Winning at trial and obtaining a jury verdict or court judgment is only a part of the battle. You must also preserve and protect your judgment in order to enforce it. This article describes some pitfalls which may confront counsel when a judgment lien is initially recorded or later renewed.
RECORDING THE JUDGMENT
Include the Social Security Number and Driver’s License Number if Known
A judgment lien based upon a lump sum money judgment is created by recording an abstract of the money judgment with the county recorder of the county in which the judgment debtor’s real property is located. CCP §697.310. The judgment then becomes a lien on any real property owned by the judgment debtor within that county whether owned or acquired later. See Mercantile Collection Bureau v. Roach (1961) 195 Cal.App.2d 355, 15 Cal.Rptr. 710. The requirements for a valid abstract of judgment are set out in CCP §674. It is not a surprise that an essential omission from these requirements, such as failing to include the amount of the judgment, renders the judgment invalid, and nullifies the effect of the judgment lien. Ellrott v. Bliss (1983) 147 Cal.App.3d 901, 195 Cal.Rptr. 446. Even seemingly minor omissions, however, can also be fatal. Such a danger lurks in CCP §674(a)(6), which requires that the abstract of judgment must include the last four digits of the judgment debtor’s social security number and his driver’s license number if known to the creditor. It is not enough to simply indicate on the abstract that the information is unknown if in fact it is known to the creditor. See Keele v. Reich (1985) 169 Cal.App.3d 1129, 215 Cal.Rptr.756 [no substantial compliance with CCP §674 when creditor knew Social security number, but failed to include it, stating “unknown” on abstract]. Under Keele, counsel preparing an abstract of judgment for recording must check all sources, including documentation in the file, any documentary evidence obtained from the judgment debtor through discovery, and the client as well, to determine whether the judgment debtor’s social security number or driver’s license number is known. Failure to do so, if discovered, will invalidate the judgment. In fact, the Keele court states that “no court has validated a judgment lien where mandatory information was omitted from an abstract,” suggesting that any omission from the listed requirements of CCP §674, including even items such as the address where the summons was served, invalidates the abstract and prevents the judgment lien from taking effect.
Amend a Defective Abstract to Include the Social Security Number and Driver’s License Information
Abstracts recorded after 1978 may be amended to include the social security number and the driver’s license information if they were known at the time of the original recording but omitted. The amendment relates back to the recording date of the original abstract except as to persons who had no actual notice of the original (the rules are slightly different for abstracts recorded prior to July 10,1985). Recording an amendment “does not extend or otherwise alter the computation of time as provided in Section 697.390 [Renewal of Judgments].” CCP §674(b).
RENEWING THE JUDGMENT
On their face, the judgment renewal statutes set forth in CCP §683.010 through §683.320 appear relatively straightforward. Counsel using this procedure, however, must be careful to comply with all the requirements of these statutes or risk bearing responsibility for an expired judgment.
Enforce the Judgment Before Ten Years has Passed
Under CCP §683.020, a money judgment is enforceable for 10 years after the date of entry of the judgment. The judgment can be extended if the judgment is renewed before the ten year period expires. Failure to renew within the ten year period is fatal. As stated in the Comment to CCP §683.020, unless the judgment is renewed or a statute provides otherwise, after expiration of the ten year period the judgment cannot be enforced, enforcement procedures are barred, and any judgment lien is extinguished. The ten year period is not extended by any stay of enforcement or tolled for any other reason. In fact, except for a bankruptcy stay, as discussed below, CCP §683.210 provides that a “judgment may be renewed notwithstanding any stay of enforcement of the judgment.” See Jonathan Neil & Associates, Inc. v. Jones (2006) 138 Cal.App.4th 1481, 1488-1489, 42 Cal.Rptr.3d 350, 355-356. A judgment creditor facing a state court stay of execution, therefore, must proceed with timely renewal of the judgment.
Pay Close Attention If Judgment Debtor’s Bankruptcy Prevents Timely Judgment Renewal
CCP §683.210 which states that a judgment may be renewed even if there is a stay of enforcement in effect does not apply to the automatic stay created by a Federal Court bankruptcy filing. See11 USC362(a) [automatic stay prevents “any act to create, perfect or enforce any lien” against the debtor’s estate]. In order to renew the judgment the judgment creditor must either seek relief from stay (In re Lobherr (BC CD CA 2002) 282 BR 912, 915-916; but see also In re Silva (BC D ID 1997) 215 BR 73, 77) or wait until the automatic stay has expired, in which case 11 USC 108(c) extends the period in which to renew the judgment until 30 days after the creditor has received notice that the stay has ended. See In re Spiritos (9th Cir. 2000) 221 F3d 10789, 1080-1082. The creditor must therefore monitor the bankruptcy proceeding closely and promptly renew the judgment once the bankruptcy case has closed or the debtor’s discharge is entered.
