A lien holder who fails to renew its judgment loses that priority even after entry of an Interlocutory Judgment in a partition lawsuit.
In a recent California court of appeal opinion the court dealt with what it calls a straightforward issue: In a partition action, does a judgment creditor who was deemed the priority lien holder lose that status if it does not renew its judgment? The answer is yes.
Two parties, Pentech Financial Services, Inc. and Edward P. Roski, Trustee of the Roski Community Property Trust Dated November 1, 1987, are two of several lien holder defendants in a partition action involving four San Diego properties.
The parties entered into a stipulated interlocutory judgment relating to the partition lawsuit. The parties agreed that upon sale of the properties, liens would be prioritized by each lien’s recording date.
However, a year later, Pentech’s judgment expired. And Pentech failed to renew it.
The trial court determined that Pentech lost its lien priority because it no longer even had a valid, enforceable judgment. The court therefore awarded Roski, as the new priority lien holder, its proportional share of the funds (exceeding $500,000) from the sale of the properties.
Pentech admits that it did not renew its judgment but argued to the court of appeal that the trial court’s initial determination of priority lien status was final and nonreviewable.
The appellate court looked at two issues:
The Enforcement of Judgments Law
The Enforcement of Judgments Law governs the enforcement of judgments. In the case of a money judgment, a judgment creditor has a 10-year period to enforce its judgment. This period can be extended by 10 years if an application for renewal is submitted before the original term expires. But once a judgment expires, it may not be enforced. Upon the judgment’s expiration, all enforcement procedures “shall cease” and any lien pursuant to the judgment “is extinguished.”
A judgment lien on real property is effective only during the period of enforceability of the judgment. Like the judgment, the judgment lien can also be extended by 10 years if renewed.
California partition lawsuits are governed by the Code of Civil Procedure, which sets forth the process by which a court determines the parties’ interests in a property and the manner of partition. If the court finds that the plaintiff is entitled to partition, it shall make an interlocutory judgment that determines the interests of the parties in the property and order the partition of the property and, unless it is to be later determined, the manner of partition.
Although the interlocutory judgment is not final, it is appealable. Upon the conclusion of the time for appeal, the interlocutory judgment becomes final and conclusive despite its designation s ‘interlocutory’. “An interlocutory decree in an action for the partition of real property, although preliminary to the final judgment of conformation, is conclusive as to the matters determined therein.” As a final judgment on the matters determined therein, the court does not have the power to amend an interlocutory judgment after it becomes final, even in cases of error.
Pentech therefore made the argument that its priority was enshrined in the interlocutory judgment and was therefore final.
The appellate court, however, pointed to California Code of Civil Procedure section 872.040, which is part of the partition scheme. That section provides that “nothing in this title excuses compliance with any applicable laws, regulations, or ordinances governing the division, sale, or transfer of property.”
The court engaged in a lengthy analysis to hold that, by its plain terms, section 872.040 mandated Pentech’s compliance with the renewal provisions of the Enforcement of Judgments Law despite the trial court’s priority lien determination. Pentech’s failure to renew the lien automatically extinguished it.
Lessons for a Los Angeles Partition Attorney
A Los Angeles real estate litigation and partition attorney who deals regularly with partition lawsuits in the Los Angeles Superior Court and other Southern California courts must keep in mind that the interlocutory judgment is not the end of the process. Judgments and liens must be renewed and failure to do so is most likely malpractice.
Another concept to keep in mind is that the interlocutory judgment is appealable and, if not timely appealed, becomes final—even if the partition process has not ended.
Los Angeles real estate and partition attorney Laine T. Wagenseller has written extensively on partition lawsuits. He is the founder of Wagenseller Law Firm in downtown Los Angeles. The lawyers at Wagenseller Law Firm handle many partition actions, especially among family members. For more information, please call us at (213) 805-7445.