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Sarazin v. Sternat

United States District Court, E.D. Wisconsin

January 18, 2017

REBECCA SARAZIN, Appellant,
v.
SHAWN STERNAT, Appellee. Bankruptcy No. 15-21681

          ORDER

          J.P. Stadtmueller U.S. District Judge.

         On August 19, 2016, this appeal was taken by the appellant Rebecca Sarazin (“Sarazin”) from an August 5, 2016 order of the bankruptcy court in bankruptcy case number 15-21681. (Docket #1). The order overruled Sarazin's objection to appellee Shawn Sternat's (“Sternat”) homestead exemption and granted Sternat's motion to avoid Sarazin's judicial lien. (Docket #1-2). The appeal is now fully briefed. (Docket #5, #6, and #7). For the reasons explained below, the Court will reverse and remand this matter to the bankruptcy court for further proceedings.

         1. JURISDICTION AND STANDARD OF REVIEW

         Sarazin timely filed her Notice of Appeal on August 19, 2016, fourteen days after the bankruptcy court's order (Docket #1-2). Bankr. R. 8002(a)(1). This Court has jurisdiction of this appeal because the underlying order conclusively determined the status of Sarazin's claim. Schaumburg Bank & Trust Co., N.A. v. Alsterda, 815 F.3d 306, 313 (7th Cir. 2016). The Court reviews the bankruptcy court's findings of fact for clear error and its legal conclusions de novo. In re Marcus-Rehtmeyer, 784 F.3d 430, 436 (7th Cir. 2015).

         2. FACTS

         The relevant facts are brief and undisputed.[1] Sternat and Sarazin filed for divorce in state court in 2012. In September 2014 the circuit court, inter alia, divided the marital assets and liabilities via a judgment of divorce (the “Divorce Judgment”). (Docket #5-1 at 64-77). The Divorce Judgment granted Sternat the marital home (the “Home”), the primary asset of value between them, and assigned most of the marital debts to Sarazin. Id. at 75-76. To remedy this imbalance, the court ordered that Sternat make an equalization payment to Sarazin. Id. at 76. The Divorce Judgment described the payment as follows:

Equalization. Based on the above division, the court orders that to equalize the division of assets and debts, [Sternat] is to pay to [Sarazin] an equalization payment of $178, 923.00, which judgment is hereby granted in favor of [Sarazin] and against [Sternat].
The court finds that the IRS, WI Dept. of Revenue, and Loans from Shirley Wiedemeier debts [sic] described above are all marital debts.
Because the marital residence is the only remaining asset of value, it is hereby ordered to be sold to pay these debts as an equalizing payment from [Sternat] to [Sarazin], as soon as reasonably practical.

Id.

         Sternat did not sell the Home or make the equalization payment. He instead filed for Chapter 13 bankruptcy protection. Sarazin filed a claim for the equalization payment. She objected to Sternat's attempt to apply the homestead exception to the Home, and Sternat filed a motion to avoid Sarazin's lien. The bankruptcy court order under review resolved both issues simultaneously. (Docket #1-2).

         3.ANALYSIS

         Before the bankruptcy court, Sarazin argued that the Divorce Judgment had awarded her a mortgage lien, rather than a judicial lien. (Docket #5-1 at 47-49). The bankruptcy court found that Divorce Judgment was merely a judicial lien, concluding that Sarazin had conceded the point. Id. at 55.[2] This is a question of law, which the Court reviews de novo, and it concludes that this finding was erroneous. The Divorce Judgment awarded Sarazin a mortgage under Wisconsin law.

         This result is dictated by the Wisconsin Court of Appeals opinion in Klemme. There, a husband (Robert) and wife (Patricia) were granted a judgment of divorce. Klemme v. Schoneman, 477 N.W.2d 77, 77 (Wis. Ct. App. 1991). The judgment incorporated a stipulation concerning division of ...


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