New England Mortgage Services Co. v. Petit

590 A.2d 1054, 15 U.C.C. Rep. Serv. 2d (West) 649, 1991 Me. LEXIS 124

• Court: Supreme Judicial Court of Maine
• Decided: May 9, 1991
• Status: Published

Opinions

GLASSMAN, Justice.

The plaintiff, New England Mortgage Services Company (New England Mortgage), appeals from a judgment of the Superior Court (York County, Perkins, J.) affirming the District court (Biddeford, Henry, J.) in its dissolution of a judgment lien on any proceeds that might be derived from a pending action by the defendant, Catherine Petit, against third parties. We hold that the statute controlling the enforcement of money judgments, 14 M.R. S.A. §§ 3120-3137 (1980 & Supp.1990), does not authorize the District Court to grant a lien on the proceeds of a tort claim by Petit against parties unrelated to New England Mortgage. Accordingly, we affirm the dissolution of New England Mortgage’s lien on Petit’s pending legal malpractice action.

New England Mortgage obtained judgments of $245,304.27 and $78,567.81 in two actions against Petit and then sought disclosure of Petit’s assets in the District Court pursuant to 14 M.R.S.A. § 3122 (Supp.1990). Petit disclosed as her only asset the legal malpractice claim that she and other co-plaintiffs had pending in the Superior Court against parties unrelated to New England Mortgage. The District Court granted a lien on the proceeds of Petit’s pending malpractice action, which it later dissolved on Petit’s motion for its dissolution. From a judgment of the Superior Court affirming the District Court’s dissolution of the lien, New England Mortgage appeals. The sole contention of New England Mortgage is that under the provisions of 14 M.R.S.A. § 3131 (Supp.1990) the District Court was authorized to issue a valid lien to New England Mortgage, and the court erred in dissolving the original lien. We disagree.

District Court procedures for the enforcement of money judgments are prescribed by statute.¹ 14 M.R.S.A. §§ 3120-3137 (1980 & Supp.1990). The statute provides that the court may make a turnover order that transfers items of a debtor’s property, not exempted by statute from attachment or execution, to a judgment creditor. 14 M.R.S.A. § 3131(1) (Supp. 1990). Alternatively, if an item of a debt- or’s property is worth more than a creditor’s judgment, the court may issue a sale order and a portion of the proceeds may be used to satisfy the judgment. Id. § 3131(2). A turnover order or sale order constitutes a lien on the specified item of a debtor’s property and, if the debtor disposes of the item after entry of the order, on the proceeds of that disposition to the extent that a secured party would have an interest in proceeds under Article 9 of the Uniform Commercial Code. Id. § 3131(9) (Supp.1990).² A party can perfect an interest in proceeds only under circumstances permitting an Article 9 security interest. 11 M.R.S.A. § 9-306(3) (Supp.1990).³ Article 9 does not provide a security interest in “[a]ny claim arising out of tort.” Id. § 9-104(11) (Supp.1990).⁴

We do not decide in this case whether a judgment creditor is foreclosed from obtaining a lien on the possible proceeds of other types of pending suits. Here, Petit’s legal malpractice action clearly is a claim arising out of a tort. Petit could not grant a valid lien on such a claim under Article 9, and section 3131 provides a lien on the proceeds of a debtor’s property only in accordance with Article 9. Therefore, we hold that New England Mortgage cannot obtain a judgment lien on the unrealized proceeds of Petit’s pending malpractice claim under the terms of section 3131.⁵

Nor can New England Mortgage obtain a lien on the proceeds of Petit’s pending action under the common law. Petit could not voluntarily assign her malpractice action to New England Mortgage because the latter has neither the intimate connection nor the clear interest in the claim necessary to become a party to that action. Thurston v. Continental Casualty Co., 567 A.2d 922, 923 (Me.1989). If such an interest cannot be assigned voluntarily, then it cannot be attached. See Wilde v. Mahaney, 183 Mass. 455, 460-61, 67 N.E. 337 (1903). Further, as a chose in action, Petit’s pending action is not subject to attachment or execution at common law.⁶ Smith v. Kennebec & Portland R. Co., 45 Me. 547, 548 (1858); see Maine Fire and Marine Insurance Co. v. Weeks, 7 Mass. 437, 438 (1811) (negotiable notes not subject to execution); Sharp v. Clark, 2 Mass. 91, 93 (1806) (sheriff’s execution not subject to execution); 6 Am.Jur.2d Attachment and Garnishment §§ 126-27, 132, 135 (1963).

