In re Lamm

• Decision Date: 17 January 1984
• Docket Number: Civ. A. No. 83-205-NN.
• Citation: 47 BR 364
• Parties: In re Donald Nelson LAMM and Patricia Crockett Lamm.
• Court: U.S. District Court — Eastern District of Virginia

47 B.R. 364 (1984)

In re Donald Nelson LAMM and Patricia Crockett Lamm.

Civ. A. No. 83-205-NN.

United States District Court, E.D. Virginia, Newport News Division.

January 17, 1984.

R.L. Shrecengost, Newport News, Va., for appellees.

OPINION AND ORDER

KELLAM, District Judge.

This appeal from the Bankruptcy Court brings on for consideration the question of when does a transfer of funds withheld by a fieri facias, a garnishment summons, become effective as it relates to 11 U.S.C. § 547(b)(4)(A).

I.

The facts are not in dispute. Natpac Foods, Inc. (Natpac) recovered a judgment against Donald Nelson Lamm (Donald) on August 16, 1982, in the state courts of Virginia. It sued out a writ of fieri facias (§ 8.01-466 Code of Virginia) on the judgment and a garnishment summons (§ 8.01-511 Code of Virginia) on September 24, 1982. The garnishment was served on Donald and Anheuser Busch, Inc., the employer of Donald, and returnable to December 23, 1982. The garnishment directed the employer to withhold from the wages of Donald a sufficient sum to cover the principal, interest, costs, etc. of the judgment, for a total of $988.82. After paying to the wage earner the sums exempt from garnishment, as provided by statute, the garnishee withheld the excess each week until the garnishee had in hand the total sum needed to discharge the lien and judgment. The first withholding was on September 26, 1982, and the final one on November 14, 1982. On November 19, 1982, Anheuser Busch, Inc. swore to the accuracy of its answer, showing the full sum of $988.82 had been withheld. That answer was filed with the Court—the exact date of the Court's stamp is blurred, but appears to be November 1982. On December 23, 1982, the return day of the garnishment, judgment was entered against the garnishee for $988.82. The record does not disclose whether Anheuser Busch paid the funds to the Court with its answer, or when the funds were actually surrendered by it or when Natpac actually received the funds.

On March 11, 1983, Donald and his wife filed a joint petition in bankruptcy pursuant to Chapter 13 of the Bankruptcy Act. In the schedule filed with the petition, Donald and his wife sought to claim an exemption of $247.21, pursuant to Section 34-29 of the Code of Virginia, consisting of a part of the garnished wages, and the balance under Section 34-4 as a homestead exemption.¹

II.

The order of the Bankruptcy Court of September 30, 1983, from which this appeal is taken, provided:

1. That Natpac is in possession of $988.82 paid pursuant to a garnishment summons . . . returnable on December 23, 1982, said return being within ninety days of the filing of a voluntary petition herein;

2. Although the employer deducted . . . wages of Debtor, Donald Nelson Lamm, more than ninety days prior to filing of his petition . . . such transfer is a preference and voidable under § 547 . . . because the return date of the garnishment summons and not the actual date the funds were deducted from Debtor\'s wages is the date of transfer.

3. The Debtors are entitled to claim an exemption of $247.20 in the garnishment wages held by Natpac.

4. Trustee shall recover of Natpac . . . $988.82.

The total file from the Bankruptcy Court has not been made a part of the record and is not before this Court. Debtor's Schedule B-4 (2 pages), objections to Debtor's claimed exemptions, answer to the garnishment, the garnishment summons; and a few other papers are part of the record on appeal. In Schedule B-4, property claimed to be exempted pursuant to Section 34-4 of the Code of Virginia, consists of approximately $5,000.00, under 34-26 of the Code of Virginia some $3,000.00, and under 34-29 of the Code of Virginia, some $8,700.00, including $741.61 wages garnished by Natpac, plus wages due of $399.00, plus other sums claimed for a total exemption of $17,330.07. Objection to to the claimed exemptions were filed by Natpac, particularly the sums paid in the garnishment proceedings of $988.82. The objection sets forth that the said sum received "represented the non-exempt portion of wages payable by said employer to Debtor on dates more than 90 days prior to March 11, 1983, the date of the filing of the bankruptcy petition; and that debtors had no interest in the said monies on the date the petition was filed or 90 days previous thereto."

For simplification of the issue, judgment was obtained by Natpac against Donald on August 16, 1982; execution was issued on the judgment September 24, 1982, as well as a garnishment summons directed to Donald and Anheuser Busch, suggesting that by reasons of the lien of the fieri facias (execution) there was liability upon the garnishees, and directed Anheuser Busch to withhold funds from any sum due or to become due to Donald after date of service of the summons to cover the lien of $988.82, except such sums as were exempt pursuant to Section 34-29 of the Code of Virginia. The voluntary petition in bankruptcy was filed March 11, 1983.

