Opinion
Case No. 01-11529-RGM, Ad. Proc. No. 01-1210
April 2, 2002
MEMORANDUM OPINION
Barrie M. Peterson, the debtor in possession in this chapter 11 case, seeks a determination of the validity, extent and priority of certain liens claimed by Atlantic Funding Corporation, principally, a declaration that the assets of First Flight Limited Partnership and Maryland Air Industries are not subject to a lien in favor of Atlantic Funding Corporation. The matter is before the court on the parties' cross-motions for summary judgment.
The parties stipulated to the genuineness of the documents attached to Atlantic Funding's proof of claim and the documents attached to each party's motions as well as certain facts. Notwithstanding the stipulation, the court cannot resolve all issues on the present record.
Findings of Fact
1. Atlantic Funding obtained a judgment against Barrie M. Peterson and Barrie M. Peterson, Trustee, in the United States District Court of the Eastern District of Virginia on November 15, 1991, in the principal amount of $1,217,201.96 together with interest.
2. The assets of First Flight Limited Partnership are almost exclusively commercial income producing real estate located in Washington County, Maryland.
3. The assets of Maryland Air Industries consist of parts inventory for certain aircraft and intellectual property relating to the manufacture of the aircraft. The parts inventory is, apparently, located in Washington County, Maryland. The situs of the intellectual property is unknown.
4. The principal place of business of First Flight is in Woodbridge, Virginia. Memorandum Opinion, ¶ 6, C.F. Trust, Inc. v. First Flight Limited Partnership, E.D.Va. Civil Action No. 99-1742-A, March 22, 2001, (Ellis, J.) ("Memorandum Opinion").
5. The judgment was duly docketed in the Circuit Court for Washington County, Maryland pursuant to the Uniform Enforcement of Foreign Judgments Act, Md. Code, § 11-801, et seq., of the Courts Judicial Proceedings Article on November 8, 1995.
6. The judgment was duly docketed in the Circuit Court for Prince William County, Virginia, on or about May 31, 1996.
7. A charging order was entered by the Circuit Court for Prince William County on March 1, 1996, against Peterson's interest in First Flight.
8. A writ of fieri facias was issued by the Circuit Court for Prince William County on February 11, 2000. It was received by the sheriff of Fairfax County, Virginia, on February 25, 2000. The sheriff returned a "Not Found" as to Peterson and Barrie M. Peterson, Trustee, on March 21, 2000, and made a second return that states, "Executed in Fairfax County, Virginia. No property found out of which to make a levy due to question of ownership." The second return is dated March 21, 2000.
9. An order was entered on March 22, 2001, in the United States District Court for the Eastern District of Virginia in the case known as C.F. Trust, et al., v. First Flight Limited Partnership, et al., Civil Action No. 99-1742-A by the Honorable T.S. Ellis which declared:
Defendant First Flight Limited Partnership and defendant Maryland Air Industries are the alter egos of Barrie Peterson and that their assets are subject to the valid judgments held by C.F. Trust, Inc. and Atlantic Funding Corporation.
The Memorandum Opinion which was also dated March 22, 2001, and which accompanied the order was amended as to certain findings of facts and conclusions of law by an order dated April 26, 2001. The amendments did not alter the March 22, 2001, order. An appeal of the order is pending in the Court of Appeals.
10. The judgment was duly registered in the United States District Court for the District of Massachusetts and duly docketed in Nantucket County, Massachusetts. An execution issued on the judgment on September 28, 1995. The sheriff of Nantucket County, Massachusetts seized and levied upon Peterson's interest in the Nantucket real property on September 29, 1995.
11. Peterson filed a voluntary petition in bankruptcy pursuant to chapter 11 of the United States Bankruptcy Code in this court on April 6, 2001.
Conclusions of Law 1. The lien created by the Virginia writ of fieri facias.
