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Friday, August 22, 2014

Lien Priority

One of many judgment articles. There are many types of property liens, including junior liens, senior liens, first mortgages, second trust deeds; and variations of these, and other names for these basic types.

I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice.

A lien is the simplest way to secure a debt because it attaches to any property the debtor owns or will own in the future, so the creditor has a chance to get paid.

Debts can be secured by recording a lien, which attaches the debt to any properties in the county or state, and that lien usually must be paid before the property can be sold. A lien makes real estate property collateral for the debt.

If the borrower does not make their payments when they are due, the lien holder can arrange to force the sale of the property in a foreclosure action in order to try to get paid.

There can be several liens on a property at the same time. If one lien holder forecloses, what happens to the other liens? This article explains who is entitled to the possible excess money from a sale, if any is left over.

Lien priority in California is usually based on who records their lien first. The first in time to record their lien usually gets priority over all subsequently recorded liens.

Lien priority is covered by Civil Code Section 1367(d) which states: (d) A lien created pursuant to subdivision (b) shall be prior to all other liens recorded subsequent to the notice of assessment, except that the declaration may provide for the subordination thereof to any other liens and encumbrances.

An example of how lien priority works is if the owner (debtor) purchases a home for $600,000. To do this, they take out a loan for the full $600,000. This loan is secured by the property and is first in time, so it will be the most senior lien. The lender quickly records their lien, in California usually as a "deed of trust", often referred to as the first trust deed.

In our example, the homeowner later takes out a line of credit against his property for a maximum limit of $40,000. This line of credit is secured by the property and the lien is recorded after the (purchase-money) first trust deed. This lien is junior to the $600,000 lien.

The final lien happens when the homeowner gets a $8,000 judgment against them. The judgment owner records a lien that is in third place. This lien is junior to the previous two liens.

Any later liens that get recorded will be in the priority according to when they are recorded.

What happens when a lien is foreclosed upon? There are two variations, a senior lien foreclosing and a junior lien foreclosing.

If the first (most senior) lender forecloses, usually all junior liens are wiped out. This does not remove the debts, only the collateral. Junior lien holders become unsecured creditors if the senior lien forecloses.

The second variation is when a junior lien forecloses. The rules are the same for any lien recorded after the junior lien. Any liens recorded after the foreclosing junior lien will be wiped out. The senior lien remains. The purchaser of the property at the foreclosure sale buys it subject to the senior lien(s), and will have to make payment arrangements to the senior lien holder(s).

If no one bids at the foreclosure auction, the most senior lien holder usually gets the property, and the debtor is usually liable for any losses that the senior lien holder incurs.

What happens when the property is sold at foreclosure and the auction sale generates more money than what is owed to the lien holder that foreclosed? These are called surplus funds, and the rights to these funds are defined by law in California Civil Code 2924k.

Civil code 2924k says that the first expense to be paid after a foreclosure auction occurs, is the costs and expenses of conducting the foreclosure sale. Next, usually the senior liens and the lien holder that foreclosed are paid off. If there is any money remaining, then any liens junior to the foreclosing lien are paid in their order of priority. Lastly, if any funds are left, they are paid to the debtor.

An example of how this works would be if the senior lien holder forecloses on the property and it sells for $640,000. First, the costs of the sale get paid, for example $5,000, which leaves $635,000. Next, the senior lien of $600,000 is paid in full, leaving a surplus of $35,000. The $35K goes to the next lien holder, the $40K line of credit, which might not be the full $40K limit. Any leftover funds go to the third lien holder, the judgment owner.

What if a junior lien holder forecloses? For example the line of credit forecloses and the property is sold at the auction for $50,000. The property only sells for $50,000 because the high bidding auction buyer buys the property subject to the existing $600,000 first mortgage.

In this example, first the costs of the sale are paid (e.g.) $5,000, leaving $45,000 remaining. Next, the line of credit is paid off in full for $30,000, leaving $15,000 in surplus funds. The judgment owner is paid in full for their $8,000 lien. This leaves $7,000 remaining, which is paid to the debtor. No payment is made to senior lien holder(s) because their status is not affected by the foreclosure of a junior lien. The high bidder is buying the property subject to the senior lien holder(s).

An exception all lien holders should be aware of is the higher priority of property tax liens. Property tax liens get automatic priority over all other liens no matter when they were recorded. Another complication is if the homeowner files for bankruptcy protection.


Mark D. Shapiro - Judgment Referral Expert - - where Judgments go to get Recovered!

