Shuntavia D Wigfall
MEMORANDUM OPINION
Chapter 13 debtor Shuntavia Wigfall moves to avoid the lien of the City of Chicago on her car. She asserts that it is a judicial lien that can be avoided under
The debtor owns a 2005 Jeep Grand Cherokee that she valued in Schedule B at $2,000. She listed a lender in Schedule D as a creditor secured by a non-purchase money security interest in the car. She also listed the City of Chicago as a creditor owed $13,884 for unpaid parking tickets. The City impounded her car pre-petition and asserts a possessory lien in it. The debtor claimed a $2,400 exemption in the car under
II. Avoiding a Judicial Lien that Impairs an Exemption
Section 522(f) permits a debtor to avoid a judicial lien that impairs an exemption.
The parties do not dispute that the debtor meets the first three requirements. First, the debtor owns the car and properly asserted a $2,400 exemption in it as permitted under
The parties dispute the fourth requirement – whether the City‘s lien is a judicial lien. The debtor contends that it is a judicial lien because the City must follow an administrative adjudicatory process before it can impound a car and create a lien. The City contends that the lien is statutory because it is created automatically once the City impounds a car.
III. Judicial Liens vs. Statutory Liens
The outcome here depends on whether the City‘s lien is a judicial lien or a statutory lien. The Bankruptcy Code define both terms. Section 101(36) states that a “judicial lien” is a “lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.”
The key difference is that a statutory lien must arise “solely” by virtue of the statutory provision creating it whereas a judicial lien arises after some kind of process – judicial, quasi-judicial, or administrative.
As various courts have noted, the legislative history gives examples of statutory liens:
A statutory lien is only one that arises automatically, and is not based on an agreement to give a lien or judicial action. Mechanics‘, materialmen‘s, and warehousemen‘s liens are examples. Tax liens are also included in the definition of statutory lien.
H.R.Rep. No. 95-595 (1977), reprinted in 1978 U.S.C.C.A.N. 6271; Schick, 418 F.3d at 324; Rosol, 114 B.R. at 565.
A prime example of a statutory lien is a mechanic‘s lien. The lien attaches by statute to improved property from the date that payment for labor and materials to make the improvement is due. No judicial, administrative, or other process must be followed before the claimant obtains the lien. See, e.g.,
Judicial liens, by contrast, require some type of process before the lien arises. When the statute that creates the lien provides an adjudicatory process for determining the claimant‘s rights, the lien that arises is judicial, not statutory. In Leaks, for example, the court held that a lien is judicial when an administrative process must be followed before it can be asserted. The State of Arkansas determined that it had overpaid unemployment benefits based on fraud. It issued a notice of the determination, and when the time for contesting or appealing the determination expired, it recorded a certificate that created a lien under a state statute. The state argued that the lien was statutory because it arose solely because of the recording of its certificate.
The court rejected this argument, explaining that the lien was judicial because the quasi-judicial process required before the certificate could be recorded was “a necessary component of
a lien‘s creation.” Leaks, 2017 WL 2577546 at *3. The court refused to “disconnect” the lien‘s creation by the filing of a certificate from the process that preceded the filing. Id. The court concluded that the state‘s lien was judicial and could be avoided under
The district court in Boyd reached the same conclusion under a similar Wisconsin statute. The district court rejected the state‘s argument that it held a statutory lien because the lien was created solely by the recording of a “warrant” when the statute required an administrative process before the warrant could be recorded. Boyd, slip op. at 8 (“I disagree that DWD‘s liens can be so easily separated from the underlying process through which they are obtained.“) .
The same is true here. The City‘s lien arises from Chicago Municipal Code provisions that create an administrative process that must be followed before the City can seize the car and create a lien. As the Seventh Circuit held in In re Fulton, 926 F.3d 916, 931 (7th Cir. 2019), for each ticket issued, the City must follow an administrative process by which that ticket
make the City‘s lien judicial – one obtained by “‘judgment, . . . or other legal or equitable process or proceeding.”
