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Rouse v. Rauch (In re Spence)

No. 16-6004 (BAP 8th Cir. Aug. 4, 2016)
The BAP for the 8th Circuit affirmed the ruling of the bankruptcy court (W.D. Mo. - Springfield) holding that a sheriff's posting of execution application and order on boat slip was sufficient notice of levy under Missouri law and created valid lien. Further, the failure to give direct notice to debtor did not invalidate levy or lien because debtor was not prejudiced by lack of notice. Trustee had sought to avoid distribution of execution sale proceeds to judgment creditor, arguing that failure to post "levy," and instead posting execution application and order, invalidated judgment lien and rendered creditor unsecured, and thus not entitled to execution proceeds.
Procedural context:
Trustee sued for turnover of execution sale proceeds, and to avoid judgment creditor's claimed execution lien in funds. Bankruptcy court entered judgment in favor of defendant. Trustee appealed to BAP for 8th Circuit.
Judgment creditor (HOA) obtained judgment for $36k and applied for execution, requesting personal property execution and levy. Creditor sought to execute upon boat slip owned by debtor. Court issued writ of execution, directing sheriff to execute the writ. Rather than post a proper "Notice of Levy," sheriff posted a copy of the execution application and order on pole next to boat slip. Boat slip was sold at sheriff's sale for $51,500, which was placed in trust account pending determination of entitlement to funds. Debtor then filed chapter 11; case converted to chapter 7. Chapter 7 trustee filed adversary proceeding to determine entitlement to sale proceeds, alleging that posting of the execution application and order was insufficient to accomplish levy, and that consequently, judgment creditor was unsecured. Bankruptcy court ruled that posting was adequate, and failure to give direct notice to debtor was not prejudicial. Consequently, judgment creditor held valid lien and trustee could not avoid lien and recover funds for estate.
Kressel, Saladino, Nail

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