III.

Virginia Code 8.01-478 provides that except for exemptions provided for in Title 34, a writ of fieri facias may be levied on goods and chattels and money and banknotes of a judgment debtor and "shall bind what is capable of being levied on only from the time it is actually levied by the officer to whom it has been delivered to be executed."² Under the Virginia law, the officer is not required to seize the property levied on, only that he have them in his power and note it on the execution. Palais v. DeJarnette, 145 F.2d 953 (4th Cir.1944); Dorrier v. Masters, 83 Va. 459, 2 S.E. 927. The lien acquired by the levy of the execution is both substantial and enduring, as much so as a mortgage or a pledge. Humphrey v. Hitt, 47 Va. (6 Gratt) 509. Virginia Code Section 8.01-501 provides:

Every writ of fieri facias shall, in addition to the lien it has under §§ 8.01-478 and 8.01-479 on what is capable of being levied on under those actions, be a lien from the time it is delivered to a . . . officer to be executed, on all personal estate of or which the judgment debtor is or may afterwards and on or before the return day of such writ became possessed or entitled, which, from its nature is not capable of being levied on under such sections, except such as is exempt under the provisions of Title 34, and except as against an assignee of any such estate for valuable consideration, the lien by virtue of this section shall not affect him unless he had notice thereof at the time of the assignment.

The lien of fieri facias extends to all the personal estate of the judgment debtor which is not capable of being levied on, which includes bonds, notes, stocks, debts of all kind, including a debt payable in the future and includes all choses in action to which a debtor may be entitled. Boisseau v. Bass, 100 Va. 207, 209, 40 S.E. 647; Evans v. Greenhow, 56 Va. (15 Gratt) 153; In re Acorn Electric Supply, Inc., 348 F.Supp. 277, 280 (D.C.Va.1972).

The execution of a writ of fieri facias establishes a lien on intangibles from the time it is delivered to the officer. Virginia Code 8.01-501; Pischke v. Murray, 11 B.R. 913, 916 (Bkrtcy.E.D.Va.1981). The lien, once established, only ceases when the right of the judgment creditor to enforce the judgment by execution or by action, or to extend the right by motion, ceases. Further, as to intangibles, the lien shall cease one year from the return date of the execution pursuant to which the lien arose, or where the intangible is a debt due from or a claim upon, a third person in favor of the judgment debtor or the estate of such person, one year from the final determination of the amount owed to the judgment debtor. Virginia Code § 8.01-505.

Pursuant to Virginia Code Section 8.01-511, on a suggestion by the judgment creditor "that by reason of the lien of his writ of fieri facias, that there is a liability on any person other than the judgment debtor, upon which sum, when determined such writ of fieri facias is a lien, a summons of garnishment may be sued out and served on the garnishee and the judgment debtor." The fieri facias issued on the judgment became a lien when the garnishment summons was issued and served. First National Bank of Norfolk v. Norfolk & Western Railway Co., 327 F.Supp. 196, 197 (D.C.Va.1971). Garnishment "is the process by which a judgment creditor enforces the lien of his execution against a debt or property due his judgment debtor in the hands of a third person, garnishee." Lynch v. Johnson, 196 Va. 516, 84 S.E.2d 419, 421 (1954). A summons in garnishment under the Virginia statute is a warning to the garnishee not to pay the money or deliver the property of the judgment debtor in his hands, upon penalty that if he does, he may subject himself to personal judgment. Lynch v. Johnson, supra. There being a lien against the funds in the hands of the garnishee, he is merely a stakeholder, and may escape all liability by surrendering the funds to the Court for its proper disposition. The garnishment summons itself does not create a lien, but the lien is created by the fieri facias, and dates from the date of the delivery of the fieri facias to the officer. The garnishment is the notice of the lien. For "the purposes of bankruptcy, the judgment lien need not be absolute, unequivocal or irrevocable," but "need only be superior to the rights of a subsequent judgment lien creditor, and in Virginia, the lien by writ of fieri facias is such a lien." In re Acorn Electric Supply, Inc., supra, 348 F.Supp. at 281. See also Metcalf Brothers & Co. v. Barker, 187 U.S. 165, 23 S.Ct. 67, 47 L.Ed. 122 (1902); Charron & Co. v. Boswell, 59 Va. (18 Gratt) 216; Jackson v. Valley Tie & Lumber Co. 108 Va. 714, 62 S.E. 964 (1908). Under the Virginia Code 8.01-501, "the only person who can defeat the fieri facias lien is a bona fide purchaser or assignee for value without notice," and "the satisfaction of . . . the preexisting execution lien, during the four-months period preceding the...