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U.S. Supreme Court

United States v. Security Indus. Bank, 459 U.S. 70 (1982)

United States v. Security Industrial Bank

No. 81-184

Argued October 6, 1982

Decided November 30, 1982

459 U.S. 70


A provision of the Bankruptcy Reform Act of 1978, 11 U.S.C. § 522(f)(2) (1976 ed., Supp. V), permits individual debtors in bankruptcy proceedings to avoid nonpossessory, nonpurchase-money liens on certain property, including household furnishings and appliances. Appellees loaned individual debtors money and obtained and perfected such liens on the debtors' household furnishings and appliances before the 1978 Act was enacted. Subsequently, these debtors instituted separate bankruptcy proceedings under the 1978 Act. Sections 522(b) and (d) exempt household items from the property included within debtors' estates. The debtors claimed these exemptions, relying on § 522(f)(2) to avoid the liens. The Bankruptcy Courts refused to apply § 522(f)(2) retroactively to abrogate the liens. The Court of Appeals, in consolidated appeals, affirmed, holding that, although the 1978 Act was intended to apply retrospectively, and thus was designed to invalidate liens acquired before the enactment date, such an application violates the Takings Clause of the Fifth Amendment.

Held: Section 522(f)(2) was not intended to be applied retrospectively to destroy preenactment property rights. Pp. 459 U. S. 74-82.

(a) Where there is substantial doubt whether retroactive destruction of appellees' liens would comport with the Fifth Amendment, the cardinal principle that this Court will first determine whether a construction of a statute is fairly possible by which the constitutional question may be avoided warrants a consideration of whether, as a matter of statutory construction, § 522(f)(2) must necessarily be applied retroactively. Pp. 459 U. S. 74-78.

(b) No bankruptcy law shall be construed to eliminate property rights that existed before the law was enacted in the absence of an explicit command from Congress. In light of this principle, in the absence of a clear expression of Congress' intent to apply § 522(f)(2) to property rights established before the enactment date, the statute will not be construed in a manner that could call upon this Court to resolve difficult and sensitive

Page 459 U. S. 71

questions arising out of the guarantees of the Takings Clause. Pp. 459 U. S. 81-82.

642 F.2d 1193, affirmed.

REHNQUIST, J., delivered the opinion of the Court, in which BURGER, C.J.,and WHITE, POWELL, STEVENS, and O'CONNOR, JJ., joined. BLACKMUN, J., filed an opinion concurring in the judgment, in which BRENNAN and MARSHALL, JJ., joined, post, p. 459 U. S. 82.

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