In re Schweigert
| Decision Date | 07 October 2020 |
| Docket Number | Case No. 20-90044-BPH |
| Parties | In re TRAVIS J. SCHWEIGERT, Debtor. |
| Court | U.S. Bankruptcy Court — District of Montana |
In this Chapter 131 case, on August 29, 2019, the Court held a hearing on Travis Schweigert's ("Debtor") Objection to Proof of Claim No. 6 filed by Tamara Schweigert2 ("Tamara") and Tamara's Objection to Confirmation Debtor's Amended Chapter 13 Plan.3 Appearances were made on the record. No testimony or evidence was offered. Counsel for Tamara requested permission to file a reply addressing the arguments made in Debtor's supplemental brief in support of his Objection to Proof of Claim No. 6 filed on September 9, 2020.4 The request was granted and Tamara filed a reply on September 17, 2020.5
The Court has reviewed the Objections, Supplemental Briefs, and Responses filed by Debtor and the Tamara. Based on the record developed before the Court, the following constitute the Court's findings of fact and conclusions of law to the extent required by Rules 7052 and 9014.
Debtor filed his petition for Chapter 13 relief on March 10, 2020.6 Tamara timely filed a proof of claim, and later amended it ("Amended Claim").7 The Amended Claim is $42,432.86. The Amended Claim is allegedly secured by a security interest in Debtor's livestock brands and branded livestock. Debtor objected to the secured status of Tamara's Amended Claim.8 Tamara filed a response to Debtor's objection.9 Both parties filed Memorandums of Law in support of their respective positions.10
Tamara's alleged security interest in Debtor's brands and branded livestock arises from a November 4, 2018 Writ of Execution ("Writ") she obtained after recovering a judgment against Debtor in Lake County District Court.11 The district court's "Order Granting Fees and Costs and Final Judgment" made no mention of Debtor's brands or branded livestock.12 However, the Writ directed the Montana Department of Livestock ("DOL") to satisfy the judgment "out of brandsowned or maintained by [Debtor] with the [DOL]."13 Notably, the Writ did not direct the DOL to actually place a lien on Debtor's brands or branded livestock. By its terms, the Writ expired 120 days after it was received by the DOL.14
After obtaining the Writ, Tamara also filed a "Notice of Security Interest Covering Branded Livestock" ("Notice") with the DOL.15 The exact date the Writ was served on the DOL is not entirely clear. The record shows only that the Notice has a "Creation Date" of November 27, 2018.16 Tamara contends that by mailing the Writ to the DOL, filing the Notice, and paying the associated filing fee, "she was granted a secured lien" against Debtor's brands.17
Debtor argues that Tamara's contention is incorrect for three reasons. First, Debtor contends that mailing the Writ accompanied by the Notice does not create a valid security interest in brands or branded livestock.18 Second, Debtor asserts that if any security interest was created through Tamara's filing, that security interest expired in March of 2019, is no longer enforceable, and Tamara's claim is unsecured.19 Finally, Debtor contends that A.R.M. § 32.15.601, relied on by Tamara, is inapplicable to her claim.20 Thus, Debtor contends Tamara is only entitled to an unsecured claim in the amount of the state court judgment.
Tamara's Objection to Confirmation, Debtor's Objection to Tamara's Proof of Claim, and supplemental briefing filed by both parties raise the following issue: Did the filing of theWrit and Notice with the DOL create and perfect a security interest in Debtor's brands or branded livestock?
A properly filed proof of claim constitutes prima facie evidence of the validity and amount of the claim. Rule 3001(f). Where an objection to the claim is filed, the objector must rebut the presumption of validity, and the claimant must sustain the ultimate burden of proof. In re Holm, 931 F.2d 620, 623 (9th Cir. 1991). Here, Debtor objected to Tamara's claim and contended that Tamara is simply a judgment creditor who failed to perfect a judgment lien in Debtor's brand. This fulfilled Debtor's burden to rebut the presumption of validity with respect to Tamara's claim. Thus, Tamara bears the ultimate burden to establish the validity of her alleged secured claim.
Section 506 of the Bankruptcy Code governs the determination and treatment of secured claims in bankruptcy proceedings. A claim cannot be a "secured claim" for purposes of § 506(a) unless it is secured by a "lien" on property in which the bankruptcy estate has an interest. 4 COLLIER ON BANKRUPTCY ¶ 506.03[1] (Richard Levin & Henry J. Sommer eds., 16th ed.). Liens generally fall into three categories: judicial liens, statutory liens, or consensual liens. In re Strobbe, 2007 WL 2562611 *2 (Bankr. D. Mont. 2011). "Those three categories are mutually exclusive and are exhaustive except for certain common law liens." Id.
