Elder v. Smith

Opinion by JAMES R. EYLER, Judge. In this appeal, Emma Elder, appellant, is attempting to satisfy a purported lien against real estate that is located in Anne Arundel County and known as 928 Beales Trail, Pasadena, Maryland 21122 (“Beales Trail”). Appellant owns a one-half interest in Beales Trail as a tenant in common with the estate of her former husband, Colonel Percy Elder, Sr. (“the decedent”). Appellant obtained the purported lien after the Circuit Court for Baltimore City entered a judgment in her favor against the decedent based on an unpaid monetary award against decedent, resulting from the couple’s divorce.

Unfortunately for appellant, she did not obtain and record the judgment until after the decedent’s death. Thus, the Orphans’ Court for Baltimore County concluded that appellant’s purported lien was unenforceable. Accordingly, the orphans’ court ordered appellant to release her lien and directed the personal representative of the decedent’s estate, Cherry Elder Smith, appellee, to sell Beales Trail, place one-half of the net proceeds into the estate, 1 and administer the estate in accordance with Maryland Code (2006 Repl. Vol.), § 8-104 of the Estates and Trusts Article (“E.T.”).

Appellant contends that the orphans’ court erred when it ordered her to release her lien against Beales Trail. We shall affirm. ⁶⁵⁰ Factual Background Appellant and the decedent divorced on February 19, 2002. As part of the resolution of property issues, the circuit court entered a monetary award in favor of appellant in the amount of $31,500 and also ordered the couple to sell Beales Trail and evenly divide the proceeds. The monetary award was not reduced to judgment at that time. 2 The decedent died on November 8, 2005.

In accordance ■with the decedent’s will, on May 12, 2006, the orphans’ court appointed appellee as the personal representative of the estate. The only asset in the estate was the decedent’s one-half interest in Beales Trail. As of the time of the decedent’s death, the decedent had not paid the monetary award, and Beales Trail had not been sold. On May 9, 2006, appellant filed a claim against the decedent’s estate in the amount of the monetary award.

On May 16, 2006, appellant sought and obtained from the circuit court an order reducing the monetary award to a judgment. 3 On September 13, 2006, appellant sought and obtained from the circuit court an order substituting appellee as the judgment debtor. The latter order recites that a “Notice of Substitution” was served on appellee, but no response was filed. On December 29, 2006, appellant recorded the judgment in Anne Arundel County which, according to appellant, created a lien on Beales Trail. At that time, appellee was unaware of appellant’s purported lien.

In February, 2007, appellant and appellee accepted a contract for the sale of Beales Trail in the amount of $86,000. On ⁶⁵¹ July 7, 2007, the orphans’ court approved the contract. Settlement was scheduled for November 11, 2007. After settlement, appellee intended to distribute one-half of the net proceeds to appellant as the joint property owner and distribute the other half of the net proceeds to the estate.

Prior to settlement, appellee discovered appellant’s purported lien on Beales Trail and realized that, if the lien was valid and she had to distribute the estate’s share of the proceeds to appellant, the estate would be insolvent. Consequently, appellee refused to attend the settlement, wrote a letter to appellant disallowing appellant’s claim against the estate, and on November 13, 2007, filed a “Motion for Clarification” in the orphans’ court, arguing that appellant’s purported lien was invalid. On November 28, 2007, appellant filed a response. On January 11, 2008, the orphans’ court held a hearing, and on February 15, 2008, issued a memorandum opinion and order.

The orphans’ court concluded that appellant’s lien was unenforceable and, accordingly, ordered appellant to release the purported lien on Beales Trail. Additionally, the orphans’ court ordered appellee to pay one half of the proceeds from the sale of Beales Trail to the estate and that appellee distribute the proceeds in accordance with E.T. § 8-104. Appellant noted a timely appeal. Discussion Appellant contends that her lien, established by virtue of Maryland Code (2006 Repl.

