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Megal Development Corp. v. Shadof11/8/2005
This appeal is before the court on certification from the court of appeals, pursuant to Wis. Stat. § 809.61 (Rule) (2003-04). Defendants Craig and Susan Shadof (Shadofs) appeal an order of the circuit court denying their application for satisfaction of a judgment and a judgment lien under Wis. Stat. § 806.19(4), where the underlying judgment had been discharged in bankruptcy. The Shadofs appealed, and the court of appeals certified the issue of whether § 806.19(4) requires the satisfaction of a judgment debt against a homestead, where the underlying judgment has been discharged in bankruptcy, yet the debtor's homestead equity exceeds the allowable homestead exemption, and where the debtor failed to seek avoidance of the judgment lien in the bankruptcy court. The court of appeals further raised the issue of whether, if § 806.19(4) does require the satisfaction of a judgment debt when the underlying judgment has been discharged in bankruptcy, the statute is in conflict with, and therefore preempted by, federal bankruptcy law.
We conclude that the circuit court erred in refusing to satisfy the judgment debt pursuant to Wis. Stat. § 806.19(4). The plain language of the statute unambiguously provides that when a proper application is received by the clerk and submitted to the judge for signature, the only thing required for satisfaction of a judgment debt and cessation of an associated judgment lien is that the underlying judgment has been discharged in bankruptcy . Further supporting our conclusion is the legislative history of the statute, as well as persuasive precedent discussed herein. We also conclude that § 806.19(4) is not in conflict with, and therefore not preempted by, federal bankruptcy law.
I.
The relevant facts are not in dispute. On May 18, 1994, Megal Development Corporation (Megal) obtained a small claims judgment for eviction and money damages against the Shadofs in the amount of $52,713.78. Pursuant to Wis. Stat. §§ 806.10(1), 806.15(1) and 815.20(1), the judgment subsequently became a lien upon the Shadofs' homestead property located in Waukesha County, Wisconsin.
In February 2003 the Shadofs filed for Chapter 7 bankruptcy relief in the United States Bankruptcy Court for the Eastern District of Wisconsin. They included the Megal judgment as a dischargeable debt on Schedule D of their bankruptcy forms. On June 12, 2003, at the conclusion of the bankruptcy proceedings, Judge James E. Shapiro granted the Shadofs a Discharge of Debtor, which included a discharge of the debt to Megal. The Trustee in bankruptcy found that after subtracting the first and second mortgages, the homestead exemption, and the judgment lien from the value of the homestead, there was no money left in the estate to pay unsecured creditors. Therefore, the Trustee abandoned the property at which point it reverted to the Shadofs. Coming out of bankruptcy, the Shadofs' homestead equity exceeded the $40,000 homestead exemption.
During the bankruptcy proceeding, Megal filed an Objection to Debtor's Claim for Exemption on May 22, 2003, arguing that the Shadofs had equity in their homestead in excess of the $40,000 exemption. The bankruptcy court set aside Megal's objection as premature, because the Shadofs had not sought to avoid any portion of Megal's judgment lien. However, the bankruptcy court order specified that Megal retained the right to challenge any subsequent lien avoidance motion brought under 11 U.S.C. § 522(f)(2004).
On June 16, 2003, the Shadofs filed an application with the Waukesha County Circuit Court seeking an order satisfying the Megal judgment and the judgment lien pursuant to Wis. Stat. § 806.19(4). Circuit Court Judge Donald J.
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