Thursday, August 21, 2014

Serving In The Courtroom

One of many judgment articles: It is not a good idea to serve someone in a courtroom while the judge is there because judges hate it. Why is this so despised? Judges look on appearances at the courthouse as being mandatory, and that the totality of consequences is to be dispensed only from the judge.

If somebody gets served at the courtroom while the court is in session; judges see that as a consequence of their mandatory appearance that they did not mete out, and that is often unacceptable to them. I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice.

In California and perhaps in every state, serving documents while the judge is on the bench is a no-no. If not a law, it is an unwritten rule that everybody is supposed to know as a matter of common sense, that process service is not allowed while the court is in session.

However, you can usually serve people as they are walking in and/or walking out of court. Once they leave the building, they are fair game. Serving after the hearing is good, because you will know what the person looks like and they only have one way out.

Some process servers go to the courtroom when it first opens. After the bailiff opens the door, they follow the bailiff to his/her desk. They show them their registered process server ID and say something like "I have legal documents to serve on John Doe, who is supposed to appear here this morning. Can I serve him before the judge takes the bench?"

The bailiff will most likely say yes. Then the process server says something like "Do you mind if I call out his name, or would you prefer to do it?" Most of the time, the bailiff will call out the person's name. If the person comes to the bailiff, the bailiff will be a witness to the process server's personal service. If the person does not respond, the server tells the bailiff something like "I will wait here a little while, please call out his name again in a few minutes if the judge isn't on the bench yet".

A long time ago, there was the immunity rule that covered serving people in court, however the immunity rule is no longer the law of California. See Severn v. Adidas Sportschuhfabriken, 33 California App. 3d 754 (Cal. App. 1st District 1973).


Mark D. Shapiro - Judgment Referral Expert - - where Judgments go to get Recovered!

When Your Debtor Bounces A Check

What if your judgment debtor bounces a check they sent you?

In California, CC 1719 says that you may go after the "maker of the check".  Follow the procedure outlined in CC 1719 (certified letter, wait 30 days, file Claim for 3 times the amount of the check, plus damages of $1500 for each check, get judgment on bounced check matter) and if all goes well, you'll have a totally separate judgment against the maker of the check. However you must sue in the big court, not small claims, so try to add your costs to your judgment. The fine print is  If you sue, you can add penalties of treble the amount of the check but not less than $100.00 nor more than $1500.00.  If the check is for $900, then the maximum penalty you can add is $1500.00.

CC 1719 shouldn't have any bearing on your current case against the judgment debtor other than he doesn't get credit for the rubber checks. 


Mark D. Shapiro - Judgment Referral Expert - - where Judgments go to get Recovered!

Wednesday, August 20, 2014

Copying Court Records

If you are a judgment enforcer, you might go to the courthouse and ask the clerk; or use a court computer(s) to look up judgment cases and then ask the clerk to pull records for you. The court clerk will make copies for you for (e.g., 50 cents per page), and that adds up, and sometimes you have to wait in line too. It sure would be more time and cost effective if you could use a camera or a scanner.

This article describes how things work in California, your mileage may vary. In most courthouses, cameras and scanners are prohibited. If they catch you using one, they may ask you to leave. I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice.

Here are the relevant parts of the California Rules of the Court, section 10.500:

e) Public access
(1)The Judicial Council intends by this rule to implement Government Code section 68106.2(g), added by Senate Bill X4 13 (Stats. 2009-10, 4th Ex. Session, chapter 22), which requires adoption of rules of court that provide public access to non-deliberative and non-adjudicative court records, budget and management information.

(A)A judicial branch entity must allow inspection and copying of judicial administrative records unless the records are exempt from disclosure under this rule or by law.

And, California Government Code Section 70627:

The fees collected under this section shall be distributed to the court in which they were collected.

(a) The clerk of the court shall charge fifty cents ($0.50) per page to cover the cost of preparing copies of any record, proceeding, or paper on file in the clerk's office.

(b) For comparing with the original on file in the office of the clerk of any court, the copy of any paper, record, or proceeding prepared by another and presented for the clerk's certificate, the fee is one dollar ($1) per page, in addition to the fee for the certificate.

(c) The fee for a search of records or files conducted by a court employee that requires more than 10 minutes is fifteen dollars ($15) for each search.

Unless you are a registered photocopier, your access to see the files is permitted, but to copy them (in any fashion) usually requires the court clerk to do the copying at the fees listed above.

Most California court clerks use California Rules of Court (CRC) 1.150 to ban cameras, and most courts ban scanners too. In addition to CRC 1.150, most courts have local rules forbidding cameras in any area the courthouse, not just the courtrooms.

