Memorandum of Decision Re: Lien Avoidance

NORTHERN DISTRICT OF CALIFORNIA In re YURY and IRINA TRUBNIKOV,                                                          No. 01-11202      Debtor(s). ______________________________________/
Memorandum on Motion to Avoid Lien
     Prior to bankruptcy, debtors Yury and Irina Trubnikov sold their home at 4 Bay Way, San Rafael, California, to creditors Ruslan Torsheov, Fatima Evloeva and Vakha Evloev under a lease option agreement. After a trial, a state court found that the Trubnikovs had made material misrepresentations and ordered the agreement rescinded. The court further found that the creditors had a purchaser's lien on the property to secure about $240,000.00 in damages, attorneys' fees and costs. The Trubnikovs then commenced Chapter 11 bankruptcy proceedings and have moved to avoid the creditors' lien pursuant to § 522(f)(1)(A) of the Bankruptcy Code. The creditors oppose the motion on grounds that their lien is a statutory lien rather than a judicial lien.
California Civil Code § 3050 provides:
One who pays to the owner any part of the price of real property, under an agreement for the sale thereof, has a special lien upon the property, independent of possession, for such part of the amount paid as he may be entitled to recover back, in case of a failure of consideration.      A lien is not a judicial lien if the creditor had an interest in the property before the occurrence of judicial action. In re Boyd, 31 B.R. 591, 594 (D.C. 1983), aff'd 741 F.2d 1112 (8th Cir. 1984). Just because a creditor resorts to judicial process to enforce a lien does not mean that a lien is an avoidable judicial lien. In re Thompson, 240 B.R. 776, 781 (10th Cir. BAP 1999); In re Harpole, 260 B.R. 165, 172 (Bkrtcy.D.Mont. 2001).      California Civil Code § 3050 gives a purchaser of realty who rescinds a contract for the vendor's fraud a lien on the property for the portion of the purchase price paid before rescission. Montgomery v.Meyerstein (1921) 186 Cal. 459. Since the creditors in this case had such a lien by statute prior to the commencement of their state court lawsuit, their lien is a statutory lien rather than a judicial lien and is accordingly not avoidable under § 522(f)(1)(A) of the Bankruptcy Code. Their use of the courts to enforce their lien did not transform it into a judicial lien.      For the foregoing reasons, the Trubnikovs' motion will be denied. Counsel for the creditors shall submit an appropriate form of order.
Dated: December 26, 2001                                                          ___________________________                                                                                                                     Alan Jaroslovsky                                                                                                                     U.S. Bankruptcy