A. Lien on Tangible Personal Property. In Virginia, the lien of a writ of fieri facias ("fi. fa.") attaches to tangible personal property from the time the sheriff levies on the property and continues in effect until the return date, in this case, a period of 90 days, or if longer, a reasonable period to permit property levied upon to be sold. Response of Atlantic Funding, Exhibit B, Writ of Fieri Facias (establishing the return date); Va. Code § 8.01-478; Palais v. DeJarnette (In re Scharton), 145 F.2d 953 (4th Cir. 1944); Grandstaff v. Ridgley, 71 Va. (30 Gratt.) 1 (1878). Here, no property was levied upon. Consequently, no tangible personal property is subject to a lien arising from the fi. fa.
B. Lien on Intangible Personal Property. In Virginia, a lien arises as to all intangibles within the Commonwealth of Virginia upon the receipt of the fi. fa. by the sheriff. Va. Code § 8.01-501; Network Solutions, Inc. v. Umbro Int'l., Inc., 259 Va. 759, 529 S.E.2d 80 (2001); In re Acorn Elec. Supply, Inc., 348 F. Supp. 277 (E.D.Va. 1972). No levy is required. The lien expires one year from the return day. Va. Code § 8.01-505. Here, the only intangibles identified are the intellectual property rights of Maryland Air Industries and Peterson's partnership interests. The record is unclear as to the situs of the intellectual property rights and Peterson's partnership interest in Maryland Air Industries. If the situs was within the Commonwealth from February 25, 2000, until the filing of the petition in this case, the lien of the fi. fa. attached to the intangibles. Va. Code § 8.01-481; Homeowner's Fin. Corp. v. Pennington, 47 B.R. 322 (Bankr.E.D.Va. 1985). If the situs was always outside the Commonwealth during the entire applicable period, the lien did not attach to the intangibles. To the extent that an intangible had a situs in the Commonwealth of Virginia at any time from February 25, 2000 through April 6, 2001, it is subject to the lien of the writ of fieri facias issued on February 11, 2000. Peterson's partnership interest in First Flight will be addressed below. Any intangibles owned by Maryland Air Industries and situate in Virginia during the applicable period are subject to the lien of the fi. fa. by virtue of Judge Ellis' order of March 22, 2001.
The lien on intangibles may exist longer if the intangible is a debt due from, or a claim upon, a third person in favor of the judgment debtor or the estate of the third person. In this event, the lien continues for one year from the final determination of the amount owed to the judgment creditor. Va. Code § 8.01-505.
The one-year period would have expired on May 11, 2001, but for the bankruptcy in this case. The return date of the fi. fa. was May 11, 2000, 90 days after it was issued on February 11, 2000. See Response of Atlantic Funding, Exhibit B, Writ of Fieri Facias. The bankruptcy extends the lien. In re Andrews, 210 B.R. 719 (Bankr.E.D.Va. 1997); Homeowner's Fin. Corp. v. Pennington, 47 B.R. 322 (Bankr.E.D.Va. 1985).
2. Lien of the Charging Order. A charging order was entered by the Circuit Court of Prince William County, Virginia, on March 1, 1996, with respect to Peterson's interest in First Flight. The charging order provides that:
[T]he entire interest of Barrie M. Peterson in First Flight . . . is charged with the payment of the Judgment . . .
and appointed a receiver to:
collect the partnership share of Barrie M. Peterson in the Partnership profits, income, proceeds of sale, distributions or any other moneys due or that become due to Barrie M. Peterson in respect of, or pertaining to, the Partnership
Charging Order entered March 1, 1996, Atlantic Funding Proof of Claim, Exhibit I.
Section 50-73.46 of the Virginia Revised Uniform Limited Partnership Act provides:
On application to a court of competent jurisdiction by any judgment creditor of a partner, the court may charge the partnership interest of the partner with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the partnership interest. This chapter does not deprive any partner of the benefit of any exemption laws applicable to his partnership interest.
