3M Dozer Service, Inc. v. Baker

Citations: 2006 OK 28; 136 P.3d 1047; 2006 Okla. LEXIS 24; 2006 WL 1148175Docket: 100,262

Court: Supreme Court of Oklahoma; May 2, 2006; Oklahoma; State Supreme Court

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3M Dozer Service, Inc. obtained a judgment against Barbara Moore Baker on February 16, 1988, and filed it, creating a lien on five properties owned by Baker. By 1991, Baker transferred her interests in these properties, some to related individuals, and one property later returned to her. The creditor renewed the judgment on February 11, 1993, extending the lien through a court-issued writ. Baker filed for bankruptcy on November 18, 1996, excluding the properties under the creditor’s lien from her bankruptcy estate. 

On January 26, 1998, the creditor attempted a second renewal of the judgment but made errors in the filing, including incorrect dates and failing to file a certified copy with the county clerk. Following this, on April 30, 1998, the creditor sought a writ of execution on Baker’s goods, but the district court set aside the sale in May 1999 due to unrelated reasons. Karen Sue Moore, Baker's daughter, contended that the lien was dormant, but the district court upheld its validity. 

The creditor's request to modify the bankruptcy court's automatic stay to pursue foreclosure was denied on August 6, 1999. However, on June 11, 2001, the creditor filed a foreclosure action against Baker and others with interests in the property. Baker responded by asserting her bankruptcy status and seeking to hold the creditor in contempt for violating the bankruptcy stay.

The bankruptcy court initially stayed the lawsuit but did not address the validity of the lien and judgment. On October 29, 2001, the court found Creditor in contempt for violating the bankruptcy stay by filing the lawsuit, although it ruled that filing an execution on April 30, 1998, did not violate the stay. On June 21, 2002, the court vacated the stay and retroactively annulled it to June 11, 2001, allowing Creditor to proceed with the lawsuit, while Debtor was discharged from personal liability on July 10, 2002.

On July 3, 2003, Creditor moved for summary judgment in the foreclosure action against Debtor and other Defendants. Debtor and Defendant Moore filed a joint response with a cross-motion for summary judgment, claiming the 1988 judgment was dormant and the lien unenforceable. Defendants Mark and Sherry Stewart, who were served later, filed similar motions. Creditor contended that the bankruptcy prevented the judgment from becoming dormant until after the stay was lifted and argued that a previous order from May 26, 1999, affirming the lien's validity was binding on all Defendants.

The district court ruled that the Creditor's judgment was dormant and the lien unenforceable due to lack of an underlying obligation, granting summary judgment to the Defendants and quieting title in their favor. The Court of Civil Appeals initially upheld this but later clarified that the federal bankruptcy code allowed Creditor 30 days post-stay to enforce the lien, indicating that the bankruptcy stay did not prevent extension of the lien.

The court agreed with the reasoning that while Creditor's judgment lien would typically have expired due to failure to file a renewal notice by February 11, 1998, the bankruptcy extended the dormancy period. Consequently, Creditor had at least 30 days after the stay was lifted to file a foreclosure action.

The automatic stay resulting from a debtor's bankruptcy does not hinder a creditor from renewing a judgment by filing a notice of renewal. According to 11 U.S.C. § 362(a), the stay prevents acts that create, perfect, or enforce liens against the debtor's property for claims arising before bankruptcy; however, the Court of Civil Appeals determined that renewing a judgment merely maintains the status quo and does not constitute a prohibited act under the stay. The majority of courts support this view, particularly when judicial involvement in the renewal process is minimal. Specific cases illustrate that while certain actions, such as foreclosure or enforcement of a mechanic's lien, may be stayed, the straightforward act of renewing a judgment generally is not. 

When renewal requires significant judicial discretion or enforcement actions, such as issuing a writ of scire facias or contestable service, the automatic stay may apply. In this case, the creditor had four options for renewing the judgment, but only the notice of renewal was permissible under the stay. Previous rulings indicate that other judicial proceedings initiated by the creditor during the stay would be ineffective. Thus, the automatic stay did not prevent the creditor from filing the notice of renewal, which is deemed a non-judicial act that preserves the existing judgment status. Further analysis is required beyond this determination.

Creditor had a minimum of 30 days post-lifting of the automatic stay under the Bankruptcy Code to file an enforcement action, even if it could have renewed its judgment. The Bankruptcy Code, specifically 11 U.S.C. § 108(c), extends the limitations period for certain civil actions against a debtor, ensuring that the expiration of such periods is delayed until either the end of the specified time or 30 days after the stay's termination. If the automatic stay impeded Creditor from renewing its judgment and judgment lien, section 108(c) would extend the renewal period accordingly. 

