Bankruptcy Case
When a judgment creditor has docketed with the local sheriff a writ of execution against corporate stock held by a debtor, does that affect a lien on the stock? That was the issue that was represented in the case of Trodglen v. Hastings, which was decided by the United States Bankruptcy Court for the Southern District of Florida.

Editor's Note: This article originally appeared in the Credit & Collection Manager's Letter, which Credit Today purchased in 2006.

The case involved a debtor, John T. Trodglen, who owed creditors $146,621.25. In November, a certified copy of the final judgment against the debtor as filed with the state's Secretary of State. The following May a writ of execution on the final judgment was issued by the circuit court for Leon County. Two days later the sheriff of the county acknowledged the receipt, docketing, and recording of the writ of execution.

The judgment creditors, Linda Hastings and Carol Henley, held a claim in this bankruptcy case secured by the stock in Trodglen Paving Inc., which was 100% owned by the debtor and was therefore the property of the estate. The judgment creditors contended that their judgment lien was perfected by docketing and recording a writ of execution with the sheriff of Indian River County prior to the commencement of the debtor's bankruptcy case. The judgment creditors sought to levy on the shares of stock held by Trodglen, and the sheriff was instructed to act on their behalf.

The sheriff attempted to levy on the stock but was told by the secretary at Trodglen Paving that the stock could not be found. The debtor also asserted that the judgment creditors had no lien on the stock and were unsecured creditors.

In deciding this case, the court focused on two state statutes, which call for the perfecting of a judgment lien of personal property once a writ is docketed with the sheriff, and the law which requires actual seizures of securities to bring about a judgment lien against corporate stock. To determine whether a judgment creditor's lien is perfected on the date of bankruptcy filing, the judgment creditor's rights must be compared to the rights of a hypothetical judgment lien creditor since, under section 544 of the Bankruptcy Code, the trustee is granted the status and rights of such a creditor. The question that the court had to answer was: Did the judgment creditors have a lien on the stock as of the filing date that was enforceable against another judgment lien creditor in existence on that date?

Click "next" to view the court's ruling.

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