The charging order clearly attaches to the "profits, income, proceeds of sale, distributions or any other moneys due or that become due" to Peterson, and not to the partnership assets. Va.Code. § 50-73.46; First Union Nat'l. Bank v. Craun, 853 F. Supp. 209 (W.D.Va. 1994); Pischke v. Murry, 11 B.R. 913 (Bankr.E.D.Va. 1981) (Bostetter, J.).
What is not immediately clear is whether Peterson's partnership interest itself is subject to a lien. While the charging order does not create a lien on Peterson's partnership interest, the lien of the fi. fa. may. There are two issues: First, if the lien arising from the fi. fa. attaches to Peterson's partnership interest, did it expire one year after the return date as apparently provided in Va. Code § 8.01-505? Second, did the lien attach to Peterson's limited partnership interest itself? The first question has been answered in this district. The filing of a petition in bankruptcy maintains the status quo existing at the time of filing. "A creditor in bankruptcy, therefore, is not 'obligated to seek relief from the stay in order to seek a new writ of fieri facias to keep the lien in effect' post-petition." In re Andrews, 210 B.R. 719, 722 (Bankr.E.D.Va. 1997) (quoting Homeowner's Fin. Corp. v. Pennington, 47 B.R. at 327).
In re Pischke, 11 B.R. 913 (1981) (Bostetter, J.) appears to hold to the contrary. However, Pennington, an opinion also written by Judge Bostetter, reports that Pischke was reversed on this point by the District Court in an unpublished opinion. Pennington, 47 B.R. at 327.
The answer to the second question is not as clear. A review of the published cases suggests that the fi. fa. attaches to the partnership interests. In Pischke, the bankruptcy court was presented with eight judgment creditors all of whom asserted liens against the bankrupt's limited partnership interest in a limited partnership. All had caused a fi. fa. to be issued, but only three had obtained charging orders. The court held that the judgment creditors' priority was determined by the date of entry of the charging orders and not the date that the fi. fa. lien arose. It also held that charging orders issued pursuant to the predecessor of § 50-73.46, Section 50-65 of the Virginia Uniform Limited Partnership Act, were the "only appropriate remedy available to the . . . holders of judgment liens." Pischke, 11B.R. at 918 n. 5. Doubt is cast on this second holding, though, by the reference in Pennington to an unpublished opinion of the District Court on the appeal in Pischke. The unpublished opinion held that the lien created by a fi. fa. continued in force if it had not expired prior to the filing of the petition in bankruptcy notwithstanding Va. Code § 8.01-505 which would otherwise limit the fi. fa. to the period ending one year after the return date. Pennington, 47 B.R. at 327. Such a ruling would have been unnecessary if a charging order were the exclusive remedy available to a judgment creditor seeking to satisfy a judgment from a debtor's limited partnership interest. One may, therefore, infer that the creditors who did not obtain a pre-petition charging order were secured creditors and that the security for each creditor was the fi. fa. lien that attached to the limited partnership interest in the absence of a charging order. In addition, in Craun, a more recent case, a security interest was perfected against a limited partnership interest after the judgment was entered but before the charging order was entered. No fi. fa. was ever issued. The court held that there was no lien on the limited partnership interest and that the security interest had priority over the later charging order. However, had a fi. fa. issued prior to perfection of the security agreement, the fi. fa. would have created a lien from the time it was delivered to the marshal as provided in Va. Code § 8.01-501. Craun, 853 F. Supp. at 211. Craun, therefore, also inferentially supports the view that a charging order is not the sole remedy of a judgment creditor.
Pischke arose under the Bankruptcy Act of 1898. The Bankruptcy Code of 1978 does not appear to alter the analysis in Pischke.
There is no indication that the priorities found in Pischke — that charging orders have precedence over judgment liens for which no charging order has been obtained and that among multiple charging orders, precedence is determined by the date of entry of the charging order — were affected.
