In re Savidge

• Decision Date: 31 January 1986
• Docket Number: Bankruptcy No. 85-334-JRR.
• Citation: 57 BR 389
• Parties: In re Daniel A. SAVIDGE, Debtor.
• Court: U.S. District Court — District of Delaware

57 B.R. 389 (1986)

In re Daniel A. SAVIDGE, Debtor.

Bankruptcy No. 85-334-JRR.

United States District Court, D. Delaware.

January 31, 1986.

Jeffrey M. Weiner, of Bayard, Handelman & Murdoch, Wilmington, Del., for appellee, Associates Commercial Corp.

Jeffrey M. Goddess, of Saul, Ewing, Remick & Saul, Wilmington, Del., for appellant, ITT Indus. Credit.

OPINION

ROTH, District Judge.

This is an appeal from a decision of the Bankruptcy Court which sustained an objection by Associates Commercial Corporation ("Associates") to the claimed status of appellant ITT Industrial Credit Company ("ITT") as a secured creditor of debtor Daniel A. Savidge ("Savidge"). Matter of Daniel Savidge, 49 B.R. 429 (Bankr., D.Del., 1985).

The facts relevant to the appeal commence on August 3, 1983, when ITT instituted an action against Savidge and Commercial Transportation Systems, Inc. ("CT") in the Superior Court of the State of Delaware. ITT claimed in this action that CT and Savidge were both in default of installment notes payable to ITT. ITT further claimed that CT and Savidge had each unconditionally guaranteed payment to ITT of the other's note.

The Sheriff of New Castle County was unable to serve Savidge personally with ITT's complaint. Therefore, in order to compel defendant Savidge's appearance, ITT on August 29, 1983, pursuant to 10 Del.C. § 3501,¹ moved in Superior Court for a writ of domestic attachment against the interest of Savidge in real estate located at 3212 Sapphire Drive. The motion was granted that same day and on September 8, 1983, the Sheriff levied on Savidge's interest in the real estate. On September 28, 1983, Savidge and CT filed an Answer in the Superior Court in which Savidge denied personal liability to ITT.

A year later, on September 10, 1984, Savidge filed a voluntary Petition for Bankruptcy.² As of that date, ITT had not recovered judgment against Savidge in the Superior Court action. On October 4, 1984, ITT filed a proof of claim in the amount of $29,902.43 in the Savidge bankruptcy case. ITT asserted secured status for this amount as a result of the domestic attachment. Savidge received a discharge by order of the Bankruptcy Court on January 4, 1985. The real estate at 3212 Sapphire Drive remained in the bankruptcy estate.

After September 8, 1983, when the Sheriff had levied on Savidge's real estate by the writ of domestic attachment, Associates obtained a judgment lien against Savidge. On March 6, 1985, Associates, as a secured creditor, objected to the secured status of ITT's claim. The Bankruptcy Court sustained the objection and ITT instituted the present appeal.

In reviewing the decision of the Bankruptcy Court in this case, it is not necessary to address findings of fact because there is no dispute concerning material issues of fact. The role of the district court is then to make an independent determination on the legal issues. Prudential Insurance Co. of America v. Colony Square, 29 B.R. 432 (W.D.Pa., 1983). The specific legal issue presented here is whether domestic attachment, unperfected by judgment before the filing of a bankruptcy petition, is a sufficient lien to create secured status for the creditor making that attachment. We agree with the Bankruptcy Court that it is not and affirm its decision.

In order to illustrate the reasons for which we affirm, it is helpful first to spell out the arguments made by appellant. Appellant ITT contends that a creditor, who obtains a valid domestic attachment against real property of a debtor, has a lien against that property which survives the filing of a bankruptcy petition by the debtor. ITT argues that it can perfect its lien after termination of the automatic stay³ or abandonment of the property⁴ by proceeding to judgment in the Superior Court action. ITT cites the rule, recognized in Delaware, that a lien by domestic attachment, once it has been perfected by judgment, goes back and holds the property as of the date of the attachment. 2 Woolley on Delaware Practice § 1256. ITT then reasons that, although it cannot collect its debt as a personal liability of Savidge, it can still proceed after his discharge to try to obtain judgment in the Superior Court action and, if successful, enforce against the real estate its lien, originated by domestic attachment and now perfected by judgment and relating back to September 8, 1983, the date of the attachment.

ITT relies on Section 546(b)⁵ of the Bankruptcy Code to permit perfection of its lien after Savidge's filing for bankruptcy. We do not agree. Section 3501, the Domestic Attachment Statute, is intended to enable the Court to secure jurisdiction. Beneficial Consumer Discount Co. v. Church, Del.Super., 359 A.2d 185 (1976). We hold that this type of unperfected lien, created by ITT's writ of domestic attachment in order to compel the appearance of the defendant and wholly dependent upon the subsequent recovery of a judgment on the attachment process, is not the type of "interest in property" which can be perfected under Section 546(b) after the debtor files for bankruptcy.

ITT does not claim that its disputed claim would have survived bankruptcy if Savidge had been served personally. It contends, however, that because by chance Savidge could not be found by the Sheriff but had to be brought into the Superior Court action by a writ of domestic attachment, ITT should acquire the status of a secured creditor. ITT claims this status even though litigation would still be necessary after the filing of bankruptcy to establish whether or not Savidge was, in fact, liable to ITT and, if so, in what amount.

The fact that ITT would have had a lien dating back to the date of the attachment, if it had obtained a judgment against Savidge before he filed for bankruptcy, does not create secured status for ITT when, in fact, Savidge filed for bankruptcy prior to ITT's lien being perfected by a judgment. A lien, created by a domestic attachment, is conditional upon the subsequent recovery of a judgment. If judgment cannot be obtained, then the conditional lien is dissolved. 2 Woolley on Delaware Practice § 1256.

ITT was prevented by the automatic stay provisions of Section 362 from proceeding to judgment in the Superior Court action against Savidge personally after he filed for bankruptcy. When Savidge filed, ITT's claim was a disputed one of the kind dischargeable in bankruptcy. As the Bankruptcy Court held, the date of Savidge's filing for bankruptcy determined the nature of ITT's claim against him. Savidge's personal obligation to ITT was dischargeable in bankruptcy and could no longer...