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Smith v. Kofstad

Supreme Court of Alaska

April 24, 2009

Mike SMITH d/b/a Wasilla Concrete, Petitioner,
v.
Raymond KOFSTAD, individually and d/b/a Busch Concrete, and Marguerite Kofstad, Respondents.

Page 442

Sarah J. Tugman, Anchorage, for Petitioner.

Patricia Hefferan, Wasilla, for Respondents.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, CARPENETI, and WINFREE, Justices.

OPINION

WINFREE, Justice.

I. INTRODUCTION

Alaska Statute 09.35.020 provides that a judgment creditor must obtain court permission to execute on a judgment if more than five years have elapsed after entry and no previous execution has been issued.[1] Permission

Page 443

will be granted if there are " just and sufficient reasons" for failure to previously execute on the judgment. In this case judgment was issued in 1995, but the judgment creditor did not attempt to execute on it for nearly ten years. He explained the delay by alleging that the judgment debtor, who died in 2001, lacked assets sufficient to satisfy the judgment during that time. The district court denied permission to execute, finding the judgment creditor had made no effort to verify whether assets did in fact exist. The judgment creditor appealed and the superior court affirmed the district court's decision.

We accepted the judgment creditor's petition for hearing and now affirm on an alternative ground: because ownership of the property upon which the judgment creditor sought execution passed by operation of law to the judgment debtor's spouse upon the judgment debtor's death, the effort to execute is futile.

II. FACTS AND PROCEEDINGS

Mike Smith, d/b/a Wasilla Concrete, sued Raymond Kofstad, d/b/a Busch Concrete, over nonpayment for construction materials and supplies. Smith obtained a default judgment against Raymond [2] for $41,589.41 in September 1995. The judgment was recorded the next month in the Palmer Recording District,[3] where Raymond and Marguerite owned a home as tenants by the entirety. Raymond died in January 2001.

Smith first sought a writ of execution in August 2005, almost ten years after entry of judgment and more than four years after Raymond died. Smith filed a motion in the district court requesting leave to execute on the Kofstad home pursuant to Alaska Rule of Civil Procedure 69(d).[4] The motion was accompanied by an affidavit explaining that Smith had not previously obtained a writ of execution because he " did not believe that the judgment debtor had assets with net value capable of satisfying a portion of the judgment." [5] He further stated: " I also became aware that the defendant was deceased during the Fall of 2000[sic]. I checked property records and discovered that a number of IRS liens had been recorded, which would have made execution upon the judgment debtor's real property fruitless. I believe the IRS liens have since expired." Smith served the motion, affidavit, and a summons on Marguerite.[6] She opposed the motion,[7]

Page 444

and the district court denied leave to execute without explanation.

Smith appealed the denial to the superior court. Marguerite then argued that " there is no showing that there were no assets to execute against while the debtor was alive" and contended that Smith " did not ask a process server to do a bank sweep, to seize the permanent fund dividend or take any action whatsoever to collect any amount from any source." Smith did not expressly deny these assertions, but argued Marguerite had waived this defense by not raising it in response to his original motion for leave to execute.[8] The superior court remanded the case to the district court to make factual findings and to explain the denial of Smith's motion for a writ of execution.

The district court then explained that Smith's reasons for delaying execution were inadequate: " [Smith's] subjective belief as to the value of decedent's assets or decedent's position with the IRS does not justify ... [Smith's] delay in obtaining a writ of execution."

The superior court affirmed the district court's denial of Smith's motion, stating that Smith bore the burden of " demonstrating that [he] made some inquiry regarding available assets during the five year period" and that Smith " did nothing to execute on the debt, or even to ascertain what assets were or were not available to do so, until after January 2001." The court concluded that Smith had " not demonstrated a fair and sufficient reason to relax the five-year deadline" for execution.

We accepted Smith's petition for hearing, and later asked the parties to address whether, in light of Raymond's death and the extinguishment of his interest in the tenancy by the entirety, Smith could execute on the Kofstad home.

