and the bank foreclosed its liens. The foreclosures resulted in a deficiency judgment against the debtors in the amount of approximately $161,000.00. Pursuant to ARK. CODE ANN. § 16-65-117(a)(1)(A), the resulting money judgment became a lien on the debtors' jointly held Wilmar property.

On December 17, 2009, the bank started an action to foreclose its judgment lien on the Wilmar property in an attempt to satisfy its remaining debt. On June 29, 2010, the debtors divorced. As part of a settlement leading up to the divorce, the parties agreed to divide the Wilmar property. To implement the agreement and the resulting divorce decree, the debtors executed reciprocal quit claim deeds dividing the property and giving each of the debtors an undivided interest in one half of the Wilmar property. The state court proceeded with the foreclosure action and on August 4, 2010, ordered a foreclosure sale of the Wilmar property for September 14, 2010. Before the sale could occur, both debtors filed bankruptcy petitions.

In their separate cases, the debtors each claimed a homestead exemption of 80 acres in their respective ...


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