Opinion ID: 2054217
Heading Depth: 3
Heading Rank: 2

Heading: The Significance, If Any, of the Court's Role in Creating a Valid Judgment Lien Under Herman v. Siney

Text: The next legal question under Herman is more subtle: whether the fact that the Municipal Court had assumed jurisdiction over the property by issuing writs of garnishment, before the District Court receiver was appointed, was critical to establishing the creditors' priority over the claims of the receiver. This question is important in determining how narrowly or broadly Herman is to be understood. Municipal Court involvement in Herman issuance of writs of garnishment was necessary for creation of the creditor's garnishment lien on the debtor's funds in the bank. In contrast, as explained above, no court is involved (beyond entry of the judgment itself) in creating a judgment lien on real estate, although the court, of course, may have to be involved in the judgment creditor's eventual enforcement of the lien. [31] We believe that the Municipal Court's involvement was indispensable to creation of a judgment lien in Herman because the court's issuance of the garnishment writs, upon application, was essential to creation of the creditors' lien on the debtor's bank accounts; indeed, there was no other way of obtaining a judgment lien on those particular assets. But the fact that the court was essential to creation of the judgment lien on a bank account does not mean that the court is equally essential to creating judgment liens on other kinds of collateral. For example, a creditor's recording of a judgment lien with the Recorder of Deeds serves the same purpose, as a matter of law, as the court's issuance, accompanied by service, of a writ of garnishment on a garnishee; creation of a judgment lien through such recordation is no less complete than creation of a judgment lien through service of a court-issued garnishment writ. In fact, in either case, creation of the lien is initiated by interaction between the creditor (or its attorney) and the court's or Recorder's office staff; the transaction is ministerial, not discretionary. Thus, in the case of a garnishment, the court acts administratively; it does not perform a truly judicial function until it rules on a motion for judgment of recovery. Looked at in this way, the court's issuance of a writ of attachment or garnishment and the Recorder's entry of a judgment on its record are similar acts to accomplish identical purposes. In sum, the court's role under Herman, was indispensable to creation of the particular kind of judgment lien at issue in that case, but a court's involvement is not necessarily required to create all judgment liens. We conclude the fundamental message of Herman is that the act of creating a judgment lien, whatever kind of action is required, is the critical act for determining whether a judgment lien creditor has priority over the claim of the debtor's receiver. If the creditor has obtained a judgment lien before a receiver is appointed for the debtor, Herman stands for the proposition that the lien creditor will prevail. See Maxi Sales Co. v. Critiques, Inc., 796 F.2d 1293, 1297 n. 2 (10th Cir.1986) (general rule of law is that appointment of a receiver does not determine any rights nor destroy any liens. The receiver merely becomes an assignee of the insolvent, having exactly the same rights that he [or she] had.); Martin v. General Amer. Casualty Co., 226 La. 481, 76 So.2d 537, 541 (1954) (a receiver cannot enjoin the execution of a judgment wherein the seizure occurred prior to his [or her] appointment); Kluckhuhn v. Ivy Hill Ass'n, Inc., 55 Md. App. 41, 461 A.2d 16, 20 (1983) (A receiver takes property subject to claims that existed against it prior to the receivership.); National Surety Corp. v. Sharpe, 236 N.C. 35, 72 S.E.2d 109, 123 (1952) (receiver takes the property of the insolvent debtor subject to the mortgages, judgments, and other liens existing at the time of his [or her] appointment); DeAngelis v. Commonwealth Land Title Ins. Co., 467 Pa. 410, 358 A.2d 53, 55 (1976) (Having already shown that the aid of a receiver is extended only in behalf of creditors who have fully exhausted their remedy at law, it follows necessarily that the jurisdiction will not be exercised in favor of mere general creditors, whose rights rest only in contract and are not yet reduced to judgment, and who have acquired no lien upon the property of the debtor. ); First S. Properties, Inc. v. Vallone, 533 S.W.2d 339, 343 (Tex.1976) (a receivership destroys no prior vested right). [32] We therefore turn to Herman 's application to the facts of this case.