Tamara does not contend that attachment or perfection of her alleged brand mortgage arises from common law. Tamara concedes that her alleged lien is nonconsensual.21 Tamara also concedes that her alleged lien is not statutory.22 Thus, the validity of Tamara's secured claimhinges on whether she executed her judgment in accordance with Title 25 of the Montana Code.
Montana law provides that from the time a judgment is docketed, it becomes a lien upon all real property of the judgment debtor located in the county. Mont. Code Ann. § 25-9-301(2). However, the act of docketing a judgment does not have the same effect on a judgment debtor's personal property. "With regard to personal property, which, unlike real property, is not referred to in the statute as subject to a lien immediately when a judgment is docketed, a lien does not arise prior to execution on that property." In the Estate of Bolinger, 1998 MT 303, ¶ 76, 292 Mont. 97, 971 P.2d 767. Stated more simply, a judgment does not become a lien against personal property until there has been an execution to enforce the judgment. Id., ¶ 76.
The Montana Supreme Court has made clear that personal property includes "everything that is the subject of ownership, not coming under denomination of real estate." Hanson v. Estate of Bjerke, 2004 MT 200, 322 Mont. 280, 95 P.3d 704 (citing Black's Law Dictionary, 1217 (6th ed. 1990)). Under this expansive definition, brands and branded livestock are clearly categorized as forms of personal property. See also In re Guardianship of Plummer, 137 Mont. 168, 350 P.2d 846 (). Thus, Montana law governing the execution of judgments against personal property guides this analysis.
The most common method by which a judgment is enforced against a judgment debtor's personal property is by writ of execution. See Mont. Code Ann. § 25-13-201 (). A writ permits a sheriff or other levying officer to levy on the judgment debtor's personal property and satisfy the judgment from the value of the property. Mont. Code Ann. § 25-13-402(1)(a). The sheriff or levying officer must accomplish this levy within 120 days after receiving the writ. Id.
To execute a judgment by levy, the sheriff or levy officer simply seizes the personal property described in the writ, sells the property, collects the proceeds, and pays the judgment creditor "as much of the proceeds as will satisfy the judgment." Mont. Code Ann. § 25-13-402(1)(a)(i)-(iii). Until the levy occurs, personal property remains unencumbered by any interest a judgment creditor claims simply because of their status as a judgment creditor. See Mont. Code Ann. § 25-13-501 ().
In this case, Tamara obtained a judgment against Debtor in state court on June 23, 2018. At that time, her judgment became a lien on all Debtor's real property in Lake County under Mont. Code Ann. § 25-9-301.23 However, without a writ of execution Tamara was unable to satisfy her judgment out of Debtor's personal property, including his brands. She obtained a writ of execution on November 4, 2018. The Writ directed the DOL "to satisfy the judgment out of brands owned or maintained by [Debtor] with the [DOL]" within 120 days after its receipt.
The record is devoid of any evidence that Tamara ever delivered the Writ to the sheriff or levying officer for purposes of levying on the brands or branded livestock. Instead, the record only indicates that Tamara mailed the Writ and Notice to the DOL. Tamara contends that simply filing the Writ and Notice with the DOL created a nonconsensual lien on Debtor's brands pursuant to A.R.M. § 32.15.601(3). In essence, Tamara argues that A.R.M § 32.15.601 providesan alternative procedure for satisfying a judgment by writ of execution. The Court disagrees.
Before analyzing the substance of Tamara's interpretation of A.R.M. § 32.15.601, the Court takes this opportunity to explain the role administrative rules play within Montana's statutory scheme.
Administrative agencies like the DOL "enjoy only those powers specifically conferred upon them by the [Montana] Legislature." Montana Independent Living Project v. Department of Transportation, 2019 MT 298, ¶ 31, 398 Mont. 204, 454 P.3d 1216. Consistent with this limitation, all rules adopted by administrative agencies must fall within the applicable legislative guidelines. Id. Administrative rules that conflict with statutory requirements or exceed the authority provided by statute are per se invalid. Clark Fork Coalition v. Tubbs, 2016 MT 229, ¶ 25, 384 Mont. 503, 380 P.3d 771.
Administrative rules are intended to accomplish one of several discrete tasks. Indeed, the definition of the term "rule" in Montana's Administrative Procedures Act makes clear that...
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