III. STANDARD OF REVIEW

" When there has been an appeal to the superior court as an intermediate court of appeal, we ‘ approach the issues independently.’ " [9] " We may affirm a judgment on any grounds that the record supports, even grounds not relied on by the [lower] court." [10]

IV. DISCUSSION

A judgment creditor generally can obtain a writ of execution as a matter of course within five years of the judgment.[11] There is no definitive time limitation on the commencement of executions of judgment, [12] but if the judgment creditor does not seek a writ of execution within five years, " no execution may issue except by order of the court in

Page 445

which judgment is entered." [13] The court shall grant leave to execute only if it determines " there are just and sufficient reasons for the failure to obtain the writ of execution within five years after the entry of judgment." [14] We have held that a judgment debtor's previous lack of assets that could satisfy the judgment, rendering execution futile, is a just and sufficient reason to permit leave to execute under AS 09.35.020. [15]

The parties disagree whether, as a matter of law, a judgment creditor must diligently try to verify the lack of assets during the five year period to merit permission to later execute on the judgment. But because execution is now futile-when Raymond died and Marguerite took full ownership of their home by operation of survivorship, Smith's ability to execute on Raymond's share of the property was extinguished-we need not reach the question raised by the parties.

When an individual judgment debtor dies, his or her property generally is transferred through probate proceedings to heirs or devisees, subject to creditor claims against the decedent.[16] If a judgment creditor has an existing lien on specific property owned by the judgment debtor, the lien survives the judgment debtor's death and can be foreclosed as if the judgment debtor were still living.[17] Alternatively the judgment creditor can file a claim in the probate proceedings to have the debt satisfied from the decedent's estate.[18]

But when property is owned by husband and wife as tenants by the entirety and one spouse dies, the decedent's share in the property does not pass through probate. Instead, the decedent's share is extinguished at death and the surviving spouse takes full ownership of the property by operation of law from the original conveyance: " The common law theory ... is that the decedent's interest vanishes at death, and therefore no probate is necessary because no interest passes to the survivor at death." [19] When the decedent's share in unsevered survivorship property extinguishes, so therefore must the putative interest of any creditor in that property. Courts in other jurisdictions have uniformly assumed, if not expressly stated, that with respect to unsevered survivorship property, the death of a judgment debtor and the consequent destruction of the judgment debtor's share in the property also destroys any interest of a judgment creditor in that share.[20] This is an issue of first impression

Page 446

for this court.[21]

We hold, in accordance with the uniform practice in other jurisdictions and with the logic of tenancy by the entirety, that: (1) recording a judgment against a judgment debtor, thus creating a judgment lien against property owned by the judgment debtor, does not sever a tenancy by the entirety between the judgment debtor and spouse, and (2) a judgment creditor's interest, if any, in a judgment debtor's interest in an unsevered tenancy by the entirety is extinguished when the judgment debtor predeceases the spouse. [22] We observe that a judgment creditor may take action to sever a tenancy by the entirety:

If an individual and another own property in this state as tenants in common or tenants by the entirety, a creditor of the individual ... may obtain a levy on and sale of the interest of the individual in the property. A creditor who has obtained a levy, or a purchaser who has purchased the individual's interest at the sale, may have the property partitioned or the individual's interest severed.[[23]]

Severance terminates a tenancy by the entirety, nullifying survivorship [24] and thus protecting a judgment creditor's interest in the judgment debtor's share of the property. We express no opinion on when in the execution process a tenancy by the entirety is actually severed. Smith never attempted to levy on the Kofstads' home prior to Raymond's death, and the Kofstads' tenancy by the entirety therefore remained unsevered; Raymond's death consequently extinguished his interest in the home.

Because Smith is unable to execute on the Kofstad home, his application under AS 09.35.020 for leave to execute on the home is futile.

V. CONCLUSION

We AFFIRM the decision of the superior court on the alternative ground set forth above.


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