Larry L. Morinia and Brenda Joyce Morinia

1 This Court has jurisdiction over this action pursuant to
28 U.S.C. § 1334. 	This is a core proceeding under 28 U.S.C. §
157(b)(2)(B), which gives this Court authority to enter a final
judgment. 	This memorandum opinion constitutes the Court’s
findings of fact and conclusions of law pursuant to Bankruptcy
Rule 7052.
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW MEXICO
In re:
LARRY L. MORINIA
dba LBM Trucking
aka Larry Lloyd Morinia and
BRENDA JOYCE MORINIA
fdba More Than Digital,
Debtors. 	No. 11-07-12803 SA
MEMORANDUM OPINION OVERRULING
CREDITORS’ OBJECTION TO DEBTORS’ AMENDED EXEMPTIONS
This matter comes before the Court to determine the amount
of a homestead exemption that may be claimed under New Mexico law
in a bankruptcy proceeding. 	More specifically, the question is
whether a debtor’s right to claim a larger state homestead
exemption otherwise permitted by an amendment to the homestead
exemption statute is limited by virtue of a pre-existing judicial
lien on the real property in which the exemption is claimed. 	The
Court concludes that the exemption is not so limited, and
therefore the Court holds that each Debtor in this case is
entitled to claim a $60,000 homestead exemption. 1
Facts
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 1 of 10

2N.M. Stat. Ann. § 42-10-9 (1993) read:
42-10-9. 	HOMESTEAD EXEMPTION. 	Each person shall have exempt a
homestead in a dwelling house and land occupied by him or in a
dwelling house occupied by him although the dwelling is on land
owned by another, provided that the dwelling is owned, leased or
being purchased by the person claiming the exemption. 	Such a
person has a homestead of thirty thousand dollars ($30,000)
exempt from attachment, execution or foreclosure by a judgment
creditor and from any proceeding of receivers or trustees in
insolvency proceedings and from executors or administrators in
probate. 	If the homestead is owned jointly by two persons, each
joint owner is entitled to an exemption of thirty thousand
dollars ($30,000).
3The 2007 amendment substituted “the person” for “him” in
two places, substituted “sixty” for “thirty” in two places, and
(continued...)
Page -2-
The following facts necessary to the determination of
Creditors’ objection to Debtors’ amended claimed exemptions are
undisputed:
1. Effective July 1, 1993 N.M. Stat. Ann. § 42-10-9 (1993)
was amended to increase the state homestead exemption to $30,000
per joint homestead owner. 2
2. 	On October 6, 2005 the Harrises (“Creditors”) were
awarded a state court judgment against Debtors in the amount of
$1,980,580.60 plus accrued interest on October 6, 2005.
3. 	On October 31, 2005 Creditors recorded their judgment
against Debtors’ Bernalillo County real property located at 6400
Prairie Dunes NE, Albuquerque, NM 87111.
4. 	Effective June 15, 2007, N.M. Stat. Ann. § 42-10-9
(2007) was again amended to increase the homestead exemption to
$60,000 per person. 3
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 2 of 10

3(...continued)
substituted “($60,000)” for “($30,000)” in two places as compared
to the 1993 version of the statute.
4Debtors subsequently filed an amended schedule of
exemptions, which continued to claim the $120,000 total homestead
exemption, doc 33, to which Creditors reiterated their objection.
Doc 36.
Page -3-
5. 	On November 7, 2007 Debtors filed a Chapter 11 voluntary
petition. 	Doc 1.
6. 	On November 21, 2007 Debtors claimed New Mexico
homestead exemptions of $60,000 each, for a total of $120,000, in
the equity in their property at 6400 Prairie Dunes NE,
Albuquerque, NM 87111. 	Doc 15.
8. 	On January 4, 2008 Creditors timely objected to Debtors’
claims of a $120,000 homestead exemption, arguing the exemption
should be limited to $60,000 total for both of them. 	Doc 22. 4
Bankruptcy Rule 4003(b)(1).
Conclusions of Law
An exemption is a “privilege given to a judgment debtor by
law, allowing the debtor to retain certain property without
liability.” 	Black’s Law Dictionary 266 (3rd pocket ed. 2006).
Generally exemption statutes are to be liberally construed in
favor of the debtor. 	In re Wells, 132 B.R. 966, 967 (Bankr. D.
N.M. 1991)(citation omitted). 	In creating a comprehensive
bankruptcy scheme, Congress allowed the states to “opt out” of
the federal exemptions codified in 11 U.S.C. § 522(d). 	See §
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 3 of 10

