Opinion
8:22-bk-01449-CPM
07-12-2023
In re: Russell Eugene Scohy, II, Debtor.
Chapter 7
ORDER: 1) CONDITIONALLY GRANTING MOTION TO AVOID JUDICIAL LIEN OF PINELLAS COUNTY CODE ENFORCEMENT AND 2) SETTING DEADLINE TO OBJECT TO DEBTOR'S CLAIMS OF EXEMPTION
Catlierme Peek McEwen United States Bankruptcy Judge
THIS CASE came on for consideration of the Debtor's Motion to Avoid Judicial Lien of Pinellas County Code Enforcement (the "Motion") (Doc. No. 48), seeking relief under § 522(f) of the Bankruptcy Code to avoid a lien against real property that the Debtor asserts is his exempt homestead. Pinellas County filed a response (Doc. No. 67) asserting that: (i) its lien arises under section 162.09 of the Florida Statutes, making it a statutory lien, not a judicial lien; and (ii) the real property at issue is listed in the public records as owned by RDF REIT, not the Debtor.
Under this provision, a "debtor may avoid the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under [applicable law], if such lien is . . . a judicial lien, other than a judicial lien that secures a debt [for a domestic support obligation." 11 U.S.C. § 522(f).
Following a hearing on the Motion, the Court entered an order giving the Debtor 30 days to produce a copy of a deed showing that he owns the property or trust documents for RDF REIT from which the Court might determine if the Debtor may claim the property as his homestead. On March 23, 2023, the Debtor filed both a copy of an improperly executed quitclaim deed naming himself as the grantee and a copy of a Declaration of Trust for RDF REIT (the "Declaration") (Doc. No. 125). Based on the language of the Declaration, RDF REIT appears to be the type of revocable trust that would permit the Debtor to claim the property at issue as his homestead - provided the requirements for homestead exemption under Article X, Section 4 of the Florida Constitution are otherwise satisfied - even if the trust holds legal title and the Debtor is not the sole grantor and beneficiary. Although the copy of the Declaration provided by the Debtor is incomplete because it is missing schedules referenced therein and signature page(s), for purposes of this order, the Court treats the Declaration as having been properly executed and as identifying the real property at issue as trust property.
See, e.g., In re Cooke, 371 B.R. 554 (Bankr. M.D. Fla. 2007) (debtors could claim homestead exemption with respect to real property to which trust held legal title because: 1) the trust document gave them the right to use and possess the property as their residence; 2) the debtors intended to make the real property their homestead; and 3) the debtors actually maintained the property as their principal residence; fact that they were not the sole grantors and beneficiaries of the trust did not defeat this right) (citations omitted).
Were that not the case, it is unlikely that title could have ever passed to RDF REIT, as reflected in the public records of Pinellas County. If, however, the Declaration is ever proved to this Court to be ineffective, the Court will need to revisit this ruling. As for the quitclaim deed the Debtor filed, it is invalid because it fails to comply with the formalities required by Florida law. See Fla. Stat. § 689.01.
With respect to the nature of the lien at issue as statutory or judicial, the Court looks first to the definition of a judicial lien found in the Bankruptcy Code. Under the Code, a "judicial lien" is a "lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding." A "statutory lien," on the other hand, is a "lien arising solely by force of a statute on specified circumstances or conditions, or a lien of distress for rent, whether or not statutory."
A classic example of a statutory lien is a lien arising under section 713.03 of the Florida Statutes, which states in pertinent part that "[a]ny person who performs services as architect, landscape architect, interior designer, engineer, or surveyor and mapper . . . has a lien on the real property improved for any money that is owing him or her for his or her services used in connection with improving the real property, . . . ." (Emphasis added.) And although this statute further states that the lien is acquired once a claim of lien is properly recorded, "the mere fact that in order to enforce a lien a supplier may be required to resort to the court does not make that lien a judicial lien." Thus, for purposes of § 522(f), a key distinction between statutory and judicial liens is that the former arise prior to any type of judicial or administrative process or proceeding.
In re Piambino, 45 B.R. 243, 244 (Bankr. M.D. Fla. 1984) (material men's liens, as well as mechanics' and warehousemen's liens, are typical examples of statutory liens not subject to avoidance under § 522(f)). See also, Fla. Stat. § 153.67 (with respect to a lien for unpaid utility fees, if "the fees, rates or charges for the services and facilities of any water or sewer system shall not be paid as and when due, any unpaid balance thereof and all interest accruing thereon shall be a lien on any parcel or property affected thereby.").
Id. (citation omitted). Cf. Weed v. Washington (In re Washington), 242 F.3d 1320, 1323 (11th Cir. 2001) (in the context of a common law lien, court ruled that attorney's charging lien is not a judicial lien under § 522(f) even though it is perfected by filing a motion to enforce the lien, because the lien itself arises automatically upon the satisfaction of certain conditions).
As used in this order, "administrative proceeding" is considered synonymous with a "quasi-judicial proceeding." See Administrative Proceeding, Black's Law Dictionary (10th ed. 2014) (a "hearing, inquiry, investigation, or trial before an administrative agency, usually adjudicatory in nature . . ." or a "trial-type hearing." See also Quasi-Judicial, Black's Law Dictionary (10th ed. 2014) ("an executive or administrative official's adjudicative acts").
