The opinion of the court was delivered by: Judge Munley
Before the court is Filomena White Realty, Inc.'s appeal from the Bankruptcy Judge John J. Thomas's decision granting William and Diane Taitt's motion to avoid a non-possessory nonpurchase money judicial lien. The matter has been fully briefed and is ripe for disposition. For the following reasons, the appeal will be denied.
On December 29, 2009, Debtors filed a Voluntary Petition under Chapter 7 of the United States Bankruptcy Code. (Debtor's Br. at 1 (Doc. 7)). Appellees William and Diane Taitt (hereafter "Debtors") were the owners of real estate at 117 Bridle Road, Stroudsburg, Monroe County, Pennsylvania.*fn1 There was a total of four liens on the property. The value of the property was said to be $380,000.00 at the time of the petition.*fn2
(Bankruptcy Ct. Op. at 1 (Doc. 2-5)). The property was subject to a first and second mortgage in favor of ESSA Bank & Trust, totaling $328,000.00. (Id.) Appellant Filomena White Realty, Inc. (hereafter "Filomena") had a third judgment lien, in the amount of $123,643.10. (Id.) This judgment resulted from Debtor's default on a commercial mortgage held by Filomena and was entered in Monroe County Court of Common Pleas. (Mot. to Avoid Non-possessory Nonpurchase Money J. Lien at 1 (Doc. 2-1)). Filomena's judgment was followed by a fourth lien in the form of a mortgage in favor of Helen Diecidue*fn3 in the amount of $115,000.00. (Bankruptcy Ct. Op. at 1 (Doc. 2-5)). While the Diecidue mortgage predates Filomena's judgment, Diecidue executed a subordination agreement resulting in her mortgage being primed by the judgment. (Id.)
The Debtors claimed a $40,400.00 exemption in their real estate as set forth on Schedule C of their petition. (Debtor's Br. at 3 (Doc. 7)). On May 7, 2010, Debtor claims that all of their dischargable debts were deemed discharged under 11 U.S.C. § 727 and Filomena did not object. (Id. at 2). On October 20, 2010, Debtors filed a motion to avoid Filomena's judgment lien under 11 U.S.C. § 522(f). (Doc. 2-1).
On July 18, 2011, Judge John J. Thomas issued his decision granting the Debtor's motion to strike the judgment. (Bankruptcy Ct. Op. (Doc. 2-5)). The court rejected Filomena's argument "that the subordination agreement somehow elevates the status of the judgment into something closer to the mortgage lien" and found that Filomena's lien was avoidable. (Id. at 2). The bankruptcy court examined 11 U.S.C. § 522(f)(2)(a) to determine whether Filomena's judgment impaired Debtor's claimed exemption. By inserting the relevant numbers into the statutory formula, the bankruptcy court found that the sum total of Filomena's lien, the other liens on the property and the amounts of the exemption that the Debtors would claim if there were no liens exceeds the value of the property absent any liens. (Id. at 2-3). The excessive figure was "well above the face amount of [Filomena's] judicial lien resulting in that lien being avoidable en toto." (Id. at 3). The court noted that while the statute may act to the detriment of the judgment holder, "the result appears to be a conscious decision by Congress." (Id.)
On July 27, 2011, Filomena appealed the bankruptcy court's decision to this district court. (Notice of Appeal (Doc. 1)). The parties briefed the issues, bringing the case to its present posture.
We have jurisdiction over the instant bankruptcy appeal pursuant to 28 U.S.C. § 158(a)(1), which provides that the district courts of the United States have jurisdiction to hear appeals from final judgments, orders and decrees of the bankruptcy courts.
The district court reviews the bankruptcy court decisions of law de novo. In re O'Brien Envtl. Energy, Inc., 188 F.3d 116, 122 (3d Cir. 1999). The bankruptcy court's findings of fact will only be set aside if clearly erroneous. FED. R. BANKR. P. 8013 ("Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous, and due regard shall be given to the ...