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In re Davis

United States District Court, N.D. Indiana

August 28, 2019

In re Davis et al., Plaintiffs/Appellants,
v.
Jerrold B. Carrington, Defendant/Appellant.

          OPINION AND ORDER

          JUDGE HOLLY A. BRADY UNITED STATES DISTRICT COURT

         Creditors Albert Davis and A. F. Davis Law, PLLC (the “Davis Creditors”) appeal a decision of the Bankruptcy Court in Jerrold B. Carrington's (“Debtor Carrington”) Chapter 13 bankruptcy case. The Davis Creditors assert that the Bankruptcy Court erred when it concluded that their judgment lien on Debtor Carrington's marital property is not a present property right and should be treated as an unsecured claim. They maintain that Debtor Carrington's contingent future interest in the marital property has a present value, thereby entitling the Davis Creditors to a secured claim.

         This Court has jurisdiction over the matters raised in this appeal pursuant to 28 U.S.C. § 158(a)(1). No. issues of fact are raised on appeal. This Court will perform a de novo review of the challenged conclusions of law. See In re Longardner & Assoc., Inc., 855 F.2d 455, 459 (7th Cir. 1988).

         BACKGROUND

         A. The Consent Judgment

         In August 2012, a final consent judgment in favor of Albert Davis and against Debtor Carrington was entered in resolution of litigation that Davis brought against Carrington in a federal court located in California. It stated:

Judgment is hereby entered in favor of plaintiff Albert Davis and against Jerrold B. Carrington in the amount set forth below.
Defendant Carrington shall pay to Mr. Davis in certified funds the sum of seventy-eight thousand dollars ($78, 000) plus interest, 60% of which shall be made payable to Mr. Davis and 40% of which shall be made payable to A. F. DAVIS LAW within five (5) days of the entry of this Judgment; interest shall accrue at the rate of 10% from July 23, 2012 until the date Defendant Carrington fully pays Mr. Davis the entire amount of this judgment.

         B. Recording the Lien

         In June 2013, Davis recorded the judgment with the Lake County Clerk and the Lake County Recorder of Deeds against Debtor Carrington's interest in property located on Forest Avenue in Gary, Indiana (the “Real Estate”). Davis began proceedings supplemental to collect on the judgment. Debtor Carrington did not make any payments toward satisfaction of the judgment.

         C. The Bankruptcy Proceedings

         On May 1, 2017, Debtor Carrington filed a petition under Chapter 13 of the United States Bankruptcy Code. Debtor Carrington's wife was not included in the Chapter 13 petition. On August 8, 2017, the Davis Creditors timely filed their Proof of Claim for $104, 700.28 (the “Davis Claim”). The Davis Claim was listed as secured based on the California federal court judgment lien, and the recording of the lien with the Lake County Clerk's Office and the Lake County Recorder of Deeds.

         Debtor Carrington filed an objection to the treatment of the Davis Claim as secured. Both sides submitted briefs and the Bankruptcy Court issued an order regarding the parties' stipulations and set a briefing schedule to address the issue of whether the Davis Claim is secured considering Indiana's treatment of tenancy by the entirety. Prior to submitting his brief on this issue, Debtor Carrington filed a Motion to Avoid Lien.

         On October 25, 2018, the Bankruptcy Court entered the Memorandum, Opinion and Order holding that the contingent future interest held by Debtor Carrington in the marital property does not form the basis of a present lien and therefore the Davis Claim is currently unsecured. The Bankruptcy Court framed the issue before it as whether the federal judgment against Debtor Carrington was a judicial lien on the Real Estate that Debtor Carrington and his non-debtor spouse jointly owned as tenants by the entirety. The Bankruptcy Court found persuasive the analysis and conclusions of law by the court in In Re Yotis, 518 B.R. 481 (Bankr. N.D.Ill. 2018), noting that Indiana and Illinois law did not differ in any material respects regarding tenancy by the entirety. The Yotis court resolved a debtor's motion to avoid judicial liens where the debtor and his non-debtor spouse held title to their real estate as tenancy by the entirety. The court held that, ...


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