Matter of Pischke
| Decision Date | 18 June 1981 |
| Docket Number | Bankruptcy No. 76-432-A. |
| Citation | 11 BR 913 |
| Parties | In the Matter of Vail W. PISCHKE, Debtor. Vail W. PISCHKE, Debtor-in-Possession, Plaintiff, v. William G. MURRAY, Esquire, Chairman of the Creditors' Committee, GATX, C.J. Coakley, Samuel Greenbaum, Esquire, Boise Cascade, Bank of Virginia/Potomac, Fairfax County National Bank, First & Merchants National Bank, Virginia National Bank, LAM Associates, United Bank & Trust of Maryland, and Southern Arizona Bank & Trust, Defendants. |
| Court | U.S. District Court — Virgin Islands, Bankruptcy Division |
Roy B. Zimmerman, Alexandria, Va., for Vail W. Pischke.
William G. Murray, Arlington, Va., defendant, pro se.
John J. Czyzewski, Vienna, Va., for GATX Leasing Corp.
Terence P. Quinn, Vienna, Va., for C.J. Coakley.
Samuel M. Greenbaum, Greenbaum & Gins, Washington, D.C., defendant, pro se.
Dillard C. Laughlin, Stephen K. Christenson, Kendrick, Gearheart, Aylor & Lockowandt, Arlington, Va., for Boise Cascade.
Joseph V. Gartlan, Jr., Washington, D.C., and Jill R. Abeshouse, Alexandria, Va., for Bank of Virginia/Potomac.
Randolph A. Sutliff, McCandlish, Lillard, Church & Best, Fairfax, Va., for Fairfax County Nat. Bank.
J. David Linthicum, Arlington, Va., for First & Merchants Nat. Bank.
Jonathan C. Kinney, Walter H. Hylton, III, Bean, Kinney, Korman & Hylton, Arlington, Va., for Virginia Nat. Bank.
Leslie R. Roos, Repetti, Deerin & Murphy, P.C., Washington, D.C., for LAM Associates.
United Bank & Trust Co. of Maryland, Oxon Hill, Md., C. Wynne Tolbert, David C. Canfield, Arlington, Va., for Southern Arizona Bank & Trust Co.
MARTIN V.B. BOSTETTER, Jr., Bankruptcy Judge.
This matter came on for hearing on a Complaint filed by the debtor-in-possession, Vail W. Pischke, the plaintiff herein, in a proceeding before this Court under Chapter XI of the Bankruptcy Act against William G. Murray, Esquire, and other named defendants1 seeking a determination of the validity, priority or extent of various liens upon the plaintiff's property and for a valuation of each security. The defendants are holders of either judgment and execution liens against the plaintiff, or have executed loan agreements with the plaintiff (or with the plaintiff as guarantor) evidenced by the recordation of financing statements and security agreements. The plaintiff is a limited partner in a partnership known as First Charter Land Associates ("First Charter").
Two principal issues are presently before the Court for resolution. First, those of the defendants who hold judgment liens are seeking to satisfy their liens against the plaintiff's interest in First Charter. Arising out of this is a controversy among several of the defendants as to the status of their respective judgment liens. Two of the defendants, Fairfax County National Bank ("FCNB") and Bank of Virginia/Potomac ("BVP") contend that the order of priority for all of the judgment lien holders must be determined as of the date on which charging orders were issued. FCNB and BVP procured charging orders after the issuance of liens of fieri facias which levied on the interest of plaintiff in the limited partnership. The defendants who have failed to procure charging orders assert that a lien of fieri facias is sufficient to perfect their interests against the partnership interest of the plaintiff. These defendants contend that it is the date on which the writ of fieri facias is delivered to the sheriff for execution which is determinative of the priority between the holders of judgment liens.
A second issue to be resolved by the Court concerns the status of certain financing statements recorded by the defendants, C.J. Coakley and Samuel Greenbaum, Esquire. Several of the defendants argue that the defendant Coakley's financing statement was improperly filed and, hence, is ineffective against third parties. The defendant GATX Leasing Corporation ("GATX") asserts that Greenbaum's financing statement should not be considered as he failed to pursue his claim at trial other than to file an Answer to the plaintiff's complaint.