However it is worth introducing yourself to the court clerks when they are not busy. In some courts, polite enforcers have been able to get the clerk's office to concede that a hand scanner is acceptable, by politely discussing the clerk's concerns. A scanner is not a camera, and because the files would not be disassembled, some clerks allow scanning.

What if the court clerks do not permit scanners or cell phone cameras to be used? Some enforcers bring their laptop computers into the clerk's department and use a text editor, a database, or a spreadsheet to do data entry at the courthouse. If you do not have a laptop, these five steps will be helpful:

1) Check to see if the ROAs (register of actions) are online before you go to the courthouse. Many courthouses have these online now, so you can go to their web site and search case information; however usually they do not show the specific paperwork. You can search records by name or case number.

2) See what computer access for looking up judgments is available at the courthouse.

3) Determine where the actual physical judgment records are, and how to access them.

4) Determine the court case numbering. Figure out how to use that numbering to go back two or more years. For example: 12-SC45503 is today. Try going back to 10-SC45503, etc. You can check these by using the ROA, and search records prior to going to courts, find the ones you want to view; and ask for them specifically at the clerk's counter.

5) To learn how your court decides issues; determine when the post-judgment hearings are held for motions to vacate, motions to pay in installments, claims of exemption, third-party claims, etc.


Mark D. Shapiro - Judgment Referral Expert - - where Judgments go to get Recovered!

Tuesday, August 19, 2014

Settlements And Judgments

It is usually good news, when you settle a big judgment for less than the full amount owed.

Many judgment-related settlements tend to make the underlying judgments obsolete, however it does not have to be this way. I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice.

The problem with titling a document "settlement agreement" is that such agreements can be breached, and another round through the court is often necessary to bring a new case to judgment. Instead, consider titling such a compromising document as a "memorandum of understanding", which accomplishes the same end result, without the potential to litigate a breached settlement agreement.

What if the judgment debtor's attorney insists on a settlement agreement, should you stand your ground or roll over and sign the agreement? If you sign a settlement agreement, consider the chances of the debtor not paying you.

What if you settle and sign one of the types of settlement agreements that you should never sign, one that includes the phrase "release of all claims"? Then you will have a potential novation problem.

A novation is a new obligation that replaces the old one as soon as you sign it. You want to avoid this at all costs, because if you sign such an agreement; it can be interpreted as a novation, and your judgment becomes toast as a matter of law, the moment you sign it.

Better than a novation is an accord and satisfaction, where you agree to accept something different to satisfy the previous obligation, however the previous obligation still stands if the agreement is breached. This is a huge difference.

As long as you have language in your agreement that states that this agreement does not replace the original judgment obligation, the judgment continues in full force but is temporarily stayed; you will avoid novation and your judgment will remain active.

It is a good idea to add a paragraph in your agreement that says the agreement is an accord and satisfaction, and is not a novation. The common boilerplate in most prejudgment settlement agreements are a trap for the unwary in post-judgment matters.

After full performance of the agreement by the debtor, the debt gets extinguished; but absent full performance by the debtor, the judgment becomes due again in full.

If the debtor pays the amount due as per your compromising memorandum of understanding, then you satisfy the judgment. If you satisfy a judgment, be sure to complete these seven steps if they apply:

1) Always file a full satisfaction of judgment.

2) Record the satisfaction of judgment in every county where you recorded an abstract of judgment.

3) File a release of any UCC (Uniform Commercial Code) judgment liens with the Secretary of State.

4) Release all pending levies.

5) Release all other judgment liens you have obtained.

6) Dismiss any fraudulent conveyance lawsuits related to the judgment with prejudice.

7) Agree to sign any other document reasonably requested by the judgment debtor to confirm that the judgment has been fully satisfied and all liens have been released.

Some judgment enforcers will not sign any settlement agreements. They say: "As long as you hand over a check, I will give you a satisfaction, period". The judgment is a matter of public record so they refuse to sign such an agreement.

Some attorneys have asked judgment enforcers to move to have judgments vacated for payment. Some judgment debtors do not like the stigma of a judgment but to that, most enforcers would say something like: "Too bad, you should have handled this long before now if you did not want a judgment against you on the public record".


Mark D. Shapiro - Judgment Referral Expert - - where Judgments go to get Recovered!

Monday, August 18, 2014

OSX 10.9.4 Mavericks broke email

I upgraded to OSX 10.9.4 Mavericks and boom my POP email account stopped working, it says I have an incorrect password when I know my password is right, I have my ISPs settings right and I can connect via webmail just fine, and I can connect and send iCloud email, so the problem is with OSX - Apple please fix your email!

