Court of Appeals: Div. III – Court Holds That A Judgment “Lien” Can Expire, But Not the Judgment
Krueger v. Tippett
This was a very fact intensive case. In summary, the Kruegers borrowed money from the Tippetts several times beginning in 1976. The loans were secured by real estate and an assignment of the proceeds of a $50,000 life insurance policy on Hal Krueger. The Kruegers filed for bankruptcy in 1981 and subsequently the bankruptcy trustee agreed with the Tippetts to abandon any claims the bankruptcy estate had in the life insurance policy and some other Krueger assets. The Tippetts were allowed to proceed against the policy and the other assets. They obtained a judgment in 1986 in the amount of $43,186.54 and began to foreclose on the Krueger home. However, the Tippetts agreed to release the lien and stop foreclosure procedure for Hal Kruegers’ reaffirmation of the assignment of the life insurance policy. The Tippetts released the lien and filed a partial satisfaction of judgment acknowledging payment of $30,000. So the Tippetts still had a judgment.
Well eventually ole’ Hal kicked the bucket in 2007and the Tippetts came calling for their money from the life insurance proceeds. However, Hal’s wife also claimed the proceeds as the named beneficiary and stated that the Tippetts had let their 1986 judgment expire. The trial court ruled that since the bankruptcy trustee abandoned the insurance policy, it was completely assigned to the Tippetts. Ms. Krueger disagreed and she appealed the decision.
So what was the status of the life insurance policy once the bankruptcy trustee abandoned it? Krueger argues that once abandoned, the property reverts back to the debtor (Krueger). Tippett argues that the abandonment was a transfer from the trustee to them.
The Court of Appeals agreed with Krueger. A bankruptcy trustee cannot abandon property of the estate to a creditor. The property reverts back to the debtor. However, the Tippetts were free to pursue their interest in the policy once it was released.
Krueger also argued that since the Tippetts had taken no action on their judgment it had expired. She pointed out that the judgment was obtained in 1986 and thus it expired in 1996. The Court of Appeals disagreed. The reasoning is that the reassignment of the policy was executed after the judgment. The policy was just a method of how the judgment would be paid. Krueger argued that since the judgment had expired, payment was not enforceable. However, the Court pointed out that the judgment lien had expired, not the judgment itself. Huh?
“Washington's statutory framework for enforcing judgments focuses on the judgment lien. Entry of judgment creates a lien. When that lien expires, there is no longer any statutory method of enforcing the judgment, and nothing can be done to revive the lien. The statutes, however, address the judgment lien rather than the underlying judgment itself. The parties have not provided, and we have not found, any authority that the judgment itself ceases to exist when it becomes unenforceable…The 1986 judgment, while unenforceable, was still valid and served to establish the value of the assignment of the insurance proceeds. The judgment awarding the entire proceeds to the Tippetts is affirmed.”
So the Court of Appeals affirmed the trial court, but just not for the same reasons.
Okay, that just made my head hurt.