United States District Court, E.D. Wisconsin
Stadtmueller U.S. District Judge.
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
JURISDICTION AND STANDARD OF REVIEW
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).
relevant facts are brief and undisputed. 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
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
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).
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. 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.
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