And Apple, please fix iTunes, for some strange reason, iTunes no longer lets me delete podcasts, after I listen to a podcast, I want to delete it, Apple has decided not to let me delete podcasts. Apple please fix this.

Levying Security Deposits

Is it possible to levy on a security deposit held by a landlord? Can a landlord refuse by saying that they need to hold the deposit until the debtor moves out? In court, landlords often prevail on third-party claims on security deposits.

I am a Judgment Broker, not a lawyer, and this article is my opinion, please consult with a lawyer if you need legal advice.

Often, even if you get an assignment order on whatever is left in a security deposit after the judgment debtor moved; sometimes once the judgment debtor knows they will not be getting their deposit back, they simply do not pay the landlord the final month's rent, so there is no deposit left after the judgment debtor moves.

Even if the landlord is only holding the debtor's money, some judges believe the deposit is theirs as security for the rental agreement, and they will turn it over only after a successful dissolution of the rental agreement. Some judges do not even want you to subpoena landlords for personal appearances in court because that would be too harassing. They believe you should be able to get whatever you need from a landlord simply by subpoenaing documents.

One could subpoena the landlord's bank statements if the debtor is paying through direct deposit, or paying rent in other ways that do not allow you to figure out where the money is coming from; less intrusively.

In most cases, the amount held is not worth the effort to fight a claim of exemption, unless it is an expensive rental. If you challenge such a claim, be prepared to pay the landlord's attorney fees. Experienced judgment enforcers attempt them on occasion, however if the landlord files a third-party claim on the funds, they do not oppose the claim, they just drop it.

In California, the landlord's attorney might bring up the CCPs, the sections that describe what property is exempt from execution. One CCP implies that property is not assignable or transferable by the debtor, except to the landlord. The landlord's attorney might argue, although the CCP is not that specific, it does make sense that the deposit is not subject to execution. At this point, you will probably lose your opposition to the third-party claim.

The deposit of the tenant is assignable to the landlord. Tenants do it all the time when they authorize the landlord to deduct from the deposit for repairs (often the language is in the rental agreement itself) and to pay a portion (or all) of the last month's rent. See California Code 1950.5(h). Because such deposits are assignable, and because they belong to the tenant, not the landlord, they are subject to execution. Whether your court allows this is more art than science.

You might try to argue that the security deposit the landlord is holding is, by law, property of the judgment debtor, held by the landlord, and therefore is subject to a levy as per California Code of Civil Procedure sections 695.010(a) and 699.710; and Civil Code sections 1950.5(a),(d),(m),(n) and (o). Of course, relying on these statutes is not an automatic slam-dunk.

Generally, a judge will use your "Motion for Turnover Order and Sanctions, for ZZZZ, Third Party Holding Assets of XXXX, Judgment Debtor" as an opportunity to view the situation as a possible claim of exemption for the judgment debtor. Many judges will order the funds to be turned over only if they believe the judgment debtor can easily replace them to the landlord. Otherwise, as a matter of public policy, the judge is not going to order a rental deposit to be turned over if it ultimately results in the eviction of the judgment debtor tenant, especially where innocent minor children are involved.

There is no guarantee one will prevail in a challenge to a third-party claim. In summary, you can give security deposit levies a shot, but do not push too hard if the landlord fights it. The more relevant California laws appear below:

Civil Codes:

1950.5(a) This section applies to security for a rental agreement for residential property that is used as the dwelling of the tenant.

(d) Any security shall be held by the landlord for the tenant who is party to the lease or agreement. The claim of a tenant to the security shall be prior to the claim of any creditor of the landlord.

(h) Upon termination of the landlord's interest in the premises, whether by sale, assignment, death, appointment of receiver or otherwise, the landlord or the landlord's agent shall, within a reasonable time, do one of the following acts, either of which shall relieve the landlord of further liability with respect to the security held:

(1) Transfer the portion of the security remaining after any lawful deductions made under subdivision (e) to the landlord's successor in interest. The landlord shall thereafter notify the tenant by personal delivery or by first-class mail, postage prepaid, of the transfer, of any claims made against the security, of the amount of the security deposited, and of the names of the successors in interest, their address, and their telephone number.

(m) No lease or rental agreement may contain any provision characterizing any security as "nonrefundable."

(o) Proof of the existence of and the amount of a security deposit may be established by any credible evidence, including, but not limited to, a canceled check, a receipt, a lease indicating the requirement of a deposit as well as the amount, prior consistent statements or actions of the landlord or tenant, or a statement under penalty of perjury that satisfies the credibility requirements set forth in Section 780 of the Evidence Code.


Mark D. Shapiro - Judgment Referral Expert  - - where Judgments go to get Recovered!