Vol.), § ll-402(c) of the Courts and Judicial Proceedings Article (“C.J.”), was valid without the necessity of filing a claim against the estate and comes within E.T. § 8-114(b). 4 ⁶⁵² Section 11-402 provides, in pertinent part, that a money judgment, indexed and recorded in a county other than the county in which the judgment was originally entered, constitutes a lien on the judgment debtor’s interest in land located in the county in which it was recorded. E.T. § 8-114 is entitled “enforcement of claims against estate” and provides: (a) An execution or a levy shall not issue nor be made against property of the estate under a judgment against a decedent or a personal representative. (b) The provisions of this section do not apply to the enforcement of mortgages, pledges, liens, or other security interests upon property in an appropriate proceeding. In support of her arguments, appellant also relies on E.T. § 8 — 103(d) (exempting actions or proceedings “to enforce a mortgage, pledge, judgment or other lien, or security interest upon property of the estate” from the time requirements for filing a claim against an estate); McHugh v. Martin, 198 Md. 173 , 81 A.2d 623 (1950); and Polk v. Pendleton, 31 Md. 118 (1869).

As we shall explain, we disagree with appellant’s interpretation of the statutes, and the reported decisions on which appellant relies are not on point. First, we will restate the basic underlying issue in this case. When a claim against a decedent exists prior to the decedent’s death and is reduced to judgment after the decedent’s death, and the judgment gives rise to a lien under non-estate law, is the judgment creditor entitled to execute on that lien after the decedent’s death? The general rule, followed by a majority of the states that have addressed the issue, 5 is that the priority of claims against a decedent’s estate, in existence prior to the death of the decedent, is determined as of the date ⁶⁵³ of death, and a lien obtained after the decedent dies is unenforceable.

See L.S. Tellier, Annotation, Rank of Creditor’s Claim Against Decedent’s Estate or His Rights in Respect of Property of Estate as Affected by Reduction of His Claim to Judgment Against Executor or Administrator, or Levy of Attachment or Execution, 121 A.L.R. 656 (1939, Bluebook of Suppl. Dec. 1st Perm. Vol. 1946, 2d. Perm.

Vol. 1952, 3d. Perm. Vol. 1958, 5th Perm. Vol. 1976, 7th Perm.

Vol. 1990). We conclude that this is the law in Maryland. This law underlies the relevant statutory scheme. 6 E.T. §§ 8-103 and 8-104 provide for the presentation of claims against an estate. E.T. § 8-105(a) provides for the order of payment of claims. 7 Section 8-105(b) provides that a “preference shall not be given in the payment of a claim over another claim of the same class.” E.T. §§ 8-110, 8-111, and 8-112 address claims not yet due, secured claims, and contingent claims, respectively.

E.T. § 8-114(a), quoted above, provides that a judgment creditor may not execute a levy to obtain a lien against property of the estate, in order to enforce a ⁶⁵⁴ judgment. Nothing in this statutory scheme permits a creditor with a pre-death claim to enhance the priority of its claim after the debtor dies. In fact, the statutory scheme presumes that a claim’s priority status is determined on the date that the decedent dies. In light of the general rule mentioned above and the relevant statutory scheme, we draw three conclusions.

First, we conclude that E.T. § 8-114(b) excepts only secured creditors who obtain their liens prior to death from § 8-114(a)’s prohibition. Thus, appellant’s lien is unenforceable under subsection § 8-114(a). See 54 Op. Atty.

Gen. 440 (1969) 8 ; In re Estate of Landis, 48 N.J.Super. 382, 137 A.2d 635, 637 (Co.Ct.Prob.Div.1958); Allan J. Gibber, Gibber on Estate Administration § 6.38 (5th ed. 2008). Second, we conclude that E.T. § 8-103(d) refers only to secured claims in existence prior to the decedent’s death. Third, we conclude that C.J. § ll-402(c), which creates a statutory lien, 9 does not govern