If the debtor receives a discharge, the underlying debt upon which the judgment lien is based will normally be discharged as well (see 11 USC 524(a)(1)), but if the creditor’s lien attached to real property before the bankruptcy, the creditor is allowed to renew the judgment in order to preserve the existing judgment lien even though the underlying debt is discharged. In re Weathers (BC D KS 1981) 15 BR 945; 949; Songer v. Cooney (1989) 214 Cal.App.3d 387,391, 264 Cal.Rptr.1, 2-3.
If the Ten Year Period Has Passed, Determine Whether it is Possible to Bring an Independent Action Based upon the Judgment
The judgment renewal statutes in CCP §683.010 through §683.320 do not prevent a creditor from bringing an independent action based upon the judgment within the ten year limitations period of CCP §337.5. See Comment to CCP §683.020. Even if the ten year period for judgment renewal has passed, a timely lawsuit under CCP §337.5 may still be possible because such an action may have a later bar date than the renewal statutes. First, the ten year period of CCP §337.5 does not accrue until the judgment is final, a date which will always be later than the date of entry of the judgment. Furthermore, CCP §337.5’s ten year period is subject to normal tolling provisions if the debtor is disabled, out of the state or in bankruptcy for a portion of the ten year period. See Kertesz v. Ostrovsky (2004) 115 Cal.App.4th 369, 8 Cal.Rptr.3d 907. While bringing an independent action is a more cumbersome procedure than the expedited judgment renewal process, if the initial ten year period has passed, counsel should investigate whether any tolling provisions apply. As a last resort, an expired judgment may be used as an offset under CCP §431.70.
Renew Large Judgments Often and Early
Judgment creditors holding large judgments should renew them as often as possible in order to maximize the amount of interest which accrues. The first judgment renewal may be done at any time. Subsequent renewals may be done only if five years have passed since the prior renewal. Early renewals have the effect of compounding interest. As stated in Ahart, Cal. Practice Guide: Enforcing Judgments & Debts, Section 6:68 (The Rutter Goup 2010),
There is an economic advantage to renewing a judgment early, because accrued interest is added to the judgment principal upon renewal. … Thereafter, 10% interest accrues on the total amount of the renewed judgment, allowing the judgment creditor, in effect, to earn compound interest. [OCM Principal Opportunities Fund v. CIBC World Markets Corp., 168 Cal.App.4th at 200, 85 Cal.Rptr. At 360-361 – compound interest on renewed judgment does not violate constitutional limit on judgment interest].
Renewing a judgment every five years rather than every ten years can significantly increase the size of the judgment.
It is also important to review a judgment well before the ten year period is set to expire in order to allow for the time necessary to complete all the required renewal procedures. The first step, filing the application for renewal with the court clerk, is relatively straightforward, and the judgment renewal is effective upon filing. In order to retain the priority of existing judgment liens, however, it is also necessary to record a certified copy of the renewal application before the ten year period has expired. CCP §683.180(a). Notice of the renewal must then be served on the judgment debtor, either personally or by mail, and the proof of service filed with the court. The renewed judgment may not be enforced until the proof of service has been filed.
Special rules apply if the judgment debtor has attempted to transfer the real property subject to the creditor’s judgment lien prior to the renewal. In order to preserve the existing judgment lien, the creditor must personally serve the transferee with a copy of the renewal application and file the proof of service within 90 days after the application is filed. As stated in Debt Collection Practice in California, Obtaining, Renewing and Satisfying Judgment, Section 7.72 (CEB 2011),
This points up the importance of checking the grantor and grantee records for transfers of the debtor’s real property as part of the judgment renewal process, so any parties who may have acquired such property subject to the judgment lien are notified of the renewal in a timely manner to prevent the lien from expiring.
If the creditor is aware that the judgment debtor owns real property which is subject to the judgment lien being renewed, it is absolutely necessary for counsel and the creditor to determine whether the debtor has attempted to transfer the property. If so, unless these procedures are followed in a timely manner, the creditor’s judgment lien will be ineffective against the transferee.
Renew Personal Property Liens
Personal property liens can now be extended under recent amendments to CCP §697.510. The normal duration of a personal property lien is five years. A creditor may now extend the lien for additional five year periods by filing a continuation statement with the Secretary of State within the six-month period prior to the expiration of the existing lien.
Prudent counsel can avoid the dangers described in this article, and preserve and protect the fruits of the litigation process, by properly recording and renewing judgments and judgment liens.