Does a Judgement Attach to Property or Owner in Foreclosure?

Question

Here's a cool and interesting case that is happening tomorrow in Virginia:

I'm looking at a property going to foreclosure which was purchased in 1998. Married wife/owner has satisfied multiple trusts and now has a 2008 1st Trust being foreclosed upon tomorrow.

Due diligence has uncovered a $14,000 Hospital Judgement docketed on 2006 (so having priority over the current, foreclosing, 1st trust)

BUT... the judgement does not have any address associated with it (found it under the owners name).

AND the judgement lists both the husband and wife's name as defendants. Husband is not on the deed to the property - just the wife (as married, party of the second).

1. Does the judgement attach to the property even if the address is not specified?

2. If it does, is it 50% of the amount of the judgement, or the whole enchilada?

3. Is it true that judgments have an active "shelf-life" of 10 years, barring any renewal recordations? Or do they remain active forever?

Thanks!

Dion DePaoli · Answer

It is a tad different with Judgement Liens. A first position mortgage, which is what it sounds like we have in this instance may be forced to pay off the lien to foreclose their interest. This can be a function of the sale proceeds or may be a required advance to effect the sale. In other circumstances the judgement lien may not have any superiority to a first lien mortgage. In Virginia, where the OP is, I believe they will get paid.

The distinction has to do with how a judgement lien attaches. A mortgage is a 'specific' interest in real property. A judgement lien is an 'entire' interest in all real property in equity. So to that regard mortgages and deeds of trusts are thought of as being a purchaser. In certain circumstances the lien may automatically become inferior to that instrument as they may not be anything to attach to. That is, the Mortgage/DOT Borrower does not possess equity (that equity which secures the Mortgage/DOT) long enough for the judgement to attach to. Circumstance dependent.

Before this becomes a little to much of a mind bend. Know that judgement liens are not the same as mortgages/dots. The question at large is whether the lien will survive the auction because it is superior. In that question you should be able to get a good answer from the county or any title agency for the area. In some instances the county will not allow (by law) the lien to survive since there is no longer an interest held by the debtor which the lien attaches. So, the JL may get an auto-pay off by riding the coat tails of the Mortgagee foreclosing. In those situations, the Mortgagee would likely advance to pay the lien, add the balance to their total due and proceed with the sale. The Mortgagee may also then be able to claim a short from the sale up to the amount of the lien for which they advanced provided they obtained title insurance.

Wayne Brooks · Answer

That's not the case anywhere I'm aware of. A judgment IS a lien against property, it doesn't have to becalled a "lien". In most states a judgment attaches to all property owned by that person, now or in the future. Addresses/legal descriptions never have to be specified. But, a local title co./attorney can confirm.

Account Closed · Answer

From my understanding, a judgment is attached to a person, a lien is attached to property. So, if they didn't get a lien against the property, it shouldn't affect the sale. If a lien is attached to the property, it would have to be paid off in the sale.

That's my understanding. But your title company could advise you better.

Dion DePaoli · Answer

Rodney,

Domesticating a judgment is simply filing it within the courts jurisdiction. If the judgement was from Virginia and debtor moved to Texas the creditor would need to domesticate the judgement in Texas in order to enforce the collection remedies. The same goes for inter-state counties. That is all it means.

It sounds as though your due diligence provided a little better look into the potential title defect than that of the trustee. Trustee's and Mortgagee are all human, things can be missed and errors made. Kudos to you though.

In your follow up to the survival of the judgement lien post sale, I glanced at Virginia Code 8.01-464. Order of liability between alienees of different parts of estate. The lien does not take a superior interest (IMO for what it is worth) to the Mortgage/DOT. The lien would have priority to other similar (liens just not the Mortgage/DOT. So this lien is unsecured from the property as a result of the foreclosure. The idea would be the voluntary party should not be harmed from the debtor's statutory lien. We see similar instances of this with federal liens such as IRS. They can be unsecured from subject property.

In any case if you were to move forward now and 'if' the lien survived (which it doesn't appear to have done so) the sale of the property would require the Mortgagee to remove the lien to give clear and marketable title. In that, if you like the property, go make an offer on the REO and know that it certainly will not be your issue to deal with or worry about through that sale. Good luck and good discussion.

