670 B.R. 694
Bankr. S.D.N.Y.2025Background
- Firstbase.io, Inc. (Debtor) filed for Chapter 11 bankruptcy and initiated an adversary proceeding to avoid a judgment lien held by Harbor Business Compliance Corp. (Harbor) as a preferential transfer and reclassify Harbor’s claim as unsecured.
- Both parties filed motions for summary judgment, agreeing there were no disputed material facts.
- The core dispute centered on whether Harbor’s lien, obtained by delivering a judgment execution to a sheriff under NY CPLR § 5202(a), was a judicial lien (voidable preference) or a statutory lien (exempt from avoidance under § 547(c)(6)).
- The judgment underlying Harbor’s lien was entered by a federal district court; execution on the judgment occurred within 90 days of the bankruptcy filing while the Debtor was insolvent.
- The Plaintiff’s schedules showed the presence of other secured and priority creditors such that Harbor would receive less in a hypothetical Chapter 7 case than as a secured creditor in Chapter 11.
- The court’s decision would determine whether Harbor’s lien could be avoided and reclassified as unsecured under the Bankruptcy Code.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Harbor’s lien a judicial or statutory lien under § 101? | Judicial: arises from judgment and levy | Statutory: arises automatically by statute | Judicial lien; not statutory, thus can be avoided |
| Is avoidance of this lien as a preference under § 547 proper? | Yes: all statutory requirements met | No: statutory lien exception applies | Proper: § 547(c)(6) does not protect judicial liens |
| Does the lien enable Harbor to receive more than in Ch. 7? | Yes: would receive more as secured claim | Not directly addressed | Yes: Schedules show Harbor would receive less in Chapter 7 |
| Should the claim be recharacterized as unsecured? | Yes: if lien avoided as preference | No: lien is statutory, should stay secured | Yes: claim recharacterized as unsecured after lien avoidance |
Key Cases Cited
- In re Specialty Prop. Dev., Inc., 399 B.R. 857 (Bankr. M.D. Fla. 2008) (Florida judgment execution liens are judicial, not statutory)
- In re Veteran Plate Glass Co., 71 B.R. 74 (Bankr. N.D. Ohio 1987) (Writs of execution on judgments create judicial liens)
- In re Sterling Die Casting, Inc., 126 B.R. 673 (Bankr. E.D.N.Y. 1991) (Execution under NY law on personalty is a voidable preference)
- In re Lucasa Int'l, Ltd., 13 B.R. 596 (Bankr. S.D.N.Y. 1981) (Execution liens under NY law are voidable preferences)
- In re Schick, 418 F.3d 321 (3d Cir. 2005) (Difference between judicial and statutory liens depends on origin and determination of debt amount)