Bankruptcy – Judgment Lien – Car Purchase

A Harrisonburg U.S. Bankruptcy Court denies debtors’ motion to void a judgment lien obtained by defendant car dealership on a judgment docketed in Augusta County Circuit Court in 1999, that attached to the female debtor’s interest in real estate she later acquired.

The dealer obtained a judgment against debtor in Augusta County General District Court on Aug. 24, 2008, as a result of a deficiency claim the dealer asserted after liquidation of an automobile that collateralized the loan. Debtor filed a counterclaim on Aug. 20, 1998. Notations on the warrant in debt show two dispositions, a judgment in favor of the dealer for the deficiency claim and a dismissal of debtor’s counterclaim.

Debtor noted an appeal of the dismissal of her counterclaim. The Augusta County Circuit Court processed and ruled on the appeal as if only the counterclaim was appealed. At the dealer’s request, the GDC clerk issued an abstract of the judgment that the dealer presented to the circuit court clerk for recordation in order to perfect its lien against any property owned or thereafter acquired in Augusta County by debtor. The record is clear that debtor pursued only an adjudication of her counterclaim at the circuit court level. The circuit court denied her counterclaim and the case concluded. When debtor acquired the interest in real property in 1999, the judgment lien attached by operation of law. Debtor and her husband filed a Chapter 13 proceeding on July 30, 2007, and now seek to disallow the dealer’s secured claim.

Debtor takes the position that Va. Code § 16.1-106 et seq., requires that, upon appeal, there be a trial de novo of all issues determined by the GDC which results in an annulment or voiding of the GDC judgment order in its entirety. Since the Augusta County Circuit Court, on appeal, determined only the counterclaim of debtor, she asserts there is no valid judgment in favor of the dealer and the judgment lien which attached to real estate which she acquired is void.

Based upon the holding in Addison v. Salyer, 185 Va. 644 (1946), if the appeal was properly perfected, the GDC judgment was rendered a nullity and debtors’ position in this case prevails, notwithstanding both the intent of the female debtor to appeal only the counterclaim and the circuit court’s disposition of the case in a manner consistent with that intent.

Here, the circuit court proceeded with the appeal presented without requiring a bond. On appeal, no party objected to the lack of bond or raised the issue. Case notes to Va. Code § 16.1-107 indicate that omission by the GDC of an appeal bond is not fatal to oust the circuit court of jurisdiction because it can fix the bond issue under Va. Code § 16.1-114.1.

It is clear the procedure followed in the appeal of this case did not precisely follow the Virginia Code’s statutory provisions.

However, the wording of Va. Code § 16.1-114.1provides a means for the circuit court to use equitable powers “to promote substantial justice to all parties and to bring about a trial of the merits of the controversy.” In her appeal, debtor wanted an adjudication solely of the adverse ruling of her counterclaim. She abandoned any trial de novo of the judgment awarded the dealer and the GDC and circuit Court accommodated her request for review of the counterclaim.

The GDC did not require a bond for appeal and the circuit court elected to try the appeal with no bond. This court holds that it was within the circuit court’s discretion to exercise its equitable powers to dispose of the appeal solely on the counterclaim issue and subsumed within that disposition was a finding that the judgment was final and binding upon her.

This court believes it would be inequitable to now find the judgment of the dealer became a nullity eight years after it was granted because debtor got the justice she pursued when she appealed to the circuit court. Because of the way debtor proceeded from the GDC to the circuit court, the only judgment annulled by the appeal was the counterclaim.

Debtors’ request to avoid the judgment lien is denied.

Tolley v. Obaugh Ford Inc. (Krumm, J.) No. 07-50514, May 27, 2008; USBC at Harrisonburg, Va.; Roland S. Carlton Jr. for plaintiffs; Susan B. Read for defendant. VLW 008-4-044, 6 pp.