While Va. Code § 50-73.46 does not provide a clear answer to the question, several things are clear. Section 50-73.46 does not contain any language or an indication that it preempts, modifies or affects any existing creditor remedy or that a limited partnership interest is exempt from creditor's claims. This is in clear distinction to § 50-73.108(E) of the Virginia Uniform Partnership Act which became effective July 1, 1997, and which explicitly provides that it is "the exclusive remedy by which a judgment creditor of a partner or partner's transferee may satisfy a judgment out of the judgment debtor's transferable interest in the partnership." Moreover, § 50-73.46 states, "To the extent so charged, the judgment creditor has only the rights of an assignee of the partnership interest." The rights of an assignee are set out in § 50-73.45 and § 50-73.47. While the ability to transfer a limited partnership interest may be restricted by the partnership agreement, Article 7 of the Virginia Revised Uniform Limited Partnership Act (itself entitled "Assignment of Partnership Interests") clearly envisions the transfer of partnership interests, a right that differs from the right to merely receive a partner's distributions. If a partner may voluntarily transfer his partnership interest, a creditor — absent a clear prohibition in the Virginia Code — should be able to effect the same transfer involuntarily. Section 50-73.46 provides a means to accomplish such a transfer with a charging order, but it does not make this the exclusive remedy and does not limit § 8.01-501 which governs the lien of a fi. fa. on intangibles. A lien may be significant. While the lien of the fi. fa. arises immediately upon delivery of the fi. fa. to the sheriff, entry of a charging order is neither as simple nor as immediate. The delay between the time the lien of a fi. fa. may arise and when a charging order may be entered permits mischief if no lien is in place during the gap period as is well illustrated by Cruan. Absent a clear indication that the General Assembly intended to limit judgment creditor's rights when it enacted § 50-73.46, the preexisting general law continues in force and a limited partnership interest is subject to the lien of a writ of fieri facias from the time that the fi. fa. is delivered to the sheriff. In this case, because the bankruptcy petition was filed on April 6, 2001, a date before the fi. fa. lien on intangibles expired, the lien continues in effect and Peterson's limited partnership interest in First Flight is subject to the lien in favor of Atlantic Funding.
3. Docketed Lien in Washington County, Maryland.
A. Personal property. In Maryland, a lien on personal property arises only when the sheriff levies on the personal property. Md. Code, § 11-403 of the Courts Judicial Proceedings Article. The parties agree that a fi. fa. never issued on the Maryland judgment and that no personal property was ever levied upon. Therefore, the Washington County, Maryland judgment did not create a lien on the personal property of First Flight or Maryland Air Industries in Maryland.
B. Real property. A lien arose on all of the real property owned by Peterson and Barrie M. Peterson, Trustee, in Washington County, Maryland, by virtue of the docketing of the federal judgment in Washington County on November 8, 1995. Atlantic Funding asserts that the March 22, 2001, order declaring First Flight to be the alter ego of Peterson also creates a lien on First Flight's real property situate in Washington County. Peterson argues that it does not because in Maryland, a lien attaches to real estate only if the judgment is indexed in the name of the title owner. He states:
Maryland courts have uniformly held that judgments indexed in the wrong name do not give rise to a lien against property held in another name, even if the property is in fact owned by the judgment debtor. E.g., Frederick Ward Assocs. v. Venture, Inc., 99 Md.App. 251, 636 A.2d 496 (1994) (judgment entered against "Chris Walker" did not constitute a lien against land owned by him, but titled in the name of "John C. Walker"; where judgment is indexed in a nickname or misnomer that is sufficiently dissimilar to the name in which the judgment debtor's property is titled, the judgment will not be enforceable as a lien against the property with respect to a subsequent bona fide purchaser for value without notice of the judgment); Waicker v. Banegura, 357 Md. 450, 745 A.2d 419 (2000) (money judgment constitutes a lien on the judgment debtor's interest in real property only if correctly indexed and recorded in the name of the owner of record of the property against which the lien is sought to be imposed).