Set forth below are the names of the respective defendants, the amounts of their claims, the dates judgments were entered against the plaintiff, the dates of execution of liens of fieri facias, and the dates of issuance of charging orders, as follows:
Charging
Claimant Amount Judgment Fieri Facias Order
1. Boise Cascade 8,767.17 12/30/74 3/18/75
2. Bank of Virginia/ 10/ 3/75 5/ 4/76
Potomac 89,049.43 7/24/75 10/30/75
3. GATX 54,162.14 11/22/74 2/12/75 6/13/75
4. Fairfax County
National Bank 34,132.25 7/25/75 11/10/75 4/23/76
5. First and Merchants' 3/10/76
Bank 93,000.00 8/29/75 5/25/76
6. Virginia National Bank 86,104.80 10/ 7/75 2/17/76
7. LAM Associates 41,500.00 2/15/76 4/12/76
8. Southern Arizona Bank
& Trust Co. 64,912.94 9/15/75 10/22/75
The defendants Southern Arizona Bank and Trust Company ("Southern Arizona"), Boise Cascade, Virginia National Bank ("VNB") and GATX contend that the issuance of a writ of fieri facias and execution upon delivery to the authorized enforcement officer fully perfected their liens against the plaintiff's limited partnership interest in First Charter. These defendants contend further that a charging order is unnecessary to perfect a lien on a partnership interest under Virginia law, since for purposes of perfection the partnership interest is treated as an intangible and, hence, is considered perfected pursuant to Virginia Code § 8.01-501 (1977 Repl.). Under this view, a charging order is not regarded as either a lien-creating device or a lien-perfecting device. Rather, a charging order is seen as a lien-enforcement mechanism between judgment lien creditors of an individual partner and an equity-adjusting device between personal creditors of the partners and the creditors of the partnership.
The assertion is made by the aforesaid defendants that although there exists a specified statutory method of reaching a partnership interest of a judgment debtor, this does not mean that a judgment creditor who has a charging order relegates a prior lien to a position of inferiority to the charging order. These defendants argue that permitting a court of competent jurisdiction to charge the interest of a partner with payment of an unsatisfied judgment does not either directly or indirectly support the conclusion that the granting of a charging order gives a priority to the judgment creditor seeking the charging order as against the judgment creditors of the partner who do not have such charging orders.
The Court recognizes that under Virginia law the execution of a writ of fieri facias establishes a lien on intangibles from the time the writ is delivered to the sheriff. The case law is equally "clear that it is the creation of a lien and not its enforcement which is critical" in a bankruptcy setting. In re Acorn Electric Supply, Inc., 348 F.Supp. 277, 279 (E.D.Va.1972).
Virginia has adopted the Uniform Partnership Act ("UPA"), Virginia Code § 50-1 et seq. (1980 Repl.) and the Uniform Limited Partnership Act ("ULPA"), Virginia Code § 50-44 et seq. (1980 Repl.).2 The charging order provision appearing in Virginia Code § 50-65, as amended, is modeled on Section 22 of the ULPA and Section 28 of the UPA (see Virginia Code § 50-28, as amended). Paragraph (1) of Section 50-65 establishes a procedure by which a judgment creditor of a debtor who has a limited partnership interest in a partnership may satisfy his judgment from the debtor's partnership interest through the use of a charging order.3 This method is virtually identical to the procedure set forth in the statute applicable to "non-limited" partnerships — Virginia Code § 50-28, supra.
It has been stated that a charging order statute "constitutes . . . repeal by implication of any previous procedures designed to" reach a partner's interest in a partnership. Gose, The Charging Order Under the Uniform Partnership Act, 28 Wash.L.Rev. 1, 20 (1953). An analysis of this principle considered in conjunction with the fact that it is the creation of the lien and not its enforcement which is critical in the bankruptcy setting indicates that the better and most logical application is that the Virginia charging order statute, as codified by the Legislature's adoption of the ULPA, supersedes other legislation in the area concerning satisfaction of a judgment creditor's claim against a partner's interest in a partnership.
It would appear that to date no case has construed Section 50-65 of the Virginia Code. The Legislature, in enacting the ULPA, recognized that the provisions of this Act should be interpreted and construed to effect uniformity with the decisions of the courts of those states which have enacted the ULPA. Virginia Code § 50-71(2) (1980 Repl.).
The Supreme Court of California in Baum v. Baum, 51 Cal.2d 610, 335 P.2d 481 (1959) construed that state's "non-limited" partnership charging order statute. The Baum court found that a charging order on a partnership interest replaced "levies of execution as the remedy for reaching such interests." Id. 335 P.2d at 483. In reaffirming the rationale enunciated in an earlier decision by a California intermediate appellate court, Sherwood v. Jackson, 121 Cal. App. 354, 8 P.2d 943 (1932), the court in Baum, supra, 335 P.2d at 483, determined that a creditor could not "levy attachment or execution on a partner's right...
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