Green Hill Corporation v. Charles C. Kim Duak F. Kim Bank of Seoul/new York Agency

842 F.2d 742, 1988 U.S. App. LEXIS 3893, 1988 WL 26087

• Court: Court of Appeals for the Fourth Circuit
• Decided: March 30, 1988
• Docket: 87-2041
• Status: Published

Opinions

HARRISON L. WINTER, Chief Judge:

Green Hill Corporation (Green Hill) appeals from an order of the district court which affirmed an order of the bankruptcy court denying Green Hill’s motion for relief from an automatic stay. Green Hill contends that by filing a lis pendens under Virginia law it obtained a lien on the property of Charles and Duak Kim prior to the Kims’ petition for bankruptcy under Chapter 11, and that it should be relieved from the stay in order to foreclose the lien. We agree with the district and bankruptcy courts that Green Hill did not satisfy Virginia state law requirements for the creation of lien merely by filing a memorandum lis pendens and obtaining a money judgment against the Kims. We perceive no basis on which to relieve it from the stay and we therefore affirm.

I.

Green Hill obtained a money judgment of $530,990.05 against the Kims on June 10, 1986, in the Eastern District of Virginia. Green Hill Corp. v. Kim, Civ. No. 85-1087-A (E.D.Va. filed Sept. 25, 1985). It did not docket its judgment in state court prior to the Kims’ petition for bankruptcy under Chapter 11 on June 20, 1986. In re Kim, No. 86-01115-A (Bankr.E.D.Va.1986). However, counsel for Green Hill and the plaintiff in a related case filed a notice of lis pendens in the office of the Clerk of Fairfax County, Virginia, pursuant to Va. Code Ann. § 8.01-268 (1984), on September 27,1985.¹ After the filing of the notice but before Green Hill’s judgment was entered, the Bank of Seoul/New York Agency (Bank) recorded a deed of trust secured by the Kims’ real property which had been executed on August 6, 1985. After bankruptcy ensued, Green Hill moved for relief from the automatic stay in order to enforce its alleged lien. Its theory was that it acquired a lien under Virginia law upon obtaining a favorable judgment in its pre-petition litigation with the Kims, thus warranting relief from automatic stay under the Bankruptcy Act, 11 U.S.C. § 362(d)(1). The Bank intervened in the proceeding to defend the priority of its lien.

II.

Both the bankruptcy court and the district court ruled that the filing of the lis pendens and the subsequent judgment did not give Green Hill a valid lien which Green Hill could enforce. We agree.

Under Virginia law, the filing of a memorandum lis pendens neither creates nor enforces a lien. In re Hart, 24 B.R. 821 (Bankr.E.D.Va.1982). Rather, Green Hill's filing of the lis pendens pursuant to Va. Code Ann. § 8.01-268 (1984)² served merely as “notice of the pendency of the suit to any one interested and a warning that he should examine the proceedings therein to ascertain whether the title to the property was affected or not by such proceedings.” Harris v. Lipson, 167 Va. 365, 189 S.E. 349 (1937). See also Bray v. Landergren, 161 Va. 699, 172 S.E. 252, 256-57 (1934). Thus the notice did not create a lien and the effect of the notice is not altered by mention of the injunction obtained by another plaintiff in another suit prohibiting the Kims from transferring their assets.

In the ten days which elapsed after Green Hill obtained a money judgment and prior to the Kims’ filing under Chapter 11, it could have docketed its money judgment in state court, thus creating a lien. See Va.Code Ann. § 8.01-458 (1984). Green Hill did not act within that period, and after the Kims’ filing, Green Hill was automatically stayed from “any act to create, perfect, or enforce any lien against property of the estate.” 11 U.S.C. § 362(a)(4).

III.

There is an additional reason why Green Hill may not prevail. Green Hill obtained a money judgment against the Kims. It seeks only recourse to real estate once owned by the Kims’ to satisfy that judgment; it does not seek to litigate title to the real estate. The Virginia Supreme Court has stated that the lis pendens statute is applicable to disputes concerning title to real property, but not to an action to recover a personal judgment. Preston’s Drive Inn Restaurant, Inc. v. Convery, 207 Va. 1013, 154 S.E.2d 160, 163 (1967).³ Under this authority the memorandum of lis pendens was ineffective to achieve the objective now claimed.

AFFIRMED.

1 . In addition to describing the suit in which Green Hill was plaintiff, the notice of Its pen-dens described other litigation instituted by the president of Green Hill, acting individually, against the Kims. In that other litigation, plaintiff Abdoulalem Ghariani obtained an injunction prohibiting the Kims from transferring their property before final judgment. Civ. No. 85-993-A (E.D.Va. filed Aug. 17, 1985). The fact that the injunction had been granted was set forth in the notice of lis pendens.

2 . In relevant part, § 8.01-268 provides:

No lis pendens or attachment shall bind or affect a subsequent bona fide purchaser of real or personal estate for valuable consideration and without actual notice of such lis pendens or attachment, until and except from the time a memorandum setting forth the title of the cause or attachment, the general object thereof, the court wherein it is pending, the amount of the claim asserted by the plaintiff, a description of the property, and the name of the person whose estate is intended to be affected thereby, shall be admitted to record in the clerk's office of the [relevant court]....

3 . The debtors cite as contrary authority In re Hart, 24 B.R. at 824 (while "technically" lis pendens is available only for actions directly involving title to real property, this "formal rather than substantive” difference did not render a lis pendens null and void). That case has no application here because it concerned a lis pendens notice of prejudgment attachments on the debtors' real property which, of course, created liens on the property. It is significant that In re Hart was decided by the same bankruptcy judge who decided the instant case. Although it was cited to him in oral argument, he did not apply it to grant Green Hill’s motion. Rather Green Hill's motion was denied.