Complaint ¶ 10. Consequently, Peterson argues, the real property situate in Washington County, Maryland, is not subject to the lien of the docketed judgment because the judgment is against him while the property is titled in First Flight.
Section 11-402 of the Courts Judicial Proceedings Article of the Maryland Code provides that a money judgment when indexed and recorded constitutes a lien on the "debtor's interest in land". In this case, § 11-402(c) governs and the lien arises from the date of docketing. See also Md. Rule 2-621. Section 11-501 makes clear that the sheriff may seize and sell the "legal or equitable interest of the defendant named in the writ in real or personal property." Nothing in § 11-402, § 11-501 or Rule 2-621 requires the debtor's property to be titled in the debtor's name. The real question is the meaning of the phrase "indexed and recorded" as used in § 11-402(c) and Rule 2-621. The leading Maryland case is, as cited by Peterson, Waicker v. Banegura, 357 Md.450, 745 A.2d 419 (2000). But, Peterson misreads it. The actual holding is, as clearly stated by the Court:
There are occasions when property is not held by the true owner or titled in the true owner's name. For example, a debtor may deposit his money into someone else's bank account; the true owner of real property may have it titled, perhaps for convenience, in another's name; or, as here, the owner of record is the alter ego of the debtor.
We hold that the Circuit Court for Baltimore County correctly ruled that Mystic Investments had a priority interest because appellants' judgment lien was misindexed. Generally, absent evidence of actual knowledge, when a judgment is indexed under an incorrect or misspelled name rather than the "correct name," it fails to operate as constructive notice in respect to subsequent lien holders or purchasers without actual knowledge. Notice will be found for judgments that are indexed under incorrect names only when the facts and circumstances indicate that a party had actual knowledge that the judgment was indexed under an incorrect name, or had actual knowledge that the debtor used or was known under the misnomer.
Waicker, 357 Md. at 479-80, 745 A.2d at 434-35.
While isolated language in Waicker could be read to support Peterson's assertion, the facts of the case, the argument of the opinion and the numerous other clear statements undermine his assertion. The actual holding is that a judgment docketed in the county where real property is located creates, from the date of docketing, a lien on all the judgment debtor's real estate in that county. The lien is valid as between the judgment debtor and the judgment creditor, whether properly indexed or not. If it is not properly indexed, a subsequent purchaser without actual knowledge of the misindexed lien will take free of the misindexed lien.
Waicker involves a misindexed judgment lien followed by a refinance of a pre-existing deed of trust. The new lender did not know of the misindexed judgment when it recorded its deed of trust and disbursed its money. Similarly, in Frederick Ward Associates, Inc. v. Venture, Inc., 99 Md.App. 251, 636 A.2d 496 (1994), a judgment lien was indexed in the nickname of the debtor. After the judgment was indexed, the property was sold, subdivided, improved and each lot sold again. In each instance, none of the purchasers had actual knowledge of the misindexed judgment lien. The Court held for the purchasers. The cases turned on the absence of actual notice to the subsequent lender and purchasers. Had the misindexed liens not attached to the property in the first instance, the knowledge of the subsequent lender and purchasers would not have been relevant. The lien of the misindexed judgments would simply not have attached. End of analysis. End of case. Where knowledge is an element, it is an element of enforceability of the misindexed judgment as to subsequent parties. If a subsequent purchaser has actual knowledge of the misindexed lien, the misindexed lien has priority. Messinger v. Eckenrode, 162 Md. 63, 158 A. 357 (1932) (actual knowledge of misnomer prevented relief) (discussed in Waicker, 357 Md. at 465-67, 745 A.2d at 427). If a misindexed lien did not attach at all, it would not arise from nowhere and attach simply because a subsequent party had actual notice. "In the absence of any such evidence, such an incorrectly indexed judgment will not be accorded priority against innocent third persons." Waicker, 357 Md. at 465, 745 A.2d at 427 (emphasis added).