Rodney D. · Answer

Since I have it available from my notes, and there seems to be the question of whether the Trustee lumped the judgement in with the foreclosure sale, here is the newspaper ad:

Trustee's Sale 4502 Kerrybrooke Drive Alexandria, Virginia 22310

(Tax Map No. 0821120045)

Default having been made in the terms of a certain Deed of Trust dated October 14, 2008, in the original principal amount of $341,212.00 and recorded in the Clerk's Office of the Circuit Court of the County of Fairfax, Virginia in Deed Book 20147, page 1097, the undersigned Substitute Trustees will sell at public auction on May 20, 2015, at 10:00 a.m., in front of the building housing the Fairfax County Circuit Court, 4110 Chain Bridge Road, Fairfax, VA, the property designated as Lot 45, Section 1, KERRYBROOKE, as the same is duly dedicated, platted and recorded in Deed Book 2923, at Page 598, among the land records of Fairfax County, Virginia. Sale is subject to all prior liens, easements, restrictions, covenants, and conditions, if any, of record, or other matters which would be disclosed by an accurate survey or inspection of the premises. TERMS: CASH. A deposit of $34,000.00 or 10% of the sale price, whichever is lower, will be required of the successful bidder at time of sale. Prior to the sale, interested bidders will be required to register with and must present a bid deposit which may be held during the sale by the trustee. The bid deposit must be certified funds and/or cash, but no more than $10,000.00 of cash will be accepted. The successful bidder's deposit will be retained at the sale and applied to the sale price. If held by the trustee, all other bid deposits will be returned to the unsuccessful bidders. Settlement is to be made within 15 days. The successful bidder will be responsible for obtaining possession of the property, and for all costs and fees related to recording the Trustee's Deed, including the grantors tax. The successful bidder will be required to execute a Memorandum of Trustee's Sale, available for review on the Foreclosure Sales page of www.glasserlaw.com, outlining additional terms of sale and settlement. A Trustee's Deed will be prepared by Trustee's attorney at high bidder's expense. This is a communication from a debt collector.

Glasser and Glasser, P.L.C. on behalf of Atlantic Trustee Services, L.L.C. and/or REO Solutions, LLC, Substitute Trustees, Crown Center Building, Suite 600, 580 East Main Street, Norfolk, VA 23510, File No. 200736-1, Tel: (757) 321-6465, between 10:00 a.m. & 12:00 noon only.

April 21, 28, 2015 11907633

(Tax Map No. 0821120045)

Default having been made in the terms of a certain Deed of Trust dated October 14, 2008, in the original principal amount of $341,212.00 and recorded in the Clerk's Office of the Circuit Court of the County of Fairfax, Virginia in Deed Book 20147, page 1097, the undersigned Substitute Trustees will sell at public auction on May 20, 2015, at 10:00 a.m., in front of the building housing the Fairfax County Circuit Court, 4110 Chain Bridge Road, Fairfax, VA, the property designated as Lot 45, Section 1, KERRYBROOKE, as the same is duly dedicated, platted and recorded in Deed Book 2923, at Page 598, among the land records of Fairfax County, Virginia. Sale is subject to all prior liens, easements, restrictions, covenants, and conditions, if any, of record, or other matters which would be disclosed by an accurate survey or inspection of the premises. TERMS: CASH. A deposit of $34,000.00 or 10% of the sale price, whichever is lower, will be required of the successful bidder at time of sale. Prior to the sale, interested bidders will be required to register with and must present a bid deposit which may be held during the sale by the trustee. The bid deposit must be certified funds and/or cash, but no more than $10,000.00 of cash will be accepted. The successful bidder's deposit will be retained at the sale and applied to the sale price. If held by the trustee, all other bid deposits will be returned to the unsuccessful bidders. Settlement is to be made within 15 days. The successful bidder will be responsible for obtaining possession of the property, and for all costs and fees related to recording the Trustee's Deed, including the grantors tax. The successful bidder will be required to execute a Memorandum of Trustee's Sale, available for review on the Foreclosure Sales page of www.glasserlaw.com, outlining additional terms of sale and settlement. A Trustee's Deed will be prepared by Trustee's attorney at high bidder's expense. This is a communication from a debt collector.

