In re Aura Systems, Inc.

347 B.R. 720 (2006)

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In re Aura Systems, Inc.

United States Bankruptcy Court for the Central District of California
347 B.R. 720 (2006)

Facts

In 2005, Aura Systems, Inc. (Aura) (debtor), a Delaware corporation, filed for Chapter 11 bankruptcy. During bankruptcy proceedings, certain claimants (the claimants) (creditors) claimed secured-creditor status related to a prior lawsuit. More specifically, the claimants’ proof of claim claimed a security interest in Aura’s accounts receivable, equipment, and inventory pursuant to a judgment lien. The claimants had sued Aura approximately 10 years earlier for alleged violations of federal securities laws related to their purchase of Aura common stock. The parties reached a settlement, and Aura agreed to pay the claimants $4 million in monthly installments. However, in 2002, Aura defaulted on the monthly installments. Accordingly, the claimants obtained a $923,250 judgment against Aura for the unpaid installments. Before Aura filed for bankruptcy, the claimants filed a notice of judgment lien with the California secretary of state. Aura objected to the claimants’ claim and moved for summary judgment on the ground that the filing of a notice of judgment lien with the California secretary of state against a non-California corporation with property in California did not create a judgment lien.

Rule of Law

Issue

Holding and Reasoning (Bufford, J.)

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