In this case, Atlantic Funding obtained a lien on all of Peterson's real property in Washington County, Maryland, on November 8, 1995, when the judgment was docketed. On March 22, 2001, it was judicially determined that First Flight is the alter ego of Peterson, and, therefore, that all assets of First Flight are Peterson's assets. The First Flight assets — in reality having always been Peterson's in every respect except record title — were subject to the judgment lien since November 8, 1995, even though there was no judicial determination of the alter ego status until March 22, 2001. The judicial determination merely recognized an existing fact. It created no new relationship. It did not merge two entities into one entity. It merely recognized that Peterson and First Flight were one in the same. Therefore, the judgment against Peterson could always have been enforced against property titled in First Flight's name. Messinger, 158 A. at 359 ("[I]t is not disputed that both judgments may be enforced against the same two defendants, notwithstanding the difference in names, the identity being the material fact.").
While it is theoretically possible that First Flight was initially a legitimate, independent entity that first became Peterson's alter ego sometime after it was organized, Judge Ellis' Memorandum Opinion fairly supports the conclusion that First Flight became Peterson's alter ego no later than August 27, 1992. As of August 27, 1992, "Peterson owned or controlled 100% of the partnership interest in First Flight, directly as 98% . . . sole limited partner and indirectly through his wholly owned Top Flight Airpark, Inc. . . . the sole general partner owning a 2% . . . partnership interest." Memorandum Opinion, ¶ 15. Presently, Peterson and his son, Scott Peterson, each hold a 49% limited partnership interest. The 2% general partnership interest is owned by Upland, a corporation wholly owned by Peterson's son. Memorandum Opinion, ¶ 15. Atlantic Funding's judgment was entered on November 15, 1991, by consent. The court finds that the lien arose on November 8, 1995.
This is further illustrated by Hartman v. Thompson, 104 Md. 389, 65 A. 117 (1906). In Hartman, Louis F. Grafflin purchased property but requested that the deed be made to James Moore. The trial court found that Grafflin and Moore were one in the same person. The Court of Appeals held that where a deed is made to an existing person using an assumed name, rather than an entirely fictitious individual, the deed conveys good title. It quoted a treatise on real estate which stated, "The object of names being merely to distinguish one person from another, it seems to be sufficient if this is effected, though the true name of the party be not used, or even no name at all." Hartman, 65 A. at 119. Bernstein v. Hobelman, 70 Md. 29, 16 A. 374 (1889) is also instructive. In Bernstein a partnership, Wehr, Hobelman Gottlieb, was designated as the grantee in a mortgage. The trial court ordered a foreclosure sale. The owner appealed, arguing that the mortgage was void because there was no grantee. Partnerships were not juridic entities and could not hold title to real property in the partnership name. The Court of Appeals held that the description of the grantees was sufficient and that the mortgage was valid and enforceable. It stated, "By the common law it was not necessary that a deed should contain the name of the grantee, but a sufficient description of him was always indispensable." Bernstein, 16 A. at 375.
These cases teach that the validity of a deed, mortgage or judgment lien is not dependant on the perfect recitation of the grantee's or debtor's name as long as the grantee or debtor exists and can be identified. However, where innocent third parties are injured by a misnomer or a misindexed name, a judgment will not be effective as to an innocent third party. This does not affect the validity of the deed, mortgage or judgment lien as between the parties to it. Peterson is correct that had a subsequent innocent third party obtained a lien on the First Flight real estate, the November 8, 1995, judgment (which was indexed under Peterson, not First Flight, the record owner's name) would not have had priority over the subsequent innocent third party. The innocent third party would have had priority over Atlantic Funding and taken free of the lien. In this case, there was no such subsequent innocent third party. This, though, does not alter the fact that the lien existed and was fully enforceable by Atlantic Funding against Peterson and First Flight.