Glasser and Glasser, P.L.C. on behalf of Atlantic Trustee Services, L.L.C. and/or REO Solutions, LLC, Substitute Trustees, Crown Center Building, Suite 600, 580 East Main Street, Norfolk, VA 23510, File No. 200736-1, Tel: (757) 321-6465, between 10:00 a.m. & 12:00 noon only.

April 21, 28, 2015 11907633

Appeared in: Washington Post on 04/21/2015 and 04/28/2015

Nothing in the ad mentions the superior judgement specifically but these ads are usually boilerplate anyway.

When I mentioned the judgement to the Trustee, even he seemed surprised there was a superior one on this property.

Rodney D. · Answer

This is such a good discussion, where to begin...

So the auction occurred this morning, and as is typical, it opened up too high -- nobody bid and it went back to the lender. After the auction I asked the Trustee the very same questions (we have a friendly history). I also asked my settlement attorney who is HIGHLY knowledgeable, to see if there were any differences in the answers received from either attorney and the responses receive here.

Here's what I was able to find out. Please keep in mind that these answers apply to Virginia and may be different in your locals. Although my research has led me to believe CA and VA read from the same law book:

1. Does the judgement/lien attach to the property even with no address listed or recorded with the judgement? YES. @Wayne Brooks: was correct in that it attaches to any property that person owns in the county it was recorded in. The Trustee also cautioned as long as we were sure that it is the same person and not another person with the same name. A judgement on "John Smith" without address information could get rather difficult as to what property it would be a judgement/lien against.

2. If it does, is it 50% of the amount of the judgement, or the whole enchilada? The whole enchilada. All defendants listed on the judgement are responsible for 100% of the judgement (each) until the judgement is satisfied, whether either/any of them own property in that county or not. I was told that many plaintiffs, when awarded judgments, sometimes file "domesticated judgments" in the counties that they "believe" the defendants will likely reside (if they don't have a permanent address at the time of the award) in the hopes of attaching their judgement when/if they do purchase property in that particular county.

3. Is it true that judgments have an active "shelf-life" of 10 years, barring any renewal recordations? Or do they remain active forever? This answer is a little more involved. The "simple" answer is (in VA):

Judgements, if filed in "General Sessions" Court survive 10 years (unless renewed).

Judgements, if filed in Circuit Court survive 20 years (unless renewed).

IRS judgements survive 10 years (unless renewed).

The confusion (not in this case) comes when an out of county court awards a judgement to the plaintiff in "General Sessions" court, then Plaintiff files a "domesticated judgement" in the Circuit Court of another county. That remains unclear but for the moment I am satisfied with the answers given for my need.... with one exception:

Dion raised an excellent point (you are good, sir!)

Is the $14,000 superior position judgement folded into the foreclosure (from a purchasers perspective). In other words, does the purchaser have to pay off the $14k judgement in addition to their bid on the property? Have to go back and ask...

Bill Gulley · Answer

As Dion mentioned.

A judgment is statutory lien, a mortgage lien is a voluntary lien, that's the difference guys. :)

Rick H. · Answer

All laws are local so don't assume any of the above to be accurate, just guesses, with the exception of Dion's.

In my state, CA, judgment follows entity or individual and attaches to all assets in the county where a current, valid Abstract of Judgment (AJ) is recorded. It's priority is established by date of recording but may have remained if a purchase money loan is obtained (may be an oddity of CA).

Unless renewed, most AJ's are good for ten (10) with the exception of certain Writ of Attachments that must be renewed after a shorter time ( 5 years, I believe).

If the concern is whether (or really "how") this lien may be affected by a sale, worst case might be to wait out the remaining 10 year term or negotiate with creditor for discount (if they renew).

In my world, I would note it, go forward, and deal with it later as a risk that I've priced an allowance for in my acquisition.

Steve Babiak · Answer

I don't quite believe this. If this were the case, then a second position lien being foreclosed would have to pay off the first position lien post auction (whether done by the county or other party) rather than getting title subject to the senior lien remaining in place. Maybe I'm wrong on that ...

Certainly the more senior lien would have to be settled before any owner can get clear title.

Steve Babiak · Answer

Does a Judgement Attach to Property or Owner in Foreclosure?

Does a Judgement Attach to Property or Owner in Foreclosure?

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