Appeal from the United States District Court for the Western District of D.C. Civil Action No. 89-107J. Becker, Greenberg and Nygaard, Circuit Judges
In this bankruptcy matter, docket No. 89-3590, James R. Huff, II, (Trustee) and Central Bank, a judgment creditor of Decatur Contracting d/b/a Hoffman Construction Company, Inc. (Decatur), appealed to the district court from an order of the bankruptcy court which (a) permitted the Trustee to avoid Central Bank's judicial lien on a money judgment obtained by Decatur before bankruptcy; and, (b) refused the Trustee's request to avoid several partial transfers of the same judgment to appellees M.A.W.G., Inc., t/a C.A.M. Co. (C.A.M. Co.), Erie Bearings Company, Place Electric Supply, Inc., and Brumbaugh Insurance Group. The district court affirmed the bankruptcy court and both the Trustee and Central Bank appeal. We will reverse.
On March 4, 1985, Decatur confessed judgment against Glen Irvan Corporation (Irvan) in the amount of $168,560.36 plus interest. Irvan filed a petition to open or strike the judgment which was denied by the Common Pleas Court of Clearfield County on October 2, 1985. On October 16, 1985, Decatur served a writ of execution and interrogatories on Summit Bank, which held Irvan's funds. On October 21, 1985, Irvan filed a notice of appeal with the Superior Court of Pennsylvania. On November 27, 1985, the common pleas court directed Irvan to post a supersedeas bond in the amount of $215,941.12. On December 9, 1985, Irvan obtained a Certificate of Deposit (CD), payable to the Commonwealth of Pennsylvania, from Summit Bank, which delivered the CD to the Prothonotary of Clearfield County, Pennsylvania. This security operated as a supersedeas of Decatur's writ of execution. Pa.R.App.P. 1735.
On March 10, 1986, the first CD matured and Summit Bank issued an identical one in its place and delivered it to the Prothonotary.
On April 4, 1986, Decatur made two partial assignments of its judgment against Irvan without obtaining Irvan's consent. It assigned $71,806.04 to C.A.M. Co. and $49,736.54 to Erie Bearings Company. Both assignments were docketed by the Prothonotary on April 11, 1986.
On May 2, 1986, the Superior Court of Pennsylvania dismissed Irvan's appeal. On May 23, 1986, it denied Irvan's petition to reopen the appeal.
On June 2, 1986, Decatur assigned $27,042.82 of its judgment against Irvan to Place Electric Supply, Inc., again without Irvan's consent.
On June 9, 1986, the second CD matured and Summit Bank issued an identical one in its place and delivered it to the Prothonotary.
On June 10, 1986, the common pleas court dissolved the supersedeas. The order, which indicates that Irvan consented, directs the Prothonotary "to transmit to Carl A. Belin, Jr., as attorney for the judgment creditor [Decatur] and assignee of judgments, the sum of $190,144.52." App. at 24. This money was not transmitted.
On June 11, 1986, Decatur assigned $30,000 of its judgment against Irvan to Brumbaugh Insurance Group, again without Irvan's consent.
On June 12, Central Bank obtained a $236,104.52 judgment by confession against Decatur in the common pleas court.
On June 13, 1986, Irvan filed a Petition for Allowance of Appeal with the Pennsylvania Supreme Court.
On June 17, 1986, the Prothonotary docketed the partial assignments of Place Electric Supply, Inc. and Brumbaugh Insurance Company.
On June 18, 1986, Central Bank caused a writ of execution and interrogatories to be served upon Carl Belin, as garnishee, because he was authorized to receive the $190,144.52 from the Prothonotary in satisfaction of Decatur's judgment against Irvan.
On September 8, 1986, the third CD matured and Summit Bank issued an identical one in its place. This CD was not delivered to the Prothonotary as the previous CD's had been; rather, Summit Bank retained it.
On September 16, 1986, Central Bank caused a writ of execution and interrogatories to be served on Summit Bank as garnishee.
On September 24, 1986, Summit Bank mailed the September 8th CD to Belin. Belin had the Prothonotary endorse the CD on September 26, 1986 and returned it to Summit Bank the same day. On September 30, 1986, Summit Bank wired $196,130.34 to Belin to be held in escrow pending the outcome of Irvan's appeal to the Pennsylvania Supreme Court.
On November 21, 1986, the Pennsylvania Supreme Court denied Irvan's appeal.
On December 24, 1986, Decatur filed a voluntary petition for bankruptcy under Chapter 11 of the Bankruptcy Code, 11 U.S.C. §§ 1101-1146. The Chapter 11 proceeding was later converted to a Chapter 7 proceeding and James R. Huff, II, was appointed Trustee.
On May 27, 1987, the Trustee filed a complaint in the bankruptcy court seeking to avoid the assignments and Central Bank's garnishment. As to the partial assignments, the Trustee claimed that they were void because Irvan did not consent to the assignments, and that they were avoidable preferences. The Trustee further claimed that any lien acquired by Central Bank's garnishment was also an avoidable preference.
The facts underlying this appeal are not in dispute. The parties raise only questions of law, thus this court's scope of review is plenary. Matter of Jersey City Medical Center, 817 F.2d 1055, 1059 (3d Cir. 1987); Universal Minerals, Inc. v. C. A. Hughes & Co., 669 F.2d 98, 101-102 (3d Cir. 1981). Although the Trustee's ability to avoid the parties' liens is controlled by the federal bankruptcy law, the court must look to Pennsylvania law to determine what, if any, ...