Atlantic Funding must do something with its March 22, 2001, order if it is to maintain its priority as to subsequent innocent third parties. Waicker, 357 Md. at 464, 745 A.2d at 426, n. 11. But, Footnote 11 does not require anything be done as between Atlantic Funding, Peterson and First Flight. Absent the intervention of an innocent third party, nothing needs to be done and Atlantic Funding has a good judgment lien against the real property of First Flight.
While this conclusion is reached based on Maryland law, there is a second reason why Peterson cannot prevail. The District Court held that the assets of First Flight and Maryland Air Industries are "subject to the valid judgment held by C.F. Trust, Inc. and Atlantic Funding Corporation." Order dated March 22, 2001. Unless and until reversed on appeal, this court must give it full force and effect. While the order does not address the priority of the lien, it clearly makes First Flight's property subject to the Washington County judgment, the very position that Peterson protests here.
Both parties address the impact of the trustee's avoidance powers, particularly 11 U.S.C. § 544 as to First Flight's real property in Washington County. Those powers are, at this time, irrelevant because Peterson took the position that there is no lien. He only asked that the court declare that the assets of First Flight are not subject to a lien in favor of Atlantic Funding. If there is no lien, there is nothing to avoid. Peterson did not seek to avoid the lien. While this may be the next logical relief to be requested, it has not yet been sought.
Peterson presumably would prefer that there be no lien. If there is a lien and it is avoided as to Atlantic Funding, it would, nevertheless, be preserved for the benefit of the estate. 11 U.S.C. § 551. He would still need to deal with the lien in his chapter 11 plan, although the beneficiary would change from Atlantic Funding to the estate.
Atlantic Funding is secured by a judgment lien on all of the real property owned by First Flight in Washington County, Maryland. The lien arose on November 8, 1995.
5. Docketed Judgment in Massachusetts. Atlantic Funding, whose judgment is only against Peterson, docketed its judgment in Massachusetts. At the time the judgment was docketed, Peterson and his wife, Nancy, owned a luxury ocean-front vacation beach home in Nantucket as tenants by the entireties. The property was subject to two prior encumbrances: (i) a mortgage and (ii) a judgment against both Peterson and his wife assigned to Jubal, Inc., a corporation owned by Peterson's son, Scott. A judgment lien in favor of C.F. Trust, Inc., and against both Peterson and his wife, was docketed after the Atlantic Funding judgment. Both Atlantic Funding and C.F. Trust executed on their judgments. The sheriff of Nantucket County scheduled a sale of the Nantucket property for April 6, 2001. The day before the sheriff was to sell the Nantucket property, Nancy Peterson conveyed her interest in the property to Peterson. Peterson immediately filed his voluntary chapter 11 petition in this case.
Neither the mortgagee nor Jubal are parties to this adversary proceeding. None of the parties sought a declaration as to the validity or extent of the mortgage or the Jubal judgment lien. Consequently, the court makes no ruling and expresses no opinion on the validity or extent of the mortgage or the Jubal judgment lien.
Massachusetts law with respect to tenants by the entireties property differs from Virginia and Maryland law. In Massachusetts, a docketed lien against one tenant by the entirety creates a lien on the judgment debtor's one-half interest in the real property. M.G.L.A. c. 209, § 1; Snyder v. Rockland Trust Company (In re Snyder), 249 B.R. 40, 44 (BAP 1st Cir. 2000); Coraccio v. Lowell Five Cents Savings Bank, 415 Mass. 145, 152, 612 N.E.2d 650, 655 (1993); Peebles v. Minnis, 402 Mass. 282, 521 N.E.2d 1372 (1988). See Janet D. Ritsko, Comment, Lien Times in Massachusetts: Tenancy by the Entirety after Coraccio v. Lowell Five Cents Savings Bank, 30 New Eng.L.Rev. 85 (1995).
