A JUDGMENT CREDITOR SHOULD ALWAYS VERIFY THAT A LIEN HAS BEEN PROPERLY RECORDED
Ron Stormoen
POINT: Creditors and their lawyers should always follow this practice: After an abstract of judgment (or lis pendens or mechanic’s lien or deed of trust, i.e., any document that creates a lien on real property) is recorded, they should check the County Recorder’s index to make sure they can find the lien in the debtor’s chain of title. If they cannot, they need to immediately remedy the problem or they may lose a valuable right.
The case discussed herein is instructive (and the other cited law below supports the case), so it should inform the creditor’s (and their lawyers’) due diligence in collections.
A court of appeal held that a subsequent purchaser of property who didn’t have notice of a judgment lien (i.e., a recorded abstract of judgment) recorded against the prior owner (who was a judgment debtor) was not bound by the creditor’s lien when buyer purchased the property from the judgment debtor. (Alberto Vasquez v. LBS Financial Credit Union; Court of Appeal, Second District, Division 7, California June 17, 2020, 2020 WL 3263702,)
A sale or refinance is often how the judgment creditor gets paid on a judgment. A judgment lien (or lis pendens or mechanic’s lien or deed of trust) follows the property on sale (or refinance), if the buyers had notice. And, a recorded abstract normally imparts constructive (should have known) notice on a buyer. “Every duly recorded conveyance of real property, or recorded judgment affecting title to or possession of real property, is constructive notice of the contents thereof to subsequent purchasers and mortgagees from the time of recordation.” (In re Marriage of Cloney (2001) 91 Cal.App.4th 429, 437.) “[A] recorded document does not provide constructive notice unless and until it can be located by a title search. [ ] Because the lis pendens at issue was not indexed at the time defendants took their interests in the property, it could not have been located by a diligent title search, and therefore did not provide constructive notice.” (Dyer v. Martinez (2007) 147 Cal.App.4th 1240, 1242.)
The issue in Vasquez was what does duly recorded mean. In that case, the County Recorder improperly indexed the abstract of judgment because the creditor apparently listed the debtor’s legal name on the recorded abstract (e.g., Wilbert G. Guerrero) but the property’s chain of tile listed the debtor’s common name (e.g., Guillermo Guerrero). The judgment creditor never checked to make sure the recording was properly indexed. Apparently, the title company for the buyer could not reasonably locate the abstract of judgment because of how the County Recorder indexed the name. Therefore, the court found that the abstract imparted neither actual nor constructive notice, and the buyer took the property free and clear of the judgment lien. In other words, the lawyers for the creditor lost a valuable asset for collection!
Takeaway:
1. After the creditor has the abstract recorded, the creditor then needs to do a title search (can do it online with County Recorder) to make sure the abstract judgment lien shows up.
2. If one can’t find the lien in the chain of title, the creditor needs to try and get the recorder to fix the problem so the lien appears in the chain of title.
Interestingly, the court in Vasquez noted that the abstract had the correct social security number and driver’s license of the debtor but said these did not impart notice because one cannot search by those numbers with the County Recorder. The name (or incorrect name) ruled the day.
Disclaimer
This entry does not give specific legal advice about your specific legal problem. No text or graphic contained in this entry is to be or should be used or relied upon as legal advice. This entry does not create an attorney-client relationship. If you want specific legal advice about your particular legal issues, or if you want to create an attorney-client relationship, you need to retain the Law Offices of Ron A. Stormoen by a signed written retainer agreement.