The entry is:

Judgment affirmed.

ROBERTS, WATHEN and CLIFFORD, JJ., concur.

1 . The statutory enforcement procedures are not exclusive. 14 M.R.S.A. § 3120 (Supp.1990). The Legislature also has made a general provision that “[a]ll chattels, real and personal liable at common law to attachment and not exempted therefrom by statute, may be taken and sold on execution as prescribed in this subchapter and [§§ 5001-5006].” 14 M.R.S.A. § 4751 (Supp. 1990); see also id. § 4151 (related provision authorizing attachments). A chose in action, such as Petit’s pending malpractice action, is not listed as an exemption from execution by the provisions of 14 M.R.S.A. §§ 4421-4426 (Supp. 1990). But see id. § 4422(15) (exemption of $400 for “any property" of a debtor). Under the common law, however, a chose in action is beyond the reach of attachment and execution. See Martel v. Bearce, 311 A.2d 540, 544 (Me.1973). Thus, New England Mortgage must find authority for its lien, if any, in the specific statutory provisions for enforcement of money judgments.

2 . 14 M.R.S.A. § 3131(9) provides:

Lien. An order entered pursuant to this section shall constitute a lien against the property which is the subject of the order and against the proceeds of any disposition of the property by the judgment debtor which occurs at any time after entry of the order. The lien shall extend to proceeds of any disposition of the property, real or personal, subject to the lien of the judgment creditor to the extent that a secured party would have an interest in the proceeds under Title 11, section 9-306. The lien shall be for the full amount of the unpaid judgment, interest and costs, and shall become perfected as to 3rd parties on the earlier of:

A.The time the judgment creditor or purchaser takes possession of the property;

B. If the property is real estate, the time when an attested copy of the turnover or sale order is filed with the registry of deeds where a mortgage would be filed to be duly perfected;

C. If the property is personalty against which a security interest may be perfected by filing pursuant to Title 11, the time when an attested copy of the turnover or sale order is filed with the filing officer where a filing would be required under Title 11, section 9-401;

D. If the property is a motor vehicle for which a certificate of title is required, the time when an attested copy of the turnover or sale order is delivered to the office of the Secretary of State where notice would be delivered pursuant to Title 29, section 2374, subsection 1; or

E. If the judgment creditor or purchaser takes possession of the property, or if an order is recorded, filed or delivered pursuant to this subsection during the pendency of any properly perfected prejudgment or post-judgment attachment obtained in the underlying action, or any judgment lien created pursuant to section 4651, the time when the attachment or lien was duly perfected against the property-

The evident purpose of section 3131(9) is not to expand the category of property subject to a turnover or sale order but rather to hold accountable a judgment debtor that disposes of property in an attempt to evade such an order.

3 .Section 9-306(3) provides in pertinent part:

Except as provided in this section and in Article 8,[ ] a security interest in proceeds can be perfected only by the methods or under the circumstances permitted in this Article for original collateral of the same type.

4 . Tort claims are excluded from Article 9 because they "do not customarily serve as commercial collateral.” 11 M.R.S.A. § 9-104(11) (U.C.C. Comment 8) (1964); see Bluxome Street Assoc. v. Fireman’s Fund. Ins. Co., 206 Cal.App.3d 1149, 1156, 254 Cal.Rptr. 198, 202 (Cal.Ct.App.1988). A security interest can be granted in a tort claim only where permitted by common law. Israel Discount Bank Ltd. v. Gottesman, 544 F.2d 80, 82 (2d Cir.1976); 1 G. Gilmore, Security Interests in Personal Property § 10.7, at 316 (1965).

5 . New England Mortgage does not contend that it is entitled to a lien under the trustee process for enforcement of money judgments provided by a related section, 14 M.R.S.A. § 3127-A (Supp.1990). Accordingly, we do not decide whether section 3127-A has any application to Petit’s pending malpractice action.

6 . Northeast Bank N.A. v. Crochere, 438 A.2d 266 (Me.1981), is not to the contrary. In Crochere, we assumed without deciding that a debtor’s pending tort claim was at common law considered exempt from a creditor’s judgment lien. We concluded that even if a lien granted by the District Court on such a pending tort claim was invalid, it still could be challenged only by a direct appeal, not by a collateral attack. Id. at 268.