"The sole issue presented on appeal is whether the individual creditors of one spouse may attach property held in tenancy by the entirety while it remains the principal residence of the other, nondebtor spouse. Because we conclude that such property may be attached, we affirm."Peebles v. Minnis, 402 Mass. 282, 282, 521 N.E.2d 1372, 1372 (1988).
Immediately, prior to Nancy Peterson's conveyance of her interest in the Nantucket property to Peterson, Atlantic Funding had a judgment lien only against Peterson's one-half interest in the Nantucket property subject only to the mortgage and the prior Jubal judgment lien. C.F. Trust had a judgment lien (i) against Nancy Peterson's one-half interest in the property subject only to the mortgage and the prior Jubal judgment lien, and (ii) a judgment lien against Peterson's one-half interest in the property subject to the mortgage, the Jubal judgment lien and Atlantic Funding's judgment lien. The last-minute conveyance did not change these priorities. Nancy Peterson's conveyance was, as a matter of law, subject to all liens and encumbrances of record at the time of the conveyance. Atlantic Funding's lien did attach to Peterson's new interest in the property, but subject to all existing liens and encumbrances. The present priority of liens is: (i) the prior mortgage; (ii) the Jubal judgment lien: (iii) the Atlantic Funding judgment lien as to one-half the property; (iv) the C.F. Trust judgment lien as to the entire property; and (v) the Atlantic Funding judgment lien (to the extent not fully satisfied by its third priority) as the remaining one-half interest in the property.
A different result would have occurred had either Peterson or his wife died. The decedent's interest would have vested by right of survivorship in the surviving spouse unencumbered by any liens on the decedent's half interest.
The record does not reflect whether there are any liens subordinate to the C.F. Trust judgment lien. If there are they would have priority over the fifth priority Atlantic Funding judgment lien. Nor does the record permit a determination of the value of the collateral, the Nantucket property. No finding is made and the court expresses no opinion on the application of 11 U.S.C. § 506.
Conclusion
The cross-motions for summary judgment are granted and denied as follows:
1. Virginia writ of fieri facias issued on February 2, 2000: No tangible personal property of the debtor is subject to any lien created by the Virginia writ of fieri facias. All of the debtor's intangibles that had a situs anywhere in Virginia from February 25, 2000, to April 6, 2001, which intangibles specifically include, but are not limited to, the debtor's partnership interest in First Flight Limited Partnership and all distributions from First Flight Limited Partnership from February 25, 2000, to April 6, 2001, are subject to the lien arising from the Virginia writ of fieri facias issued on February 11, 2000. Such intangibles may also include the intellectual property of Maryland Air Industries and Peterson's partnership interest in Maryland Air Industries, but no determination is made as to those assets at this time. The lien of the writ of fieri facias issued on February 11, 2000, continues in full force and effect as to all intangibles subject to the lien on April 6, 2001.
2. Charging Order entered by Circuit Court of Prince William County, Virginia, on March 1, 1996: The charging order entered by the Circuit Court of Prince William County, Virginia, on March 1, 1996, does not create a lien on the assets of First Flight Limited Partnership. It does create a lien on all of the debtor's partnership distributions.
3. Judgment docketed in Washington County, Maryland: The judgment docketed in Washington County, Maryland, does not create a lien on any personal property. The judgment docketed Washington County, Maryland, created a lien on November 8, 1995, on all of the real property situate in Washington County, Maryland, owned by First Flight Limited Partnership on or after November 8, 1995.
4. Judgment docketed in Nantucket, Massachusetts: The docketed judgment and attachment in Nantucket, Massachusetts created a lien on the debtor's real property situate in Nantucket, Massachusetts. The relative priority of First Atlantic's lien on the Nantucket real property is: (I) the prior mortgage; (ii) the Jubal judgment lien; (iii) the Atlantic Funding judgment lien as to one-half the property; (iv) the C.F. Trust, Inc., judgment lien as to the entire property; and (v) the Atlantic Funding judgment lien (to the extent not fully satisfied by its third priority) as the remaining one-half interest in the property.