Kelley v. First Cmty. Bank (In re Brownlee)
593 B.R. 916
Bankr. M.D. Ga.2018Background
- Debtors filed Chapter 11 on March 21, 2017; case converted to Chapter 7 on March 7, 2018. Trustee seeks to avoid a judicial-lien transfer under 11 U.S.C. § 547.
- Tift County Superior Court entered a consent judgment for First Community Bank against the Debtors on December 7, 2016 (104 days before petition).
- A Writ of Fieri Facias (Fi. Fa.) was recorded in Tift County on December 22, 2016 (89 days before petition) and re-recorded January 3, 2017; Fi. Fa. also recorded in Worth County on January 25, 2017 (55 days before petition).
- Dispute centers on whether the judgment itself (entry date) created a judicial lien against Debtors’ real property, or whether the lien arose only when the Fi. Fa. was recorded.
- If the lien attached on entry and was perfected within 30 days, the transfer date is Dec. 7, 2016 (outside the 90-day preference window); if lien attached only upon recording, the transfer occurred within the 90-day look-back and is avoidable.
Issues
| Issue | Plaintiff's Argument (Trustee) | Defendant's Argument (First Community) | Held |
|---|---|---|---|
| Whether entry of a Georgia judgment creates a judicial lien on debtor's real property before recording | Judgment entry does not create a lien; recording is required to create/affect a lien on title | Entry of judgment creates the lien as between parties; recording only protects against third parties and relates back for priority | Entry alone does not create a judicial lien on real property; recording is required to create the lien |
| Whether the transfer/perfection date for § 547 purposes is the judgment entry date or the recording date | Transfer/perfection occurred when judgment was recorded (within 90 days), so avoidable | Transfer took effect at entry and was perfected within 30 days so outside 90-day window | Transfer date is the recording date (judicial lien created at recording), so within the 90-day look-back; Trustee wins on this issue |
Key Cases Cited
- In re Hedrick, 524 F.3d 1175 (11th Cir.) (when a transfer is "made" for § 547 purposes depends on when it is perfected)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Butner v. United States, 440 U.S. 48 (state law defines property interests)
- National Bank of Ga. v. Morris-Weathers Co., 248 Ga. 798 (Ga. 1982) (recording makes judgment "effective as a lien on real estate" and relates back for priority)
- In re Tinsley, 421 F. Supp. 1007 (M.D. Ga.) (unrecorded judgment did not attach to real property)
- Watkins v. Citizens & S. Nat'l Bank, 163 Ga. App. 468 (Ga. Ct. App.) (recording is the process of perfecting a lien; unrecorded judgment still exists but is perfected by recording)