5§ 522(b) reads in relevant part:
(1) Notwithstanding section 541 of this title, an individual
debtor may exempt from property of the estate the property listed
in either paragraph (2) or, in the alternative, paragraph (3) of
this subsection . . .
(2) Property listed in this paragraph is property that is
specified under subsection (d), unless the State law that is
applicable to the debtor under paragraph (3)(A) specifically does
not so authorize.
(3) Property listed in this paragraph is -
(A) subject to subsections (o) and (p), any property
that is exempt under Federal law . . . or State or local law that
is applicable on the date of the filing of the petition . . . .
6Debtors have not yet actually filed a lien avoidance motion
at this point in the case. 	Perhaps they await the outcome of
this exemption objection proceeding. 	However, the concepts of
exemption and lien avoidance are so entwined in section 522, the
Court will proceed as if Debtors are currently pursuing lien
avoidance.
Page -4-
522(b)(2). 	New Mexico has not “opted out” of the federal scheme.
As a result, bankruptcy debtors in New Mexico have the option to
choose between the federal exemptions codified in § 522(d) or the
state exemptions incorporated by § 522(b)(3). 5 	As a general
rule, “[e]xemptions are defined and determined as of the date
Debtor filed his petition in bankruptcy.” 	In re Larson, 260 B.R.
174, 197, (Bankr. D. Colo. 2001)(citation omitted); see Owen v.
Owen, 500 U.S. 305, 314 n. 6 (1991) and §522(b)(3)(A).
The lien avoidance provisions 6 of the Bankruptcy Code allow
a debtor “to avoid the fixing of a judicial lien on an interest
of the debtor in property to the extent that such lien impairs an
exemption. . . .” 	§ 522(f)(1)(A); In re Pacheco, 342 B.R. 352,
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 4 of 10

7The “mere existence of a judicial lien impairs the
homestead exemption because it constitutes a cloud on the title.”
In re Cisneros, 257 B.R. 332, 339 (Bankr. D.N.M. 2000), quoting
from Coats v. Ogg (In re Coats), 232 B.R. 209, 214 n. 8 (10th
Cir. B.A.P. 1999).
8 § 522(f)(2)(A) reads:
For the purposes of this subsection, a lien shall be considered
to impair an exemption to the extent that the sum of-
(i) the lien;
(ii) all other liens on the property; and
(iii) the amount of the exemption that the debtor could claim if
there were no liens on the property;
exceeds the value that the debtor’s interest in the property
would have in the absence of any liens.
Page -5-
353 (Bankr. D. N.M. 2006). 7 	Section 522(f)(2)(A) provides the
mechanism to calculate whether a judicial lien impairs an
exemption. 8 	Transcripts of judgment are a type of judicial lien
that is avoidable under § 522(f). 	In re Gregory Rockhouse Ranch,
380 B.R. 258, 262 (Bankr. D. N.M. 2007).
The text of § 522(f)(1)(a) refers to the impairment of
“exemptions to which the debtor would have been entitled under
subsection (b),” which includes federal exemptions and state
exemptions alike. 	Owen, 500 U.S. at 313. 	Bankruptcy law,
however, preempts state law in determining what liens may be
avoided in bankruptcy. 	Willis v. Strother (In re Strother), 328
B.R. 818, 821 (10th Cir. B.A.P. 2005) (overriding Oklahoma state
law which limited right to claim homestead exemption for a
judicial lien arising from work and material used in constructing
the home); accord In re Cisneros, 257 B.R. at 338 (whether a lien
“impairs” an exemption may be determined in every case by
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 5 of 10

9At the time the transcript of judgment was recorded against
Vega’s property in March 1979, N.M. Stat. Ann. § 42-10-9 allowed
for a $10,000 exemption; a few months later an increase in the
exemption to $20,000 became effective. 	The lien was foreclosed
by judgment in 1981, and the district court ultimately limited
Vega’s exemption to $10,000.
Page -6-
applying the § 522(f)(2) formula, regardless of the state law
limitations on the exemption).
a. 	New Mexico state law limitations on homestead exemptions
Pursuant to §522(b)(3)(A), the homestead exemption that
Debtors could claim is limited to that provided by “State or
local law that is applicable on the date of the filing of the
petition. . . .” 	Thus, the statute dictates that the proper
amount of the homestead exemption was determined by the law in
effect in New Mexico on November 21, 2007.
The New Mexico Supreme Court interpreted the state’s
homestead exemption in Ranchers State Bank of Belen v. Vega, 99
N.M. 42, 653 P.3d 873 (1982). 	Under New Mexico law, a money
judgment becomes a lien on the judgment debtor’s realty when the
transcript of judgment docket is filed and recorded with the
county clerk of the county in which the realty is situated. 	N.M.
Stat. Ann. 1978, § 39-1-6 (2008); In re Gregory Rockhouse Ranch,
380 B.R. at 262. In Vega, a transcript of judgment was recorded
against defendant Vega prior to a legislative increase in the
amount of the New Mexico homestead exemption. 9 	Id. at 43. 	The
New Mexico Supreme Court held that a legislative increase in the
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 6 of 10

