Credit Bureau of Broken Bow, Inc. v. Moninger
27 U.C.C. Rep. Serv. (West) 1106, 204 Neb. 679, 284 N.W.2d 855 (1979)
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Rule of Law:
A judgment creditor's lien, created by a valid levy on property, has priority over a previously created but unperfected security interest, and a levying officer's knowledge of the unperfected interest is not imputed to the judgment creditor.
Facts:
- The Credit Bureau of Broken Bow, Inc. (Bureau) obtained a judgment against John Moninger.
- Moninger renewed a promissory note with the Broken Bow State Bank (Bank), intended to be secured by his 1975 Ford pickup truck, but no security agreement was executed at that time.
- The Bureau obtained a writ of execution to collect on its judgment.
- On July 7, 1978, a deputy sheriff checked the vehicle's title, found no liens, and went to Moninger's workplace to levy on the pickup.
- The deputy served the writ on Moninger and asserted dominion over the vehicle by grabbing it and stating, 'I execute on the pickup for the County of Custer,' but did not take physical possession.
- During this interaction, Moninger told the deputy that the Bank had a loan against the pickup and held the title.
- On July 10, 1978, three days after the levy, the Bank and Moninger executed a formal security agreement, and the Bank perfected its security interest by having it noted on the vehicle's title.
- The pickup truck was later physically seized by deputies on July 13, 1978, and sold at a sheriff's sale.
Procedural Posture:
- The Credit Bureau of Broken Bow, Inc. obtained a default judgment against John Moninger in Custer County court.
- Following a sheriff's sale of Moninger's truck, the sheriff filed a motion in the county court to determine the priority of claims to the sale proceeds between the Bureau and the Broken Bow State Bank.
- The county court entered judgment for the Bank, finding its lien was superior.
- The Bureau, as appellant, appealed the county court's judgment to the District Court for Custer County.
- The District Court affirmed the county court's judgment in favor of the Bank.
- The Bureau, as appellant, appealed the District Court's decision to the Supreme Court of Nebraska.
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Issue:
Does a judgment creditor's execution lien have priority over a bank's security interest if the creditor's lien was established by a levy before the bank's interest was perfected, even if the debtor informed the levying officer of the bank's unperfected interest?
Opinions:
Majority - Brodkey, J.
Yes, a judgment creditor's execution lien has priority over an unperfected security interest when the levy occurs before perfection. Under U.C.C. § 9-301(1)(b), an unperfected security interest is subordinate to the rights of a person who becomes a lien creditor without knowledge of the security interest before it is perfected. The Bureau became a lien creditor on July 7, 1978, when the deputy sheriff performed a valid levy. A valid levy does not require physical seizure; it is sufficient for the officer to be present and expressly assert dominion over the property by virtue of the writ. The Bureau was a creditor 'without knowledge' because the knowledge Moninger gave to the deputy sheriff is not imputed to the Bureau. A sheriff acts as an agent of the law, not as an agent of the judgment creditor. Since the Bureau's lien attached on July 7, before the Bank perfected its interest on July 10, the Bureau's lien is superior.
Analysis:
This decision reinforces the critical importance of timely perfecting security interests under the Uniform Commercial Code. It clarifies that a valid levy can be accomplished without physical seizure, thereby establishing a judgment creditor's priority at the moment the officer asserts dominion. The court's refusal to impute a sheriff's knowledge to the judgment creditor protects the integrity of the public filing system, affirming that creditors must rely on official records, not on informal notices conveyed during enforcement actions. The ruling squarely places the risk of loss on the party that fails to follow statutory perfection procedures.
