Opinion
Case No. 02-01389.
June 28, 2006
DECISION RE MOTION TO AVOID JUDICIAL LIEN
The motion of the debtor, Bridget A. Manson, to avoid the judicial lien of Ford Motor Credit Company ("Ford") will be denied for the following reasons.
I
For purposes of deciding the motion without the necessity of resolving any disputed facts, I will accept Manson's version of the facts as that version does not suffice to prevent denial of her motion. In 2002, Manson commenced this case under chapter 7 of the Bankruptcy Code (11 U.S.C.), fully exempted her home pursuant to 11 U.S.C. § 522 utilizing District of Columbia exemptions, and obtained a discharge that applied to Ford's claim (but not any lien Ford might have). The case was closed that year.
In November 2005, while in the process of refinancing her home mortgage, Manson discovered Ford's judicial lien. The settlement attorneys, Eisen Rome, escrowed the amount of the lien to permit Manson the opportunity to reopen her case and seek to avoid the lien. On February 20, 2006, she filed a motion to reopen her case in order to file a motion to avoid the lien. Her attorney mailed a copy of the motion to reopen to Ford. The court granted that motion to reopen on March 16, 2006.
On or about March 29, 2006, the attorneys for Ford received from Eisen Rome, Manson's settlement attorneys, a check for $11,501.06, in payment of its judgment against Manson. On April 24, 2006, Manson (in apparent ignorance of the payment that had been made to Ford) filed and served her motion to avoid the lien under 11 U.S.C. § 522(f)(1)(A) as impairing her exemption. Not until May 25, 2006, did Ford's attorneys file an Order of Satisfaction with the District of Columbia Superior Court.
Manson's amended motion stated that the date was April 26, 2006 (a date that was nevertheless after the filing of the motion to avoid Ford's lien). The court will assume that the later date is the correct date.
Ford defended against the motion to avoid its lien by pointing to the payment of the judgment debt and the satisfaction filed with the Superior Court, and at the hearing on the motion pointed to In Re Wilding, 332 B.R. 487 (B.A.P. 1st Cir. 2005), as a decision supporting its position. The court gave Manson time to address Ford's argument in writing.
In a post-hearing amended motion, Manson emphasizes that Eisen Rome paid Ford subsequent to the reopening of the case (albeit not prior to the filing of the motion to avoid the lien). She contends that her right to avoid the lien (a right Ford does not dispute that she had), and thereby to receive the monies that were withheld from her refinancing, "should not be dependent solely on the unilateral actions of the title company." She contends that:
At the time this case was reopened, the money in question was being held in escrow pending a resolution of the lien avoidance. Ford's subsequent receipt of the funds from a third party should have no bearing on the resolution of the question of its entitlement to said asset.
Accordingly, she contends that the court may avoid Ford's liennunc pro tunc, and order Ford to turn over the funds that had been held in escrow. In her supporting memorandum, Manson further argues that Wilding is distinguishable because the judgment lien in Wilding was both satisfied and released prior to the reopening of the case, and prior to the filing of the motion to avoid the lien.
II
The court does not find Wilding distinguishable in any meaningful way, and will follow its reasoning.
A.
In both Wilding and this case, the judgment was satisfied after the filing of the debtor's motion to reopen and before the filing of the motion to avoid lien. True, in the instant case the lien was satisfied after the case was reopened, whereas inWilding, 332 B.R. at 488 n. 1, it was satisfied before the case was reopened, but reopening here only meant that the court could consider a motion to avoid the lien if one were eventually filed. That is not a material difference as the critical fact, in this and in Wilding, is that before the motion to avoid the lien was filed the lien was satisfied, and there was no lien remaining in place to be avoided.
B.
The timing of the release of the lien is immaterial. "The important dates are those on which the Debtor fully satisfied the lien and then filed the motion seeking to avoid it." Wilding, 332 B.R. at 490 (italics in original). Because, as in Wilding, the lien here was satisfied before the filing of the motion to avoid the lien, there was no lien to avoid once Manson filed her motion to avoid the lien.
C.
Although Manson attempted to protect herself by having her settlement attorneys hold the amounts attributable to the judgment lien in escrow pending resolution of a motion to avoid the lien, the escrow failed because the settlement attorneys disregarded the arrangement and sent the funds to Ford's attorney. Manson may very well have rights under nonbankruptcy law if agreed terms of that escrow arrangement were violated. However, those rights are irrelevant for purposes of administering § 522(f) as the judgment remains satisfied and there is currently no lien affixed to the property for this court to avoid.
The escrow was not an escrow to which Ford was a party. It was only a bilateral arrangement between the debtor and the settlement attorneys. If those attorneys violated the terms of the agreement establishing the escrow by paying Ford, Manson may have a claim against them for breach of contract. If Ford itself induced a breach of that contract, Manson may even have a claim against Ford for tortious interference with Manson's contractual rights by inducing breach of the contract.
This decision does not preclude Manson from establishing damages arising from any breach of the escrow contract based on her having had § 522(f) rights that were nullified by the settlement attorneys making payment to Ford. Further, if Manson were by judicial action to force Ford to set aside the payment and return it into escrow, this decision does not preclude resort to a motion to avoid the lien at that juncture. (It is more likely that damages would be held an adequate remedy at law in lieu of an equitable remedy of restoring the parties to their prior position.)
III
The court will deny Manson's motion to avoid Ford's lien without adjudicating whether the lien, when it was in existence, was avoidable.