Conversely, if a lien arises only by virtue of a judicial or other legal or equitable process or proceeding, without which the lien would not exist, the lien qualifies as judicial under § 522(f). Therefore, in determining whether a lien is a judicial or statutory lien, Courts focus on when and how a lien arises, not when and how it is enforced. Judicial liens arise only after and as a result of some type of judicial or administrative process or proceeding.
In re Shippy, 646 B.R. 516, 520-21 (Bankr. W.D. Wash. 2022).
Id. at 519-21.
An obvious example of a judicial lien is a lien on personal property created under Florida law by filing a copy of a final state court judgment with the Florida Department of State, which lien clearly arises only after the conclusion of a lawsuit resulting in a judgment. An example of a judicial lien that arises following an administrative proceeding is one created by the recording of a final order of the Washington State Department of Labor and Industries denying workers' compensation benefits, which order may be recorded to create a lien only after a worker is given multiple opportunities to challenge an initial determination to deny benefits, including the right to a hearing and the right to seek review of decisions of the department, an industrial appeals judge, and an appellate tribunal.
See Fla. Stat. § 55.202.
In re Shippy, 646 B.R. at 522-23. See also City of Chicago v. Mance (In re Matter of Mance), 31 F.4th 1014, 1019 (7th Cir. 2022) (impoundment lien on debtor's vehicle is a judicial lien under § 522(f) because substantial quasi-judicial proceedings must occur before the city may impound a vehicle).
The code enforcement lien at issue here, similar to the lien just described, arises only after an administrative proceeding has concluded. Specifically, a code inspector who notes a code violation must notify the alleged violator and give him or her a reasonable time to correct the violation. If the violation is not corrected within the specified time, the inspector must notify the code enforcement board and request a hearing. At the hearing, the enforcement board must take the testimony of the code inspector and the alleged violator, which testimony is taken under oath and recorded. "[F]undamental due process shall be observed and shall govern the proceedings." At the conclusion of the hearing, the board issues findings of fact - based on evidence of record - and conclusions of law. It then issues an order for appropriate relief, which may include a fine and, under certain conditions, the cost of repairs if the order is not complied with by a given date. A certified copy of an order imposing a fine, or a fine plus repair costs, may be recorded in the public records and, thereafter, constitutes a lien. Thus, a lien arising under section 162.09 of the Florida Statutes qualifies as a judicial lien not because a code enforcement board's order imposing a fine must be recorded to create the lien, but rather because of the administrative proceeding that precedes the code enforcement board's ability to issue and record an order imposing a fine. Accordingly, it is
Id.
Id. See also Massey v. Charlotte County, 842 So.2d 142 (Fla. 2d DCA 2003) (due process under Fla. Stat. § 162.06 was denied where code enforcement board approved imposition of a fine and lien based solely upon the affidavit of a building inspector supervisor and without further discussion).
Id.
Fla. Stat., § 162.09(3). Any lien created pursuant to this section may not, however, be foreclosed on any homestead property protected under s. 4, Art. X of the Florida Constitution. Id.
ORDERED
1. The Motion is granted as stated herein.
2. Because the judicial lien of Pinellas County Code Enforcement (the "Lien") created by the recordation of an order imposing fines (and/or costs) for certain code violations impairs property the Debtor has claimed as exempt homestead property, which property is located at 5421 33rd Street N., St. Petersburg, Florida, legally described as:
A copy of the referenced order of the Enforcement Board was not attached to the Debtor's Motion or to County's response thereto.
Parcel ID:35-30-16-01404-005-0011, ARCADIAN HEIGHTS BLK E, S 42, 4FT OR LOTS 1 AND 2the Lien is avoidable under § 522(f) unless the Court sustains an objection to the Debtor's claim of exemption with respect to this property. To date, however, no such objection has been filed.
The Court notes that the real property in question has been deemed property of the estate from the inception of this case because the Debtor included it in his Schedule A as property owned by him. He also included this property in his Schedule C as his exempt homestead. And, as set forth in the Administrative Order Prescribing Procedures for Chapter 13 Cases (Doc. No. 4), the time to object to exemptions is currently extended through confirmation and, thus, has not yet run. (The deadline set forth in this administrative order alters the deadline described in the Notice of Chapter 13 Bankruptcy Case (Doc. No. 5) that tracks Federal Rule of Bankruptcy Procedure 4003(b).)
3. The Court hereby establishes a date certain for parties in interest to object to the Debtor's exemptions as claimed in Schedule C (Doc. No 1, as amended at Doc. No. 47), which new deadline shall run through August 18, 2023. This deadline supersedes the deadline described in the Administrative Order Prescribing Procedures for Chapter 13 Cases (Doc. No. 4).
4. If the Debtor's homestead withstands any potential objection, then unless the Debtor's bankruptcy case is dismissed, the Lien will be extinguished and shall not survive the bankruptcy nor remain affixed to the Debtor's property described above.
The Clerk is directed to serve a copy of this order on the Debtor and interested non-CM/ECF filers.