The City argues that its lien is statutory because it is created under the Municipal Code by the simple act of impounding the vehicle. In its view, the administrative process required before it can impound the vehicle is irrelevant. The City ignores the Fulton decision interpreting the precise ordinances at issue here and holding that the City must obtain several “judgments” after administrative adjudications before it may impound a car.
The City relies instead on the Third Circuit Schick decision addressing a lien created by a New Jersey statute that bears no resemblance to the City‘s ordinances. In Schick, a debtor sought to use
The decision is not particularly persuasive. It contains little explanation of why the adjudications required before surcharges can be assessed have “no relation” to the assertion of the lien. The analysis in Leaks and Boyd is more compelling. Both courts discussed Schick but
did not follow it. They examined the statutory schemes for determining liability and asserting a lien and concluded that the lien was judicial because it was the end result of the administrative process. Leaks at *3 (“The [state‘s] disconnecting of the quasi-judicial process from the filing of the certificates is untenable - that process is a necessary component of the lien‘s creation.“); Boyd, slip op. at 8-9 (“The natural reading of this provision is that the warrant (and the resulting lien) is the end result of the administrative and judicial process referenced.“). They recognized that without the previous adjudications, no lien could be created so the lien was judicial.
But Schick is easily distinguished from this case in any event. After concluding that the adjudication of the underlying offenses had no relation to the creation of
As explained in detail in In re Peake, 588 B.R. 811, 817-821 (Bankr. N.D. Ill. 2018) , aff‘d sub nom. In re Fulton, 926 F.3d 916 (7th Cir. 2019), the City adopted a number of ordinances to comply with an Illinois statute that permits a municipality to “provide by ordinance for a system of administrative adjudication of vehicular standing and parking violations and vehicle compliance . . . .”
070, 080; Peake, 588 B.R. at 818. If the owner contests the ticket and loses, she may appeal under the Administrative Review Law of Illinois. M.C.C. § 9-100-090; Peake 588 B.R. at 818. If the owner fails to contest the ticket, or contests the ticket but loses and fails to appeal, the City obtains a final “determination of liability” on the ticket. Peake, 588 B.R. at 818-19. As Fulton held, each final determination of liability is a judgment.
Then, if the vehicle owner accumulates a specified number of determinations of liability, the City must follow another administrative process before it can immobilize or impound a vehicle. M.C.C. § 9-100-120(b). The City must first issue a notice of impending vehicle immobilization. Id. The owner then has 21 days from the date of the notice to request a hearing and appear in person to submit evidence that would disprove her liability for the payment of the tickets. Id. Only after this process is completed can the vehicle be immobilized and then impounded to collect the amounts owed for the traffic offenses.1 Once a vehicle is immobilized
Section 9-100-120(j) then states that any vehicle immobilized the city “shall be subject to a possessory lien. . . .” This lien arises once a vehicle is immobilized before towing and impoundment, so it would apply to all impounded vehicles as well. The lien continues in effect until the conditions for release of an impounded vehicle are met.
The City nonetheless added provisions to two other ordinances stating that a possessory lien attaches upon impoundment of a vehicle. M.C.C. §§ 9-92-080(f); 2-14-132(l). Sections 9-92-080 and 2-14-132 provide procedures that apply after impoundment of a vehicle. All three of these ordinances were amended over the years in piecemeal fashion, resulting in less than
or impounded, it is “subject to a possessory lien in favor of the City in the amount required to obtain release of the vehicle.” M.C.C. §§ 9-100-120(j); Peake, 588 B.R. at 819-20.
consistent wording and duplicative provisions. It is clear, however, that the City must follow the processes mandated in § 9-100-120(b) before it can impound a vehicle.
III. Conclusion
The City‘s lien is a judicial lien that can be avoided under
Dated: October 29, 2019
ENTERED:
Carol A. Doyle
United States Bankruptcy Judge