Page -7-
amount of the homestead exemption may not be claimed against a
judicial lien that attached prior to the effective date of the
statutory amendment increasing the exemption. 	Id. at 44.
The instant case is functionally indistinguishable from
Vega. 	As such, it is clear under existing New Mexico law that
Debtors’ homestead exemptions would be limited to $30,000 each,
as the Creditors recorded their judgment against Debtors’
property prior to the legislative increase. 	However, because
bankruptcy law “preempts state law in determining what liens may
be avoided in bankruptcy,” Strother, 328 B.R. at 821, the inquiry
does not stop with this finding.
b. 	Applying § 522(f)(2)
“Courts properly assume, absent sufficient indication to
the contrary, that Congress intends the words in its enactment to
carry ‘their ordinary, contemporary, common meaning.’” Pioneer
Inv. Serv. v. Brunswick Assocs., 507 U.S. 380, 388 (1993)(quoting
Perrin v. United States, 444 U.S. 37, 42 (1979)). 	In the absence
of an ambiguity, when there is a dispute over the interpretation
of the statute, courts should not analyze the legislative
history. 	Zeigler Eng’g Sales, Inc. v. Cozad (In re Cozad), 208
B.R. 495, 498 (10 th Cir. BAP 1997).
The Supreme Court determined the threshold question to be
“not whether the [judicial] lien impairs an exemption to which
the debtor is in fact entitled but whether it impairs an
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 7 of 10

Page -8-
exemption to which he would have been entitled but for the lien
itself.” 	Owen, 500 U.S. at 310-11 (emphasis in original)
(holding Florida’s exclusion of certain liens from the scope of
its homestead protection does not achieve a similar exclusion
from the Bankruptcy Code’s lien avoidance provision). In Owen,
the Supreme Court applied § 522(f) in a situation where the
relevant state law (a series of judicial decisions) would not
have allowed a homestead exemption to be claimed. 	Id. at 306.
The Supreme Court held that a judicial lien on property claimed
exempt under a state law may be avoided under § 522(f), even if
state law limits the circumstances under which the property may
be exempt. 	In re Coats, 232 B.R. at 209 (“while federal law
permits states to define what property is exempt, federal law
governs the availability of lien avoidance, and pre-empts any
state law that limits the scope of its exemptions in a way that
would interfere with the ‘fresh start’ policy served by the
avoidance of certain types of liens under § 522(f)”); accord
Aetna Finance Co. v. Leonard (In re Leonard), 866 F.2d 335, 336
(10th Cir. 1989)(“[A] state may elect to control what property is
exempt under state law but federal law determines the
availability of the lien avoidance provision”).
Similar to the Florida state law addressed in Owen, in the
instant case New Mexico law would not allow the debtors to claim
the higher homestead exemption. 	But Owen holds that §522(f)
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 8 of 10

Page -9-
overrides state law to permit the voiding of the lien. 	Owen is
functionally indistinguishable from the instant case.
Conclusion
No material facts are in issue. 	Under New Mexico law
applicable on the date of the filing of the bankruptcy petition,
Debtors were entitled to a homestead exemption in the amount of
$60,000 each pursuant to N.M. Stat. Ann. § 42-10-9 (2007). 	The
plain language of the federal lien avoidance provision allows for
Debtors to claim an exemption which they would have been entitled
“if there were no liens on the property.” 	§ 522(f)(2)(a)(iii).
The language “denotes a state of affairs that is conceived or
hypothetical, rather than actual.” 	Owen, 500 U.S. at 311. If
there were not a transcript of judgement against the 6400 Prairie
Dunes property the Debtors could rightly claim a $60,000
homestead exemption each pursuant to N.M. Stat. Ann. § 42-10-9
(2007). 	Accordingly, Creditors’ objection to Debtors claimed
exemptions is overruled. 	The Court will enter an Order in
accordance with this Memorandum Opinion.
Honorable James S. Starzynski
United States Bankruptcy Judge
Date Entered on Docket: 	August 13, 2008
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 9 of 10

Page -10-
copies to:
Arin Elizabeth Berkson
Moore, Berkson & Gandarilla, P.C.
PO Box 216
Albuquerque, NM 87103-0216
George M Moore
Moore, Berkson & Gandarilla
PO Box 216
Albuquerque, NM 87103-0216
Ruth Fuess
Miller Stratvert PA
PO Box 25687
Albuquerque, NM 87125
Brian John Haverly
Miller Stratvert PA
PO Box 25687
Albuquerque, NM 87125
Dylan O'Reilly
Miller Stratvert P.A.
PO Box 869
Farmington, NM 87499-0869
United States Trustee
PO Box 608
Albuquerque, NM 87103-0608
Case 07-12803-s7 Doc 77 Filed 08/13/08 Entered 08/13/08 15:27:45 Page 10 of 10