CRP Holdings, A-1, LLC v. O'Sullivan (In re O'Sullivan), 544 B.R. 407

Debtor Casey O’Sullivan and his wife acquired a residence as tenants by the entirety in 1995; wife was not a judgment debtor.
CRP obtained a $765,151.18 judgment against the debtor (and a related business) on January 5, 2015 and filed a Notice of Foreign Judgment in Barton County on January 26, 2015.
Debtor filed Chapter 7 on April 3, 2015, claimed a $15,000 exemption in his apportioned homestead interest (Mo. Rev. Stat. § 513.475 and 11 U.S.C. § 522(b)(3)(B)), and moved to avoid CRP’s judgment lien under § 522(f). CRP objected.
Bankruptcy court concluded, applying Farrey v. Sanderfoot, that CRP’s judgment lien “fixed” to the residence after the debtor acquired his tenancy by the entirety interest and that the lien impaired the debtor’s exemption; it granted avoidance.
On appeal CRP conceded its lien attached to the residence but argued it did not fix to the debtor’s tenancy-by-entirety interest because that interest was not individually subject to execution. The BAP affirmed.

Issue	Plaintiff's Argument (CRP)	Defendant's Argument (Debtor)	Held
Whether CRP’s judgment lien “fixed” to the debtor’s tenancy-by-entirety interest such that it is avoidable under 11 U.S.C. § 522(f)(1)	Lien did not fix to debtor’s individual tenancy-by-entirety interest because under Missouri law that interest is not subject to execution against one spouse; thus no avoidable lien on debtor’s interest	The judgment lien fixed after debtor acquired his tenancy-by-entirety interest and § 522(f)(1) permits avoidance of judicial liens (including inchoate/unenforceable ones) that impair exemptions	Court held the lien fixed (for § 522(f) timing) after debtor acquired the interest and is avoidable; avoidance affirmed

Farrey v. Sanderfoot, 500 U.S. 291 (1991) ("fixing" is a temporal event—lien must fasten to an interest after the debtor possessed that interest to be avoidable under § 522(f))
Fed. Nat’l Mortg. Ass’n v. Pace, 415 S.W.3d 697 (Mo. Ct. App. 2013) (tenancy by the entirety presumptively arises from conveyance to husband and wife; neither spouse has separate alienable interest)
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Shackelford, 591 S.W.2d 210 (Mo. Ct. App. 1979) (property held by tenancy by the entirety is not subject to judgment against only one spouse)
Rodgers v. First Nat. Bank of Appleton City, 82 Mo. App. 377 (Mo. Ct. App. 1900) (filing a transcript of a judgment can create a cloud on title even if the judgment cannot be enforced against the property)