Should you take that asset if it has a lien on it?

An unfortunate part of my job is to have a court officer seize assets from people who refuse to pay the judgments that are placed with us for collection. I don’t like doing this for several reasons. First, I much prefer to work on a payment plan with a debtor and to collect the judgment in a more civilized way. Secondly, I don’t care for the embarrassment or indignity that I cause my fellow human being. Its just not a nice way to treat people. I believe that G-d put all of us on this earth to look after and take care of one another. There is a third reasons why I don’t like to have assets seized…..As you can guess from the title of this post, it involves a 4 letter word……LIEN.
In law school, they taught us the phrase “First in time, first in right.” This means that the first person or entity to record his/its lien is first in line to get paid? Right?…..WRONG….Lets talk about a few kinds of liens and worse yet, competing liens for when your court officer asks for direction. Here it goes.
Rule 1 – You can always take an asset subject to a lien. Just remember that when you take that asset, you must satisfy that lien obligation. I frequently get calls from angry attorneys on behalf of banks stating “I am from Big Firm and my client/bank has a lien on the assets that you took. Tell your court officer to leave them alone.” I respectfully inform my brother counsel that I am going to have my court officer take the property and we can duke out the lien issue in court. Of course this prompts a series of threats for costs and sanctions and such, but you cannot take that kind of talk seriously. I certainly don’t and neither should you. Take the asset and figure out the issues later.
Rule 2 – Unperfected liens are no liens at all. You would be surprised at the number of times a lender or its counsel overlooks the fact that its lien has not been perfected. This may be due to an expired lien or one for which a U.C.C. had not been recorded. They may think they have a lien, but alas, they might be in error.
Lien v Lien…which lien wins?
Here is a good axiom to remember. State, County and Personal Property tax liens generally trump most other liens. Why? Because the statute says so. See MCLA 211.40 et.seq, which says “…All personal taxes levied or assessed for state, county, village, or township taxes are also a first lien, prior, superior, and paramount, on all personal property of the persons assessed…” Hence, State, County and Personal Property tax liens beat out UCC liens and even purchase money mortgages.

UCC v Purchase Money Mortgage.
These two liens generally intersect when commercial personal property is installed onto the real estate. For example, the equipment of a cash wash that is hard wired into the electrical systems, vented through the building and plumbed into the real estate. The UCC lien on the car wash equipment generally prevails over the Purchase Money Mortgage.
Blanket Security Liens v Purchase Money Liens. Purchase Money Mortgages generally win over blanket security liens (“all assets acquired…) regardless of the date filed.

UCC Purchase Money v Lien on Title of the Motor Vehicle
. A lender has no business trying to perfect a security interest in Michigan by filing a U.C.C. In Michigan, our statutes allow for a lien titles. Hence, if a court officer takes a car and UCC lender cries foul, he will have to tell it to the judge because his security interest in the car is unperfected.
Divorce Liens v Title to Vehicles. This is a great area of concern to collection attorneys. We rely on Secretary of State records to see who owns the lien. However, divorce d ecrees can create a great deal of problems because trump the SOS reports even though these divorce decrees are usually not recorded with SOS. When a divorce decree assigns a vehicle from one spouse to the other, that divorce decree, in and of itself, acts as the transfer document. Neither spouse needs to record that transfer with the Secretary of State. This causes all sorts of problems for court officers and attorneys who seize vehicles. Note that the same is NOT true with respect to real estate. A deed of some sort must be recorded with the Register of Deeds to perfect the transfer.
Conclusion. If your debtor will not cooperate with you to satisfy the judgment that you have obtained against him, you are left with no choice but to seize his assets. When you do so, be careful to do your homework to see what, if any liens, exist against his property.

This entry was posted on Monday, August 25th, 2008 and is filed under Collection Laws Michigan . You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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