The determination of property rights in bankruptcy relies on state law unless there is a direct conflict with the Bankruptcy Code. The Supreme Court acknowledged that the extension provision of the Bankruptcy Code assists lienholders whose rights are hindered by bankruptcy, leaving it to local courts to assess the degree of such hindrance. The Second and Ninth Circuits have affirmed that section 108(c) applies irrespective of whether the automatic stay would have prevented lien renewal, indicating that the inability to enforce the judgment during part of the dormancy period is what keeps the duration open under section 108(c).

A bankruptcy court interpreting a Georgia statute highlighted that a valid judgment lien allows a creditor to enforce a judgment, but its lapse strips that right. Any action to renew a judgment is considered a continuation of civil action, subject to nonbankruptcy time limitations. Section 108(c) extends the renewal timeframe, but its applicability can be negated if an automatic stay does not prevent lien filing or perfection. 

In the current case, the creditor's ability to enforce its lien was impeded by the debtor's bankruptcy. Although the debtor's properties were not part of the bankruptcy estate, it was successfully argued in court that the creditor could not foreclose while bankruptcy proceedings were active. Despite potential opportunities for the creditor to pursue actions against current property owners, it sought permission from the bankruptcy court to proceed against the properties but was unsuccessful. The current owners could challenge the creditor's lien due to the enforceability of the underlying judgment.

Prior case law established that collection efforts against a bankruptcy debtor during an automatic stay are ineffective, a principle that, while differing in facts, applies to the present situation due to non-arms-length property transfers. The court concluded that the legal landscape was ambiguous during the creditor's enforcement attempts, and while the creditor's actions could have been more strategic, it continuously sought to assert its lien, which faced repeated obstacles from the bankruptcy stay. The defendants' claim that the stay did not hinder the creditor's efforts was dismissed, as was their argument regarding the lack of knowledge about the lien's potential extension since they did not provide supporting evidence, while the creditor presented evidence suggesting property transfers were made to evade the lien.

Creditor's ability to enforce its lien was timely, regardless of whether the enforcement period was extended by 30 days or tolled during Debtor's bankruptcy. Creditor filed the action before the 30-day deadline post-notice of the stay's termination. Ordinarily, the judicial lien would have lapsed on February 11, 1998, due to Creditor's failure to file a certified renewal notice. However, the automatic stay from Debtor's bankruptcy allowed a 30-day extension for executing the judgment and lien after the stay was lifted. The district court incorrectly deemed the judgment dormant as a matter of law. On remand, the district court must address factual issues, including the ownership of properties subject to the lien and the nature of property transfers related to Debtor. The court does not rule on the rights of bona-fide purchasers or the impact of Creditor's arguments on the outcome. The only conclusion is that Creditor was legally permitted to enforce its lien at least 30 days after receiving notice of the stay's lifting. The prior decision from the Court of Civil Appeals is vacated, the district court's judgment is reversed, and the case is remanded for further proceedings, with all justices in agreement.

Creditor obtained a judgment against Debtor in District Court case no. C-84-93, which was delayed due to Debtor's bankruptcy filing before the trial. The judgment confirmed a settlement in which Debtor acknowledged that her payment was based on "fraud and embezzlement." There is a noted scrivener's error in the bankruptcy court's order regarding execution dates, but it correctly references the execution on April 30, 1998. Defendants (Debtor, Defendant Moore, and Defendants Mark and Sherry Stewart) presented identical arguments and are addressed collectively. Other defendants were served but did not participate in the proceedings, yet the district court's summary judgment was deemed final as it resolved all of Creditor's claims and quieted title in favor of current record owners, establishing appellate jurisdiction.

Post-1998, a judgment became unenforceable unless specific actions were taken by the creditor within five years, including filing a certified execution or renewal notice. The necessity of determining whether Creditor's 1998 renewal notice complied with legal requirements is not addressed. Scire facias, a writ to revive dormant judgments, is referenced. The origins of the properties involved appear linked to the "Stewart family," though the exact relationship to Defendants Mark and Sherry Stewart is unclear, necessitating further district court examination on remand.

The bankruptcy court retroactively annulled the stay effective June 11, 2001, though the order was not filed until June 21, 2002. Consequently, Creditor likely did not receive notice of the stay’s termination until after June 21, 2002. Creditor filed this action on June 11, 2001, and a notice of renewal on July 22, 2001, both of which occurred before the 30-day period following the stay's filing expiration.