Bankr. E.D.N.C.: In re Hutton- Perfection of Judgment Lien against Motor Vehicle Following Levy

Summary:

Mr. Hutton’s vehicles were seized in a levy by the Onslow County Sheriff’s Department in executing on a judgment obtained by Principis. After filing bankruptcy, Mr. Hutton sought turnover of the vehicle and asserted that the possessory lien held by Principii had not been perfected by recordation with the North Carolina DMV.

In narrowly construing and distinguishing several decisions from the North Carolina Supreme Court and Court of Appeals, the bankruptcy court rejected the argument by Principis that recordation is required to perfect a lien under N.C.G.S. § 20-58 only if there is a “security interest” as defined in N.C.G.S. § 20-4.01(41) to have been created by agreement (which a judgment lien is not.) The bankruptcy court relied on the narrow exceptions in N.C.G.S. § 20-58.8, which did not include liens created through judicial proceedings, to find that the failure to record a lien meant that it was unperfected.

Commentary:

As Rule 7001(1) requires turnover be sought by adversary proceeding and Rule 7001(2) requires the same to determine the validity of a lien, it is unclear why Principis even tacitly consented to this matter being heard by motion. The speedier nature of motion practice does make sense when it is just a question of turnover, both as storage costs continued to mount and so too would potential damages from violating the stay by retaining property, but here the secured status was lost without the full due process protections of an adversary proceeding.

That aside, as the possessory lien was a transfer, whether perfected or not, within 90 days of the filing of bankruptcy (actually only 8 days), that lien could have been avoided as an involuntary preference by Mr. Hutton pursuant to 11 U.S.C. § 522(h). This would seem to have been a more modest means to the same end.

For a copy of the opinion, please see:

Hutton- Perfection of Judgment Lien against Motor Vehicle Following Levy

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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